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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
FORM 10-K
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[X] ANNUAL REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: December 31, 2007
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from: _____________ to _____________
ADVANCED RESOURCES GROUP, LTD.
------------------------------
(Name of small business issuer in its charter)
DELAWARE 0-27256 13-3858917
-------- ------- ----------
(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
C/O ADVANCED RESOURCES GROUP, LTD, 338 PRESIDENT STREET,
SADDLEBROOK, NEW JERSEY 07663
-----------------------------
(Address of Principal Executive Office) (Zip Code)
(973) 246-9114
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(Small Business Issuer's telephone number, including area code)
N/A
---
(Former name or former address, if changed since last report)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
None
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
Common Stock, $.001 Par Value
(Title of Class)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the Small Business Issuer was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. [ ] Yes [X] No
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of Small Business Issuer's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]
Indicate by check mark whether the Small Business Issuer is a shell company (as
defined in Rule 12b-2 of the X Yes No Act). [X] Yes [ ] No
State issuer's `revenue for its most recent fiscal year. $0
State the aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the price at which the common equity
was sold, or the average bid and asked price of such common equity, as of a
specified date within the past 60 days. The aggregate market value at November
12, 2008of shares of the Small Business Issuer's Common Stock, $.001 par value
per share (based upon the closing price of $0.04 per share of such stock on the
"Pink sheets" on such date), held by non-affiliates of the Small Business Issuer
was approximately $75,307.
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. At November 12, 2008, there
were outstanding 336,190,941 shares of the Small Business Issuer's Common Stock,
$.001 par value.
Transitional Small Business Disclosure Format (Check one): [X] Yes [ ] No
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INDEX
PART I
Item 1. Description of Business. 1
Item 2. Description of Property. 2
Item 3. Legal Proceedings. 2
Item 4. Submission of Matters to a Vote of Security Holders. 2
PART II
Item 5. Market for Common Equity and Related Stockholder
Matters. 3
Item 6. Managements' Discussion and Analysis or
Plan of Operation. 3
Item 7. Financial Statements. 4
Item 8. Changes in and Disagreements With Accountants
on Accounting and Financial Disclosure. 13
Item 8A. Controls and Procedures. 13
Item 8B. Other Information. 13
PART III
Item 9. Directors, Executive Officers, Promoters,
Control Persons and Corporate Governance;
Compliance With Section 16(a) of the Exchange Act. 14
Item 10. Executive Compensation. 15
Item 11. Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters. 16
Item 12. Certain Relationships and Related Transactions, and
Director Independence. 16
Item 13. Exhibits. 16
Item 14. Principal Accounting Fees and Services. 17
SIGNATURES 18
i
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
GENERAL
We are making this statement in order to satisfy the "safe harbor" provisions
contained in the Private Securities Litigation Reform Act of 1995. This Annual
Report on Form 10-KSB includes forward-looking statements relating to the
business of the Company. Forward-looking statements contained herein, or in
other statements made by the Company are made based on Management's expectations
and beliefs concerning future events impacting the Company and are subject to
uncertainties and factors relating to the Company's operations and business
environment, all of which are difficult to predict and many of which are beyond
the control of the Company, that could cause actual results of the Company to
differ materially from those matters expressed in or implied by forward-looking
statements. The Company believes that the following factors, among others, could
affect its future performance and cause actual results of the Company to differ
materially from those expressed in, or implied by, forward-looking statements
made by, or on behalf of the, Company; (a) general economic, business and market
conditions; (b) competition; (c) the success of advertising and promotional
efforts; (d) the existence or absence of adverse publicity; (e) changes in
relationships with the Company's major customers or in the financial condition
of those customers; and (f) the adequacy of the Company's financial resources
and the availability and terms of any additional capital. Such forward-looking
statements are based on assumptions that the Company will continue to design,
market and provide successful new services, that competitive conditions will not
change materially, that demand for the Company's services will continue to grow,
that the Company will retain and add qualified personnel, that the Company's
forecasts will accurately anticipate revenue growth and the costs of producing
that growth, and that there will be no material adverse change in the Company's
business. In light of the significant uncertainties inherent in the
forward-looking information included in this Form 10-KSB, actual results could
differ materially from the forward-looking information contained in this Annual
Report on Form 10-KSB.
OVERVIEW
As of the end of May, 2003, Online Gaming Systems, Ltd. (the "Company" or the
"Small Business Issuer") was dormant and was seeking a merger with an operating
business. Until 2003, the Company developed and marketed interactive products
and services in the gaming, entertainment and information technology fields. We
were incorporated in the state of Colorado in October 1939 under the name
"Pacific Gold, Inc." to explore and develop gold and silver ore prospects and to
operate mining and milling facilities. Pacific Gold, Inc. conducted limited
mining activities until operations ceased. After we changed our name to The CEEE
Group, we then sought new business opportunities as a development stage entity.
In 1973, we changed our name to Cine-Chrome Laboratories, Inc. and operated a
film-processing lab in California. From 1984 until June 1994, we did not conduct
any operations, transactions or business activities. In June 1994, we began
acting as a corporate advisory operation, which included acting as a "finder"
with respect to U.S. public companies and providing advisory services concerning
corporate structure and raising capital. Beginning in 1996 until 2003, we
concentrated our business operations primarily on the manufacturing, marketing
and development of interactive gaming products and services. This business
became dormant in 2003.
In July 1996, we consummated a share exchange pursuant to an Exchange of Stock
Agreement and Plan of Reorganization with Atlantic International Capital Ltd.
("AIC"), a Delaware corporation, and the former stockholders of AIC. As a
result, the business of AIC became our business.
On November 22, 1996, we merged with, and into, a wholly owned Delaware
subsidiary, Atlantic International Entertainment, Ltd. We, among other things:
o changed our state of incorporation to Delaware
o increased our authorized capital stock to 110,000,000
(100,000,000 shares of common stock, $.001 per share (the
"Common Stock") and 10,000,000 shares of preferred stock,
$.001 par value per share (the "Preferred Stock");
o Performed a 1 for 3 reverse stock split.
In August 1999 we changed our name to Online Gaming Systems, Ltd. In September
2000, we relocated our corporate offices to Las Vegas, Nevada. In November 2002,
we increased our authorized Common Stock from 100,000,000 to 200,000,000. Since
May 2003, until December 31, 2007, we have been dormant and were seeking a
business combination.
On October 23, 2006, the Company agreed to merge with WS Acquisition Corp. ("WS
Acquisition"), in a transaction to be consummated in 2007. Mr. William Stehl,
President and Chairman of the Board of the Company, is the sole stockholder and
sole officer of WS Acquisition. Under the merger agreement, Mr. Stehl will
receive 240,000,000 shares of Company common stock and 60,000,000 shares of
Company preferred stock in exchange for all of the shares of WS Acquisition
common stock.
1
The Company's executive offices are located c/o Advanced Resources Group, Ltd.,
338 President Street, Saddle Brook, New Jersey 07663. The telephone number of
the Company is (973) 253-6131.
Description of Business
The Company ceased business operations in May 2003 and was dormant during the
period covered by this report. Before May, 2003, the Company produced internet
gaming software used by internet gaming sites. Since May 2003, until December
31, 2007, we have been dormant and seeking a business combination.
ITEM 2. DESCRIPTION OF PROPERTY.
The Company does not own or lease any property since the Company ceased
operations in May 2003.
ITEM 3. LEGAL PROCEEDINGS.
The Company is not a party to any pending or threatened litigation, either as
plaintiff or defendant.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On October 23, 2006, the holder of approximately 81% of the outstanding Common
Stock appointed William A. Stehl and Richard Dunning as directors of the
Company, to serve until their successors are elected and qualified. The Company
did not submit any other matters to a vote of securityholders during the period
covered by this report.
2
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
During 2006 and 2007, the Company's common stock traded on the "pink sheets"
electronic trading system under the trading symbol "AVRG." The following table
sets forth the high and low closing prices for our common stock as reported on
the "pink sheets" electronic trading system for each full quarterly period
within the two most recent fiscal years.
Fiscal Year Ending December 31, 2006
--------------------------------------------------------------------------------------------------------
QUARTER DATE HIGH LOW
--------------------------------------------------------------------------------------------------------
1 st March 31, 2007 $.0021 $.0015
--------------------------------------------------------------------------------------------------------
2 nd June 30, 2007 $.025 $.01
--------------------------------------------------------------------------------------------------------
3 d September 30, 2007 $.016 $.007
--------------------------------------------------------------------------------------------------------
4 th December 31, 2007 $.019 $.005
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Fiscal Year Ending December 31, 2007
--------------------------------------------------------------------------------------------------------
QUARTER DATE HIGH LOW
--------------------------------------------------------------------------------------------------------
1 st March 31, 2007 $1.35 $.020
--------------------------------------------------------------------------------------------------------
2 nd June 30, 2007 $.71 $.31
--------------------------------------------------------------------------------------------------------
3rd September 30, 2007 $.51 $.19
--------------------------------------------------------------------------------------------------------
4 th December 31, 2007 $.34 $.10
--------------------------------------------------------------------------------------------------------
During the period covered by this report, market maker quotations were posted on
the "pink sheets" electronic trading system. All prices indicated are as
reported to us by broker-dealer(s) making a market in our securities. The
quotations indicated above reflect inter-dealer prices, without retail mark-up,
markdown or commission, and may not necessarily represent actual transactions.
As of December 31, 2007, there were approximately 750 Holders of Record of our
Common Stock, including brokerage firms, clearinghouses, and/or depository firms
holding our securities for their respective clients. We do not know the exact
number of beneficial owners of our securities.
The Company has not paid any cash dividends on the Common Stock in the past and
the Board of Directors does not anticipate declaring any cash dividends on the
Common Stock in the foreseeable future.
ITEM 6. MANAGEMENTS' DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
THIS MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION CONTAINS
FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S
ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN THESE
FORWARD-LOOKING STATEMENTS. FACTORS THAT MAY CAUSE SUCH DIFFERENCES INCLUDE, BUT
ARE NOT LIMITED TO, THE COMPANY'S EXPANSION INTO NEW MARKETS, COMPETITION,
TECHNOLOGICAL ADVANCES AND AVAILABILITY OF MANAGERIAL PERSONNEL AND THE ABILITY
TO MERGE WITH A STRATEGIC PARTNER.
OVERVIEW
The Company became dormant in May 2003. Until May 2003, the Company developed
and marketed Internet and private network transaction based products that it
offered to licensed gaming operators in regulated jurisdictions. Since May 2003,
until December 31, 2007, we have been dormant and are seeking a business
combination.
RESULTS OF OPERATIONS
The Company permanently ceased operations in May 2003, therefore no discussion
and analysis of financial condition and results of operations would be relevant.
3
LIQUIDITY AND CAPITAL RESOURCES
The Company permanently ceased operations in May 2003, therefore no discussion
and analysis of financial condition and results of operations would be relevant.
ITEM 7. FINANCIAL STATEMENTS.
ONLINE GAMING SYSTEMS, LTD.
AND SUBSIDIARY
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm 5
Consolidated Balance Sheet at December 31, 2007 6
Consolidated Statements of Operations for the Years Ended
December 31, 2007 and 2006 7
Consolidated Statements of Changes in Stockholders' (Deficiency)
Equity for the Years Ended December 31, 2007 and 2006 8
Consolidated Statements of Cash Flows for the Years Ended
December 31, 2007 and 2006 9
Notes to the Consolidated Financial Statements 10 to 12
4
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors of
Advanced Resources Group, Ltd.and Subsidiary
We have audited the accompanying balance sheets of Advanced Resources Group. Ltd
and Subsidiary as of December 31, 2007, and the related statements of income,
changes in stockholders' equity, and cash flows for the periods ended December
31,2007. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conduct 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. An audit includes examining on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
The Company has not generated significant revenues or profits to date. This
factor among others may indicate the Company will be unable to continue as a
going concern. The Company's continuation as a going concern depends upon its
ability to generate sufficient cash flow to conduct its operations and its
ability to obtain additional sources of capital and financing. The accompanying
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Company at December 31,
2007, and the results of its operations and its cash flows for the year ended
December 31, 2007, in conformity with U.S. generally accepted accounting
standards.
Pollard-Kelley Auditing Services, Inc.
/s/ Pollard-Kelley Auditing Services, Inc.
Independence, Ohio
November 15, 2008
5
ADVANCED RESOURCES GROUP, LTD
FKA ONLINE GAMING SYSTEMS, LTD
DECEMBER 31, 2007
Assets
Current Assets
Cash $ 13
Advances receivable 1,300
Investment in WS Acquisition, Inc, 51,000,000
------------
Total Current Assets 51,001,313
Total Assets $ 51,001,313
============
Liabilities and Stockholders' Equity
Current Liabilities
Shareholder loans $ 70,121
------------
Total Current Liabilities 70,121
Total Liabilities --
Stockholders' Equity
Convertible Preferred Stock - Par Value $.001 Per Share;
Authorized 10,000,000 shares, none issued 60,000
Common Stock - Par Value $.001 Per Share;
Authorized 200,000,000 Shares, Issued and
Outstanding 337,315,980 Shares 337,316
Additional Paid in Capital 52,333,169
Treasury Stock, 1,125,012 Common Shares - At Cost (1,730,485)
Accumulated Deficit (68,808)
------------
50,931,192
------------
Total Liabilities and Stockholders' Equity $ 51,001,313
============
The accompanying Notes are an integral part of these financial statements
6
ADVANCED RESOURCES GROUP, LTD
FKA ONLINE GAMING SYSTEMS, LTD
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDING
------------------------------
DECEMBER DECEMBER
2007 2006
------------- ------------
Revenues $ -- $ --
Cost of Sales -- --
Gross Profit -- --
Operating Expenses 68,808 --
------------- -------------
-------------
Net Income $ (68,808) $ --
============= =============
Basic and Diluted Earnings Per Share of Common Stock $ (0.00)
Weighted Average Shares of Common Stock Outstanding 143,767,566
The accompanying Notes are an integral part of these financial statements
7
ADVANCED RESOURCES GROUP, LTD
FKA ONLINE GAMING SYSTEMS, LTD
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE PERIODS ENDING DECEMBER 31, 2007
PREFERRED COMMON ADDITIONAL TREASURY
STOCK STOCK PAID IN STOCK ACCUMULATED
AMOUNT VALUE AMOUNT VALUE CAPITAL AMOUNT VALUE DEFICIT TOTAL
---------- ------- ------------ ---------- ------------ ------------ ------------ ------------ ------------
Balance
December 31,
2005 -- $ -- 97,315,953 $ 97,316 $ 18,764,076 (1,125,012) $ (1,730,485) $(21,325,310) $ (4,194,403)
Cancellation
by principal
stock-holder
of outstanding
principal
convertible
note balance
and accrued
interest -- -- -- -- 4,194,403 -- -- -- 4,194,403
Net Earnings -- -- -- -- -- -- -- -- --
---------- ------- ------------ ---------- ------------ ------------ ------------ ------------ ------------
Balance
December 31,
2006 -- $ -- 97,315,953 $ 97,316 $ 22,958,479 (1,125,012) $ (1,730,485) $(21,325,310) $ --
Quasi -
reorganization -- -- -- -- (21,325,310) -- -- 21,325,310 --
Issue of stock
for WS
Acquistion 60,000,000 $60,000 240,000,000 240,000 50,700,000 -- -- -- 51,000,000
Net Earnings -- -- -- -- -- -- -- (68,808) (68,808)
---------- ------- ------------ ---------- ------------ ------------ ------------ ------------ ------------
Balance
March 31, 2007 60,000,000 $60,000 337,315,953 $ 337,316 $ 52,333,169 (1,125,012) $ (1,730,485) $ (68,808) $ 50,931,192
========== ======= ============ ========== ============ ============ ============ ============ ============
The accompanying Notes are an integral part of these financial statements
8
ADVANCED RESOURCES GROUP, LTD
FKA ONLINE GAMING SYSTEMS, LTD
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDING
---------------------
DECEMBER DECEMBER
2007 2006
-------- ---------
Operating Activities:
Earnings from operations $(68,808) $ --
Adjustments to reconcile net loss to net cash provided
Increase/(Decrease) in Other Assets $ 1,300 $ --
-------- ---------
Net Cash - Operating Activities (67,508) --
-------- ---------
Investing Activities:
Net Cash - Investing Activities $ -- $ --
Financing Activities
Advances from related parties $ 76,521 $ --
Repayment to related party (9,000) --
Net Cash - Financing Activities 67,521 --
-------- ---------
Change in Cash 13 --
Cash - Beginning of Period -- --
-------- ---------
Cash - End of Period $ 13 $ --
======== =========
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for:
Interest $ -- $ --
Taxes $ -- $ --
The accompanying Notes are an integral part of these financial statements
9
ADVANCED RESOURCES GROUP, LTD.AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[1] ORGANIZATION
Nature of Business - Advanced Resources Group, Ltd.[the "Company"] is located in
Saddle Brook, New Jersey. At December 31, 2007, the Company was dormant and had
ceased operations in May, 2003. Before May 2003, the Company primarily developed
and marketed interactive gaming products and services through the Internet. The
Company established Online Gaming Systems Australia Pty., as a wholly owned
subsidiary, to offer sports book sales in Australia and the Pacific Island
region. On December 31, 2005, the Company was majority owned by Hosken
Consolidated Investments and Subsidiaries ["HCI"], a South African Company. HCI
is an investment holding company involved in various technology industries. In
the second quarter of 2006, HCI executed a stock purchase agreement to sell
77,767,153 (approximately 81%) shares of the outstanding common stock of the
Company to a non-related third party buyer. In August 2006, the stock purchase
agreement was consummated and HCI cancelled the outstanding convertible note of
$2,474,907 plus interest owed to it by the Company.
On October 23, 2006, the Company agreed to merge with WS Acquisition Corp. ("WS
Acquisition"), in a transaction to be consummated in 2007. Mr. William Stehl,
President and Chairman of the Board of the Company, is the sole stockholder and
sole officer of WS Acquisition. Under the merger agreement, Mr. Stehl will
receive 240,000,000 shares of Company common stock and 60,000,000 shares of
Company preferred stock in exchange for all of the shares of WS Acquisition
common stock. (see Note 8).
[2] SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation - The consolidated financial statements include the
accounts of the Company and its only subsidiary, Online Gaming Systems
Australia, Pty. Ltd. All material intercompany accounts and transactions have
been eliminated.
Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents - The Company considers all highly liquid investments,
with a maturity of three months or less when purchased, to be cash equivalents.
..
Property and Equipment and Depreciation - Property and equipment are stated at
cost. Depreciation is computed primarily using the straight-line method over the
estimated useful lives of the assets. Leasehold improvements are amortized using
the straight-line method over the lesser of the term of the related lease or the
estimated useful lives of the improvements.
Routine maintenance and repair costs are charged to expense as incurred and
renewals and improvements that extend the useful life of the assets are
capitalized. Upon sale or retirement, the cost and related accumulated
depreciation are eliminated from the respective accounts and any resulting gain
or loss is reported within the consolidated statements of operations.
Revenue Recognition - Revenue is recognized once four criteria are met: (1) the
Company must have persuasive evidence that an arrangement exists, (2) services
have been performed and accepted by the customer, (3) the selling price must be
fixed and determinable and (4) collectibility must be reasonably assured.
Income Taxes - The Company provides deferred taxes on the tax effects of
differences between the financial reporting and tax bases of the Company's
assets and liabilities at the enacted tax rates in effect for the years in which
the differences are expected to be reversed. The Company evaluates the
recoverability of deferred tax assets and establishes a valuation allowance when
it is more likely than not that some portion or all of the deferred tax assets
will not be realized.
Earnings Per Share - Basic earnings per share is computed by dividing the
earnings available to common stockholders by the weighted average number of
common shares outstanding during the period. Diluted earnings per share reflects
the amount of earnings for the period available to each share of common stock
outstanding during the reporting period, while giving effect to all dilutive
potential common shares that were outstanding during the period, such as common
shares that could result from the potential exercise or conversion of securities
into common stock. The computation of diluted earnings per share does not assume
conversion, exercise, or contingent issuance of securities that would have an
antidilutive effect on per share amounts, [i.e. increasing earnings per share or
reducing loss per share]. The dilutive effect of outstanding options and
warrants and their equivalents are reflected in dilutive earnings per share by
the application of the treasury stock method which recognizes the use
10
of proceeds that could be obtained upon exercise of options and warrants in
computing diluted earnings per share. It assumes that any proceeds should be
used to purchase common stock at the average market price during the period.
Options and warrants will have a dilutive effect only when the average market
price of the common stock during the period exceeds the exercise price of the
options or warrants. At December 31, 2007 and 2005 all outstanding options were
anti-dilutive for earning per share calculations (see Note 6).
The Company adopted Statement of Financial Statement of Financial Accounting
Standards No. 123 (revised), "Share-Based Payment" ("FAS123(R)") effective
January 1, 2006. Provisions of FAS123(R) require companies to recognize the fair
value of stock option grants as a compensation cost in their financial
statements. In addition to stock options granted after the effective date,
companies are required to recognize a compensation cost with respect to any
unvested stock options outstanding as of the effective date equal to the grant
date fair value of those options with the cost related to unvested options to be
recognized over the vesting period of the options.
[3] SIGNIFICANT RISKS AND UNCERTAINTIES
Concentrations of Credit Risk - The Company places its cash with high credit
quality institutions to limit its credit exposure. The Company routinely
assesses the credit worthiness of its customers before a sale takes place and as
such believes its credit risk exposure is limited. The Company performs ongoing
credit evaluations of its customers but does not require collateral as a
condition of service.
[4] CONVERTIBLE NOTES PAYABLE - RELATED PARTY
At December 31, 2005 the Company had a $2,474,907 convertible note payable
balance due HCI. Terms of the revised loan agreement provides for an extension
of the maturity to repay all principal outstanding and related accrued interest
by December 31, 2006. The notes payable are secured by substantially all assets
of the Company. As of December 31, 2005, the Company has accrued $1,719,496 in
interest related to the convertible debt borrowing. No interest has been accrued
in 2007 and 2005 due to the business being dormant.
In the second quarter of 2006, HCI executed a stock purchase agreement to sell
77,767,153 (approximately 81%) shares of the outstanding common stock of the
Company at June 30, 2006 to a non-related third party buyer. In August 2006, the
stock purchase agreement was consummated and HCI cancelled the outstanding
convertible note of $2,474,907 plus interest owed to it by the Company.
[5] INCOME TAXES
There is no provision for income taxes for each of the years ended December 31,
2007 and 2005 due to the Company's business operations being dormant.
As of December 31, 2007, the Company had a gross deferred tax asset of
approximately $6,700,000. The deferred tax asset primarily consists of
approximately $16,700,000 of federal net operating loss tax carryforwards
expiring in years 2012 through 2022. The gross deferred tax asset is offset by a
valuation allowance of $6,700,000 at December 31, 2007. The Company's ability to
utilize its NOL carryforwards may be subject to certain limitations in the
future periods, including Section 382 of the Internal Revenue Code of 1986, as
amended.
[6] STOCK OPTIONS
[A] On January 1, 1997, the Company adopted an Incentive Stock Option Plan for
Employees, Directors, Consultants and Advisors [the "Plan"]. The Plan expired
December 31, 2006. Employees, directors, consultants and advisors of the
Company, or any of its subsidiary corporations, are eligible for participation
in the Plan. The Plan provides for stock to be issued pursuant to options
granted and shall be limited to 250,000 shares of Common Stock, $.001 par value.
The shares have been reserved for issuance in accordance with the terms of the
Plan. At the November 2002 stockholder meeting, the stockholders approved an
amendment to the plan to increase the maximum number of shares of common stock
issuable upon exercise of options granted under the plan to 10,000,000. In
December 2002, the Board of Directors authorized the issuance of 5,300,000
incentive stock options under the plan to five members of management. In 2003,
the five members of management terminated their employment and under the terms
of the Plan the options expired The Company did not grant any incentive stock
options during each of the years ended December 31, 2007 and 2005. As of
December 31, 2007, there were no outstanding options under the Plan.
[B] Non-incentive stock options and warrants may be granted to employees or
non-employees at fair market value or at a price less than fair market value of
the common stock at the date of grant. There were no non-incentive stock options
and warrants
11
granted during each of the years ended December 31, 2007 and 2005. The following
is a summary of non-incentive stock options and warrants transactions for the
two years ended December 31, 2007:
WEIGHTED-AVERAGE
SHARES EXERCISE PRICE
------------------ ---------------------
Outstanding at December 31, 2004 1,557,334 $ 2.25
Granted -- --
Exercised -- --
Canceled 1,424,000 2.25
Outstanding at December 31, 2005 133,334 2.25
Exercisable at December 31, 2005 133,334 2.25
Granted -- --
Exercised -- --
Canceled 133,334 2.25
Outstanding at December 31, 2007 --
Exercisable at December 31, 2007 --
The Company uses the Black-Scholes option valuation model to estimate the fair
value of options. Option valuation models require the input of highly subjective
assumptions including the expected stock price volatility.
[7] NEW AUTHORITATIVE ACCOUNTING PRONOUNCEMENTS
Management does not believe that any recently issued, but not yet effective,
accounting standards, if currently adopted, would have a material effect on the
accompanying financial statements.
[8] EQUITY EVENT
On October 21, 2007 , the Company completed the transaction with WS Acquisition
described in Note 1, above, to exchange 240,000,000 shares of Company common
stock and 60,000,000 shares of Company preferred stock for all of the common
stock of WS Acquisition.
12
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
ITEM 8A. CONTROLS AND PROCEDURES.
EVALUATION OF INTERNAL CONTROL OVER FINANCIAL REPORTING
Management of the Company is responsible for establishing and maintaining
adequate internal control over financial reporting. The Company's internal
control system was designed to provide reasonable assurance to the Company's
management and board of directors regarding the preparation and fair
presentation of published financial statements.
Management assessed the effectiveness of the Company's internal control over
financial reporting (as defined in the Securities Exchange Act of 1934 Rule
13a-15(f) and 15d-15(f) as of December 31, 2007. In making this assessment, it
used the criteria set forth by the Committee of Sponsoring Organizations of the
Treadway Commission ("COSO:) in Internal Control- Integrated Framework. Based on
management's assessment the Company believes that, as of December 31, 2007, the
Company's internal control over financial reporting is effective based on those
criteria.
This annual report does not include an audit report of the Company's registered
public accounting firm regarding internal control over financial reporting.
Management's report was not subject to attestation by the Company's registered
public accounting firm pursuant to temporary rules of the Securities and
Exchange Commission that permit the company to provide only management's report
in this annual report
CHANGES IN INTERNAL CONTROLS
There was no change to the Company's internal controls over financial reporting
during the fiscal year ended December 31, 2007 that materially affected, or
reasonably likely to materially affect, the Company's internal controls over
financial reporting.
ITEM 8B. OTHER INFORMATION.
None
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PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS AND
CORPORATE GOVERNANCE; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE
ACT.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the
Company's officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
(the "Commission"). Officers, directors and greater than ten percent
shareholders are required by the Commission's regulations to furnish the Company
with copies of all Section 16(a) forms they file.
DIRECTORS
The directors of the Company and their positions with the Company during the
period covered by this report are set forth below. All of the Company's former
officers resigned in May 2003, when the Company became dormant. The Company's
former director resigned March 30, 2007, and the majority stockholder of the
Company elected William A. Stehl and Richard Dunning as directors on October 23,
2006.
NAME AGE POSITION
- --------------- --- -----------------------------------------------
Richard Dunning 52 President, Chief Executive Officer and Director
RICHARD DUNNING was appointed a Director of the Company on October 23, 2006 by
majority written consent of stockholders. Since 1996, Mr. Dunning has been an
officer and director of 21 st century Funding and since 2002, Mr. Dunning has
been a director of International Surfacing, Inc. Mr. Dunning attended Denver
University and the University of Colorado, receiving a BA in Psychology and
Political Science in 1985. Mr. Dunning also attended the University of Colorado
Law School.
MEETINGS AND COMMITTEES
The Board held no meetings during the year ended December 31, 2007. From time to
time during such year, the Board acted by written consent. The Company has no
standing compensation or audit committees. The Board of Directors performs the
typical functions of such committees. The Committee recommends engagement of the
Company's independent accountants approves services performed by such
accountants and reviews and evaluates the Company's accounting system and its
system of internal controls.
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ITEM 10. EXECUTIVE COMPENSATION.
The following table provides certain summary information concerning the
compensation earned, by the Company's Chief Executive Officer and its Chairman
for services rendered in all capacities to the Company and its subsidiaries for
each of the last three fiscal years. No individuals received any cash or other
compensation in the years ended December 31, 2007, 2005 or 2004. Such
individuals will be hereafter referred to as the Named Executive Officers.
SUMMARY COMPENSATION TABLE
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS
- ------------------------------------- ---- ------ -----
President and Chief Executive Officer 2007 $ --
(1) Appointed March 2007
STOCK OPTIONS
On January 1, 1997, the Company adopted an Incentive Stock Option Plan for
Employees, Directors, Consultants and Advisors (the "Plan"). The Plan expired
December 31, 2006. Employees, directors, consultants and advisors of the
Company, or any of its subsidiary corporations, were eligible for participation
in the Plan. The Plan provided for stock to be issued pursuant to options
granted and was limited to 250,000 shares of Common Stock, $.001 par value. The
shares were reserved for issuance in accordance with the terms of the Plan. The
exercise of these options may be for all or any portion of the option and any
portion not exercised will remain with the holder until the expiration of the
option period.
During 2007 and 2005, the Company did not issue any stock options under the
Plan.
During 2002 the Board of Directors and shareholders approved amendments to the
Plan that, among other things, increased the number of shares available under
the Plan to 10,000,000.
No options were granted during 2005, 2004 or 2003. All options granted to any
named executive officers expired in 2003
BOARD OF DIRECTORS COMPENSATION
In the past, the Company compensated directors who are also executive officers
of the Company for service on the Board of Directors. Directors received $1,500
per meeting and are reimbursed for their expenses incurred in attending meetings
of the Board of Directors.
The Company has paid no compensation to any directors since the Company became
dormant in May 2003. The Company has no plan to pay directors at this time.
LONG-TERM INCENTIVE AND PENSION PLANS
The Company does not have any long-term incentive or pension plans.
OTHER
No director or executive officer is involved in any material legal proceeding in
which he is a party adverse to the Company or has a material interest adverse to
the Company.
EMPLOYMENT AGREEMENTS
None
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ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS.
The following table sets forth, as of December 31, 2007, information regarding
the beneficial ownership of the Company's Common Stock by each person known by
the Company to own five percent or more of the outstanding shares, by each of
the directors and officers, and by the directors and officers as a group. (1) As
of October 1, 2007, 336,190,941 shares of the Common Stock of the Company were
issued and outstanding.
NAME AND ADDRESS OF BENEFICIAL OWNER (2) MOUNT OF BENEFICIAL OWNERSHIP PERCENT OF CLASS
---------------------------------------- ----------------------------- ----------------
LanMac Associates 78,698,120 23.3%
WS Acquistionsl 240,000,000 71.1%
Richard Dunning 0 0%
All Officers and Directors as a Group 0 0%
(2 Persons)
(1) Beneficial ownership has been determined in accordance with Rule 13d-3
of the Securities Exchange Act of 1934. Generally, a person is deemed
to be the beneficial owner of a security if he has the right to acquire
voting or investment power within 30 days.
(2) Unless otherwise stated, the address for the beneficial owner is 5 Erie
Street, Garfield, NJ 07026.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE.
In prior years, the Company's operating shortfalls were funded largely by its
largest stockholder, HCI. In 2007 and 2005, however, HCI did not provide any
funds to the Company. During 2003, HCI funded the Company $400,000 in the form
of convertible notes. During 2002, HCI funded the Company $1,590,000 in the form
of convertible notes.
All of the notes issued to HCI were cancelled in August 2006.
ITEM 13. EXHIBITS.
Exhibits:
3.1 Certificate of Incorporation of the Company, incorporated by reference
to Exhibit 3.1 to the Company's Form 10-KSB for the fiscal year ended
December 31, 1996.
3.2 Bylaws of the Company, incorporated by reference to Exhibit 3.2 to the
Company's Form 10-KSB for the fiscal year ended December 31, 1996.
4.1 Specimen Common Stock Certificate, incorporated by reference to Exhibit
4.1 to the Company's Form 10-KSB for the fiscal year ended December 31,
1996.
10.6 Stock Purchase Agreement dated March 10, 1999 by and between Atlantic
International Entertainment, Ltd. and Centerline Associates, Inc.,
incorporated by reference to Exhibit 10.6 to the Company's Form 10-QSB
for the quarter ended March 31, 1999.
10.7 Stock Option and Incentive Plan adopted by Board of Directors on March
25, 1999, incorporated by reference to Exhibit 10.7 to the Company's
Form 10-QSB for the quarter ended March 31, 1999.
10.8 Stock Purchase Agreement dated December 10, 1999 by and between
Atlantic Internet Holdings, Inc., incorporated by reference to Exhibit
10.8 to the Company's Form 10-KSB for the year ended December 31, 1999.
31.1 Certification by Chief Executive Officer pursuant to Section 302 of
Sarbanes-Oxley Act of 2002.
31.2 Certification by Chief Financial Officer pursuant to Section 302 of
Sarbanes-Oxley Act of 2002.
32.1 Certification of Chief Executive Officer and Chief Financial Officer
pursuant to Section 906 of Sarbanes-Oxley Act of 2002.
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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.
Pollard-Kelly Auditing Services, Inc.. were our primary auditors for the fiscal
year ended December 31, 2007.
AUDIT FEES
For Moore Stephens' audit of our annual financial statements, review of Form
10-KSB, and for their review of our Quarterly Reports on Form 10-QSB, Moore
Stephens billed us a total of $17,000 and $15,000 for the fiscal years ended
December 31, 2006 and 2005, respectively.
There were no audit fees paid in 2007 for 2007.
TAX FEES : None.
ALL OTHER FEES : None.
THE BOARD OF DIRECTORS PRE-APPROVAL POLICY AND PROCEDURES
We do not have a separate Audit Committee. Our full Board of Directors performs
the functions of an Audit Committee. During fiscal year 2003, the Board of
Directors adopted policies and procedures for the pre-approval of audit and
non-audit services for the purpose of maintaining the independence of our
independent auditors. We may not engage our independent auditors to render any
audit or non-audit service unless either the service is approved in advance by
the Board of Directors or the engagement to render the service is entered into
pursuant to the Board of Director's pre-approval policies and procedures. On an
annual basis, the Board of Directors may pre-approve services that are expected
to be provided to us by the independent auditors during the following 12 months.
At the time such pre-approval is granted, the Board of Directors must (1)
identify the particular pre-approved services in a sufficient level of detail so
that management will not be called upon to make judgment as to whether a
proposed service fits within the pre-approved services and (2) establish a
monetary limit with respect to each particular pre-approved service, which limit
may not be exceeded without obtaining further pre-approval under the policy.
The Board has considered whether the provision of the services described above
under the caption "All Other Fees" is compatible with maintaining Moore
Stephen's independent audit.
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SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Date: November 18, 2008
ONLINE GAMING SYSTEMS, LTD.
By: /s/ Richard Dunning
-------------------
Richard Dunning
President
18