UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549








FORM
10-KSB





ANNUAL
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934





For the
fiscal year ended December 31,
2007





TRANSITION
REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT





For the
transition period from _____________________ to ______________








Commission
File Number: 0-19227








ZEGARELLI GROUP
INTERNATIONAL, INC.


(Exact
name of small business issuer as specified in its charter)








California
            
            95-4040591(State
      or other jurisdiction of incorporation)
            
            (IRS
      Employer Identification No.)








80679
Camino Santa Elise


Indio, CA
91352


(Address
of principal executive offices) (Zip Code)








(760)
345-9205


(Issuer’s
telephone number)








Securities
registered under Section 12(b) of the Exchange Act:   None.





Securities
registered under Section 12(g) of the Exchange Act:   Common Stock, par value
$0.001





Check
whether the issuer is not required to file reports pursuant to Section 13 or
15(d) of the Exchange Act.   ̈





Check
whether the issuer (1) filed all reports required to be filed by Section 13 or
15(d) of the Exchange Act during the past 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.  Yes      
No 





Check if
there is no disclosure of delinquent filers in response to Item 405 of
Regulation S−B contained in this form, and no disclosure will be contained, to
the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10−KSB or any
amendment to this Form 10−KSB. 





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





Aggregate
market value of the voting stock held by non-affiliates:  N/A.   There is
no voting stock held by non-affiliates.





Issuer
revenues for its most recent fiscal year: $-0-




Number of
shares outstanding of each of the issuer's classes of common stock at March __,
2008: Common Stock: 22,248,337.




Transitional
Small Business Disclosure Format: Yes      No 














ZEGARELLI GROUP
INTERNATIONAL, INC.





FORM
10-KSB





TABLE
OF CONTENTS








PageCAUTIONARY
      NOTE ABOUT FORWARD-LOOKING STATEMENTS
            3PART IItem
      1.
            Description of Business
            3Item
      2.
            Description of Property
            6Item
      3.
            Legal Proceedings
            6Item
      4.
            Submission of Matters to a Vote of Security
      Holders
            6PART IIItem
      5.
            Market for Common Equity and Related Stockholder
      Matters
            7Item
      6.
            Management’s Discussion and Analysis or Plan of
      Operation
            8Item
      7.
            ConsolidatedFinancial Statements
            11Item
      8.
            Changes In and Disagreements With Accountants on
      Accounting and Financial Disclosure
            20Item
      8A.
            Controls and Procedures
            20Item
      8B.
            Other Information
            20PART IIIItem
      9.
            Directors, Executive Officers, Promoters and
      Control Persons; Compliance With Section 16(a) of the Exchange
      Act
            20Item
      10.
            Executive Compensation
            22Item
      11.
            Security Ownership of Certain Beneficial Owners
      and Management and Related Stockholder Matters
            22Item
      12.
            Certain Relationships and Related
      Transactions
            23Item
      13.
            Exhibits
            23Item
      14.
            Principal Accountant Fees and
      Services
            23SIGNATURES
            24











- 2
-







CAUTIONARY
NOTE ABOUT FORWARD-LOOKING STATEMENTS





The
information contained in this Report includes some statements that are not
purely historical and that are “forward-looking statements” within the meaning
of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”),
and Section 21E of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), and as such, may involve risks and uncertainties. These
forward-looking statements relate to, among other things, expectations of the
business environment in which we operate, perceived opportunities in the market
and statements regarding our mission and vision. In addition, any statements
that refer to projections, forecasts or other characterizations of future events
or circumstances, including any underlying assumptions, are forward-looking
statements. You can generally identify forward-looking statements as statements
containing the words “anticipates,” “believes,” “continue,” “could,”
“estimates,” “expects,” “intends,” “may,” “might,” “plans,” “possible,”
“potential,” “predicts,” “projects,” “seeks,” “should,” “will,” “would” and
similar expressions, or the negatives of such terms, but the absence of these
words does not mean that a statement is not forward-looking.





Forward-looking
statements involve risks and uncertainties that could cause actual results or
outcomes to differ materially from those expressed in the forward-looking
statements. The forward-looking statements contained herein are based on various
assumptions, many of which are based, in turn, upon further assumptions. Our
expectations, beliefs and forward-looking statements are expressed in good faith
on the basis of management’s views and assumptions as of the time the statements
are made, but there can be no assurance that management’s expectations, beliefs
or projections will result or be achieved or accomplished.





For a
discussion of the risks, uncertainties, and assumptions that could affect our
future events, developments or results, you should carefully review the “Risk
Factors” set forth under “Item 1. Description of Business,” below. In light
of these risks, uncertainties and assumptions, the future events, developments
or results described by our forward-looking statements herein could turn to be
materially different from those we discuss or imply.





PART I





ITEM 1.   DESCRIPTION OF
BUSINESS




We were
incorporated in California on April 22, 1986 as Cosmetic Group U.S.A., Inc. and
conducted the business of contract manufacturing and the manufacturer and sale
of professional hair care products under the “Zegarelli” name. Through our
contract manufacturing operations, we custom developed, formulated and
manufactured a wide range of color cosmetics and other personal care products
for customers that market products for sale under their own brand names. In
addition to our operations as a contract manufacturer, in 1994, we developed
with Arnold Zegarelli, a professional hair designer, a line of professional hair
care products which we manufactured and marketed to beauty salons and hair care
professionals. Sales of the Zegarelli product line commenced in the second
quarter of 1995. On September 23, 1997 we sold all the assets and business of
our contract manufacturing segment, and changed our name to Zegarelli Group
International, Inc. (“our,” “we,” or the “Company”).




On April
1, 2000, we ceased all operations. On July 1, 1999 we filed for bankruptcy
protection under Chapter 7, which was converted to a Chapter 11 on September 8,
1999 and on September 30, 2002 converted back to a Chapter 7. On February 10,
2003 we voluntarily withdrew our petition from the Bankruptcy Court. On November
9, 1998 we filed a Form 15 with the Securities and Exchange Commission (“SEC”)
terminating our registration under Section 12(g) of the Securities Act of 1934
(the “1934 Act”) and this suspended our obligation to file reports with the SEC.
We have been inactive since April 1, 2000. The Company is currently considered a
“shell corporation.” On July 3, 2008, the Company filed a Form 10-SB, which went
effective with the SEC on September 1, 2008, and accordingly reactivated the
Company’s obligation to file periodic reports with the SEC.




The
Company will attempt to locate and negotiate with a business entity for the
merger of that target company into the Company. In certain instances, a target
company may wish to become a subsidiary of the Company or may wish to contribute
assets to the Company rather than merge. No assurances can be given that the
Company will be successful in locating or negotiating with any target company.
The Company will provide a method for a foreign or domestic private company to
become a reporting (“public”) company whose securities are qualified for trading
in the United States secondary market.




PERCEIVED
BENEFITS




There are
certain perceived benefits to being a reporting company with a class of
publicly-traded securities. These are commonly thought to include the
following:





·
            the
      ability to use registered securities to make acquisitions of assets or
      businesses;


·
            increased
      visibility in the financial
community;


·
            the
      facilitation of borrowing from financial
  institutions;


·
            improved
      trading efficiency;


·
            shareholder
      liquidity;


·
            greater
      ease in subsequently raising
capital;


·
            compensation
      of key employees through stock
options;


·
            enhanced
      corporate image;


·
            a
      presence in the United States capital
market.




- 3
-






POTENTIAL
TARGET COMPANIES




A
business entity, if any, which may be interested in a business combination with
the Company, may include the following:





·
            a
      company for which a primary purpose of becoming public is the use of its
      securities for the acquisition of assets or
  businesses;


·
            a
      company which is unable to find an underwriter of its securities or is
      unable to find an underwriter of securities on terms acceptable to
      it;


·
            a
      company which wishes to become public with less dilution of its common
      stock than would occur upon an
underwriting;


·
            a
      company which believes that it will be able to obtain investment capital
      on more favorable terms after it has become
  public;


·
            a
      foreign company which may wish an initial entry into the United States
      securities market;


·
            a
      special situation company, such as a company seeking a public market to
      satisfy redemption requirements under a qualified Employee Stock Option
      Plan;


·
            a
      company seeking one or more of the other perceived benefits of becoming a
      public company.




A
business combination with a target company will normally involve the transfer to
the target company of the majority of the issued and outstanding common stock of
the Company, and the substitution by the target company of its own management
and board of directors. No assurances can be given that we will be able to enter
into a business combination. The Company is voluntarily filing this Registration
Statement with the Securities and Exchange Commission and is under no obligation
to do so under the Securities Exchange Act of 1934.





Employees




As of the
date hereof, the Company has only three employees, who serve as its officers and
directors. The three employees are part-time and receive no compensation nor is
any compensation accruing, except for the accruing of $1,000 per year for Mr.
Booth, which began in 2005. The Company has no plans to hire more employees or
compensate any employees until such time as the Company’s business warrants the
expense, or until the Company successfully acquires or merges with an operating
business. We may find it necessary to periodically hire part-time clerical help
on an as-needed basis. The funds in this case will be advanced by Mr.
Booth.





Competition




The
Company will remain an insignificant participant among the firms which engage in
the acquisition of business opportunities. There are many established venture
capital and financial concerns that have significantly greater financial and
personnel resources and technical expertise than the Company. In view of the
Company's extremely limited financial resources and limited management
availability, the Company will continue to be at a significant competitive
disadvantage compared to the Company's competitors.





RISK
FACTORS





The
Company's business is subject to numerous risk factors, including the
following:





NO
RECENT OPERATING HISTORY OR REVENUE AND MINIMAL ASSETS




The
Company has been inactive since April 2000 and has had no revenues or earnings
from operations. The Company has no significant assets or financial resources.
The Company will, in all likelihood, sustain operating expenses without
corresponding revenues, at least until the consummation of a business
combination. This may result in the Company incurring a net operating loss which
will increase continuously until the Company can consummate a business
combination with a target company. There is no assurance that the Company can
identify such a target company and consummate such a business
combination.





SPECULATIVE
NATURE OF THE COMPANY'S PROPOSED OPERATIONS




The
success of the Company's proposed plan of operation will depend to a great
extent on the operations, financial condition and management of the identified
target company. While management will prefer business combinations with entities
having established operating histories, there can be no assurance that the
Company will be successful in locating candidates meeting such criteria. In the
event the Company completes a business combination, of which there can be no
assurance, the success of the Company's operations will be dependent upon
management of the target company and numerous other factors beyond the Company's
control.





SCARCITY
OF AND COMPETITION FOR BUSINESS OPPORTUNITIES AND COMBINATIONS




The
Company is and will continue to be an insignificant participant in the business
of seeking mergers with and acquisitions of business entities. A large number of
established and well-financed entities, including venture capital firms, are
active in mergers and acquisitions of companies which may be merger or
acquisition target candidates for the Company. Nearly all such entities have
significantly greater financial resources, technical expertise and managerial
capabilities than the Company and, consequently, the Company will be at a
competitive disadvantage in identifying possible business opportunities and
successfully completing a business combination. Moreover, the Company will also
compete with numerous other small public companies in seeking merger or
acquisition candidates.





- 4
-






NO
AGREEMENT FOR BUSINESS COMBINATION OR OTHER TRANSACTION -- NO STANDARDS FOR
BUSINESS COMBINATION




The
Company has no current arrangement, agreement, or understanding with respect to
engaging in a merger with or acquisition of a specific business entity. There
can be no assurance that the Company will be successful in identifying and
evaluating suitable business opportunities or in concluding a business
combination. Management has not identified any particular industry or specific
business within an industry for evaluation by the Company. There is no assurance
that the Company will be able to negotiate a business combination on terms
favorable to the Company. The Company has not established a specific length of
operating history or a specified level of earnings, assets, net worth, or other
criteria which it will require a target company to have achieved, or without
which the Company would not consider a business combination with such business
entity. Accordingly, the Company may enter into a business combination with a
business entity having no significant operating history, losses, limited or no
potential for immediate earnings, limited assets, negative net worth, or other
negative characteristics.





CONTINUED
MANAGEMENT CONTROL, LIMITED TIME AVAILABILITY




While
seeking a business combination, management anticipates devoting only a limited
amount of time per month to the business of the Company. The Company's officers
have not entered into written employment agreements with the Company and they
are not expected to do so in the foreseeable future. The Company has not
obtained key man life insurance on its officers and directors. Notwithstanding
the combined limited experience and time commitment of management, loss of the
services of any of these individuals would adversely affect development of the
Company's business and its likelihood of continuing operations.





CONFLICTS
OF INTEREST -- GENERAL




The
Company's officers and directors participate in other business ventures which
may compete directly with the Company. Additional conflicts of interest and
non-arms length transactions may also arise in the future. Management has
adopted a policy that the Company will not seek a merger with, or acquisition
of, any entity in which any member of management serves as an officer, director
or partner, or in which they or their family members own or hold any ownership
interest. See “ITEM 5 DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS -- Conflicts of Interest.”





REPORTING
REQUIREMENTS MAY DELAY OR PRECLUDE ACQUISITION




Section
13 of the Securities Exchange Act of 1934 (the "Exchange Act") requires
companies subject thereto to provide certain information about significant
acquisitions including certified financial statements for the company acquired
covering one or two years, depending on the relative size of the acquisition.
The time and additional costs that may be incurred by some target companies to
prepare such financial statements may significantly delay or essentially
preclude consummation of an otherwise desirable acquisition by the Company.
Acquisition prospects that do not have or are unable to obtain the required
audited statements may not be appropriate for acquisition so long as the
reporting requirements of the Exchange Act are applicable.





LACK
OF MARKET RESEARCH OR MARKETING ORGANIZATION




The
Company has neither conducted, nor have others made available to it, market
research indicating that demand exists for the transactions contemplated by the
Company. Even in the event demand exists for a merger or acquisition of the type
contemplated by the Company, there is no assurance the Company will be
successful in completing any such business combination.





LACK
OF DIVERSIFICATION




The
Company's proposed operations, even if successful, will in all likelihood result
in the Company engaging in a business combination with only one business entity.
Consequently, the Company's activities will be limited to those engaged in by
the business entity which the Company merges with or acquires. The Company's
inability to diversify its activities into a number of areas may subject the
Company to economic fluctuations within a particular business or industry and
therefore increase the risks associated with the Company's
operations.





REGULATION
UNDER INVESTMENT COMPANY ACT




Although
the Company will be subject to regulation under the Exchange Act, management
believes the Company will not be subject to regulation under the Investment
Company Act of 1940, insofar as the Company will not be engaged in the business
of investing or trading in securities. In the event the Company engages in
business combinations which result in the Company holding passive investment
interests in a number of entities, the Company could be subject to regulation
under the Investment Company Act of 1940. In such event, the Company would be
required to register as an investment company and could be expected to incur
significant registration and compliance costs. The Company has obtained no
formal determination from the Securities and Exchange Commission as to the
status of the Company under the Investment Company Act of 1940 and,
consequently, any violation of such Act could subject the Company to material
adverse consequences.





- 5
-






PROBABLE
CHANGE IN CONTROL AND MANAGEMENT




A
business combination involving the issuance of the Company's common stock will,
in all likelihood, result in shareholders of a target company obtaining a
controlling interest in the Company. Any such business combination may require
shareholders of the Company to sell or transfer all or a portion of the
Company's common stock held by them. The resulting change in control of the
Company will likely result in removal of the present officers and directors of
the Company and a corresponding reduction in or elimination of their
participation in the future affairs of the Company. Currently, there are no
pending acquisitions, business combinations or mergers.





REDUCTION
OF PERCENTAGE SHARE OWNERSHIP FOLLOWING BUSINESS COMBINATION




The
Company's primary plan of operation is based upon a business combination with a
business entity which, in all likelihood, will result in the Company issuing
securities to shareholders of such business entity. The issuance of previously
authorized and un-issued common stock of the Company would result in reduction
in percentage of shares owned by the present shareholders of the Company and
would most likely result in a change in control and/or management of the
Company.





TAXATION




Federal
and state tax consequences will, in all likelihood, be major considerations in
any business combination the Company may undertake. Currently, such transactions
may be structured so as to result in tax-free treatment to both companies,
pursuant to various federal and state tax provisions. The Company intends to
structure any business combination so as to minimize the federal and state tax
consequences to both the Company and the target company; however, there can be
no assurance that such business combination will meet the statutory requirements
of a tax-free reorganization or that the parties will obtain the intended
tax-free treatment upon a transfer of stock or assets. A non-qualifying
reorganization could result in the imposition of both federal and state taxes
which may have an adverse effect on both parties to the
transaction.





REQUIREMENT
OF AUDITED FINANCIAL STATEMENTS MAY DISQUALIFY BUSINESS
OPPORTUNITIES




Management
of the Company will request that any potential business opportunity provide
audited financial statements. One or more attractive business opportunities may
choose to forego the possibility of a business combination with the Company
rather than incur the expenses associated with preparing audited financial
statements. In such case, the Company may choose to obtain certain assurances as
to the target company's assets, liabilities, revenues and expenses prior to
consummating a business combination, with further assurances that an audited
financial statement would be provided after closing of such a transaction.
Closing documents relative thereto may include representations that the audited
financial statements will not materially differ from the representations
included in such closing documents.





ITEM
2.   DESCRIPTION OF PROPERTY




The
Company has no properties and at this time has no agreements to acquire any
properties. The Company currently uses an office provided by Mr. Booth, the
Company’s President and CEO, at no cost to the Company. Mr. Booth has agreed to
continue this arrangement until the Company completes an acquisition or merger.
We presently do not own any equipment, and do not intend to purchase or lease
any equipment prior to or upon completion of a business
combination.





ITEM
3.LEGAL
PROCEEDINGS




We are
not presently parties to any litigation, nor to our knowledge and belief is any
litigation threatened or contemplated.




ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS




None.






- 6
-






PART II




ITEM 5.   MARKET FOR COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS




MARKET
PRICE




There has
only been limited trading for the Company's Common Stock over the past seven
years. There is no assurance that an active trading market will ever develop or,
if such a market does develop, that it will continue. The Securities and
Exchange Commission has adopted Rule 15g-9 which establishes the definition of a
“penny stock,” for purposes relevant to the Company, as any equity security that
has a market price of less than $5.00 per share or with an exercise price of
less than $5.00 per share, subject to certain exceptions. For any transaction
involving a penny stock, unless exempt, the rules require: (i) that a broker or
dealer approve a person's account for transactions in penny stocks and (ii) the
broker or dealer receive from the investor a written agreement to the
transaction, setting forth the identity and quantity of the penny stock to be
purchased. In order to approve a person's account for transactions in penny
stocks, the broker or dealer must (i) obtain financial information and
investment experience and objectives of the person and (ii) make a reasonable
determination that the transactions in penny stocks are suitable for that person
and that person has sufficient knowledge and experience in financial matters to
be capable of evaluating the risks of transactions in penny stocks. The broker
or dealer must also deliver, prior to any transaction in a penny stock, a
disclosure schedule prepared by the Commission relating to the penny stock
market, which, in highlight form, (i) sets forth the basis on which the broker
or dealer made the suitability determination and (ii) that the broker or dealer
received a signed, written agreement from the investor prior to the transaction.
Disclosure also has to be made about the risks of investing in penny stocks in
both public offerings and in secondary trading, and about commissions payable to
both the broker-dealer and the registered representative, current quotations for
the securities and the rights and remedies available to an investor in cases of
fraud in penny stock transactions. Finally, monthly statements have to be sent
disclosing recent price information for the penny stock held in the account and
information on the limited market in penny stocks. In order to qualify for
listing on the Nasdaq SmallCap Market, a company must have at least (i) net
tangible assets of $4,000,000 or market capitalization of $50,000,000 or net
income for two of the last three years of $750,000; (ii) public float of
1,000,000 shares with a market value of $5,000,000; (iii) a bid price of $4.00;
(iv) three market makers; (v) 300 shareholders and (vi) an operating history of
one year or, if less than one year, $50,000,000 in market capitalization. For
continued listing on the Nasdaq Small Cap Market, a company must have at least
(i) net tangible assets of $2,000,000 or market capitalization of $35,000,000 or
net income for two of the last three years of $500,000; (ii) a public float of
500,000 shares with a market value of $1,000,000; (iii) a bid price of $1.00;
(iv) two market makers; and (v) 300 shareholders.




If, after
a merger or acquisition, the Company does not meet the qualifications for
listing on the Nasdaq SmallCap Market, the Company's securities may be traded in
the over-the-counter (“OTC”) market. The OTC market differs from national and
regional stock exchanges in that it (1) is not sited in a single location but
operates through communication of bids, offers and confirmations between
broker-dealers and (2) securities admitted to quotation are offered by one or
more broker-dealers rather than the “specialist” common to stock exchanges. The
Company may apply for listing on the NASD OTC Bulletin Board or may offer its
securities in what are commonly referred to as the “pink sheets” of the National
Quotation Bureau, Inc. To qualify for listing on the NASD OTC Bulletin Board, an
equity security must have one registered broker-dealer, known as the market
maker, willing to list bid or sale quotations and to sponsor the company for
listing on the Bulletin Board. If the Company is unable initially to satisfy the
requirements for quotation on the Nasdaq SmallCap Market or becomes unable to
satisfy the requirements for continued quotation thereon, and trading, if any,
is conducted in the OTC market, a shareholder may find it more difficult to
dispose of, or to obtain accurate quotations as to the market value of, the
Company's securities.





HOLDERS




There are
approximately 272 holders of the Company's Common Stock.





DIVIDENDS




The
Company has not paid any dividends to date, and has no plans to do so in the
immediate future.





RECENT
SALES OF UNREGISTERED SECURITIES




During
the past three years, the Company has not sold any securities that were not
registered, except as follows:




On March
6, 2006, the Company issued 15,000,000 shares of common stock to Alfred Booth,
its President in exchange for extinguishment of debt and for services rendered
to the Company over the past seven years and 500,000 shares to the Law Offices
of William B. Barnett for legal services rendered to the Company.







- 7
-






ITEM 6.MANAGEMENT’S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATIONS




The Company has been inactive since April 1,
2000. The Company has not had any revenues from operations during the last seven
fiscal years nor any interim period in the current fiscal year for which
financial statements are furnished in this Report or amendments thereto.
Therefore, the Company is not able to nor required to provide comparative
period-to-period analysis of its operations pursuant to Item 303 of Regulation
B.





Results
of Operation




The
Company did not have any operating income for the years ending December 31, 2007
and December 31, 2006, and the registrant recognized a net loss of $37,567in
2007 and $48,403 in 2006. Some general and administrative expenses, comprised of
costs mainly associated with legal, accounting and office.





Liquidity
and Capital Resources




At
December 31, 2007 the Company had no capital resources and will rely upon the
issuance of common stock and additional capital contributions from shareholders
to fund administrative expenses pending acquisition of an operating
company.





Plan
of Operations




We are
currently investigating to acquire a target company or business seeking the
perceived advantages of being a publicly held corporation. Our principal
business objective for the next 12 months and beyond such time will be to
achieve long-term growth potential through a combination with a business rather
than immediate, short-term earnings. The Company will not restrict our potential
candidate target companies to any specific business, industry or geographical
location and, thus, may acquire any type of business.




The
Company does not currently engage in any business activities that provide cash
flow. The costs of investigating and analyzing business combinations and
administering the Company’s business for the next 12 months is established to be
as follows:





(i)  
filing of Exchange Act reports (approximately $30,000);


(ii) 
costs relating to consummating an acquisition (approximately $30,000);
and


(iii)
payment of back sales taxes (approximately $36,000).




We
believe we will be able to meet these costs through additional amounts, as
necessary, to be loaned to or invested in the Company by our stockholders,
management or other investors. On March 1, 2006, our CEO and President, Alfred
Booth, loaned us $49,107 pursuant to an Agreement to Advance Funds dated March
1, 2006 between Mr. Booth and the Company.




The
Company may consider a business which has recently commenced operations, is a
developing company in need of additional funds for expansion into new products
or markets, is seeking to develop a new product or service, or is an established
business which may be experiencing financial or operating difficulties and is in
need of additional capital. In the alternative, a business combination may
involve the acquisition of, or merger with, a company which does not need
substantial additional capital, but which desires to establish a public trading
market for its shares, while avoiding, among other things, the time delays,
significant expense, and loss of voting control which may occur in a public
offering.




None of
our officers or directors have had any preliminary contact or discussions with
any representative of any other entity regarding a business combination with us.
Any target business that is selected may be a financially unstable company or an
entity in its early stages of development or growth, including entities without
established records of sales or earnings. In that event, we will be subject to
numerous risks inherent in the business and operations of financially unstable
and early stage or potential emerging growth companies. In addition, we may
effect a business combination with an entity in an industry characterized by a
high level of risk, and, although our management will endeavor to evaluate the
risks inherent in a particular target business, there can be no assurance that
we will properly ascertain or assess all significant risks.




Our
management anticipates that it will likely be able to effect only one business
combination, due primarily to our limited financing, and the dilution of
interest for present and prospective shareholders, which is likely to occur as a
result of our management's plan to offer a controlling interest to a target
business in order to achieve a tax-free reorganization. This lack of
diversification should be considered a substantial risk in investing in us,
because it will not permit us to offset potential losses from one venture
against gains from another.




The
Company anticipates that the selection of a business combination will be complex
and extremely risky. Because of general economic conditions, rapid technological
advances being made in some industries and shortages of available capital, our
management believes that there are numerous firms seeking even the limited
additional capital that we will have and/or the perceived benefits of becoming a
publicly traded corporation. Such perceived benefits of becoming a publicly
traded corporation include, among other things, facilitating or improving the
terms on which additional equity financing may be obtained, providing liquidity
for the principals of and investors in a business, creating a means for
providing incentive stock options or similar benefits to key employees, and
offering greater flexibility in structuring acquisitions, joint ventures and the
like through the issuance of stock. Potentially available business combinations
may occur in many different industries and at various stages of development, all
of which will make the task of comparative investigation and analysis of such
business opportunities extremely difficult and complex.




- 8
-






Sources
of Business Opportunities




The
Company intends to use various sources in its search for potential business
opportunities including its officers and directors, consultants, special
advisors, securities broker-dealers, venture capitalists, members of the
financial community and others who may present management with unsolicited
proposals. Because of the Company’s limited capital, it may not be able to
retain on a fee basis professional firms specializing in business acquisitions
and reorganizations. The Company will most likely have to rely on outside
sources, not otherwise associated with the Company that will accept their
compensation only after the Company has finalized a successful acquisition or
merger. The Company will rely upon the expertise and contacts of such persons,
use notices in written publications and personal contacts to find merger and
acquisition candidates, the exact number of such contacts are dependent upon the
skill and industriousness of the participants and the conditions of the
marketplace.  To date the Company has not engaged nor entered into any
definitive agreements nor understandings regarding retention of any consultant
to assist the Company in its search for business opportunities, nor is
management presently in a position to actively seek or retain any prospective
consultants for these purposes.




The
Company does not intend to restrict its search to any specific kind of industry
or business. The Company may investigate and ultimately acquire a venture that
is in its preliminary or development stage, is already in operation, or in
various stages of its corporate existence and development. Management cannot
predict at this time the status or nature of any venture in which the Company
may participate. A potential venture might need additional capital or merely
desire to have its shares publicly traded. The most likely scenario for a
possible business arrangement would involve the acquisition of, or merger with,
an operating business that does not need additional capital, but which merely
desires to establish a public trading market for its shares. Management believes
that the Company could provide a potential public vehicle for a private entity
interested in becoming a publicly held corporation without the time and expense
associated with a public offering.





Evaluation




Once the
Company has identified a particular entity as a potential acquisition or merger
candidate, management will seek to determine whether acquisition or merger is
warranted or whether further investigation is necessary. Such determination will
generally be based on management’s knowledge and experience, (limited solely to
working history) See “Item 5. Directors, Executive Officers Promoters and
Control Persons,” at or with the assistance of outside advisors and consultants
evaluating the preliminary information available to them. Management may elect
to engage outside independent consultants to perform preliminary analysis of
potential business opportunities. However, because of the Company’s limited
capital it may not have the necessary funds for a complete and exhaustive
investigation of any particular opportunity. Management will not devote full
time to finding a merger candidate, will continue to engage in outside unrelated
activities, and anticipates devoting no more than an average of five (5) hours
weekly to such undertaking.




In
evaluating such potential business opportunities, the Company will consider, to
the extent relevant to the specific opportunity, several factors including
potential benefits to the Company and its shareholders; working capital,
financial requirements and availability of additional financing; history of
operation, if any; nature of present and expected competition; quality and
experience of management; need for further research, development or exploration;
potential for growth and expansion; potential for profits; and other factors
deemed relevant to the specific opportunity.




Because
the Company has not located or identified any specific business opportunity as
of the date hereof, there are certain unidentified risks that cannot be
adequately expressed prior to the identification of a specific business
opportunity. There can be no assurance following consummation of any acquisition
or merger that the business venture will develop into a going concern or, if the
business is already operating, that it will continue to operate successfully.
Many of the potential business opportunities available to the Company may
involve new and untested products, processes or market strategies which may not
ultimately prove successful.





Form
of Potential Acquisition or Merger




Presently
the Company cannot predict the manner in which it might participate in a
prospective business opportunity. Each separate potential opportunity will be
reviewed and, upon the basis of that review, a suitable legal structure or
method of participation will be chosen. The particular manner in which the
Company participates in a specific business opportunity will depend upon the
nature of that opportunity, the respective needs and desires of the Company and
management of the opportunity, and the relative negotiating strength of the
parties involved. Actual participation in a business venture may take the form
of an asset purchase, lease, joint venture, license, partnership, stock
purchase, reorganization, merger or consolidation. The Company may act directly
or indirectly through an interest in a partnership, corporation, or other form
of organization; however, the Company does not intend to participate in
opportunities through the purchase of minority stock positions.




Because
of the Company’s current status of inactivity since 2000 and its concomitant
lack of assets and relevant operating history, it is likely that any potential
merger or acquisition with another operating business will require substantial
dilution to the Company’s existing shareholder’s interests. There will probably
be a change in control of the Company, with the incoming owners of the targeted
merger or acquisition candidate taking over control of the Company. Management
has not established any guidelines as to the amount of control it will offer to
prospective business opportunity candidates, since this issue will depend to a
large degree on the economic strength and desirability of each candidate, and
the corresponding relative bargaining power of the parties. However, management
will endeavor to negotiate the best possible terms for the benefit of the
Company’s shareholders as the case arises. Management may actively negotiate or
otherwise consent to the purchase of any portion of their common stock as a
condition to, or in connection with, a proposed merger or acquisition. In such
an event, existing shareholders may not be afforded an opportunity to approve or
consent to any particular stock buy-out transaction.





- 9
-
 
    Management
does not have any plans to borrow funds to compensate any persons, consultants,
or promoters in conjunction with its efforts to find and acquire or merge with
another business opportunity. Management does not have any plans to borrow funds
to pay compensation to any prospective business opportunity, or shareholders,
management, creditors, or other potential parties to the acquisition or merger.
In either case, it is unlikely that the Company would be able to borrow
significant funds for such purposes from any conventional lending sources. In
all probability, a public sale of the Company’s securities would also be
unfeasible, and management does not contemplate any form of new public offering
at this time. In the event that the Company does need to raise capital, it would
most likely have to rely on the private sale of its securities. Such a private
sale would be limited to persons exempt under the Commissions’ Regulation D or
other rule, or provision for exemption, if any applies; however, no private
sales are contemplated by the Company’s management at this time. If a private
sale of the Company’s securities is deemed appropriate in the future, management
will endeavor to acquire funds on the best terms available to the Company;
however, there can be no assurance that the Company will be able to obtain
funding when and if needed, or that such funding, if available, can be obtained
on terms reasonable or acceptable to the Company. The Company does not
anticipate using Regulation S promulgated under the Securities Act of 1933 to
raise any funds any time within the next year, subject only to its potential
applicability after consummation of a merger or acquisition.




In the
event of a successful acquisition or merger, a finder’s fee, in the form of cash
or securities of the Company, may be paid to persons instrumental in
facilitating the transaction. The Company has not established any criteria or
limits for the determination of a finder’s fee, although most likely an
appropriate finder’s fee will be negotiated between the parties, including the
potential business opportunity candidate, based upon economic considerations and
reasonable value as estimated and mutually agreed upon at that time. A finder’s
fee would only be payable upon completion of the proposed acquisition or merger
in the normal case, and management does not contemplate any other arrangement at
this time. Current management has not in the past used any particular
consultants, advisors or finders. Management has not actively undertaken a
search for, or retention of, any finder’s fee arrangement with any person. It is
possible that a potential merger or acquisition candidate would have its own
finder’s fee arrangement, or other similar business brokerage or investment
banking arrangement, whereupon the terms may be governed by a pre-existing
contract; in such case, the Company may be limited in its ability to affect the
terms of compensation, but most likely the terms would be disclosed and subject
to approval pursuant to submission of the proposed transaction to a vote of the
Company’s shareholders. Management cannot predict any other terms of a finder’s
fee arrangement at this time. If such a fee arrangement was proposed,
independent management and directors would negotiate the best terms available to
the Company so as not to compromise the fiduciary duties of the representative
in the proposed transaction, and the Company would require that the proposed
arrangement would be submitted to the shareholders for prior ratification in an
appropriate manner.










- 10
-








ITEM 7.     FINANCIAL STATEMENTS








ZEGARELLI
GROUP INTERNATIONAL, INC.


(a
development stage company)





INDEX
TO FINANCIAL STATEMENTS





AS
OF DECEMBER 31, 2007











Report of Independent Registered Public Accounting Firm
            12Balance Sheets
            13Statement of Operations and
      Retained Deficit
            14Statement of Stockholders Equity
            15Cash Flow Statement
            16Notes to the Financial Statements
            17
      - 19














- 11
-









REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM











Board of
Directors and Stockholders


Zegarelli
Group International, Inc.


Sun
Valley, California







We have
audited the accompanying balance sheets of Zegarelli Group International, Inc.
as of December 31, 2007 and 2006 and the related statements of income and
retained earnings and cash flows for the years then ended.  These
financial statements are the responsibility of the Company's
management.  Our responsibility is to express an opinion on these
financial statements based on our audits.





We
conducted our audits in accordance with auditing standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. The Company
has determined that it is not required to have, nor were we engaged to perform,
an audit of its internal control over financial reporting. Our audit included
consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the Company’s
internal control over financial reporting. Accordingly, we express no such
opinion. An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the consolidated financial statements. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall consolidated financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.





In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Zegarelli Group International, Inc.
as of December 31, 2007 and 2006, and the results of its operations and its cash
flows for the years then ended in conformity with accounting principles
generally accepted in the United States of America.





The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern.  As discussed in Note 1 to the
financial statements, the Company has been inactive and has an accumulated
deficit.  These conditions raise substantial doubt about its ability
to continue as a going concern.  Management’s plans in regard to these
matters are also described in Note 1.  The financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.












/s/ FARBER HASS HURLEY
LLP


FARBER
HASS HURLEY LLP


Granada
Hills, California





March 28,
2008











- 12
-









ZEGARELLI
GROUP INTERNATIONAL, INC.


(a
development stage company)


BALANCE
SHEETS


DECEMBER
31, 2007 AND 2006




2007
              
              
              2006ASSETSCash
              
              $
              --
              
              
              $
              --Due from affiliate
              
              
              --
              
              
              
              --Total
      Assets
              
              $
              --
              
              
              $
              --LIABILITIESAdvances from majority stockholder
              
              $
              28,970
              
              
              $
              4,107Accrued expenses
              
              
              47,704
              
              
              
              36,00076,674
              
              
              
              40,107COMMITMENTS,
      CONTINGENCIES AND SUBSEQUENT EVENTSSTOCKHOLDERS'
      DEFICITPreferred stock - $.01 par value, authorized – 1,000,000
      shares,
                issued and outstanding – 0 shares
              
              $
              --
              
              
              $
              --Common stock - no par value: authorized - 25,000,000 shares,
                issued and outstanding – 22,248,337 shares and 6,748,337
      shares,
                respectively
              
              
              7,436,101
              
              
              
              7,436,101Contributed capital
              
              
              918,231
              
              
              
              917,231Accumulated deficit
              
              
              (8,431,006
              )
              
              
              (8,393,439
              )(76,674
              )
              
              
              (40,107
              )$
              --
              
              
              $
              --


The
accompanying notes are an integral part of these financial
statements.







- 13
-









ZEGARELLI
GROUP INTERNATIONAL, INC.


(a
development stage company)


STATEMENTS
OF OPERATIONS


YEARS
ENDED DECEMBER 31, 2007 AND 2006




REVENUES
              
              $
              --
              
              
              $
              --ADMINISTRATIVE
      EXPENSES
              
              
              36,767
              
              
              
              47,603LOSS
      BEFORE INCOME TAXES
              
              
              (36,767
              )
              
              
              (47,603
              )PROVISION
      FOR INCOME TAXES
              
              
              800
              
              
              
              800NET
      LOSS
              
              $
              (37,567
              )
              
              $
              (48,403
              )WEIGHTED
      AVERAGE COMMON SHARES OUTSTANDING
              
              
              22,248,337
              
              
              
              19,495,605NET
      LOSS PER SHARE - BASIC AND DILUTED
              
              $
              (0.00
              )
              
              $
              (0.00
              )


The
accompanying notes are an integral part of these financial
statements.








- 14
-









ZEGARELLI
GROUP INTERNATIONAL, INC.


(a
development stage company)


STATEMENTS
OF STOCKHOLDERS' DEFICIT


YEARS
ENDED DECEMBER 31, 2007 AND 2006




Common
      Stock
              
              
              ContributedShares
              
              
              Amount
              
              
              Capital
              
              
              DeficitJanuary
      1, 2006
              
              
              6,748,337
              
              
              $
              7,389,601
              
              
              $
              916,231
              
              
              $
              (8,345,036
              )Contributed capital
              
              
              
              
              
              
              
              
              
              
              1,000Conversion of debt tocommon
      stock
              
              
              15,000,000
              
              
              
              45,000Common stock issuedfor
      services
              
              
              500,000
              
              
              
              1,500Net
      loss
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (48,403
              )December
      31, 2006
              
              
              22,248,337
              
              
              
              7,436,101
              
              
              
              917,231
              
              
              
              (8,393,439
              )Contributed capital
              
              
              
              
              
              
              
              
              
              
              1,000Net
      loss
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (37,567
              )December
      31, 2007
              
              
              22,248,337
              
              
              $
              7,436,101
              
              
              $
              918,231
              
              
              $
              (8,431,006
              )




The
accompanying notes are an integral part of these financial
statements.







- 15
-







ZEGARELLI
GROUP INTERNATIONAL, INC.


(a
development stage company)


STATEMENTS
OF CASH FLOWS


YEARS
ENDED DECEMBER 31, 2007 AND 2006





2007
              
              
              2006CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      loss
              
              $
              (37,567
              )
              
              $
              (48,403
              )Common
      stock issued for services
              
              
              --
              
              
              
              1,500Salary
      contributed as capital
              
              
              1,000
              
              
              
              1,000Increase
      in accrued expenses
              
              
              11,704
              
              
              
              --Net
      cash used by operating activities
              
              
              (24,863
              )
              
              
              (45,903
              )CASH
      FLOWS FROM FINANCING ACTIVITIES:Advances
      from majority stockholder
              
              
              24,863
              
              
              
              45,903Net
      cash provided by financing activities
              
              
              24,863
              
              
              
              45,903NET
      INCREASE (DECREASE) IN CASHAND
      CASH EQUIVALENTSCASH
      AND CASH EQUIVALENTS – Beginning
              
              
              --
              
              
              
              --CASH
      AND CASH EQUIVALENTS – Ending
              
              $
              --
              
              
              $
              --








The
accompanying notes are an integral part of these financial
statements.







- 16
-







ZEGARELLI GROUP INTERNATIONAL,
INC.


NOTES
TO THE FINANCIAL STATEMENTS


DECEMBER
31, 2007 AND 2006






1.      OPERATIONS
AND ABILITY TO CONTINUE AS A GOING CONCERN





Zegarelli
Group International, Inc. (the “Company”) was incorporated on February 27, 1990.
The Company manufactured cosmetic products for private label distributors
throughout the United States. The Company ceased operations and has been
inactive since 2002. The Company was a publicly-traded company listed on the OTC
Bulletin Board (“pink-sheets”). On November 9, 1998, the Company filed a Form 15
with the Securities and Exchange Commission ("SEC") terminating its registration
under Section 12(g) of the Securities Act of 1934, which relieved the
Company of its requirement to file reports with the SEC. Even though the Company
has not made any further filings with the SEC since 1998, the Company has had
some minimal stock trading activity.





The
Company’s board is now considering merging with another entity that has viable
operations. As such, the existing company is not going to continue as a going
concern after any merger. These financial statements do not contain any
adjustments that would be necessary should the Company not continue as a going
concern.




2.      SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES





Revenue Recognition —  The Company recognizes
revenue from product sales upon shipment to the customer. The Company recognizes
revenue in accordance with SEC Staff Accounting Bulletin 104.





Concentration of Credit Risk
—  Financial instruments,
which potentially subject the company to concentrations of credit risk, consist
principally of cash and cash equivalents. At December 31, 2007 and 2006,
substantially all cash and cash equivalents were on deposit at one financial
institution.





Cash and Cash Equivalents
—  Cash equivalents
consist of highly liquid investments with original maturities of three months or
less.





Research and Development Costs
—  The Company expenses
research and development costs as incurred, which is presented as a separate
line on the statement of operations.





Advertising Costs —  Costs incurred for
producing and communicating advertising are expensed when incurred and included
in selling, general and administrative expenses. Advertising expense amounted to
$0  in 2007 and 2006, respectively.




Property and Equipment —  Property and equipment
are stated at cost. Major renewals and improvements are charged to the asset
accounts while replacements, maintenance and repairs, which do not improve or
extend the lives of the respective assets, are expensed. At the time property
and equipment are retired or otherwise disposed of, the asset and related
accumulated depreciation accounts are relieved of the applicable amounts. Gains
or losses from retirements or sales are credited or charged to income. Property
and equipment are depreciated over the useful lives of the asset ranging from 3
years to 5 years under the straight line method.




Intangible Assets —  Intangible assets are
amortized on a straight-line basis over the estimated useful lives of the assets
which range from five to twenty years.




Earnings Per Share —  The Company determines
earnings per share in accordance with Statement of Financial Accounting
Standards No. 128, Earnings   Per Share (“SFAS 128”). Basic
earnings (loss) per share is computed by dividing net income (loss) available to
common stockholders by the weighted average number of common shares outstanding
during the period. Diluted earnings (loss) per share reflects the potential
dilution that could occur if securities or other contracts to issue common stock
were exercised or converted into common stock or resulted in the issuance of
common stock that then shared in the earnings of the entity.




Stock Option Plan —  During the years ended
December 31, 2007 and 2006, the Company has not had any stock option plan, nor
any outstanding options or warrants. The Company has adopted the fair value
method of accounting for stock based compensation in accordance with SFAS
No. 123r, Accounting for
Stock-Based Compensation,





Impairment of Long-Lived Assets and
Assets to be Disposed of - The Company adopted the provisions of SFAS No.
121, Accounting for the
Impairment of   Long-Lived Assets and for Long-Lived
Assets to Be Disposed of. This Statement requires that long-lived assets
and certain identifiable intangibles be reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amount of an asset may
not be recoverable. Recoverability of assets to be held and used is measured by
a comparison of the carrying amount of an asset to future net cash flows
expected to be generated by the asset. If such assets are considered to be
impaired, the impairment to be recognized is measured as the amount by which the
carrying amounts of the assets exceed the fair value of the assets. Assets to be
disposed of are reported at the lower of the carrying amount or fair value less
costs to sell.





- 17
-


ZEGARELLI
GROUP INTERNATIONAL, INC.
 NOTES
TO THE FINANCIAL STATEMENTS
 DECEMBER
31, 2007 AND 2006




Income Taxes - Income taxes
are accounted for under the asset and liability method. Deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases and operating loss and tax credit
carry forwards. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.




Use of Estimates - Management
of the Company has made a number of estimates and assumptions relating to the
reporting of assets and liabilities and the disclosure of contingent assets and
liabilities to prepare these financial statements in conformity with generally
accepted accounting principles. Actual results could differ from those
estimates.





Fair Value of Financial
Instruments - The carrying values of cash equivalents, accounts
receivable, accounts payable, short-term debt to a related party and accrued
liabilities and those potentially subject to valuation risk at December 31, 2006
and December 31, 2007 approximated fair value due to their short maturity or
nature.




Recent Accounting
Pronouncements In February 2007, the Financial Accounting Standards Board
(“FASB”) issued SFAS No. 159, “The Fair Value Option for Financial Assets and
Financial Liabilities” (“SFAS 159”). SFAS 159 provides companies with an option
to report selected financial assets and liabilities at fair value and
establishes presentation and disclosure requirements designed to facilitate
comparisons between companies that choose different measurement attributes for
similar types of assets and liabilities. SFAS 159 will be effective for us
beginning January 1, 2008. We are currently evaluating the impact of adopting
SFAS 159 but do not believe that it will have a material impact on our financial
statements.




In
December 2007, the Financial Accounting Standards Board (“FASB”) issued SFAS No.
141(R), “Business
Combinations” and SFAS No. 160, “Accounting and Reporting of
Noncontrolling Interests in Consolidated Financial Statements – an amendment to
ARB No. 51.”These Standards will significantly change the accounting and
reporting for business combination transactions and noncontrolling (minority)
interests in consolidated financial statements, including capitalizing at the
acquisition date the fair value of acquired in-process research and development,
and, remeasuring and writing down these assets, if necessary, in subsequent
periods during their development.  These new standards will be applied
prospectively for business combinations that occur on or after January 1, 2009,
except that presentation and disclosure requirements of SFAS 160 regarding
noncontrolling interests shall be applied retroactively.  The
implementation of these standards is not expected to have a material impact on
the consolidated statements of operations or financial position.





In
December 2009, the FASB ratified EITF No. 07-1, “Accounting for Collaborative
Agreements.” This standard provides guidance regarding financial
statement presentation and disclosure of collaborative agreements, as defined,
which includes arrangements regarding the developing and commercialization of
products and product candidates.  EITF 07-01 is effective as of
January 1, 2009.  Implementation of this standard is not expected to
have a material impact on the consolidated statements of operations or financial
position.





In June
2007, the FASB ratified EITF 07-3, “Accounting for Nonrefundable Advance
Payments for Goods or Services to be used in Future Research and Development
Activities.” This standard requires that nonrefundable advance payments
for goods and services that will be used or rendered in future research and
development activities pursuant to executory contractual arrangements be
deferred and recognized as an expense in the period the related goods are
delivered or services are performed.  EITF No. 07-3 became effective
as of January 1, 2008 and it did not have a material impact on the consolidated
statements of operations or financial position upon adoption.





In
September 2006, the FASB issued SFAS No. 157 “Fair Value Measurements”
(“SFAS 157”), which defines fair value, establishes a framework for
measuring fair value in generally accepted accounting principles, and expands
disclosures about fair value measurements. SFAS 157 is effective in fiscal
years beginning after November 15, 2007.  Adoption of this
standard did not have a material impact on our consolidated statements of
operations or financial position.




3.
            RELATED
      PARTY TRANSACTIONS





The
majority stockholder has advanced the Company funds to bring it into compliance
with various regulations and tax laws. During the years ended December 31, 2007
and 2006, this stockholder advanced $24,863 and $45,903, respectively. No
interest expense was accrued on these advances. In March 2006, the Company
converted $45,000 of debt due to the majority stockholder into 15,000,000 shares
of common stock. The balance of advances due to the majority stockholder
amounted to $28,970 and $4,107 as of December 31, 2007 and 2006,
respectively.





The
majority stockholder receives a salary of $1,000 a year which is contributed
back to the Company as contributed capital.




4.      COMMITMENTS,
CONTINGENCIES AND SUBSEQUENT EVENTS





The
Company is in negotiations with the California State Board of Equalization
regarding the sale and transfer of net assets in 1997. As of December 31,
2007, the majority stockholder estimated that this dispute will be settled for
approximately $36,000, which will be loaned to the Company by the
stockholder.


- 18
-






ZEGARELLI
GROUP INTERNATIONAL, INC.


NOTES
TO THE FINANCIAL STATEMENTS


DECEMBER
31, 2007 AND 2006









5.      INCOME
TAXES





The
Company files a both Federal and California income tax returns. Income tax
expense for the years ended December 31, 2007 and 2006 consisted of the
following:




2007
            
            
            2006State franchise tax
            $
            800
            
            
            $
            800Federal taxes
            
            (0
            )
            
            
            (0
            )Total
            $
            800
            
            
            $
            800





Income
tax expense for the years ended December 31, 2007 and 2006 differed from the
amounts computed by applying the U.S. federal income tax rate of 34 percent to
loss before income taxes primarily due to the generation of additional net
operating loss carry forwards for which no net tax benefit has been provided
(full valuation allowance).





The tax
effects of temporary differences that give rise to significant portions of the
deferred tax assets at December 31, 2007 and 2006 is composed primarily of the
net loss carry forwards. The net change in the total valuation allowance for the
year ended December 31, 2007 and 2006 was insignificant. In assessing the
realizability of deferred tax assets, management considers whether it is more
likely than not that some portion or all of the deferred tax assets will not be
realized. The ultimate realization of deferred tax assets is dependent upon the
generation of future taxable income during the periods in which those temporary
differences become deductible. Management considers projected future taxable
income and tax planning strategies in making this assessment. Based upon the
level of historical taxable losses, management believes it is more likely than
not the Company will not realize the benefits of these deductible differences
and has established a valuation allowance to fully reserve the deferred tax
assets at December 31, 2007 and 2006. Additionally, the ultimate realizability
of net operating losses may be limited by change of control provisions under
Section 382 of the Internal Revenue Code.




At
December 31, 2007, the Company had net operating loss carry forwards for Federal
income tax purposes of approximately $3,551,000 which are available to offset
future Federal taxable income, if any, expiring through 2022.










- 19
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ITEM 8.   CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE





Our
accountant is Farber Hass Hurley LLP, independent certified public accountants.
We do not presently intend to change accountants. At no time have there been any
disagreements with such accountants regarding any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure.




ITEM 8A.   CONTROLS AND
PROCEDURES


ITEM 8A(T). MANAGEMENT'S ANNUAL
REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING.
 
 Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting for the company in accordance with as defined
in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control
over financial reporting is designed to provide reasonable assurance regarding
the (i) effectiveness and efficiency of operations, (ii) reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles, and (iii)
compliance with applicable laws and regulations.  Our internal controls
framework is based on the criteria set forth in the Internal Control -
Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO).
 
 Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
 
 Management's
assessment of the effectiveness of the small business issuer's internal control
over financial reporting is as of the year ended December 31, 2007. We believe
that internal control over financial reporting is effective. We have not
identified any, current material weaknesses considering the nature and extent of
our current operations and any risks or errors in financial reporting under
current operations.
 
 This
annual report does not include an attestation report of the company's registered
public accounting firm regarding internal control over financial reporting.
Management's report was not subject to attestation by the Company's registered
public accounting firm pursuant to temporary rules of the SEC that permit the
Company to provide only management's report in this annual report.


Evaluation
of disclosure controls and procedures




Under the
supervision and with the participation of our management, including our
principal executive officer and principal financial officer, we conducted an
evaluation of our disclosure controls and procedures, as such term is defined
under Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities
Exchange Act of 1934, as amended (“Exchange Act”), as of December 31, 2007.
Based on this evaluation, our principal executive officer and principal
financial officers have concluded that our disclosure controls and procedures
are effective to ensure that information required to be disclosed by us in the
reports we file or submit under the Exchange Act is recorded, processed,
summarized, and reported within the time periods specified in the Securities and
Exchange Commission’s rules and forms and that our disclosure and controls are
designed to ensure that information required to be disclosed by us in the
reports that we file or submit under the Exchange Act is accumulated and
communicated to our management, including our principal executive and principal
financial officers, or persons performing similar functions, as appropriate to
allow timely decisions regarding required disclosure.





Changes
in internal controls





We have
not made any changes to our internal controls subsequent to the Evaluation Date.
We have not identified any deficiencies or material weaknesses or other factors
that could significantly affect these controls, and therefore, no corrective
action was taken.





PART
III





ITEM 9.   DIRECTORS, EXECUTIVE OFFICERS,
PROMOTERS AND CONTROL PERSONS: COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE
ACT




The
following table sets forth as of December 31, 2007, the name, age, and position
of each executive officer and director and the term of office of each director
of the Corporation.





Name
            
            Position
            
            Director
      or Officer SinceAlfred
      E. Booth, Jr.
            
            President,
      Chief Executive Officer, and Chairman of the Board
            
            April
      1986Judith
      E. Zegarelli
            
            Vice
      President, Secretary, and Director
            
            April
      1986Marie
      Booth
            
            Chief
      Financial Officer and Director
            
            August
      2006





All
officers hold their positions at the will of the Board of Directors. All
directors hold their positions for one year or until successors are elected and
qualified.





Set forth
below is certain biographical information regarding the Company’s executive
officer and director:





Alfred E. Booth, Jr., Chief Executive
Officer and Chairman of the Board is a co-founder of the Company and has
been its President and member of its Board of Directors since its inception in
April of 1986. Mr. Booth was appointed Chairman of the Board and Chief Executive
Officer in September 1989. From January 1983 to April 1986, Mr. Booth
distributed cosmetics through beauty salons, retail outlets, and direct mail for
Preview Products Cosmetics, Inc., a company which he co-founded with Ms.
Zegarelli. For the past three years Mr. Booth has been the President/CEO of
Color Factory, Inc., a private company engaged in the manufacture of
cosmetics.





Judith E. Zegarelli, Vice President,
Secretary, and Director is a co-founder of the Company and has been the
Secretary and Director since 1989 to present and Vice President and director of
the Company since April 1986. Since 1989, Ms. Zegarelli served as Vice President
of New Product Development and Infomercial Sales. For the past three years Ms.
Zegarelli has been a Senior Vice President and principal shareholder of the
Color Factory, Inc., a private company engaged in the manufacture of
cosmetics.





Marie Booth, Chief Financial Officer
and Director has been a director of the Company since July 2006. Mrs.
Booth was appointed Chief Financial Officer in September 2006. Mrs. Booth has
worked in the business with Alfred Booth since July 1997. Mrs. Booth is the wife
of Alfred Booth.







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Conflicts
of Interest




Mr. Booth
will be primarily responsible for seeking, evaluating, negotiating and
consummating a business combination with a target company which may result in
terms providing benefits to Mr. Booth. Demands may be placed on the time of Mr.
Booth which will detract from the amount of time he is able to devote to the
Company. Mr. Booth intends to devote as much time to the activities of the
Company as required; however, should such a conflict arise, there is no
assurance that Mr. Booth would not attend to other matters prior to those of the
Company. Mr. Booth projects that initially up to 20 hours per month of his time
may be spent locating a target company which amount of time would increase when
the analysis of, and negotiations and consummation with, a target company are
conducted. Mr. Booth owns 15,825,000 shares of common stock of the Company which
represents 71.1% of the total issued and outstanding shares of the Company and
is the CEO, President, director and controlling shareholder of the Company. At
the time of a business combination, management expects that some or all of the
shares of common stock owned by Mr. Booth will be purchased by the target
company or retired by the Company. The amount of common stock sold, or continued
to be owned, by Mr. Booth cannot be determined at this time. The terms of a
business combination may include such terms as Mr. Booth remaining a director or
an officer of the Company. The terms of a business combination may provide for a
payment of cash, or otherwise, to Mr. Booth for the purchase of all or part of
the common stock of the Company by a target company, or for services rendered
incident to or following a business combination. Mr. Booth would directly
benefit from such employment or payment. Such benefits may influence Mr. Booth’s
choice of a target company. The Company may agree to pay finder's fees, as
appropriate and allowed, to unaffiliated persons who may bring a target company
to the Company where that reference results in a business combination. No
finder's fee of any kind will be paid by the Company to management or promoters
of the Company or to their associates or affiliates. No loans of any type have,
or will be, made by the Company to management or promoters of the Company or to
any of their associates or affiliates. The Company will not enter into a
business combination, or acquire any assets of any kind for its securities, in
which management or promoters of the Company or any affiliates or associates
have any interest, direct or indirect.




Management
has adopted certain policies involving possible conflicts of interest, including
prohibiting any of the following transactions involving management, promoters,
shareholders or their affiliates: (i) any lending by the Company to such
persons; (ii) the issuance of any additional securities to such persons prior to
a business combination; (iii) the entering into any business combination or
acquisition of assets in which such persons have any interest, direct or
indirect; or (iv) the payment of any finder's fees to such persons. These
policies have been adopted by the Board of Directors of the Company and any
changes in these provisions require their approval. Management does not intend
to propose any such action and does not anticipate that any such action will
occur. There are no binding guidelines or procedures for resolving potential
conflicts of interest. Failure by management to resolve conflicts of interest in
favor of the Company could result in liability of management to the Company.
However, any attempt by shareholders to enforce a liability of management to the
Company would most likely be prohibitively expensive and time
consuming.





Term
of Office




Our
directors are appointed for a one-year term to hold office until the next annual
general meeting of our shareholders or until removed from office in accordance
with our bylaws. Our officers are appointed by our board of directors and hold
office until removed by the board.




All
officers and directors listed above will remain in office until the next annual
meeting of our stockholders, and until their successors have been duly elected
and qualified. There are no agreements with respect to the election of
Directors. We have not compensated our Directors for service on our Board of
Directors, any committee thereof, or reimbursed for expenses incurred for
attendance at meetings of our Board of Directors and/or any committee of our
Board of Directors. Officers are appointed annually by our Board of Directors
and each Executive Officer serves at the discretion of our Board of Directors.
We do not have any standing committees. Our Board of Directors may in the future
determine to pay Directors’ fees and reimburse Directors for expenses related to
their activities.




None of
our Officers and/or Directors have filed any bankruptcy petition, been convicted
of or been the subject of any criminal proceedings or the subject of any order,
judgment or decree involving the violation of any state or federal securities
laws within the past five (5) years.




Audit Committee




We do not
have a standing audit committee of the Board of Directors. Management has
determined not to establish an audit committee at present because of our limited
resources and limited operating activities do not warrant the formation of an
audit committee or the expense of doing so. We do not have a financial expert
serving on the Board of Directors or employed as an officer based on
management’s belief that the cost of obtaining the services of a person who
meets the criteria for a financial expert under Item 401(e) of Regulation S-B is
beyond its limited financial resources and the financial skills of such an
expert are simply not required or necessary for us to maintain effective
internal controls and procedures for financial reporting in light of the limited
scope and simplicity of accounting issues raised in its financial statements at
this stage of its development.




Certain
Legal Proceedings




No
director, nominee for director, or executive officer of the Company has appeared
as a party in any legal proceeding material to an evaluation of his ability or
integrity during the past five years.




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Compliance
With Section 16(A) Of The Exchange Act.




Section
16(a) of the Exchange Act requires the Company’s officers and directors, and
persons who beneficially own more than 10% of a registered class of the
Company’s equity securities, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission and are required to
furnish copies to the Company. To the best of the Company’s knowledge, any
reports required to be filed were timely filed in fiscal year ended December 31,
2007.





Code of Ethics




To date,
we have not adopted a Code of Ethics applicable to our principal executive
officer and principal financial officer because the Company has no meaningful
operations. The Company does not believe that a formal written code of ethics is
necessary at this time. We expect that the Company will adopt a code of ethics
if and when the Company successfully completes a business combination that
results in the acquisition of an on-going business and thereby commences
operations.





ITEM 10.  EXECUTIVE
COMPENSATION





Compensation
of Executive Officers





The
following summary compensation table sets forth all compensation awarded to,
earned by, or paid to our chief executive officer during the fiscal years ended
December 31, 2007 and 2006:





SUMMARY
COMPENSATION TABLE





Name
      and Principal Position
            Year
            
            Salary
              ($)*
            
            Bonus
              ($)
            
            Stock
      Awards
              ($)
            
            Option
      Awards
              ($)
            
            Non-Equity
      Incentive Plan Compensation ($)
            
            Non-Qualified
      Deferred Compensation Earnings
              ($)
            
            
            All
      Other Compensation
              ($)
            
            
            Totals
              ($)Alfred
      E. Booth, Jr.
              President,
            2007
            
            $
            0
            
            
            0
            
            
            0
            
            
            
            0
            
            
            0
            
            
            0
            
            
            
            0
            
            
            $
            0Chief
      Executive Officer
            2006
            
            $
            0
            
            
            0
            
            
            0
            
            
            
            0
            
            
            0
            
            
            0
            
            
            
            0
            
            
            $
            0





*  None
of our officers and directors receives any compensation for services rendered,
have not received such compensation in the past six years, and are not accruing
any compensation pursuant to any agreement with our Company except for $1,000
per year being accrued for Mr. Booth since 2005. Our officers and directors are
reimbursed for expenses incurred on our behalf. Our officers and directors will
not receive any finder’s fee as a result of their efforts to implement the
business plan outlined herein; however, our officers and directors anticipate
receiving benefits as beneficial shareholders of our common stock.




We have
not adopted any retirement, pension, profit-sharing, stock-option or insurance
programs or other similar programs for the benefit of our
employees.




There are
no employment contracts between the Company and any of its officers or
directors.




There are
no compensatory plans or arrangements, including payments to be received from
the Company, with respect to any officer and director set out above which would
in any way result in payments to any such person’s employment with the Company
or any change in control of the Company, or a change in the person’s
responsibilities following a change in control of the Company.





ITEM
11.SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT




The
following table sets forth as of December 31, 2007, each person known by us to
be the beneficial owner of five percent or more of the Company's Common Stock,
all directors individually and all directors and officers of the Company as a
group. Except as noted, each person has sole voting and investment power with
respect to the shares shown.





Name
      of
              Beneficial
      Owner
            
            Amount
      and Nature
              of
      Beneficial Ownership
            
            Percentage
              of
      ClassAlfred
      E. Booth, Jr. (1)
            
            15,825,000
      (1)
            
            71.1%Judith
      E. Zegarelli
            
            632,441
            
            2.8%Marie
      Booth (1)
            
            -0-
      (1)
            
            -0-Total
      Officers and Directors as a Group  (3 Persons)
            
            16,457,441
            
            73.9%





(1) Alfred
Booth and Marie Booth are husband and wife and they are both the beneficial
owner of 15,825,000 shares of common stock.




There are
no contracts or other arrangements that could result in a change of control of
the Company.





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ITEM 12.   CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS.




Our
policy is that a contract or transaction either between the Company and a
director, or between a director and another company in which he is financially
interested is not necessarily void or void-able if the relationship or interest
is disclosed or known to the board of directors and the shareholders are
entitled to vote on the issue, or if it is fair and reasonable to our
Company.




In March
2006, Mr. Booth, the CEO, President and major shareholder of the Company
advanced the Company $49,107 pursuant to an Agreement to Advance Funds. The
Company executed a promissory note to Mr. Booth, with interest at 8% payable
quarterly.




The
aforementioned note may be prepaid at any time, without premium or penalty. The
note is immediately due and payable, without notice or demand, upon or at any
time after the occurrence or existence of any one or more of the “Events of
Default” listed in the promissory note. We are using these funds to make
payments for our expenses, prior to the consummation of a business combination,
to the extent such expenses are not deferred and either would exceed our
otherwise available funds or would render us effectively insolvent upon our
payment. Pursuant to the terms of the Advance Agreement, the loan carries an
interest rate of 8% per annum, documented by the promissory note and payable
only upon consummation of a business transaction. Upon consummation of a
business combination, we or the target may repay Mr. Booth for this loan, and
any subsequent loans made under the Agreement to Advance Funds, out of the
proceeds of an offering and/or from funds furnished by the target.





We
currently use the offices of management at no cost to us. Management has agreed
to continue this arrangement until we complete an acquisition or merger.





ITEM 13.   EXHIBITS




Exhibit Number
              
              Description3.1*
              
              Certificate
      of Incorporation of the Company and amendments thereto3.2*
              
              Bylaws
      of the Company and amendments thereto10.1*
              
              Agreement
      to Advance Funds between the Company and Alfred Booth dated March 1,
      200610.2*
              
              Promissory
      Note between the Company and Alfred Booth dated March 1,
    200631.1
              
              Certification
      of Chief Executive Officer pursuant to Section 302(a) of the
      Sarbanes-Oxley Act of 200231.2
              
              Certification
      of Chief Financial Officer pursuant to Section 302(a) of the
      Sarbanes-Oxley Act of 200232.1
              
              Certification
      of Chief Executive Officer and Chief Financial Officer pursuant to Section
      906 of the Sarbanes-Oxley Act of
2002




*Incorporated
by reference to Form 10SB filed on July 31, 2007





ITEM 14.PRINCIPAL ACCOUNTANT FEES AND
SERVICES




Audit
Fees




For the
Company’s fiscal year ended December 31, 2007, we were billed approximately
$14,000 for professional services rendered for the audit of our financial
statements and the review of financial statements included in our periodic and
other reports filed with the Securities and Exchange Commission.




Tax
Fees




For the
Company’s fiscal year ended December 31, 2007, we were not billed for
professional services rendered for tax compliance, tax advice, and tax
planning.




All
Other Fees




The
Company did not incur any other fees related to services rendered by our
principal accountant for the fiscal year ended December 31, 2007.








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SIGNATURES






Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, there unto duly authorized.






Date:
            March 31,
      2008
            
            By:
            /s/Alfred
      E. Booth, Jr.Alfred
      E. Booth, Jr., President and
Director






In
accordance with the Securities Exchange Act of 1934 this Annual Report has been
signed below by the following persons on behalf of our Company and in the
capacities and on the dates indicated:






ZEGARELLI
GROUP INTERNATIONAL, INC.






Date:
            March
      31, 2008
            
            By:
            /s/Alfred
      E. Booth, Jr.Alfred
      E. Booth, Jr., President and DirectorDate:
            March
      31, 2008
            
            By:
            /s/Marie
      BoothMarie
      Booths, Chief Financial Officer and
Director




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