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**UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549**___________________**FORM 10-KSB**_________________________________

ý                                **ANNUAL REPORT PURSUANTTO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

  

For the fiscal year ended June 30,2006

  

or

  

** ̈                     TRANSITION REPORT PURSUANT TO SECTION13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

For The Transition PeriodFrom  ___________ To ___________ Commission File No.: 0-27511

**PEREGRINEINDUSTRIES, INC.**(Exact Name Of RegistrantAs Specified In Its Charter)
| Florida                                           | 65-0611007                              |
|---------------------------------------------------|-----------------------------------------|
| (State of Incorporation)                          | (I.R.S. Employer    Identification No.) |
|                                              |                                    |
| 115    East 57th Street, Suite 1118, New York, NY | 10022                                   |
| (Address of Principal    Executive Offices)       | (ZIP Code)                              |

Registrant'sTelephone Number, Including Area Code: (646) 202-9679

**SecuritiesRegistered Pursuant to Section 12(g) of The Act: Common Stock, $0.0001**

Indicate by checkmark whether the registrant (1) has filed all reports required to be filed by Section 13or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or forsuch shorter period that the registrant was required to file such reports), and (2) hasbeen subject to such filing requirements for the past 90 days. Yes x No  ̈Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 ofRegulation S-K is not contained herein, and will not be contained, to the best of theregistrant's knowledge, in the definitive proxy or information statements incorporated byreference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. x

Issuer's revenuesfor its most recent fiscal year: none

At June 30, 2006,the aggregate market value of the 3,625,833 voting common stock held by non-affiliates ofthe registrant was approximately $271,937 based on the average bid and asked price of theRegistrants common stock on June 30, 2006. At June 30, 2006, the Registrant had 45,920,000 shares of common stock outstanding.

Indicate by check mark whether the registrant is a shellcompany (as defined in Rule 12b-2 of the Exchange Act). Yes x No  ̈

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TABLE OF CONTENTS
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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              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|      **PART I**  
ITEM 1.
            
   DESCRIPTION    OF BUSINESS
        3  
ITEM 2.
            
   DESCRIPTION    OF PROPERTY
        8   
ITEM 3.
            
   LEGAL    PROCEEDINGS
        8   
ITEM 4.
            
   SUBMISSION OF    MATTERS TO A VOTE OF SECURITY HOLDERS
        8   
  **PART II**   

ITEM 5.
            
   MARKET    FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
        9  
ITEM 6.
            
   MANAGEMENT'S    DISCUSSION AND ANALYSIS AND PLAN OF OPERATION
        9   
ITEM 7.
            
   FINANCIAL    STATEMENTS
        10   
ITEM 8.
            
   CHANGES    IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
        10   
ITEM 8.A
            
   CONTROLS AND PROCEDURES
        10   
  **PART III**   

ITEM 9.
            
   DIRECTORS    AND EXECUTIVE OFFICERS OF THE REGISTRANT, COMPLIANCE WITH SECTION 16(A)
        11  
ITEM 10.
            
   EXECUTIVE COMPENSATION
        11   
ITEM 11.
            
   SECURITY    OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
        12   
ITEM 12.
            
   CERTAIN RELATIONSHIPS    AND RELATED TRANSACTIONS
        13   
ITEM 13.
            
   EXHIBITS AND    REPORTS ON FORM 8-K
        13   
ITEM 14.
            
   PRINCIPAL    ACCOUNTING FEES AND SERVICES
        13   ****
**PART I**

**ITEM 1. DESCRIPTION OF BUSINESS**Back toTable of Contents

Some of the statements contained in this Form 10-KSB ofPeregrine Industries, Inc. (hereinafter the "Company", "We" or the"Registrant") discuss future expectations, contain projections of our plan ofoperation or financial condition or state other forward-looking information. In thisregistration statement, forward-looking statements are generally identified by the wordssuch as "anticipate", "plan", "believe", "expect","estimate", and the like. Forward-looking statements involve future risks anduncertainties, there are factors that could cause actual results or plans to differmaterially from those expressed or implied. These statements are subject to known andunknown risks, uncertainties, and other factors that could cause the actual results todiffer materially from those contemplated by the statements. The forward-lookinginformation is based on various factors and is derived using numerous assumptions. Areader, whether investing in the Company's securities or not, should not place unduereliance on these forward-looking statements, which apply only as of the date of thisAnnual Report. Important factors that may cause actual results to differ from projectionsinclude, for example: 
**-**the success or failure of management's efforts    to implement the Registrant's plan of operation; **-**the ability of the Registrant to fund its    operating expenses; **-**the ability of the Registrant to compete with    other companies that have a similar plan of operation; **-**the effect of changing economic conditions    impacting our plan of operation; **-**the ability of the Registrant to meet the    other risks as may be described in future filings with the SEC. 
**OrganizationalHistory and General Background of the Registrant**

The Company was incorporated in Floridain 1995 for the purpose of designing and manufacturing heat pump pool heaters, residentialair conditioners and parallel flow coils for the heating, ventilation and air conditioningindustry. In June 2002, the Registrant and its subsidiaries filed a petition for Reliefand Reorganization under Chapter 11 of the Bankruptcy Code in the U.S. Bankruptcy Courtfor the Southern District of Florida (case no. 02-24188). In September 2002, thebankruptcy proceeding was converted to Chapter 7. As a result of the conversion to Chapter7, the Registrant's assets were transferred to a United States Trustee on September 4,2002 and the Registrant terminated its former business operations.

Inconnection with the order of the U.S. Bankruptcy Court dated March 15, 2004, the Courtauthorized that Park Avenue Group appoint a new board of directors and authorized theissuance of restricted shares to the new management of the Registrant. The issuance ofrestricted shares to the Registrant's new management effectively resulted in a change incontrol of the Registrant. The shareholders of the Registrant prior to the bankruptcyproceedings remained shareholders of the Registrant subsequent to the emergence of theRegistrant from bankruptcy. The Court order further provided that Registrant emerged frombankruptcy free and clear of liens, claims and interests. The court order authorized (i)that the existing officers and directors were deemed removed from office; (ii) theappointment of new members to the Registrant's board of directors; (iii) the amendment ofRegistrant's Article of Incorporation to increase the number of authorized shares to100,000,000 shares; (iv) the issuance up to 30,000,000 shares of common stock, par value$0.0001, to the new management of the Registrant, which management was appointed by thenewly-constituted board of directors; (v) the authority of the board of directors toimplement a reverse split of the issued and outstanding shares in a ratio to be determinedby the board of directors; (vi) the cancellation and extinguishment of all common shareconversion rights of any kind, including without limitation, warrants, options,convertible bonds, other convertible debt instruments and convertible preferred stock; and(vii) the cancellation and extinguishment of all preferred shares of every series andaccompanying conversion rights of any kind.

**Business Objectives of the Registrant**

Asa result of the bankruptcy proceeding, the Registrant has no present operations.Management determined to direct its efforts and limited resources to pursue and effect abusiness combination.

    *Currenttrends*

Management believes that asa result of the relative uncertainty in the United States equity markets over the past fewyears, many privately-held companies have been closed off from the public market andtraditional IPO's. During the past few years, many privately-held or public companiesattempted to divest non-core assets and divisions and valuations of these assets anddivisions have decreased significantly. Therefore, Management believes that there aresubstantial business opportunities to effect attractive acquisitions. As a public entitywith its shares of common stock registered under the Exchange Act and publicly trading,Management believes to be well positioned to identify target acquisitions and to effect abusiness combination in order to take advantage of these current trends.

    *Effecting a business combination*

Prospective investors in theCompany's common stock will invest in the Company without an opportunity to evaluate thespecific merits or risks of any one or more business combinations. A business combinationmay involve the acquisition of, or merger with, a company which needs to raise substantialadditional capital by means of being a publicly trading company, while avoiding what itmay deem to be adverse consequences of undertaking a public offering itself. These includetime delays, significant expense, loss of voting control and compliance with variousFederal and state securities laws. A business combination may involve a company which maybe financially unstable or in its early stages of development or growth.

*    TheRegistrant has not identified a target business or target industry*

The Company's effort inidentifying a prospective target business will not be limited to a particular industry andthe Company may ultimately acquire a business in any industry Management deemsappropriate. To date, the Company has not selected any target business on which toconcentrate our search for a business combination. While the Company intends to focus ontarget businesses in the United States, we are not limited to those entities and mayconsummate a business combination with a target business outside of the United States.Accordingly, there is no basis for investors in the Company's common stock to evaluate thepossible merits or risks of the target business or the particular industry in which we mayultimately operate. To the extent we effect a business combination with a financiallyunstable company or an entity in its early stage of development or growth, includingentities without established records of sales or earnings, we may be affected by numerousrisks inherent in the business and operations of financially unstable and early stage orpotential emerging growth companies. In addition, to the extent that we effect a businesscombination with an entity in an industry characterized by a high level of risk, we may beaffected by the currently unascertainable risks of that industry. An extremely high levelof risk frequently characterizes many industries which experience rapid growth. Inaddition, although the Company's Management will endeavor to evaluate the risks inherentin a particular industry or target business, we cannot assure you that we will properlyascertain or assess all significant risk factors.

    Sourcesof target businesses

The Registrant anticipatesthat target business candidates will be brought to our attention from various unaffiliatedsources, including securities broker-dealers, investment bankers, venture capitalists,bankers and other members of the financial community, who may present solicited orunsolicited proposals. Our Management may also bring to our attention target businesscandidates. While we do not presently anticipate engaging the services of professionalfirms that specialize in business acquisitions on any formal basis, we may engage thesefirms in the future, in which event we may pay a finder's fee or other compensation. In noevent, however, will we pay Management any finder's fee or other compensation for servicesrendered to us prior to or in connection with the consummation of a business combination.

    *Selectionof a target business and structuring of a business combination*

Management owns 43.5% of theissued and outstanding shares and will have broad flexibility in identifying and selectinga prospective target business. In evaluating a prospective target business, our Managementwill consider, among other factors, the following:

- financial condition and results of operation of the target company;- growth potential;- experience and skill of management and availability of additional personnel;- capital requirements;- competitive position;- stage of development of the products, processes or services;- degree of current or potential market acceptance of the products, processes or services;- proprietary features and degree of intellectual property or other protection of theproducts, processes or services;- regulatory environment of the industry; and- costs associated with effecting the business combination.

These criteria are notintended to be exhaustive. Any evaluation relating to the merits of a particular businesscombination will be based, to the extent relevant, on the above factors as well as otherconsiderations deemed relevant by our Management in effecting a business combinationconsistent with our business objective. In evaluating a prospective target business, wewill conduct a due diligence review which will encompass, among other things, meetingswith incumbent management and inspection of facilities, as well as review of financial andother information which will be made available to us.

We will endeavor tostructure a business combination so as to achieve the most favorable tax treatment to us,the target business and both companies' stockholders. We cannot assure you, however, thatthe Internal Revenue Service or appropriate state tax authority will agree with our taxtreatment of the business combination. 

The time and costs requiredto select and evaluate a target business and to structure and complete the businesscombination cannot presently be ascertained with any degree of certainty. Any costsincurred with respect to the identification and evaluation of a prospective targetbusiness with which a business combination is not ultimately completed will result in aloss to us.

    *Probablelack of business diversification*

We may seek to effectbusiness combinations with more than one target business, it is probable that we will havethe ability to effect only a single business combination. Accordingly, the prospects forour success may be entirely dependent upon the future performance of a single business.Unlike other entities which may have the resources to complete several businesscombinations of entities operating in multiple industries or multiple areas of a singleindustry, it is probable that we will not have the resources to diversify our operationsor benefit from the possible spreading of risks or offsetting of losses. By consummating abusiness combination with only a single entity, our lack of diversification may:

- subject us to numerouseconomic, competitive and regulatory developments, any or all of which may have asubstantial adverse impact upon the particular industry in which we may operate subsequentto a business combination, and- result in our dependency upon the development or market acceptance of a single orlimited number of products, processes or services.

   *Limitedability to evaluate the target business' management*

Although we intend toclosely scrutinize the management of a prospective target business when evaluating thedesirability of effecting a business combination, we cannot assure you that our assessmentof the target business' management will prove to be correct. In addition, we cannot assureyou that the future management will have the necessary skills, qualifications or abilitiesto manage a public company intending to embark on a program of business development.Furthermore, the future role of our directors, if any, in the target business cannotpresently be stated with any certainty. While it is possible that one or more of ourdirectors will remain associated in some capacity with us following a businesscombination, it is unlikely that any of them will devote their full efforts to our affairssubsequent to a business combination. Moreover, we cannot assure you that our directorswill have significant experience or knowledge relating to the operations of the particulartarget business. 

Following a businesscombination, we may seek to recruit additional managers to supplement the incumbentmanagement of the target business. We cannot assure you that we will have the ability torecruit additional managers, or that additional managers will have the requisite skills,knowledge or experience necessary to enhance the incumbent management. 

Competition

In identifying, evaluatingand selecting a target business, we expect to encounter intense competition from otherentities having a business objective similar to ours. Many of these entities are wellestablished and have extensive experience identifying and effecting business combinationsdirectly or through affiliates. Many of these competitors possess greater technical, humanand other resources than us and our financial resources will be relatively limited whencontrasted with those of many of these competitors. While we believe there are numerouspotential target businesses, our ability to compete in acquiring certain sizable targetbusinesses will be limited by our limited financial resources. This inherent competitivelimitation gives others an advantage in pursuing the acquisition of a target business.Further, any of these obligations may place us at a competitive disadvantage insuccessfully negotiating a business combination. Our management believes, however, thatour status as a public entity and potential access to the United States public equitymarkets may give us a competitive advantage over privately-held entities having a similarbusiness objective as us in acquiring a target business with significant growth potentialon favorable terms. 

If we succeed in effecting abusiness combination, there will be, in all likelihood, intense competition fromcompetitors of the target business. In particular, certain industries which experiencerapid growth frequently attract an increasingly larger number of competitors, includingcompetitors with increasingly greater financial, marketing, technical and other resourcesthan the initial competitors in the industry. The degree of competition characterizing theindustry of any prospective target business cannot presently be ascertained. We cannotassure you that, subsequent to a business combination, we will have the resources tocompete effectively, especially to the extent that the target business is in a high-growthindustry.

Employees

Mr. Rubin, our CEO and CFO,and Mr. Craft, our president, are our sole executive officers. Messrs. Rubin and Craft are not obligated to contribute any specific number of hours per week andintend to devote only as much time as they deem necessary to the Company's affairs. Theamount of time they will devote in any time period will vary based on the availability ofsuitable target businesses to investigate. We do not intend to have any full timeemployees prior to the consummation of a business combination.

RISK FACTORS

FORWARD-LOOKING STATEMENTSThis Form 10-KSB contains forward-looking statements that are based on currentexpectations, estimates, forecasts and projections about us, our future performance, themarket in which we operate, our beliefs and our management's assumptions. In addition,other written or oral statements that constitute forward-looking statements may be made byus or on our behalf. Words such as "expects", "anticipates","targets", "goals", "projects", "intends","plans", "believes", "seeks", "estimates",variations of such words and similar expressions are intended to identify suchforward-looking statements. These statements are not guarantees of future performance andinvolve certain risks, uncertainties and assumptions that are difficult to predict orassess. Therefore, actual outcomes and results may differ materially from what isexpressed or forecast in such forward-looking statements.

DEPENDENCE ON KEY PERSONNELThe Registrant is dependent upon the continued services of its officers and directors.To the extent that their services become unavailable, the Registrant will be required toobtain other qualified personnel and there can be no assurance that it will be able torecruit and hire qualified persons upon acceptable terms.

LIMITED RESOURCES; NO PRESENT SOURCE OFREVENUES.At present, we have limited business operations and our business activities are limited toseeking potential business opportunities. Due to our limited financial and personnelresources, there is only a limited basis upon which to evaluate our prospects forachieving our intended business objectives. We have only limited resources and have nooperating income, revenues or cash flow from operations. Our Management or a related partyis providing us with limited funding, on an as needed basis, necessary for us tocontinue our corporate existence and our business objective to seek new businessopportunities, as well as funding the costs, including professional accounting fees, inorder to continue to be a reporting company under the Exchange Act. We have no writtenagreement with our Management or related parties to provide any interim financing for anyperiod. In addition, we will not generate any revenues unless and until we enterinto a new business, of which there can be no assurance.

BROAD DISCRETION OF MANAGEMENTAny person who invests in our securities will do so without an opportunity to evaluate thespecific merits or risks of any potential new prospective business in which we may engage.As a result, investors will be entirely dependent on the broad discretion and judgment ofManagement in connection with the selection of a prospective business. There can be noassurance that determinations made by our Management will permit us to achieve ourbusiness objectives.

ABSENCE OF SUBSTANTIVE DISCLOSURE RELATING TO PROSPECTIVE BUSINESS We have not yet identified any prospective business or industry in which we may seek tobecome involved and at present we have no information concerning any prospectivebusiness. There can be no assurance that any prospective business opportunity will benefitshareholders or prove to be more favorable to shareholders than any other investment thatmay be made by shareholders and investors.

THERE IS NO LIQUID MARKET FOR OUR COMMON STOCK AND NONE MAY DEVELOP OR BESUSTAINEDThe Registrant's common stock is subject to quotation on the NASDAQ Bulletin Board underthe symbol HVAC. There is currently no liquid trading market in our common stock. Therecan be no assurance that there will be a liquid trading market for our common stockfollowing commencement of a new business. In the event that a liquid trading marketcommences, there can be no assurance as to the market price of our shares of common stock,whether any trading market will provide sufficient liquidity to investors, or whether anytrading market will be sustained.

UNSPECIFIED INDUSTRY FOR NEW PROSPECTIVE BUSINESS OPPORTUNITIES; UNASCERTAINABLERISKSThere is no basis for shareholders to evaluate the possible merits or risks of potentialnew business opportunities or the particular industry in which we may ultimately operate.To the extent that we effect a business combination with a financially unstable entity oran entity that is in its early stage of development or growth, including entities withoutestablished records of revenues or income, we will become subject to numerous risksinherent in the business and operations of that financially unstable company. In addition,to the extent that we effect a business combination with an entity in an industrycharacterized by a high degree of risk, we will become subject to the currentlyunascertainable risks of that industry. A high level of risk frequently characterizescertain industries that experience rapid growth. Although Management will endeavor toevaluate the risks inherent in a particular new prospective business or industry, therecan be no assurance that we will properly ascertain or assess all such risks or thatsubsequent events may not alter the risks that we perceive at the time of the consummationof any new business opportunity.

CONFLICTS OF INTERESTOur Management is not required to commit their fulltime to our affairs. There may be a conflict of interest in allocating their time in theevent that Management engages in similar business efforts for other entities. OurManagement will devote such time, in their sole discretion, to conduct our business,including the evaluation of potential new business opportunities. As a result, the amountof time devoted to our business and affairs may vary significantly depending upon whetherwe have identified a new prospective business opportunity or are engaged in activenegotiations related to a new business. In the event that a conflict of interest shallarise, Management will consider factors such as availability of audited financialstatements, current capitalization and the laws of jurisdictions. If several businessopportunities or operating entities approach Management with respect to a businesscombination, Management will consider the foregoing factors as well as the preferences ofthe Management. However, Management will act in what they believe will be in the bestinterests of the shareholders of the Registrant. The Registrant shall not enter into atransaction with a target business that is affiliated with Management.

COMPETITIONWe expect to encounter intense competition from other entities seeking to pursue newbusiness opportunities. Many of these entities are well-established and haveextensive experience in identifying new prospective business opportunities. Many of thesecompetitors possess greater financial, technical, human and other resources than we do andthere can be no assurance that we will have the ability to compete successfully. Basedupon our limited financial and personnel resources, we may lack the resources as comparedto those of many of our potential competitors.

ADDITIONAL FINANCING REQUIREMENTSWe have no revenues and are dependent upon the willingness of Management or relatedparties to fund the costs associated with the reporting obligations under the ExchangeAct, and other administrative costs associated with our corporate existence. As ofthe date of this filing, the Registrant has paid for general and administrative expenses,including accounting fees, reinstatement fees, and other professional fees related to thepreparation and filing of reports under the Exchange Act. We may not generate any revenuesunless and until the commencement of new business operations. We believe that we will havesufficient funds available to pay accounting and professional fees and other expenses tofulfill our reporting obligations under the Exchange Act until we commence businessoperations. In the event that our available funds from our Management or affiliates proveto be insufficient, we will be required to seek additional financing. Our failure tosecure additional financing could have a material adverse affect on our ability to pay theaccounting and other fees in order to continue to fulfill our reporting obligations andpursue our business plan. We do not have any arrangements with any bank or financialinstitution to secure additional financing and there can be no assurance that any sucharrangement would be available on terms acceptable and in our best interests. We do nothave any written agreement with our affiliates to provide funds for our operatingexpenses.

STATE BLUE SKY REGISTRATION; POTENTIAL LIMITATIONS ON RESALE OF THE SECURITIESThe holders of our shares of common stock and those persons who desire to purchase them inany trading market that might develop, should be aware that there may be state blue-skylaw restrictions upon the ability of investors to resell our securities. Accordingly,investors should consider the secondary market for the Registrant's securities to be alimited one.

It is the present intention of theRegistrant's management after the commencement of new business operations to seek coverageand publication of information regarding the Registrant in an accepted publication manualwhich permits a manual exemption. The manual exemption permits a security to bedistributed in a particular state without being registered if the Registrant issuing thesecurity has a listing for that security in a securities manual recognized by the state.However, it is not enough for the security to be listed in a recognized manual. Thelisting entry must contain (1) the names of issuer's officers, and directors, (2) anissuer's balance sheet, and (3) a profit and loss statement for either the fiscal yearpreceding the balance sheet or for the most recent fiscal year of operations. Furthermore,the manual exemption is a nonissuer exemption restricted to secondary tradingtransactions, making it unavailable for issuers selling newly issued securities.

Most of the accepted manualsare those published in Standard and Poor's, Moody's Investor Service, Fitch's InvestmentService, and Best's Insurance Reports, and many states expressly recognize these manuals.A smaller number of states declare that they "recognize securities manuals" butdo not specify the recognized manuals. The following states do not have any provisions andtherefore do not expressly recognize the manual exemption: Alabama, Georgia, Illinois,Kentucky, Louisiana, Montana, South Dakota, Tennessee, Vermont and Wisconsin.

DIVIDENDS UNLIKELYWe do not expect to pay dividends for the foreseeable future because we have no revenues.The payment of dividends will be contingent upon our future revenues and earnings, if any,capital requirements and overall financial condition. The payment of any future dividendswill be within the discretion of our board of directors. It is our expectation that afterthe commencement of new business operations that future management will determine toretain any earnings for use in business operations and accordingly, we do not anticipatedeclaring any dividends in the foreseeable future.

POSSIBLE ISSUANCE OF ADDITIONAL SECURITIESOur Articles of Incorporation, as amended, authorize the issuance of 100,000,000 shares ofcommon stock, par value $0.0001. As of June 30, 2006, we had 45,920,000 shares issued andoutstanding. We may be expected to issue additional shares in connection with our pursuitof new business opportunities and new business operations. To the extent that additionalshares of common stock are issued, our shareholders would experience dilution of theirrespective ownership interests. If we issue shares of common stock in connection with ourintent to pursue new business opportunities, a change in control of the Registrant may beexpected to occur. The issuance of additional shares of common stock may adversely affectthe market price of our common stock, in the event that an active trading marketcommences.  

COMPLIANCE WITH PENNY STOCK RULESOur securities will be considered a "penny stock" as defined in theExchange Act and the rules thereunder, unless the price of our shares of common stock isat least $5.00. We expect that our share price will be less than $5.00. Unless our commonstock is otherwise excluded from the definition of "penny stock", the pennystock rules apply. The penny stock rules require a broker-dealer, prior to a transactionin penny stock not otherwise exempt from the rules, to deliver a standardized riskdisclosure document that provides information about penny stocks and the nature and levelof risks in the penny stock market. The broker-dealer also must provide the customer withcurrent bid and offer quotations for the penny stock, the compensation of thebroker-dealer and its sales person in the transaction, and monthly account statementsshowing the market value of each penny stock held in the customer's account. In addition,the penny stock rules require that the broker-dealer, not otherwise exempt from suchrules, must make a special written determination that the penny stock is suitable for thepurchaser and receive the purchaser's written agreement to the transaction. Thesedisclosure rules have the effect of reducing the level of trading activity in thesecondary market for a stock that becomes subject to the penny stock rules. So long as thecommon stock is subject to the penny stock rules, it may become more difficult to sellsuch securities. Such requirements could limit the level of trading activity for ourcommon stock and could make it more difficult for investors to sell our common stock. 

GENERAL ECONOMIC RISKSThe Registrant's current and future business plans are dependent, in large part, on thestate of the general economy. Changes in economic conditions may adversely affect our planof operation.

**ITEM 2.DESCRIPTION OF PROPERTIES**Back to Table of Contents

The Registrant's corporate officeis located at the offices of Park Avenue Group, Inc., 115 East 57th Street, 11th Floor,New York, NY 10022. These facilities consist of approximately 300 square feet of executiveoffice space and are leased from Park Avenue Group, Inc., an affiliated party. TheRegistrant believes that the office facilities are sufficient for the foreseeable futureand this arrangement will remain until we find a new business opportunity or consummate abusiness combination. 

**ITEM 3. LEGAL PROCEEDING**Back toTable of Contents

The Registrant's officers and directors are not aware of anythreatened or pending litigation to which the Registrant is a party or which any of itsproperty is the subject and which would have any material, adverse effect on theRegistrant.

**ITEM4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS**Back toTable of Contents

During the year ended June 30, 2006, no matters weresubmitted to a vote of our security holders.

**PART II**

**ITEM 5.MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTER**Back toTable of Contents

(a) Market Price InformationOurcommon stock is currently quoted on the NASD Bulletin Board under the symbol HVAC, anNASD-sponsored and operated inter-dealer automated quotation system for equity securitiesnot included on The Nasdaq Stock Market. Quotation of the Company's securities on the NASDBulletin Board limits the liquidity and price of the Company's common stock more than ifthe Company's shares of common stock were listed on The Nasdaq Stock Market or a nationalexchange.For the periods indicated, the following table sets forth the high and low bidprices per share of common stock. The below prices represent inter-dealer quotationswithout retail markup, markdown, or commission and may not necessarily represent actualtransactions.

Fiscal 2006

Fiscal 2005

Fiscal 2004

High

Low

High

Low

High

Low

First Quarter ended September 30

$

0.30

$

0.0001

$

0.0001

$

0.0001

$

0.0001

 

$

0.0001

Second Quarter ended December 31

$

0.10

$

0.08

$

0.0001

$

0.0001

$

0.0001

 

$

0.0001

Third Quarter ended March 31

$

0.10

$

0.05

$

0.0001

$

0.0001

$

0.0001

$

0.0001

Fourth Quarter ended June 30
$
0.10
$
0.05

$

0.0001

$

0.0001

$

0.0001

$

0.0001

(b) As of June 30,2006, our shares of common stock were held by approximately 180 stockholders. The transferagent of our common stock is Florida Atlantic Stock Transfer, Inc. 

(c) DividendsWe currently do not pay cash dividends on our common stock and have no plans to reinstatea dividend on our common stock.

(d) Sale of UnregisteredSecuritiesThe Registrant has not issued any restricted shares of common stock during the fourthquarter 2006.

(e) Equity Compensation PlansWe have no equity compensation plans.

**ITEM 6.MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION**Back toTable of Contents

The following discussion containsforward-looking statements. Forward-looking statements give our current expectations orforecasts of future events. You can identify these statements by the fact that they do notrelate strictly to historical or current facts. They use of words such as"anticipate", "estimate", "expect", "project","intend", "plan", "believe", and other words and terms ofsimilar meaning in connection with any discussion of future operating or financialperformance. From time to time, we also may provide forward-looking statements in othermaterials we release to the public.

OverviewOur current activities are related to seeking a new business opportunities. We willuse our limited personnel and financial resources in connection with such activities. Itmay be expected that pursuing a new business opportunity will involve the issuance ofrestricted shares of common stock. At June 30, 2006, we had no cash assets and the Companyhad current liabilities of $81,304. 

Liquidity and Capital Resources

During the fiscal period ended June 30,2006, we received funds through advances made to us by a related party. While we aredependent upon interim funding provided by such related party or by management to payprofessional fees and expenses, we have no written finance agreement with management toprovide any continued funding. Through the date of this filing, a related party and/ormanagement provided funding for our plan of operation which funds were used for generaladministrative expenses and accounting fees.

Aspart of our intent to seek new business opportunities, we may determine to seek to raisefunds from the sale of equity or debt securities.We have no agreements to issue any debtor equity securities and cannot predict whether equity or debt financing will becomeavailable at terms acceptable to us, if at all.

We anticipate that in connection withthe commencement of a new business opportunity or consummation of a business combination,we will issue a substantial number of additional restricted shares or other securities. Ifsuch additional securities are issued, our shareholders will experience a dilution intheir ownership interest in the Company. If a substantial number of shares are issued inconnection with a business combination, a change in control may be expected to occur.

Thereare no limitations in our articles of incorporation on our ability to borrow funds orraise funds through the issuance of restricted common stock to pursue new businessopportunities. Our limited resources and lack of operating history may make it difficultto do borrow funds or raise capital. Our inability to borrow funds or raise funds throughthe issuance of restricted common stock required to facilitate new business opportunitiesmay have a material adverse effect on our financial condition and future prospects. To theextent that debt financing ultimately proves to be available, any borrowing will subjectus to various risks traditionally associated with indebtedness, including the risks ofinterest rate fluctuations and insufficiency of cash flow to pay principal and interest.

**ITEM7. FINANCIAL STATEMENTS**Back to Table of Contents

The Registrant's audited financial statements for thefiscal years ended June 30, 2006 and 2005 are attached to this annual report.

Financial Statements

**ITEM8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIALDISCLOSURE**Back to Table of Contents

None.

**ITEM 8A. CONTROLS AND PROCEDURES**Back toTable of Contents
*Evaluation of disclosure controls and procedures.As of June 30, 2006, the Company's chief executive officerand chief financial officer conducted an evaluation regarding the effectiveness of theCompany'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 disclosurecontrols and procedures were effective as of the end of the period covered by this report.

*Changes in internal controls*. During the period covered by this report, no changes occurred inour internal control over financial reporting that materially affected, or is reasonablylikely to materially affect, our internal control over financial reporting.

**PART III**

**ITEM9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT, COMPLIANCE WITH SECTION 16(A)**Back to Table of Contents

The following tablesets forth the names and ages of the members of our Board of Directors and our executiveofficers and the positions held by each.
**Name**
**Age****Title**  **Date Became Executive    Officer**Richard Rubin  
64  CEO, CFO and Chairman03/2004Thomas J. Craft, Jr.
42President and Director03/2004
Richard Rubin, 63, CEO, CFO andchairman of the Registrant, has been an officer and a director of the Registrant sinceMarch 30, 2004.. During the last five years, Mr. Rubin has been engaged in the business ofproviding corporate securities consulting services and reorganizing distressed publiccompanies. From October 2000 until February 2002, Mr. Rubin served as an officer anddirector of PlanetLink Communications, Inc. In February 2002, Mr. Rubin also became ansecretary and a director of Nettel Holdings, a reporting company and resigned as secretaryand director in May 2003. Mr. Rubin served as a director of Jeantex Group, a reportingcompany from August 2002 to September 2003. Mr. Rubin is CEO and a director of PeregrineIndustries, Inc., a public company reporting under the Exchange Act.

Thomas J. Craft, Jr., 41, hasbeen president and a director of the Registrant since March 30, 2004. Mr. Craft is anattorney practicing law under the laws of the State of Florida, specializing in corporatesecurities law. From May 1996 through October 2001, Mr. Craft served as the secretary anda director of GlobeTel Communications, Inc. From October 2000 until February 2002 Mr.Craft served as president and a director of PlanetLink Communications, Inc. Mr. Craftbecame president and a director of Nettel Holdings in February 2002 and resigned in March2003. In November 2002, Mr. Craft became a director of American International Industries,Inc., a reporting company. Mr. Craft served as a director of Jeantex Group, areporting company, from August 2002 to September 2003.

All directors holdoffice until the next annual meeting of stockholders and until their successors have beenduly elected and qualified. Officers are appointed by the Board of Directors and eachexecutive officer serves at the discretion of the Board of Directors. We do not have anystanding committees at this time.

None of ourdirectors, officers, affiliates or promoters has, within the past five years, filed anybankruptcy petition, been convicted in or been the subject of any pending criminalproceedings, or is any such person the subject or any order, judgment or decree involvingthe violation of any state or federal securities laws.

**ITEM 10.EXECUTIVE COMPENSATION**Back to Table of Contents

The following tablesets forth information concerning the total compensation that we have paid or that hasaccrued on behalf of our chief executive officer and other executive officers with annualcompensation exceeding $100,000 during the fiscal years ending June 30, 2006 and 2005.

**Long-Term    Compensation**

**Annual    Compensation**

**Awards**

**Payouts**

**Name and Principal Position**

**Year**

**Salary    ($)**

**Bonus    ($)**

**Other    Annual Compensation ($)**

**Restricted    Stock Award(s) ($)**

**Securities    Under-lying Options/ SARs (#)**

**LTIP    Payouts ($)**

**All    other Compensation ($)**
Richard Rubin
2006
-0--0-24,000-0--0--0--0-
2005
-0--0--0--0--0--0--0-Thomas J. Craft,    Jr.
2006
-0--0-24,000-0--0--0--0-
2005
-0--0--0--0--0--0--0-
**ExecutiveEmployment Agreements**

To date, we havenot entered into any employment agreements with our executive officers. No executive compensation was paid during the fiscal years ended June 30, 2005 bythe Registrant. 

 

**TEM11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT**Back toTable of Contents

The following tablesets forth information regarding the beneficial ownership of our common stock as of June30, 2006. The information in this table provides the ownership information for: eachperson known by us to be the beneficial owner of more than 5% of our common stock; each ofour directors; each of our executive officers; and our executive officers and directors asa group.

Beneficialownership has been determined in accordance with the rules and regulations of the SEC andincludes voting or investment power with respect to the shares. Unless otherwiseindicated, the persons named in the table below have sole voting and investment power withrespect to the number of shares indicated as beneficially owned by them.
**Name of Beneficial Owner**** ****Common Stock Beneficially Owned (1)**** ****Percentage of Common Stock  Owned (1)**Richard Rubin10,000,00021.78%115 East 57th    Street, Suite 1118New York, NY 10022  Thomas J. Craft,    Jr.10,000,00021.78%11000 Prosperity    Farms RoadPalm Beach Gardens,    FL 33410  Park Avenue Group,    Inc.1,600,0003.48%115 East 57th    Street, Suite 1118New York, NY 10022  Ivo Heiden10,000,00021.78%115 East 57th    Street, Suite 1118New York, NY 10022  Merrill and Debra    Yarbrough, JTTEN8,731,66719.01%2905 Via NapoliDeerfield Beach, FL    33442All Directors and    Executive Officers as a Group (2 people)21,600,00047.04%
(1) Applicablepercentage ownership is based on 45,920,000 shares of common stock outstanding as of June30, 2006. Beneficial ownership is determined in accordance with the rules of theSecurities and Exchange Commission and generally includes voting or investment power withrespect to securities. Shares of common stock that are currently exercisable orexercisable within 60 days of June 30, 2006 are deemed to be beneficially owned by theperson holding such securities for the purpose of computing the percentage of ownership ofsuch person, but are not treated as outstanding for the purpose of computing thepercentage ownership of any other person.

**ITEM 12. CERTAINRELATIONSHIPS AND RELATED TRANSACTIONS**Back to Table of Contents

Duringthe last two fiscal years, to the knowledge of the Registrant, there was no person who hador has a direct or indirect material interest in any transaction or proposed transactionto which the Registrant was or is a party. Transactions in this context relate to anytransaction which exceeds $60,000.

**ITEM13. EXHIBITS AND REPORTS ON FORM 8-K**Back to Table of Contents

(a) The following documents are filed as exhibits tothis report on Form 10-KSB or incorporated by reference herein. Any document incorporatedby reference is identified by a parenthetical reference to the SEC filing that includedsuch document.

Exhibit    No.Description31.1Certification of CEO an CFO    pursuant to Rule 13a-14(a) or 15d-14(a) of the Exchange Act pursuant to Section 302 of the    Sarbanes-Oxley Act of 2002.32.1Certification of CEO and CFO    pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the    Sarbanes-Oxley Act of 2002.
(b) Reports on Form 8-K During the Last Quarter of the Fiscal YearCovered by this Report:

The Registrant did not file a Form 8-K during the last quarter of thefiscal year covered by this annual report.

**ITEM 14. PRINCIPAL ACCOUNTING FEESAND SERVICES**Back to Table of Contents

Independent PublicAccountantsThe Registrant's Board of Directors has appointed Michael F. Cronin, CPA as independentpublic accountant for the fiscal year ended June 30, 2006 and June 30, 2005.

 

Principal Accounting FeesThe following table presents the fees for professional audit services rendered by MichaelF. Cronin, CPA for the audit of the Registrant's annual financial statements for the yearsended June 30, 2006 and 2005, and fees billed for other services rendered by Michael F.Cronin, CPA during those periods. 

  

**Year Ended ****June 30,  2006****June 30, 2005**
Audit fees (1)$ 4,000   $ 4,000
Audit-related fees (2)  -      - 
All other fees   -      - (1) Audit fees consist of    audit and review services, consents and review of documents filed with the SEC. (2) Audit-related fees    consist of assistance and discussion concerning financial accounting and reporting    standards and other accounting issues. 
Code of Ethics The Corporation has adopted a Code of Ethics that are designed to deter wrongdoing and topromote honest and ethical conduct, full, fair, accurate, timely and understandabledisclosure in the Registrant's SEC reports and other public communications. The Code ofEthics promotes compliance with applicable governmental laws, rules and regulations. 

 
**Section16(a) ComplianceSection 16(a) of the Securities and Exchange Act of 1934 requires the Registrant'sdirectors and executive officers, and persons who own beneficially more than ten percent(10%) of the Registrant's Common Stock, to file reports of ownership and changes ofownership with the Securities and Exchange Commission. Copies of all filed reports arerequired to be furnished to the Registrant pursuant to Section 16(a). Based solely on thereports received by the Registrant and on written representations from reporting persons,the Registrant was informed that its officers and directors have not filed all reportsrequired under Section 16(a). The Registrant has not been furnished with any reports forMerrill and Debra Yarbrough, who beneficially own 8,731,667 shares or 19.01%.

**SIGNATURES**Back to Table of Contents

Pursuant to therequirements of the Securities Exchange Act of 1934, this report has been signed below bythe following persons on behalf of the registrant and in the capacities and on the dateindicated.

/s/ RICHARDRUBINChief Executive Officer, CFO and Chairman*   Dated: September 29, 2006*

 

**FinancialStatements**Back to Table of Contents
Report of Independent Registered Public Accounting Firm16Financial Statements for the Years    Ended June 30, 2006 and 2005   Balance Sheets17   Statement of Operations18   Statement of Stockholders' Equity19   Statement of Cash Flows20Notes to Financial Statements21
 
**REPORTOF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMBack to Table of Contents

**Michael F. CroninCertified Public Accountant687 Lee Road****Rochester,****NY****14606**

To the Board of Directors and StockholdersPeregrine Industries, Inc.New York, NY

I have audited the accompanying balance sheet of Peregrine Industries,Inc. (the "Company") as of June 30, 2006 and 2005 and the related statements ofoperations, stockholders' equity and cash flows for the years then ended. The financialstatements are the responsibility of management. My responsibility is to express anopinion on these financial statements based on my audits.

I conducted my audits in accordance with auditing standards establishedby the Public Company Accounting Oversight Board. Those standards require that I plan andperform the audits to obtain reasonable assurance about whether the financial statementsare free of material misstatement. The company is not required to have, nor was I engagedto perform, an audit of its internal control over financial reporting. My audit includedconsideration of internal control over financial reporting as a basis for designing auditprocedures that are appropriate in the circumstances, but not for the purpose ofexpressing an opinion on the effectiveness of the Company's internal control overfinancial reporting. Accordingly, I express no such opinion. An audit includes examining,on a test basis, evidence supporting the amounts and disclosures in the financialstatements. An audit also includes assessing the accounting principles used andsignificant estimates made by management, as well as evaluating the overall financialstatement presentation. I believe that my audits provide a reasonable basis for myopinion.

In my opinion, the financial statements referred to above presentfairly, in all material respects, the financial position of Peregrine Industries, Inc. asof June 30, 2006 and 2005 and the results of its operations, its cash flows and changes instockholders' equity for the years then ended in conformity with accounting principlesgenerally accepted in the United States.

September 29, 2006

/s/ Michael F. CroninMichael F. CroninCertified Public Accountant

**Peregrine Industries, Inc.**
Balance Sheet
Back to Table of Contents**  ****Fiscal Year Ended****Fiscal Year Ended****June 30, 2006****June 30, 2005**
ASSETSCurrent assets:      Cash$0$0   Advances to related    parties00     Total    current assets00               **Total Assets**$0$0  
LIABILITIES    AND STOCKHOLDERS' EQUITY (DEFICIENCY)  Current liabilities:   Accountants    payable-trade00   Advances due to    related party81,3042,421         Total current liabilities81,3042,421  Stockholders' deficiency:   Preferred stock,    $.0001 par value; 5,000,000 authorized, none issued- -    Common stock,    $.0001 par value; 100,000,000 shares authorized;         45,920,000 issued and outstanding at June 2006 and        29,270,000 issued and outstanding at June 20054,5922,927   Additional paid in    capital61,2924,573   Accumulated deficit(147,188)(9,921)        Stockholders' deficiency(81,304)(2,421)          **Total Liabilities and Stockholders' deficiency**$0
$0  See Summary of    Significant Accounting Policies and Notes to Financial Statements.**Peregrine Industries, Inc.**Statement of Operations
Back to Table of Contents  **Fiscal Year Ended****Fiscal Year Ended****June 30, 2006****June 30, 2005**Revenue$0$0Costs and Expenses:   General and    administrative137,2672,465Total costs and expenses137,2672,465  Loss before income taxes(137,267)(2,465)Income taxes00Loss from continuing operations(137,267)(2,465)   Net loss$(137,267)$(2,465)  Per share amounts:   Basic and diluted net loss$(0.00)$(0.00)   Weighted average shares outstanding (basic and    diluted)44,262,26529,270,000  See Summary of Significant    Accounting Policies and Notes to Financial Statements.
**Peregrine Industries, Inc.**
Statement    of Stockholders' Equity
Back to Table of Contents  **Preferred****Common****Common****Additional****Stock****Paid-In**
**Accumulated**
**Shares**
**Par Value**
**Shares**
**Amount**
**Capital**
**Deficit**Balance at June 30, 2003
133,3631414,270,000
$
1,427
(1,442)0   Stock issued for    cash15,000,0001,5006,000   Cancellation of    preferred stock(133,363)(14)14   Net loss          (7,456)Balance at June 30, 2004
0029,270,000
$
2,927
4,572(7,456)     Net loss          (2,465)Balance at June 30, 2005
0029,270,000
$
2,927
4,572(9,921)     Stock issued for    cash9,000,0009007,099   Stock issued for    services7,650,00076549,620   Net loss          (137,267)Balance at June 30, 20060$045,920,000$4,592$61,291$(147,188)  See Summary of    Significant Accounting Policies and Notes to Financial Statements.
**Peregrine Industries, Inc.**
Statement of Cash    Flows
Back to Table of Contents  ** ****Fiscal Year Ended****Fiscal Year Ended**** ****June 30, 2006****June 30, 2005**  Cash flows from operating activities:$(137,267)$(2,465)Net lossAdjustments required to reconcile net loss  to cash used in operating activities:   Expenses paid by issuance of common    stock50,3850   Increase (decrease) in accounts    payable and accrued expenses0(523)     **Cash    flows used by operating activities**(86,882)(2,988)  Cash flows from investing    activities:   Purchase of equipment00     **Cash    used in investing activities**00   Cash flows from financing activities:   Proceeds from    issuance of common stock7,9990   Loans from related parties78,8832,988   Repayment of related party loans00     **Cash    generated by financing activities**86,8822,988  Change in cashCash - Beginning of period00**Cash - End of period**$0$0  See Summary of Significant    Accounting Policies and Notes to Financial Statements.****PEREGRINE INDUSTRIES, INC.**BACKGROUND ANDSIGNIFICANT ACCOUNTING POLICIESJune 30, 2006Back to Table of Contents

**The Company**

Peregrine Industries, Inc. (the "Company") was formed onOctober 1, 1995 for the purpose of manufacturing residential pool heaters. The Company wasformerly located in Deerfield Beach, Florida. Products were primarily sold throughout theUnited States, Canada, and Brazil. In September 1998, the Company formed a wholly-ownedsubsidiary, Alcool, Inc., in Montgomery, Alabama, in order to expand its manufacturingcapacity and product line. Canadian operations were conducted through a wholly ownedsubsidiary Thermopompe Peregrine Heat Pump, a Quebec corporation.
*Change in Fiscal Year

On April 22, 2004 we elected to change our fiscal year end fromSeptember 30 to June 30. Accordingly, the 2004 results of operations, cash flows andstatement of stockholders’ equity reflect transactions for the nine month transitionperiod ended June 30, 2004. 
*Bankruptcy Proceedings

On June 4, 2002, we filed a petition for Relief and Reorganizationunder Chapter 11 of the Bankruptcy Code in the U.S. Bankruptcy Court for the SouthernDistrict of Florida (case no. 02-24188). On September 4, 2002, the bankruptcy proceedingswere converted to Chapter 7 for liquidation of the Company’s business. As a result ofthe conversion of the Company's reorganization, to a case under Chapter 7, all of ourproperties were transferred to a United States Trustee and we terminated all of ourbusiness operations. The Bankruptcy Trustee has disposed of all of the assets.

On March 29, 2004, the U.S. Bankruptcy Court confirmed the sale of thePeregrine corporate shell entity. The accounts of the former subsidiaries were notincluded in the sale and have not been carried forward.

**Basis of Presentation:**

We adopted "fresh-start" accounting as of September 5, 2002in accordance with procedures specified by AICPA Statement of Position ("SOP")No. 90-7, "Financial Reporting by Entities in Reorganization under the BankruptcyCode.

**Significant Accounting Policies:**
*Use of EstimatesThe preparation of financial statements inconformity with generally accepted accounting principles requires management to makeestimates and assumptions that affect reported amounts of assets and liabilities anddisclosure of contingent assets and liabilities at the date of the financial statement andthe reported amounts of revenues and expenses during the reporting period. Actual resultscould differ from the estimates.
*Cash and Cash Equivalents: For financial statement presentationpurposes, the Company considers those short-term, highly liquid investments with originalmaturities of three months or less to be cash or cash equivalents.
*Property and Equipment New property and equipment are recordedat cost. Property and equipment included in the bankruptcy proceedings and transferred tothe Trustee had been valued at liquidation value. Depreciation is computed using thestraight-line method over the estimated useful lives of the assets, generally 5 years.Expenditures for renewals and betterments are capitalized. Expenditures for minor items,repairs and maintenance are charged to operations as incurred. Gain or loss upon sale orretirement due to obsolescence is reflected in the operating results in the period theevent takes place.
*Valuation of Long-Lived Assets: We review the recoverability ofour long-lived assets including equipment, goodwill and other intangible assets, whenevents or changes in circumstances occur that indicate that the carrying value of theasset may not be recoverable. The assessment of possible impairment is based on ourability to recover the carrying value of the asset from the expected future pre-tax cashflows (undiscounted and without interest charges) of the related operations. If these cashflows are less than the carrying value of such asset, an impairment loss is recognized forthe difference between estimated fair value and carrying value. Our primary measure offair value is based on discounted cash flows. The measurement of impairment requiresmanagement to make estimates of these cash flows related to long-lived assets, as well asother fair value determinations.
*Stock Based Compensation:Stock-based awards to non-employeesare accounted for using the fair value method in accordance with SFAS No. 123, *Accountingfor Stock-Based Compensation*, and EITF Issue No. 96-18, *Accounting for EquityInstruments that are Issued to Other Than Employees for Acquiring, or in Conjunction withSelling Goods or Services*. All transactions in which goods or services are theconsideration received for the issuance of equity instruments are accounted for based onthe fair value of the consideration received or the fair value of the equity instrumentissued, whichever is more reliably measurable. The measurement date used to determine thefair value of the equity instrument issued is the earlier of the date on which thethird-party performance is complete or the date on which it is probable that performancewill occur. 

On January 1, 2006, we adopted the provisions of Statement of FinancialAccounting Standards ("SFAS") 123R, "Share-Based Payment" ("SFAS123(R)"), which requires that companies measure and recognize compensation expense atan amount equal to the fair value of share-based payments granted under compensationarrangements. Prior to January 1, 2006, we accounted for our stock-based compensationplans under the recognition and measurement principles of Accounting Principles Board("APB") Opinion 25, "Accounting for Stock Issued to Employees," andrelated interpretations, and would typically recognize no compensation expense for stockoption grants if options granted had an exercise price equal to the market value of theunderlying common stock on the date of grant. 

We adopted SFAS 123(R) using the "modified prospective"method, which results in no restatement of prior period amounts. Under this method, theprovisions of SFAS 123(R) apply to all awards granted or modified after the date ofadoption. In addition, compensation expense must be recognized for any unvested stockoption awards outstanding as of the date of adoption on a straight-line basis over theremaining vesting period. We calculate the fair value of options using a Black-Scholesoption pricing model. We do not currently have any outstanding options therefore no chargeis required for the three months ended March 31, 2006. SFAS 123(R) also requires thebenefits of tax deductions in excess of recognized compensation expense to be reported inthe Statement of Cash Flows as a financing cash inflow rather than an operating cashinflow. In addition, SFAS 123(R) required a modification to the Company’s calculationof the dilutive effect of stock option awards on earnings per share. For companies thatadopt SFAS 123(R) using the "modified prospective" method, disclosure of proforma information for periods prior to adoption must continue to be made. 
*Fair Value of Financial Instruments: Statements of FinancialAccounting Standards No. 107, "Disclosures about Fair Value of FinancialInstruments," requires disclosure of fair value information about financialinstruments. Fair value estimates discussed herein are based upon certain marketassumptions and pertinent information available to management as of June 30, 2006. Therespective carrying value of certain on-balance sheet financial instruments approximatedtheir fair values. 

These financial instruments include cash and cash equivalents, accountspayable and accrued expenses. Fair values were assumed to approximate carrying values forthese financial instruments since they are short-term in nature and their carrying amountsapproximate fair values or they are receivable or payable on demand.
*Earnings per Common Share: Basic net loss per share is computedusing the weighted average number of common shares outstanding during the period. Dilutednet loss per common share is computed using the weighted average number of common anddilutive equivalent shares outstanding during the period. Dilutive common equivalentshares consist of options to purchase common stock (only if those options are exercisableand at prices below the average share price for the period) and shares issueable upon theconversion of our Preferred Stock. Due to the net losses reported, dilutive commonequivalent shares were excluded from the computation of diluted loss per share, asinclusion would be anti-dilutive for the periods presented.

There were no common equivalent shares required to be added to thebasic weighted average shares outstanding to arrive at diluted weighted average sharesoutstanding in 2006 or 2005. 
*Income Taxes:The Company accounts for income taxes inaccordance with Statement of Financial Accounting Standards No. 109, "Accounting forIncome Taxes," ("SFAS 109") which requires recognition of estimated incometaxes payable or refundable on income tax returns for the current year and for theestimated future tax effect attributable to temporary differences and carry-forwards.Measurement of deferred income tax is based on enacted tax laws including tax rates, withthe measurement of deferred income tax assets being reduced by available tax benefits notexpected to be realized.
*Accounting For Obligations And Instruments Potentially To Be Settled InThe Company’s Own Stock The Company accounts for obligations and instrumentspotentially to be settled in the Company’s stock in accordance with EITF Issue No.00-19, *Accounting for Derivative Financial Instruments Indexed To, and PotentiallySettled In a Company’s Own Stock*. This issue addresses the initial balance sheetclassification and measurement of contracts that are indexed to, and potentially settledin, the Company’s own stock.

Under EITF Issue No. 00-19 contracts are initially classified as equityor as either assets or liabilities, in the following situations:

Equity

- Contracts that require physical settlement or net-share settlement;and

- Contracts that give the company a choice of net-cash settlement orsettlement in its own shares (physical settlement or net-share settlement), assuming thatall the criteria for equity classification have been met.

Assets or Liabilities

- Contracts that require net-cash settlement (including a requirementto net-cash settle the contract if an event occurs and if that event is outside thecontrol of the company); and

- Contracts that give the counterparty a choice of net-cash settlementor settlement in shares (physical settlement or net-share settlement).

All contracts are initially measured at fair value and subsequentlyaccounted for based on the current classification. Contracts initially classified asequity do not recognize subsequent changes in fair value as long as the contracts continueto be classified as equity. For contracts classified as assets or liabilities, the Companyreports changes in fair value in earnings and discloses these changes in the financialstatements as long as the contracts remain classified as assets or liabilities. Ifcontracts classified as assets or liabilities are ultimately settled in shares, anypreviously reported gains or losses on those contracts continue to be included inearnings. The classification of a contract is reassessed at each balance sheet date.

In accordance with EITF Issue No. 00-19, a transaction which includes apotential for net-cash settlement, including liquidated damages, requires that derivativefinancial instruments, including warrants and additional investment rights, initially berecorded at fair value as an asset or liability and subsequent changes in fair value bereflected in the statement of operations. The recorded value of the liability for suchderivatives can fluctuate significantly based on fluctuations in the market value of theunderlying common stock of the issuer of the derivative instruments, as well as in thevolatility of the stock price during the term used for observation and the remaining term.

Warrant Derivative Liabilities

The Company accounts for warrants issued in connection with financingarrangements in accordance with EITF Issue No. 00-19, *Accounting for DerivativeFinancial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock*.Pursuant to EITF Issue No. 00-19, an evaluation of specifically identified conditions ismade to determine whether the fair value of warrants issued is required be classified as aderivative liability. The fair value of warrants classified as derivative liabilities isadjusted for changes in fair value at each reporting period, and the correspondingnon-cash gain or loss is recorded in current period earnings.

**Recent Accounting Pronouncements**

In December 2004, the FASB issued SFAS No. 153, *"Exchanges ofNonmonetary Assets—an amendment of APB Opinion No. 29,"* which is effectivefor us starting July 1, 2005. In the past, we were frequently required to measure thevalue of assets exchanged in non-monetary transactions by using the net book value of theasset relinquished. Under SFAS No. 153, we will measure assets exchanged at fair value, aslong as the transaction has commercial substance and the fair value of the assetsexchanged is determinable within reasonable limits. A non-monetary exchange has commercialsubstance if the future cash flows of the entity are expected to change significantly as aresult of the exchange. The adoption of SFAS No. 153 is not anticipated to have a materialeffect on our consolidated financial position, results of operations or cash flows.

In May 2005, the FASB issued SFAS No. 154, "Accounting Changes andError Corrections," which replaces APB Opinion No. 20 "Accounting Changes,"and FASB Statement No. 3 "Reporting Accounting Changes in Interim FinancialStatements," and changes the requirements for the accounting for and reporting of achange in accounting principle. This Statement requires retrospective application to priorperiods’ financial statements of changes in accounting principle, unless it isimpracticable to determine either the period-specific effects or the cumulative effect ofthe change. This Statement shall be effective for accounting changes and corrections oferrors made in fiscal years beginning after December 15, 2005. Early adoption is permittedfor accounting changes and corrections of errors made in fiscal years beginning after thedate this Statement is issued. We do not believe that adoption of SFAS 154 will have amaterial impact on our financial statements.

In February 2006, the FASB issued SFAS No. 155, *Accounting forCertain Hybrid Financial Instruments—an amendment of FASB Statements No. 133 and140*. This statement amends SFAS No. 133, *Accounting for Derivative Instrumentsand Hedging Activities*, and SFAS No. 140, *Accounting for Transfers andServicing of Financial Assets and Extinguishments of Liabilities*, and resolves issuesaddressed in SFAS No. 133 Implementation Issue No. D1, *Application ofStatement 133 to Beneficial Interest in Securitized Financial Assets*. SFASNo. 155 (a) permits fair value re-measurement for any hybrid financialinstrument that contains an embedded derivative that otherwise would require bifurcation;(b) clarifies which interest-only strips and principal-only strips are not subject tothe requirements of SFAS No. 133; (c) establishes a requirement to evaluatebeneficial interests in securitized financial assets to identify interests that arefreestanding derivatives or that are hybrid financial instruments that contain an embeddedderivative requiring bifurcation; (d) clarifies that concentrations of credit risk in theform of subordination are not embedded derivatives; and (e) eliminates restrictionson a qualifying special-purpose entity’s ability to hold passive derivative financialinstruments that pertain to beneficial interests that are or contain a derivativefinancial instrument. The standard also requires presentation within the financialstatements that identifies those hybrid financial instruments for which the fair valueelection has been applied and information on the income statement impact of the changes infair value of those instruments. The Company is required to apply SFAS No. 155 to allfinancial instruments acquired, issued or subject to a re-measurement event beginningJuly 1, 2007, although early adoption is permitted as of the beginning of anentity’s fiscal year. The Company is evaluating the provisions of SFAS No. 155.The effects of adopting of SFAS No. 155 on the Company’s financial statementsare not known at this time.

**Peregrine Industries, Inc.**Notes to Financial StatementsJune 30, 2006

**1. "Fresh Start" Accounting:**

On September 4, 2002 all assets were transferred to the chapter 7trustee in settlement of all outstanding corporate obligations. We adopted"fresh-start" accounting as of September 5, 2002 in accordance with proceduresspecified by AICPA Statement of Position ("SOP") No. 90-7, "FinancialReporting by Entities in Reorganization under the Bankruptcy Code."

On March 29, 2004, the U.S. Bankruptcy Court for the Southern Districtof Florida confirmed the order previously granted on March 15, 2004 for the sale ofPeregrine as a shell entity. All results for periods including and subsequent to September5, 2002 are referred to as those of the "Successor Company".

In accordance with SOP No. 90-7, the reorganized value of the Companywas allocated to the Company's assets based on procedures specified by SFAS No. 141,"Business Combinations". Each liability existing at the plan sale date, otherthan deferred taxes, was stated at the present value of the amounts to be paid atappropriate market rates. It was determined that the Company's reorganization valuecomputed immediately before September 5, 2002 was $0. We adopted "fresh-start"accounting because holders of existing voting shares immediately before filing andconfirmation of the sale received less than 50% of the voting shares of the emergingentity and its reorganization value is less than its post-petition liabilities and allowedclaims. 

**2. Income Taxes:**

The Company had approximately $808,000 in net operating loss carryoversavailable to reduce future income taxes. These carryovers were reduced to zero oreliminated through our bankruptcy proceedings. We have adopted SFAS 109 which provides forthe recognition of a deferred tax asset based upon the value the loss carry-forwards willhave to reduce future income taxes and management's estimate of the probability of therealization of these tax benefits. We have determined it more likely than not that our netoperating loss carry-forwards will not be utilized; therefore we have provided for avaluation allowance against the related deferred tax asset. A summary of the deferred taxasset presented on the accompanying balance sheets is as follows:

**2006**
**2005**
The provision    (benefit) for income taxes consists of the following:
Currently    payable:
      Federal$
0 $
0 
      State
0 
0 
        Total currently payable
0 
0 
Deferred:
      Federal
(44,337)
796 
      State
(6,863)
123 
        Total deferred
(51,200)
919 
  Less    increase in allowance
51,200 
(919)
  Net    deferred 
0 
0 
        Total income tax provision (benefit)$
0 $
0    
**2006**
**2005**
Individual    components of deferred taxes are as follows: 
      Deferred tax asset arising from net operating loss carry forwards$
(47,500)$
3,701 
        Total
(47,500)
3,701 
      Less valuation allowance
47,500 
(3,701)
      Net deferred $
0 $
0 
Individual    components of deferred tax allowance are as follows: 
      Deferred tax asset arising from net operating loss carry forwards
47,500 
(3,701)
      Total
47,500 
(3,701)
        Net Deferred Income Taxes$
0 $
0 
Utilization of federal and state NOL and tax credit carryforwards maybe subject to a substantial annual limitation due to the ownership change limitationsprovided by the Internal Revenue Code of 1986, as amended, and similar state provisions.The annual limitation may result in the expiration of NOL and tax credit carryforwardsbefore full utilization.

**3. Commitments:**

The Company, prior to its bankruptcy, was a party to numerous lawsuitsand claims. As a result of the bankruptcy and the subsequent transfer by the BankruptcyTrustee of the Company’s corporate shell entity free of all liens, claims andencumbrances pursuant to Section 363(f) of the US Bankruptcy Code, the Company is nolonger party to any litigation.

The Company is not a party to any leases and does not have anycommitments 

**4. Stockholders' Equity:***Common Stock

In July 2005, we issued 15,050,000 shares of common stock to relatedparties. 9,000,000 shares were issued to pay outstanding advances of $ 7,999 and 6,050,000shares, valued at $5,385, were issued to reflect the cost of services provided to ourcompany to meet ongoing reporting and compliance obligations. In January, 2006 we issued1,600,000 shares valued at $45,000 to a related party for ongoing consulting &advisory services. These shares are restricted as to transferability. All issued shares ofcommon stock are entitled to vote on a 1 share/1 vote basis. 
*Preferred Stock

The articles of incorporation were amended in September, 1998 toauthorize the issuance of 5,000,000 shares of 5% cumulative, convertible preferred stockwith a par value of $.0001 per share. At the same time, Series A of such stock wasdesignated, consisting of 200,000 shares. The holders of the Series A preferred stock donot have voting rights and can convert such shares into the Company's common stock on aone to one ratio. The Company may redeem the Series A preferred stock at any time at thestated value of $5 per share plus accrued but unpaid dividends.

On May 12, 2004 and pursuant to authority granted to it by thebankruptcy court, the Board cancelled and extinguished all issued and outstandingpreferred stock. All related dividends obligations were also extinguished. 
*Stock Based Compensation

Stock based compensation is accounted for by using the intrinsic valuebased method in accordance with Accounting Principles Board Opinion No. 25,"Accounting for Stock Issued to Employees" ("APB 25"). The Company hasadopted Statements of Financial Accounting Standards No. 123, "Accounting for StockBased Compensation, ("SFAS 123") which allows companies to either continue toaccount for stock based compensation to employees under APB 25, or adopt a fair valuebased method of accounting. The Company has elected to continue to account for stock basedcompensation to employees under APB 25. APB 25 recognizes compensation expense for optionsgranted to employees only when the market price of the stock exceeds the grant exerciseprice at the date of the grant. The amount reflected as compensation expense is measuredas the difference between the exercise price and the market value at the date of thegrant. 

There were no employee or non-employee options granted in either fiscalperiod ended June 30, 2006 or 2005. 

**5. Change of Control/Related Parties:***Change of Control

On February 12, 2004, the Trustee for Peregrine and Park Avenue Group,Inc. entered into a contract resulting in a change in control of Peregrine. On March 15,2004, the Bankruptcy Court granted an order approving the contract and finding that ParkAvenue Group is a good faith purchaser within the meaning of 11 USC Section 363(m). OnMarch 29, 2004, the U.S. Bankruptcy Court for the Southern District of Florida confirmedthe order previously granted on March 15, 2004. 

The confirmed Court order provided that the existing officers anddirectors were deemed removed from office and also authorized the following: (i)the appointment of new members to the board of directors; (ii) the amendment of theArticle of Incorporation to increase the number of authorized shares to 100,000,000shares; (iii) the issuance of up to 30,000,000 shares of common stock, par value $0.0001to the new management;(iv) the authority to implement a reverse split of the issued andoutstanding shares in a ratio to be determined by the board of directors; (v) thecancellation and extinguishment of all common share conversion rights of any kind,including without limitation, warrants, options, convertible bonds, other convertible debtinstruments and convertible preferred stock; and (vi) the cancellation and extinguishmentof all preferred shares of every series and accompanying conversion rights of any kind. 

On March 30, 2004, the three new officers and directors each subscribedto 5 million restricted shares for a total of $7,500 or $.0005 per share. After theissuance, each officer owns 17.1% of our common stock. Management collectively controls43.5% of the issued and outstanding shares. 
*Related Party Transactions

The Company’s operating expenses have been paid by advance from its principalshareholders.*********************** |