SportsQuest, Inc. 10-K

ITEM 8. FINANCIAL STATEMENTS SPORTSQUEST, INC. TABLE OF CONTENTS Page INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM: F-1 Kramer, Weiseman and Associates LLP CONSOLIDATED FINANCIAL STATEMENTS: Consolidated Balance Sheet at May 31, 2008 F-2 Consolidated Statements of Operations for the period ended May 31, 2008 F-3 Consolidated Statements of Stockholders’ Equity for the period ended May 31, 2008 F-4 Consolidated Statements of Cash Flows for the period ended May 31, 2008 F-5 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F-6 26 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of SPORTSQUEST, INC. We have audited the accompanying consolidated balance sheet of SportsQuest, Inc. and Subsidiaries as of May 31, 2008, and the related consolidated statements of operations, changes in shareholders' deficiency and cash flows for the year then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. The financial statements of SportsQuest, Inc. and Subsidiaries as of May 31, 2007 were audited by other auditors whose report dated August 8, 2008, expressed an unqualified opinion, with an explanatory paragraph relating to the assumption the Company will continue as a going concern, on those statements. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provided a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of SportsQuest, Inc., Inc and Subsidiaries, as of May 31, 2008, and the results of their operations and their cash flows for the period then ended in conformity with accounting principles generally accepted in the United States of America. These consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has operating and liquidity concerns, has incurred an accumulated deficit of approximately $2,852,972 through the period ended May 31, 2008, and current liabilities exceeded current assets by approximately $3,854,841 at May 31, 2008. These conditions raise substantial doubt about the Company's ability to continue as a going concern. Management's plans as to these matters are also described in Note 2. The consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of these uncertainties. Kramer Weisman and Associates LLP Davie, Florida September 15, 2008 F-1 SPORTSQUEST, INC. CONSOLIDATED BALANCES SHEETS FOR PERIOD ENDED MAY 31, 2008 2008 ASSETS: CURRENT ASSETS Cash $ 13,553 Prepaid expenses and other current assets 125,043 Total current assets 138,595 PROPERTY AND EQUIPMENT, net 7,099 Due from affiliate 717,077 Intangible assets - media content 10,000,000 Investment in unconsolidated subsidary 3,903,750 TOTAL ASSETS $ 14,766,521 LIABILITIES AND STOCKHOLDERS' EQUITY: CURRENT LIABILITIES: Accounts payable $ 73,739 Accrued expenses and other liabilities 15,947 Notes from affiliates 3,903,750 Total current liabilities 3,993,436 COMMITMENTS AND CONTINGENCIES: - Convertible note payable 255,205 Bond payable 733,308 Total liabilities 4,981,950 STOCKHOLDERS' EQUITY: Preferred stock, $.0001 par value, 1,200,000 shares authorized, 100,000 issued as of May 31, 2008 10 Common stock, $.0001 par value, 98,800,000 shares authorized, 12,397,594 issued and outstanding as of May 31, 2008 1,240 Treasury stock (10,000 ) Additional Paid-in capital 9,833,995 Common stock subscribed, not issued 2,812,300 Accumulated deficit (2,852,972 ) Total stockholders' equity 9,784,572 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 14,766,521 The accompanying notes are an integral part of these consolidated financial statements. F-2 SPORTSQUEST,INC. CONSOLIDATED STATEMENT OF OPERATIONS FOR PERIOD ENDED MAY 31, 2008 2008 REVENUES: Revenue $ 15,750 15,750 OPERATING EXPENSES: General and administrative expenses 994,708 Sales and marketing expenses - Depreciation and amortization 394 Total operating expenses 995,102 OPERATING LOSS (979,352 ) OTHER (INCOME) AND EXPENSES Interest expense 245,653 Impairment of assets 189,534 Gain on the sale of assets (7,743 ) Total other expense 427,444 NET (LOSS) $ (1,406,796 ) NET (LOSS) INCOME PER SHARE: Basic and diluted: $ (0.12 ) WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: Basic and diluted: 12,147,594 The accompanying notes are an integral part of these consolidated financial statements. F-3 SPORTSQUEST, INC. CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY FOR PERIOD ENDED MAY 31, 2008 Additional Common Stock Preferred Stock Common Stock Treasury Paid-in Subscribed Accumulated Shares Amount Shares Amount Stock Capital Note Issued Deficit Total OCTOBER 31, 2007 - $ - 11,897,594 $ 1,190 $ - $ 8,784,245 $ - $ (1,446,177 ) $ 7,339,258 Bond issuance 170,000 170,000 Purchase of treasury stock (10,000 ) (10,000 ) Warrantes issued 804,800 804,800 Preferred stock issued 100,000 10 10 Common stock issued for compensation 500,000 50 74,950 75,000 Common stock subscribed, not issued 2,812,300 2,812,300 Net loss (1,406,796 ) (1,406,796 ) MAY 31, 2008 100,000 $ 10 12,397,594 $ 1,240 $ (10,000 ) $ 9,833,995 $ 2,812,300 $ (2,852,972 ) $ 9,784,572 F-4 SPORTSQUEST, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR PERIOD ENDED MAY 31, 2008 2008 CASH FLOWS FROM OPERATING ACTIVITIES: Net (loss) $ (1,406,796 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 394 Purchase of treasury stock (10,000 ) Commons stock issued for services 75,000 Impairments of assets 189,534 Preferred stock issued 10 Warrants issued 804,800 Bond issued 170,000 Changes in operating assets and liabilities: Prepaid and other current assets (40,350 ) Accounts payable (30,500 ) Accrued expenses and other liabilities (64,580 ) Net cash (used) in operating activities (312,489 ) CASH FLOWS FROM INVESTING ACTIVITIES: Note receivable affiliates (179,937 ) Net cash (used in) by investing activities (179,937 ) CASH FLOWS FROM FINANCING ACTIVITIES: Cash received on bond payable 70,448 Proceeds from the sale of assets 2,257 Cash received on loans payable 255,205 Net cash provided by financing activities 327,910 (DECREASE) IN CASH (164,516 ) CASH, BEGINNING OF YEAR 178,069 CASH, END OF YEAR $ 13,553 2008 SUPPLEMENTAL CASH FLOW INFORMATION: Interest paid $ 245,643 Common stock issued for services $ 75,000 Value of warrants from convertible note payable $ 804,800 Preferred stock issued as compensation $ 10 The accompanying notes are an integral part of these consolidated financial statements. F-5 SPORTSQUEST, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED MAY 31, 2008 NOTE 1 – BACKGROUND SportsQuest, Inc . (“SportsQuest”) is a majority, 79%, owned subsidiary of DoMark. The Sportsquest business was created to develop, own and manage high end sports events and their operating entities, as well as executing a growth strategy involving acquisition of diverse and effective sports marketing platforms. SportsQuest was incorporated in April 3, 1986 in Delaware under the name Bay Head Ventures, Inc. The Company has been managing the US Pro Golf Tour and anticipates it will continue to manage USPGT for the foreseeable future. SportsQuest trades on the Pink Sheets under “SPQS.PK”. SportsQuest holds significant value in content media and is refocusing is business model. On August 17, 2007,SportsQuest, Inc. entered into a Stock Issuance, Assumption and Release Agreement (the “Assumption Agreement”), by and among SportsQuest, Inc. and Greens Worldwide Incorporated (“Greens”) and AJW Partners, LLC, AJW Offshore, Ltd., AJW Qualified Partners, LLC and New Millennium Capital Partners II, LLC (collectively, the “Greens Worldwide Investors”). The transactions contemplated by the Assumption Agreement include the following: The issuance by Greens of 390,000 shares of its Series A Convertible Preferred Stock, par value $10.00 per share, to SportsQuest, Inc.; and; The assumption by SportsQuest of 50% of Greens indebtedness to the Greens Worldwide Investors under a Securities Purchase Agreement, dated as of March 22, 2007, by and among Greens and the Greens Worldwide Investors (the “Greens Worldwide Agreement”). Greens is an unconsolidated subsidiary of SportsQuest, Inc. NOTE 2 - GOING CONCERN The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America which contemplate continuation of the Company as a going concern. However, the Company has year end losses from operations and had minimal revenues from operations in 2008. During the year ended May 31, 2008 the Company incurred net loss of $1,406,796. Further, the Company has inadequate working capital to maintain or develop its operations, and is dependent upon funds from private investors and the support of certain stockholders. These factors raise substantial doubt about the ability of the Company to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of these uncertainties. In this regard, Management is planning to raise any necessary additional funds through loans and additional sales of its common stock. There is no assurance that the Company will be successful in raising additional capital. NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Company prepares its financial statements in accordance with accounting principles generally accepted in the United States of America. Significant accounting policies are as follows: F-6 Principles of Consolidation The accompanying financial statements represent the consolidated financial position and results of operations of the Company and include the accounts and results of operations of the Company and its majority owned subsidiary. The accompanying financial statements include only the active entity of SportsQuest, Inc. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. These estimates and assumptions also affect the reported amounts of revenues, costs and expenses during the reporting period. Management evaluates these estimates and assumptions on a regular basis. Actual results could differ from those estimates. The primary management estimates included in these financial statements are the impairment reserves applied to various long-lived assets, allowance for doubtful accounts for gateway access fees and licensing fees, and the fair value of its stock tendered in various non-monetary transactions. Reclassification Certain prior period amounts have been reclassified to conform to current year presentations. Cash and Cash Equivalents The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. At May 31, 2008, cash and cash equivalents include cash on hand and cash in the bank. Property and Equipment Property and equipment is recorded at cost and depreciated over the estimated useful lives of the assets using principally the straight-line method. When items are retired or otherwise disposed of, income is charged or credited for the difference between net book value and proceeds realized thereon. Ordinary maintenance and repairs are charged to expense as incurred, and replacements and betterments are capitalized. The range of estimated useful lives used to calculated depreciation for principal items of property and equipment are as follow: Asset Category Depreciation/ Amortization Period Computer Equipment 3 Years Office equipment 5 Years Income Taxes Deferred income taxes are provided based on the provisions of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS No. 109"), to reflect the tax effect of differences in the recognition of revenues and expenses between financial reporting and income tax purposes based on the enacted tax laws in effect at May 31, 2008. F-7 Net Loss Per Share Basic earnings per share is computed in accordance with FASB No. 128 Earnings Per Share, by dividing net income (loss) available to common shareholders by the weighted average number of common shares outstanding during the reporting period. Diluted earnings per share reflects the potential dilution that could occur if stock options and other commitments to issue common stock were exercised or equity awards vest resulting in the issuance of common stock that could share in the earnings of the Company. As of May 31, 2008, there were no potential dilutive instruments that could result in share dilution . Fair Value of Financial Instruments The fair value of a financial instrument is the amount at which the instrument could be exchanged in a current transaction between willing parties other than in a forced sale or liquidation. The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value: Cash and cash equivalents, licensing receivable, prepaid expenses, other assets, and accounts payable, income tax payable, and other current liabilities carrying amounts approximate fair value due to their most maturities. Stock-Based Compensation Financial Statement Position (“FSP”) FAS No. 123(R)-5 was issued on October 10, 2006. The FSP provides that instruments that were originally issued as employee compensation and then modified, and that modification is made to the terms of the instrument solely to reflect an equity restructuring that occurs when the holders are no longer employees, then no change in the recognition or the measurement (due to a change in classification) of those instruments will result if both of the following conditions are met: (a). There is no increase in fair value of the award (or the ratio of intrinsic value to the exercise price of the award is preserved, that is, the holder is made whole), or the antidilution provision is not added to the terms of the award in contemplation of an equity restructuring; and (b). All holders of the same class of equity instruments (for example, stock options) are treated in the same manner. The provisions in this FSP shall be applied in the first reporting period beginning after the date the FSP is posted to the FASB website. The Company has adopted SP FAS No. 123(R)-5 but it did not have a material impact on its consolidated results of operations and financial condition. Goodwill and Other Intangible Assets The Company adopted Statement of Financial Accounting Standard (“SFAS No.”) No. 142, Goodwill and Other Intangible Assets , effective July 1, 2002. As a result, the Company discontinued amortization of goodwill, and instead annually evaluates the carrying value of goodwill and other intangible assets for impairment, in accordance with the provisions of SFAS No. 142. There was no impairment of goodwill or other intangible assets in Fiscal 2008 Impairment of Long-Lived Assets In accordance with SFAS No. 144, long-lived assets, such as property, plant, and equipment, and purchased intangibles, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Goodwill and other intangible assets are tested for impairment annually. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. There were no events or changes in circumstances that necessitated a review of impairment of long lived assets. F-8 Concentration of Credit Risk The Company maintains its operating cash balances in banks in Oviedo Florida. The Federal Depository Insurance Corporation (FDIC) insures accounts at each institution up to $100,000. Financial instruments that potentially subject the Company to concentrations of credit risk are primarily trade accounts receivable. The trade accounts receivable are due primarily from small business customers in numerous geographical locations throughout the United States. The Company estimates and provides an allowance for uncollectible accounts receivable. Revenue Recognition Revenue includes sponsorship and media sales. The Company recognizes revenue from product sales in accordance with Staff Accounting Bulletin (SAB) No. 104, “Revenue Recognition in Financial Statement” which is at the time customers are invoiced at shipping point, provided title and risk of loss has passed to the customer, evidence of an arrangement exists, fees are contractually fixed or determinable, collection is reasonably assured through historical collection results and regular credit evaluations, and there are no uncertainties regarding customer acceptance. Recent Accounting Pronouncements Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities In June 2008, the FASB issued FSP Emerging Issues Task Force (“EITF”) Issue No. 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities.” The FSP addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting and, therefore, need to be included in the earnings allocation in computing earnings per share under the two-class method. The FSP affects entities that accrue dividends on share-based payment awards during the awards’ service period when the dividends do not need to be returned if the employees forfeit the award. This FSP is effective for fiscal years beginning after December 15, 2008. The Company is currently assessing the impact of FSP EITF 03-6-1 on its consolidated financial position and results of operations. Determining Whether an Instrument (or an Embedded Feature) Is Indexed to an entity's Own Stock In June 2008, the FASB ratified EITF Issue No. 07-5, "Determining Whether an Instrument (or an Embedded Feature) Is Indexed to an Entity's Own Stock" (EITF 07-5). EITF 07-5 provides that an entity should use a two step approach to evaluate whether an equity-linked financial instrument (or embedded feature) is indexed to its own stock, including evaluating the instrument's contingent exercise and settlement provisions. It also clarifies on the impact of foreign currency denominated strike prices and market-based employee stock option valuation instruments on the evaluation. EITF 07-5 is effective for fiscal years beginning after December 15, 2008. The Company is currently assessing the impact of EITF 07-5 on its consolidated financial position and results of operations. F-9 Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement) In May 2008, the FASB issued FSP Accounting Principles Board (“APB”) Opinion No. 14-1, “Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement).” The FSP clarifies the accounting for convertible debt instruments that may be settled in cash (including partial cash settlement) upon conversion. The FSP requires issuers to account separately for the liability and equity components of certain convertible debt instruments in a manner that reflects the issuer's nonconvertible debt (unsecured debt) borrowing rate when interest cost is recognized. The FSP requires bifurcation of a component of the debt, classification of that component in equity and the accretion of the resulting discount on the debt to be recognized as part of interest expense in our consolidated statement of operations. The FSP requires retrospective application to the terms of instruments as they existed for all periods presented. The FSP is effective as of January 1, 2009 and early adoption is not permitted. The Company is currently evaluating the potential impact of FSP APB 14-1 upon its consolidated financial statements. The Hierarchy of Generally Accepted Accounting Principles In May 2008, the FASB issued SFAS No. 162, "The Hierarchy of Generally Accepted Accounting Principles" (FAS No.162). SFAS No. 162 identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements. SFAS No. 162 is effective 60 days following the SEC's approval of the Public Company Accounting Oversight Board amendments to AU Section 411, "The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles". The implementation of this standard will not have a material impact on the Company's consolidated financial position and results of operations. Determination of the Useful Life of Intangible Assets In April 2008, the Financial Accounting Standards Board (“FASB”) issued FASB Staff Position on Financial Accounting Standard (“FSP FAS”) No. 142-3, “Determination of the Useful Life of Intangible Assets”, which amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of intangible assets under SFAS No. 142 “Goodwill and Other Intangible Assets”. The intent of this FSP is to improve the consistency between the useful life of a recognized intangible asset under SFAS No. 142 and the period of the expected cash flows used to measure the fair value of the asset under SFAS No. 141 (revised 2007) “Business Combinations” and other U.S. generally accepted accounting principles. The Company is currently evaluating the potential impact of FSP FAS No. 142-3 on its consolidated financial statements. Disclosure about Derivative Instruments and Hedging Activities In March 2008, the FASB issued SFAS No. 161, “ Disclosure about Derivative Instruments and Hedging Activities , an amendment of SFAS No. 133”, (SFAS 161). This statement requires that objectives for using derivative instruments be disclosed in terms of underlying risk and accounting designation. The Company is required to adopt SFAS No. 161 on January 1, 2009. The Company is currently evaluating the potential impact of SFAS No. 161 on the Company’s consolidated financial statements. Delay in Effective Date In February 2008, the FASB issued FSP FAS No. 157-2, “Effective Date of FASB Statement No. 157”. This FSP delays the effective date of SFAS No. 157 for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value on a recurring basis (at least annually) to fiscal years beginning after November 15, 2008, and interim periods within those fiscal years. The impact of adoption was not material to the Company’s consolidated financial condition or results of operations. F-10 Business Combinations In December 2007, the FASB issued SFAS No. 141(R) “Business Combinations” (SFAS 141(R)). This Statement replaces the original SFAS No. 141. This Statement retains the fundamental requirements in SFAS No. 141 that the acquisition method of accounting (which SFAS No. 141 called the purchase method ) be used for all business combinations and for an acquirer to be identified for each business combination. The objective of SFAS No. 141(R) is to improve the relevance, and comparability of the information that a reporting entity provides in its financial reports about a business combination and its effects. To accomplish that, SFAS No. 141(R) establishes principles and requirements for how the acquirer: a. Recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree. b. Recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase. c. Determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. This Statement applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008 and may not be applied before that date. The Company does not expect the effect that its adoption of SFAS No. 141(R) will have on its consolidated results of operations and financial condition. Noncontrolling Interests in Consolidated Financial Statements—an amendment of ARB No. 51 In December 2007, the FASB issued SFAS No. 160 “Noncontrolling Interests in Consolidated Financial Statements – an amendment of ARB No. 51” (SFAS No. 160). This Statement amends the original Accounting Review Board (ARB) No. 51 “Consolidated Financial Statements” to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. This Statement is effective for fiscal years and interim periods within those fiscal years, beginning on or after December 15, 2008 and may not be applied before that date. The does not expect the effect that its adoption of SFAS No. 160 will have on its consolidated results of operations and financial condition. Fair Value Option for Financial Assets and Financial Liabilities In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities – Including an amendment of SFAS No. 115” (SFAS No. 159), which becomes effective for the Company on February 1, 2008, permits companies to choose to measure many financial instruments and certain other items at fair value and report unrealized gains and losses in earnings. Such accounting is optional and is generally to be applied instrument by instrument. The Company does not anticipate that the election, of this fair-value option will have a material effect on its consolidated financial condition, results of operations, cash flows or disclosures. F-11 Fair Value Measurements In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements" (SFAS No. 157). SFAS No. 157 provides guidance for using fair value to measure assets and liabilities. SFAS No. 157 addresses the requests from investors for expanded disclosure about the extent to which companies’ measure assets and liabilities at fair value, the information used to measure fair value and the effect of fair value measurements on earnings. SFAS No. 157 applies whenever other standards require (or permit) assets or liabilities to be measured at fair value, and does not expand the use of fair value in any new circumstances. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 and will be adopted by the Company in the first quarter of fiscal year 2008. The Company is unable at this time to determine the effect that its adoption of SFAS No. 157 will have on its consolidated results of operations and financial condition. Accounting Changes and Error Corrections In May 2005, the FASB issued SFAS No. 154, "Accounting Changes and Error Corrections" (SFAS No. 154), which replaces Accounting Principles Board (APB) Opinion No. 20, "Accounting Changes," and SFAS No. 3, "Reporting Accounting Changes in Interim Financial Statements - An Amendment of APB Opinion No. 28”. SFAS No. 154 provides guidance on the accounting for and reporting of accounting changes and error corrections, and it establishes retrospective application, or the latest practicable date, as the required method for reporting a change in accounting principle and the reporting of a correction of an error. SFAS No. 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. The Company adopted SFAS No. 154 in the first quarter of fiscal year 2007 and does not expect it to have a material impact on its consolidated results of operations and financial condition. NOTE 4 - PROPERTY AND EQUIPMENT Property and equipment, net at May 31, consist of the following: Years 2008 Computer Equipment 3 $ 8,100 Total property and equipment 8,100 Less: accumulated depreciation (1,001 ) $ 7,099 The depreciation expense for the years ended May 31, 2008 was $394. NOTE 5 – INTANGIBLE ASSETS Property and equipment, net at May 31, consist of the following: Years 2008 Media content 3 $ 10,000,000 Total intangible assets 10,000,000 Less: accumulated amortization (- ) $ 10,000,000 The Company has not amortized these assets as they were purchased late in the year and have not been placed in services as of May 31, 2008. F-12 NOTE 6 – NOTE PAYABLE Notes payable comprise the following: · On February 26, 2008, SportsQuest, Inc. entered into a Securities Purchase Agreement (the “Purchase Agreement”), by and among SportsQuest, Inc. (“Parent”), and SportsQuest Management Group, Inc. (the “Subsidiary”). The Parent SportsQuest, Inc., and Subsidiary, SQ Mgt Group are collectively referred to as the “Company” and the secured party’s signatory and their respective endorsees, transferees and assigns are collectively the “Secured Party”. The transactions contemplated by the Purchase Agreement resulted in a funding of a total of $250,000 into the Company. The Callable Secured Convertible Notes issued for the $250,000 resulted in a beneficial conversion factor that was valued at $170,000 on the date of issuance which was accounted for as additional paid in capital and the value of this beneficial conversion factor will be amortized over the conversion or when a note is converted during the period available for conversion. The Purchase Agreement provided that the Parent shall issue to the Secured Party certain of SportsQuest 8% Callable Secured Convertible Notes, due three years from the date of issue, which are convertible into shares of SportsQuest Common Stock, par value $0.0001 per share and the Parent shall issue the Secured Party certain Common Stock purchase warrants. AJW Master Fund or its registered assigns, is entitled to purchase from SportsQuest 2,000,000 fully paid and non-assessable shares of the Company’s Common Stock, par value $0.0001 per share, at an exercise price per share equal to $0.003. AJW Partners, LLC or its registered assigns, is entitled to purchase from SportsQuest 2,000,000 fully paid and non-assessable shares of the Company’s Common Stock, par value $0.0001 per share, at an exercise price per share equal to $0.003. New Millennium Capital Partners II, LLC or its registered assigns, is entitled to purchase from the Company SportsQuest, Inc. 6,000,000 fully paid and non-assessable shares of Common Stock, par value $0.0001 per share, at an exercise price per share equal to $0.003. · On August 16, 2007, SportsQuest, Inc. entered into a Securities Purchase Agreement (the “Purchase Agreement”), by and among the Company and AJW Partners, LLC, AJW Master Fund, Ltd. and New Millennium Capital Partners II, LLC (collectively, the “Air Brook Investors”). The transactions contemplated by the Purchase Agreement will result in a funding of a total of $1,500,000 into the Company. The Purchase Agreement provided for the sale by SportsQuest to the SportsQuest Investors of callable secured convertible notes with an aggregate face amount of $1,500,000, plus interest (the “Facility Notes”). The Air Brook Investors purchased from the Company at closing Facility Notes with an aggregate face amount of $500,000 and are required to purchase additional Facility Notes with an aggregate face amount of $500,000 from the Company upon each of (i) the filing of the registration statement required by the Registration Rights Agreement and (iii) the declaration of effectiveness of such registration statement by the Securities and Exchange Commission. The Facility Notes accrue interest at a rate of 8% per year, require quarterly interest payments in certain circumstances related to the market price of the Company’s common stock, and are due and payable on August 16, 2010 (the “Maturity Date”). The Company is not required to make any principal payments until the Maturity Date, but it has the option to prepay the amounts due under the Facility Notes in whole or in part at any time, subject to the payment of varying prepayment penalties depending on the time of such prepayment, as set forth in the Facility Notes. The Facility Notes are convertible into common stock of the Company at a discount to the then current fair market value of the Company’s common stock, as set forth in the Facility Notes. F-13 In addition, the Purchase Agreement provided for the issuance by SportsQuest to the SportsQuest Investors of warrants to purchase 10,000,000 shares of SportsQuest common stock (the “Warrants”). Each Warrant permits its holder to acquire shares of SportsQuest common stock at an exercise price of $0.25 per share at any time through August 16, 2014. SportsQuest allocated the proceeds received between the Facility Notes issued and the warrant based on the relative fair values at the time of issuance in accordance with APB Opinion 14, Accounting for Convertible Debt and Debt Issued with Stock Purchase Warrants . The Company then further allocated the proceeds received to the beneficial conversion feature in accordance with EITF Issue No. 98-5, Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios , and the guidance in EITF Issue No. 00-27, Application of Issue No. 98-5 to Certain Convertible Instruments. The fair value of the warrant was estimated on the date of issuance using the Black-Scholes valuation model and the assumptions described in the table below: Fair value of underlying stock at date of issuance $ 0.51 Exercise price $ 0.25 Expected life 7 years Expected dividend yield 0 % Risk-free interest rate 4.39 % Volatility 62.08 % As of a result of the above allocations, the Company recorded discounts of $833,333 related to the $1,000,000 worth of Facility Notes issued during 2007. These discounts have been reflected as additional paid in capital in the accompany statement of stockholders’ equity. During 2007, the Company recorded approximately $496,193 of interest expense related to the amortization of the discounts. As a condition to entering into the Purchase Agreement, SportsQuest and the SportsQuest Investors entered into a Registration Rights Agreement, dated as of August 16, 2007. As set forth in the Registration Rights Agreement, SportsQuest has agreed to file a registration statement with the Securities and Exchange Commission, within 30 days, to cover the resale by the SportsQuest Investors of the shares of SportsQuest common stock into which the Facility Notes are convertible. The Company has further agreed to use its best efforts to have such registration statement declared effective and to keep such registration statement effective until the earlier of (i) the date on which all of the securities covered by the registration statement have been sold and (ii) the date on which such securities may be immediately sold to the public without registration or restriction. The Company has also granted piggyback registration rights to the SportsQuest Investors, to the extent that it files a registration statement for its own account, for the same period. · On August 16, 2007, SportsQuest loaned $500,000 to Lextra Management Group, Inc. (“Lextra”), as set forth in a callable secured note (the “Lextra Note”) containing terms substantially similar to the Facility Notes. The Lextra Note, however, does not contain any provision for the outstanding amount due under it to be converted into Lextra’s stock. This note was satisfied during the period through the Asset Purchase Agreement referred to in note 9. F-14 · On August 17, 2007, SportsQuest entered into a Stock Issuance, Assumption and Release Agreement (the “Assumption Agreement”), by and among the Company and Greens Worldwide Incorporated (“Greens Worldwide”) and AJW Partners, LLC, AJW Offshore, Ltd., AJW Qualified Partners, LLC and New Millennium Capital Partners II, LLC (collectively, the “Greens Worldwide Investors”). The transactions contemplated by the Assumption Agreement include the following: • The issuance by Greens Worldwide of 390,000 shares of its Series A Convertible Preferred Stock, par value $10.00 per share (the “Series A Preferred Stock”), to SportsQuest; and • The assumption by SportsQuest of 50% of Greens Worldwide’s indebtedness to the Greens Worldwide Investors under a Securities Purchase Agreement, dated as of March 22, 2007, by and among Greens Worldwide and the Greens Worldwide Investors (the “Greens Worldwide Agreement”). Under the terms of the Assumption Agreement, the Greens Worldwide Investors will release Greens Worldwide from its obligations under the notes described above. In consideration for such release, SportsQuest will issue to the SportsQuest Investors (who are the successors to the Greens Worldwide Investors) callable secured convertible notes with an aggregate face amount of $3,903,750, including interest (collectively, the “Assumption Notes”), and Greens Worldwide will issue to the SportsQuest Investors callable secured convertible notes with an aggregate face amount of $3,903,750, including interest. The Assumption Notes have the same terms and conditions as the notes described above, except that the Assumption Notes are convertible into SportsQuest common stock. SportsQuest has elected to account for the investment at cost since Greens Worldwide does not have common shares for SportsQuest to convert its preferred and it is unlikely that Greens Worldwide will have common shares in the short term. In the event that Greens Worldwide has sufficient common shares available for conversion, and SportsQuest was to exercise its conversion rights, SportsQuest would not own more than 50% of the voting common shares of Greens Worldwide. · On September 25, 2007, SportsQuest entered into an Exchange Agreement that stipulated that the Company shall pay ZCE the sum of $150,000 in cash at the closing (the “Closing Cash Payment”). Under the Bring Down and Amendment, the parties acknowledged that the Closing Cash Payment was intended to be used to pay off certain debts of ZCE (the Debt”). Pursuant to the Bring Down and Amendment, the parties agreed that the Closing Cash Payment would be paid to ZCE at closing. Instead, the parties amended the cash payment and SportsQuest agreed to service the Debt after closing according to the then current monthly schedule and pursuant to the terms of the Bring Down and Amendment. SportsQuest agreed in the Bring Down and Amendment to pay off the Debt in full on the closing of the sale of callable secured convertible notes in the aggregate principal amount of $500,000 to AJW Master Fund, Ltd., AJW Partners, LLC (collectively, “NIR”) pursuant to the Securities Purchase Agreement, dated August 16, 2007, among the Company and NIR, which closing shall occur within five business days after the declaration of the effectiveness of the Form SB-2 registration Statement filed by the Company with the Securities and Exchange Commission on September 14, 2007. F-15 NOTE 7 – STOCKHOLDER’S EQUITY During the year ended May 31, 2008 and 2007 : Quarter Ended Stock issued Cash Received Non Cash for Cash Stock Issued Year Ended May 31, 2008 - - 500,000 On May 15, 2008, our President and Chief Executive Officer executed an agreement with DoMar Exotic Furnishings, Inc. (the “Agreement”) whereby pursuant to the terms and conditions of that Agreement, DoMar, Inc. purchased of 100,000 Series A Preferred Convertible Shares of our company owned by R. Thomas Kidd which represents approximately seventy-nine percent (79%) of our capital stock of SportsQuest, Inc. The Closing of the transaction occurred on May 20, 2008. In February, 2008 500,000 common shares were issued to a Board of Director for services rendered. NOTE 8 – INCOME TAXES The provision (benefit) for income taxes from continued operations for the years ended May 31, 2008 and 2007 consist of the following: May 31, 2008 Current: Federal $ (564,264 ) State (- ) (564,264 ) Deferred: Federal 564,264 State - 564,264 Benefit from the operating loss carryforward - (Benefit) provision for income taxes, net $ - The difference between income tax expense computed by applying the federal statutory corporate tax rate and actual income tax expense is as follows: May 31, 2008 Statutory federal income tax rate 34.0 % State income taxes and other 0.0 % Effective tax rate 34. % F-16 Deferred income taxes result from temporary differences in the recognition of income and expenses for the financial reporting purposes and for tax purposes. The tax effect of these temporary differences representing deferred tax asset and liabilities result principally from the following: May 31, 2008 Net operating loss carryforward 2,852,972 (2,852,972 ) Deferred income tax asset $ - The Company has a net operating loss carryforward of approximately $2,852,972 available to offset future taxable income through 2028. NOTE 9 – SUBSEQUENT EVENTS On August 23, 3007, SportsQuest entered into an Investment Agreement (the “Investment Agreement”) with Dutchess Private Equities Fund, Ltd., a Cayman Islands exempted company (“Dutchess”). The Investment Agreement provides for the Company’s right, subject to certain conditions, to require Dutchess to purchase up to $50,000,000 of SportsQuest common stock at a seven percent discount to market over the 36 month period following a registration statement covering such common stock being declared effective by the Securities and Exchange Commission. As a condition to entering into the Investment Agreement, SportsQuest and Dutchess entered into a Registration Rights Agreement, dated as of August 23, 2007 (the “Registration Rights Agreement”). As set forth in the Registration Rights Agreement, the Company has agreed to file a registration statement with the Securities and Exchange Commission within 45 days after the date of the Registration Rights Agreement to cover the resale by Dutchess of the shares of the Company’s common stock issued pursuant to the Investment Agreement. SportsQuest has agreed to initially register for resale 10,000,000 shares of its common stock which would be issuable on the date preceding the filing of the registration statement based on the closing bid price of SportsQuest common stock on such date and the amount reasonably calculated that represents common stock issuable to other parties as set forth in the Investment Agreement except to the extent that the Securities and Exchange Commission requires the share amount to be reduced as a condition of effectiveness. SportsQuest has further agreed to use all commercially reasonable efforts to cause the registration statement to be declared effective by the Securities and Exchange Commission within 120 days after the date of the Registration Rights Agreement and to keep such registration statement effective until the earlier to occur of the date on which (a) Dutchess shall have sold all of the shares of common stock issued or issuable pursuant to the Investment Agreement; or (b) Dutchess has no right to acquire any additional shares of common stock under the Investment Agreement. F-17 NOTE 10- COMMITMENTS AND CONTINGENCIES ZCE, INC. On September 27, 2007, the Company completed an Exchange Agreement entered into on August 20, 2007 with Zaring-Cioffi Entertainment, LLC, a California limited liability company (“Zaring-Cioffi”), ZCE, Inc., a California corporation (“ZCE”), and Q-C Entertainment, LLC, a Washington limited liability company (“Q-C”). Pursuant to a Bring Down Agreement and Amendment (the “Bring Down and Amendment”), dated September 25, 2007, among the Company, Zaring/Cioffi Entertainment, Inc., Zce, David Quin (“Quin”) and Jeff Merriman Cohen (“Cohen”), Quin and Cohen, the sole members of Q-C, assumed the rights, obligations and liabilities of Q-C under the Exchange Agreement, as amended by the Bring Down and Amendment. Under the terms of the Exchange Agreement, as amended by the Bring Down and Amendment, the Company purchased 100% of the issued and outstanding shares of Zaring-Cioffi from its shareholders, ZCE, Quin and Cohen, in exchange for the issuance of 409,836 shares of restricted common stock of the Company to ZCE and 409,836 shares of restricted common stock of the Company to Cohen and Quin, which stock in the aggregate was valued at $500,000. In addition, the Company issued warrants (the “Warrants”) to purchase an aggregate 400,000 shares of restricted common stock of the Company to the shareholders of Zaring-Cioffi according to the following Schedule: 50,000 shares to each of ZCE and Quin Cohen at a strike price of $0.50 per share expiring December 31, 2007; 50,000 shares to each ZCE and Quin and Cohen at a strike price of $1.00 per share expiring December 31, 2008; and 100,000 shares to each of ZCE and Quin and Cohen at a strike price of $1.50 per share expiring December 31, 2009. Furthermore, Quin and Cohen received, at no cost, a Bronze Level sponsorship position (or its equivalent) at all Zaring-Cioffi events through 2009. Under the Bring Down and Amendment, the Company, Zaring-Cioffi, ZCE, Cohen and Quin also made the representations and warranties set forth in the Exchange Agreement as of closing and agreed that the representations and warranties would not survive the closing. This matter is presently in litigation and the Company has been assured by its counsel that it will prevail in this matter. NOTE 11 – NET LOSS PER SHARE Net loss per share is calculated using the weighted average number of shares of common stock outstanding during the year. The company considers the outstanding warrants granted for diluted earnings per share for the year ended May 31, 2008 and 2007 respectively because the effect of their inclusion would be anti-dilutive. NOTE 12 – RELATED PARTY TRANSACTIONS On February 15, 2008, SportsQuest issued 500,000 of its common shares to a Company Director as compensation for a value of $75,000, or $.15 per share. F-18 The 2007, Air Brook Limousine notified us that it had experienced extraordinary increases in the cost of performing the agreements and advised us of its intent to cancel the contracts. As part of a settlement of issues, we entered into an Agreement and Plan of Reorganization dated March 8, 2007, pursuant to which, among other things, we agreed that A.B. Park & Fly would be merged with and into a wholly-owned subsidiary of Air Brook Limousine, wherein the separate existence of A.B. Park & Fly would cease. In consideration for the preceding, Air Brook Limousine agreed to deliver to us 150,000 shares of our common stock, which we canceled as outstanding shares. This merger was completed on March 15, 2007. On August 16, 2007, Lextra Management Group, Inc., an event management company, acquired 51.16% of our issued and outstanding common stock pursuant to an Agreement dated June 26, 2007 by and among Lextra, our company and certain of our principal stockholders. Pursuant to the terms of this agreement, at the closing, Lextra acquired (a) 1,165,397 shares representing 51.16% of the issued and outstanding shares of our common stock from the selling stockholders for an aggregate purchase price of $116,500 and (b) an outstanding accounts receivable due to Air Brook Limousine by us in the amount of $340,000. At the closing, Air Brook Limousine cancelled the agreement dated August 10, 1993 under which Air Brook Limousine stipulated that it would fund our operations for as long as Air Brook Limousine deemed necessary and as long as it was financially able. The Company has chosen to account for the acquisition of its wholly owned subsidiary, ZCE, Inc., as an unconsolidated investment in the subsidiary as the Exchange Agreement and Bring Down and Amendment agreement is in question and may be settled or rescinded once the Company determines which course of action is in the best interest of the Company and its shareholders during litigation. On August 16, 2007, 6,800,000 shares were issued for a value of $340,000 in exchange for release from debt to the Company’s affiliate. As of October 31, 2007, there was a balance due to Zaring Cioffi Entertainment of $150,000. Pursuant to the Bring Down and Amendment, the Company would service the debt of ZCE on a monthly basis until the registration statement was declared effective by the SEC and the Company had received its third tranche of funding in the amount of $500,000 under the callable notes dated August 17, 2007. In addition, the Company has the right of offset for the sum of $20,000 already advanced to ZCE on August 30, 2007, before the closing. NOTE 12 – STOCK BASED COMPENSATION The Company issues stock options from time to time to executives, key employees and members of the Board of Directors. The Company has adopted the disclosure-only provisions of Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation," and continues to account for stock based compensation using the intrinsic value method prescribed by Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees". Accordingly, no compensation cost has been recognized for the stock options granted to employees. In December 2004, the FASB issued a revision of SFAS No. 123 ("SFAS No. 123(R)") that requires compensation costs related to share-based payment transactions to be recognized in the statement of operations. With limited exceptions, the amount of compensation cost will be measured based on the grant-date fair value of the equity or liability instruments issued. In addition, liability awards will be re-measured each reporting period. Compensation cost will be recognized over the period that an employee provides service in exchange for the award. SFAS No. 123(R) replaces SFAS No. 123 and is effective as of the beginning of January 1, 2006. Based on the number of shares and awards outstanding as of December 31, 2005 (and without giving effect to any awards which may be granted in 2006), we do not expect our adoption of SFAS No. 123(R) in January 2006 to have a material impact on the financial statements. F-19 Financial Statement Position (“FSP”) FAS No. 123(R)-5 was issued on October 10, 2006. The FSP provides that instruments that were originally issued as employee compensation and then modified, and that modification is made to the terms of the instrument solely to reflect an equity restructuring that occurs when the holders are no longer employees, then no change in the recognition or the measurement (due to a change in classification) of those instruments will result if both of the following conditions are met: (a). There is no increase in fair value of the award (or the ratio of intrinsic value to the exercise price of the award is preserved, that is, the holder is made whole), or the antidilution provision is not added to the terms of the award in contemplation of an equity restructuring; and (b). All holders of the same class of equity instruments (for example, stock options) are treated in the same manner. The provisions in this FSP shall be applied in the first reporting period beginning after the date the FSP is posted to the FASB website. The Company has adopted SP FAS No. 123(R)-5 but it did not have a material impact on its consolidated results of operations and financial condition. There were no options granted in the year ended May 31, 2008 and 2007 and all options previously granted have been fully vested and therefore there is no pro forma effect for the year then ended. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model. The Company accounts for stock awards issued to nonemployees in accordance with the provisions of SFAS No. 123 and 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 . Under SFAS No. 123 and EITF 96-18, stock awards to nonemployees are accounted for at their fair value as determined under Black-Scholes option pricing model. * * * * * * ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. Resignation of Previous Auditor . By letter dated September 6, 2007, Robert G. Jeffrey, C.P.A. (“Jeffrey”), the former auditor and accountant of SportsQuest, Inc. (formerly known as Air Brook Airport Express, Inc.) (the “Company”), resigned, effective August 16, 2007. The report of Jeffrey on the Company’s financial statements for the years ended October 31, 2006 and 2005 did not contain an adverse opinion or disclaimer of opinion and was not modified as to uncertainty, audit scope or accounting principles. The decision to change accountants was not recommended or approved by the board of directors or audit committee of the board of directors. During the 2005 and 2006 fiscal years and the interim period from November 1, 2006 through August 16, 2007, there were no disagreements with Jeffrey, whether or not resolved, on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which, if not resolved to Jeffrey’s satisfaction, would have caused him to make reference to the subject matter of the disagreement in connection with his audit report. During the same period, there were no other events, as described in Item 304(a)(1)(iv)(B) of Regulation S-B. Appointment of New Auditor . On September 7, 2007, the Company engaged Raiche Ende Malter & Co. LLP (the “First New Auditor”) as its independent registered public accounting firm for the Company’s fiscal year ended October 31, 2007. The decision to engage the New Auditor as the Company’s independent registered public accounting firm was approved by the Company’s board of directors. The Company did not consult with the First New Auditor, during either of the years ended October 31, 2006 and 2005 or the interim period from November 1, 2006 to September 7, 2007, regarding either the application of accounting principles to a specified transaction, either completed or contemplated, or the type of audit opinion that might be rendered on the Company’s financial statements, or any other matter or event described in Item 304(a)(2)(i) or (ii) of Regulation S-B. The Company did not have the First new Auditor review any quarterly or annual financial statements. 27 On February, 2007, dismissed Raiche Ende Malter & Co. LLP and retained Gately & Associates, LLC. (the Second new Auditor”) as its independent registered public accounting firm for the Company’s fiscal year ended October 31, 2007. The decision to engage the Second New Auditor as the Company’s independent registered public accounting firm was approved by the Company’s board of directors. The Company has not consulted with the Second New Auditor, during either of the years ended October 31, 2006 and 2005 or the interim period from November 1, 2006 to September 9, 2007, regarding either the application of accounting principles to a specified transaction, either completed or contemplated, or the type of audit opinion that might be rendered on the Company’s financial statements, or any other matter or event described in Item 304(a)(2)(i) or (ii) of Regulation S-B. On September 8, 2008, Kramer Wiseman and Associates, LLP ("KWA") was appointed as the independent auditor for SportsQuest, Inc. (the "Company") commencing with the year ending May 31, 2008, and Gately & Associates, LLC. ("Gately") were dismissed as the independent auditors for the Company as of September 8, 2008. The decision to change auditors was approved by the Board of Directors on September 8, 2008. The report of Gately on the financial statements for either of the one most recent completed fiscal years did not contain any adverse opinion or disclaimer of opinion or was qualified or modified as to uncertainty, audit scope or accounting principles, except for the following: “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 accumulation of losses and shortage of capital raise substantial doubt about its ability to continue as a going concern. Management's plans concerning these matters are also described in Note 3. The financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should the Company be unable to continue as a going concern. During the Company's one most recent interim quarter April 30, 2008, January 31, 2008, and annual report October 31, 2007, there were no disagreements with Gately on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreement, if not resolved to the satisfaction of Gately, would have caused it to make reference to the subject matter of the disagreements in connection with its report with respect to the financial statements of the Company. During the Company's one most recent interim quarter April 30, 2008, January 31, 2008, and annual report October 31, 2007, there were no "reportable events" as such term is described in Item 304(a)(1)(v) of Regulation S-B under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), with respect to the Company. During the Company's one most recent interim quarter April 30, 2008, January 31, 2008, and annual report October 31, 2007, the Company did not consult with KWA with respect to the Company regarding (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company’s financial statements, (ii) any matter that was either the subject of a disagreement (as defined in Item 304(a)(1)(iv) of Regulation S-B under the Exchange Act and the related instructions to Item 304 of Regulation S-B) or a "reportable event" (as such term is described in Item 304(a)(1)(v) of Regulation S-B), or (iii) any of the matters or events set forth in Item 304(a)(2)(i) and (ii) of Regulation S-B. 28 The Company has furnished a copy of this Report to Gately and requested them to furnish the Company with a letter addressed to the Securities and Exchange Commission stating whether it agrees with the statements made by the Company herein in response to Item 304(a) of Regulation S-K and, if not, stating the respects in which it does not agree. The letter from Gately will be submitted when received with an amended filing.