Securities Authorized for Issuance Under Equity Compensation Plans

Securities Authorized for Issuance Under Equity Compensation Plans.

Overview

In June 2007, we acquired our wholly-owned subsidiary, Valtech Communications Inc. ("Valtech") in a reverse merger transaction, issuing 40 million restricted shares to the Valtech shareholders.

Valtech offers low-cost, highly reliable service of Digital Phone, Digital Voice, High-Speed Internet and Digital TV backed by fast, friendly and live customer service(“Telecommunication Services”). We have expanded our bundled services by providing an end-to-end IPTV solution consisting of IPTV middleware, video on demand, network based PVR, IPTV head ends, content protection, IPTV infrastructure, system integration and IPTV applications such as games.

We intend to use our limited resources to market our services to new residential and commercial building complexes and existing hotel chains. Further, we intend to market our bundled Telecommunication Services in industry publications and intend to develop our website and promote its presence in order to increase web traffic and possible sales to new clients (www.valtech.ca).

Provided the Company can secure additional funding, our plan to increase our marketing activities throughout Canada, pay industry compatible salaries to our executives and staff, hire additional salespersons, who among other activities, would engage in direct solicitations. At present, we have not received commitments for capital from third parties and there can be no assurance that we will be able to acquire additional capital on terms acceptable to the Company, if at all.

We believe that the our negative cash flow from operations will decrease steadily as our subscriber base increases. While we have a commitment from a principal shareholder to provide funding until we achieve positive cash flow from operations, if our affiliated control shareholders cease provided short-term interim funding through loans to expand our business, the Company may experience reduced growth in its revenues.

Regardless of the amount of funds available to us for marketing, we intend to continue to pursue strategic alliances with complementary businesses in an effort to enter and expand our Telecommunication Services. The complementary businesses we intend to solicit are those that have developed and maintain marketing channels to our potential customers.

At present, we use proceeds from shareholder loans to purchase telecommunication hardware, cables and equipment. It is our intention to secure alternative debt and/or equity funding sources in order to reduce depends from our current funding sources.

Cash and Cash Equivalents. The Company considers all highly liquid fixed income investments with maturities of three months or less, to be cash equivalents. On November 30, 2008, the Company had cash of $19. At November 30, 2008 the company had no cash equivalents.

Accounts Receivable. Management periodically reviews the current status of existing receivables and management's evaluation of periodic aging of accounts. The Company charges off accounts receivable to expense when deemed uncollectible. The Company had no bad debt expenses at the end of November 30, 2008 and 2007, respectively. The Company accounts receivable for the years ended November 30, 2008 and 2007 were $64,971 and $80,787, respectively.

Deferred Costs. The Company's deferred development costs were $371,983 at November 30, 2008 and $435,396 at November 30, 2007. The Company recorded $78,876 amortization expense for the year ended November 30, 2008 and $67,476 for the year ended November 30, 2007 reflecting increased volume of installation costs. The Company's deferred development costs are amortized over five (5) years. The level of development costs is directly related to the level of business development which we cannot predict with certainty, although Valtech is actively marketing its telecommunications services.

Revenue Recognition. The Company's wholly owned subsidiary, Valtech Communications, Inc. owns and operates a triple play (telephone, internet and TV channels distribution) network in Canada via fiber to individual customers, hotels and retirement homes. The Company bills its subscribers on a monthly basis and recognizes the monthly revenue based upon the specific plan selected by the subscriber. The Company also provides contract services to wire commercial buildings with fiber optic cable in order to provide for similar services.

Property and Equipment. Property and equipment are stated at cost and are depreciated using the straight line method over their estimated useful lives 5 - 7 years for equipment. The Company does not own real estate. The Company for the year ended November 30, 2008 had $26,373 of equipment and for the year ended November 30, 2007 $33,944. This decrease represents the depreciation of existing equipment.

Comparison of the years ended November 30, 2008 and 2007

Revenues: Revenue for the year ended November 30, 2008 was $372,638 compared to $123,324 for year ended November 30, 2007. The Company's revnues increase was $249.314 which represents a 202% increase from the prior year. Valtech accounted for one hundred per cent (100%) of revenues for November 30, 2008 and 2007, respectively. The Company's increase in revenue is mainly attributed to new customers. The increase in new customers for our Telecommunication Services is attributable to our marketing activities and increased name recognition. We believe that our revenues are recurring as we have experienced low customer turn-over rates.

Cost of Sales: Cost of Sales for the year ended November 30, 2008 was $497,572 compared to $61,733 for year ended November 30, 2007. The Company's cost of sales increase was $435,839 which represents a 706% increase from prior year due to higher costs associated with the increase in sales. Advertising expenses remained stable. Thus, the increase in the cost of sales arose from the increase in the costs of wiring and installation as well as equipment, such as set top boxes.

Depreciation and Amortization: For the year ended November 30, 2008 we recorded $85,197 in depreciation and amortization expenses compared to $73,536 during the year ended November 30, 2007.

General and Administrative Expenses: General and Administrative Expenses for the year ended November 30, 2008 was $677,660 compared to $274,618 for year ended November 30, 2007. The Company's general and administrative expenses increase was $391,288 which represents a 142.48% increase from prior year due to higher costs related to increase in sales. Valtech increased its technical office staff in order to respond to tenders for business.

Interest Income: Interest Income for the year ended November 30, 2008 was $11 compared to $117 for the year ended November 30, 2007. The Company's interest income was $106 less than the prior year which represents a 90.06 % decrease. The Company had less cash for the year ended November 30, 2008 resulting in less interest income as compared to the year ended November 30, 2007.

Interest Expense: The Company's interest expense for the year ended November 30, 2008 was $29,268 compared to $11,262 for year ended November 30, 2007. The increase of $18,006 represents a 159.88%. This was the direct result of increases in line of credit draw for working capital to enable the purchase of equipment for new installations.

During the year ended November 30, 2008, we had a net decrease in cash of $9,363. Total cash resources as of November 30, 2008 was $19. During the year ended November 30, 2008 and 2007, net cash used in operating activities was $491,992 and $12,972, respectively. This cash was used to fund our operations for the periods, adjusted for non-cash expenses and changes in operating assets and liabilities.

Net cash used in investing activities for the year ended November 30, 2008 was $14,372 compared to $428,791 net cash used in investing activities for the year ended November 30, 2007. The net cash used in investing activities for the year ended November 30, 2008 and 2007 was related to deferred development costs of $14,372 and $428,791, respectively. The decrease in deferred development costs is directly related to the installation of equipment needed to provide our services.

Net cash provided by financing activities was $397,268 for the year ended November 30, 2008 compared to $422,958 net cash provided by financing activities for the year ended November 30, 2007. The net cash provided by financing activities for the year ended November 30, 2008 resulted from a bank loan of $163,438 and proceeds of $233,830 from affiliated shareholders. The net cash proceeds from financing activities for the year ended November 30, 2007 resulted from a bank loan of $287,971 and proceeds of $134,987 from affiliated shareholders.

Our continued operations will depend on whether we are able to raise additional funds through third parties, such as equity and debt financing, as well as additional loans from our affiliated shareholders. However, there can be no assurance that such additional funds will be available on acceptable terms and there can be no assurance that any additional funding that we do obtain will be sufficient to meet our needs in the long term. We will continue to fund operations from cash on hand and through the similar sources of capital previously described. We can give no assurances that any additional capital that we are able to obtain will be sufficient to fully fund our growth plan.

We have incurred an accumulated deficit of $1,117,753 through November 30, 2008. We have incurred negative cash flow from operations since we started our Telecommunication Services business. We have spent, and expect to continue to spend, substantial amounts in connection with implementing our business strategy, including equipment related to our Telecommunications Services. Based on our current plans, we believe that our cash will not be sufficient to enable us to meet our planned operating needs, including our plan for expansion, at least for the next 18 months. Our cash requirements for fiscal year 2009 are estimated to be $600,000 based on our present revenue growth rate. We have short-term funding commitments of $500,000 from one of our controlling shareholders until such time the Company generates positive cash flow from operations or is able to secure alternative long-term funding through the issuance of debt and/or equity. We expect to be able to meet our current debt obligations provided that our current customer base does not decrease. At present, the Company is unable to meet its obligations under the Ericsson agreemet unless it raises additional funding, and no negotiations are on-going with Ericsson at present.

However, the actual amount of funds we will need to operate is subject to many factors, some of which are beyond our control. These factors include the following:

-  the progress of our revenue growth under the current uncertain business environment;
 - the number and additional subscriber to out bundled Telecommunications Services;
 - our ability to retain our current subscriber base and licensing arrangements;
 - our ability to achieve secure equipment financing;
 - the costs involved in marketing our Telecommunication Services; and
 - the costs involved being a public company.

We have based our estimate on assumptions that may prove to be wrong. We may need to obtain additional funds sooner or in greater amounts than we currently anticipate. Potential sources of financing include strategic relationships, public or private sales of our shares or debt and other sources. We may seek to access the public or private equity markets when conditions are favorable due to our long-term capital requirements. We do not have any committed sources of financing at this time, and it is uncertain whether additional funding will be available when we need it on terms that will be acceptable to us, or at all. If we raise funds by selling additional shares of common stock or other securities convertible into common stock, the ownership interest of our existing stockholders will be diluted. If we are not able to obtain financing when needed, we may be unable to carry out our business plan. As a result, we may have to significantly limit our operations and our business, financial condition and results of operations would be materially harmed.

Effect of Exchange Rate on Cash.

The Company benefited from the Canadian exchange rate total of $99,733 for the year ended November 30, 2008 compared to $858 for the year ended November 30, 2007. The decrease reflects the decrease in the value of the Canadian dollar as compared to the United States dollar.

Cash end of Year. The Company cash decreased by $9,363 to $19 at the end of November 30, 2008 compared to a decrease of $17,947 to $9,382 at the end of November 30, 2007.

As of November 30, 2008 we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K promulgated under the Securities Act of 1934.

The Company leases its office space from a related party. See also footnote 7 in the consolidated financial statements.

Our financial statements are prepared in accordance with accounting principles generally accepted in the United States, which require management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, the disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The critical accounting policies that affect our more significant estimates and assumptions used in the preparation of our financial statements are reviewed and any required adjustments are recorded on a monthly basis.

On December 16, 2004, the Financial Accounting Standards Board (“FASB”) published Statement of Financial Accounting Standards No. 123 (Revised 2004), “Share-Based Payment” (“SFAS 123R”). SFAS 123R requires that compensation cost related to share-based payment transactions be recognized in the financial statements. Share-based payment transactions within the scope of SFAS 123R include stock options, restricted stock plans, performance-based awards, stock appreciation rights, and employee share purchase plans. The provisions of SFAS 123R, as amended, are effective for small business issuers beginning as of the next fiscal year after December 15, 2005. The Company has adopted the provisions of SFAS 123R. The adoption of this principle had no effect on the Company’s operations.

On January 1, 2006, the Company adopted the provisions of FAS No. 123R “Share-Based Payment” (“FAS 123R”) which requires recognition of stock-based compensation expense for all share-based payments based on fair value. Prior to January 1, 2006, the Company measured compensation expense for all of its share-based compensation using the intrinsic value method prescribed by Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB 25”) and related interpretations. The Company has provided pro forma disclosure amounts in accordance with FAS No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure – an amendment of FASB Statement No. 123” (“FAS 148”), as if the fair value method defined by FAS No. 123, “Accounting for Stock Based Compensation” (“FAS 123”) had been applied to its stock-based compensation.

The Company has elected to use the modified–prospective approach method. Under that transition method, the calculated expense in 2006 is equivalent to compensation expense for all awards granted prior to, but not yet vested as of January 1, 2006, based on the grant-date fair values estimated in accordance with the original provisions of FAS 123. Stock-based compensation expense for all awards granted after January 1, 2006 is based on the grant-date fair values estimated in accordance with the provisions of FAS 123R. The Company recognizes these compensation costs, net of an estimated forfeiture rate, on a pro rata basis over the requisite service period of each vesting tranche of each award. The Company considers voluntary termination behavior as well as trends of actual option forfeitures when estimating the forfeiture rate.

The Company measures compensation expense for its non-employee stock-based compensation under the Financial Accounting Standards Board (FASB) Emerging Issues Task Force (EITF) Issue No. 96-18, “Accounting for Equity Instruments that are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services”. The fair value of the option issued is used to measure the transaction, as this is more reliable than the fair value of the services received. The fair value is measured at the value of the Company’s common stock on the date that the commitment for performance by the counterparty has been reached or the counterparty’s performance is complete. The fair value of the equity instrument is charged directly to compensation expense and additional paid-in capital.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements, an amendment of Accounting Research Bulletin No 51” (SFAS 160). SFAS 160 establishes accounting and reporting standards for ownership interests in subsidiaries held by parties other than the parent, changes in a parent’s ownership of a noncontrolling interest, calculation and disclosure of the consolidated net income attributable to the parent and the noncontrolling interest, changes in a parent’s ownership interest while the parent retains its controlling financial interest and fair value measurement of any retained noncontrolling equity investment. SFAS 160 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. Early adoption is prohibited. The adoption of SFAS No. 160 is not expected to have a material effect on the Company’s financial position, results of operations or cash flows.

In December 2007, the FASB issued SFAS 141R, Business Combinations (“SFAS 141R”), which replaces FASB SFAS 141, Business Combinations. This Statement retains the fundamental requirements in SFAS 141 that the acquisition method of accounting be used for all business combinations and for an acquirer to be identified for each business combination. SFAS 141R defines the acquirer as the entity that obtains control of one or more businesses in the business combination and establishes the acquisition date as the date that the acquirer achieves control.  SFAS 141R will require an entity to record separately from the business combination the direct costs, where previously these costs were included in the total allocated cost of the acquisition.  SFAS 141R will require an entity to recognize the assets acquired, liabilities assumed, and any non-controlling interest in the acquired at the acquisition date, at their fair values as of that date.  This compares to the cost allocation method previously required by SFAS No. 141.  SFAS 141R will require an entity to recognize as an asset or liability at fair value for certain contingencies, either contractual or non-contractual, if certain criteria are met.  

Finally, SFAS 141R will require an entity to recognize contingent consideration at the date of acquisition, based on the fair value at that date.  This Statement will be effective for business combinations completed on or after the first annual reporting period beginning on or after December 15, 2008.  Early adoption of this standard is not permitted and the standards are to be applied prospectively only.   Upon adoption of this standard, there would be no impact to the Company’s results of operations and financial condition for acquisitions previously completed.  The adoption of SFAS No. 141R is not expected to have a material effect on the Company’s financial position, results of operations or cash flows.

In December 2007, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 110, “Use of a Simplified Method in Developing Expected Term of Share Options” (“SAB 110”). SAB 110 expenses the current view of the staff that it will accept a company’s election to use the simplified method discussed in Staff Accounting Bulletin No. 107, “Share Based Payment”, (“SAB 107”), for estimating the expected term of “plain vanilla” share options regardless of whether the company has sufficient information to make more refined estimates. SAB 110 became effective for the Company on December 1, 2007. The adoption of SAB 110 did not have a material impact on the Company’s financial position.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133 (“SFAS 161”). SFAS 161 requires enhanced disclosures about an entity’s derivative and hedging activities. These enhanced disclosures will discuss: how and why an entity uses derivative instruments; how derivative instruments and related hedged items are accounted for under SFAS 133 and its related interpretations; and how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. The Company does not believe that SFAS 161 will have an impact on their results of operations or financial position.

In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles” (SFAS 162). SFAS 162 makes the hierarchy of generally accepted accounting principles explicitly and directly applicable to preparers of financial statements, a step that recognizes preparers’ responsibilities for selecting the accounting principles for their financial statements. The effective date for SFAS 162 is 60 days following the U.S. Securities and Exchange Commission’s approval of the Public Company Accounting Oversight Board’s related amendments to remove the GAAP hierarchy from auditing standards, where it has resided for some time. The adoption of SFAS 162 will not have an impact on the Company’s results of operations or financial position.

In May 2008, the FASB issued SFAS No. 163, “Accounting for Financial Guarantee Insurance Contracts – an interpretation of SFAS No. 60” (SFAS 163). SFAS 163 prescribes accounting for insures of financial obligations, bringing consistency to recognizing and recording premiums and to loss recognition. SFAS 163 also requires expanded disclosures about financial guarantee insurance contracts. Except for some disclosures, SFAS 163 is effective for financial statements issued for fiscal years beginning after December 15, 2008. The adoption of SFAS 163 will not have an impact on the Company’s results of operations or financial position.

In April 2008, the FASB issued FSP No. FAS 142-3, “Determination of the Useful Life of Intangible Assets”. This FSP amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142, “Goodwill and Other Intangible Assets”. The Company was required to adopt FSP 142-3 on October 1, 2008. The guidance in FSP 142-3 for determining the useful life of a recognized intangible asset shall be applied prospectively to intangible assets acquired after adoption, and the disclosure requirements shall be applied prospectively to all intangible assets recognized as of, and subsequent to, adoption. The Company does not believe FSP 142-3 will materially impact their financial position, results of operations or cash flows.

In May 2008, the FASB issued FSP Accounting Principles Board 14-1, “Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)” (“FSP APB 14-1”). FSP APB 14-1 requires the issuer of certain convertible debt instruments that may be settled in cash (or other assets) on conversion to separately account for the liability (debt) and equity (conversion option) components of the instrument in a manner that reflects the issuer’s non-convertible debt borrowing rate. FSP APB 14-1 is effective for fiscal years beginning after December 15, 2008 on a retroactive basis. The Company does not believe that the adoption of FSP APB 14-1 will have a material effect on its financial position, results of operations or cash flows.

In June 2008, the Emerging Issues Task Force issued EITF No. 07-05, “Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entity’s Own Stock” (“EITF 07-05”), which supersedes the definition in EITF 06-01 for periods beginning after December 15, 2008. The objective of EITF 07-05 is to provide guidance for determining whether an equity-linked financial instrument (or embedded feature) is indexed to an entity’s own stock and it applies to any freestanding financial instrument or embedded feature that has all the characteristics of a derivative in FSAB 133, for purposes of determining whether that instrument or embedded feature qualifies for the first part of the scope exception in paragraph 11(a) of SFAS 133 (“the Paragraph 11(a) Exception”). EITF 07-05 also applies to any freestanding financial instrument that is potentially settled in an entity’s own stock, regardless of whether the instrument is within the scope of EITF 00-19. The Company is determining what impact, if any, EITF 07-05 will have on its financial position, results of operations and cash flows.

In June 2008, the Emerging Issues Task Force issued EITF 08-04, “Transition Guidance for Conforming Changes to EITF 98-5, Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios” (“EITF 08-04”). EITF 08-04 is effective for years ending after December 15, 2008. The overall objective of EITF 08-04 is to conform the requirements of EITF 00-27 and FASB 150 with EITF 98-5 to provide for consistency in application of the standard. The Company has computed and recorded a beneficial conversion feature in connection with certain of their prior financing arrangements and does not believe that EITF 08-04 will have a material effect on that accounting.

In May 2009, the FASB published SFAS No. 165, “Subsequent Events” (“SFAS 165”). SFAS 165 requires the Company to disclose the date through which subsequent events have been evaluated and whether that date is the date the financial statements were issued or the date the financial statements were available to be issued. SFAS 165 is effective for financial periods ending after June 15, 2009. Management has adopted SFAS 165 and has evaluated subsequent events through September 30, 2009, the date the financial statements were issued.

Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date and are not expected to have a material impact on the financial statements upon adoption.

Evaluation of Disclosure Controls and Procedures

Evaluation of disclosure controls and procedures. As of November 30, 2008, the Company's Chief Executive Officer and Chief Financial Officer conducted an evaluation regarding the effectiveness of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the  Exchange Act. Based upon the evaluation of these controls and procedures, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of the end of the fiscal year 2008.

Management is responsible for establishing and maintaining adequate internal control over financial reporting and for the assessment of the effectiveness of those internal controls. As defined by the SEC, internal control over financial reporting is a process designed by our principal executive officer/principal financial officer, who is also the sole member of our Board of Directors, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the financial statements in accordance with U.S. generally accepted accounting principles.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management has assessed the effectiveness of our internal control over financial reporting as of November 30, 2008. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. Based on our assessment and those criteria, we have concluded that our internal control over financial reporting was not effective as of November 30, 2008.

This annual report does not include an attestation 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.

In connection with the review of the audit of the Company’s financial statements for the year ended November 30, 2008, and as a result of the SEC’s comment letters regarding the annual report on Form 10-K, the Company's CEO and CFO conducted an evaluation regarding the effectiveness of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Exchange Act. Based upon the evaluation of these controls and procedures and discussions with our independent accountants, our CEO and CFO concluded that our disclosure controls and procedures was not effective as of November 30, 2008. Specifically, the Company did not have effective controls designed and in place over the consolidation of the financial statements of its wholly-owned subsidiary, which resulted in adjustments on the translation of foreign currencies, adjustments to certain estimates made on the allowance of doubtful accounts and the write-off of certain receivables, under accrual of interest expense and reclassifications on their statement of cash flows. In light of the above, the Company re-audited and restated its financial statements for the year ended November 30, 2008.