- --------------------------------------------------------------------------------
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended September 30, 2007
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from__________to__________
Commission file number 0-32067
Big Sky Industries I, Inc.
-------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Florida 59-3646899
------------------------------------- -----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
7557 West Sand Lake Road, Suite 153, Orlando, FL 32819
--------------------------------------------------- ------------------
(Address of principal executive offices) (Zip Code)
(407)-628-7033
-----------------------------
(Issuer's telephone number)
Securities registered under Section 12 (b) of the Exchange Act:
Title of Each Class Name of Exchange on Which Registered
- ------------------------ -------------------------------------
None None
Securities registered under Section 12(g) of the Exchange Act:
Title of Each Class
-------------------------------------------
Common Stock, $0.001 Par Value
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such report), 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 is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ X ]
State issuer's revenues for the fiscal year ended September 30, 2007
were..................$0.00.
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
specific date within the past 60 days. (See definition of affiliate in Rule
12b-2 of the Exchange Act.)
As of December 31, 2007, there were 1,050,000 shares of common stock, $0.001 par
value, issued and outstanding.
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [ X ]
TABLE OF CONTENTS
Part 1
Item 1 Description of Business 1
Item 2 Description of Property 3
Item 3 Legal Proceedings 3
Item 4 Submission of Matters to a Voted of Security Holders 3
Part II
Item 5 Market for Common Equity and Related Stockholder Matters and
Small Business Issuers Purchases of Equity Securities 4
Item 6 Management's Discussion and Analysis or Plan of Operation 5
Item 7 Financial Statements 6
Item 8 Changes in and Disagreements With Accounts on Accounting and
Financial Disclosures 6
Item 8A Controls and Procedures 6
Item 8B Other Information 7
Part III
Item 9 Directors and Executive Officers of the Registrant 8
Item 10 Executive Compensation 10
Item 11 Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters 11
Item 12 Certain Relationships and Related Transactions11
Item 13 Exhibits 13
Item 14 Principal Accountant Fees and Services 13
Signatures 14
FORWARD LOOKING STATEMENTS
This report on Form 10-KSB contains statements that plan for or anticipate the
future. Forward-looking statements about the future of the blank check ("Blank
Check") companies in general, statements about our future business plans and
strategies, and most other statements that are not historical in nature. In this
report, the words anticipate, plan, believe, expect, estimate, may, could, will,
and similar expressions are intended to identify forward-looking statements.
Because forward-looking statements involve future risks and uncertainties, there
are factors that could cause actual results to differ materially from those
expressed or implied. For example, a few of the uncertainties that could affect
the accuracy of forward -looking statements include:
1.Changes in general economic and business conditions, which affect
Blank Check companies;
2.legal or policy developments that diminish the appeal of our
company;
3.the level of demand for Blank Check companies; and 4.changes in our
business strategies.
The Private Securities Litigation Reform Act of 1995, which provides a "safe
harbor" for similar statements by existing public companies, does not apply to
our company.
PART I
ITEM 1. DESCRIPTION OF BUSINESS
General Development of the Company
We were organized as Big Sky Industries I, Inc. under the laws of the State of
Florida on January 31, 2000, as a shell ("Shell") company, which conducts
virtually no business operation, other than our effort investigating
opportunities to effect a merger, exchange of capital stock, asset acquisition,
or other similar business combination ("Business Combination") with an operating
or development stage business ("Target Business"). We registered our Company's
common stock, par value $0.001 ("Common Stock") pursuant to Securities and
Exchange Commission ("SEC") registration statement Form 10-SB (filed December 6,
2000) on a voluntary basis in order to create a reporting Shell company. On
December 14, 2000, the SEC approved our Form 10-SB registration statement, with
an effective date sixty days after the filing date. We have a shareholder base
of two shareholders and 1,050,000 shares of Common Stock outstanding, all of
which are restricted pursuant to Rule 144 of the Securities Act of 1933, as
amended (the "Securities Act"). Unless the context otherwise requires, all
references to the Company, we, our, and other similar terms means Big Sky
Industries, I, Inc.
Our Present Business
We make reference to our entire Form 10-SB registration statement, as amended,
filed with the U.S. Securities and Exchange Commission on December 6, 2000,
which contains information and more comprehensive discussion of our business and
our industry, information and discussion not required to included in this report
on Form 10-KSB.
We are in our early development and promotional stages. We are a Shell company,
conducting virtually no business operation, other than our effort investigating
opportunities to associate with a suitable business partner and identifying
merger partners or acquisition candidates. We do not engage in any substantive
commercial business or other business operations. Our executive and business
offices are located at 7557 West Sand Lake Road, Suite 153, Orlando, FL 32819.
1
ITEM 1. DESCRIPTION OF BUSINESS (CONTINUED)
Our Company's former sole officer and director and current director, Mr. Ramon
Chimelis, devoted approximately 5% of his time to our business. Mr. Chimelis
devoted as much time as was reasonably necessary to carry out our Company's
business and affairs, including the evaluation of potential Target Businesses
and the negotiation of a Business Combination, which has resulted in the
issuance of a Memorandum of Understanding with Coffee Exchange of America's Inc
for the purchase of 900,000 shares, approximately 85.7% of the Company's
outstanding common shares. Our new chairman, president, and chief executive
officer, Mr. Carl Olivieri, will devote approximately 50% of his time to carry
out the Company's business affairs.
We have no full-time employees. We expect to use consultants, attorneys, and
accountants as necessary, and we do not anticipate a need to engage any
full-time employees while we are investigating opportunities and evaluating
Target Businesses. We will address the need for employees and their availability
at the time we make a decision to consummate a specific Business Combination.
We are a corporate vehicle created to effect a merger, exchange of capital
stock, asset acquisition, or other similar Business Combination with an
operating or development stage business, which desires to employ our Company to
become a reporting corporation under the Securities Exchange Act of 1934 (the
"Exchange Act"). On December 6, 2000, we registered our Common Stock, par value
$0.001 pursuant to Form 10-SB registration statement on a voluntary basis in
order to create a reporting Shell company. We have a shareholder base of two
shareholders and 1,050,000 shares of Common Stock outstanding, all of which is
restricted pursuant to Rule 144 of the Securities Act of 1933, as amended.
Pursuant to resolution of our board of directors, no Business Combination may
occur prior to our Company obtaining the requisite audited financial statements
required pursuant to Form 8-K (or its equivalent) promulgated under the Exchange
Act.
As a Shell corporation, we face special risks inherent in the investigation,
acquisition, or involvement in a new business opportunity. Further, as a new or
start-up company, we face all of the unforeseen costs, expenses, problems, and
difficulties related to new companies.
Since inception, we have investigated business opportunities to complete a
Business Combination transaction with a Target Business that has significant
growth potential, which, in the opinion of management, could provide a profit
for our Company and our shareholders. We believe that such an opportunity has
presented itself, and, in this regard, the Company and Mr. Chimelis entered into
a Memorandum of Understanding with Coffee Exchange of America's Inc for the
purchase of 900,000 shares, approximately 85.7% of the Company's outstanding
common shares (See Note 5. Related Party Transaction).
2
ITEM 1. DESCRIPTION OF BUSINESS (CONTINUED)
No trading market in our Common Stock presently exists. In light of the
restrictions concerning Shell companies contained in many state blue sky laws
and regulations, it is not likely that a trading market will be created in our
Common Stock until such time as the Memorandum of Understanding (discussed
above) results in a signed agreement between the Company's current majority
shareholder and the Target Business, Coffee Exchange of The America's, Inc. We
cannot assure that a trading market in our Common Stock will develop, after the
Business Combination occurs, especially in light of the U.S. Securities and
Exchange Commission's view that Rule 144 is not available for resale
transactions for securities issued by Blank Check companies, and that resale of
such securities cannot occur without registration under the Securities Act.
We cannot presently ascertain with any degree or certainty the costs required to
structure and consummate the identified Business Combination (including
negotiating relevant agreements and preparing requisite documents for filing
pursuant to applicable securities laws and state blue sky and corporation laws).
ITEM 2. PROPERTIES
Our executive and business offices are currently located at 7557 West Sank Lake
Road, Suite 153, Orlando, FL 32819. Pursuant to an oral arrangement, we
sub-lease our office space on a month-to-month basis free of charge from Mr.
Chimelis, our former sole officer and director and current director. We believe
this office space is adequate to serve our needs until such time as the
identified Business Combination with the Target Business (See Memorandum of
Understanding discussed above) occurs. Mr. Chimelis has agreed to continue the
current sub-lease arrangement for office space, pursuant to the terms described
above, until such time as the identified Business Combination with the Target
Business occurs. See "Certain Relationships and related Transactions."
ITEM 3. LEGAL PROCEEDINGS.
As of December 30, 2007, we are not a party to any material legal proceedings,
nor are we aware of any threatened litigation of a material nature.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matter was submitted to a vote of our security holders during the fourth
quarter of our fiscal year.
3
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS.
Market Information
No public trading market presently exists for the Company's Common Stock, and,
other than the execution of the Memorandum of Understanding with Exchange of
America's, Inc. (See discussion above) there are no other plans, proposals,
arrangements, or understandings with any person with regard to the development
of any trading market in any of the Company's securities. No shares of Common
Stock have been registered for resale under the federal securities laws or the
blue sky laws of any state. We cannot guarantee that any trading market will
develop in our Common Stock at any time in the future, especially in light of
the U.S. Securities and Exchange Commission's view that Rule 144 is not
available for resale transactions for securities issued by Blank Check
companies, and that the resale of such securities cannot occur without
registration under the Securities Act. Further, the holders of shares of Common
Stock and persons who may desire to purchase shares of Common Stock in any
trading market that might develop in the future, should be aware that there may
be significant state blue sky law restrictions upon the ability of shareholders
to sell their shares and of purchasers to purchase the shares of Common Stock.
Some jurisdictions may not allow the trading or resale of blind-pool or Blank
Check securities under any circumstances. Accordingly, shareholders should
consider the secondary market for the Company's securities to be limited one.
We do not intend to develop any trading market in the Company's Common Stock
until such time as a Business Combination is effectuated and the requisite
audited financial statements required pursuant to Form 8-K (or its equivalent)
are filed with the SEC. No assurances are made, however, that a trading market
for the Company's Common Stock will ever develop.
Holders
As of December 30, 2007, two holders of record held our Common Stock.
Dividends
Since inception, the Company has not declared or paid cash dividends. No
restrictions limit our ability to pay dividends on our Common Stock. We do
expect to pay any dividends in the near future.
Recent Sales of Unregistered Securities
As of December 30, 2007, we have issued an aggregate of 1,050,000 shares of
Common Stock as follows:
On January 31, 2000, we adopted and agreed to be bound by the items of an
organizational agreement. Mr. Chimelis, former sole officer and director and
current director, pursuant to which Mr. Chimelis agreed to provide cash in
return for the issuance to him of ouFr Company securities. Accordingly, on
January 31, 2000, we issued Mr. Chimelis a total of 1,000,000 shares of Common
Stock at $0.001 per share. The cash consideration provided by Mr. Chimelis
pursuant to the terms of the organizational agreement totaled $1,000.00.
In January 2000, the Company issued 50,000 shares valued at $50 as consideration
for services rendered by one of the two founding stockholders of the Company for
the formation of the Company.
The Company relied on Section 4(2) of the Securities Act, since the transaction
did not involve any public offering.
4
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS.
(CONTINUED)
No underwriters were utilized and no commissions or fees were paid with respect
to any of the above transactions. No other shares of Common Stock have been
issued by our Company in any other transaction.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
This Annual Report on Form 10-KSB should be read in conjunction with our audited
financial statements and notes, which are attached hereto beginning on page
F-1and have been incorporated by reference into Item 7 of this Report on Form
10-KSB.
This Annual Report on Form 10-KSB contains forward-looking statements. For this
purpose, any statements contained in it that are not statements of historical
fact should be regarded as forward-looking statements. For example, the words
believe, anticipates, plans, and expects are intended to identify
forward-looking statements. There are a number of important factors that could
cause our Company's actual results to differ materially from those indicated by
such forward-looking statements.
Plan of Operation
Big Sky Industries I, Inc. is presently a development stage company that
conducts virtually no business operations, other than investigating
opportunities to effect a merger, exchange of capital stock, asset acquisition,
or other similar business combination (a "Business Combination") with an
operating or development stage business ("Target Business"), which desires to
employ the Company to become a reporting corporation under the Securities
Exchange Act of 1934. To date, we have not engaged in any operations, nor have
we generated any revenue; it has not received cash flow from business
operations. The Company will carry out its plan of business as discussed above.
See "Description of Business." We do not have significant cash or other material
assets, nor do we have an established source of revenue needed to cover the
costs of normal operations, which would allow us to continue as a going concern.
These financial statements have been prepared using generally accepted
accounting principles applicable to a going concern, which contemplates the
realization of assets and liquidation of liabilities in the normal course of
business. Our ability to meet those obligations and continue as a going concern
is dependent upon us raising new capital through advances from current
shareholders and issuing equity securities to complete a Business Combination
transaction with a Target Business. If it becomes necessary for us to raise
additional funds to support normal operations during the next twelve months, our
principal shareholder and former sole officer and director and current director,
Ramon Chimelis, will advance funds as needed. If we need to raise funds beyond
funds needed for normal operations, we may choose to sell additional common
stock, especially if we complete the identified business transaction with the
Target Business (See Memorandum of Understanding discussion above).
Since inception, we have received a cash infusion of $1,165. With the exception
of certain other professional fees and costs related to a Business Combination,
we expect that we will incur minimal operating costs and, as indicated above,
our principal shareholder, former sole officer and director and current director
will advance funds, as needed, to meet our cash requirements during the next
twelve months. It is likely, however, that a Business Combination, including the
identified Business Combination discussed above, might not occur during the next
twelve months; and in the event that our principal shareholder does not advance
adequate funds to support normal operations and we deplete our present cash
reserves prior to completing a Business Combination transaction with a Target
Business, we may cease operations and a Business Combination may not occur.
5
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
(CONTINUED)
Other than the identified Business Combination discussed above (See Memorandum
of Understanding entered into on March 31, 2007; Note 5, Related Party
Transaction) we have not yet identified another Business Combination
opportunity; therefore, we are unable to predict our cash requirements
subsequent to a Business Combination with an unidentified Target Business. As
indicated above, we may be required to raise capital through the sale of or
issuance of additional securities, in order to ensure that we can meet our
operating costs for the remainder of our fiscal year, if we complete a Business
Combination transaction with a Target Business. In the event that we elect to
raise additional capital by selling common stock, prior to, or in connection
with, completing a Business Combination transaction, we expect to do so through
the private placement of restricted securities.
There are no agreements or understandings of any kind with respect to any loans
from officers or directors of the Company on behalf of the Company, other than
that describe above.
Our cash reserves have been minimal since inception; therefore, we have not
compensated our officers or directors. In the near term, we may compensate them
for their services by issuing them stock in lieu of cash. Presently, there are
no arrangements or anticipated arrangements to pay any type of additional
compensation to any officer or director. Regardless of whether our cash assets
prove to be inadequate to meet our operational needs, we might seek to
compensate providers of services by the issuance of stock in lieu of cash.
ITEM 7. FINANCIAL STATEMENTS
The Financial Statements of the Company and the accompanying notes thereto and
the independent's registered public accounting firm's report are included as
part of this Form 10-KSB and immediately follow the signature page of this Form
10-KSB, beginning with page F-1.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
ITEM 8A. CONTROLS AND PROCEDURES
As required by the Securities Exchange Act of 1934 (the "Exchange Act"), we
carried out an evaluation of the effectiveness of the design and operation of
our disclosure controls and procedures as of September 30, 2007, being the date
of our most recently completed fiscal year end. This evaluation was carried out
under the supervision and with the participation of our chief executive officer.
Based upon that evaluation, our chief executive officer concluded that our
disclosure controls and procedures are effective to ensure that the information
required to be disclosed by us in the reports that we file or submit under the
Exchange Act is recorded, processed, summarized and reported within the time
periods specified by the rules and forms of the Securities and Exchange
Commission.
Disclosure controls and procedures are controls and other procedures that are
designed to ensure that information required to be disclosed our reports filed
or submitted under the Exchange Act is recorded, processed, summarized and
reported, within the time periods specified in the Securities and Exchange
Commission's rules and forms. Disclosure controls and procedures include,
without limitation, controls and
6
ITEM 8A. CONTROLS AND PROCEDURES (CONTINUED)
procedures designed to ensure that information required to be disclosed in our
reports filed under the Exchange Act is accumulated and communicated by our
chief executive officer, to allow timely decisions regarding required
disclosure. During our most recently completed fiscal year ended September 30,
2007, there were no changes in our internal control over financial reporting
that have materially affected, or are reasonably likely to affect, our internal
control over financial reporting.
The term "internal control over financial reporting" is defined as a process
designed by, or under the supervision of, the registrant's principal executive
and principal financial officers, or persons performing similar functions, and
effected by the registrant's board of directors, management and other personnel,
to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles and includes those policies and
procedures that:
(1) Pertain to the maintenance of records that in reasonable detail accurately
and fairly reflect the transactions and dispositions of the assets of the
registrant;
(2) Provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the
registrant are being made only in accordance with authorizations of
management and directors of the registrant; and
(3) Provide reasonable assurance regarding of timely detection of unauthorized
acquisition, use or disposition of the registrant's assets that could have
a material effect on the financial statements.
Our management, including our chief executive officer, does not expect that our
disclosure controls or our internal controls will prevent all error and all
fraud. A control system, no matter how well conceived and operated, can provide
only reasonable, not absolute, assurance that the objectives of the control
system are met. Further, the design of a control system must reflect the fact
that there are resource constraints, and the benefits of controls must be
considered relative to their costs. Because of the inherent limitations in all
control systems, no evaluation of controls can provide absolute assurance that
all control issues and instances of fraud, if any, within our company have been
detected. These inherent limitations include the realities that judgments in
decision-making can be faulty and that breakdowns can occur because of simple
errors or mistakes. Additionally, controls can be circumvented by the individual
acts of some persons, by collusion of two or more people or by management
override of the control. The design of any system of controls also is partially
based on certain assumptions about the likelihood of future events, and we
cannot assure you hat any design will succeed in achieving its stated goals
under all potential future conditions. Over time, controls may become inadequate
because of changes in conditions, or the degree of compliance with the policies
or procedures may deteriorate. Because of the inherent limitations in a
cost-effective control system, misstatements due to error or fraud may occur and
not be detected.
ITEM 8B. OTHER INFORMATION.
Not Applicable.
7
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT.
Name Age Position
- -------- ---------- ---------------------------
Carl Olivieri 45 Chairman, CEO, President
Ramon Chimelis 41 Director, Former President,
Treasurer, Secretary
Mr. Olivieri, is currently the chairman of the board, chief executive officer
and president of Big Sky Industries, I and has held that position since November
20, 2007. Since January 22, 2007, he has held the position of chairman of the
board, chief executive officer and president of Coffee Exchange of America's,
Inc. He previously served as chairman and CEO of Global Triad Inc. from February
2007 to September 2007. From October 2003 until October 2006, he served as
Executive Vice President and Director of Urban America Television network.
Mr. Chimelis has served as our president, treasurer, and secretary since our
inception in January 2000. Additionally, Mr. Chimelis is an officer and director
of other Shell companies with the same business plan as the Company. See
"Directors, Executive Officers, Promoters and Control Persons, Other Blank Check
Activities." Since June 2003, Mr. Chimelis has been self-employed, engaged in
day trading. Form January 2000 to June 2003, he was a shareholder, officer and
director of Design Pallets, Inc., a manufacturer of corrugated pallets, located
in Orlando, Florida. From 1999 to January 2000, Mr. Chimelis was engaged in day
trading through Gunslinger Group, Inc., a privately held investing firm. From
1998 to 1999 he served as a trader at the broker-dealer firm of JOQ Financial,
Inc., and from 1995 to 1998, he was a stock broker at Collner Higgins and
Higgins and Anderson. Mr. Chimelis studied business finance at Brevard Community
College from 1984 to 1989.
Other Blank Check Activities
Mr. Chimelis holds identical positions, as an officer, director, and
shareholder, for a total of nine other Blank Check companies plus serves as
shareholder and director Big Sky Industries, I. The following table sets forth,
as of the date hereof, the identities of these companies, the amount and
percentage of beneficial ownership held by Mr. Chimelis in such companies, and
the percentage of time he intends to devote to the affairs of these companies.
Percent of Time
Amount and Percentage of Intended to Devote To the
Name, Filing Type of Beneficial Ownership Affairs of the Company
------------------------ --------------------------- ---------------------------
Big Sky Industries I, Inc. 1,000,000 Shares (95.23%) 5%
Form 10-SB/12G
SEC File No. 0-32067
Big Sky Industries II, Inc. 1,000,000 Shares (95.23%) 5%
Form 10-SB/12G
SEC File No. 0-32069
Big Sky Industries III, Inc. 1,000,000 Shares (95.23%) 5%
Form 10-SB/12G
SEC File No. 0-32071
8
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT. (CONTINUED)
Big Sky Industries IV, Inc. 1,000,000 Shares (95.23%) 5%
Form 10-SB/12G
SEC File No. 0-32073
Big Sky Industries V, Inc. 1,000,000 Shares (95.23%) 5%
Form 10-SB/12G
SEC File No. 0-32097
Big Sky Industries VI, Inc. 1,000,000 Shares (95.23%) 5%
Form 10-SB/12G
SEC File No. 0-32077
Big Sky Industries VII, Inc.
Form 10-SB/12G 1,000,000 Shares (95.23%) 5%
SEC File No. 0-3207
9
Big Sky Industries VIII, Inc.
Form 10-SB/12G 1,000,000 Shares (95.23%) 5%
SEC File No. 0-32075
Big Sky Industries IX, Inc.
Form 10-SB/12G 1,000,000 Shares (95.23%) 5%
SEC File No. 0-32083
Big Sky Industries X, Inc.
Form 10-SB/12G 1,000,000 Shares (95.23%) 5%
SEC File No. 0-32081
The Company and each of these other entities will be in competition with each
other for Target Businesses. Presently, no determination has been made as to the
priority of these companies, with respect to the order with which these
companies will attempt to effectuate a Business Combination, once they are
prepared to effectuate a Business Combination.
As of the date hereof, Mr. Olivieri, chairman of the board, chief executive
officer, and president is the only persons who performs material operations on
behalf of the Company, and he does not anticipate making any significant changes
in the composition of Company officers or directors, until such time as a
Business Combination occurs. Mr. Olivieri assumed his current positions on
November 20, 2007. Mr. Chimelis, former president, treasurer, secretary, and
sole director and current director was the only person who performed material
operations on behalf of the Company prior to November 20, 2007.
Each director is elected until the next Annual Meeting of shareholders and until
a successor is qualified. Ramon Chimelis is the initial promoter of the Company;
the Company had no other promoter.
9
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT. (CONTINUED)
COMMITTEES
Audit Committee Financial Expert
The Securities and Exchange Commission has adopted rules implementing Section
407 of the Sarbanes-Oxley Act of 2002 requiring public companies to disclose
information about "audit committee financial experts." As of the date of this
Annual report, we do not have a standing Audit Committee. The functions of the
Audit Committee are currently assumed by our full Board of Directors.
Additionally, we do not have a member of our Board of Directors that qualifies
as an "audit committee financial expert." For that reason, we do not have an
audit committee financial expert.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
To the best of our knowledge, based solely on a review of the copies of such
reports furnished to us and written representation that no other reports are
required, Section 16(a) filing requirements applicable to our officers,
directors, and greater than ten percent beneficial owners were filed timely
during the most recent fiscal year.
ITEM 10. EXECUTIVE COMPENSATION
Compensation of Officers
During the period covered by this report, Mr.Chimelis, former president and sole
director and current director received no salary or any other type of
compensation. He had no employment agreement with our Company and we had no
other executive officers. On November 20, 2007, Mr. Olivieri assumed the
positions of chairman, president, and chief executive officer; Mr. Chimelis
remains on the board of directors as a director. Pursuant to Instruction 5 to
Item 402 (a) (2) of Regulation S-B, no table or column is provided in this Item
10 to this report on Form 10-KSB.
Mr. Chimelis was not bound by an employment agreement with the Company during
the period covered by this report. As a result, his relationship with the
Company could have been terminated at any time for any reason. On November 20,
2007, he resigned all positions he held with the Company, but remains as a
member of the board of directors.
Compensation of Directors
During the period covered by this report, Mr. Chimelis received no salary or any
other type of compensation in his capacity as sole director of the Company. As
of the date hereof, we do not have in place a compensation arrangement for our
directors for their services as directors, for committee participation, or
special assignments.
Employee Stock Option Plan
We have no stock option, retirement, pension, or profit-sharing programs for the
benefit of directors, officers, or other employees; however, our board of
directors may recommend adoption of one or more such programs in the future.
10
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of the date hereof, the names, addresses,
amount and nature of beneficial ownership and percent of such ownership of each
person or group known to the Company to be the beneficial owner of more than
five percent (5%) of the Company's Common Stock.
Name and Address of Amount and Nature
Beneficial Owner of Beneficial Ownership Percent of Class
--------------------------- ------------------------ -----------------
Ramon Chimelis
7557 West Sand Lake Road
Suite 153
Orlando, Florida 32836 1,000,000 95.23%
The following table sets forth, as of the date hereof, the names and addresses,
amount and nature of beneficial ownership and percent of such ownership of the
Company's Common Stock of each of the officers and directors of the Company, and
the officers and directors of the Company as a group.
Name and Address of Amount and Nature
Beneficial Owner of Beneficial Ownership Percent of Class
--------------------------- ------------------------ ----------------
Ramone Chimelis
7557 West Sand Lake Road
Suite 153
Orlando, Florida 32836 1,000,000 95.23%
Carl Olivieri
7557 West Sand lake Road
Suite 153
Orlando, Florida 32836 0 0%
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Although our management has no current plans to cause the Company to do so, our
affiliates, officers and directors (at September 30, 2007, our Company had one
officer, one director, and two shareholders; as of November 20, 2007, the
Company had one officer, two directors, and two shareholders) may actively
negotiate for or otherwise consent to the disposition of any portion of their
Common Stock as a condition to or in connection with a Business Combination.
Therefore, it is possible that the terms of any Business Combination will
provide for the sale of some shares of Common Stock held by management or
affiliates. Thus, it is likely that none of our other shareholders will be
afforded the right to sell pursuant to the same terms that such selling
officers, directors, or affiliates will be provided. Also, such shareholders
will not be afforded an opportunity to approve or consent to such management or
affiliate's stock purchase. It is more likely than not that any sale of
securities by the Company's current stockholders to an acquisition candidate
would be at a price substantially higher than the originally paid by such
stockholders. Any payment to current stockholders in context of an acquisition
involving our Company would be determined entirely by the largely unforeseen
terms of a future agreement with an unidentified business entity or the terms
(not yet finalized) of the identified business entity (See Note 5, Related Party
Transaction).
11
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS (CONTINUED)
The executive and business offices of the Company consist of office space
located at 7557 West Sand Lake Road, Suite 153, Orlando, FL 32819. Pursuant to
an oral arrangement, we sub-lease our office space on a month-to-month basis
free of charge from Mr. Chimelis, our former sole officer and director and
current director. We believe this office space is adequate to serve our needs
until such time as a Business
Combination occurs, and we expect to be able to utilize these offices, pursuant
to the terms described above, until such time as a Business Combination occurs.
Pursuant to Sections 607.0901(5) and 607.0902(5) of the Florida Business
Corporation Act, our Company has inserted certain provision in our articles of
incorporation, which have the effect of removing us from the purview of the
control-share acquisition and affiliated transaction statutes promulgated under
Sections 607.0901 and 607.0902 of the Florida business Corporation Act and
hence, the protections afforded by such statues.
Section 607.0901 of the Florida Business Corporation Act imposes limitations on
the exercise of corporate control, directly or indirectly, by a beneficial owner
of more than 10% of a corporation's outstanding voting stock (an "interested
shareholder"). The corporation's "disinterested directors" as defined therein,
or a supermajority of the corporation's shareholders (other than the interested
shareholder and related parties) are required to approve certain business
combinations and corporate transactions with the interested shareholder or any
entity or individual controlled by the interested shareholder ("affiliated
transaction"), unless certain statutory exemptions apply, or the corporation has
opted out of the affiliated transactions statue. The stated purpose of the
affiliated transactions statute is to assure that Florida shareholders who do
not tender their shares in a hostile takeover offer receive a fair price for
those shares in a second-step, freeze-out transaction. By removing the Company
from the purview of Florida's affiliated transaction stature, the consideration
received by selling shareholders in a "second-step" transaction could be less
than the consideration received by the selling shareholders in the initial
transaction.
Section 607.0902 of the Florida Business Corporation Act denies corporate
control to an acquirer of control shares by extinguishing the voting rights of
shares of an "issuing public corporation," as defined therein, acquired in a
"control share acquisition,"as defined therein. Voting rights may be reinstated
to the extent provided in a shareholders' resolution approved by (1) each class
or series entitled to vote separately on the proposal by a majority of all votes
entitled to be cast by such class or series and (2) each class or series
entitled to vote separately on the proposal by a majority of all votes entitled
to be cast by such class or series, excluding all "interested shares" (
generally speaking, those shares that may be voted by or at the direction of a
person who made a control-share acquisition or an officer or employee/director
of the subject "issuing public corporation"). The acquisition of shares is not
directly affected, only the voting rights attendant to control shares. Other
shares of the same corporation are owned or acquired by the same person are not
affected.
The stated purpose of the control share acquisition statute is to protect
Florida shareholders by affording them an opportunity to decide whether a change
in corporate control is desirable. By removing the Company from the purview of
Florida's control-share acquisition stature, shares of an "issuing public
corporation" acquired pursuant to a control acquisition are not deemed to be
"control-share acquisitions," which, in the Company's case, effectively denies
non-management/affiliate shareholders an opportunity to approve or consent to an
acquirer's purchase of such management or affiliate's stock pursuant to a
Business Combination.
On November 30, 2007, the Company's board of directors approved the movement of
its corporate charter from the state of Florida to the state of Nevada.
12
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
31.1 Certification by Chief Executive Officer pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.*
32.1 Certification by Chief Executive Officer pursuant to 18
U.S.C Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.*
*Filed herewith
(b) Reports on Form 8-K
We filed one current report on Form 8-K, dated November 28, 2007, with
the Securities Exchange Commission, pursuant to Item 5.02, reporting
the resignation of Ramon Chimelis from the position of chief executive
officer and president and the appointment of Carl Olivieri as chairman
of the board, chief executive officer, and president of Big Sky
Industries I, Inc. We also reported pursuant to Item 5.03, "Amendments
to Articles of Incorporation or By-Laws; Change in Fiscal Year," that
the board of directors approved the movement of Big Sky's corporate
charter from the state of Florida to the state of Nevada. No financial
statements were filed with this current report.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Audit Fees:
The Company incurred aggregate fees and expenses from Patrick Rodgers, CPA, PA
of $8,000 for the audit of fiscal years ended September 30, 2007 and September
30, 2006, including review of the Company's financial statements included in its
Forms 10-QSB for the fiscal years ended September 30, 2007 and September 30,
2006, respectively.
Tax Fees:
The Company did not incur any tax fees from Patrick Rodgers, CPA, PA for the
fiscal years ended September 30, 2007 and 2006.
All Other Costs:
During fiscal years ended September 30, 2007 and 2006, the Company incurred
aggregate fees and expenses of $-0- from Patrick Rodgers, CPA, PA for all other
services consisting of other fees and expenses.
Audit Committee:
All of the services described above for fiscal years ended September 30, 2007
and 2006 were approved by Ramon Chimelis, the former president and sole director
and current director, pursuant to the Company's policies and procedures. On May
22, 2007, Patrick Rodgers, CPA, PA was appointed as the new independent
registered public accounting firm, to provide auditing and related services,
including review of the Company's financial statements included in its Forms
10-QSB and Form 10-KSB, beginning with the quarter ended June 30, 2003. The
Company intends to continue using Patrick Rodgers, CPA, PA for audit and audit
related services, and as needed for due diligence in acquisitions.
13
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
BIG SKY INDUSTRIES I, INC.
Date: January 7, 2008 By: /s/ Carl Olivieri
-------------------------------
Carl Olivieri
Chairman, President, and
Chief Executive officer
Date: January 7, 2008 By: /s/ Ramon Chimelis
--------------------------------
Ramon Chimelis
Director
14
BIG SKY INDUSTRIES I, INC.
FINANCIAL STATEMENTS
FOR YEARS ENDED SEPTEMBER 30, 2007 AND 2006
TABLE OF CONTENTS
Balance Sheet as of September 30, 2007 F-3
Statements of Operations for the years ended
September 30, 2007 and 2006 F-4
Statement of Stockholders' Equity (Deficit) for the
Period January 31, 2000 (inception) to
September 30, 2007 F-5
Statement of Cash Flows for the years ended F-6
September 30, 2007 and 2006
Notes to Financial Statements F-7 to F-12
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Stockholders
Big Sky Industries I, Inc.
Orlando, Florida 32819
I have audited the accompanying balance sheet of Big Sky Industries I, Inc.
("the Company"), a development stage company, as of September 30, 2007, and the
related statements of operations, stockholders' equity (deficit), and cash flows
for the years ended September 30, 2007 and 2006. These financial statements are
the responsibility of the Company's management. My responsibility is to express
an opinion on these financial statements based on my audit.
I conducted my audit in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require that I 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. I believe that my audit provides a reasonable
basis for my opinion.
In my opinion, these financial statements present fairly, in all material
respects, the financial position of Big Sky Industries I, Inc. as of September
30, 2007 and the results of its operations and its cash flows for the years
ended September 30, 2007 and 2006, in conformity with accounting principles
generally accepted in the United States.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has a continuing record of losses, a working
capital deficiency, and negative stockholders' equity which raises substantial
doubt about its ability to continue as a going concern. Management's plans in
regard to these matters are also described in Note 1. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
/s/ Patrick Rodgers, CPA, PA
Altamonte Springs, Florida
December 31, 2007
F-2
BIG SKY INDUSTIES I, INC.
(a Development Stage Company)
BALANCE SHEET
AT SEPTEMBER 30, 2007
ASSETS
Cash $ --
-------
TOTAL ASSETS $ --
=======
LIABILITIES AND STOCKHOLDERS' DEFICIT
LIABILITIES
Advances payable 9,000
Accrued expenses $ 3,568
-------
TOTAL LIABILITIES 12,568
-------
STOCKHOLDERS' DEFICIT
Preferred stock, no par value; 5,000,000 shares authorized,
none outstanding
Common stock, $.001 par value, 50,000 shares authorized
1,050,000 shares issued and outstanding 1,050
Additional paid-in capital 187
Deficit accumulated during the development stage (13,805)
-------
TOTAL STOCKHOLDERS' DEFICIT (12,568)
-------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ --
=======
The accompanying notes are an integral part of these financial statements.
F-3
BIG SKY INDUSTRIES I, INC.
(A Development Stage Company)
STATEMENT OF OPERATIONS
Period From
January 31,
2000
Year Ended Year Ended (Inception) to
September 30, September 30, September 30,
2007 2006 2007
---------- ---------- ----------
EXPENSES
General and administrative expenses $ 6,788 $ -- $ 13,805
---------- ---------- ----------
NET LOSS BEFORE INCOME TAXES 6,788 -- 13,805
PROVISION FOR INCOME TAXES -- -- --
---------- ---------- ----------
NET LOSS $ 6,788 $ -- $ 13,805
========== ========== ==========
Basic and diluted loss per share $ 0.01 $ 0.00 $ 0.01
========== ========== ==========
Weighted average number of common
shares outstanding
(basic and diluted) 1,050,000 1,050,000 1,050,000
========== ========== ==========
The accompanying notes are an integral part of these Financial statements.
F-4
BIG SKY INDUSTRIES I, INC.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE PERIOD JANUARY 31, 2000 (INCEPTION) TO SEPTEMBER 30, 2007
Deficit
Accumulated
Additional During the
Common Stock Paid-in Development
Description Shares Amount Capital Stage Total
--------- --------- --------- --------- ---------
Issuance of common stock 1,000,000 $ 1,000 $ -- $ -- $ 1,000
Common stock exchanged for services 50,000 50 -- -- 50
Capital contributed by stockholders -- -- 165 165
Net loss for the initial period
ended September 30, 2000 -- -- -- (3,227) (3,227)
--------- --------- --------- --------- ---------
Balance, September 30, 2000 1,050,000 1,050 165 (3,227) (2,012)
Net loss for the fiscal year
ended September 30, 2001 -- -- -- (2,830) (2,830)
--------- --------- --------- --------- ---------
Balance, September 30, 2001 1,050,000 1,050 165 (6,057) (4,842)
Net loss for the fiscal year
ended September 30, 2002 -- -- -- (700) (700)
--------- --------- --------- --------- ---------
Balance, September 30, 2002 1,050,000 1,050 165 (6,757) (5,542)
Capital Contibuted by stockholders -- -- 22 -- 22
Net loss for the fiscal year
ended September 30, 2003 -- -- -- (260) (260)
--------- --------- --------- --------- ---------
Balance, September 30, 2003 1,050,000 1,050 187 (7,017) (5,780)
Net loss for the fiscal year
ended September 30, 2004 -- -- -- -- --
--------- --------- --------- --------- ---------
Balance, September 30, 2004 1,050,000 1,050 187 (7,017) (5,780)
Net loss for the fiscal year
ended September 30, 2005 -- -- -- -- --
--------- --------- --------- --------- ---------
Balance, September 30, 2005 1,050,000 1,050 187 (7,017) (5,780)
Net loss for the fiscal year
ended September 30, 2006 -- -- -- -- --
--------- --------- --------- --------- ---------
Balance, September 30, 2006 1,050,000 $ 1,050 $ 187 $ (7,017) $ (5,780)
Net loss for the fiscal year
ended September 30, 2007 -- -- -- (6,788) (6,788)
--------- --------- --------- --------- ---------
Balance, September 30, 2007 1,050,000 $ 1,050 $ 187 $(13,805) $(12,568)
========= ========= ========= ========= =========
The accompanying notes are an integral part of these financial statements.
F-5
BIG SKY INDUSTRIES I, INC.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
Period From
January 31,
2000
Year Ended Year Ended (Inception) to
September 30, September 30, September 30,
2007 2006 2007
------- ------- -------
CASH FLOW FROM OPERATING ACTIVITIES:
Net loss $(6,788) $ -- $(13,805)
Adjustments to reconcile net loss to net
cash used by operating activities:
Common stock exchanged for services -- -- 50
Increase in accrued liabilities 6,788 -- 12,568
------- ------- -------
NET CASH USED BY OPERATING ACTIVITIES -- -- (1,187)
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of common stock -- -- 1,000
Contribution of capital by stockholders -- -- 187
------- ------- -------
NET CASH PROVIDED BY FINANCING
ACTIVITIES -- -- 1,187
------- ------- -------
NET DECREASE IN CASH -- -- --
CASH AT BEGINNING OF PERIOD -- -- --
------- ------- -------
CASH AT END OF PERIOD $ -- $ -- $ --
======= ======= =======
SUPPLEMENTAL DISCLOSURES:
Cash paid during the period for interest $ -- $ -- $ --
======= ======= =======
Cash paid during the period for income taxes $ -- $ -- $ --
======= ======= =======
The accompanying notes are an integral part of these financial statements.
F-6
BIG SKY INDUSTRIES I, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 2007 AND 2006
NOTE 1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business Activity and Organization
- ----------------------------------
Big Sky Industries I (the "Company") was incorporated in Florida on January 31,
2000. On November 20, 2007, the Company's board of directors approved the
movement of its corporate charter from the state of Florida to the state of
Nevada. The Company was organized as a "shell" company and conducts virtually no
business operation, other than investigating opportunities to associate with a
suitable business partner and identifying merger partners or acquisition
candidates. The Company is a development stage enterprise, as defined by
Financial Accounting Standards ("FAS") No 7, "Accounting and Reporting by
Development Stage Enterprises."
Since incorporation in January 2000, the Company has been devoting its efforts
to activities such as raising capital, establishing sources of information, and
developing markets for its planned operations. As of September 30, 2007, the
Company has not generated any revenue, and, as such, it is considered a
development stage company.
Basis of presentation and going concern uncertainty
- ---------------------------------------------------
The financial statements of the Company have been prepared assuming that the
Company will continue as a going concern. However, since inception the Company
has incurred losses from operations of approximately $14,000. As a result, the
Company has a negative working capital and a negative stockholders' equity. The
losses from operations are primarily attributable to the overhead expenses
deemed necessary to support the Company's operations during the development
stage. In light of the Company's current financial position and the uncertainty
of its ability to consummate a business Combination, which would involve the
acquisition, a merger, exchange of capital stock, asset acquisition, or other
similar business combination (a "Business Combination") with an operating or
development stage business ("Target Business"), there is substantial doubt about
the Company's ability to continue as a going concern. The Company anticipates
meeting its cash requirements through the financial support of its management
and stockholders until it completes an acquisition or merger with a company
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 disclosures of
contingent assets and liabilities at the date of these financial statements and
the reported amounts of revenues and expenses during the reporting periods.
Actual results could differ from those estimates.
Income Taxes
- ------------
The Company computes deferred income taxes under the provisions of FAS No.109,
which requires the use of an asset and liability method of accounting for income
taxes. FAS No. 109 provides for the recognition and measurement of deferred
income tax benefits based on the likelihood of their realization in future
years. A valuation allowance must be established to reduce deferred income tax
benefits if it is more likely than not that a portion of the deferred income tax
benefits will not be realized.
F-7
BIG SKY INDUSTRIES I, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 2007 AND 2006
NOTE 1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Earnings Per Common Share
- -------------------------
The Company follows the provisions of the Financial Accounting Standards Board's
Statement of Financial Accounting Standards ("SFAS") No. 128 "Earnings Per
Share." SFAS No. 128 requires companies to present basic earnings per share
("EPS") and diluted EPS, rather than the primary and fully diluted EPS
presentations that were formerly required by Accounting Principles Board No.
15,"Earnings Per Share." Basic EPS is computed by dividing net income or loss by
the weighted average number of common shares outstanding during the year.
Diluted EPS is calculated using the "if converted" method for convertible
securities and the treasury stock method for options and warrants as previously
prescribed by Accounting Principles Board Opinion No. 15, "Earnings Per Share."
Cash and Cash Equivalents
- -------------------------
The Company considers all investments with original maturities of three months
or less to be cash equivalents.
Fair value of financial instruments
- -----------------------------------
In accordance with the reporting requirements of SFAS No. 107, Disclosures About
Fair Value of Financial Instruments, the Company calculates the fair value of
its assets and liabilities which qualify as financial instruments under this
statement and includes this additional information in the notes to the financial
statements when the fair value is different than the carrying value of those
financial instruments. The estimated fair value of the loans from related party
approximate their carrying amounts due to the short maturity of these
instruments. At September 30, 2007, the Company did not have any other financial
instruments.
Recent accounting pronouncements
- --------------------------------
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 positions upon initial adoption. The cumulative effect of applying FIN 48 at
adoption, if any, is to be reported as an adjustment to opening retained
earnings for the year of adoption. FIN 48 is effective for the Company's year
end 2007, although early adoption is permitted. The Company is assessing the
potential effect of FIN 48 on its financial statements.
F-8
BIG SKY INDUSTRIES I, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 2007 AND 2006
NOTE 1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
In February 2006, the FASB issued SFAS 155, "Accounting for Certain Hybrid
Financial Instruments." This Statement amends FASB Statements No. 133,
Accounting for Derivative Instruments and Hedging Activities, and No. 140,
Accounting for Transfers and Servicing of Financial Assets and extinguishments
of Liabilities. This Statement resolves issues addressed in Statement 133
Implementation Issue No. Dl, "Application of Statement 133 to Beneficial
Interests in Securitized Financial Assets." This Statement:
a) Permits fair value re-measurement for any hybrid financial instrument that
contains an embedded derivative that otherwise would require bifurcation.
b) Clarifies which interest-only strips and principal-only strips are not
subject to the requirements of Statement 133.
c) Establishes a requirement to evaluate interests in securitized financial
assets to identify interests that are freestanding derivatives or that are
hybrid financial instruments that contain an embedded derivative requiring
bifurcation.
d) Clarifies that concentrations of credit risk in the form of subordination
are not embedded derivatives.
Amends Statement 140 to eliminate the probation on qualifying special-purpose
entity from holding a derivative financial instrument that pertains to a
beneficial interest other than another derivative financial instrument.
The fair value election provided for in paragraph 4(e) of this Statement may
also be applied upon adoption of this Statement for hybrid financial instruments
that had been bifurcated under paragraph 12 of Statement 133 prior to the
adoption of this Statement. Earlier adoption is permitted as of the beginning of
our fiscal year, provided we have not yet issued financial statements, including
financial statements for any interim period, for that fiscal year. Provisions of
this Statement may be applied to instruments that we hold at the date of
adoption on an instrument-by-instrument basis.
Adoption of this Statement is required as of the beginning of the first fiscal
year that begins after September 15, 2005. The adoption of this statement is not
expected to have a material impact on the company's financial statements.
In March 2006, The FASB issued SEAS 156, "Accounting for Servicing of Financial
Assets." This Statement amends FASB Statement No. 140, Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities, with
respect to the accounting for separately recognized servicing assets and
servicing liabilities. This Statement:
a) Requires an entity to recognize a servicing asset or servicing liability
each time it undertakes an obligation to service a financial asset by
entering into a servicing contract in certain situations.
b) Requires all separately recognized servicing assets and servicing
liabilities to be initially measured at fair value, if practicable.
F-9
BIG SKY INDUSTRIES I, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 2007 AND 2006
NOTE 1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
c) Permits an entity to choose either the amortization method or the fair
value measurement method for each class of separately recognized servicing
assets and servicing liabilities.
d) At its initial adoption, permits a one-time reclassification of
available-for-sale securities to trading securities by entities with
recognized servicing rights, without calling into question the treatment of
other available-for-sale securities under Statement 115, provided that the
available-for-sale securities are identified in some manner as offsetting
the entity's exposure to changes in fair value of servicing assets or
servicing liabilities that a servicer elects to subsequently measure at
fair value.
e) Requires separate presentation of servicing assets and servicing
liabilities subsequently measured at fair value in the statement of
financial position and additional disclosures for all separately recognized
servicing assets and servicing liabilities.
Adoption of this Statement is required as of the beginning of the first fiscal
year that begins after September 15, 2006. The adoption of this statement is not
expected to have a material impact on the company's financial statements.
In September 2006, the FASB issued Statement No. 157, "Fair Value Measurements."
This Statement defines fair value, establishes a framework for measuring fair
value in generally accepted accounting principles and expands disclosure about
fair value measurement. The implementation of this guidance is not expected to
have any impact on the company's financial statements.
In September 2006, the FASB issued Statement of Financial Accounting Standards
No. 158, "Employers' Accounting for Defined Benefit Pension and Other
Postretirement Plans, an amendment of PASS Statements No. 87, 106, and 132(R)"
("SFAS No. 158"). SFAS No. 158 requires companies to recognize a net liability
or asset and an offsetting adjustment to accumulate other comprehensive income
to report the funded status of defined benefit pension and other postretirement
benefit plans. SFAS No. 158 requires prospective application, recognition and
disclosure requirements effective for the company's fiscal year ending December
31, 2007. Additionally, SFAS No. 158 requires companies to measure plan assets
and obligations at their year-end balance sheet date. This requirement is
effective for the company's fiscal year ending December 31, 2009. The company is
currently evaluating the impact of the adoption of SFAS No. 258 and does not
expect that it will have a material impact on its financial statements.
F-10
BIG SKY INDUSTRIES I, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 2007 AND 2006
NOTE 1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
In September 2006, the United States Securities and Exchange Commission ("SEC"),
adopted SAB No. 108, "Considering the Effects of Prior Year Misstatements when
Quantifying Misstatements in Current Year Financial Statements." This SAB
provides guidance on the consideration of the effects to prior year
misstatements in quantifying current year misstatements for the purpose of a
materiality assessment. SAB 108 establishes an approach that requires
quantification of financial statement errors based on the effects of each of the
company's balance sheet and statement of operations financial statements and the
related financial statement disclosures. The SAB permits existing public
companies to record the cumulative effect of initially applying this approach in
the first year ending after November 15, 2006 by recording the necessary
correcting adjustments to the carrying values of assets and liabilities as of
the beginning of that year with the offsetting adjustment recorded to the
opening balance of retained earnings. Additionally, the use of the cumulative
effect transition method requires detailed disclosure of the nature and amount
of each individual error being corrected through the cumulative adjustment and
how and when it arose. The company is currently evaluating the impact, if any,
that SAB 108 may have on the company's results of operations or financial
position.
NOTE 2. ADVANCES PAYABLE
Advances payable represents short-term advances to the Company by a third party
for the payment of certain operating expenses incurred during the fourth quarter
of the fiscal year ended September 30, 2007. These advances are non-interest
bearing and due on demand.
NOTE 3. LOSS PER COMMON SHARE
Net loss per common share outstanding for the year ended September 30, 2007 and
2006, as shown on the Statement of Operations, is based on the number of common
shares outstanding at the balance sheet date. Weighted average shares
outstanding was not computed since it would not be meaningful in the
circumstances, as all shares issued during the period from incorporation through
September 30, 2007 were for initial capital and were issued to just two
individuals. Therefore, the total shares outstanding at the end of the period
were deemed to be the most relevant number of shares to use for purposes of this
disclosure. For the year ended September 30, 2007 and 2006, basic and diluted
weighted average common shares include only common shares outstanding, since
there were no common share equivalents.
NOTE 4. CAPITAL STOCK
Common Stock
- ------------
The holders of the common stock are entitled to one vote per share; they have
non-cumulative voting rights. The holders are also entitled to receive dividends
when, as, and if declared by the board of directors. Additionally, the holders
of the common stock do not have any preemptive right to subscribe for, or
purchase any shares of any class of stock.
F-11
BIG SKY INDUSTRIES I, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 2007 AND 2006
NOTE 4. CAPITAL STOCK (CONTINUED)
In January 2000, the Company issued 1,000,000 shares of common stock at par
value per share, for a total of $1,000. A stock subscription receivable was
recorded at the date of issuance for the same amount, which was paid in June
2000.
In January 2000, the Company issued 50,000 shares valued at $50 as consideration
for services rendered by one of the two founding stockholders of the Company for
the formation of the Company.
Preferred Stock
The board of directors of the Company is authorized to provide for the issuance
of preferred stock in classes or series, and, by filing the appropriate articles
of amendment with the Secretary of State of Florida, is authorized
to establish the number of shares to be included in each class or series, which
may include a conversion feature into common stock. As of September 30, 2007, no
shares of preferred stock have issued and no preferences, limitations, or
relative rights have been assigned.
NOTE 5. RELATED PARTY TRANSACTION
In January 2000, the Company issued 50,000 shares valued at $50 as consideration
for services rendered by one of the two founding stockholders of the Company for
the formation of the Company.
On March 31, 2007, the Company and Mr. Chimelis signed a Memorandum of
Understanding ("MOU") with Coffee Exchange of America's Inc. ("CEOTA") for the
purchase of 950,000 of Mr. Chimelis' shares, or approximately 85.7% of the
Company's issued and outstanding common shares. The MOU provides that CEOTA will
make payments of $2,500 and $1,059 for unpaid audit fees and state corporation
fees, respectively, and $30,000 to the Company's shareholders before the common
shares are transferred to CEOTA. As of December 31, 2007, all payments, provided
for under the terms of the MOU, have not been made by CEOTA; therefore, the
transaction has not been completed.
NOTE 6. INCOME TAXES
At September 30, 2007, the Company had a net operating loss carryforward of
approximately $13,805. This loss may be carried forward to offset federal income
taxes in future years through the year 2027. However, if subsequently there are
ownership changes in the Company, as defined in Section 382 of the Internal
Revenue Code, the Company's ability to utilize net operating losses available
before the ownership change may be restricted to a percentage of the market
value of the Company at the time of the ownership change.
Therefore, substantial net operating loss carryforwards could, in all
likelihood, be limited or eliminated in future years due to a change in
ownership as defined in the Code. The utilization of the remaining carryforwards
is dependent on the Company's ability to generate sufficient income during the
carryforward periods and no further significant changes in ownership.
It is management's opinion that the entire deferred tax benefit of approximately
$2,600, resulting from the net operating loss carryforward may not be recognized
in future years. Therefore, a valuation allowance of $2,600, equal to the
deferred tax benefit, has been established, resulting in no deferred tax
benefits as of the balance sheet date.
F-12