On March 30,
2010, the Company acquired 25% of the outstanding share capital of Godfrey (China) Limited, a Hong Kong corporation (Godfrey),
in exchange for the Companys technology used for the design and production of SAE-AS81820, 81934 and 81935 self-lubricated
spherical bearings, bushings and rod-end bearings. The Company legally owns 25% of Godfrey.
The formation and acquisition of the interest in Godfrey is intended to assist the Company in its focus on the Chinese bearings
market. In September 2010, Godfrey opened a production facility in Guangzhou, China. The Company received its 25% interest in Godfrey
for a 50% interest in the intellectual property assets acquired on February 1, 2010 (as discussed in Note 3). Since the investment
in Godfrey is an active investment, it has been accounted for under the equity method. Since the independent valuation
determined that the purchase price allocation attributed no value to the intangible assets, there was no dollar investment in Godfrey
by the Company and therefore no charge to the investment being impaired. At October 31, 2012 there were suspended losses of $583,648.
As there were no operations for Godfrey and
the fact that Godfrey is being accounted for as an equity investment, no proforma presentation
is necessary because there was no impact on the previously issued financial statements.
the year ended October 31, 2012, the Company transferred a total of $65,733 to Godfrey for its cash flow needs. The Company determined
that the amount owed by Godfrey was uncollectible so recorded bad expense of $35,733. As at October 31, 2012, the amount due from
Godfrey was $0. As of October 31, 2011, the amount due to Godfrey was $30,000.