UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10/A
(Amendment
No. 3 to Form 10-SB)
GENERAL
FORM FOR REGISTRATION OF SECURITIES
Pursuant
to Section 12(b) or (g) of The Securities Exchange Act of
1934
Organa
Technologies Group, Inc.
(Exact
Name of Registrant as Specified in its Charter)
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Delaware
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02-0545879
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(State
or Other Jurisdiction of
Incorporation
or Organization)
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(I.R.S.
Employer
Identification
No.)
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2910
Bush Drive
Melbourne,
FL 32935
(Address
of Principal Executive Offices and Zip Code)
(321)
421-6652
(Registrant’s
Telephone Number, Including Area Code)
with
a copy to:
Thomas
G. Amon, Esq.
Law
Offices of Thomas G. Amon
250
West 57
th
Street, Suite 1316
New
York, NY 10107
Telephone:
(212) 810-2430
Facsimile:
(212) 819-2427
Securities
to be registered under Section 12(b) of the
Act: None.
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Title
of Each Class to be so Registered
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Name
of Each Exchange on Which Each
Class
is to be Registered
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None.
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None.
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Securities
to be registered pursuant to Section 12(g) of the
Act:
Shares
of Common Stock, par value $0.01
(Title
of class)
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company.
See
definitions of “large accelerated filer”, “accelerated filer”, and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
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Large
accelerated filer
o
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Accelerated
filer
o
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Non-accelerated
filer
o
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Smaller
reporting company
x
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Table of Contents
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Page
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Item 1.
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Business
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3
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Item 1.A
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Risk
Factors
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8
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Item 2.
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Financial
Information
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10
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Item 3.
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Properties
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17
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Item 4.
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Security
Ownership of Certain Beneficial Owners and Management
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17
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Item 5.
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Directors
and Executive Officers
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18
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Item 6.
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Executive
Compensation
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20
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Item 7.
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Certain
Relationships and Related Transactions, and Director
Independence
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22
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Item 8.
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Legal
Proceedings
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24
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Item 9.
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Market
Price of and Dividends on the Registrant’s Common Equity and Related
Stockholder Matters
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25
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Item 10.
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Recent
Sales of Unregistered Securities
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26
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Item 11.
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Description
of Registrant’s Securities to be Registered
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27
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Item 12.
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Indemnification
of Directors and Officers
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28
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Item 13.
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Financial
Statements and Supplementary Data
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28
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Item 14.
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Changes
in and Disagreements with Accountants on Accounting and Financial
Disclosure
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28
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Item 15.
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Financial
Statements and Exhibits
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28
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CONSOLIDATED
FINANCIAL
STATEMENTS
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December
31, 2007 and 2006:
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Report
of Independent Registered Public Accounting Firm
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F-2
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Consolidated
Balance Sheet
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F-3
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Consolidated
Statement of Income
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F-4
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Consolidated
Statement of Stockholders’ Equity
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F-5
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Consolidated
Statement of Cash Flows
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F-6
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Notes
to Consolidated Financial Statements
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F-7
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Unless
otherwise indicated in this registration statement or the context otherwise
requires, all references in this registration statement to “Organa Technologies
Group,” “Organa,” “the Company,” “we,” “us” and “our” refer to Organa
Technologies Group, Inc., our predecessor entity Integrity Messenger Corporation
and any of our subsidiaries, which are separate entities generally taxable
as
corporations.
Item 1.
Business
.
Background
The
Company was organized under the laws of the state of Delaware in December
of
2002 under the name Integrity Messenger Corporation (“IMC”). In April 2006, the
Board approved a name change to Organa Technologies Group, Inc. (“OTG” or the
“Company”). The Company operated Integrity Messenger Instant Messenger under the
parent Company through December 31, 2007, at which time it took its instant
messenger server off-line and shutdown the Integrity Messenger Instant
Messenger. On February 19, 2008 the Company elected to cease operations
permanently on the Integrity Messenger Instant Messenger. While the Company
retains ownership of the software, it will determine in the future if it
will
enter into this line of service in the future. In the event the Company elects
to develop a new instant messenger service it will operate under a different
name. References to OTG will include the period prior to the name change
when
the Company was IMC. The Company’s principal office is located at: 2910 Bush
Drive, Melbourne, Florida 32935, United States of America, telephone:
(321) 421-6652.
The
Company, through its subsidiaries operates under the following business segments
for financial reporting purposes:
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NAICS
CODE
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DESCRIPTION
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541511
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Web
(i.e.) page design services, custom
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561422
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Order
taking for clients over the Internet
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454111
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Internet
retail sales sites and Business to Customer retail sales Internet
sites
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519130
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Internet
entertainment sites
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454112
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Internet
auctions, retail
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519140
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Entertainment
sites, Internet
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541512
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Computer
hardware consulting services or consultants
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518210
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Web
hosting
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517919
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VoIP
service provider, using client-supplied telecommunications
connections
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The
Company is a management company which has acquired technology-based businesses.
The Company, through its subsidiaries, provides the following
services:
Hurricane
Host, Inc. (“HH”)
,
a
Florida corporation: Provides Internet Web Hosting and Voice over Internet
Protocol (VOIP) services. Through direct resale or its distributors, the
Company
provides a communication protocol whereby individuals from all over the world
can login and communicate while playing online games such as World of Warcraft®,
Tom Clancy’s Ghost Recon, and any other game that provides the standard
protocols for online communication. As part of this VoIP service, customers
may
also participate in VoIP telephone services and potentially save on long
distance charges. The Company utilizes the Ventrilo Communication Software
as
its service where it pays a “seat fee” per user to Ventrilo. HH offers reseller
agreements for companies where they can purchase blocks of slots on the VoIP
processor. HH also provides web-hosting for various companies and individuals.
HH continues to market its product directly to the end-users; however, as
the
on-line communication grows, more companies are beginning to develop their
own
online protocols in an attempt to attract more of the ‘gamers’ into their
processors. As this streamline effort grows HH will be required to market
directly to the game developers to provide server support for their games.
The
acquisition of HH was an arms-length transaction. For further information
on the
products and services you may review the website at
www.hurricanehost.com
.
The
Company does not incorporate the website as a part of this filing. The financial
statements of HH are included in the Consolidated Financial Statements of
the
Company.
Organa
Consulting Group, Inc. (“OCG”)
,
a
Florida corporation: Provides web design services, hardware and software
installation and training, and other Internet related consulting services.
Specifically, OCG has provided consulting services in the design of a network
center for utilization of more than 40,000 active on-line users simultaneously,
while providing Internet securities procedures to restrict distributed denial
of
service (“DDOS”) attacks and hacker penetration. DDOS attacks occur when
multiple compromised systems flood the bandwidth or resources of a targeted
system, usually one or more web servers. The purpose of these type of attacks
are three-fold, (i) to rapidly consume all of the website’s allocated monthly
bandwidth, (ii) draw the attention of the site’s host, who when faced with the
constant onslaught on the entire hosting network will closedown the site,
or
(iii) take up all available connections of the host so that people cannot
access
the site. The Company has designed on-line Payment Processors for two customers;
one of them in conjunction with local banking authorities, which has received
approval and licensing from the Florida Office of Financial Regulations for
Render Payment Corporation. OCG has expanded its services to provide audio
and
video solutions to create a virtual office environment and theater style
conference rooms. OCG has historically provided website development for various
on-line marketing companies; however, OCG has elected not to service companies
in this line of business at this time. The financial statements of OCG are
included in the Consolidated Financial Statements of the
Company.
Davinci’s
Computer Corp. (“DCC”)
,
a
Florida corporation: Provides hardware and software computer system solutions
and services. DCC services clients in Central Florida where it provides computer
server oversight, updates, email management, and other corporate security
measures. While DCC offers hardware products as part of its solution services,
its primary function is to provide onsite and offsite support for mainframe,
server, and PC operations. DCC was acquired in order to provide OTG with
the
resources needed to complement its online services. A local firm was sought
out
in order for OTG to avail itself of direct access to hardware expertise.
The
acquisition of DCC was an arms-length transaction. The financial statements
of
DCC are included in the Consolidated Financial Statements of the
Company.
Gateway
Internet Services Corporation (“GIS”)
,
a
Florida corporation: Provides on-line payment processing through Automated
Clearing House (“ACH”) and other banking solutions. GIS entered into its first
agreement in July 2007 with Render Payment Corporation with the expectation
to
begin revenue generation in 2008. The financial statements of GIS are included
in the Consolidated Financial Statements of the Company.
Game2Gear,
Inc. (“G2G
TM
”)
,
a
Florida corporation: Provides online product registration for products designed
and developed from the creators of the multi-online gaming industry. The
Company
has drafted a U.S. Patent Application to protect its G2G
TM
process
and technology that will facilitate the operational aspects associated with
the
business. Additionally, G2G
TM
is
registered with the Federal Communications Commission. The product complies
with
Part 15 of the FCC Rules as tested by Product Safety Engineering, Inc., which
is
certified by the American Association for Laboratory Accreditation.
G2G
TM
utilizes
an Advanced Encryption Standard (AES) algorithm to encrypt and decrypt the
serial number associated with a manufactured product. This algorithm is embedded
in a RFID Reader microprocessor. The number that is written to the TAG at
the
time designated by the developer, is encrypted with a serial number and
encryption key. This consolidated encryption key is embedded into the
microprocessor software and reader. In addition to the encryption key, each
reader microprocessor has a unique serial number embedded in the silicon
that
can be verified by the server. At this time the product is ready for shipment.
The digital encryption key is created using a secured hashing algorithm (SHA-1).
Upon receipt of the product by the owner, the owner utilizes the reader to
connect to the Server. The reader is powered up by a USB Port on any computer.
The reader identifies the TAG and decrypts the serial number internally,
utilizing the key embedded in the TAG. Once the reader obtains the serial
number
it waits for a command from the server. The command from the Server will
consist
of a request for the serial number and reader ID, and the randomly generated
50%
key. The reader will respond with the serial number encrypted with half of
the
resident key and half with the randomly generated key provided by the server.
At
that time the server decrypts the serial number using the same decryption
key
combination and validates the serial number and Reader ID to that which was
generated prior to shipment. The G2G
TM
process
will be incorporated in the Frostmourne
TM
Sword as
produced by Epic Weapons under its agreement with Blizzard Entertainment®. The
financial statements of G2G
TM
are
included in the Consolidated Financial Statements of the
Company.
Zowy
Media, Incorporated dba WeaponMasters (“Zowy”)
,
a
Florida corporation: Provides Internet purchasing of swords and weapon
memorabilia. The financial statements of Zowy and its subsidiaries are included
in the Consolidated Financial Statements of the Company.
Epic
Weapons, Inc. (“Epic”)
,
a
Florida Corporation: Epic provides authentication through its G2G
TM
online
product registration of replica weapons. The ownership of Epic was transferred
to OTG on January 1, 2008.
The
Company is currently controlled by Avante Holding Group, Inc., (“Avante”) and
GAMI, LLC, (“GAMI”) each owned or controlled by Michael W. Hawkins. Avante owns
69.28% of the Company and GAMI owns 13.86% of the Company. On October 31,
2006,
the Company entered into a Consulting Agreement with Avante to provide
administrative support services to the Company, to include accounting services,
marketing services, consultation on acquisitions, corporate recordkeeping,
and
other services as requested by the Board of Directors. The term of the agreement
is for three years with one automatic three year extension. In addition,
on June
1, 2007 the Company entered into a triple net lease with GAMI where the Company
has its corporate headquarters. The lease was for a term of five years, with
the
option to extend for two additional five-year terms. On March 1, 2008 DCC
entered into a lease agreement with GAMI. The lease was for a term of five
years, with the option to extend for two additional five-year
terms.
History,
Strategic Expansion and Acquisitions
The
Company was formed in December 2002 but completed its first acquisition in
January 2004, when it acquired the assets of IMC-FL in exchange for 60,000,000
shares of restricted common stock, issued under Rule 144 of the Securities
Exchange Act. IMC-FL was incorporated in February 2002 and had operated as
a
development company for an instant messenger service organization. The Company
discontinued the service in 2007 and on February 19, 2008 elected to abandon
the
project of an instant messenger solution. The Company operates as a holding
company where it provides management and oversight to its
subsidiaries.
Subsidiaries
Hurricane
Host, Inc.
The
Company made its second strategic acquisition when it acquired 100% of Hurricane
Host, LLC on March 18, 2004. HH was incorporated in
2002
and
provided server related host gaming solutions featuring on line voice chat
for
multi peer-to-group communication within the gaming industry. At the time
of
acquisition, HH had retained an annual growth rate in excess of 300% in users
and revenue in each of its first two years of operation. HH continues to
see a
modest increase in users and revenue. Since OTG acquired HH, the average
year-over-year increase in revenue is 110% (2005 - 2007 projected).
HH
is
licensed to sell Ventrilo voice chat software. This software has two parts,
server software, and PC software that talk to the web-server. Clients of
HH that
have a voice server account attach to their voice server account on our web
servers. This allows a specific amount of people to be within a "conference
call" using the internet. This is mainly used for gamers so they can communicate
securely with their team mates while playing an online game.
HH
currently utilizes computer servers in Ashburn, Virginia; Atlanta, Georgia;
Dallas, Texas; Los Angeles, California; New York City, New York; San Jose,
California; Seattle, Washington; Frankfurt, Germany; London, England; and
Montreal, Canada to support its operations.
HH
was
able to expand its geographical locations and was able to have voice servers
located in multiple different countries and multiple locations in the US.
This,
along with other advertising, was the main reason HH had such an increase
in
sales
.
HH
provides Website Hosting Services for customers who desire to have a website
available on the Internet. There is strong competition in the web-hosting
market
and companies must provide additional services that attract clients. HH does
this by providing voice chat software that attracts “Internet Gamers”. HH views
its web-hosting service as a secondary service.
Organa
Consulting Group, Inc.
On
October 25, 2005, the Company acquired 80% of Organa Consulting Group, Inc.,
from Avante, its controlling shareholder. OCG was organized to provide its
services for companies that desired website designing and hardware/system
setup
and protocols for their Internet based businesses. In addition to these
services, OCG provides video and sound setups for home owners and corporate
entities. The Company entered into its first contract in October 2005 when
it
was contracted to design an Internet-based advertisement company. Currently,
the
Company markets through local distribution channels within central Florida,
its
products and services include hardware and software installation in support
of
multimedia application to include, voice conferencing, surround sound, theatre
entertainment centers, and audio-visual products and services.
Gateway
Internet Services Corporation
On
April
20, 2006, the Company incorporated Gateway Internet Services Corporation with
the intent to provide a proprietary Internet interface between banking
institutions and the fast growing Internet Banking Providers. The Company
developed the protocols and entered into its first agreement with Render Payment
Corporation, its customer, a Florida licensed Funds Transmitter Company through
the Office of Financial Regulations. GIS launched its services in July of this
year and has recognized no revenue to date.
Render
Payment Corporation is minority owned by the Administrative Consultant. As
such,
the potential for a conflict of interest exist. The Administrative Consultant
has provided $75K in funding as part of the payment processor and has a
financial interest in its success. GIS services can only be achieved through
the
implementation and enrollment of the payment processor. While the goals of
both
companies are to launch the payment processor and enroll as many people as
possible, the may be cause in the future that will create a conflict of interest
whereby the Administrative Consultant and GIS are not in agreement. There are
currently no known conflicts of interest arising from this agreement.
Davinci’s
Computer Corp.
On
July
1, 2006, the Company acquired 100% of Davinci’s Computer Corp. DCC was
incorporated April 28, 1997 and provides hardware and software repair services
throughout Central Florida. While the services provided by DCC are not inline
with the standard operations of the Company, the Company elected to enter
into
these services in an effort to obtain the services of Jason Dieterle, the
sole
owner of Davinci’s Computer Corp., whose expertise is an integral part of the
server maintenance of our online systems. DCC was acquired in order to provide
OTG with the resources needed to complement its online services. A local
firm
was sought out in order for OTG to avail itself of direct access to hardware
expertise. DCC provides computer hardware and system support; retail for
computers, computer accessories, and software; and online and local server
maintenance services.
Zowy
Media, Incorporated
On
October 1, 2006, the Company acquired 80% of Zowy Media, Incorporated, dba
as
Swords Online and Weaponmasters under a Stock Purchase Agreement with Avante
(owner of 40%) and GAMI (owner of 40%). Since acquisition, Weaponmasters
has
continued its base operations while developing the Frostmourne
TM
Sword
under its subsidiary, Epic. Weaponmasters is currently the number one search
site for “swords” through Google™. Weaponmasters provides collectibles in its
online store. The Company launched a local retail store at 3815 North Cocoa
Blvd., Suite 27 in Cocoa, Florida, in a 300 square foot storefront facility
it
owns. Zowy owns and has registered one design patent (Patent Number US D510,121
S).
Zowy,
through various entities and previous ownership, has been in existence since
1998. Zowy has provided weapon memorabilia to its customers for many years.
Zowy’s revenues peaked in 2004 in which it grossed more than $1.2M. Zowy has
declined in revenue since that time. Zowy formed Epic and entered into an
Agreement with Blizzard Entertainment®, Inc., in 2006, to develop online game
memorabilia, specifically the Frostmourne
TM
Sword as
depicted in the Warcraft® III, Frozen Throne™ game. The Company placed no value
on this contract at the date of acquisition as Epic was within 30 days of
default and no significant performance had been completed.
The
Company acquired majority control of Zowy with intentions to re-establish
Weaponmasters’ prior stronghold on the market. The Company launched a new
website in October 2007 and initiated an email marketing campaign to its
more
than 74,000 registered users. Since the launch of the new website the Company
averaged 469 transactions per month and the newsletter database grew to 208,807
registered participants. The gross sales increased by 54.8% over the remainder
of the year. The Company cannot determine how much of the increased revenue,
growth in newsletter database, or increase in the number of transactions
were
directly related to the email campaigns and new website, as the Company
witnesses an increase in seasonal sales each year during the Christmas holiday
season. Zowy currently hosts its email server on the Administrative Consultants
computers. As such the Administrative Consultant ensures strict compliance
with
the standards concerning the sending of unsolicited bulk email (SPAM). The
Administrative Consultants ensure their email servers do not get “Black Listed”
from other servers by clients who send SPAM through their servers. As such,
Weaponmasters is authorized to send one email to each customer who purchases
items from our online store and offer an “opt-out” removal from our newsletter
list.
Epic
Weapons, Inc.
Epic
Weapons, Inc. was formed as a limited liability company on January 5, 2006
and
converted to a C Corporation on January 2, 2007. On May 1, 2006, Epic entered
into an Exclusive License Agreement with Blizzard Entertainment®, Inc., a
Delaware Corporation, which is owned by newly formed Activision Blizzard,
for
the development of the collectible Frostmourne
TM
Sword as
depicted in the World of Warcraft® and Warcraft® III game. The
Frostmourne
TM
sword
preorders began on March 18, 2008. Epic has developed a proprietary process
in
which it provides ancillary services for the registration and valuation of
collectibles as seen in video games and movies. Epic will be launching Epic
Connect™ Club that will provide services that will enhance the valuation of the
collectible items and track the history of ownership. Epic has also entered
into
negotiations with various other video game manufacturers to add additional
product to our collectible line.
Game2Gear,
Inc.
Game2Gear,
Inc, was incorporated in Florida to provide a proprietary embedded encryption
that provides identification of the product in which it is embedded. The
software has been licensed to Epic and will be utilized in the
Frostmourne
TM
sword
upon its release in April 2008. The product has passed Intentional Radiated
Emissions testing, Unintentional Radiated Emissions testing, and Conducted
Emissions testing as required under Part 15 of the FCC Rules.
Business
Strategy
The
Company continues to look at increasing revenue internally and through strategic
acquisitions.
We
utilize many methods of identifying new products to produce and potential
companies to acquire. Our staff continually reviews current market trends
to
determine appropriate products to introduce (review Marketing and Sales Strategy
below). We have had them presented to us by business brokers, have reviewed
competition and looked for compelling stories, or incorporated a subsidiary
directly for a specific purpose. In some instances, the companies come looking
to us for assistance. We will continue to finance additional acquisitions
through private placements of stock, debt, or revenue from
operations.
Expansion
through Acquisitions
The
Company continues to look for additional acquisition opportunities in the
technology field that will enhance its overall growth, complement its existing
operations and increase shareholder value. OTG considers its acquisition
through
strategic growth. The Company looks for synergistic companies that will provide
strength and growth opportunities to the developing products and services
of
OTG. We will review current competition in many markets and determine if
an
acquisition or joint venture is in the best interest of OTG. OTG will finance
any further acquisitions through additional stock allocations or through
cash
generated from current sales/revenue streams.
Marketing
and Sales Strategy
OTG
and
its subsidiaries evaluate the constant change of Internet business. As such,
our
marketing and sales strategy is subject to change quickly and often. When
we
evaluate a new product we place considerable analysis on immediate return
on
invest (during initial 12 month period of launch) as the typical life expectancy
of products in the online gaming market is typically short-lived. In instances
where a client has demonstrated an ability to continue to control a market
share
we will consider long term sales as well. As such, management continues to
attend trade shows looking for potential products to develop, manufacture,
or
resale through our online stores.
Our
services are marketed directly through each subsidiary. As we continue to
acquire companies or services, we look for synergic growth opportunities
that
will allow for expansion of the multiple services available under our umbrella
of companies. While this may generate large eliminations in our financial
statements, the growth in revenue created by the cross pollination is desirable.
The
Company continues to utilize newsletters, advertisement, and viral knowledge
of
our services to expand its customer base. The Company has listed some operations
in various telephone directories and yellow books in Brevard County, Florida
to
grow its customer awareness. In addition, the Company, as part of the expected
launch of the
Frostmourne
TM
Sword
will work with Blizzard Entertainment® to make the 13 million plus owners of
their software knowledgeable about the purchase opportunity in owning a sword.
As Weaponmasters will be the exclusive reseller of this sword, expected
increases in customer purchases are expected across the Weaponmasters
platform.
Competitive
Environment
The
Internet service business is a highly competitive business. The Company attempts
to reduce its competition through cross pollination of services. While the
Company believes this will generate stability in its growth, there can be
no
assurances that the Company will succeed or overcome other competitive
advantages. The Company enjoys an exclusive licensing agreement with Blizzard
Entertainment®, Inc., for the resale of the
Frostmourne
TM
Sword.
The Company will pursue all legal remedies to ensure unauthorized replicas
will
enter the marketplace. The Company will continue to enjoy this exclusive
relationship through 2008, and will continue to maintain it provided 3,000
Frostmourne
TM
Swords
are sold each year.
Patents
and Intellectual Properties
The
Company currently holds one patent for the design of a specialty product
that is
offered for resale under Weaponmasters. The Company patented the design that
it
could exclusively sale the unique product and be able to defend itself from
others attempting to duplicate it. The design is for steel claws used on
the
hands. The item is a display item and not intended for use.
The
Company has a patent application in place for its processes under G2G.
The
Company ha obtained certification for FCC Part 15 concerning intentional
and
unintentional emissions compliance for its product in G2G that was released
to
the public on April 15, 2008.
The
Company’s trademarks include “G2G
TM
”
(currently pending), “GAME-TO-GEAR
TM
”,
and
“EPIC CONNECT
TM
”.
Employees
As
of
December 31, 2007, the Company had 10 full-time employees throughout the
various subsidiaries. The Company has three office managers, two technical
assistance employees that provide computer software and hardware installation,
repairs, and maintenance, and five administrative/shipping clerks. None of
our
employees are covered by a collective bargaining agreement, and management
believes its relationship with our employees is good.
|
Company
|
|
Employees
|
|
Part-Time
Employees
|
|
Consultants
|
|
Contracted
Labor
|
|
|
Organa
Technologies Group
|
|
|
3
|
|
|
-
|
|
|
1
|
*
|
|
-
|
|
|
Hurricane
Host
|
|
|
-
|
|
|
1
|
|
|
2
|
|
|
1
|
**
|
|
Organa
Consulting Group
|
|
|
2
|
|
|
1
|
|
|
-
|
|
|
-
|
|
|
Davinci
Computer
|
|
|
2
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
Gateway
Internet Services
|
|
|
-
|
|
|
-
|
|
|
1
|
|
|
-
|
|
|
Zowy
Media
|
|
|
3
|
|
|
-
|
|
|
1
|
|
|
2
|
***
|
|
Epic
Weapons
|
|
|
-
|
|
|
-
|
|
|
2
|
|
|
|
|
|
Game2Gear
|
|
|
-
|
|
|
-
|
|
|
4
|
|
|
-
|
|
*
The
Administrative Assistant has five part-time staff members providing
administrative support as needed.
**
The
Planet, Internet Server Provider, provides 24 hour customer support services
as
required.
***
The
Company uses a staffing service to provide personnel for high-volume work
flow
variances.
The
Company utilizes a considerable amount of consultants to provide periodic
work
requirements. When workflow demands a fulltime or justifiable part-time employee
the Company hires the appropriate person to fulfill the job.
Available
Information
Effective
November 26, 2007, the Company became reporting and has commenced filing
periodic reports with the Securities and Exchange Commission (“SEC”) commencing
with the Form 10-K, filed April 14, 2008. The Company completed its first
filing, a Form 8K, on February 14, 2008. All reports of the Company filed
with
the SEC will be available free of charge through the SEC’s Web site at
www.sec.gov. In addition, the public may read and copy materials filed by
the
Company at the SEC’s Public Reference Room located at 100 F Street, N.E.,
Washington, D.C. 20549. The public may also obtain additional information
on the
operation of the Public Reference Room by calling the Commission at
1-800-SEC-0330.
You
may
also request a copy of our filings at no cost by writing or telephoning us
at:
Organa
Technologies Group, Inc.
2910
Bush
Drive, Melbourne, Florida 32935
Attention:
Gina L. Bennett, Chief Executive Officer
Telephone:
321-421-6652
Item 1A.
Risk
Factors
.
If
any of the following events occur, our business, financial condition and results
of operations could be materially adversely affected. In such case, our net
asset value and the value of our equity interests could
decline.
Risks
Related to Our Business
We
have a limited relevant operating history and we may not be able to maintain
profitability in the near term, which may result in raising additional capital
and diluting our shareholders.
Our
company and management team is newly formed and has limited experience working
together in this area. Such limits could adversely effect our near term
performance in the management of our assets. Our company has had a cumulative
net loss from inception of approximately $1,512,000 with only the year ended
December 31, 2006 being profitable. Our needs for continued expenditures
for
product research and development and marketing, among other things, will
make it
difficult for us to reduce our operating expenses in order to deal with lack
of
sales growth or unanticipated reductions in existing sales. Our failure to
balance expenditures in any period with sales will create losses for the
company
that would require additional financing to meet cash flow requirements. The
possibility of our future success must be considered relative to the problems,
challenges, complications and delays frequently encountered in connection
with
the development and operation of a rapid growth business. The Company's
prospects must be evaluated with a view to the risks encountered by a company
in
an early stage of development. To the extent that such expenses are not
subsequently followed by commensurate revenues, the Company's business, results
of operations and financial condition will be materially adversely affected.
There can be no assurance that the Company will be able to generate sufficient
revenues from the sale of services and products. If cash generated by operations
is insufficient to satisfy the Company's liquidity requirements, the Company
may
be required to sell additional equity or debt securities. The sale of additional
equity or convertible debt securities would result in additional dilution
to the
Company's stockholders.
We
may compete with clients of the Administrative Consultant for access to key
personnel of the Administrative Consultant, which could reduce the amount of
time and effort they devote to us and thus negatively impact our financial
condition and results of operations.
Achieving
our business objectives will depend on our ability to acquire suitable business
and to monitor and administer those businesses, which will depend, in turn,
on
the abilities of our Administrative Consultant.
Achieving
this result on a cost-effective basis will be largely a function of the
Administrative Consultant’s structuring of the business process and its ability
to provide competent, attentive and efficient services to us. Our executive
officers and the business professionals of the Administrative Consultant will
have substantial responsibilities in connection with their respective roles
as
the Administrative Consultant and with the other business vehicles advised
by
the Administrative Consultant, as well as responsibilities to us under the
Consultant Services Agreement. They may also be called upon to provide
managerial assistance to our portfolio companies on our behalf. These demands
on
their time, which will increase as the number of business or other clients
increase, may distract them or slow the rate of growth. In order to grow, the
Administrative Consultant will need to hire, train, supervise and manage new
employees. However, we cannot assure you that any such employees will contribute
to the work of the Administrative Consultant on our behalf. Any failure to
manage our future growth effectively could have a material adverse effect on
our
business, financial condition and results of operations.
The
Administrative Consultant currently manages and may in the future manage
business vehicles with a business focus that partially overlaps with our focus,
which could result in increased competition for access to business
opportunities.
The
Administrative Consultant currently manages other companies with a business
focus that may partially overlap with our focus, and may in the future sponsor
or manage additional business opportunities or other clients with businesses
overlapping ours, which, in each case, could result in us competing for access
to business opportunities. The Company does not believe a current conflict
exists.
There
may be conflicts of interest in our relationship with the Administrative
Consultant, which could result in decisions that are not in the best interests
of our stockholders.
Under
the
terms of the Consultant Services Agreement, business professionals of the
Administrative Consultant serve or may serve as officers, directors or
principals of other entities, or may otherwise conduct any other business,
whether or not the entities or business compete with the Company. Such other
entities or business
may
have
business objectives or may implement business strategies similar or different
to
those of the Company. Accordingly, these individuals may have obligations to
investors in those entities or businesses, the fulfillment of which might not
be
in the best interests of the Company or its stockholders.
The
Company and its Administrative Consultant may determine that a business is
appropriate both for us and for one or more other business vehicles or clients.
In such event, depending on the availability of such business and other
appropriate factors, the Administrative Consultant may determine which business
vehicle makes the business or, in certain limited circumstances, whether we
would invest concurrently with one or more other business vehicles. We may
make
all such businesses subject to compliance with applicable regulations and
interpretations, and the Administrative Consultant’s allocation protocol.
Our
Administrative Consultant’s liability will be limited under the Consultant
Services Agreement, and we will indemnify our Administrative Consultant against
certain liabilities, which may lead our Administrative Consultant to act in
a
riskier manner on our behalf than it would when acting for its own
account.
Our
Administrative Consultant has not assumed any responsibility to us other than
to
render the services described in the Consultant Services Agreement. The
Consultant Services Agreement provides that, absent willful misfeasance, bad
faith or gross negligence in the performance of the Administrative Consultant’s
duties or by reason of the reckless disregard of the Administrative Consultant’s
duties and obligations, the Administrative Consultant (and its officers,
managers, partners, agents, employees, controlling persons, members and any
other person or entity affiliated with the Administrative Consultant, including,
without limitation, its general partner and the Consultant), are entitled to
indemnification from the Company for any damages, loss, liabilities, costs
and
expenses (including, without limitation, judgments, fines, reasonable attorneys’
fees and expenses, and amounts reasonably paid or to be paid in settlement)
incurred by such persons in or by reason of any pending, threatened or completed
action, suit, investigation or other proceeding (including, without limitation,
an action or suit by or in the right of the Company or its security holders)
arising out of or otherwise based upon the performance of any of the
Administrative Consultant’s duties or obligations under the Consultant Services
Agreement or otherwise as an Administrative Consultant of the Company. These
protections may lead our Administrative Consultant to act in a riskier manner
when acting on our behalf than it would when acting for its own
account.
We
may experience fluctuations in our periodic results.
We
could
experience fluctuations in our operating results due to a number of factors,
including variations in and timing of recognition of realized and unrealized
capital gains or losses, the degree to which we encounter competition in
our
markets, and general economic conditions. Specifically, the Company expects
to
see rapid growth spurts in Epic due to the sale of the
Frostmourne
TM
Sword.
In addition, Weaponmasters traditionally experiences increased sales during
the
holiday season between October and December each year. As a result of these
factors, results for any period should not be relied upon as being indicative
of
performance in future periods.
Our
financial condition and results of operation will depend on our ability to
manage future growth effectively.
Our
ability to achieve our business objectives will depend on our ability to acquire
suitable businesses and to monitor and administer those businesses, which will
depend, in turn, on our Administrative Consultant’s ability to identify, invest
in and monitor companies that meet our business criteria.
Accomplishing
this result on a cost-effective basis will be largely a function of our
Administrative Consultant’s structuring of the business process and its ability
to provide competent, attentive and efficient services to us. Our executive
officers and certain of the officers of our Administrative Consultant will
have
substantial responsibilities in connection with their roles at the Company,
as
well as responsibilities under the Business Management Agreement. They may
also
be called upon to provide managerial assistance to our portfolio companies
on
our behalf. These demands on their time, which will increase as the number
of
business grow, may distract them or slow the rate of business. In order to
grow,
we and our Administrative Consultant will need to hire, train, supervise and
manage new employees. However, we cannot assure you that any such employees
will
contribute to the work of the Administrative Consultant. Any failure to manage
our future growth effectively could have a material adverse effect on our
business, financial condition and results of operations.
The
Company is expecting an enormous growth opportunity upon the effective launch
of
the
Frostmourne
TM
sword
under Epic. Our ability to provide system resources, additional personnel
and
training, and management will have a direct effect on the company’s ability to
perform under this growth opportunity.
We
may change our business strategy and asset allocation without stockholder
consent, which may result in our engaging in riskier
businesses.
We
may
change our business strategy or asset allocation at any time without the consent
of our stockholders. Any such change in our business strategy or asset
allocation could result in our engaging in businesses that are different from,
and possibly riskier than, the business described in this registration
statement. A change in our business strategy may increase our exposure to
interest rate market fluctuations.
Risks
Relating to our Securities
Two
of our current stockholders currently have, and may continue to have, a
significant influence over our management and affairs and control over most
votes requiring stockholder approval.
The
majority of common stock is currently held by only two stockholders, Avante
(69.28%) and GAMI (13.86%), both of which are managed by one individual,
Michael
W. Hawkins. As long as these two stockholders continue to hold a significant
percentage of our common stock following an offering, they will be able to
exert
influence over our management and policies and control most votes requiring
stockholder approval. This concentration of ownership may also have the effect
of delaying, preventing or deterring a change of control of the Company,
could
deprive our stockholders of an opportunity to receive a premium for their
common
stock as part of a sale of the Company and might ultimately affect the market
price of our common stock. The Administrative Consultant has the authority
to
vote securities held by our two controlling stockholders, including on matters
that may present a conflict of interest between the Administrative Consultant
and other stockholders.
Efforts
to comply with the Sarbanes-Oxley Act will involve significant expenditures,
and
non-compliance with the Sarbanes-Oxley Act may adversely affect
us.
Upon
effectiveness of this Registration Statement, we will be subject to certain
provisions of the Sarbanes-Oxley Act of 2002, and the related rules and
regulations promulgated by the SEC. Under current SEC rules, beginning with
our
fiscal year ending December 31, 2008, our management will be required to
report on our internal controls over financial reporting pursuant to
Section 404 of the Sarbanes-Oxley Act of 2002 and rules and regulations of
the SEC thereunder. We will be required to review on an annual basis our
internal controls over financial reporting, and on a quarterly and annual basis
to evaluate and disclose changes in our internal controls over financial
reporting. As a result, we expect to incur significant additional expenses
in
the near term, which may negatively impact our financial performance and our
ability to make distributions. This process also will result in a diversion
of
management’s time and attention. We cannot be certain as to the timing of
completion of our evaluation, testing and remediation actions or the impact
of
the same on our operations and may not be able to ensure that the process is
effective or that the internal controls are or will be effective in a timely
manner. There can be no assurance that we will successfully identify and resolve
all issues required to be disclosed prior to becoming a public company or that
our quarterly reviews will not identify additional material weaknesses. In
the
event that we are unable to maintain or achieve compliance with the
Sarbanes-Oxley Act and related rules, we may be adversely affected.
With
a limited public market of our securities, currently offered on the Gray
Markets, may create volatility and huge fluctuations in our stock price and
the
price may not be indicative of the Company’s performance and have a negative
effect on the Company’s ability to raise capital or make
acquisitions.
The
Company’s common stock is quoted and traded on the Gray Markets under the ticker
symbol OGNT.PK and is thinly traded. Until such time that the Company receives
approval from the
Financial
Industry Regulatory Authority (“
FINRA”)
to trade its shares on another platform the stock may be sold or bought at
varying prices that would make it difficult for potential investors and
acquisition candidates to make a fair assessment of the Company’s valuation. As
such, the Company may not be able to fairly negotiate acquisition transactions
that are fair and equitable.
Item
2. Financial Information
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
This
report on Form 10/A contains forward-looking statements within the meaning
of
Rule 175 of the Securities Act of 1933, as amended, and Rule 3b-6 of the
Securities Act of 1934, as amended, that involve substantial risks and
uncertainties. These forward-looking statements are not historical facts,
but
rather are based on current expectations, estimates and projections about
our
industry, our beliefs and our assumptions. Words such as “anticipate”,
“expects”, “intends”, “plans”, “believes”, “seeks” and “estimates” and
variations of these words and similar expressions are intended to identify
forward-looking statements. These statements are not guarantees of future
performance and are subject to risks, uncertainties and other factors, some
of
which are beyond our control and difficult to predict and could cause actual
results to differ materially from those expressed or forecasted in the
forward-looking statements. You should not place undue reliance on these
forward-looking statements, which apply only as of the date of this Form
10/A.
Investors should carefully consider all of such risks before making an
investment decision with respect to the Company’s stock. The following
discussion and analysis should be read in conjunction with our financial
statements and summary of selected financial data for Organa Technologies
Group,
Inc. Such discussion represents only the best present assessment from our
Management.
The
Company was organized as a vehicle to enter into various Internet business
combinations seeking customers through Internet product sales and Internet
services. Our principal business objective for the next twelve months and beyond
will be to achieve long-term growth potential through the consolidation and
synergistic services that will entrench our customers to rely on the services
we
provide for their Internet experience rather than immediate, short-term earnings
that come with various fads and short-lived Internet hot-topics. The Company
will not restrict itself to any specific business, industry or geographical
location other than “technology” and, thus, may acquire any type of business
that utilizes technology, provides technology services or support, or is
associated with the Internet.
The
Company currently evaluates financial performance in three segment; Retail
Sales, Internet Services, and Hardware and Software. The following diagram
identifies the company’s associated with the respective segment.
The
Company currently engages in various business activities that provide adequate
cash flow. During the next twelve months we anticipate incurring costs and
expenses related to filing of various Securities and Exchange Act reports
and
the implementation of our contract with Blizzard Entertainment® for the resale
of the
Frostmourne
TM
Sword.
Management will fund the costs and expenses to be incurred with such activities
through loans or further investment in the Company, when
necessary.
As
of the
date of this Registration Statement, we have not selected any additional
acquisition candidates or target industry on which to concentrate our search
for
additional and synergic products and services. None of our officers or directors
has engaged in discussions on our behalf with representatives of other companies
regarding the possibility of a potential business combination with us, nor
have
we been approached by any candidates (or representatives of any candidates)
with
respect to a possible business combination with us. Additionally, we have not,
nor has anyone on our behalf, taken any measure, directly or indirectly, to
identify or locate any suitable acquisitions, nor have we engaged or retained
any agent or other representative to identify or locate such a suitable
acquisition. We have not conducted any research with respect to identifying
the
number and characteristics of any potential target business candidates.
Management
will have virtually unrestricted flexibility in identifying and selecting a
prospective target business and may consider entering into a business
arrangement with virtually any business, including a business which has recently
commenced operations, has no established record of growth or earnings and which
is subject to all of the risks attendant to a development stage operation,
including requiring additional capital, or which operates in an industry that
is
characterized by an unusually high element of risk. In the alternative, a
business combination may involve the acquisition of, or merger with, an
established company which does not require substantial additional capital,
but
which desires to establish a public trading market for its shares, while
avoiding, among other things, the time delays, significant expense, and loss
of
voting control which may occur in a public offering. Although our management
will endeavor to evaluate the risks inherent in a particular target business,
there can be no assurance that we will properly ascertain or assess all
significant risks.
Management
expects that the selection of additional businesses will be a complex,
competitive and extremely risky matter. Because of general economic conditions,
rapid technological advances being made in some industries and shortages of
available capital, our management believes that there are numerous firms seeking
even the limited additional capital which we will have and/or the perceived
benefits of becoming a publicly traded corporation. Such perceived benefits
of
having a class of securities registered under federal securities laws which
include, among other things, facilitating or improving the terms on which
additional equity financing may be obtained, creating a means for providing
incentive stock options or similar benefits to key employees, and offering
greater flexibility in structuring acquisitions, joint ventures and the like
through the issuance of capital stock. Targeted businesses may be available
in
many different industries and at various stages of development, all of which
will make the task of comparative investigation and analysis of such business
opportunities extremely difficult.
On
June
30, 2006 the Company entered into a loan with Avante, the Administrative
Assistant in order to effectuate the loan of $250,000 that was transferred
by
the Company on April 26, 2006 in the amount of $150,000 and April 27, 2006
in
the amount of $106,600 ($6,600 was payment for outstanding expenses). While
the
Company had outstanding liabilities owed to the Administrative Consultant
the
transaction was recorded as a loan. On September 30, 2006 the Company and
the
Administrative Assistant entered into corresponding Revolving Credit Agreements
whereby the Consultant could borrow up to $500,000 from the Company and the
Company could borrow up to $500,000 from the Administrative Consultant based
upon the mutual consents of both parties. Under the agreements and with the
settlement of minority interest the outstanding balance owed by the
Administrative Assistant on December 31, 2007 was $283,689. At the time of
the
Revolving Credit Agreement exchange, the Administrative Assistant had guaranteed
payment to Global Trading Agents for the initial purchase of
Frostmourne
TM
Swords
in the amount of $364,500. As of March 31, 2008 the current initial order,
due
to changes in design, and subsequent approval by the Administrative Assistant
the amount guaranteed has increased to $695,500. The initial
Frostmourne
TM
Sword
shipments were received on April 15, 2008.
On
October 19, 2007, the Company engaged Dinosaur Securities, LLC (“Dinosaur”) to
raise up to Five Million Dollars ($5,000,000) under a Confidential Private
Placement Memorandum (PPM) for Epic under an exemption to the Securities
Act of
1933. Under the terms and conditions of the PPM, the Company will issue up
to
5,000,000 shares of Series A preferred stock and pay up to 20% royalty fee
directly associated with the sale of the
Frostmourne
TM
Sword.
Each unit of the PPM consists of 10,000 shares of Series A preferred stock
and
0.04% royalty on each sale of the
Frostmourne
TM
Sword
paid quarterly. Management feels additional storage facilities, inventory,
development of technology devices, increase in manpower, and administrative
support will be required to sustain the projected sales. There can be no
assurances that Dinosaur will succeed in raising the funds solely through
qualified and accredited investors. In the event the Company is unsuccessful
in
raising the necessary capital the Company will have to consider additional
debt
structures or other financing mechanisms to support the rapid growth and
inventory levels. The initial closing date of the PPM was November 30, 2007.
Prior to closing the Company sold 13 units. The Company extended the closing
date until January 31, 2008. At the end of January 31, 2008 the company had
sold
a total of 32 units and issued 8 units for services performed. The Company
has
elected not to extend the PPM further than January 31, 2008 and it is considered
closed. For further information concerning the PPM review
Item 10
-
Recent Sales of Unregistered Securities
.
Description
of Company
The
Company is a management company that currently operates four wholly-owned
subsidiaries; Hurricane Host, Inc., an entity which provides Internet web
hosting and Voice over Internet Protocol (VOIP) services, Davinci’s Computer
Corp., an entity which provides hardware and software computer system solutions
and services, Gateway Internet Services Corporation, an entity which provides
on-line payment processing through ACH and other banking solutions, Game2Gear,
Inc., an entity that provides online product registration of replica weapons,
and three majority-owned subsidiaries; Zowy Media, Incorporated, doing business
as Swords Online and WeaponMasters, and its subsidiary, Epic Weapons, Inc.
f/k/a
Epic Weapons, LLC, entities which provide Internet purchasing of swords and
weapon memorabilia, and Organa Consulting Group, Inc., an entity which provides
web design services, hardware and software installation and training, and
other
Internet related consulting services. For further information review the
“Business Background” Section of this Form 10/A.
The
Company maintains the following websites, none of which are incorporated
as part
of this Form 10/A:
|
|
·
|
www.organatechnologies.com
|
|
|
·
|
www.integritymessenger.com
|
|
|
·
|
www.davcorp.net
(under construction)
|
|
|
·
|
www.organaconsulting.com
(under construction)
|
|
|
·
|
www.game2gear.com
(under construction)
|
Our
services and products, specifically those offered by Weaponmasters, Epic,
and
HH, are provided to customers in many different countries. The following
charts,
as reported with
www.alexa.com
on March
22, 2008 (which is not incorporated in this Form 10/A), demonstrate the
worldwide marketing of our products through:
|
Website
|
Ranking
|
|
Website
|
Ranking
|
|
Website
|
Ranking
|
|
EPIC Weapons
|
3,356
|
|
Weaponmasters
|
6,160
|
|
Hurricane Host
|
628,672
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Country
|
%
of
Users
|
|
Country
|
%
of
U
sers
|
|
Country
|
%
of
Users
|
|
United States
|
23.0
|
|
United States
|
32.0
|
|
United States
|
85.1
|
|
France
|
8.6
|
|
Canada
|
5.5
|
|
Poland
|
4.3
|
|
Canada
|
4.2
|
|
France
|
5.4
|
|
United Kingdom
|
2.1
|
|
Germany
|
3.6
|
|
Germany
|
3.3
|
|
Canada
|
2.1
|
|
Hungary
|
3.4
|
|
United Kingdom
|
2.6
|
|
Malaysia
|
2.1
|
|
Chile
|
3.1
|
|
Chile
|
2.3
|
|
Portugal
|
2.1
|
|
Spain
|
2.5
|
|
Poland
|
2.3
|
|
Turkey
|
2.1
|
|
Slovakia
|
2.2
|
|
Hungary
|
2.3
|
|
|
|
|
Poland
|
2.2
|
|
Spain
|
2.1
|
|
|
|
|
Czech
Republic
|
2.1
|
|
Australia
|
2.1
|
|
|
|
|
Croatia
|
2.0
|
|
Brazil
|
1.8
|
|
|
|
|
Greece
|
2.0
|
|
Mexico
|
1.7
|
|
|
|
|
United Kingdom
|
1.9
|
|
Greece
|
1.7
|
|
|
|
|
Brazil
|
1.8
|
|
Czech Republic
|
1.6
|
|
|
|
|
Romania
|
1.7
|
|
Romania
|
1.6
|
|
|
|
|
Russia
|
1.7
|
|
Peru
|
1.6
|
|
|
|
|
Singapore
|
1.7
|
|
Croatia
|
1.5
|
|
|
|
|
Belgium
|
1.6
|
|
Singapore
|
1.5
|
|
|
|
|
Venezuela
|
1.5
|
|
Slovakia
|
1.4
|
|
|
|
|
Peru
|
1.4
|
|
Netherlands
|
1.4
|
|
|
|
|
Mexico
|
1.4
|
|
Russia
|
1.3
|
|
|
|
|
Bulgaria
|
1.3
|
|
Belgium
|
1.1
|
|
|
|
|
Australia
|
1.2
|
|
Venezuela
|
1.1
|
|
|
|
|
Italy
|
1.1
|
|
Bulgaria
|
1.0
|
|
|
|
|
Lithuania
|
1.0
|
|
Turkey
|
0.9
|
|
|
|
|
Other countries
|
21.7
|
|
Other countries
|
18.9
|
|
|
|
HH
maintains computer server systems in Germany, Canada, and England, as well
as
the United States of America. Weaponmasters has more than 74,000 members in
its
customer database that represents more than 10,000 foreign customers in 168
different countries. HH has 5,266 members in its customer database that
represents 1,153 foreign customers in primarily three different countries;
Canada, United Kingdom, and Australia. The marketing of our products is through
various forms of magazine advertisement, word-of-mouth, and Google™, as
applicable to each product and/or service.
In
2005,
all of the Company’s revenues were derived from the operations of HH and OTG. In
2006, through strategic acquisitions and the formation of new entities, the
Company’s revenue stream increased to include DCC, Zowy and OCG. Additionally,
HH increased its revenue significantly from 2005. The Company and its
subsidiaries do not rely on any significant customers as its customer base
includes no distinct customer which is responsible for any material percent
of
the sales.
In
2004,
the Company acquired HH. Prior to the acquisition, the Company provided services
of instant messaging under the name Integrity Messenger.
The
following Management Discussion and Analysis should be read in conjunction
with
the financial statements and accompanying notes included in this Form
10/A.
Analysis
of Financial Condition and Results of Operations for the Twelve Months Ended
December 31, 2007: Comparison of the Year Ended December 31, 2007 to the
Year
Ended December 31, 2006
Results
of Operations
Overview
Total
revenues decreased to $1,143,158 for the year ended December 31, 2007 from
$1,483,816 for the year ended December 31, 2006. The decrease of $340,658
or 23%
is a direct result of the decrease in revenue by our Internet Services Division.
The Company’s Internet Services Division decreased revenue by $593,362 while the
Computer Hardware and Software Division and Retail Sales Division increased
revenue by $63,467 and $266,085, respectively.
|
|
|
Internet Retail Sales
|
|
Computer Hardware
and Software Sales
|
|
Internet
Services
|
|
Corporate
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
2006
|
|
2007
|
|
2006
|
|
2007
|
|
2006
|
|
2007
|
|
2006
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
436,735
|
|
|
170,650
|
|
|
175,903
|
|
|
112,436
|
|
|
530,520
|
|
|
1,123,882
|
|
|
-
|
|
|
76,848
|
|
|
1,143,158
|
|
|
1,483,816
|
|
|
Cost
of Sales
|
|
|
356,011
|
|
|
133,099
|
|
|
44,102
|
|
|
36,385
|
|
|
321,998
|
|
|
294,502
|
|
|
-
|
|
|
34,769
|
|
|
722,111
|
|
|
498,755
|
|
|
Gross
Profit
|
|
|
80,724
|
|
|
37,551
|
|
|
131,801
|
|
|
76,051
|
|
|
208,523
|
|
|
829,380
|
|
|
-
|
|
|
42,078
|
|
|
421,047
|
|
|
985,061
|
|
|
Operating
Expenses
|
|
|
98,444
|
|
|
86,228
|
|
|
96,077
|
|
|
67,993
|
|
|
151,996
|
|
|
477,199
|
|
|
248,134
|
|
|
160,375
|
|
|
594,652
|
|
|
791,795
|
|
|
Income
(Loss) From Operations
|
|
|
(17,721
|
)
|
|
(4,677
|
)
|
|
35,724
|
|
|
8,058
|
|
|
56,527
|
|
|
352,181
|
|
|
248,134
|
|
|
(118,296
|
)
|
|
(173,604
|
)
|
|
193,266
|
|
Revenues
and the percent of consolidated revenue for the year ended December 31,
2007, by
segment, are as follows: Retail Sales Division, $436,735 (38%), Computer
Hardware and Software Division $175,903 (15%) and Internet Services Division
$530,520 (47%).
Overall
cost of sales was $722,111 and $498,755 for the years ended December
31, 2007
and 2006, respectively. As a percent of revenue, the cost of sales increased
from 34% to 63%, for the year ended December 31, 2006 as compared to
the year
ended December 31, 2007. The increase is primarily due to overall increase
in sales by our Retail Sales Division directly (which has a higher cost
of
goods), in conjunction with the decrease in sales from our Internet Services
Division (which typically has a lower cost of goods).
The
cost
of sales and the percent of consolidated cost of sales for the year ended
December 31, 2007, by segment, are as follows: Retail Sales Division,
$356,011
(49%), Computer Hardware and Software Division $44,102 (6%) and Internet
Services Division $321,998 (45%).
Gross
profit was $421,047 and $985,061 for the years ended December 31, 2007
and 2006,
respectively. As a percent of revenue, gross profit was 37% and 66% for
the
years ended December 31, 2007 and 2006, respectively.
Total
operating expenses decreased to $594,651 for the year ended December
31, 2007
from $791,795 for the year ended December 31, 2006. This $197,144 or
24.9%
decrease was primarily attributable to operating expenses associated
with
Internet Services Division ($325,263) while increasing corporate’s operating
expenses.
The
operating expenses and the percent of consolidated operating expenses for
the
year ended December 31, 2007, were contributed as follows: Retail Sales
Division, $98,444 (17%), Computer Hardware and Software Division, $96,077
(16%),
Internet Services Division, $151,996 (25%), and Corporate, $248,134 (42%).
Retail
Sales Division
Weaponmasters
(the only revenue generating activity in the Internet Retail Sales for
2006 and
2007) revenue increased from $170,650 to $436,735 (increase of $266,085)
for the
years ended December 31, 2006 and 2007, respectively. The increase of 155.9%
is
related to the Company reporting revenue for the entire year in 2007 versus
a
partial year (time of acquisition) in 2006.
Cost
of
sales increased from $133,099 to $356,011 (increase of $222,912) for the
years
ended December 31, 2006 and 2007 respectively. The increase of 167.5% is
related
to (i) the Company reporting revenue for the entire year in 2007 versus
a
partial year (time of acquisition) in 2006; (ii) increased shipping cost;
and
(iii) and the incorporation of our pricing module that is more cost competitive
and in line with industry standards.
Operating
expenses increased from $86,228 to $98,444 (increase of $12,216) for the
years
ended December 31, 2006 and 2007, respectively. The increase of 14.2% is
related
to the Company reporting revenue for the entire year in 2007 versus a partial
year (time of acquisition) in 2006 and the development cost expensed under
Epic
for the development of the Frostmourne™ Sword ($44,000).
Loss
from
operations increased from a net loss of ($4,677) to a net loss of ($17,721)
for
the years ended December 31, 2006 and 2007, respectively. The increase
was due
primarily to the increase, as a percentage, of the cost of sales and the
cost
attributed to Epic. While revenues increased 155.9%, cost of sales increased
167.5%. The Company expensed $44,000 in work associated with the development
of
the Frostmourne™ Sword in 2006.
Computer
Hardware and Software Division
DCC
(the
only revenue generating activity in the Computer Hardware and Software
Sales
Division for 2006 and 2007) revenue increased from $112,436 to $175,903
(increase of $63,467) for the years ended December 31, 2006 and 2007,
respectively. The increase of 56.4% is related to the Company reporting
revenue
for the entire year in 2007 versus a partial year (time of acquisition)
in
2006.
Cost
of
sales increased from $36,385 to $44,102 (increase of $7,717) for the years
ended
December 31, 2006 and 2007 respectively. The increase of 21.2% is related
to (i)
the Company reporting revenue for the entire year in 2007 versus a partial
year
(time of acquisition) in 2006; (ii) and the incorporation of our pricing
module
that is more cost competitive and in line with industry standards; and
(iii) an
increase in the proportion of revenue generated from services with little
or no
direct costs as compared to product sales.
Operating
expenses increased from $67,993 to $96,077 (increase of $28,084) for the
years
ended December 31, 2006 and 2007, respectively. The increase of 41.3% is
related
to the Company reporting revenue for the entire year in 2007 versus a partial
year (time of acquisition) in 2006.
Income
from operations increased from $8,058 to $35,724 for the years ended December
31, 2006 and 2007, respectively. The increase of 343.3% was due primarily
to the
decrease, as a percentage, of the cost of sales.
Internet
Services Division
Revenue
attributed to the Internet Services Division was $530,520 (46.4% of total
consolidated revenue) in 2007 as compared to $1,123,882 (75.7% of total
consolidated revenue) in 2006 (52.8% decrease in division revenues).
The
Internet Services Division includes HH, OCG, and GIS. HH accounted for
$441,520
(38.6% of the Company’s overall revenue) and $320,849 (21.6% of the Company’s
overall revenue) in revenue for 2007 and 2006, respectively. OCG accounted
for
$803,033 (54.1% of the Company’s overall revenue) in revenue in 2006. OCG
accounted for less than 8% of the Company’s revenue in 2007.
Operating
expenses and the percent of consolidated operating expenses for the year
ended
December 31, 2006 and December 31, 2007, respectively, for HH was $97,610
(12.3%) and $93,278 (15.7%) of the overall operating expenses and 20.5%
and
61.4% of the operating expenses of the Internet Services Division segment.
The
operating expenses and the percent of consolidated operating expenses for
the
year ended December 31, 2006 for OCG was $379,589 (47.9%) of the overall
operating expenses and 79.5% of the operating expenses of the Internet
Services
Division segment.
Corporate
The
income derived from corporate in 2006 was directly related to revenue generated
from the instant messaging services initially provided by the Company.
The
Company recognized no revenue for this segment in 2007 and has terminated
the
instant messaging services.
The
operating expenses and the percent of consolidated operating expenses for
the
year ended December 31, 2006 and December 31, 2007, respectively, for corporate
headquarters was $160,375 (20.3%) and $248,134 (41.7%) of the overall operating
expenses. The increase in operating expenses is primarily due to the increase
of
staff to support overall operations, and the research and development of
additional products and services.
Liquidity
and Capital Resources
As
of
December 31, 2007, the Company had a working capital surplus of $15,026.
Net
loss was $181,038 for the year ended December 31, 2007. The Company generated
a
negative cash flow from operations of $94,811 for the year ended December
31,
2007. The negative cash flow from operating activities for the period is
primarily attributable to the Company's net loss, increase in accounts
receivables, $11,663, inventory, $35,815, and prepaid expenses and other
assets,
$83,119, offset by the decrease in due from related party, $57,928, and
increases in accounts payable and accrued expenses, $156,166.
Cash
flows used in investing activities for the year ended December 31, 2007
consisted of the acquisition of $22,397 of equipment.
Cash
flows provided by financing activities for the year ended December 31,
2007 was
$135,094 primarily due to the issuance of preferred stock.
The
Company had a net increase in cash of $17,886 for the year ended December
31,
2007 compared to an increase of $8,365 for the year ended December 31,
2006.
By
adjusting its operations and development to work within the Company’s financing
and budget, management believes it has sufficient capital resources to
meet
projected cash flow needs through the next twelve months. However, if
thereafter, the pricing of the products or services the Company sells increase
dramatically, sales grow rapidly, and we are not successful in generating
sufficient liquidity from operations or in raising sufficient capital resources,
on terms acceptable to us, this could have a material adverse effect on
our
business, results of operations, liquidity and financial condition.
On
June 30, 2006, the Company executed a Note
Receivable with Avante for $250,000. The terms of the note are 7% interest,
accrued throughout the term of the note, and payable on June 30, 2007.
On
September 30, 2006 the Company entered into a Revolving Credit Agreement
with
Avante for up to $500,000. In addition, Avante entered into a revolving
credit
agreement with the Company for up to $500,000.
The
effect of inflation on the Company's revenue and operating results was not
significant. The Company's operations are located primarily in the southeast
and
central United States and there are no seasonal aspects that would have a
material effect on the Company's financial condition or results of
operations.
Critical
Accounting Policies
The
preparation of our financial statements in conformity with accounting principles
generally accepted in the United States requires us to make estimates and
judgments that affect our reported assets, liabilities, revenues, and expenses,
and the disclosure of contingent assets and liabilities. We base our estimates
and judgments on historical experience and on various other assumptions we
believe to be reasonable under the circumstances. Future events, however, may
differ markedly from our current expectations and assumptions. While there
are a
number of significant accounting policies affecting our consolidated financial
statements; we believe the following critical accounting policies involve the
most complex, difficult and subjective estimates and judgments:
|
|
·
|
Product
warranty reserve
|
|
|
·
|
Allowance
for uncollectible accounts
|
Revenue
Recognition
The
Company recognizes revenue when persuasive evidence of an arrangement exists,
the price to the customer is fixed, collectibility is reasonably assured and
title and risk of ownership is passed to the customer, which is usually upon
delivery. However, in limited circumstances, certain customers
traditionally have requested to take title and risk of ownership prior to
shipment. Revenue for these transactions is recognized only
when:
(1)
Title
and risk of ownership have passed to the customer;
(2)
The
Company has obtained a written fixed purchase commitment;
(3)
The
customer has provided a delivery schedule; and
(4)
All
performance obligations related to the sale have been completed;
In
the
event that the Company’s arrangements with its customers include more than one
product or service, the Company determines whether the individual revenue
elements can be recognized separately in accordance with Financial Accounting
Standards Board (FASB) Emerging Issues Task Force No. 00-21 (EITF 00-21),
Revenue
Arrangements with Multiple
Deliverables
, EITF
00-21 addresses the determination of whether an arrangement involving more
than
one deliverable contains more than one unit of accounting and how the
arrangement consideration should be measured and allocated to the separate
units
of accounting.
Product
Warranty Reserve
Currently,
the Company offers limited warranties, dependent on the product and/or service
provided. The products from Zowy and Epic carry the manufacturers’ warrant. DCC
offers a ninety day warranty on service. No other warranties are available.
In
the future, when the company deems warranty reserves are appropriate, such
costs
will be accrued to reflect anticipated warranty costs.
Inventories
We
value
our inventories, which consists of products acquired from third parties,
at the
lower of cost or market. Cost is determined on the first-in, first-out method
(FIFO) and includes the cost of merchandise and freight. A periodic review
of
inventory quantities on hand is performed in order to determine if inventory
is
properly positioned at the lower of cost or market. Factors related to current
inventories such as future consumer demand and trends in the Company's core
business, current aging, current and anticipated wholesale discounts, and
class
or type of inventory is analyzed to determine estimated net realizable values.
A
provision is recorded to reduce the cost of inventories to the estimated
net
realizable values, if required. Any significant unanticipated changes in
the
factors noted above could have a significant impact on the value of our
inventories and our reported operating results.
Allowance
for Uncollectible Accounts
We
are
required to estimate the collectibility of our trade receivables. A considerable
amount of judgment is required in assessing the realization of these receivables
including the current creditworthiness of each customer and related aging
of the
past due balances. In order to assess the collectibility of these receivables,
we perform ongoing credit evaluations of our customers' financial condition.
Through these evaluations we may become aware of a situation where a customer
may not be able to meet its financial obligations due to deterioration of
its
financial viability, credit ratings or bankruptcy. The reserve requirements
are
based on the best facts available to us and are reevaluated and adjusted
as
additional information is received. Our reserves are also based on amounts
determined by using percentages applied to certain aged receivable categories.
These percentages are determined by a variety of factors including, but are
not
limited to, current economic trends, historical payment and bad debt write-off
experience. We are not able to predict changes in the financial condition
of our
customers and if circumstances related to our customers deteriorate, our
estimates of the recoverability of our receivables could be materially affected
and we may be required to record additional allowances. Alternatively, if
we
provided more allowances than are ultimately required, we may reverse a portion
of such provisions in future periods based on our actual collection experience.
As of December 31, 2007, we determined that there was no need for an additional
reserve.
Off-Balance
Sheet Arrangements
The
Company does not have any off-balance sheet arrangements.
The
Company’s principal executive offices are located at 2910 Bush Drive, Melbourne,
Florida, consisting of 2,200 square feet. This leased office space is used
by
the Company’s executive management team as well as the administrative staff. The
Company entered into a five year lease at $4,000 per month effective June
1,
2007 which expires May 31, 2012.
The
Company’s distribution facility for Zowy is located at 3815 North Cocoa Blvd,
Suite 27, Cocoa, Florida. The office in Cocoa, Florida has an adjustable
rate
mortgage at 1% over the current index. The note is due on September 2010
with a
current monthly payment of $1,573.39. The remaining balance as of December
31,
2007 was $129,835. The mortgage is secured by the building and an unconditional
and continuing guarantee by its minority shareholder. The facility is a 2,400
square foot office and warehouse. All other subsidiaries operate from the
Melbourne executive office. The Company has launched Epic Weapons formally
into
the market. With the anticipated delivery of its initial order of Frostmourne®
Swords, the Company is considering additional options for storage and shipping
site that would be adequate to operate this activity. The initial orders
will be
served out of the Cocoa facility, but the Company expects this to be inadequate
for the expected growth.
During
2007, DCC maintained a 700 square foot office space at 380 Stan Drive,
Melbourne, Florida under a month-by-month lease agreement in the amount of
$600
per month. On March 1, 2008 DCC entered into a lease agreement with GAMI,
LLC
for a period of five years at the cost of $3,000 per month where DCC relocated
to 2910 Bush Drive, Melbourne, Florida and occupies 1,012 square
feet.
|
Location
|
|
Number of Employees
|
|
Adequacy of Site
|
|
Sole Occupants
|
|
|
2910 Bush Drive,
Melbourne,
Florida
|
|
|
3
|
|
|
Yes
|
|
|
No
|
|
|
380
Stan Drive, Melbourne,
Florida
(1)
|
|
|
2
|
|
|
No
|
|
|
No
|
|
|
3815
North Cocoa Blvd, Suite 27, Cocoa,
Florida
|
|
|
3
|
|
|
Yes
|
|
|
Yes
|
|
(1)
DCC
moved from this property on March 1, 2008 and relocated to 2910 Bush Drive,
Melbourne, Florida.
Item 4.
Security
Ownership of Certain Beneficial Owners and Management.
As
of
March 31, 2008 there were 57 shareholders of the Company’s stock as the
following table identifies the ownership of each officer, director, and
significant shareholder owning beneficially 5% or more of the outstanding
shares.
|
Name
and Address of Beneficial Owner
(1)
(2) (3)
|
|
AMOUNT AND
NATURE OF
BENEFICIAL
OWNERSHIP
|
|
PERCENT
|
|
|
Willis
Kilpatrick, Director
|
|
|
20,000
|
|
|
0.07
|
%
|
|
Jason
Dieterle, General Manager, Davinci’s Computer Corp & Organa Consulting
Group, Inc.
|
|
|
2,010,000
|
|
|
6.96
|
%
|
|
GAMI,
LLC
|
|
|
4,000,000
|
|
|
13.86
|
%
|
|
Avante
Holding Group, Inc
|
|
|
20,000,000
|
|
|
69.28
|
%
|
|
All
officers and directors as a group (1 person)
|
|
|
20,000
|
|
|
0.07
|
%
|
|
|
(1)
|
Unless
otherwise noted, the address of each person or entity listed is
c/o Organa
Technologies Group, Inc., 2910 Bush Drive, Melbourne, Florida,
32935.
|
|
|
(2)
|
GAMI,
LLC is owned by Michael and Ioanna Hawkins Revocable Living Trust.
99.8%
of Avante Holding Group, Inc., is owned by GAMI, LLC. The natural
person
to vote and dispose of assets of GAMI, LLC is Michael W. Hawkins.
|
|
|
(3)
|
Beneficial
ownership is determined in accordance with the rules of the SEC
and
generally includes voting or investment power with respect to securities.
Shares of common stock subject to options, warrants or convertible
securities that are currently exercisable or exercisable within
60 days of March 31, 2008, are deemed outstanding for computing the
percentage of the person holding such options, warrants or convertible
securities but are not deemed outstanding for computing the percentage
of
any other person. Except as indicated by footnote and subject to
community
property laws where applicable, the persons named in the table
have sole
voting and investment power with respect to all shares of common
stock
shown as beneficially owned by them. However, there are currently
no
options or warrants eligible under this
criteria.
|
Item 5.
Directors
and Executive Officers.
Our
business and affairs are managed under the direction of our Board of Directors.
The Board of Directors currently consists of five members, three of which
are
considered independent board members. Our Board of Directors elects our
officers, who will serve at the discretion of the Board of
Directors.
Board
of Directors and Executive Officers
Under
our
charter, our directors are divided into two classes. Each class of directors
holds office for a two-year term. However, the initial members of the two
classes have initial terms of one year. At each annual meeting of our
stockholders, the successors to the class of directors whose terms expire
at
such meeting will be elected to hold office for a term expiring at the annual
meeting of stockholders held in the last month of the year following the
year of
their election. Each director will hold office for the term to which he or
she
is elected and until his or her successor is duly elected and
qualifies.
Information
regarding the Board of Directors is as follows:
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Age
|
|
Position
|
|
Director
Since
|
|
Expiration
of
Term
|
|
Gina
L. Bennett
|
|
39
|
|
Chief
Executive Officer and Chairman of the Board of Directors
|
|
2006
|
|
2008
|
|
Bruce
Harmon
|
|
49
|
|
Director,
Audit Chairman (1) (3)
|
|
2006
|
|
2008
|
|
Dean
Droumbalas
|
|
32
|
|
Director
(2)
|
|
2007
|
|
2009
|
|
Willis
Kilpatrick
|
|
46
|
|
Director
(2)
|
|
2007
|
|
2009
|
|
Steves
Rodriguez
|
|
36
|
|
Director,
Audit Chairman (2) (3)
|
|
2007
|
|
2009
|
|
|
(1)
|
Mr.
Harmon served as Interim Chief Financial Officer until February
19, 2008.
John S. Wittler was appointed as Chief Financial Officer on February
19,
2008.
|
|
|
(2)
|
Independent
director.
|
|
|
(3)
|
Mr.
Harmon served as Audit Chairman for financial activities for 2007.
After
the filing of the Company’s Form 10-K, April 14, 2008, Mr. Harmon was
replaced as Audit Chairman by Steves Rodriguez.
|
The
address for each director is c/o Organa Technologies Group, Inc. 2910 Bush
Drive, Melbourne, Florida 32935
Executive
Officers Who Are Not Directors
Information
regarding our executive officers who are not directors is as
follows:
|
NAME
|
|
AGE
|
|
POSITION
|
|
HELD
POSITION
SINCE
|
|
John
S. Wittler
|
|
49
|
|
Chief Financial Officer
(1)
|
|
2008
|
(1)
Appointed
on February 19, 2008.
The
address for each executive officer is c/o Organa Technologies Group, Inc.,
2910
Bush Drive, Melbourne, Florida 32935
Officers
Of Subsidiaries Who Are Not Directors
Information
regarding our executive officers of subsidiaries who are not directors is as
follows:
|
Name
|
|
Age
|
|
Position
|
|
Titus
Blair (1)
|
|
38
|
|
Vice
President of Marketing, Zowy Media, Incorporated
|
|
Timothy
Benoit
|
|
33
|
|
Chief
Technology Officer, Hurricane Host, Inc.
|
|
Jason
Dieterle
|
|
35
|
|
General
Manager, Davinci’s Computer Corp./Organa Consulting Group,
Inc.
|
The
address for each executive officer is c/o Organa Technologies Group, Inc.,
2910
Bush Drive, Melbourne, Florida 32935
(1)
Effective March 2, 2008, Titus Blair’s employment with Zowy Media, Incorporated
was terminated.
Biographical
Information
Directors
and Executive Officers
Gina
L.
Bennett, Chairman and Chief Executive Officer (CEO). Ms. Bennett provided
governance and oversight during the past two years (August 2005) through
Avante
Holding Group, Inc., a management firm. Ms. Bennett assumed the role of Chief
Executive Officer in July 2006. Ms. Bennett has been a member of the Board
of
Directors since October 2005. She was elected as Chairman of the Board in
July
2006. Prior to working with Avante Holding Group, Inc., she was the Chief
Compliance Officer for Legacy for Life (September 2003 to August 2005) where
she
managed all regulatory requirements with the FDA, FCC, FTC and international
operation including market entry, product design, and distribution throughout
Asia and Mexico. From March 2002 to September 2003, Ms. Bennett assisted
Rotech
Healthcare, Inc., f/k/a Rotech Medical Corporation (provider and distributor
of
durable medical equipment), with its restructuring and emergence from its
bankruptcy, as well as its entrance into the public marketplace. Ms. Bennett
is
also a Director for Accelerated Building Concepts Corporation (ABCC.OB).
Ms.
Bennett has a B.S. degree in Legal Studies from Nova Southeastern University.
Ms. Bennett has served on the Space Coast Red Cross Board of Directors from
2004
to 2006. She is also an active member of the Haven House and March of
Dimes.
John
S.
Wittler, Chief Financial Officer (effective February 19, 2008).
Mr.
Wittler is a CPA and brings over twenty-seven years of financial management,
audit and consulting experience to the company. For the past three and a
half
years, Mr. Wittler was a senior manager with the international consulting
firm
of Control Solutions International, where he managed and performed engagements
for Sarbanes-Oxley 404 compliance, internal audits and Quality Assessment
Reviews for medium and large publicly held companies. From 1999 through
2002, Mr. Wittler was a project management consultant for UPS Supply Chain
Solutions, where he was responsible for the design and implementation of
global,
integrated financial systems. Prior to 1999, Mr. Wittler has served as CFO
or
controller for several logistics, telecommunications, and manufacturing
companies and was an Audit Manager with Ernst & Young. He holds a B.S.
degree in Accounting from Ball State University.
Bruce
Harmon, Director and Interim Chief Financial Officer (CFO) (through February
19,
2008). Mr. Harmon has for the past five years acted as Chief Financial Officer
for SinoFresh HealthCare, Inc. (SFSH.OB, a pharmaceutical company) from
September 2002 to September 2003, Alternative Construction Technologies,
Inc.
(ACCY.OB, a manufacturer of construction products) from October 2004 to December
2007, Accelerated Building Concepts Corporation (ABCC.OB, a manufacturer
of
modular concrete buildings) from January 2006 to date, and Organa Technologies
Group, Inc. (OGNT.PK) from July 2006 to February 2008. He is now a Director
for
the Company (serving as Audit Chairman for all activity through 2007), a
Director and Audit Chairman of ABCC.OB, and a Director for Alternative
Construction Technologies (formerly Audit Chairman through 2007). He holds
a
B.S. degree in Accounting from Missouri State University.
Dean
Droumbalas has been a senior level executive of Countrywide Home Loans (a
mortgage company) since 2002. He holds the position of regional vice president
in the central Florida area and currently manages a staff of over 170 employees.
He has experience in finance management, sales and technology. He is a graduate
of Worcester Polytechnic Institute of Worcester, Massachusetts with a Bachelor
of Science degree in electrical and computer engineering.
Willis
Kilpatrick
is
currently the managing member of South Residential Enterprises, LLC (a
residential developer), a Delaware Limited Liability Company where he has,
for
the past five years, overseen residential development projects in Mississippi.
He is a licensed Pharmacist working with the Indian Reservation hospitals in
and
around Philadelphia, Mississippi. He has served as a Consultant and Board Member
for several publicly-traded and privately-held companies. He is a graduate
from
the University of Mississippi.
Steves
Rodriguez is a Partner with London & Co., LLP, Certified Public Accountants,
where he has been employed for the past fifteen years. His clients have included
many of the largest commercial production companies in Beverly Hills and in
show
business, restaurants, distributors, manufacturers, retail companies and
celebrities including: musical artists, television actors, and directors.
Services provided by his firm include business management, consultancy, taxes,
mergers and acquisition, corporate structuring, tax planning and more. His
offices are located in Santa Monica, CA and a satellite office in New York,
NY.
Executive
Officers of the Subsidiaries
Titus
Blair, since 2002, has served in various positions, most recently as Vice
President of Marketing and founder of Zowy Media, Incorporated as well as
Epic
Weapons LLC, SwordsOnline.com and WeaponMasters.com. Prior to the acquisition
of
Zowy by OTG, Mr. Blair served as President of Zowy. Mr. Blair was retained
as an
integral part of Zowy due to his relationships with Maxim, Stuff, Guns &
Ammo, G4 Television, CFQ and Rolling Stone magazines and his complementary
consulting with various companies including Hollywood.com and Sealed Media.
His
expertise is critical for the goals of Zowy which have been validated and
featured on Startup Nation's (www.startupnation.com) national radio show
assisting entrepreneurs with Internet and marketing ideas. He has been featured
on the cover of USA Today business section for his development and fielding
of
the website Christmastreesonline.com. He is also the developer of a computer
coloring book for children which sold on QVC. He holds a Bachelor of Science
in
Business Administration from Pepperdine University. Mr. Blair was released
from
services on March 2, 2008.
Timothy
Benoit is the General Manager and Chief Technology Officer for Hurricane Host,
Inc. Tim has been a UNIX Administrator for the past five years in Dallas, Texas.
He has designed, configured, and provided support services for data centers
owned by companies running UNIX clusters.
Jason
Dieterle is the General Manager, founder of Davinci’s Computer Corp., and
co-founder of Organa Consulting, Inc. He has managed Davinci’s Computer Corp.
since its inception. He provides hardware and software solutions, server
installation and maintenance, personal PC oversight, maintenance, and hardware
and system repair services.
Committees
of the Board of Directors
Audit
Committee
Bruce
Harmon served as the chairman of the Audit Committee through the filing of
the
Company’s Form 10-K. Steves Rodriguez, CPA, serves as chairman of the Audit
Committee since that point. Additionally, Dean Droumbalas serves as an
independent audit committee member. The audit committee is responsible for
overseeing all of our financial and legal and regulatory compliance functions,
including matters relating to the appointment and activities of our auditors,
audit plans and procedures, various accounting and financial reporting issues
and changes in accounting policies, and reviewing the results and scope of
the
audit and other services provided by our independent public accountants.
The
audit committee is also responsible for aiding our Board of Directors in
fair
value pricing debt and equity securities that are not publicly traded or
for
which current market values are not readily available. When appropriate,
the
Board of Directors and audit committee will utilize the services of an
independent valuation firm to help them determine the fair value of these
securities.
Nominating
and Corporate Governance Committee
The
Nominating and Corporate Governance Committee members are Willis Kilpatrick
and
Dean Droumbalas. The nominating and corporate governance committee is
responsible for identifying, researching and nominating directors for election
by our stockholders, selecting nominees to fill vacancies on our board of
directors or a committee of the board, developing and recommending to the
board
of directors a set of corporate governance principles and overseeing the
evaluation of the board of directors and our management. Willis Kilpatrick
serves as the chairman of the Nominating and Corporate Governance
Committee.
The
Nominating and Corporate Governance Committee considers nominees properly
recommended by our stockholders. The Nominating and Corporate Governance
Committee will consider qualified director nominees recommended by stockholders
when such recommendations are submitted in accordance with the Company’s
governing documents and any applicable law, rule or regulation regarding
director nominations. When submitting a nomination to the Company for
consideration, a stockholder must provide certain information that would
be
required under applicable Commission rules, including the following minimum
information for each director nominee: full name, age and address; principal
occupation during the past five years; current directorships on publicly
held
companies and private companies; number of shares of Company common stock
owned,
if any; and, a written consent of the individual to stand for election if
nominated by the Board of Directors and to serve if elected by the
stockholders.
Compensation
Committee
The
Compensation Committee members are Dean Droumbalas, Willis Kilpatrick, and
Steve
Rodriguez. Mr. Droumbalas serves as chairman of the Compensation Committee.
The Compensation Committee reviews and recommends to the full board for approval
the compensation paid by us of our officers.
Item 6.
Executive
Compensation.
The
following table shows information regarding the compensation received by
the
Executive Officers for the fiscal year ended December 31, 2007.
SUMMARY
COMPENSATION TABLE
|
Name
and Principal Position (1)
|
|
Year
|
|
Salary
($)
|
|
Bonus
($)
|
|
Stock
Awards
($)
|
|
Options
Awards
($)
|
|
Non-Equity
Incentive Plan
Compensation
($)
|
|
Nonqualified
Deferred
Compensation
Earning
($)
|
|
All Other
Compensation
($)
|
|
Total
($)
|
|
|
Gina L. Bennett
(2) (6)
|
|
|
2007
|
|
|
12,000
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
12,000
|
|
|
Chairman
and CEO
|
|
|
2006
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
Christian
Rishel (3)
|
|
|
2006
|
|
|
226,671
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
226,671
|
|
|
Chairman
and CEO
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bruce
Harmon (2) (5) (6)
|
|
|
2007
|
|
|
12,000
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
12,000
|
|
|
Director
and Interim CFO
|
|
|
2006
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
Jayson
Benoit (4)
|
|
|
2006
|
|
|
92,630
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
92,630
|
|
|
COO
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
The
amounts reflected in the above table do not include any amounts for perquisites
and other personal benefits extended to the Named Executive
Officer.
(2)
Compensation was paid through Avante Holding Group, Inc. under terms of the
Administrative Consulting Agreement.
(3)
Mr.
Rishel lest the services of the Company on June 30, 2006.
(4)
Mr.
Benoit's services ended on June 30, 2006.
(5)
Mr.
Harmon resigned as Interim CFO February 19, 2008.
(6)
We do
not have a profit sharing or retirement plan.
Prior
to
2007, officers of the Company received a salary. Subsequently, as no officer
dedicated 100% of their time to the Company, compensation was based upon
consulting fees related to performance. The Compensation committee has elected
to place the Chief Executive Officer and Chief Financial Officer on a salary
scale for 2008.
The
following table shows information regarding compensation received by our
directors for the fiscal year ended December 31, 2007.
Directors
Compensation - 2007
|
Name
of Person, Position
|
|
Fees
Earned or
Paid
in
Cash
($)
|
|
Stock
Awards
($)
|
|
Option
Awards
($)
|
|
Non-Equity
Incentive Plan Compensation ($)
|
|
Change
in Pension Value and Nonquaslified Deferred Compensation
Earnings
($)
|
|
All
Other Compensations ($)
|
|
Total
($)
|
|
|
Gina
L. Bennett, Chairman (1)
|
|
|
12,000
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
12,000
|
|
|
Bruce
Harmon, Director (1)
|
|
|
12,000
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
12,000
|
|
|
Willis
Kilpatrick, Director
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
Steves
Rodriguez, Director
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
Dean
Droumbalas, Director
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
(1)
Compensation was paid for services as Executive Officers through Avante Holding
Group under terms of the Administrative Consulting Agreement.
Effective
November 26, 2007, the independent directors receive an annual fee of $4,000.
They also receive $1,000 plus reimbursement of reasonable out-of-pocket expenses
incurred in connection with attending each board meeting and receive $1,000
plus
reimbursement of reasonable out-of-pocket expenses incurred in connection
with
each committee meeting attended, including each telephonic committee or board
meeting attended. In addition, each Committee Chairman receives an annual
fee of
$1,000 for their additional services in these capacities. In addition, we
purchase directors’ and officers’ liability insurance on behalf of our directors
and officers. Upon the effective registration of the Company, the Independent
Directors have the option to receive up to half of the annual compensation
in
shares of our common stock; the other half is paid in shares of our common
stock. At any time that the market price of our common stock is less than
the
net asset value per share, the amounts paid to directors will be in cash.
To
this date no director has received stock as compensation for their
services.
Prior
to
2007, officers of the Company received a salary. In fiscal 2007, as no officer
dedicated 100% of their time to the Company, compensation was based upon
consulting fees related to performance. The Compensation committee has elected
to place the Chief Executive Officer and Chief Financial Officer on a salary
basis for 2008.
Stock
Option Plan
The
Company adopted a stock option plan in 2007. No options under this plan were
granted in 2007. On March 1, 2008, the Company granted 3,185,000 options.
Options granted to Executive Officers as follows:
GRANTS
OF PLAN-BASED AWARDS
|
|
|
|
|
Estimated Future Payouts Under Non-
Equity
Incentive Plan Awards
|
|
Estimated Future Payouts Under Equity
Incentive Plan Awards
|
|
All Other
Stock
Awards:
Number of
Shares of
|
|
All Other
Option
Awards:
Number of
Securities
|
|
Exercise or
Base Price of
|
|
Grant Date
Fair Value of
Stock and
|
|
|
Name
|
|
Grant
Date
|
|
Threshold
($)
|
|
Target
($)
|
|
Maximum
($)
|
|
Threshold
($)
|
|
Target
($)
|
|
Maximum
($)
|
|
Stock or
Units
(#)
|
|
Underlying
Options
(#)
|
|
Option
Awards
($)
|
|
Option
Awards
($)
|
|
|
Gina
L. Bennett
|
|
|
03/01/08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,225,000
|
|
|
0.0125
|
|
|
-
|
|
|
John
S. Wittler
|
|
|
03/01/08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
400,000
|
|
|
0.0125
|
|
|
-
|
|
The
above
options vest according to the following schedule:
|
2009
|
|
2010
|
|
2011
|
|
2012
|
|
2013
|
|
|
425,000
|
|
|
400,000
|
|
|
400,000
|
|
|
200,000
|
|
|
200,000
|
|
Item 7.
Certain
Relationships and Related Transactions, and Director
Independence
.
Consulting
Services Agreement
Management
Services
Pursuant
to the terms of a Consultant Services Agreement with Avante, our Chief Executive
Officer, subject to the overall supervision of our Board of Directors, serves
as
our Administrative Consultant and manages the day-to-day financial accounting
and compliance-related operations of, and provides all administrative management
services to the Company. Avante is a majority shareholder of the Company
(69.3%). Avante is controlled by Michael W. Hawkins, its Chairman and Chief
Executive Officer. Thomas G. Amon, corporate counsel for the Company, serves
as
an advisor to Avante providing legal services on a hourly fee basis. Under
the
terms of the Consultant Services Agreement, the Consultant
provides:
|
|
·
|
Financial
Oversight and Administration
|
|
|
·
|
Investor
Relations and Awareness
|
The
compensation of all Consultant professionals and other employees of the
Administrative Consultant, when and to the extent engaged in providing business
advisory and management services under the business management agreement, as
well as the routine overhead expenses of such personnel allocable to such
services, will be provided and paid for by the Administrative Consultant and
not
by the Company. The Company will bear all other costs and expenses of its
operations and transactions, including, without limitation, those relating
to:
(a)
general expenses of the Company: organization and offering expenses; fees
and
expenses of the independent directors, including, without limitation, the
fees
and expenses of any counsel, employees, experts or advisors thereof; fees
and
expenses of the Board of Director’s Audit Committee, Nominating and Corporate
Governance Committee, Compensation Committee and other committees of the
Company
(if any), including, without limitation, the fees and expenses of any counsel,
employees, experts or advisors thereof; the Company’s fidelity
bond,
directors and officers/errors and omissions liability insurance, and any
other
insurance premiums; expenses in connection with calculating the Company’s net
asset value (including, without limitation, the cost and expenses of any
independent valuation firm); transfer agent and custodial fees; federal,
state
and local taxes; independent auditors and outside legal
costs;
(b)
expenses related to the Company’s business: expenses incurred by the
Administrative Consultant payable to third parties, including, without
limitation, agents, consultants or other advisors, in monitoring financial
and
legal affairs for the Company and in monitoring the Company’s business and
performing due diligence on its prospective portfolio companies; interest
payable on, and fees associated with, debt, if any, incurred to finance the
Company’s business; business advisory and management fees payable to the
Administrative Consultant; transaction costs and other expenses of Company
business, including, without limitation, broker-dealer commissions, costs
of any
trading firms as described in the business management agreement and costs
of any
hedging activities on behalf of the Company; and fees, including, without
limitation, indemnification payments permissible under applicable law, payable
to third parties, including, without limitation, agents, consultants, finders,
business bankers or other advisors, relating to, or associated with, evaluating
and making business; and
(c)
expenses related to the administrative services provided to the Company: amounts
payable under the Consultant Services Agreement.
Duration
and Termination
The
Consultant Services Agreement with Avante was renegotiated and entered into
on
October 31, 2006. Prior to October 31, 2006 the Company had a Consultant
Service
Agreement with Avante that was terminated when the new contract was renegotiated
in October 31, 2006. The current Agreement will remain in effect for three
years
initially, and thereafter will automatically extend for one additional three
year period, provided that such continuance is specifically approved at least
90
days in advance by (a) the vote of the Company’s Board of Directors, or by
the vote of a majority of the outstanding voting securities of the Company
and
(b) the vote of a majority of the Company’s directors who are not parties
to the agreement or interested persons of any such party. The agreement may
be
terminated at any time, without the payment of any penalty, upon 60 days’
written notice, by the Administrative Consultant. The agreement will
automatically terminate in the event of its assignment. The Company believes
that the terms and conditions of our Consultant Services Agreement are
comparable and consistent within the industry and would be consistent with
an
unaffiliated party.
Consultant
Services
Pursuant
to the terms of a Consultant Services Agreement, the Consultant will, subject
to
the overall supervision of our Board of Directors, act as Consultant of the
Company, and will furnish, or arrange for others to furnish, the administrative
services, personnel and facilities necessary for the operation of the Company
as
set out in the agreement. Under the agreement, the Consultant will provide
the
Company with office facilities, equipment, clerical, bookkeeping and record
keeping services at such facilities and such other services as the Consultant,
subject to review by the Board of Directors, will from time to time determine
to
be necessary or useful to perform its obligations under the agreement. The
Consultant will also, on behalf of the Company, conduct relations with
custodians, depositories, transfer agents, accountants, attorneys, underwriters,
corporate fiduciaries, insurers, banks and such other persons in any such
other
capacity deemed to be necessary or desirable. The Consultant will make reports
to the directors of its performance of obligations under the agreement and
furnish advice and recommendations with respect to such other aspects of
the
business and affairs of the Company as it determines to be desirable; provided
that nothing in the agreement will be construed to require the Consultant
to,
and the Consultant will not in its capacity as Consultant, provide any advice
or
recommendation relating to the securities and other assets that the Company
should purchase, retain or sell or any other business advisory services to
the
Company.
The
Consultant will be responsible for the financial and other records that the
Company is required to maintain and will prepare reports to stockholders, and
reports and other materials filed with the SEC or state securities commissions
or other regulatory bodies, to the extent required. The Consultant will, on
the
Company’s behalf, offer to provide and, upon receipt by the Consultant or the
Company of an acceptance of such offer, will provide, significant managerial
assistance to those portfolio companies to which the Company is required to
provide such assistance. In addition, the Consultant will assist the Company
in
determining and publishing the Company’s net asset value (and, in connection
therewith, overseeing the performance where applicable of third party valuation
experts), overseeing the preparation and filing of the Company’s tax returns,
and the printing and dissemination of reports to stockholders of the Company,
and generally overseeing the payment of the Company’s expenses and the
performance of administrative and professional services rendered to the Company
by others.
In
full
consideration of the provision of the services of the Consultant, the Company
shall reimburse the Consultant for the costs and expenses incurred by the
Consultant in performing its obligations and providing personnel and facilities
under the Consultant Services Agreement.
Certain
costs and expenses are required by the Consultant Services Agreement to be
borne
by the Company. In addition, in full consideration of the provision of the
services of the Consultant under the
Consultant
Services Agreement, the Company shall reimburse the Consultant for the costs
and
expenses incurred by the Consultant in performing its obligations and providing
services and facilities under the Consultant Services Agreement. Such costs
and
expenses include, but are not limited to: costs of preparing and filing reports
or other documents required by the SEC or any other applicable regulatory
agency; costs of any reports, proxy statements or other notices to stockholders,
including, without limitation, printing costs; direct costs and expenses of
administrative services, including, without limitation, secretarial and other
staff, printing, mailing, long distance telephone, copying; the Company’s
allocable portion of the Consultant’s overhead in performing its obligations
under the Consultant Services Agreement, including, without limitation, rent
and
the allocable portion of the cost, if any, of the Company’s chief compliance
officer, chief financial officer, controller/treasurer general counsel and
their
respective staffs; and all other expenses incurred by the Company or the
Consultant in connection with administering the Company’s business, including,
without limitation, federal and state registration fees; offerings of the
Company’s common stock and other securities and all costs of registration and
listing the Company’s shares on any securities exchange.
Indemnification
The
Consultant Services Agreement provides that, absent willful misfeasance, bad
faith or gross negligence in the performance of the Consultant’s duties or by
reason of the reckless disregard of the Consultant’s duties and obligations, the
Consultant (and its officers, managers, partners, agents, employees, controlling
persons, members and any other person or entity affiliated with the Consultant,
including, without limitation, its general partner and the Administrative
Consultant), are entitled to indemnification from the Company for any damages,
loss, liabilities, costs and expenses (including, without limitation, judgments,
fines, reasonable attorneys’ fees and expenses, and amounts reasonably paid or
to be paid in settlement) incurred by such persons in or by reason of any
pending, threatened or completed action, suit, investigation or other proceeding
(including, without limitation, an action or suit by or in the right of the
Company or its security holders) arising out of or otherwise based upon the
performance of any of the Consultant’s duties or obligations under the
Consultant Services Agreement or otherwise as an Administrative Consultant
of
the Company. The Company shall, upon the request of a party entitled to
indemnification under the Consultant Services Agreement and to the extent
legally permissible, advance amounts in connection
with
its
indemnification obligation; provided, however, that if it is later determined
that such party was not entitled to be indemnified, then such party shall
promptly reimburse the Company for all advanced amounts.
Related
Transactions not Covered Under the Consulting
Agreement
In
the
transaction of OTG acquiring Zowy; 40% was acquired from Avante and 40% from
GAMI with the remaining 20% being held by the former owner of Zowy. Both
Avante
and GAMI are related parties, since the majority shareholder of OTG controls
these companies.
On
October 5, 2005, a Settlement Agreement was made between OTG and Avante
regarding the $796,624 debt owed by OTG to Avante. In the Settlement Agreement,
OTG issued 400,000,000 common shares of OTG at the current market value of
$.0001, or $40,000, in lieu of the approximately $796,624 in debt. This
transaction, even though not an arms length transaction, was at an exchange
rate
of $20 to $1 therefore, it would be considered beneficial for the
Company.
The
Company’s rents its principal executive offices located at 2910 Bush Drive,
Melbourne, Florida, consisting of 5,200 square feet owned by GAMI. This leased
office space is used by the Company’s executive management team as well as the
administrative staff. The Company entered into a five year lease with GAMI
at
$4,000 per month effective June 1, 2007 which expires May 31, 2012. The lease
has two five year renewable options. The Company believes the terms and
conditions are consistent to the work requirements and industry standards
for
any unaffiliated third party.
On
June
30, 2006, the Company executed a Note Receivable with Avante for $250,000.
The
terms of the note are 7% interest, accrued throughout the term of the note,
and
payable on June 30, 2007. On September 30, 2006 the Company entered into
a
Revolving Credit Agreement with the Avante for up to $500,000. In
addition, Avante entered into a revolving credit agreement with the Company
for up to $500,000.
Effective
October 31, 2006, Consulting Services Agreement was modified to increase
the
monthly compensation from $8,000 to $10,000.
On
August
1, 2007, Avante Leasing Corporation, a wholly-owned subsidiary of Avante,
leased
a laser engraver to Zowy. The terms of the agreement include a five year
term,
19.4% interest, with a 10% purchase price at the end of the period. This
transaction was completed as the acquisition and financing of the laser engraver
required the financial guarantee of Avante and Michael W. Hawkins. As of
December 31, 2007, the balance due to Avante Leasing Corporation under this
Agreement was $20,475.
On
March
1, 2008, DCC entered into a lease agreement with GAMI, for a period of five
years at the rate of $3,000 per month. DCC relocated to 2910 Bush Drive,
Melbourne, Florida. DCC was previously located at 380 Stan Drive, Melbourne,
Florida.
Director
Independence
The
Board
of Directors currently consists of five members, three of whom are not
“interested persons” of the Company as defined in Section 2(a)(19) of the
1940 Act and qualify as Independent Directors. The Independent Directors
include
Willis Kilpatrick, Dean Droumbalas, and Steves Rodriguez.
Item 8.
Legal
Proceedings
.
On
July
19, 2006, the Company filed a lawsuit against New Millenium Entrepreneurs,
Inc.,
and Phoenixsurf.com, LLC, and various other individuals and parties claiming
libel, slander, and conspiracy to injure business. The claim relates to
consulting services provided by Organa Consulting Group, Inc., a wholly owned
subsidiary of Organa Technologies Group, Inc., to PhoenixSurf.com, a so-called
"websurfing" business which ceased operations in July 2006. The Company also
has
asked for injunctive relief, compensatory and punitive damages in excess of
$1,000,000. The law suit was filed in the Circuit Court of the Eighteenth
Judicial Circuit In and For Brevard County, Florida.
On
September 19, 2007, the Company released the individual defendants and filed
for
a default judgment against New Millenium Entrepreneurs, LLC and Phoenixsurf.com,
LLC which was granted on August 10, 2007. A hearing date to determine the amount
of the damage awards is expected to be set by the court shortly.
On
October 2, 2006, the Company was named in a lawsuit captioned
New
Millennium Entrepreneurs, LLC and Phoenixsurf.com, LLC
v.
Michael
W. Hawkins, et. al.
U.S.
District Court, Middle District of Georgia, 3: 06-CV-84 (CDC). The lawsuit
alleges violations of the Georgia Securities Act, Georgia Fair Business
Practices Act, Federal Securities laws and certain other unspecified laws in
connection with the investment by Plaintiffs of $150,000 in Organa Technologies
Group and seeks rescission of this investment. In addition, the lawsuit alleges
contractual disputes and misappropriations of funds by Organa Consulting Group.
The Company has responded to the complaint, has entered into third party claims
against the individual owners of New Millenium Entrepreneurs, LLC and other
interested parties. The Company believes it has meritorious defenses to the
claims made and intends to vigorously defend the lawsuit. On July 24, 2007,
the
Securities and Exchange Commission filed charges in the United States District
Court for the Central District of California in Los Angeles, California against
New Millenium Entrepreneurs, LLC, Phoenixsurf.com, LLC, and two of its officers
and managing members. On August 10, 2007, a Final Judgment and Permanent
Injunction were entered against these parties, with damages to be assessed
at a
future date.
Item 9.
Market
Price of and Dividends on the Registrant’s Common Equity and Related Stockholder
Matters
.
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(a)
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Market
information.
The
Company’s common stock is traded under the ticker symbol OGNT.PK and with
no current market makers is thinly traded. The price of the stock
on
December 31, 2007 was $0.16 per share. The Company has paid no
dividends.
On November 26, 2007 the Company became fully reporting under the
SEC. The
Vertical Group, Inc., has submitted an application to FINRA for
listing of
the stock on the OTC Bulletin Board. The FINRA reference number
is
20080122550.
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On
November 1, 2007, the Company authorized a 1:4 forward split whereby total
issued shares became 28,870,264 and the shares available for trading after
completion of the appropriate Rule 144K registrations is 2,870,264. On February
20, 2008 the Company filed with FINRA to affect the 1:4 forward split. The
Company has mandated a return of the original OGTG certificate in order to
be
issued a new certificate with the new shares total. The Company has paid
no
dividends. The following chart demonstrates the high and low stock sales
prices
during the respective quarters(does not reflect the 1:4 forward
split):
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2006
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1st
Qtr.
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2nd
Qtr.
|
|
3
rd
Qtr.
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4th
Qtr.
|
|
Annual
|
|
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High
|
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$
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0.95
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$
|
1.00
|
|
$
|
0.375
|
|
$
|
0.10
|
|
$
|
1.00
|
|
|
Low
|
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$
|
0.01
|
|
$
|
0.10
|
|
$
|
0.10
|
|
$
|
0.10
|
|
$
|
0.01
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|
|
|
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2007
|
|
|
|
|
1st
Qtr.
|
|
2nd
Qtr.
|
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3rd
Qtr.
|
|
4th
Qtr.
|
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Annual
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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High
|
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$
|
0.10
|
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$
|
1.00
|
|
$
|
0.30
|
|
$
|
0.3125
|
|
$
|
0.3125
|
|
|
Low
|
|
$
|
0.10
|
|
$
|
0.01
|
|
$
|
0.01
|
|
$
|
0.01
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$
|
0.01
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(b)
Dividend
Distributions.
We do
not intend to distribute dividends to stockholders in the foreseeable future.
(c)
Securities
authorized for issuance under equity compensation plans.
The
Company has authorized up to 4,000,000 shares to be issued under the Organa
Technologies Group, Inc., 2007 Common Stock Option Plan. The Company granted
3,185,000 options on March 1, 2008 that vest according to the following
schedule:
|
2009
|
|
2010
|
|
2011
|
|
2012
|
|
2013
|
|
|
1,045,000
|
|
|
870,000
|
|
|
870,000
|
|
|
200,000
|
|
|
200,000
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Penny
Stock
Our
common stock is considered "penny stock" under the rules the Securities and
Exchange Commission (the "SEC") under the Securities Exchange Act of 1934.
The
SEC has adopted rules that regulate broker-dealer practices in connection with
transactions in penny stocks. Penny stocks are generally equity securities
with
a price of less than $5.00, other than securities registered on certain national
securities exchanges or quoted on the NASDAQ Stock Market System, provided
that
current price and volume information with respect to transactions in such
securities is provided by the exchange or quotation system. The penny stock
rules require a broker-dealer, prior to a transaction in a penny stock, to
deliver a standardized risk disclosure document prepared by the Commission,
that:
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contains
a description of the nature and level of risks In the market for
penny
stocks in both public offerings and secondary trading;
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-
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contains
a description of the broker's or dealer's duties to the customer
and of
the rights and remedies available to the customer with respect
to a
violation to such duties or other requirements of Securities' laws;
contains a brief, clear, narrative description of a dealer market,
including bid and ask prices for penny stocks and the significance
of the
spread between the bid and ask price;
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-
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contains
a toll-free telephone number for inquiries on disciplinary
actions;
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-
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defines
significant terms in the disclosure document or in the conduct
of trading
in penny stocks; and
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-
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contains
such other information and is in such form, including language,
type, size
and format, as the Commission shall require by rule or
regulation.
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The
broker-dealer also must provide, prior to effecting any transaction in a penny
stock, the customer with:
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-
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bid
and offer quotations for the penny stock;
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-
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the
compensation of the broker-dealer and its salesperson in the
transaction;
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-
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the
number of shares to which such bid and ask prices apply, or other
comparable information relating to the depth and liquidity of the
marker
for such stock; and
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-
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monthly
account statements showing the market value of each penny stock
held in
the customer's account.
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In
addition, the penny stock rules that require that prior to a transaction in
a
penny stock not otherwise exempt from those rules; the broker-dealer must make
a
special written determination that the penny stock is a suitable investment
for
the purchaser and receive the purchaser's written acknowledgement of the receipt
of a risk disclosure statement, a written agreement to transactions involving
penny stocks, and a signed and dated copy of a written suitably
statement.
These
disclosure requirements may have the effect of reducing the trading activity
in
the secondary market for our stock.
Item 10.
Recent
Sales of Unregistered Securities
.
The
Company was formed under the laws of the State of Delaware in December of 2002
under the name Integrity Messenger Corporation (“IMC”). In April 2006, the Board
approved a name change to Organa Technologies Group, Inc. (“OTG” or the
“Company”).
On
January 1, 2004, the Company acquired all of the assets of IMC-FL in exchange
for 60,000,000 shares of its common stock.
In
January and February 2004, the Company completed a private placement of
11,500,000 shares of its common stock under Regulation D, Section
504.
On
April
1, 2004, the Company acquired 100% of the membership units of Hurricane Host,
LLC (“HH-LLC”) for $50,000. HH-LLC, a Texas limited liability company, was
originally formed in 2003. HH-LLC merged with Hurricane Host, Inc. (“HH-FL”,
referred as “HH” post-merger), a Florida corporation on May 23, 2005.
The
Company learned in the third quarter of 2006 that in April 2004, 250,000
shares
of common stock were issued in error by the Company’s then Transfer Agent to a
shareholder who had claimed to have lost its stock certificate, but had in
fact
sold the shares. After an internal investigation and reconciliation, the
Company
identified this error and reconciled the lost shares. The Company’s board of
directors determined that the cost associated with further action against
the
shareholder and the transfer agent was greater than adjusting the books and
records to accept the erroneous shares. The Company dismissed its transfer
agent
after the improper issuance was discovered.
On
October 5, 2005, the Company amended its Articles of Incorporation to
900,000,000 common shares and 50,000,000 blank check preferred shares
authorized.
On
October 5, 2005, the Company entered into a Settlement Agreement with Avante
whereby all debt owed to Avante, of approximately $400,000, was converted into
400,000,000 common shares of IMC with a market value of $.0001 at the time
of
the conversion. The valuation of $40,000 was substantially lower than the
obligation to Avante. This transaction was not an arms length transaction as
the
directors of OTG are also officers and minority shareholders of Avante. This
transaction was completed as needed to facilitate the Company’s plans for future
transactions that would increase the Company’s revenue and profits.
On
October 25, 2005, the Company acquired 80% of Organa Consulting Group, Inc.
(“OCG”), a Florida corporation, for $800. The minority interest of 20% in OCG is
owned by Avante. As no tangible assets or liabilities were acquired, the full
value was booked to common stock.
On
April
11, 2006, the Company’s shareholders authorized an amendment to its Certificate
of Incorporation to effect a 1:100 reverse stock split. All share and per share
amounts have been adjusted for this reverse stock split. An additional 66 shares
were issued as part of the roundup of fractional shares.
On
April
20, 2006, Gateway Internet Services Corporation (“Gateway”), a Florida
corporation, was formed as a wholly-owned subsidiary of the Company.
On
April
13,2006 the Company entered into a Convertible Promissory Note with
Phoenixsurf.com in the amount of $150,000. The Convertible Promissory Note
will
convert to equity capital when the stock price reaches $3.00 per share. The
note
bears interest at a rate of 7%. With the effective 1:4 forward split the
Convertible Note will convert at $0.75 per share when the stock price reaches
$0.75 per share. Phoenixsurf.com has filed a lawsuit in Federal Court to
rescind
the transaction. Please review
Item
8: Legal Proceedings
for
further details.
On
July
1, 2006, the Company acquired Davinci’s Computer Corp. (“DCC”) a Florida
corporation for 500,000 shares of the Company’s common stock valued at $.10 per
share at the time of the transaction.
On
October 1, 2006, the Company acquired 80% of Zowy Media, Incorporated (“Zowy”),
a Florida Corporation, in exchange for 2,000,000 shares of its common stock.
The
minority interest of Zowy is owned by Titus Blair.
On
September 10, 2007, the Company identified that during the conversion from
IMC
to OTG, 5,000 shares were erroneously issued and have been subsequently
cancelled.
On
November 1, 2007, the Board of Directors and majority shareholders authorized
a
1:4 forward stock split.
On
November 1, 2007, the Company engaged Dinosaur to act as Placement Agent
to
assist it in raising up to $5,000,000 under a Confidential Private Placement
Memorandum (PPM) for Epic. As part of the PPM the Company has authorized
5,000,000 shares of Series A preferred stock of OTG. Under the PPM each purchase
of one unit at a cost of $10,000 is entitled to receive in exchange for 10,000
shares of Series A preferred stock and a 0.04% royalty for each
Frostmourne
TM
Sword
sold during its lifetime. As an aggregate, Epic will pay up to 20% royalties
to
the Series A Preferred Shareholders. The Company issued 40 units under the
PPM.
Each
of
the stock issuances described above, with the exception of the 504 offering,
was
effected in private transaction exempt from registration under the Securities
Act of 1933, as amended, Section 4(2). No commissions were paid to anyone in
connection with these transactions and no solicitation was made by the Company
in connection therewith. All entities or persons receiving shares were believed
to be “accredited” investors as that term is defined under Regulation D. The
persons receiving the stock under the Rule 504 offering are currently being
investigated by the SEC, NASD, and U.S. Postal Services with four associated
individuals believed to have pled guilty to an illegal “pump and dump” scheme.
Management has cooperated fully with the authorities involved in this ongoing
investigation. Current management believes the initial Rule 504 offering was
placed through Rim Rock, LLC and Cold Springs, LLC. The offering is believed
to
have been made in full compliance with the Rule.
Item 11.
Description
of Registrant’s Securities to be Registered
.
The
following description is based on relevant portions of the Delaware General
Corporation Law and on our Certificate of Incorporation and Bylaws. This summary
is not necessarily complete, and we refer you to the Delaware General
Corporation Law and our Certificate of Incorporation and Bylaws for a more
detailed description of the provisions summarized below.
As
a
Delaware corporation, we are governed by the provisions of our Certificate
of
Incorporation dated as of 2002, as amended, our Bylaws and the Delaware General
Corporation Law. The Company amended its Articles of Incorporation in October
2007 and is authorized to issue 100,000,000 shares of common stock, par value
$0.0001 per share, 5,000,000 shares of Series A Preferred Stock, par value
$1.00, and 45,000,000 shares of blank check preferred stock, par value $0.0001.
The Company is currently listed on the Gray Sheets, trading under the symbol
OGNT.PK, and is thinly traded and is considered a penny-stock, and we can
offer
no assurances that a market for our shares will develop in the future.
The
Company adopted a 2007 Stock Option Plan in November 2007. On March 1, 2008
the
Company issued 3,185,000 options to eleven various officers, directors, and
consultants.
Under
Delaware law, our stockholders will not be personally liable for our debts
or
obligations solely based on their ownership of our common stock.
Common
Stock
All
shares of our common stock have equal rights as to earnings, assets, dividends
and voting and, when they are issued, will be duly authorized, validly issued,
fully paid and non-assessable. Distributions may be paid to the holders of
our
common stock if, as and when authorized by our Board of Directors and declared
by us out of funds legally available therefor. Shares of our common stock have
no preemptive, exchange, conversion or redemption rights and are freely
transferable, except where their transfer is restricted by federal and state
securities laws or by contract. In the event of our liquidation, dissolution
or
winding up, each share of our common stock would be entitled to share ratably
in
all of our assets that are legally available for distribution after we pay
all
debts and other liabilities and subject to any preferential rights of holders
of
our preferred stock, if any preferred stock is outstanding at such time. Each
share of our common stock is entitled to one vote on all matters submitted
to a
vote of stockholders, including the election of directors. Except as provided
with respect to any other class or series of stock, the holders of our common
stock will possess exclusive voting power.
Preferred
Stock
Our
Certificate of Incorporation authorizes our Board of Directors to, subject
to
any limitations prescribed by law, provide for the issuance of shares of
preferred stock in series, and, by filing a certificate of designation pursuant
to the applicable law of the State of Delaware, to establish from time to time
the number of shares to be included in each such series, and to fix the
designation, powers, preferences and rights of the shares of each such series
and any qualifications, limitations or restrictions thereof; provided, that
any
of the foregoing provisions must be consistent with the requirements of the
1940
Act to the extent applicable thereto. Thus, the Board of
Directors
could authorize, without stockholder approval, the issuance of shares of
preferred stock with terms and conditions that could have the effect of
delaying, deferring or preventing a transaction or a change in control that
might involve a premium price for holders of our common stock or otherwise
be in
their best interest. Although it may do so in the future, the Company has no
current intention to issue preferred stock.
Anti-Takeover
Measures
Delaware
law and our Certificate of Incorporation and Bylaws provide that:
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•
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our
Board of Directors is divided into two classes, as nearly equal in
size as
possible, with staggered two-year
terms;
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•
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directors
may be removed only for cause by the affirmative vote of at least
a
majority of the voting power of all of the then-outstanding shares
of
capital stock of the Company then-entitled to vote at an election
of
directors, voting together as a single class;
and
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•
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any
vacancy on the Board of Directors, however the vacancy occurs, including
a
vacancy due to an enlargement of the board, may be filled by the
affirmative vote of the holders of a majority of the shares of our
capital
stock entitled to vote.
|
The
classification of our Board of Directors and the limitations on removal of
directors and filling of vacancies could have the effect of making it more
difficult for a third party to acquire us, or of discouraging a third party
from
acquiring us.
Our
Certificate of Incorporation and Bylaws also provide that:
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•
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subject
to any rights granted in the future to holders of any series of preferred
stock, any action required or permitted to be taken by the stockholders
at
an annual meeting or special meeting of stockholders may be taken
by
written action in lieu of a meeting;
and
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•
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special
meetings of the stockholders may only be called by the Chairman of
our
Board of Directors or by a majority of our Board of
Directors.
|
Our
Certificate of Incorporation also authorizes the issuance of 45,000,000 shares
of preferred stock, which our Board of Directors may issue without stockholder
approval. See “—Preferred Stock.” Thus, our Board of Directors could authorize
the issuance of shares of preferred stock with terms and conditions that could
have the effect of delaying, deferring or preventing a transaction or a change
in control that might involve a premium price for holders of our common stock
or
otherwise be in their best interest.
For
the
purposes of calculating “a majority of the outstanding voting securities” under
our Certificate of Incorporation, each class and series of our shares will
vote
together as a single class, with respect to any class or series of shares.
If a
separate class vote is required, the applicable proportion of shares of the
class or series, voting as a separate class or series, also will be
required.
Item 12.
Indemnification
of Directors and Officers
.
Section
145 of the Delaware General Corporation Law allows for the indemnification
of
officers, directors, and any corporate agents in terms sufficiently broad to
indemnify such persons under certain circumstances for liabilities, including
reimbursement for expenses, incurred arising under the 1933 Act. The Bylaws
of
the Company provide that the Company will indemnify its directors and officers
to the fullest extent authorized or permitted by law and such right to
indemnification will continue as to a person who has ceased to be a director
or
officer of the Company and will inure to the benefit of his or her heirs,
executors and Consultants; provided, however, that, except for proceedings
to
enforce rights to indemnification, the Company will not be obligated to
indemnify any director or officer in connection with a proceeding (or part
thereof) initiated by such person unless such proceeding (or part thereof)
was
authorized by the Board of Directors. The right to indemnification conferred
will include the right to be paid by the Company the expenses (including
attorney’s fees) incurred in defending any such proceeding in advance of its
final disposition.
The
Company may, to the extent authorized from time to time by the Board of
Directors, provide rights to indemnification and to the advancement of expenses
to employees and agents of the Company similar to those conferred to directors
and officers of the Company. The rights to indemnification and to the
advancement of expenses are subject to the requirements of the 1940 Act to
the
extent applicable.
Furthermore,
the Company may maintain insurance, at its expense, to protect itself and any
director, officer, employee or agent of the Company or another company against
any expense, liability or loss, whether or not the Company would have the power
to indemnify such person against such expense, liability or loss under the
Delaware General Corporation Law.
Item 13.
Financial
Statements and Supplementary Data
.
The
Company’s audited financial statements for the year ended December 31, 2007
and restated audited financial statements for 2006, appearing on pages F-1
through F-18 hereof, are incorporated herein by reference.
Item 14.
Changes
in and Disagreements with Accountants on Accounting and Financial
Disclosure
.
None
Item 15.
Financial
Statements and Exhibits
.
(a)
List
of financial statements filed.
Our
financial statements appear at the end of this Registration Statement. Please
see the table of contents to the financial statements on page F-1 (for the
years
ended December 31, 2007 and 2006).
(b)
Exhibits.
See
the
Exhibit Index following the signature page of this Registration Statement,
which
Exhibit Index is incorporated herein by reference.
SIGNATURES
Pursuant
to the requirements of Section 12 of the Securities Exchange Act of 1934,
as amended, the Registrant has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized.
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ORGANA
TECHNOLOGIES GROUP, INC.
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By:
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/s/ Gina
L. Bennett
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Name:
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Gina
L. Bennett
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Title:
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Chief
Executive Officer
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Date:
April __, 2008
Exhibit
Index
|
Exhibit No.
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Description
|
|
|
|
|
|
3.1
|
|
Certificate
of Incorporation of the Company*
|
|
|
|
|
|
3.2
|
|
Amended
Certificate of Incorporation of the Company on January 14,
2004*
|
|
|
|
|
|
3.3
|
|
Amended
Certificate of Incorporation of the Company on June 3,
2005*
|
|
|
|
|
|
3.4
|
|
Amended
Certificate of Incorporation of the Company on October 5,
2005*
|
|
|
|
|
|
3.5
|
|
Amended
Certificate of Incorporation of the Company on April 6,
2006*
|
|
|
|
|
|
3.6
|
|
Amended
Certificate of Incorporation of the Company on April 12,
2006*
|
|
|
|
|
|
3.7
|
|
By-laws
of the Company*
|
|
|
|
|
|
3.8
|
|
Amended
Certificate of Incorporation on October 17, 2007**
|
|
|
|
|
|
10.1
|
|
Administrative
Consultant Agreement*
|
|
|
|
|
|
10.2
|
|
Settlement
Agreement with Avante Holding Group, Inc.*
|
|
|
|
|
|
10.3
|
|
Rental
Agreement with GAMI, LLC*
|
|
|
|
|
|
10.4
|
|
Form
of Agreement for Licensee With Epic Weapons****
|
|
|
|
|
|
10.5
|
|
Convertible
Promissory Note with Phoenixsurf.com (New Millennium Entrepreneurs,
LLC)**
|
|
|
|
|
|
10.6
|
|
Revolving
Credit Agreement from Avante Holding Group, Inc., dated September
30, 2006
***
|
|
|
|
|
|
10.7
|
|
Revolving
Credit Agreement to Avante Holding Group, Inc., dated September
30, 2006
***
|
|
|
|
|
|
10.8
|
|
2007
Stock Option Plan ***
|
|
|
|
|
|
10.9
|
|
Capital
Lease Agreement for Engraving System ***
|
|
|
|
|
|
10.10
|
|
Rental
Agreement between Davinci’s Computer Corp. and GAMI, LLC.
****
|
|
|
|
|
|
21
|
|
List
of Subsidiaries ***
|
|
|
|
|
|
23.1
|
|
Consent
of Liebman Goldberg & Drogin LLP
****
|
*
Incorporated by reference from Form 10SB Registration Statement filed on
September 27, 2007; Reg. No. 000-52834.
**
Incorporated by reference from Form 10SB/A Registration Statement filed
on
December 11, 2007; Reg. No. 000-52834.
***
Incorporated by Reference from Form 10-K filed on April 14, 2008.
****
Filed herewith.
ORGANA
TECHNOLOGIES GROUP, INC.
For
the Years Ended December 31, 2007 and 2006
INDEX
TO CONSOLIDATED FINANCIAL STATEMENTS
|
Consolidated
Financial Statements:
|
|
|
|
|
|
|
|
|
|
|
|
Report
of Independent Registered Public
Accounting Firm
|
|
|
F-2
|
|
|
|
|
|
|
|
|
Consolidated
Balance Sheets
|
|
|
F-3
|
|
|
|
|
|
|
|
|
Consolidated
Statements of Operations and Deficit
|
|
|
F-4
|
|
|
|
|
|
|
|
|
Consolidated
Statements of Stockholders’ Equity
|
|
|
F-5
|
|
|
|
|
|
|
|
|
Consolidated
Statements of Cash
Flows
|
|
|
F-6
|
|
|
|
|
|
|
|
|
Notes
to Consolidated Financial Statements
|
|
|
F-7 –
F-18
|
|
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board
of
Directors
Organa
Technologies Group, Inc. and Subsidiaries
We
have
audited the accompanying consolidated balance sheets of Organa Technologies
Group, Inc. and Subsidiaries as of December 31, 2007 and 2006, and the related
consolidated statements of operations, changes in stockholders' equity, and
cash
flows for the years ended December 31, 2007 and 2006. 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
audit.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that
we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required
to
have, nor were we engaged to perform an audit of its internal control over
financial reporting. Our audits included consideration of internal control
over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures
in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In
our
opinion, the consolidated financial statements referred to above present
fairly,
in all material respects, the financial position of Organa Technologies Group,
Inc. and Subsidiaries as of December 31, 2007 and 2006, and the results of
their
operations and their cash flows for each of the years ended December 31,
2007
and 2006, in conformity with accounting principles generally accepted in
the
United States of America.
The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. Additionally, as of December 31, 2007,
the
Company has a working capital deficiency. This factor raises substantial
doubt
about the Company’s ability to continue as a going concern. The consolidated
financial statements do not include any adjustments that might result from
the
outcome of this uncertainty.
LIEBMAN
GOLDBERG & DROGIN, LLP
Garden
City, New York
April
14,
2008
ORGANA
TECHNOLOGIES GROUP, INC. and SUBSIDIARIES
Consolidated
Balance Sheets
December
31,
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
Current
Assets
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
37,089
|
|
$
|
19,203
|
|
|
Accounts
Receivable
|
|
|
14,673
|
|
|
3,010
|
|
|
Due
From Related Party
|
|
|
283,689
|
|
|
341,617
|
|
|
Prepaid
Expenses
|
|
|
59,728
|
|
|
-
|
|
|
Inventory
|
|
|
54,815
|
|
|
19,000
|
|
|
|
|
|
|
|
|
|
|
|
Total
Current Assets
|
|
|
449,994
|
|
|
382,830
|
|
|
Property,
Plant and Equipment, Net
|
|
|
235,305
|
|
|
223,046
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
241,543
|
|
|
241,543
|
|
|
Other
Assets
|
|
|
47,991
|
|
|
24,600
|
|
|
|
|
|
|
|
|
|
|
|
Total
Assets
|
|
$
|
974,833
|
|
$
|
872,019
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY (DEFICIT)
|
|
Current
Liabilities
|
|
|
|
|
|
|
|
|
Notes
Payable, Current Portion
|
|
$
|
220,837
|
|
$
|
229,721
|
|
|
Capitalized
Leases, Current Portion
|
|
|
3,066
|
|
|
-
|
|
|
Accounts
Payable and Accrued Expenses
|
|
|
208,400
|
|
|
54,006
|
|
|
Accrued
Payroll
|
|
|
2,665
|
|
|
893
|
|
|
|
|
|
|
|
|
|
|
|
Total
Current Liabilities
|
|
|
434,968
|
|
|
284,620
|
|
|
|
|
|
|
|
|
|
|
|
Long-Term
Liabilities
|
|
|
|
|
|
|
|
|
Notes
Payable
|
|
|
153,311
|
|
|
154,608
|
|
|
Capitalized
Leases
|
|
|
17,409
|
|
|
-
|
|
|
Total
Long-Term Liabilities
|
|
|
170,720
|
|
|
154,608
|
|
|
|
|
|
|
|
|
|
|
|
Total
Liabilities
|
|
|
605,688
|
|
|
439,228
|
|
|
|
|
|
|
|
|
|
|
|
Minority
Interest
|
|
|
55,764
|
|
|
63,172
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
Equity
|
|
|
|
|
|
|
|
|
Preferred
Stock
|
|
|
|
|
|
|
|
|
Series
A Convertible Preferred Stock, voting; $1.00 par value; 5,000,000
shares
authorized; 130,000 shares issued and outstanding at December 31,
2007
|
|
|
130,000
|
|
|
-
|
|
|
Common
Stock
|
|
|
|
|
|
|
|
|
$.0001
par value, 100,000,000 shares authorized, 28,870,264 shares issued
and
outstanding at December 31, 2007; $.01 par value, 9,000,000 shares
authorized, 7,217,566 shares issued and outstanding at December
31,
2006
|
|
|
80,200
|
|
|
80,200
|
|
|
Additional
Paid-in Capital
|
|
|
2,071,724
|
|
|
2,076,924
|
|
|
Accumulated
Deficit
|
|
|
(1,968,543
|
)
|
|
(1,787,505
|
)
|
|
Total
Stockholders' Equity
|
|
|
313,381
|
|
|
369,619
|
|
|
Total
Liabilities and Stockholders' Equity
|
|
$
|
974,833
|
|
$
|
872,019
|
|
See
accompanying notes to consolidated financial statements.
ORGANA
TECHNOLOGIES GROUP, INC. and SUBSIDIARIES
Consolidated
Statements of Operations and Deficit
For
the Years Ended December 31,
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
$
|
1,143,158
|
|
$
|
1,483,816
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of Sales
|
|
|
722,111
|
|
|
498,755
|
|
|
|
|
|
|
|
|
|
|
|
Gross
Profit
|
|
|
421,047
|
|
|
985,061
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Expenses
|
|
|
594,651
|
|
|
791,795
|
|
|
|
|
|
|
|
|
|
|
|
Income
(Loss) From Operations
|
|
|
(173,604
|
)
|
|
193,266
|
|
|
|
|
|
|
|
|
|
|
|
Other
Income / (Expense)
|
|
|
(14,842
|
)
|
|
(2,424
|
)
|
|
|
|
|
|
|
|
|
|
|
Income
(Loss) Before Minority Interest
|
|
|
(188,446
|
)
|
|
190,842
|
|
|
|
|
|
|
|
|
|
|
|
Minority
Interest in Subsidiary
|
|
|
7,408
|
|
|
(59,672
|
)
|
|
|
|
|
|
|
|
|
|
|
Net
Income (Loss)
|
|
$
|
(181,038
|
)
|
$
|
131,170
|
|
|
|
|
|
|
|
|
|
|
|
Net
Income (Loss) Per Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted based upon 28,870,264 basic weighted average shares
outstanding and 28,880,593 fully diluted weighted average shares
outstanding
|
|
$
|
(0.01
|
)
|
|
|
|
|
Basic
and diluted based upon 22,059,232 weighted average shares
outstanding
|
|
|
|
|
$
|
0.01
|
|
See
accompanying notes to consolidated financial statements.
ORGANA
TECHNOLOGIES GROUP, INC. and SUBSIDIARIES
Consolidated
Statements of Stockholders' Equity
For
the Years Ended December 31, 2007 and 2006
|
|
|
|
|
|
|
Additional
Paid-in
Capital
|
|
Retained
Earnings(Deficit)
|
|
Total
Shareholders'
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
January 1, 2006 - Restated
|
|
$
|
55,200
|
|
$
|
-
|
|
$
|
1,851,924
|
|
$
|
(1,918,675
|
)
|
$
|
(11,551
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of 500,000 shares of common stock for purchase of
subsidiary
|
|
|
5,000
|
|
|
|
|
|
45,000
|
|
|
|
|
|
50,000
|
|
|
Issuance
of 1,000,000 shares of common stock for purchase of
subsidiary
|
|
|
10,000
|
|
|
|
|
|
90,000
|
|
|
|
|
|
100,000
|
|
|
Issuance
of 1,000,000 shares of common stock for purchase of
subsidiary
|
|
|
10,000
|
|
|
|
|
|
90,000
|
|
|
|
|
|
100,000
|
|
|
Net
Income
|
|
|
-
|
|
|
|
|
|
-
|
|
|
131,170
|
|
|
131,170
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2006 - Restated
|
|
$
|
80,200
|
|
$
|
-
|
|
$
|
2,076,924
|
|
$
|
(1,787,505
|
)
|
$
|
369,619
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of 130,000 shares of preferred stock
|
|
|
|
|
|
130,000
|
|
|
|
|
|
|
|
|
130,000
|
|
|
Commissions
on sale of preferred stock
|
|
|
|
|
|
|
|
|
(5,200
|
)
|
|
|
|
|
(5,200
|
)
|
|
Net
Loss
|
|
|
|
|
|
|
|
|
|
|
|
(181,038
|
)
|
|
(181,038
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2007
|
|
$
|
80,200
|
|
$
|
130,000
|
|
$
|
2,071,724
|
|
$
|
(1,968,543
|
)
|
$
|
313,381
|
|
|
Note:
|
In
April 2006, the outstanding shares were reduced by a reverse split
of
100:1. In October 2007, the outstanding shares were increased by
a forward
split of 1:4.
|
See
accompanying independent auditors report and notes to consolidated financial
statements.
ORGANA
TECHNOLOGIES GROUP, INC. and SUBSIDIARIES
Consolidated
Statements of Cash Flows
For
the Years Ended December 31,
|
|
|
2007
|
|
|
|
|
Cash
Flows From Operating Activities:
|
|
|
|
|
|
|
|
|
Net
Income (Loss)
|
|
$
|
(181,038
|
)
|
$
|
131,170
|
|
|
Adjustments
to Reconcile Net Income (Loss) to Net
|
|
|
|
|
|
|
|
|
Cash
Used In Operating Activities:
|
|
|
|
|
|
|
|
|
Depreciation
and Amortization
|
|
|
10,138
|
|
|
2,038
|
|
|
Minority
Interests in Subsidiaries
|
|
|
(7,408
|
)
|
|
59,672
|
|
|
Changes
in Assets and Liabilities, Net of Acquisitions:
|
|
|
|
|
|
|
|
|
Accounts
Receivable
|
|
|
(11,663
|
)
|
|
(3,010
|
)
|
|
Due
From Related Party
|
|
|
57,928
|
|
|
(341,617
|
)
|
|
Prepaid
Expenses
|
|
|
(59,728
|
)
|
|
-
|
|
|
Inventory
|
|
|
(35,815
|
)
|
|
-
|
|
|
Other
Assets
|
|
|
(23,391
|
)
|
|
(24,600
|
)
|
|
Accounts
Payable and Accrued Expenses
|
|
|
156,166
|
|
|
47,164
|
|
|
Net
Cash Used In Operating Activities
|
|
|
(94,811
|
)
|
|
(129,183
|
)
|
|
|
|
|
|
|
|
|
|
|
Cash
Flows From Investing Activities:
|
|
|
|
|
|
|
|
|
Acquisition
of Property and Equipment
|
|
|
(22,397
|
)
|
|
-
|
|
|
Cash
Received from Acquired Business
|
|
|
-
|
|
|
10,518
|
|
|
|
|
|
|
|
|
|
|
|
Net
Cash Provided By (Used In) Investing Activities
|
|
|
(22,397
|
)
|
|
10,518
|
|
|
|
|
|
|
|
|
|
|
|
Cash
Flows From Financing Activities:
|
|
|
|
|
|
|
|
|
Issuance
of Capitalized Lease
|
|
|
21,588
|
|
|
-
|
|
|
Repayment
of Capitalized Lease
|
|
|
(1,113
|
)
|
|
-
|
|
|
Issuance
of Preferred Stock
|
|
|
130,000
|
|
|
-
|
|
|
Commissions
Paid on Sale of Preferred Stock
|
|
|
(5,200
|
)
|
|
-
|
|
|
Issuance
of Notes Payable
|
|
|
-
|
|
|
150,000
|
|
|
Repayment
of Notes Payable
|
|
|
(10,181
|
)
|
|
(22,970
|
)
|
|
|
|
|
|
|
|
|
|
|
Net
Cash Provided by Financing Activities
|
|
|
135,094
|
|
|
127,030
|
|
|
Net
Increase in Cash
|
|
|
17,886
|
|
|
8,365
|
|
|
Cash
at Beginning of Year
|
|
|
19,203
|
|
|
10,838
|
|
|
Cash
at End of Year
|
|
$
|
37,089
|
|
$
|
19,203
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
Disclosure of Cash Flow Information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
Paid for Interest
|
|
$
|
43,032
|
|
$
|
7,927
|
|
|
Taxes
Paid
|
|
$
|
-
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
Schedule of Noncash Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
The
Company acquired 100% of Davinci's Computer Corp. on June 1, 2006
for
$50,000 of the Company's common stock. On October 1, 2006, the
Company
acquired 80% of Zowy Media, Incorporated for $200,000 of the Company's
common stock. In conjunction with the acquisitions, the net assets
acquired and liabilities assumed are as follows:
|
|
|
|
|
|
|
|
|
|
|
Fair
value of net assets acquired
|
|
|
|
|
$
|
249,031
|
|
|
Goodwill
|
|
|
|
|
|
241,543
|
|
|
Minority
Interest in Subsidiary
|
|
|
|
|
|
(3,507
|
)
|
|
Liabilities
assumed
|
|
|
|
|
|
(237,067
|
)
|
|
Common
Stock issued
|
|
|
|
|
$
|
250,000
|
|
See
accompanying notes to consolidated financial statements.
ORGANA
TECHNOLOGIES GROUP, INC.
Notes
to Consolidated Financial Statements
December
31, 2007
NOTE
1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
and Operation
Organa
Technologies Group, Inc. (“OTG” or the “Company”), was formerly known as
Integrity Messenger Corporation (“IMC”), a Delaware corporation formed in 2002.
In October 2005, the Board approved a name change to Organa Technologies
Group,
Inc. Reference to OTG will include the period prior to the name change when
the
Company was IMC.
The
Company was organized as a vehicle to enter into various Internet business
combinations seeking customers through Internet product sales and Internet
services. The company is a management company that has acquired several
technology based businesses.
Basis
of Consolidation
The
accompanying consolidated financial statements include the accounts of the
Company and its subsidiaries and have been prepared in accordance with U.S.
generally accepted accounting principles (“GAAP”). All significant intercompany
accounts and transactions have been eliminated.
The
consolidated financial statements include the accounts of the Company and
its
wholly-owned subsidiaries, Hurricane Host, Inc. (“HH”), Gateway Internet
Services Corporation (“GIS”), Davinci’s Computer Corp. (“DCC”), and Game2Gear,
Inc. (“G2G
TM
”),
and
its majority-owned subsidiaries, Organa Consulting Group, Inc. (“OCG”), Zowy
Media, Incorporated (“Zowy”) and its subsidiary, Epic Weapons, Inc.
(“Epic”).
Accounting
Changes
In
September 2006, the FASB issued Statement of Financial Accounting Standards
No.
157,
Fair
Value Measurements
(SFAS
157). SFAS 157 provides a common definition of fair value and establishes
a
framework to make the measurement of fair value in generally accepted accounting
principles more consistent and comparable. SFAS 157 also requires expanded
disclosures to provide information about the extent to which fair value is
used
to measure assets and liabilities, the methods and assumptions used to measure
fair value, and the effect of fair value measures on earnings. SFAS 157 is
effective for the Company’s 2009 fiscal year, although early adoption is
permitted. The Company is currently assessing the potential effect of SFAS
157
on its financial statements.
In
July
2006, the FASB issued FASB interpretation No. 48,
Accounting
for Uncertainty in Income Taxes
(FIN
48). FIN 48 clarifies the accounting for income taxes by prescribing a minimum
probability threshold that a tax position must meet before a financial statement
benefit is recognized. The minimum threshold is defined in FIN 48 as a tax
position that is more likely than not to be sustained upon examination by
the
applicable taxing authority, including resolution of any related appeals
or
litigation processes, based on the technical merits of the position. The
tax
benefit to be recognized is measured as the largest amount of benefit that
is
greater than fifty percent likely of being realized upon ultimate settlement.
FIN 48 must be applied to all existing tax position upon initial adoption.
The
cumulative effect of applying FIN 48 at adoption is to be reported as an
adjustment to beginning retained earnings for the year of adoption. FIN 48
is
effective for the Company’s 2008 fiscal year. While the Company is currently
assessing the potential effect of FIN 48, it does not anticipate any impact
to
beginning retained earnings in fiscal year 2008.
In
accordance with Statement of Financial Standards (SFAS) No. 144,
Accounting
for the Impairment of Disposable Long-Lived Assets,
the
Company will record impairment losses on long-lived assets used in operations
when events and circumstances indicate that assets might be impaired and
the
undiscounted cash flows estimated to be generated by those assets are less
than
the carrying amount of those assets. To date there has been no impairment
of the
Company’s long-lived assets.
Concentration
of Credit Risk and Significant Customers
Financial
instruments which potentially subject the Company to a concentration of credit
risk consist principally of temporary cash investments and accounts
receivable.
The
Company places its temporary cash investments with financial institutions
insured by the FDIC.
NOTE
1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -
continued
Concentrations
of credit risk with respect to trade receivables are limited due to the diverse
group of customers to whom the Company sells and that a substantial amount
of
the company’s revenues are paid for prior to the products being shipped or
services provided. The Company establishes an allowance for doubtful accounts
when events and circumstances regarding the collectability of its receivables
warrant based upon factors such as the credit risk of specific customers,
historical trends, other information and past bad debt history. As of December
31, 2007 and 2006, no allowance for doubtful accounts was deemed
necessary.
Impairment
of Goodwill
In
accordance with Statement of Financial Accounting Standards No. 142,
Goodwill
and Other Intangible Assets,
goodwill
is evaluated for potential impairment annually, generally during the fourth
quarter, by comparing the fair value of a reporting unit to its carrying
value,
including recorded goodwill. If the carrying value exceeds the fair value,
impairment is measured by comparing the derived fair value of goodwill to
its
carrying value, and any impairment determined would be recorded in the current
period. To date there has been no impairment of the Company’s recorded
goodwill.
Net
Earnings (Loss) Per Share
In
accordance with SFAS No. 128,
Earnings
Per Share
, basic
net earnings (loss) per common share is computed by dividing the net earnings
(loss) for the period by the weighted average number of common shares
outstanding during the period. Diluted earnings (loss) per share are computed
using the weighted average number of common and dilutive common stock equivalent
shares outstanding during the period. Dilutive common stock equivalent shares
consist of Series A convertible preferred stock at December 31, 2007. Dilutive
common stock equivalent shares are not utilized when the effect is
anti-dilutive.
Revenue
Recognition
The
Company recognizes revenue on our products in accordance with the Securities
Exchange Commission (SEC) Staff Accounting Bulletin No. 104, (which superseded
Staff Accounting Bulletin No. 101) “Revenue Recognition in Financial
Statements”. Under these guidelines, revenue is recognized on sales transactions
when all of the following exist: persuasive evidence of an arrangement did
exist, delivery of product or services has occurred, the sales price to the
buyer is fixed or determinable and collectibility is reasonably assured.
We
accrue a provision for estimated returns concurrent with revenue
recognition.
Segment
Information
In
accordance with the provisions of SFAS No. 131,
Disclosures
about Segments of an Enterprise and Related Information,
the
Company is required to report financial and descriptive information about
its
reportable operating segments. The Company identifies its operating segments
as
divisions based on how management internally evaluates separate financial
information, business activities and management responsibility. The Company
segments and the subsidiaries associated with each segment are as
follows:
|
Retail
Sales
|
|
Computer Hardware and
Software
|
|
Internet
Services
|
|
Zowy
Media, Incorporated
|
|
Davinci's
Computer Corp.
|
|
Hurricane
Host, Inc.
|
|
Epic
Weapons, Inc.
|
|
|
|
Organa
Consulting Group,
Inc.
|
|
Game2Gear,
Inc.
|
|
|
|
Gateway
Internet Services,
Inc.
|
NOTE
2 – RESTATEMENT OF PRIOR PERIOD CONSOLIDATED FINANCIAL
STATEMENTS
In
connection with subsequent reviews of the Company’s financial statements for the
year ended December 31, 2006 and prior, certain errors were discovered. These
errors were associated with 1) the Company’s recognition of goodwill associated
with the acquisition of Zowy Media, Incorporated and its subsidiary, Epic
Weapons, Inc. and the reporting of its subsequent results of operations and
2)
the proper recognition and recording of transactions for years prior to the
current reporting periods with Avante Holding Group, Inc. "Avante" (See Note
7 -
Related Parties).
NOTE
2 – RESTATEMENT OF PRIOR PERIOD CONSOLIDATED FINANCIAL STATEMENTS -
continued
The
acquisition of Zowy Media, Incorporated was on October 1, 2006. The adjustments
required for transactions related to AHG include years prior to 2007 and
are
reflected in an adjustment to beginning retained earnings as of January 1,
2006
and to operations for the year ended December 31, 2006. The financial statements
for the year ended December 31, 2006 were required to be restated. The Company
was not a reporting entity until November 26, 2007, therefore quarterly 2007
statements have not been published.
The
following table presents the impact of the financial statement
misclassifications on the Company’s previously reported consolidated financial
statements as of and for the year ended December 31, 2006.
|
|
|
December
31, 2006
|
|
|
|
|
|
|
Adjustments
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
Current
Assets
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
19,203
|
|
$
|
-
|
|
$
|
19,203
|
|
|
Accounts
Receivable
|
|
|
-
|
|
|
3,010
|
|
|
3,010
|
|
|
Due
From Related Party
|
|
|
311,078
|
|
|
30,539
|
|
|
341,617
|
|
|
Inventory
|
|
|
19,000
|
|
|
-
|
|
|
19,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Current Assets
|
|
|
349,281
|
|
|
33,549
|
|
|
382,830
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property,
Plant and Equipment, Net
|
|
|
223,046
|
|
|
-
|
|
|
223,046
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
191,752
|
|
|
49,791
|
|
|
241,543
|
|
|
Other
Assets
|
|
|
49,600
|
|
|
(25,000
|
)
|
|
24,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Assets
|
|
$
|
813,679
|
|
$
|
58,340
|
|
$
|
872,019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
Current
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
Notes
Payable, Current Portion
|
|
$
|
229,175
|
|
$
|
546
|
|
$
|
229,721
|
|
|
Accounts
Payable and Accrued Expenses
|
|
|
79,998
|
|
|
(25,992
|
)
|
|
54,006
|
|
|
Accrued
Payroll
|
|
|
-
|
|
|
893
|
|
|
893
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Current Liabilities
|
|
|
309,173
|
|
|
(24,553
|
)
|
|
284,620
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-Term
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
Notes
Payable
|
|
|
154,949
|
|
|
(341
|
)
|
|
154,608
|
|
|
Total
Long-Term Liabilities
|
|
|
154,949
|
|
|
(341
|
)
|
|
154,608
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Liabilities
|
|
|
464,122
|
|
|
(24,894
|
)
|
|
439,228
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority
Interest
|
|
|
101,483
|
|
|
(38,311
|
)
|
|
63,172
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
Equity
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock
|
|
|
80,200
|
|
|
-
|
|
|
80,200
|
|
|
Minority
Interest
|
|
|
10,000
|
|
|
(10,000
|
)
|
|
-
|
|
|
Additional
Paid-in Capital
|
|
|
1,670,300
|
|
|
406,624
|
|
|
2,076,924
|
|
|
Accumulated
Deficit
|
|
|
(1,512,426
|
)
|
|
(275,079
|
)
|
|
(1,787,505
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Stockholders' Equity
|
|
|
248,074
|
|
|
121,545
|
|
|
369,619
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Liabilities and Stockholders' Equity
|
|
$
|
813,679
|
|
$
|
58,340
|
|
$
|
872,019
|
|
NOTE
2 – RESTATEMENT OF PRIOR PERIOD CONSOLIDATED FINANCIAL STATEMENTS -
continued
|
|
|
For
the Year Ended December 31, 2006
|
|
|
|
|
|
|
Adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
$
|
1,483,816
|
|
$
|
-
|
|
$
|
1,483,816
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of Sales
|
|
|
450,867
|
|
|
47,888
|
|
|
498,755
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
Profit
|
|
|
1,032,949
|
|
|
(47,888
|
)
|
|
985,061
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Expenses
|
|
|
636,197
|
|
|
155,598
|
|
|
791,795
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(Loss) From Operations
|
|
|
396,752
|
|
|
(203,486
|
)
|
|
193,266
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
Income / (Expense)
|
|
|
(7,927
|
)
|
|
5,503
|
|
|
(2,424
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(Loss) Before Minority Interest
|
|
|
388,825
|
|
|
(197,983
|
)
|
|
190,842
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority
Interest in Subsidiary
|
|
|
(101,490
|
)
|
|
41,818
|
|
|
(59,672
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Income
|
|
$
|
287,335
|
|
$
|
(156,165
|
)
|
$
|
131,170
|
|
NOTE
3 – ACQUISITIONS AND NEW SUBSIDIARIES FORMED
Integrity
Messenger Corporation
Integrity
Messenger Corporation (“IMC-FL”), a Florida corporation, was formed in 2002. On
January 1, 2004, OTG acquired 100% of the stock of IMC-FL in exchange for
60,000,000 shares of common stock.
Hurricane
Host, LLC
On
April
1, 2004, OTG acquired 100% of the membership units of Hurricane Host, LLC
(“HH”)
for $50,000. HH, a Texas limited liability company, was originally formed
in
2003. HH merged with Hurricane Host, Inc. (“HH-FL”), a Florida
corporation.
Organa
Consulting Group, Inc.
On
October 25, 2005, OTG acquired 80% of Organa Consulting Group, Inc. (“OCG”), a
Florida corporation, for $800. The minority interest of 20% in OCG is owned
by
Avante Holding Group, Inc. (“AHG”).
Gateway
Internet Services Corporation
On
April
20, 2006, Gateway Internet Services Corporation (“GIS”), a Florida corporation,
was formed as a subsidiary of the Company. GIS will work parallel with its
customer, Render Payment Corporation (“RPC”). RPC is the payment processor
whereas GIS has the technology to provide secure processing of payments from
individuals through bank wires and ACH processing for select Internet clients.
As of December 31, 2007, GIS was an inactive subsidiary.
NOTE
3 – ACQUISITIONS AND NEW SUBSIDIARIES FORMED -
continued
Davinci’s
Computer Corp.
On
June
1, 2006, OTG acquired Davinci’s Computer Corp. (“DCC”) of Florida for 500,000
shares of the Company’s common stock valued at $.10 per share at the time of the
transaction. DCC provides computer consulting services to select clients
throughout the state of Florida.
In
accordance with SFAS No. 141, “Business Combinations”, the acquisition has been
accounted for under the purchase method of accounting. The purchase price
was
allocated to DCC’s tangible and intangible assets acquired and liabilities
assumed based on their estimated fair values with any excess being ascribed
to
goodwill. Management is responsible for determining the fair value of these
assets. The fair value of the assets acquired and liabilities assumed represent
management’s estimate of fair values. The following table summarizes the
activity of the acquired company at May 31, 2006:
|
STATEMENT
of OPERATIONS for the Period JANUARY 1 - MAY 31, 2006:
|
|
|
|
|
|
Sales
|
|
$
|
55,520
|
|
|
Cost
of Sales
|
|
|
12,555
|
|
|
Gross
Profit
|
|
|
42,965
|
|
|
Operating
Expenses
|
|
|
77,493
|
|
|
Income
from Operations
|
|
|
(34,528
|
)
|
|
Income
Before Taxes
|
|
$
|
(34,528
|
)
|
The
purchase price of DCC was $50,000. The following table summarized the estimated
fair values of the assets acquired and liabilities assumed at the date of
acquisition:
|
Current
assets
|
|
$
|
-
|
|
|
Property,
plant and equipment
|
|
|
-
|
|
|
Goodwill
|
|
|
55,571
|
|
|
Total
assets acquired
|
|
|
55,571
|
|
|
Current
liabilities
|
|
|
5,571
|
|
|
Long-term
debt
|
|
|
-
|
|
|
Total
liabilities assumed
|
|
|
5,571
|
|
|
Net
assets acquired
|
|
$
|
50,000
|
|
Zowy
Media, Incorporated
On
October 1, 2006, OTG acquired 80% of Zowy Media, Incorporated (“Zowy”) and its
subsidiary, Epic Weapons, Inc. (f/k/a Epic Weapons, LLC) (“Epic”), all of
Florida, for 2,000,000 shares of OTG common stock, valued at $.10 per share
at
the time of the transaction. Zowy operates an Internet website (
www.swordsonline.com
and
www.weaponmasters.com
) for
the marketing and selling of various products. Zowy operates under the dba
Weaponmasters. Epic has an agreement with Blizzard Entertainment® to market
certain licensed products (initially the Frostmourne™ Sword) related to the
World of Warcraft® computer games.
In
accordance with SFAS No. 141, “Business Combinations”, the acquisition has been
accounted for under the purchase method of accounting. The purchase price
was
allocated to Zowy’s tangible and intangible assets acquired and liabilities
assumed based on their estimated fair values with any excess being ascribed
to
goodwill. Management is responsible for determining the fair value of these
assets. The fair value of the assets acquired and liabilities assumed represent
management’s estimate of fair values. The following table summarizes the
activity of the acquired company at September 30, 2006:
NOTE
3 – ACQUISITIONS AND NEW SUBSIDIARIES FORMED -
continued
|
STATEMENT
of OPERATIONS for the Period JANUARY 1 - SEPTEMBER 30, 2006:
|
|
|
|
|
|
|
|
Sales
|
|
$
|
429,748
|
|
|
Cost
of Sales
|
|
|
155,235
|
|
|
Gross
Profit
|
|
|
274,513
|
|
|
Operating
Expenses
|
|
|
256,834
|
|
|
Income
from Operations
|
|
|
17,679
|
|
|
Income
Before Taxes
|
|
$
|
17,679
|
|
|
|
|
|
|
|
|
Note:
Income Taxes are not recorded as the company was a S Corporation
from
January 1 - September 30,
2006.
|
The
purchase price of Zowy was $200,000. The following table summarizes the
estimated fair values of the assets acquired and liabilities assumed at the
date
of acquisition:
|
Current
assets
|
|
$
|
29,519
|
|
|
Property,
plant and equipment
|
|
|
225,083
|
|
|
Goodwill
|
|
|
185,972
|
|
|
Total
assets acquired
|
|
|
440,574
|
|
|
Current
liabilities
|
|
|
82,108
|
|
|
Long-term
debt
|
|
|
154,959
|
|
|
Minority
interest
|
|
|
3,507
|
|
|
Total
liabilities assumed
|
|
|
240,574
|
|
|
Net
assets acquired
|
|
$
|
200,000
|
|
Game2Gear,
Inc.
On
December 18, 2006, Game2Gear, Inc. (“G2G”), a Florida corporation, was formed as
a subsidiary of the Company. G2G is a technology based solution that may
be
offered to various business verticals enabling vendors to internally and
externally track and process inventory more efficiently, create industry
specific and regulatory mandated security requirements and/or compliance
protocols establishing a unique product identification method that would
be
embedded into a product allowing businesses to provide better customer service
and secure its marketplace from fraudulent and unlicensed
products.
NOTE
4 – BALANCE SHEET DETAILS
Property
and equipment consist of the following:
|
|
|
Useful
|
|
December 31,
|
|
|
|
|
Life
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
Building
|
|
|
30
|
|
$
|
209,000
|
|
$
|
209,000
|
|
|
Land
|
|
|
|
|
|
20,000
|
|
|
20,000
|
|
|
Computer
equipment
|
|
|
3
|
|
|
2,657
|
|
|
1,847
|
|
|
Equipment
|
|
|
5
|
|
|
24,428
|
|
|
2,841
|
|
|
|
|
|
|
|
|
256,085
|
|
|
233,688
|
|
|
Less:
accumulated depreciation
|
|
|
|
|
|
(20,780
|
)
|
|
(10,642
|
)
|
|
Net
property and equipment
|
|
|
|
|
$
|
235,305
|
|
$
|
223,046
|
|
Depreciation
expense was $10,138 and $2,038 for the years ended December 31, 2007 and
2006,
respectively.
NOTE
4 – BALANCE SHEET DETAILS - continued
Other
assets consist of the following:
|
|
|
December 31,
|
|
|
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
|
|
Tooling
(a)
|
|
$
|
29,367
|
|
$
|
19,500
|
|
|
Design
(a)
|
|
|
17,111
|
|
|
5,100
|
|
|
Patents
|
|
|
1,513
|
|
|
-
|
|
|
Net
property and equipment
|
|
$
|
47,991
|
|
$
|
24,600
|
|
|
|
|
|
|
|
|
|
|
|
(a)
Related to the Epic Weapons, Inc. contract with Blizzard
Entertainment®.
|
Notes
payable consists of the following:
|
|
|
December 31,
|
|
|
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
|
|
PhoenixSurf.com,
LLC (Organa Consulting Group, Inc.), principal, 7% interest per
annum,
convertible to common stock when, for 10 consecutive days, the
Company's
stock is trading at $3.00 or higher.
|
|
$
|
150,000
|
|
$
|
150,000
|
|
|
Coastal
Bank (Zowy Media, Incorporated), adjustable rate mortgage at 9.25%
per
annum. Due September 2010. Current monthly payment of $1,292. Note
secured
by mortgage and an unconditional and continuing guarantee by a
minority
shareholder.
|
|
|
154,565
|
|
|
155,962
|
|
|
LHI
Cocoa Corp. (Zowy Media,Incorporated), 9% interest for 24 months
amortized
over 20 years. Due August 2007.
|
|
|
28,877
|
|
|
29,290
|
|
|
Washington
Mutual (Zowy Media, Incorporated), business line of credit, interest
at
11.25%.
|
|
|
40,706
|
|
|
49,077
|
|
|
|
|
|
374,148
|
|
|
384,329
|
|
|
Less:
Current portion
|
|
|
220,837
|
|
|
229,721
|
|
|
Total
long-term debt
|
|
$
|
153,311
|
|
$
|
154,608
|
|
NOTE
5 – COMMITMENTS
The
Company leases a laser engraver from Avante Leasing Corporation, a subsidiary
of
Avante (see Note 7 - Related Parties). The terms of the agreement include
a 5
year term, 19.4% interest, with a $2,159 purchase price at the end of the
term.
The lease expires on July 1, 2012. Monthly lease payments are
$565.
The
Company leases office space in Melbourne, Florida from GAMI, LLC (“GAMI” - See
Note 7 - Related Parties). The terms of the agreement are monthly payments
of
$4,000 expiring May 31, 2012. There are two renewable five year
extensions.
Future
minimum lease obligations are as follows:
|
2008
|
|
$
|
56,052
|
|
|
2009
|
|
|
54,780
|
|
|
2010
|
|
|
54,780
|
|
|
2011
|
|
|
54,780
|
|
|
2012
|
|
|
23,955
|
|
|
|
|
|
|
|
|
Total
Lease Obligations
|
|
$
|
244,347
|
|
Total
rent expense under non-cancelable operating leases was $35,632 and $4,452
for
the years ended December 31, 2007 and 2006, respectively.
NOTE
6 – BUSINESS SEGMENTS
The
Company operates primarily in four segments: retail sales, computer hardware
and
software sales, Internet services and corporate.
Information
concerning the revenues and operating income for the years ended December
31,
2007 and 2006, and the identifiable assets at December 31, 2007 and 2006
for the
four segments in which the Company operates are shown in the following
table:
|
|
|
Year Ended
December 31,
|
|
|
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
|
|
OPERATING
REVENUE
|
|
|
|
|
|
|
|
|
Retail
Sales
|
|
$
|
436,735
|
|
$
|
170,650
|
|
|
Computer
Hardware and Software
|
|
|
175,903
|
|
|
112,436
|
|
|
Internet
Services
|
|
|
530,520
|
|
|
1,123,882
|
|
|
Corporate
|
|
|
-
|
|
|
76,848
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
Totals
|
|
$
|
1,143,158
|
|
$
|
1,483,816
|
|
|
|
|
|
|
|
|
|
|
|
INCOME
(LOSS) FROM OPERATIONS
|
|
|
|
|
|
|
|
|
Retail
Sales
|
|
$
|
(17,720
|
)
|
$
|
(48,677
|
)
|
|
Computer
Hardware and Software
|
|
|
35,724
|
|
|
8,058
|
|
|
Internet
Services
|
|
|
56,526
|
|
|
352,181
|
|
|
Corporate
|
|
|
(248,134
|
)
|
|
(118,296
|
)
|
|
|
|
|
|
|
|
|
|
|
Consolidated
Totals
|
|
$
|
(173,604
|
)
|
$
|
193,266
|
|
|
|
|
|
|
|
|
|
|
|
IDENTIFIABLE
ASSETS
|
|
|
|
|
|
|
|
|
Retail
Sales
|
|
$
|
337,792
|
|
$
|
268,126
|
|
|
Computer
Hardware and Software
|
|
|
50,828
|
|
|
9,144
|
|
|
Internet
Services
|
|
|
54,781
|
|
|
353,143
|
|
|
Corporate
|
|
|
289,889
|
|
|
63
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
Totals
|
|
$
|
733,290
|
|
$
|
630,476
|
|
|
|
|
|
|
|
|
|
|
|
DEPRECIATION
AND AMORTIZATION
|
|
|
|
|
|
|
|
|
Retail
Sales
|
|
$
|
10,138
|
|
$
|
2,038
|
|
|
Computer
Hardware and Software
|
|
|
-
|
|
|
-
|
|
|
Internet
Services
|
|
|
-
|
|
|
-
|
|
|
Corporate
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
Totals
|
|
$
|
10,138
|
|
$
|
2,038
|
|
NOTE
7 – RELATED PARTIES
OTG
and
Avante entered into a Consulting Agreement in October 2006 to provide corporate
guidance, financial and accounting services. As compensation, AHG received
$8,000 per month in 2006. Under this agreement Avante has the unilateral
authority to hire additional personnel required to perform investor relations,
financial administration, and executive guidance and request reimbursement
from
OTG on a reimbursable expense basis. The term of this agreement is for three
years with one additional automatic three-year extension. Avante is a company
primarily owned and controlled by Michael W. Hawkins. Avante is a
significant shareholder of the Company.
In
the
transaction of OTG acquiring Zowy; 40% was acquired from Avante and 40% from
GAMI with the remaining 20% being held by the former owner of Zowy Media,
Incorporated, Titus Blair. Both Avante and GAMI are related parties, since
the
majority shareholder of OTG controls these companies. Prior to the acquisition,
Avante had a Consulting Agreement with Zowy to provide corporate guidance,
financial and accounting services. As compensation, Avante received $10,000
per
month prior to the acquisition. As a condition to the acquisition, effective
October 1, 2006, the Avante Consulting Agreement with Zowy was terminated.
The
OTG Consulting Agreement was modified to increase the monthly compensation
from
$8,000 to $10,000, the amount previously paid by Zowy.
NOTE
7 – RELATED PARTIES - continued
On
October 5, 2005, a Settlement Agreement was made between OTG and Avante
regarding the approximately $812,000 debt owed by OTG to Avante. The debt
was
issued in exchange for working capital and for unpaid contractual consulting
fees. In the Settlement Agreement, OTG issued 400,000,000 common shares of
OTG
at the current market value of $.001, or $40,000, in lieu of the approximately
$812,000 in debt. This transaction, even though not an arms length transaction,
was at an exchange rate of $20 to $1 therefore, it would be considered favorable
to the Company.
On
August
1, 2007, Avante Leasing Corporation, a wholly-owned subsidiary of Avante,
leased
a laser engraver to Zowy Media, Incorporated. The terms of the agreement
include
a five year term, 19.4% interest, with a 10% purchase price at the end of
the
period. This transaction was completed as the acquisition and financing of
the
laser engraver required the financial guarantee of Avante and Michael W.
Hawkins. As of December 31, 2007, the balance due to Avante Leasing Corporation
under this Agreement was $20,475.
On
June
1, 2007, the Company entered into a triple net lease agreement with GAMI.
Monthly rent is $4,000 which is at fair market value. GAMI, LLC is a company
owned and controlled by Michael W. Hawkins, a majority shareholder of the
Company, and his wife.
NOTE
8 – STOCKHOLDERS’ EQUITY
Common
Stock
On
January 1, 2004, the Company acquired all of the assets of IMC-FL in exchange
for 60,000,000 shares of its common stock.
In
January and February 2004, the Company completed a private placement of
11,500,000 shares of its common stock under Regulation D, Section
504.
The
Company learned in the Fall of 2006 that in April 2004, 250,000 shares of
common
stock were issued in error by the Company’s then Transfer Agent to a shareholder
who had claimed to have lost its stock certificate, but had in fact sold
the
shares. After an internal investigation and reconciliation, the Company
identified this error and reconciled the lost shares. The Company’s board of
directors determined that the cost associated with further action against
the
shareholder and the transfer agent was greater than adjusting the books and
records to accept the erroneous shares. The Company dismissed its transfer
agent
after the improper issuance was discovered.
On
October 5, 2005, the Company amended its Articles of Incorporation to
900,000,000 common shares and 50,000,000 blank check preferred shares
authorized.
On
October 5, 2005, the Company entered into a Settlement Agreement with Avante
whereby all debt owed to Avante, of approximately $812,000, was converted
into
400,000,000 common shares of IMC with a market value of $.0001 at the time
of
the conversion. The valuation of $40,000 was substantially lower than the
obligation to Avante. This transaction was not an arms length transaction
as the
directors of OTG are also officers and minority shareholders of Avante. This
transaction was completed as needed to facilitate the Company’s plans for future
transactions that would increase the Company’s revenue and
profits.
On
April
11, 2006, the Company’s shareholders authorized an amendment to its Certificate
of Incorporation to effect a 1:100 reverse stock split. All share and per
share
amounts have been adjusted for this reverse stock split. An additional 66
shares
were issued as part of the roundup of fractional shares.
On
July
1, 2006, the Company acquired Davinci’s Computer Corp. a Florida Corporation for
500,000 shares of the Company’s common stock valued at $.10 per share at the
time of the transaction.
On
September 10, 2007, the Company identified that during the conversion from
IMC
to OTG, 5,000 shares were erroneously issued and have been subsequently
cancelled.
On
October 1, 2006, the Company acquired 80% of Zowy Media, Incorporated, a
Florida
Corporation, in exchange for 2,000,000 shares of its common stock. The minority
interest of Zowy is owned by Titus Blair.
On
October 15, 2007, the Company filed an amendment to its Articles of
Incorporation to authorize 100,000,000 shares of common stock, $0.0001 par
value
per share, 45,000,000 shares of blank check preferred stock, $0.0001 par
value,
and 5,000,000 shares of series A preferred stock at $1.00 par value per
share.
On
November 1, 2007, the Company authorized a 1:4 forward split whereby total
issued shares will be 28,870,264 and the shares available for trading after
completion of the appropriate Rule 144K registrations is
2,870,264.
Each
of
the stock issuances described above, with the exception of the 504 offering,
was
effected in private transaction exempt from registration under the Securities
Act of 1933, as amended, Section 4(2). No commissions were paid to anyone
in
connection with these transactions and no solicitation was made by the Company
in connection therewith. All entities or persons receiving shares were believed
to be “accredited” investors as that term is defined under Regulation D. The
persons receiving the stock under the Rule 504 offering are
currently
being investigated by the SEC, NASD, and U.S. Postal Services with four
associated individuals believed to have pled guilty to an illegal “pump and
dump” scheme. Management has cooperated fully with the authorities involved in
this ongoing investigation.
NOTE
8 – STOCKHOLDERS’ EQUITY - continued
Current
management believes the initial Rule 504 offering was placed through Rim
Rock,
LLC and Cold Springs, LLC. The offering is believed to have been made in
full
compliance with the Rule.
Preferred
Stock
On
November 1, 2007, the Company engaged Dinosaur Securities, LLC to act as
Placement Agent to assist it in raising up to $5,000,000 under a Confidential
Private Placement Memorandum (PPM) for Epic. As part of the PPM the Company
has
authorized 5,000,000 shares of Series A preferred stock of OTG. Under the
PPM
each purchase of one unit at a cost of $10,000 is entitled to receive in
exchange for 10,000 shares of Series A preferred stock and a 0.04% royalty
for
each Frostmourne
TM
Sword
sold during its lifetime. As an aggregate, Epic will pay up to 20% royalties
to
the Series A Preferred Shareholders. The preferred shares are convertible
to the
Company’s common stock on a one-for-one basis at any time by the preferred
shareholder. At December 31, 2007, 130,000 preferred Series A shares were
issued
and outstanding and Dinosaur Securities has been paid $5.200 for its
services.
NOTE
9 – STOCK OPTION PLAN
Under
its
2007 Stock Option Plan (the “Plan”), the Company has the authority to grant
stock options for a fixed number of shares to employees, directors, and
consultants with an exercise price not lower than the fair market value at
the
date of grant. The Company adopted SFAS 123(r),
Share-Based
Payments
, in the
first quarter of fiscal 2006. In accordance with the provisions of SFAS 123(r),
the Company will recognize compensation expense related to outstanding options
granted under the 2007 Plan. No options were granted in 2007.
There
are
4,000,000 unissued options under the 2007 Stock Option Plan at December 31,
2007. Subsequently, 3,185,000 options were granted in March,
2008.
NOTE
10 – EARNINGS PER SHARE
The
Company presents both basic and diluted earnings per share (EPS) amounts.
Basic
EPS is calculated by dividing net income by the weighted average number
of
common shares outstanding during the year. Diluted EPS Is based upon the
weighted average number of common and common equivalent shares outstanding
during the year which assumes conversion of the Company’s convertible preferred
stock. Common equivalent shares are excluded from the computation in periods
in
which they have an anti-dilutive effect.
A
reconciliation of net income and the weighted average number of common and
common equivalent shares outstanding for calculating diluted earnings per
share
is as follows:
|
|
|
For the Year Ended December 31,
|
|
|
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
|
|
Numerator
for basic income (loss) per share, as reported
|
|
$
|
(181,038
|
)
|
$
|
131,170
|
|
|
Preferred
stock dividends
|
|
|
-
|
|
|
-
|
|
|
Income
(loss) for basic EPS calculations
|
|
$
|
(181,038
|
)
|
$
|
131,170
|
|
|
|
|
|
|
|
|
|
|
|
Effect
of dilutive securities, as reported Interest on convertible
debt
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
DILUTED
INCOME (LOSS) FOR EPS CALCULATIONS
|
|
$
|
(181,038
|
)
|
$
|
131,170
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED
AVERAGE NUMBER OF SHARES FOR BASIC EPS
|
|
|
28,870,264
|
|
|
22,059,232
|
|
|
|
|
|
|
|
|
|
|
|
Effect
of dilutive securities, as reported
Convertible
Preferred Stock
|
|
|
10,329
|
|
|
-
|
|
|
WEIGHTED
AVERAGE NUMBER OF SHARES FOR DILUTED EPS
|
|
|
28,880,593
|
|
|
22,059,232
|
|
|
|
|
|
|
|
|
|
|
|
BASIC
INCOME (LOSS) PER SHARE
|
|
$
|
(0.01
|
)
|
$
|
0.01
|
|
|
|
|
|
|
|
|
|
|
|
DILUTED
INCOME (LOSS) PER SHARE
|
|
$
|
(0.01
|
)
|
$
|
0.01
|
|
A
reconciliation of income tax computed at the statutory federal rate to income
tax expense (benefit) is as follows:
|
|
|
For the Year Ended
|
|
|
|
|
December 31,
|
|
|
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
|
|
Tax
expense (benefit) at the statutory rate of 35%
|
|
$
|
(65,956
|
)
|
$
|
66,795
|
|
|
State
income taxes, net of federal income tax
|
|
|
-
|
|
|
-
|
|
|
Change
in valuation allowance
|
|
|
65,956
|
|
|
(66,795
|
)
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
-
|
|
$
|
-
|
|
The
tax
effects of temporary differences that give rise to significant portions of
the
deferred tax assets and deferred tax liabilities are presented
below:
|
Deferred
tax assets:
|
|
|
|
|
|
Net
operating loss carryforward – through December 31,
2005
|
|
$
|
671,536
|
|
|
Less
tax expense – 2006
|
|
|
(66,795
|
)
|
|
Net
operating loss carryforward at December 31, 2006
|
|
$
|
604,741
|
|
|
Total
deferred tax assets
|
|
$
|
604,741
|
|
|
Net
operating loss carryforward – 2007
|
|
|
65,956
|
|
|
Less
valuation allowance
|
|
|
(670,697
|
)
|
|
Total
net deferred tax assets at December 31, 2007
|
|
$
|
0
|
|
In
assessing the realizability of deferred tax assets, management considers
whether
it is more likely than not that some portion or all of the deferred tax assets
will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods
in
which those temporary differences become deductible. Management considers
the
scheduled reversal of deferred tax liabilities, projected future taxable
income
and tax planning strategies in making this assessment.
Because
of the historical earnings history of the Company, the net deferred tax assets
for 2005, 2006 and 2007 were fully offset by a 100% valuation allowance.
The
valuation allowance for the remaining net deferred tax assets was $688,989
as of
December 31, 2007.
At
December 31, 2007, the Company had remaining net operating losses carryforward
available for United States tax purposes of $1,916,286. The remaining
carryforward expires in various years through 2027.
NOTE
12 – LEGAL PROCEEDINGS
On
July
19, 2006, the Company filed a lawsuit against New Millenium Entrepreneurs,
Inc.,
and Phoenixsurf.com, LLC, and various other individuals and parties claiming
libel, slander, and conspiracy to injure business. The claim relates to
consulting services provided by Organa Consulting Group, Inc., a wholly owned
subsidiary of Organa Technologies Group, Inc., to PhoenixSurf.com, a so-called
"Websurfing" business. The Company also has asked for injunctive relief,
compensatory and punitive damages in excess of $1,000,000. The law suit was
filed in the Circuit Court of the Eighteenth Judicial Circuit In and For
Brevard
County, Florida. On September 19, 2007 the companies released the
individual parties and filed for default judgment against New Millenium
Entrepreneurs, LLC and Phoenixsurf.com, LLC. On October 10, 2007 the Company
was
awarded default judgment in its case against New Millenium Entrepreneurs,
Inc.,
and Phoenixsurf.com, LLC. The Company is scheduled for a pre-trial conference
on
May 22, 2008.
On
October 2, 2006, the Company was named in a lawsuit captioned
New
Millennium Entrepreneurs, LLC and Phoenixsurf.com, LLC
v.
Michael
W. Hawkins, et. al.
U.S.
District Court, Middle District of Georgia, 3: 06-CV-84 (CDC). The lawsuit
alleges violations of the Georgia Securities Act, Georgia Fair Business
Practices Act, Federal Securities laws and certain other unspecified laws
in
connection with the investment by Plaintiffs of $150,000 in Organa Technologies
Group and seeks rescission of this investment. In addition, the lawsuit alleges
contractual disputes and misappropriations of funds by Organa Consulting
Group.
The Company has responded to the complaint, has entered into third party
claims
against the individual owners of New Millenium Entrepreneurs, LLC and other
interested parties, and believes it has meritorious defenses to the claims
made
and intends to vigorously defend the lawsuit. Subsequently, the SEC filed
charges on July 24, 2007 in the United States District Court for the Central
District of California in Los Angeles, California against New
Millenium
Entrepreneurs, LLC, Phoenixsurf.com, LLC, and two of its officers and managing
members. On August 10, 2007, a Final Judgment and Permanent Injunction were
filed with the Court against the New Millenium Entrepreneurs, LLC. Counsel
for
the Company and the Company itself are unable to determine any damage liability
or collectibility at the present time.
NOTE
13 – SUBSEQUENT EVENTS
On
March
1, 2008, the Company granted 3,185,000 stock options to eleven employees,
directors, and related parties.
On
March
1, 2008, DCC entered into a lease agreement with GAMI, LLC for a period of
five
years at the rate of $3,000 per month. DCC relocated to 2910 Bush Drive,
Melbourne, Florida. DCC was previously located at 380 Stan Drive, Melbourne,
Florida.
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