United
States


Securities
and Exchange Commission


Washington,
D.C. 20549





Form
10-K/A


(AMENDMENT
NO. 1)




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




For
the fiscal year ended December 31, 2008


OR




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




For the
transition period from _______________to_________________





Commission
File Number 001-12000




YASHENG
ECO-TRADE CORPORATION


(Name
of  issuer as specified in its charter)





VORTEX
RESOURCES CORP.


(Form
name of issuer as specified in its charter)


Delaware
                  
                  13-3696015(State
      or other jurisdiction of
                  
                  (I.R.S.
      Employerincorporation
      or organization)
                  
                  Identification
      No.)




9107
Wilshire Blvd., Suite 450, Beverly Hills, CA 90210


(Address
of principal executive offices)




Issuer’s
telephone number, including area code: (310) 461-3559


Issuer’s
facsimile number, including area code: (310) 461-1901





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 per share




Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. Yes o No x




Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15 (d) of the Act. Yes o No x





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




Indicate
by checkmark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirement for
the past 90 days. Yes x  No o





Indicate
by check mark if disclosure of delinquent filers in response to Item 405 of
Regulation S-K is not contained herein, and 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-K/A or any amendment to
this Form 10-K/A. o




Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company. See
definition of “accelerated filer, large accelerated filer or smaller reporting
company” in Rule 12b-2 of the Exchange Act. (Check one):




Large
accelerated filer    o   Accelerated
filer    o  
Non-accelerated filer   o   Smaller
Reporting Company    x





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





The
aggregate market value of the registrant’s common stock (the only class of
voting  stock) held by non-affiliates of the Company as of December
31, 2008 was $90.563, based on the closing price of the registrant’s common
stock on such date of $0.02 as reported by the Over the Counter Bulletin
Board.




At August
19, 2009, 113,403,807 shares of common stock were issued and
outstanding.












TABLE
OF CONTENTS





PagePART
      IITEM
      1.
                                                                                                  DESCRIPTION
      OF BUSINESS
                                                                                                  
                                                                                                  3ITEM
      1A.
                                                                                                  RISK
      FACTORS
                                                                                                  
                                                                                                  6ITEM
      1B.
                                                                                                  UNRESOLVED
      STAFF COMMENTS
                                                                                                  
                                                                                                  7ITEM
      2.
                                                                                                  PROPERTIES
                                                                                                  
                                                                                                  7ITEM
      3.
                                                                                                  LEGAL
      PROCEEDINGS
                                                                                                  
                                                                                                  7ITEM
      4.
                                                                                                  SUBMISSION
      OF MATTERS TO A VOTE OF SECURITY HOLDERS
                                                                                                  
                                                                                                  8PART
      IIITEM
      5.
                                                                                                  MARKET
      FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER
    MATTERS
                                                                                                  
                                                                                                  9ITEM
      6.
                                                                                                  SELECTED
      FINANCIAL DATA
                                                                                                  
                                                                                                  14ITEM
      7.
                                                                                                  MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS
                                                                                                  
                                                                                                  14ITEM
      7A.
                                                                                                  QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
                                                                                                  
                                                                                                  22ITEM
      8.
                                                                                                  FINANCIAL
      STATEMENTS
                                                                                                  
                                                                                                  22ITEM
      9.
                                                                                                  CHANGES
      IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURE
                                                                                                  
                                                                                                  23ITEM
      9A
                                                                                                  CONTROLS
      AND PROCEDURES
                                                                                                  
                                                                                                  23ITEM
      9B
                                                                                                  OTHER
      INFORMATION
                                                                                                  
                                                                                                  26PART
      IIIITEM
      10.
                                                                                                  DIRECTORS,
      EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION
      16(A) OF THE EXCHANGE ACT
                                                                                                  
                                                                                                  28ITEM
      11.
                                                                                                  EXECUTIVE
      COMPENSATION
                                                                                                  
                                                                                                  31ITEM
      12.
                                                                                                  SECURITY
      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
                                                                                                  
                                                                                                  36ITEM
      13.
                                                                                                  CERTAIN
      RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
      INDEPENDENCE
                                                                                                  
                                                                                                  38ITEM
      14.
                                                                                                  PRINCIPAL
      ACCOUNTANT FEES AND SERVICES
                                                                                                  
                                                                                                  39ITEM
      15.
                                                                                                  EXHIBITS
                                                                                                  
                                                                                                  40SIGNATURES
                                                                                                  
                                                                                                  44INDEX
      TO EXHIBITS




EXPLANATORY
NOTE





Vortex
Resources Corp. (hereinafter referred to as “us,” “we,” or the “Company”) is
filing this Amendment No. 1 on Form 10-K/A (the “First Amendment”) to its Annual
Report for the fiscal year ended December 31, 2008, which was filed with the
Securities and Exchange Commission (“Commission”) on April 15, 2009 (the
“Original Report”) in response to certain comments raised by the staff of the
Commission.





This
First Amendment reflects material subsequent events which occurred after the
filing of the Original Report. You should read this First Amendment together
with our other reports that update and supersede the information contained in
this First Amendment.


2





ITEM
1.           DESCRIPTION OF
BUSINESS




History
of Business




Yasheng
Eco-Trade Corporation (formerly known as (“f/k/a”) Vortex Resources Corp,,
Euroweb International Corp. and Emvelco Corp.) (“we”, “us”, “Vortex” or the
“Company”), is a Delaware corporation and was organized on November 9, 1992. We
were a development stage company through December 1993.”. On January 8, 2007,
the Company changed its name from “Euroweb International Corp.” to “Emvelco
Corp.”.  On August 19, 2008, the Company changed its name from
“Emvelco Corp.” to “Vortex Resources Corp”.





The
Company’s holdings in its subsidiaries at December 31, 2008 was as
follows:




100% of
DCG – discontinued operations


50% of
Vortex Ocean One, LLC


Approximately
7% of Micrologic, (held by EA Emerging Ventures Corp, a 100% owned subsidiary of
the Company)





The above
subsidiaries are presently dormant and the Company is presently conducting its
business, the development of the logistics center, through Yasheng Eco-Trade
Corporation.





Going
Concern





The
accompanying consolidated financial statements included in this Annual Report on
Form 10-K/A include an opinion from Robinson, Hill & Co., the Company’s
independent auditors, that there is substantial doubt as to our ability to
continue as a going concern. As discussed in Note 13 to the financial
statements, the financing of the Company’s projects is dependent on the future
effect of the so called sub-prime mortgage crisis on financial
institutions.  This sub-prime crisis may affect the availability and
terms of financing of the completion of the projects as well as the availability
and terms of financing may affect the Company’s ability to obtain relevant
financing, if required.    The financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.





General
Business Strategy





Our
business plan since 1993 has been identifying, developing and operating
companies within emerging industries for the purpose of consolidation and sale
if favorable market conditions exist. Although the Company primarily focuses on
the operation and development of its core businesses, the Company pursues
consolidations and sale opportunities in a variety of different industries, as
such opportunities may present themselves, in order to develop its core
businesses as well as outside of its core business.  The Company may
invest in other unidentified industries that the Company deems profitable. If
the opportunity presents itself, the Company will consider implementing its
consolidation strategy with its subsidiaries and any other business that it
enters into a transaction.  In January 2009, the Company commenced the
development of a logistics center.





Yasheng
Group Logistics Center




On
January 20, 2009, the Company entered into a non-binding Term Sheet (the “Term
Sheet”) with Yasheng Group, Inc., a California corporation
(“Yasheng”).  Yasheng is an agriculture conglomerate which has
subsidiaries located in the Peoples Republic of China who are engaged in the
production and distribution of agricultural, chemical and biotechnological
products to the United States, Canada, Australia, Pakistan and various European
Union countries as well as in China.  Pursuant to the Term Sheet,
Yasheng agreed to transfer 100% ownership of 80 acres of property located in
Victorville, California for use as a logistics center and eco-trade cooperation
zone (the “Project”).  Vortex has also agreed that it will change its
name from “Vortex Resources Corp.” to “Yasheng EcoTrade
Corporation”.  As consideration for contributing the property, the
Company agreed to issue Yasheng 130,000,000 shares of the Company’s common stock
and Capitol Properties (“Capitol”), an advisor on the transaction, 100,000,000
shares of the Company’s common stock.  On March 5, 2009, the Company
and Yasheng implemented an amendment to the Term Sheet pursuant to which the
parties agreed to explore further business opportunities including the potential
lease of an existing logistics center, and/or alliance with other major groups
complimenting and/or synergetic to the development of a logistics
center.  Further, in accordance with the amendment, the Company has
issued 50,000,000 shares to Yasheng and 38,461,538 shares to Capitol in
consideration for exploring the business opportunities and their efforts
associated with the development of the logistics center.  The issuance
of the shares of common stock to Yasheng and Capital Properties resulted in
substantial dilution to the interests of other stockholders of the Company but
did not represent a change of control in the Company in light of the number of
shares of common stock and Super Voting Series B Preferred Stock that were
outstanding on the date of issuance. The Company and Yasheng have also evaluated
several properties throughout California with the goal of leasing the property
to be used for the logistics center.  Management believes that leasing
the property with an option to buy will have significant cost savings in
comparison to acquiring such property. In June 2009, the Company has narrowed in
search down to a few potential properties and has subsequently identified a
specific site in the San Bernardino, California vicinity that it intends to move
forward on.


3





On August
26, 2009, the Company entered into an agreement with Yasheng pursuant to which
the Company agreed to acquire 49% of the outstanding securities (the “Yasheng
Logistic Securities”) of Yasheng (the United States) Logistic Service Company
Incorporated (“Yasheng Logistic”), a California corporation and a wholly owned
subsidiary of Yasheng.  In consideration of the Yasheng Logistic
Securities, the Company will issue Yasheng 100,000,000 restricted shares of
common stock of the Company.  Further, Yasheng has agreed to cancel
the 50,000,000 shares of the Company that were previously issued to
Yasheng.  The sole asset of Yasheng Logistic is the certificate of
approval for Chinese enterprises investing in foreign countries granted by the
Ministry of Commerce of the People’s Republic of China.





Our
mission will be to develop an Asian Pacific Cooperation Zone in Southern
California to enhance and enable increased trade between the United States and
China. Our facility will provide a “Gateway to China” through a centralized
location for the marketing, sales, customer service, product completion for
“Made in the USA” products and distribution of goods imported from China. It
will also promote Joint Ventures and exporting opportunities for US
companies.




The
importing or sourcing materials from China has been the solution for creating
significant margins for goods sold in the United States.  While many
large multi-national companies have been able to navigate and capitalize on the
opportunities the Chinese industrial complex has created, most US companies
simply do not have the resources to manage the complexities of working with
companies in China.  Some of the complexities for US companies
importing from China include selecting the right manufacturer or vendor for your
company, addressing transportation, tax and customs issues and quality control
and delivery issues..




Due to
the complexities and uncertainties US companies have found trying to import
goods and services from China, our goal is to establish a centralized US based
trade center. The goal is to create a “Gateway to China” with warehouse and
office space. The warehouse will be centrally located in Southern California
with easy access to the ports of Long Beach and Los Angeles, and railways. The
warehouse will have the ability to handle both 20 and 40 foot containers
including wet, dry and cold storage. The office space will be designed to
provide US headquarters for the Chinese companies involved. One of the keys to
success for the Asian Pacific Cooperation Zone is the ability to leverage a
common infrastructure of technology, administration and transportation to sell
goods and services in the United States. We anticipate the Cooperative zone will
be utilized for distribution, sales, marketing, warehousing, administration,
customer service, showroom display, pick and pack services as well as other
value added services that prepares products for delivery to
customers.




The goal
is for the Asian Pacific Cooperation Zone to initially house 50 companies. We
expect to initially to retain these companies through our relationship with
Yasheng Group which will include their subsidiaries as well as other companies
from the Gansu region of Northwest China.




The
business model is to facilitate the importing and exporting of goods and
services. The primary regions for import/export are Gansu China and the western
United States. Imports and Exports will be promoted and managed through the
Asian Pacific Cooperation Zone. Revenue will be generated through a number of
offerings including the lease of office space, storage space, distribution
services, and administration services along with other value added
services.




We have
recently placed bids for lease/purchase option on three potential locations for
the logistics center.  After we have selected the site for our
facility, the first phase will be preconstruction including design and obtaining
required permits.  The second phase will be construction and the third
phase will be commencing operations focused on facilitating the sale of Chinese
goods in the US and identifying opportunities for the completion of products
within the US and also for export opportunities to China.




Our
successful development of the logistics center includes many risks including
raising adequate funds to pay for the lease of the facility and development of
the facility of which there is no guarantee that such funds will be available,
the general state of the economy in both the United States and China and
concerns over whether the recession will continue or even possibly
deepen.  Further, if we fail to enter into a definitive agreement
with  Yasheng Group, we will lose a significant source of our
potential clients for the logistics center.  As such, we would be
required to develop additional sources of clients and develop a significant
sales force to achieve such result.





Yasheng
Group Option





Pursuant
to the Term Sheet, the Company granted Yasheng an irrevocable option to merge
all or part of its assets into the Company (the “Yasheng Option”). If Yasheng
exercises the Yasheng Option, as consideration for the transaction to be
completed between the parties, Vortex will issue Yasheng such number of shares
of the Company’s common stock calculated by dividing the value of the assets
which will be included in the transaction with the Company by the volume
weighted average price of the Company’s common stock as quoted on a national
securities exchange or the Over-the-Counter Bulletin Board for the ten days
preceding the closing date of such transaction. The value of the assets
contributed by Yasheng will be based upon the asset value set forth in Yasheng’s
audited financial statements provided to the Company prior to the closing of any
such transaction..  Furthermore, if a substantial portion of Yasheng
is merged into the Company upon the exercise of the Yasheng Option, the Company
agreed to change its name to “The Yasheng Group, Inc.”


4





On August
26, 2009, the Company entered into a Stock Exchange Agreement (the “Exchange
Agreement”) with Yasheng Group (BVI), a British Virgin Island corporation
(“Yasheng-BVI”), pursuant to which Yasheng-BVI agreed to sell the Company
75,000,000 shares (the “Group Shares”) of common stock of Yasheng Group in
consideration of 396,668,000 shares (the “Company Shares”) of common stock of
the Company (the “Exchange”).  The parties agreed to close the
Exchange as soon as possible, but a closing date has not been set.





As the
Company does not presently have the authorized amount of shares of common stock
to provide for the issuance of the Company Shares, the parties agreed that the
Company will issue the amount of shares of common stock presently available at
the closing and will issue the balance of such Company Shares upon increasing
the authorized shares of common stock.  The Company has agreed that
the Company Shares held by Yasheng-BVI are non-dilutive  in that
Yasheng-BVI shall never own less than 55% of the issued and outstanding shares
of the Company.  Yasheng-BVI may appoint a number of directors to the
Board of Directors to provide voting control of the Board of Directors to
Yasheng -BVI.   Capitol Properties agreed to restructure its holdings
in order to expedite the closing.





As part
of the closing procedure, the Company requested that Yasheng-BVI provide a
current legal opinion from a reputable Chinese law firm attesting to the fact
that no further regulatory approval from the Chinese government is required as
well as other closing conditions to close the
Exchange.    On November 3, 2009, the Company sent Group and
Yasheng-BVI a letter demanding various closing items.  Group and
Yasheng-BVI did not deliver the requested items and, on November 9, 2009, after
verbally  consulting management of the Company with respect to the
hardship and delays expected consolidating both companies audits, Group and
Yasheng-BVI  sent a termination notice to the Company advising that
the Exchange Agreement has been terminated.





The
Company is presently evaluating its options in moving forward with respect to
Group based on various letters of intent and agreements with Group
regarding various matters and is presently determining whether it should cease
all activities with Group.





Real
Estate Development and Financial Services Industries





Until
December 31, 2007, the Company’s primary focus was on the business of real
estate development and financial services industries through its wholly-owned
subsidiary, Emvelco RE Corp, a Delaware corporation. (“ERC”) and ERC’s
subsidiaries in the United States and Europe.  The Company has
resolved to discontinue its real estate operations.





The
Company formed and organized 610 N Crescent Heights LLC and 13059 Dickens LLC,
for the purpose of developing two separate single family homes for future
sales.. The Company owned 100% of subsidiary 610 N. Crescent Heights, LLC,
which is located in Los Angeles, CA.  On April 2008, the Company
obtained Certificate of Occupancy from the City of Los Angles, and listed the
property for sale at selling price of $2,000,000. At September 30, 2008, the
Company sold the property for the gross sale price of
$1,990,000.





We formed
and organized 13059 Dickens LLC, a California limited liability company (the
“Dickens LLC”) on November 20, 2007 to purchase and develop that certain
property located at 13059 Dickens Street, Studio City, California 91604
(the “Dickens Property”). On December 5, 2007, the Dickens LLC entered into an
All Inclusive Deed of Trust, All Inclusive Promissory Note in the principal
amount of $1,065,652.39, Escrow Instructions and Grant Deed in connection with
the purchase of the Dickens Property. Pursuant to the All Inclusive Deed of
Trust and All Inclusive Promissory Note, the Dickens LLC purchased the Dickens
Property for the total consideration of $1,065,652.39 from  an
unrelated third party (“Seller”) and fifty percent (50%) owner of the Dickens
LLC. The Company and Seller formed the Dickens LLC to own and operate the
Dickens Property and to develop a single family residence at the
location.   As a result of the change in the Company’s business
focus, the Company entered advanced negotiations with regards to selling its
interest to the other party at no cost to the Company, by conveying back title
of said property, and releasing the Company from any associated liability. As of
September 30, 2008, the project was sold back to the third party, by reversing
the transaction, at no cost to the Company.





Mineral
Resources Industry





In 2008,
the Company’s primary focus shifted from real estate development and financial
services industries to the mineral resources industry, specifically within the
gas and oil sub-industry. On May 1, 2008, the Company entered into an Agreement
and Plan of Exchange (the “DCG Agreement”) with Davy Crockett Gas Company, LLC
(“DCG”) and its members (“DCG Members”). Pursuant to the DCG Agreement, the
Company acquired and the DCG Members sold, 100% of the outstanding membership in
DCG in exchange for 50,000,000 shares of preferred stock of the Company. The
sales price was $50 million, as calculated by the 50 million shares at an agreed
price of $1.00.


5





On June
30, 2008, the Company formed Vortex Ocean One LLC (“Vortex One”) with Tiran
Ibgui, an individual ("Ibgui"). In addition, we assigned the four leases in
Crockett County, Texas to Vortex One.  As a condition precedent to
Ibgui contributing the required funding, Vortex One pledged all of its assets to
Ibgui including the leases.   On October 29, 2008, the Company
entered into a settlement arrangement with Mr. Ibgui, whereby the Company agreed
to transfer the 525,000 common shares previously owned by Vortex One to Mr.
Ibgui.





Due to
current issues in the development of the oil and gas project in Crockett County,
Texas, the board obtained a current reserve report for the Company’s interest in
DCG and Vortex One, which report indicated that the DCG properties as being
negative in value. As a result of such report, the world and US recessions and
the depressed oil and gas prices, the board of directors elected to dispose of
the DCG property and/or desert the project in its entirety.





Further,
in February 28, 2009, Ibgui, as the secured lender to Vortex One, directed
Vortex One to assign the term assignments with 80% of the proceeds being
delivered to Ibgui, as secured lender, and 20% of the proceeds being delivered
to the Company – as per the original agreement.  The transaction
closed on February 28, 2009 in consideration of a cash payment in the amount of
$225,000, a 12 month promissory note in the amount of $600,000 and a 60 month
promissory note in the amount of $1,500,000. Mr. Ibgui paid $25,000 fee, and
from the net consideration of $200,000 Mr. Ibgui paid the Company its 20%
portion of $40,000 on March 3, 2009. No relationship exists between Ibgui, the
assignee of the leases and the Company  and/or its affiliates,
directors, officers or any associate of an officer or director.





On
January 13, 2009, the Company entered into a Non Binding Term Sheet (the “Grand
Term Sheet”) to enter into a definitive asset purchase agreement with Grand
Pacaraima Gold Corp. (“Grand”), which owns 80% of the issued and outstanding
securities of International Treasure Finders Incorporated to acquire certain oil
and gas rights on approximately 481 acres located in Woodward County, Oklahoma
(the “Woodward County Rights”).  In consideration for the Woodward
County Rights, the Company will pay Grand an amount equal to 50% of the current
reserves.  The consideration shall be paid half in shares of common
stock of the Company and half in the form of a note.  The number of
shares to be delivered by the Company will be calculated based upon the volume
weighted average price (“VWAP”) for the ten days preceding the closing
date.  The note will mature on December 31, 2009 and carry interest of
9% per annum payable monthly.  In addition, the note will be
convertible into shares of common stock of the Company at a 10% discount to the
VWAP for the ten days preceding conversion.  At the Company election,
the Company may enter into this transaction utilizing a subsidiary to be traded
on the Swiss Stock Exchange.  The above transaction is subject to the
receipt of a reserve report, drafting and negotiation of a final definitive
agreement, performing due diligence as well as board approval of the Company. As
such, there is no guarantee that the Company will be able to successfully close
the above transaction. Dr. Gregory Rubin, a director of the Company, is an
affiliate of ITFI and, as a result, has recused himself from any discussions
regarding this matter.  Due to the drastic decline in gas and oil
prices, the Company has shelved this transaction and may in the future again
attempt to commence discussions with Grand in the future.




Micrologic,
Inc.





On
October 11, 2006, the Company, through EA Emerging Ventures Inc. (“EVC”) entered
into a Term Sheet (the “Micro Term Sheet”) with Dr. Danny Rittman in connection
with the formation and initial funding of Micrologic, Inc. (“Micrologic”), a
Nevada corporation, for the design and production of EDA applications and
Integrated Circuit (“IC”) design processes; specifically, the development and
production of the NanoToolBox TM  tools suite which shortens the time
to market factor. NanoToolBox TM is a smart platform that is designed to
accelerate IC’s design time and shrink time to market
factor.   Pursuant to the Micro Term Sheet, the Company was
obligated to fund Micrologic $1 million and only funded $400,000 to
date.




On
November 15, 2007, the parties entered into a Settlement and Release Agreement
and Amendment No. 1 (the “Micro Amendment”) to that certain Micro Term
Sheet.  Pursuant to the Micro Amendment, the Company was required to
fund an additional $50,000 for a total investment of $450,000 and received
100,000 shares of Micrologic (vested via EVC) representing about ten percent
(10%) equity ownership in Micrologic, prior to further dilution.The Micro Amendment also
contains a settlement and release clause releasing the parties from any further
obligations to each other.  Micrologic subsequently issued additional
securities diluting our interest to approximately 7% of the issued and
outstanding of Micrologic, Inc.




Employees




As of
September 24, 2009, the Company employed a total of four full-time employees,
all of whom are in executive and administrative functions.  We believe
that our employee relations are good.





ITEM
1A. Risk Factors





As a
smaller reporting company, as defined in Rule 12b-2 of the Exchange Act, we are
not required to provide the information required by this Item.


6





Item
1B.      UNRESOLOVED STAFF COMMENTS.





As a
smaller reporting company, as defined in Rule 12b-2 of the Exchange Act, we are
not required to provide the information required by this Item.





ITEM
2.       DESCRIPTION OF
PROPERTIES




On
September  2008 the Company’s principal executive offices were
relocated from 10990 Wilshire Blvd, Suite 1220, Los Angeles, CA  to
9107 Wilshire Blvd., Suite 450, Beverly Hills, CA 90210.  This
office space is operating as executive suites space and services which we rent
for $219 per month as base rent, plus charges of actual spaces uses. Future
minimum payments for the years ending December 31, 2009 and 2010 are $2,628 and
$2,628, respectively.  Our lease runs on a month-to-month basis and we
are required to provide 10 days notice if we decide to vacate the
premises.





On June
2006, we entered into a lease for approximately 1,500 square feet of office
space located at 1061 1⁄2 North Spaulding Ave., West Hollywood, CA 90046
which we rent for $2,500 per month.  Future minimum payments for the
years ending December 31, 2009 and 2010 are $30,000 and $30,000, respectively.
Our lease terminates June 2011 and we have not as yet determined whether we will
renew the lease for the existing space or seek new space.  The Company
is utilizing this space for operational and accounting services for its wholly
owned subsidiary.




ITEM
3.       LEGAL PROCEEDINGS




From time
to time, we are a party to litigation or other legal proceedings that we
consider to be a part of the ordinary course of our business. We are not
involved currently in legal proceedings other than detailed below that could
reasonably be expected to have a material adverse effect on our business,
prospects, financial condition or results of operations. We may become involved
in material legal proceedings in the future .




2007
Litigation





On
February 14, 2007, the Company filed a complaint in the Superior Court of
California, County of Los Angeles against Salon Hecht, a foreign attorney
alleging fraud and seeking the return of funds held in escrow, and sought
damages in the amount of approximately 250,000 Euros (approximately $316,000 as
of the date of actual transferring the funds), plus interest, costs and fees. On
April  2007, Mr. Hecht returned $92,694 (70,000 Euros on the date of
transfer) to the Company which netted $72,694.  On June 2007, the
Company filed a claim seeking a   default judgment against Yalon
Hecht. On October 25, 2007, the Company obtained a default judgment against
Yalon Hecht for the sum of $249,340.65. As of September 24, 2009, the Company
has not commenced procedures to collect on the default judgment.





Verge
Bankruptcy





On
January 23, 2009, Verge Living Corporation (the “Debtor”), a former wholly owned
subsidiary of Atia Group Limited (“AGL), a former subsidiary of the Company,
filed a voluntary petition (the “Chapter 11 Petitions”) for relief under Chapter
11 of Title 11 of the United States Code (the “Bankruptcy Code”) in the United
States Bankruptcy Court for the District of California (the “Bankruptcy
Court”).  The Chapter 11 Petitions are being administered under the
caption  In re: verge Living Corporation, et al., Chapter 11 Case No.
ND 09-10177___ (the “Chapter 11 Proceedings”).  The Bankruptcy Court
assumed jurisdiction over the assets of the Debtors as of the date of the filing
of the Chapter 11 Petitions.  The Debtors will continue to operate
their businesses and manage their properties as “debtors-in-possession” under
the jurisdiction of the Bankruptcy Court and in accordance with the applicable
provisions of the Bankruptcy Code and orders of the Bankruptcy Court. On April
28, 2009, Chapter 11 Proceedings changed venue to the United States Bankruptcy
Court for the District of Nevada, Chapter 11 Case No BK-S-09-16295-BAM. As
Debtor as well as its parent AGL were subsidiaries of the Company at time when
material agreements where executed between the parties, the Company may become
part of the proceeding.





Rusk
Litigation





In August
2008, Dennis E. Rusk Architect LLC and Dennis E. Rusk, (“Rusk”) were terminated
by a former affiliate of the Company. Rusk filed a lawsuit against the Debtor,
the Company and multiple other parties in Clark County, Nevada, Case No.
A-564309, whereby Rusk monetary damages for breach of contract. The Company has
taken the position that the Company will have no liability in this matter as it
never entered an agreement with Rusk. The court handling the Verge bankruptcy
entered an automatic stay for this matter.


7





Trafalgar
Capital Litigation





On April
14, 2009, the Company filed a complaint in Superior Court of California, County
of Los Angeles, Case No. BC 411768_against Trafalgar Capital Specialized
Investment Fund, Luxembourg and its affiliates (which was served on June 5, 2009
via registered mail), alleging breach of contract and fraud and alleged damages
in the amount of $30,000,000.  While the Company believes its has
meritorious claims, it is not possible at this time to reasonably assess the
outcome of the case or its impact on the Company.




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




On
December 3, 2008 the Company filled a Preliminary Information Statement on
Schedule 14C with the SEC pursuant to which the Company informed its
shareholders that pursuant to a written consent, dated November 24, 2008, a
majority of the shares holders of the Company approved a 1 for 100 reverse split
of the Company’s Common Stock.  A Definite Information Statement on
Schedule 14C was filed with the SEC on January 9, 2009.  The reverse
split was effectuated on February 24, 2009 and the Company’s symbol on the
Over-the-Counter Bulletin Board was changed from VTEX into VXRC.




8





PART
II




ITEM
5.       MARKET FOR REGISTRANT’S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS




Market
Information




On April
19, 2007, the Company received a NASDAQ Staff Determination (the
“Determination”) indicating that the Company has failed to comply with the
requirement for continued listing set forth in Marketplace Rule 4310(c)(14)
requiring the Company to file its Form 10-K/A for the year ended December 31,
2006 with the Securities and Exchange Commission and that its securities are,
therefore, subject to delisting from the NASDAQ Capital Market. The Company
requested and received a hearing before a NASDAQ Listing Qualifications Panel
(the “Panel”) to review the Determination. Upon the hearing on May 31, 2007, the
Panel granted the Company’s request for continued listing.




On
November 1, 2007, the Company received a NASDAQ Staff Determination (the
“Determination”) indicating that the Company has failed to comply with the
requirement for continued listing set forth in Marketplace Rule 4310(c)(4)
requiring the Company to maintain a minimum bid price of $0.80 and that its
securities are, therefore, subject to delisting from the NASDAQ Capital Market
if it does not regain compliance by April 29, 2008. If the bid price of the
Company’s common stock closes at $1.00 per share or more for a minimum of 10
consecutive business days any time prior to April 29, 2008, then the NASDAQ
Staff will provide written notification that it complies with the
Rule.  On February 11, 2008, the Company received a decision letter
from NASDAQ informing the Company that it has regained compliance with
Marketplace Rule 5310(c)(4). The Staff letter noted that the closing bid price
of the Company’s common stock has been at $1.00 per share or greater for at
least 10 consecutive business days. On February 11, 2008, the Company received a
decision letter from The NASDAQ Stock Market LLC (“NASDAQ”) informing the
Company that it has regained compliance with Marketplace Rule 5310(c)(4). The
Staff letter noted that the closing bid price of the Company’s common stock has
been at $1.00 per share or greater for at least 10 consecutive business
days.




During
2008 The Company elected to move from The NASDAQ Stock Market to the OTCBB to
reduce, and more effectively manage, its regulatory and administrative costs,
and to enable Company’s management to better focus on its business of developing
the resources industry – commencing natural gas drilling rights recently
acquired in connection with the acquisition of DCG – The Company is traded on
the OTCBB under the symbol VXRC (on February 24, 2009 the Company symbol was
changed from VTEX into VXRC). Before that, the Company’s common stock was traded
on the NASDAQ Capital Market (“NASDAQ”) under the symbol “EMVL”.




The
following table sets forth the high and low bid prices for the Company’s common
stock during the periods indicated as reported by NASDAQ or OTCBB.




High ($)
                                  
                                  
                                  Low ($)Quarter
      Ended:2007March
      31, 2007
                                  
                                  $
                                  1.93
                                  
                                  
                                  $
                                  1.30June
      30, 2007
                                  
                                  
                                  1.60
                                  
                                  
                                  
                                  1.17September
      30, 2007
                                  
                                  
                                  1.56
                                  
                                  
                                  
                                  0.92December
      31, 2007
                                  
                                  
                                  1.10
                                  
                                  
                                  
                                  0.402008March
      31, 2008
                                  
                                  $
                                  0.85
                                  
                                  
                                  $
                                  0.85June
      30, 2008
                                  
                                  
                                  2.00
                                  
                                  
                                  
                                  0.80September
      30, 2008
                                  
                                  
                                  1.10
                                  
                                  
                                  
                                  1.09December
      31, 2008
                                  
                                  
                                  0.02
                                  
                                  
                                  
                                  0.02





On
February 24, 2009, the Company effected a reverse split of its issued and
outstanding shares of common stock on a 100 for 1
basis.    As a result of the reverse split, the issued and
outstanding shares of common stock were reduced on a basis of one share for
every 100 shares outstanding. The shareholders holding a majority of the issued
and outstanding shares of common stock and the board of directors approved the
reverse split on November 24, 2008.  As part of the reverse that
became effective on February 24, 2009 the Company is now quoted on the
Over-the-Counter Bulletin Board under the symbol VXRC.OB.  During
2009, the Company was quoted on the Frankfurt exchange, under the symbol HTE2.
The Company did not initiate this quotation nor has it filed any reports with
the Frankfurt Exchange.


9





On April
14, 2009 the closing bid price on the OTCBB for the Company’s common stock was
$0.625.




Holders
of Common Stock




As of
August 19, 2009, the Company had 113,430,807 shares of common stock outstanding
and 131 shareholders of record. The Company was advised by its transfer agent,
the American Stock Transfer & Trust Company, that according to a search
made, the Company has approximately 3,351 beneficial owners who hold their
shares in street names.




Dividends




It has
been the policy of the Company to retain earnings, if any, to finance the
development and growth of its business.




Equity
Compensation Plan Information





The following table summarizes the
equity compensation plans under which our securities may be issued as of
December 31, 2008.





Plan Category
                      
                      Number of securities to be
                        issued upon exercise of
                        outstanding options and
                        warrants
                      
                      
                      Weighted-average
                        exercise price of
                        outstanding optionsand
                        warrants
                      
                      
                      Number of securities
                        remaining available for
                        future issuance under
                        equitycompensation
                        plansEquity
      compensation plans approved by security holders
                      
                      
                      12,500
                      
                      
                      
                      377
                      
                      
                      
                      46,460Equity
      compensation plan not approved by security holders
                      
                      
                      0
                      
                      
                      
                      0
                      
                      
                      
                      0TOTAL
                      
                      
                      12,500
                      
                      
                      
                      377
                      
                      
                      
                      46,460




Sale
of Securities that were not registered Under the Securities Act of
1933




Common
Stock




On
February 14, 2008, the Company raised Three Hundred Thousand Dollars ($300,000)
from private offerings pursuant to two (2) Private Placement Memorandums dated
as of February 1, 2008 (“PPMs”). One PPM was in the amount of One Hundred
Thousand Dollars ($100,000) and the other was in the amount of Two Hundred
Thousand Dollars ($200,000). The offering is for Company common stock which
shall be “restricted securities” and were sold at $1.00 per share. The money
raised from the Private Placement of the Company shares will be used for working
capital and business operations of the Company. The PPMs were done pursuant to
Rule 506. A Form D has been filed with the Securities and Exchange Commission in
compliance with Rule 506 for each Private Placement.




On March
30, 2008, the Company raised $200,000 from a private offering pursuant to a
Private Placement Memorandum (“PPM”). The private placement was for Company
common stock which shall be “restricted securities” and were sold at $1.00 per
share. The offering included 200,000 warrants to be exercised at $1.50 for two
years (for 200,000 shares of Company common stock), and additional 200,000
warrants to be exercised at $2.00 for four years (for 200,000 shares of Company
common stock). Said Warrants may be exercised to common shares of the Company
only if the Company issues subsequent to the date of the PPM, 25,000,000 (twenty
five million) or more shares of its common stock. The money raised from the
private placement of the Company’s shares was used for working capital and
business operations of the Company. The PPM was done pursuant to Rule 506. A
Form D has been filed with the Securities and Exchange Commission in compliance
with Rule 506 for each Private Placement. The investor is D’vora Greenwood
(Attia), the sister of Mr. Yossi Attia. Mr. Attia did not participate in the
board meeting which approved this PPM.





On May 6,
2008 the Company issued 500,000 shares of its common stock, $0.001 par value per
share, to Stephen Martin Durante in accordance with the instructions provided by
the Company pursuant to the 2004 Employee Stock Incentive Plan registered on
Form S-8 Registration.




On June
6, 2008, the Company raised $300,000 from the private offering pursuant to a
Private Placement Memorandum (“PPM”). The private placement was for Company
common stock which shall be “restricted securities” and were sold at $1.00 per
share. The money raised from the private placement of the Company’s shares was
used for working capital and business operations of the Company. The PPM was
done pursuant to Rule 506. A Form D has been filed with the Securities and
Exchange Commission in compliance with Rule 506 for each Private Placement.
Based on information presented to the Company, and in lieu of the Company
position which was sent to the investor on September 24, 2008 the investor is in
default for not complying with his commitment to invest an additional $225,000
and the Company vested said 300,000 shares under a trustee.


10




On June
11, 2008, the Company entered into a Services Agreement with Mehmet Haluk Undes
(the “Undes Services Agreement” or “Undes”) pursuant to which the Company
engaged Mr. Undes for purposes of assisting the Company in identifying,
evaluating and structuring mergers, consolidations, acquisitions, joint ventures
and strategic alliances in Southeast Europe, Middle East and the Turkic
Republics of Central Asia. Pursuant to the Undes Services Agreement, Mr. Undes
has agreed to provide the Company services related to the identification,
evaluation, structuring, negotiating and closing of business acquisitions,
identification of strategic partners as well as the provision of legal
services.




The term
of the agreement is for five years and the Company has agreed to issue Mr. Undes
525,000 shares of common stock that was issued on August 15, 2008.




On June
30, 2008 and concurrent with the formation and organization of Vortex One,
whereby the Company contributed 525,000 shares of common stock (the “Vortex One
Shares”), a common stock purchase warrant purchasing 200,000 shares of common
stock at an exercise price of $1.50 per share (the “Vortex One Warrant”) and the
initial well that the Company intends to drill. However, the Vortex One warrants
may only be converted to shares of common stock if the Company issues 25,000,000
or more of its common stock so that there is at least 30,000,000 authorized
shares at the time of any conversion term.  As of September 30, 2008
there are 86,626,919 common shares issued and 82,126,919 shares outstanding. Mr.
Ibgui contributed $525,000. The Vortex One warrants were immediately transferred
to Ibgui. Eighty percent (80%) of all available cash flow shall be initially
contributed to Ibgui until the full $525,000 has been repaid and the Company
shall receive the balance. Following the payment of $525,000 to Ibgui, the cash
flow shall be split equally.





In July
2008, the Company issued 16,032 shares of its common stock, $0.001 par value per
share, to Robin Ann Gorelick, the Company Secretary, in accordance with the
instructions provided by the Company pursuant to the 2004 Employee Stock
Incentive Plan registered on Form S-8 Registration.





On July
28, 2008, the Company held a special meeting of the shareholders for four
initiatives, consisting of approval of a new board of directors, approval of the
conversion of preferred shares to common shares, an increase in the authorized
shares and a stock incentive plan. All initiatives were approved by the majority
of shareholders.  The 2008 Employee Stock Incentive Plan (the “2008
Incentive Plan”) authorized the board to issue up to 5,000,000 shares of Common
Stock under the plan.





On August
23, 2008, the Company issued 100,000 shares of its common stock 0.001 par value
per share, to Robert M. Yaspan, the Company lawyer, in accordance with the
instructions provided by the Company pursuant to the 2008 Employee Stock
Incentive Plan registered on Form S-8 Registration





On August
8, 2008, assigned holders of the Undes Note gave notices to the Company of their
intention to convert their original note dated June 5, 2007 into 25 million
common shares of the Company. The portion of the accrued interest from inception
of the note in the amount of $171,565 was not converted into
shares.  The Company accepted these notices and issued the said
shares.




On August
1, 2008, all holders of the Company’s preferred stock notified the Company about
converting said 100,000 preferred stock into 50 million common shares of the
Company. The conversion of preferred shares to common shares marks the
completion of the acquisition of Davy Crockett Gas Company, LLC. The Company
accepted such notice and instructed the Company’s transfer agent on August 15,
2008 to issue said 50 million common shares to the former members of DCG, as
reported and detailed on the Company’s 14A filings.




Based
upon a swap agreement dated August 19, 2008, which was executed between C.
Properties Ltd. (“C. Properties”) and KSD Pacific, LLC (“KSD”), which is
controlled by Mr. Yossi Attia Family Trust, where KSD will sell to C.
Properties, and C. Properties will purchase from KSD, all its holdings of the
Company which amount to 1,505,644 shares of common stock of the Company for a
purchase price of 734,060,505 shares of common stock of AGL.




In
connection of selling a convertible note to Trafalgar (see further disclosures
in this report ), the Company issued on September 25, 2008 the amount of 54,706
common shares at $0.001 par value per share to Trafalgar as a fee. As part of
collateral to said note, the Company issued to Trafalgar 4,500,000 common stock
0.001 par values per shares, as security for the Note.




On
November 4, 2008, the Company issued 254,000 shares of its common stock 0.001
par value per share, to one consultant (200,000 shares) and two employees
(54,000 shares), in accordance with the instructions provided by the Company
pursuant to the 2008 Employee Stock Incentive Plan registered on Form S-8
Registration.




11





On
December 5, 2008 the Company cancelled 15,000,000 of its common shares held by
certain shareholder, per comprehensive agreement detailed in this report under
Preferred Stock section. Said 15,000,000 shares were surrounded to the Company
for cancellation.




On July 21, 2005, the Company entered
into a registration rights agreement, whereby it agreed to file a registration
statement registering the 441,566 shares of Company common stock issued in
connection with the Navigator acquisition within 75 days of the closing of the
transaction. As of June 30, 2008 (effective March 31, 2008), the Company was in
default of the Registration Rights Agreement and therefore made a provision for
compensation for $150,000 to represent agreed final compensation (the
“Penalty”).  The
holder of the Penalty subsequently assigned the Penalty to three unaffiliated
parties (the “Penalty Holders”). On December 26, 2008, the Company closed
agreements with the Penalty Holders pursuant to which the Penalty Holders agreed
to cancel any rights to the Penalty in consideration of the issuance 6,666,667
shares of common stock to each of the Penalty Holders. The shares of common
stock were issued in connection with this transaction in a private placement
transaction made in reliance upon exemptions from registration pursuant to
Section 4(2) under the Securities Act of 1933 and Rule 506 promulgated there
under. Each of the Penalty Holders is an accredited investor as defined in Rule
501 of Regulation D promulgated under the Securities Act of
1933.




On
January 23, 2009, the Company completed the sale of 5,000,000 shares of the
Company’s common stock to one accredited investor for net proceeds of $75,000
(or $0.015 per common share). The shares of common stock were issued in
connection with this transaction in a private placement transaction made in
reliance upon exemptions from registration pursuant to Section 4(2) under the
Securities Act of 1933 and Rule 506 promulgated there under. The investor is an
accredited investor as defined in Rule 501 of Regulation D promulgated under the
Securities Act of 1933.




On March
2009, the Company and Yasheng entered into an amendment of the Term Sheet (the
“Amendment”), pursuant to which the parties agreed to explore various areas
including an alliance with third parties, a joint venture with various Russian
agencies floating nuclear power plants and the lease of an existing logistics
center in Inland Empire, California; in accordance with the Amendment, the
Company, as an advance issuance, has issued 50,000,000 shares to Yasheng and
38,461,538 shares to Capitol in consideration for exploring the above matters;
The shares of common stock were issued based on Board consent on March 9, 2009,
in connection with this transaction in a private transaction made in reliance
upon exemptions from registration pursuant to Section 4(2) under the Securities
Act of 1933 and/or Rule 506 promulgated thereunder. Yasheng and Capitol are
accredited investors as defined in Rule 501 of Regulation D promulgated under
the Securities Act of 1933.




As
reported by the Company on its Form 10-Q filed on November 14, 2008, Star Equity
Investments, LLC (“Star”) entered, on September 1, 2008, into that certain
Irrevocable Assignment of Promissory Note, which resulted in Star being a
creditor of the Company with a loan payable by the Company in the amount of
$1,000,000 (the “Debt”). No relationship exists between Star and the Company
and/or its affiliates, directors, officers or any associate of an officer or
director. On March 11, 2009, the Company entered and closed an agreement with
Star pursuant to which Star agreed to convert all principal and interest
associated with the Debt into 8,500,000 shares of common stock and released the
Company from any further claims. The shares of common stock were issued in
connection with this transaction in a private placement transaction made in
reliance upon exemptions from registration pursuant to Section 4(2) under the
Securities Act of 1933 and/or Rule 506 promulgated thereunder. Each of the
parties are accredited investors as defined in Rule 501 of Regulation D
promulgated under the Securities Act of 1933.




Preferred
Stock:




Series
A  - As disclosed in Form 8-Ks filed on May 7, 2008 and May 9, 2008,
on May 1, 2008, the Company entered into an Agreement and Plan of Exchange (the
“DCG Agreement”) with Davy Crockett Gas Company, LLC (“DCG”) and the members of
Davy Crockett Gas Company, LLC (“DCG Members”). Pursuant to the DCG Agreement,
the Company acquired and, the DCG Members sold, 100% of the outstanding
securities in DCG. DCG is a limited liability company organized under the laws
of the State of Nevada and headquartered in Bel Air; California is a newly
formed designated LLC which holds certain development rights for gas drilling in
Crockett County, Texas.  In consideration for 100% of the outstanding
securities in DCG, the Company issued the DCG Members promissory notes in the
aggregate amount of $25,000,000 payable together with interest in May 2010 (the
“DCG Notes”). Additional amounts of $5,000,000 in DCG Notes are issuable upon
each of the first through fifth wells going into production. Further, the DCG
Members may be entitled to receive additional DCG Notes up to an additional
amount of $200,000,000 (the “Additional DCG Notes”) subject to the revenue
generated from the land rights held by DCG located in Crockett County, Texas
less concession fees and taxes.  On June 11, 2008, the Company, the
DCG Members and DCG entered into an amendment to the DCG Agreement, pursuant to
which the DCG Members agreed to replace all notes that they received as
consideration for transferring their interest in DCG to the Company for an
aggregate of 100,000 shares of Series A Preferred Stock (the “Series A Stock”)
with the rights and preferences set forth below. The shares of Series A Stock is
convertible, at any time at the option of the Company subject to increasing the
authorized shares of the Company from 35 million to 400 million, into shares of
common stock of the Company determined by dividing the stated value by the
conversion price. The initial aggregate stated value is $50,000,000 and the
initial conversion price is $1.00 per share. In the event that the net operating
income for the Crockett County, Texas property for any year is zero or negative,
then the stated value shall be reduced by 10%. Holders of the Series A Stock are
entitled to receive, without any further action from the Company’s Board of
Directors but only if such funds are legally available, non-cumulative dividends
equal to 25% of the net operating income derived from oil and gas production on
the Crockett County, Texas property on an annual audited basis. In the event of
any liquidation, winding up, change in control or fundamental transaction of the
Company, the holders of Series A Preferred will be entitled to receive, in
preference to holders of common stock, an amount equal to the outstanding stated
value and any accrued but unpaid dividends.


12





We
granted the DCG Members piggyback registration rights. The Series A Stock is
non-voting. The Company has the right, at anytime; to redeem the Series A
Preferred Stock by paying the holders the outstanding stated value as well as
accrued dividends.




On August
1, 2008, all holders of the Company’s preferred stock notified the Company of
their intention to convert said 100,000 preferred stock into 50 million common
shares of the Company. The conversion of preferred shares to common shares marks
the completion of the acquisition of Davy Crockett Gas Company, LLC. The Company
accepted such notice and instructed the Company’s transfer agent on August 15,
2008 to issue said 50 million common shares to the former members of DCG, as
reported and detailed on the Company’s 14A filings.




Series B
- On December 5, 2008 the Company entered into and closed an
Agreement  with T.A.S. Holdings Limited (“TAS”) (the “TAS Agreement”)
pursuant to which TAS agreed to cancel the debt payable by the Company to TAS in
the amount of approximately $1,065,000 and its 15,000,000 shares of common stock
it presently holds in consideration of the Company issuing TAS 1,000,000 shares
of Series B Convertible Preferred Stock, which such shares carry a stated value
equal to $1.20 per share (the “Series B Stock”).




The
Series B Stock is convertible, at any time at the option of the holder, into
common shares of the Company based on a conversion price of $0.0016 per share.
The Series B Stock shall have voting rights on an as converted basis multiplied
by 6.25. Holders of the Series B Stock are entitled to receive, when declared by
the Company’s board of directors, annual dividends of $0.06 per share of Series
B Stock paid semi-annually on June 30 and December 31 commencing June 30,
2009.




In the
event of any liquidation or winding up of the Company, the holders of Series B
Stock will be entitled to receive, in preference to holders of common stock, an
amount equal to the stated value plus interest of 15% per year.




The
Series B Stock restricts the ability of the holder to convert the Series B Stock
and receive shares of the Company’s common stock such that the number of shares
of the Company common stock held by TAS and its affiliates after such conversion
does not exceed 4.9% of the Company’s then issued and outstanding shares of
common stock.




The
Series B Stock was offered and sold to TAS in a private placement transaction
made in reliance upon exemptions from registration pursuant to Section 4(2)
under the Securities Act of 1933 and Rule 506 promulgated there under. TAS is an
accredited investor as defined in Rule 501 of Regulation D promulgated under the
Securities Act of 1933. The Company filed its Certificate of Designation of
Preferences, Rights and Limitations of Series B Preferred Stock with the State
of Delaware





Treasury
Stock Repurchase




In June
2006, the Company’s Board of Directors approved a program to repurchase, from
time to time, at management’s discretion, up to 700,000 shares of the Company’s
common stock in the open market or in private transactions commencing on June
20, 2006 and continuing through December 15, 2006 at prevailing market prices.
Repurchases will be made under the program using our own cash resources and will
be in accordance with Rule 10b-18 under the Securities Exchange Act of 1934 and
other applicable laws, rules and regulations. A licensed Stock Broker Firm is
acting as agent for our stock repurchase program. Pursuant to the unanimous
consent of the Board of Directors in September 2006, the number of shares that
may be purchased under the Repurchase Program was increased from 700,000 to
1,500,000 shares of common stock and the Repurchase Program was extended until
October 1, 2007, or until the increased amount of shares is
purchased.





Pursuant
to the Sale Agreement of Navigator, the Company got on closing (February 2,
2007) 622,531 shares of the Company’s common stock as partial consideration. The
Company shares were valued at $1.34 per share, representing the closing price of
the Company on the NASDAQ Capital Market on February 16, 2007, the closing of
the sale. The Company canceled the common stock acquired during the disposition
in the amount of $834,192. All, the Company 660,362 treasury shares were retired
and canceled during August and September 2008.




On
November 20, 2008, the Company issued a press release announcing that its Board
of Directors has approved a share repurchase program. Under the program the
Company is authorized to purchase up to ten million of its shares of common
stock in open market transactions at the discretion of management. All stock
repurchases will be subject to the requirements of Rule 10b-18 under the
Exchange Act and other rules that govern such purchases.




As of
September 24, 2009 the Company has 1,000 treasury shares in its possession
scheduled to be cancelled.


13




ITEM
6.SELECTED FINANCIAL DATA.





As a
smaller reporting company, as defined in Rule 12b-2 of the Exchange Act, we are
not required to provide the information required by this Item.





ITEM
7        MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS




The
following discussion of the results of our operations and financial condition
should be read in conjunction with our financial statements and the related
notes, which appear elsewhere in this annual report.





Operations





Our
business plan since 1993 has been identifying, developing and operating
companies within emerging industries for the purpose of consolidation and sale
if favorable market conditions exist. Although the Company primarily focuses on
the operation and development of its core businesses, the Company pursues
consolidations and sale opportunities in a variety of different industries, as
such opportunities may present themselves, in order to develop its core
businesses as well as outside of its core business.  The Company may
invest in other unidentified industries that the Company deems profitable. If
the opportunity presents itself, the Company will consider implementing its
consolidation strategy with its subsidiaries and any other business that it
enters into a transaction.  In January 2009, the Company commenced the
development of a logistics center.





On
January 20, 2009, the Company entered into a non-binding Term Sheet (the “Term
Sheet”) with Yasheng Group, Inc., a California corporation
(“Yasheng”).  Yasheng is an agriculture conglomerate which has
subsidiaries located in the Peoples Republic of China who are engaged in the
production and distribution of agricultural, chemical and biotechnological
products to the United States, Canada, Australia, Pakistan and various European
Union countries as well as in China.  Pursuant to the Term Sheet,
Yasheng agreed to transfer 100% ownership of 80 acres of property located in
Victorville, California for use as a logistics center and eco-trade cooperation
zone (the “Project”).  Vortex has also agreed that it will change its
name from “Vortex Resources Corp.” to “Yasheng EcoTrade
Corporation”.  As consideration for contributing the property, the
Company agreed to issue Yasheng 130,000,000 shares of the Company’s common stock
and Capitol Properties (“Capitol”), an advisor on the transaction, 100,000,000
shares of the Company’s common stock.  On March 5, 2009, the Company
and Yasheng implemented an amendment to the Term Sheet pursuant to which the
parties agreed to explore further business opportunities including the potential
lease of an existing logistics center, and/or alliance with other major groups
complimenting and/or synergetic to the development of a logistics
center.  Further, in accordance with the amendment, the Company has
issued 50,000,000 shares to Yasheng and 38,461,538 shares to Capitol in
consideration for exploring the business opportunities and their efforts
associated with the development of the logistics center.  The issuance
of the shares of common stock to Yasheng and Capital Properties resulted in
substantial dilution to the interests of other stockholders of the Company but
did not represent a change of control in the Company in light of the number of
shares of common stock and Super Voting Series B Preferred Stock that were
outstanding on the date of issuance.





The
Company and Yasheng have also evaluated several properties throughout California
with the goal of leasing the property to be used for the logistics
center.  Management believes that leasing the property with an option
to buy will have significant cost savings in comparison to acquiring such
property.    In June 2009, the Company has narrowed in
search down to a few potential properties and has subsequently identified a
specific site in the San Bernardino, California vicinity that it intends to move
forward on.





On August
26, 2009, the Company entered into an agreement with Yasheng pursuant to which
the Company agreed to acquire 49% of the outstanding securities (the “Yasheng
Logistic Securities”) of Yasheng (the United States) Logistic Service Company
Incorporated (“Yasheng Logistic”), a California corporation and a wholly owned
subsidiary of Yasheng.  In consideration of the Yasheng Logistic
Securities, the Company will issue Yasheng 100,000,000 restricted shares of
common stock of the Company.  Further, Yasheng has agreed to cancel
the 50,000,000 shares of the Company that were previously issued to
Yasheng.  The sole asset of Yasheng Logistic is the certificate of
approval for Chinese enterprises investing in foreign countries granted by the
Ministry of Commerce of the People’s Republic of China.





Pursuant
to the Term Sheet, the Company granted Yasheng an irrevocable option to merge
all or part of its assets into the Company (the “Yasheng Option”). If Yasheng
exercises the Yasheng Option, as consideration for the transaction to be
completed between the parties, Vortex will issue Yasheng such number of shares
of the Company’s common stock calculated by dividing the value of the assets
which will be included in the transaction with the Company by the volume
weighted average price of the Company’s common stock as quoted on a national
securities exchange or the Over-the-Counter Bulletin Board for the ten days
preceding the closing date of such transaction. The value of the assets
contributed by Yasheng will be based upon the asset value set forth in Yasheng’s
audited financial statements provided to the Company prior to the closing of any
such transaction..  Furthermore, if a substantial portion of Yasheng
is merged into the Company upon the exercise of the Yasheng Option, the Company
agreed to change its name to “The Yasheng Group, Inc.”


14





On August
26, 2009, the Company entered into a Stock Exchange Agreement (the “Exchange
Agreement”) with Yasheng Group (BVI), a British Virgin Island corporation
(“Yasheng-BVI”), pursuant to which Yasheng-BVI agreed to sell the Company
75,000,000 shares (the “Group Shares”) of common stock of Yasheng Group in
consideration of 396,668,000 shares (the “Company Shares”) of common stock of
the Company (the “Exchange”).  The parties agreed to close the
Exchange as soon as possible, but a closing date has not been set.





As the
Company does not presently have the authorized amount of shares of common stock
to provide for the issuance of the Company Shares, the parties agreed that the
Company will issue the amount of shares of common stock presently available at
the closing and will issue the balance of such Company Shares upon increasing
the authorized shares of common stock.  The Company has agreed that
the Company Shares held by Yasheng-BVI are non-dilutive  in that
Yasheng-BVI shall never own less than 55% of the issued and outstanding shares
of the Company.  Yasheng-BVI may appoint a number of directors to the
Board of Directors to provide voting control of the Board of Directors to
Yasheng -BVI.   Capitol Properties agreed to restructure its holdings
in order to expedite the closing.   Further, both parties have
agreed to restructure the Exchange Agreement for tax or other purposes as needed
and the Company has agreed to enter into the required financing arrangements
that are acceptable to Yasheng-BVI prior to Closing.





As part
of the closing procedure, the Company requested that Yasheng-BVI provide a
current legal opinion from a reputable Chinese law firm attesting to the fact
that no further regulatory approval from the Chinese government is required as
well as other closing conditions to close the
Exchange.    On November 3, 2009, the Company sent Group and
Yasheng-BVI a letter demanding various closing items.  Group and
Yasheng-BVI did not deliver the requested items and, on November 9, 2009, after
verbally  consulting management of the Company with respect to the
hardship and delays expected consolidating both companies audits, Group and
Yasheng-BVI  sent a termination notice to the Company advising that
the Exchange Agreement has been terminated.





The
Company is presently evaluating its options in moving forward with respect to
Group based on various letters of intent and agreements with Group
regarding various matters and is presently determining whether it should cease
all activities with Group.





As of
December 31, 2008, the Company and its subsidiaries’ major assets were in the
industry of Resources and Energy – oil and gas segment.




Assets
Sold





Real
Estate




Crescent
Heights project - The Company formed and organized 610 N. Crescent Heights, LLC,
a California limited liability company (the “CH LLC”) on August 13, 2007 as
wholly owned subsidiary to purchase and develop that certain property located at
610 North Crescent Heights, Los Angeles, California 90048 (the “CH Property”).
The CH Property was acquired for $900,000 not including closing costs. On
November 13, 2007 the CH LLC finalized a construction loan with East West Bank
of $1,440,000. The CH Property was completed and sold on August 15, 2008, as the
LLC entered into a Sale and Escrow Instruction Agreements with third parties for
$1,990,000 in gross proceeds, which was closed on September 30,
2008.




Dickens
project - The Company formed and organized 13059 Dickens, LLC, a California
limited liability company (the Dickens LLC”) on November 20, 2007, to purchase
and develop that certain property located at 13059 Dickens Street, Studio City,
California 91604 (the Dickens Property”). On December 5, 2007, the Dickens
LLC entered into an All Inclusive Deed of Trust, All Inclusive Promissory Note
in the principal amount of $1,065,652, Escrow Instructions and Grant Deed in
connection with the purchase of the Dickens Property. Pursuant to the All
Inclusive Deed of Trust and All Inclusive Promissory Note, the Dickens LLC
purchased the Dickens Property for the total consideration of $1,065,652 from an
unrelated third party (“Seller”), and fifty percent (50%) owner of the Dickens
LLC. The Company and Seller formed the Dickens LLC to own and operate the
Dickens Property and to develop a single family residence at the location. The
Dickens LLC is owned 50/50 by the Company and Seller. Escrow closed on December
18, 2007. The Dickens Property is under construction. The Company reversed the
transaction on August 19, 2008 with its partner to be released from the project
at no cost or liability to the Company.





Disposal
of AGL shares: On August 19, 2008 the Company entered into final fee agreement
with Consultant, where the Company had to pay Consultant certain fees in
accordance with the agreement entered with the Consultant, the Consultant had
agreed that, in lieu of cash payment, it would receive an aggregate of up to
734,060,505 shares of stock of the AGL, which represent disposal of all the
Company holdings with AGFL and its subsidiaries. Said transaction is detailed in
Item 1 of this report, under the sub-title: “History of Acquisitions and
Dispositions - Financial Investment and Real Estate Industry”.





As of
December 31, 2008 the Company does not have any interests in real estate
development.


15





Mineral
Resources





On June
30, 2008, the Company formed Vortex Ocean One LLC (“Vortex One”) with Tiran
Ibgui, an individual ("Ibgui"). In addition, we assigned the four leases in
Crockett County, Texas to Vortex One.  As a condition precedent to
Ibgui contributing the required funding, Vortex One pledged all of its assets to
Ibgui including the leases.   On October 29, 2008, the Company
entered into a settlement arrangement with Mr. Ibgui, whereby the Company agreed
to transfer the 525,000 common shares previously owned by Vortex One to Mr.
Ibgui.





Due to
current issues in the development of the oil and gas project in Crockett County,
Texas, the board obtained a current reserve report for the Company’s interest in
DCG and Vortex One, which report indicated that the DCG properties as being
negative in value. As a result of such report, the world and US recessions and
the depressed oil and gas prices, the board of directors elected to dispose of
the DCG property and/or desert the project in its entirety.





Further,
in February 28, 2009, Ibgui, as the secured lender to Vortex One, directed
Vortex One to assign the term assignments with 80% of the proceeds being
delivered to Ibgui, as secured lender, and 20% of the proceeds being delivered
to the Company – as per the original agreement.  The transaction
closed on February 28, 2009 in consideration of a cash payment in the amount of
$225,000, a 12 month promissory note in the amount of $600,000 and a 60 month
promissory note in the amount of $1,500,000. Mr. Ibgui paid $25,000 fee, and
from the net consideration of $200,000 Mr. Ibgui paid the Company its 20%
portion of $40,000 on March 3, 2009. No relationship exists between Ibgui, the
assignee of the leases and the Company  and/or its affiliates,
directors, officers or any associate of an officer or director.





Plan
of operation





The
Company intends to continue to develop its logistics center with the continued
support and involvement of Yasheng.  Its efforts will be focused on
obtaining the required financing to develop the center, selecting the
appropriate facility for lease and commencing sales.  Secondarily, the
Company will pursue options provided by Yasheng if it elects to contribute any
of its assets to the Company as well as closing the agreement with
Yasheng-BVI.  The issuance of the shares of common stock to Yasheng
upon completion of the transaction(s) to be completed subsequent to the exercise
of the Yasheng Option will potentially result in substantial dilution to the
interests of other stockholders of the Company and could result in a change of
control of the Company on the date of issuance.  The transaction to be
completed upon the exercise of the Yasheng Option is subject to the drafting and
negotiation of a final definitive agreement, performing due diligence as well as
board approval from both parties. As such, there is no guarantee that the
Company will be able to successfully close the above transaction.





The above
efforts are subject to obtaining adequate financing on acceptable terms. The
Company anticipates that it will be spending approximately $2,000,000 over the
next 12 month period pursuing its stated plan. The Company’s present cash
reserves and monetary assets are not sufficient to carry out its plan of
operation without substantial additional financing. The Company is currently
attempting to arrange for financing through mezzanine arrangements, debt or
equity that would enable it to proceed with its plan of investment
operation.   However, there is no guarantee that we will be able
to close such financing transaction or, if financing is available, that the
terms will be acceptable to the Company.




Critical
Accounting Estimates





Our
discussion and analysis of our financial condition and results of operations are
based upon our consolidated financial statements that have been prepared in
accordance with generally accepted accounting principles in the United States of
America (“US GAAP”). This preparation requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenues
and expenses, and the disclosure of contingent assets and liabilities. US GAAP
provides the framework from which to make these estimates, assumptions and
disclosures. We choose accounting policies within US GAAP that management
believes are appropriate to accurately and fairly report our operating results
and financial position in a consistent manner. Management regularly assesses
these policies in light of current and forecasted economic conditions. Although
we believe that our estimates, assumptions and judgments are reasonable, they
are based upon information presently available. Actual results may differ
significantly from these estimates under different assumptions, judgments or
conditions for a number of reasons. Our accounting policies are stated in
details in Note 2 to the Consolidated Financial Statements. We identified the
following accounting policies as critical to understanding the results of
operations and representative of the more significant judgments and estimates
used in the preparation of the consolidated financial statements: impairment of
goodwill, allowance for doubtful accounts, acquisition related assets and
liabilities, accounting of income taxes and analysis of FIN46R as well as FASB
67.





Investment
in Real Estate and Commercial Leasing Assets. Real estate held for sale and
construction in progress is stated at the lower of cost or fair value less costs
to sell and includes acreage, development, construction and carrying costs and
other related costs through the development stage. Commercial leasing assets,
which are held for use, are stated at cost. When events or circumstances
indicate than an asset’s carrying amount may not be recoverable, an impairment
test is performed in accordance with the provisions of SFAS 144. For properties
held for sale, if estimated fair value less costs to sell is less than the
related carrying amount, then a reduction of the assets carrying value to fair
value less costs to sell is required. For properties held for use, if the
projected undiscounted cash flow from the asset is less than the related
carrying amount, then a reduction of the carrying amount of the asset to fair
value is required. Measurement of the impairment loss is based on the fair value
of the asset. Generally, we determine fair value using valuation techniques such
as discounted expected future cash flows. Based on said GAAP, the Company made a
provision to doubtful debts, on all ERC and Verge balances.




16




Our
expected future cash flows are affected by many factors including:




a) The
economic condition of the US and Worldwide markets – especially during these
current times of worldwide financial crisis.





b) The
performance of the underline assets in the markets where our properties are
located;




c) Our
financial condition, which may influence our ability to develop our properties;
and




d)
Governmental regulations.





Because
any one of these factors could substantially affect our estimate of future cash
flows, this is a critical accounting policy because these estimates could result
in us either recording or not recording an impairment loss based on different
assumptions. Impairment losses are generally substantial charges.





The
estimate of our future revenues is also important because it is the basis of our
development plans and also a factor in our ability to obtain the financing
necessary to complete our development plans. If our estimates of future cash
flows from our properties differ from expectations, then our financial and
liquidity position may be compromised, which could result in our default under
certain debt instruments or result in our suspending some or all of our
development activities.





Allocation
of Overhead Costs. We periodically capitalize a portion of our overhead costs
and also allocate a portion of these overhead costs to cost of sales based on
the activities of our employees that are directly engaged in these activities.
In order to accomplish this procedure, we periodically evaluate our “corporate”
personnel activities to see what, if any, time is associated with activities
that would normally be capitalized or considered part of cost of sales. After
determining the appropriate aggregate allocation rates, we apply these factors
to our overhead costs to determine the appropriate allocations. This is a
critical accounting policy because it affects our net results of operations for
that portion which is capitalized. In accordance with paragraph 7 of SFAS No.
67, we only capitalize direct and indirect project costs associated with the
acquisition, development and construction of a real estate project. Indirect
costs include allocated costs associated with certain pooled resources (such as
office supplies, telephone and postage) which are used to support our
development projects, as well as general and administrative functions.
Allocations of pooled resources are based only on those employees directly
responsible for development (i.e. project manager and subordinates). We charge
to expense indirect costs that do not clearly relate to a real estate project
such as salaries and allocated expenses related to the Chief Executive Officer
and Chief Financial Officer.




We
recognize our rental income based on the terms of our signed leases with tenants
on a straight-line basis. We recognize sales commissions and management and
development fees when earned, as lots or acreages are sold or when the services
are performed.





Accounting
for Income Taxes: We recognize deferred tax assets and liabilities for the
expected future tax consequences of transactions and events. Under this method,
deferred tax assets and liabilities are determined based on the difference
between the financial statement and tax bases of assets and liabilities using
enacted tax rates in effect for the year in which the differences are expected
to reverse. If necessary, deferred tax assets are reduced by a valuation
allowance to an amount that is determined to be more likely than not
recoverable. We must make significant estimates and assumptions about future
taxable income and future tax consequences when determining the amount of the
valuation allowance. In addition, tax reserves are based on significant
estimates and assumptions as to the relative filing positions and potential
audit and litigation exposures related thereto. To the extent the Company
establishes a valuation allowance or increases this allowance in a period, the
impact will be included in the tax provision in the statement of
operations.





The
disclosed information presents the Company’s natural gas producing activities as
required by Statement of Financial Accounting Standards No.  69,
“Disclosures about Oil and Gas Producing Activities.”.





Commitments
and contingencies





Our
Commitments and contingencies are stated in details in Notes to the Consolidated
Financial Statements, which include as mandatory required supplemental
information about gas and oil.  On this section management give a more
detailed disclosures to specific commitments and contingencies that were in
place (for disposed properties) prior of completion of the DCG acquisition which
changed the Company strategic substantially.


17





Effective
July 1, 2006, the Company entered into a five-year employment agreement with
Yossi Attia as the President of ERC which commenced on July 1, 2006 and provides
for annual compensation of $240,000 and an annual bonus of not less than
$120,000 per year, as well as an annual car allowance for the same
period.   In addition, on August 14, 2006, the Company amended
the Agreement to provide that Mr. Attia shall serve as the Chief Executive
Officer of the Company for a term of two years commencing August 14, 2006 and
granting annual compensation of $250,000 to be paid in the form of Company
shares of common stock.




Mr. Attia
will be entitled to a special bonus equal to 10% of the earnings before
interest, depreciation and amortization (“EBITDA”) of ERC, which such bonus is
payable in shares of common stock of the Company; provided, however, the special
bonus is only payable in the event that Mr. Attia remains continuously employed
by ERC and Mr. Attia shall not have sold shares of common stock of the Company
on or before the payment date of the Special Bonus unless such shares were
received in connection with the exercise of an option that was scheduled to
expire within one year of the date of exercise.  Mr.  Attia
has waived his rights to the receipt of the shares.




Based
upon a swap agreement dated August 19, 2008, which was executed between C.
Properties Ltd. (“C. Properties”) and KSD Pacific, LLC (“KSD”), which is
controlled by Mr. Yossi Attia Family Trust, where KSD will sell to C.
Properties, and C. Properties will purchase from KSD, all its holdings of the
Company which amount to 1,505,644 shares of common stock of the Company for a
purchase price of 734,060,505 shares of common stock of AGL.




On
September 1, 2008 Star Equity Investment LLC a third party acquired from Mr.
Attia, a $1 million note due by the Company since January 1, 2008. Said note is
bearing 12% interest commencing October 1st, 2008 and can be converted
(including interest) into common shares of the Company at a fixed price of $0.75
per share.  Equity Investment LLC noticed the Company that due to the
Company default on said note, it willing to enter negotiations to modify its
instrument. The parties agreed to settle by converting the note including
interest into 8.5 million common shares of the Company. Said agreements are
being drafted by the Company attorney.





As of the
date of closing this filing, the Company via its sub, completed the drilling of
all 4 wells at the estimated cost of $2,100,000 for four wells (not including
option payments). The Company also exercised its fifth well option (by paying
per the master agreement $50,000 option fee on November 5, 2008).  In
lieu of the world financial markets crisis, the Company approached the land
owners on DCG mineral rights, requesting an amendment to allow DCG an additional
six (6) months before it is required to exercise another option to secure a Term
Assignment of Oil and Gas Lease pursuant to the terms of the original Agreement
dated March 5, 2008. The land owner’s representative has answered the Company’s
request with discrepancies about the date as effective date.





The
Company refers the reader to its Notes to the Consolidated Financial Statements
which include material disclosing of all the Company’s Commitments and
contingencies, as well as prior items which disclose Legal
Proceeding.




Off
Balance Sheet Arrangements





There are
no material off balance sheet arrangements.





Results
of Operations





Year
Ended December 31, 2008 compared to Year Ended December 31, 2007




Due to
the new financial investment in Gas and Oil activity, which commenced in May
2008, the consolidated statements of operations for the years ended December 31,
2008 and 2007 are not comparable. The financial figures for 2007 only include
the corporate expenses of the Company’s legal entity registered in the State of
Delaware. This section of the report, should be read together with Notes of the
Company consolidated financials especially - Change in the Reporting
Entity: In accordance with Financial Accounting Standards, FAS 154, Accounting Changes and Error
Corrections , when an accounting change results in financial statements
that are, in effect, the statements of a different reporting entity, the change
shall be retrospectively applied to the financial statements of all prior
periods presented to show financial information for the new reporting entity for
those periods. Previously issued interim financial information shall be
presented on a retrospective basis.




The
consolidated statements of operations for the years ended December 31, 2008 and
2007 are compared (subject to the above description) in the sections
below:





Revenues





The
following table summarizes our revenues for the year ended December 31, 2008 and
2007:


18





Year ended December 31,
                
                2008
                
                
                2007Total
      revenues
                
                $
                —
                
                
                $
                —




There was
a sale of a property in 2008 compared to three real estate properties in
2007.  There was no revenue from the majority owned subsidiary, AGL,
for the period November 2, 2007 through December 31, 2007.  Since the board
resolved to discontinue real estate operations during 2008, revenues of
$1,990,000 and $6,950,000 from the real estate properties are included as
part of discontinued operations for years ended December 31, 2008 and 2007,
respectively.  (Note 10)





Cost
of revenues





The
following table summarizes our cost of revenues for the year ended December 31,
2008 and 2007:





Year ended December 31,
                
                2008
                
                
                2007Total
      cost of revenues
                
                $
                —
                
                
                $
                —




The cost
of revenue decrease reflects the sales of one property compare to three real
estate properties in 2007.  There was no cost of revenues from the
majority owned subsidiary, AGL, for the period November 2, 2007 through December
31, 2007.  Since the board resolved to discontinue real estate operations
during 2008, cost of sales of $2,221,929 and $6,505,506 for the real estate
properties are included as part of discontinued operations for the years ended
December 31, 2008 and 2007, respectively.  (Note 10)





There was
no cost of revenue from the majority owned subsidiary, AGL for the period
November 2, 2007 through December 31, 2007.





Compensation
and related costs





The
following table summarizes our compensation and related costs for the year ended
December 31, 2008 and 2007:





Year ended December 31,
                
                2008
                
                
                2007Compensation
      and related costs
                
                $
                558,073
                
                
                $
                762,787




Overall
compensation and related costs decreased by about 27%, or $204,714 primarily as
the result of reduction of employees





Consulting,
professional and director fees





The
following table summarizes our consulting, professional and director fees for
the year ended December 31, 2008 and 2007:





Year ended December 31
                
                2008
                
                
                2007Consulting,
      professional and director fees
                
                $
                13,049,759
                
                
                $
                1,195,922




Overall
consulting, professional and director fees increased by about 991%, or
$11,853,837, primarily as the result of a fee charge of $9,782,768 to C.
Properties as a fee associated with the DCG transaction and a $2,108,161 charge
to stock compensation expense for various grants of shares and warrants in
relation to the cost of several consultants, investment bankers, advisors,
accounting and lawyers fee over last period.




Other
selling, general and administrative expenses





The
following table summarizes our other selling, general and administrative
expenses for the year ended December 31, 2008 and 2007:





Year ended December 31
                
                2008
                
                
                2007Other
      selling, general and administrative expenses
                
                $
                413,576
                
                
                $
                —




Since
the board resolved to discontinue real estate operations during 2008, other
selling, general and administrative expenses of $0 and $469,942 for the
real estate properties are included as part of discontinued operations for the
years ended December 31, 2008 and 2007, respectively.  (Note
10)


19





Goodwill
impairment





The
following table summarizes our goodwill impairment fees for the year ended
December 31, 2008 and 2007:





Year ended December 31
                
                2008
                
                
                2007Goodwill
      impairment
                
                $
                35,935,635
                
                
                $
                10,656,933




For the
year ended December 31, 2008, an analysis was performed on the goodwill
associated with the investment in DCG that occurred during the year (which was
booked against Equity), and an impairment expense was charged against the
P&L for approximately $35 million.  (Note 10)





For
the year ended December 31, 2007, an analysis was performed on the goodwill
associated with the investment in AGL, and an impairment expense was charged
against the P&L for approximately $10.2 million.





Software
development expense





The
following table summarizes our software development expense for the year ended
December 31, 2007:





Year ended December 31
                
                2008
                
                
                2007Software
      development expense
                
                $
                —
                
                
                $
                136,236




In the
year ended December 31, 2007, the Company consolidated the results of operations
of Micrologic, which incurred $136,236 of software development
expense.  There was no software development expense in the year ended
December 31, 2008.





Depreciation
and amortization





The
following table summarizes our depreciation and amortization for the year ended
December 31, 2008 and 2007:





Year ended December 31,
                
                2008
                
                
                2007Depreciation
                
                $
                —
                
                
                $
                —




There is
no depreciation expense in the years ended December 31, 2008 and 2007 due to the
capitalization of depreciation into the Investment in Land Development accounts
for the majority owned subsidiary.




Net
interest income (expense)





The
following table summarizes our net interest income for the year ended December
31, 2008 and 2007:





Year ended December 31,
                
                2008
                
                
                2007Interest
      income
                
                $
                729,097
                
                
                $
                1,665,379Interest
      expense
                
                $
                (1,922,983
                )
                
                $
                —Net
      interest income (expense)
                
                $
                (1,193,886
                )
                
                $
                1,665,379





The
decrease in interest income is attributable to the Company investing strategy
pending establishment of the real estate development business, as well as loans
to Verge, together with capitalized 10 million dollars into Verge equity as part
of the AGL transaction, which reduced materially the amounts entitled to
interest income. Since the board resolved to discontinue real estate operations
during 2008, interest expense of $0 and $386,108 for the real estate
properties are included as part of discontinued operations for the years ended
December 31, 2008 and 2007, respectively.  (Note 10)





Additionally,
the increase in interest expense is primarily due to interest expense recognized
for a debt discounts relating to a convertible notes payable in the amount of
$966,261. The remaining increase is due to the interest accrued due to former
DCG members as well as the increase line of credits and short time borrowing
outstanding during the year.





Liquidity
and Capital Resources





As of
December 31, 2008, our cash, cash equivalents and marketable securities were
$123,903, a decrease of approximately $245,000 from the end of fiscal year 2007.
The decrease in our cash, cash equivalents and marketable securities is
primarily the result of pay-off bank loans and conversion of notes
payable.


20





Cash flow
provided from operating activities for the year ended December 31, 2008 was
$(230,983) and cash flow used in operating activities was $87,636 for the year
ended December 31, 2007.  The change is primarily due a larger net
loss in 2008.





Cash flow
used in investing activities for the year ended December 31, 2008 and 2007 was
$327,102 and $3,832,323, respectively. The change was primarily due to the
significant reduction in loan advances to ERC and Verge of approximately
$8,600,000 offset slightly by the cash received from the sale of discontinued
operations of Navigator of $3,200,000 in 2007.





Cash used
in financing activities was approximately $341,792 for the year ended December
31, 2008 and cash provided by financing activities was $1,261,643 for the year
ended December 30 2007. This change is due to the repayment of a bank loan in
2008, which was provided in 2007.





The
Company held restricted Certificate of Deposits (CD) with the Bank to access a
revolving line of credit. These deposits are interest bearing and approximated
$4.196 million as of September 30, 2008. On November 8, 2007, the lines of
credits were increased and extended as the following: $4,180,000 until October
16, 2008 and $4,229,000 until September 1, 2008. Both lines bear interest of
5.87% and are secured by restricted cash deposited in CD’s with the bank.
 On August 2008, the company notified the bank, not to extend the deposits,
and pay it off from the CD.





In the
event the Company makes future acquisitions or investments, additional bank
loans or fund raising may be used to finance such future acquisitions. The
Company may consider the sale of non-strategic assets. The Company currently
anticipates that its available cash resources will not be sufficient to meet its
prior anticipated working capital requirements, though it will be sufficient
manage the existing business of the Company without further
development.





Inflation
and Foreign Currency





The
Company maintains its books in local currency: on sold assets - Kuna for
Sitnica, N.I.S for AGL and US Dollars for the Parent Company registered in the
State of Delaware. The Company’s operations are primarily in the United States
through its wholly owned subsidiaries. Some of the Company’s customers were in
Croatia. As a result, fluctuations in currency exchange rates may significantly
affect the Company’s sales, profitability and financial position when the
foreign currencies, primarily the Croatian Kuna, of its international operations
are translated into U.S. dollars for financial reporting. In additional, we are
also subject to currency fluctuation risk with respect to certain foreign
currency denominated receivables and payables. Although the Company cannot
predict the extent to which currency fluctuations may, or will, affect the
Company’s business and financial position, there is a risk that such
fluctuations will have an adverse impact on the Company’s sales, profits and
financial position. Because differing portions of our revenues and costs are
denominated in foreign currency, movements could impact our margins by, for
example, decreasing our foreign revenues when the dollar strengthens and not
correspondingly decreasing our expenses. The Company does not currently hedge
its currency exposure. In the future, we may engage in hedging transactions to
mitigate foreign exchange risk.





Effect of Recent Accounting
Pronouncements




In
December 2007, the Securities and Exchange Commission (“SEC”) issued Staff
Accounting Bulletin No. 110 (“SAB 110”). SAB 110 amends and replaces
Question 6 of Section D.2 of Topic 14, “Share-Based Payment,” of the Staff
Accounting Bulletin series. Question 6 of Section D.2 of Topic 14 expresses the
views of the staff regarding the use of the “simplified” method in developing an
estimate of the expected term of “plain vanilla” share options and allows usage
of the “simplified” method for share option grants prior to December 31,
2007. SAB 110 allows public companies which do not have historically sufficient
experience to provide a reasonable estimate to continue to use the “simplified”
method for estimating the expected term of “plain vanilla” share option grants
after December 31, 2007. The Company will continue to use the “simplified”
method until it has enough historical experience to provide a reasonable
estimate of expected term in accordance with SAB 110.





In
December 2007, the FASB issued Statement of Financial Accounting Standards
(“SFAS”) 141-R, “Business Combinations.” SFAS 141-R retains the fundamental
requirements in SFAS 141 that the acquisition method of accounting (referred to
as the purchase method) be used for all business combinations and for an
acquirer to be identified for each business combination. It also establishes
principles and requirements for how the acquirer: (a) recognizes and
measures in its financial statements the identifiable assets acquired, the
liabilities assumed, and any non-controlling interest in the acquiree;
(b) recognizes and measures the goodwill acquired in the business
combination or a gain from a bargain purchase and (c) determines what
information to disclose to enable users of the financial statements to evaluate
the nature and financial effects of the business combination. SFAS 141-R will
apply prospectively to business combinations for which the acquisition date is
on or after the Company’s fiscal year beginning October 1, 2009. While the
Company has not yet evaluated the impact, if any, that SFAS 141-R will have on
its consolidated financial statements, the Company will be required to expense
costs related to any acquisitions after September 30,
2009.


21





In
December 2007, the FASB issued SFAS 160, “Non-controlling Interests in
Consolidated Financial Statements.” This Statement amends Accounting Research
Bulletin 51 to establish accounting and reporting standards for the
non-controlling (minority) interest in a subsidiary and for the deconsolidation
of a subsidiary. It clarifies that a non-controlling interest in a subsidiary is
an ownership interest in the consolidated entity that should be reported as
equity in the consolidated financial statements. The Company has not yet
determined the impact, if any, that SFAS 160 will have on its consolidated
financial statements. SFAS 160 is effective for the Company’s fiscal year
beginning October 1, 2009.





In
September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS
157”). SFAS 157 defines fair value, establishes a framework for measuring fair
value in generally accepted accounting principles, and expands disclosures about
fair value measurements. This Statement applies under other accounting
pronouncements that require or permit fair value measurements, the FASB having
previously concluded in those accounting pronouncements that fair value is the
relevant measurement attribute. Accordingly, this Statement does not require any
new fair value measurements. SFAS 157 is effective for financial statements
issued for fiscal years beginning after November 15, 2007, and interim periods
within those fiscal years. In February 2008, the FASB issued FASB Staff Position
No. FAS 157–2, “Effective Date of FASB Statement No. 157”, which provides a
one year deferral of the effective date of SFAS 157 for non–financial assets and
non–financial liabilities, except those that are recognized or disclosed in the
financial statements at fair value at least annually. Therefore, effective
January 1, 2008, we adopted the provisions of SFAS No. 157 with respect to
our financial assets and liabilities only. Since the Company has no investments
available for sale, the adoption of this pronouncement has no material impact to
the financial statements.





In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities — including an amendment of
FASB Statement No. 115” (“SFAS 159”). SFAS 159 permits entities to choose to
measure many financial instruments and certain other items at fair value. This
statement provides entities the opportunity to mitigate volatility in reported
earnings caused by measuring related assets and liabilities differently without
having to apply complex hedge accounting provisions. This Statement is effective
as of the beginning of an entity’s first fiscal year that begins after November
15, 2007. Effective January 1, 2008, we adopted SFAS No. 159 and have
chosen not to elect the fair value option for any items that are not already
required to be measured at fair value in accordance with accounting principles
generally accepted in the United States .





ITEM
7A.       QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK





As a
smaller reporting company, as defined in Rule 12b-2 of the Exchange Act, we are
not required to provide the information required by this Item.





ITEM
8.    FINANCIAL
STATEMENTS.




The
audited Consolidated Financial Statements of the Company for the years ended
December 31, 2008 and December 31, 2007, are included herein beginning with the
index hereto on page F-1
..


22




ITEM 9.
            CHANGES IN AND DISAGREEMENTS WITH
      ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
  DISCLOSURE




DELOITTE
RESIGNATION -




As the
Company disclosed in its Form 8-K filed April 30, 2007, on April 25, 2007 (the
“Resignation Date”), Deloitte Kft. (the “Former Auditor”) advised the Company
that it has resigned as the Company’s independent auditor. The Former Auditor
performed the audit for the one year period ended December 31, 2005, which
report did not contain any adverse opinion or a disclaimer of opinion, nor was
it qualified as to audit scope or accounting principles. During the Company’s
two most recent fiscal years and during any subsequent interim period prior to
the Resignation Date, there were no disagreements with the Former Auditor, with
respect to accounting or auditing issues of the type discussed in Item
304(a)(iv) of Regulation S-B.




Prior to
the Resignation Date, the Former Auditor advised the Company that it had raised
certain issues relating to the accounting of ERC. As of December 31, 2006, the
Company owned 43.33% of the outstanding securities of ERC. The Former Auditor
believed that this communication was a disclosable event pursuant to Item
304(a)(v). The issues raised by the Former Auditor related to the recording of
the cost of real estate purchased by Verge (a wholly owned subsidiary of ERC),
the production of records relating to loans made to VLC and the valuation of
land in connection with Lorraine Properties, LLC (a wholly owned subsidiary of
ERC). Management of the Company disagrees with the aforementioned statements and
believes that it has adequately explained each of the above inquires made by the
Former Auditor. Further, prior to being advised of the above issues, the Company
maintained that ERC and its subsidiaries do not need to be consolidated in the
Company’s financial statements, which such position was subsequently confirmed
by a detailed analysis by management and an independent third party consultant
of the accounting pronouncements governing consolidation.





The
Former Auditor advised the Company that it intended to furnish a letter to the
Company, addressed to the Staff, stating that it agreed with the statements made
herein or the reasons why it disagreed. The letter from the Former Auditor was
filed as an amendment to Form 8-K on May 14, 2007.




Appointment
of New Auditors - Robison, Hill & Co. (“RHC”) -




On April
26, 2007, the Company engaged Robison, Hill & Co. (“RHC”) as its independent
registered public accounting firm for the Company’s fiscal years ended December
31, 2007 and 2006. The decision to engage RHC as the Company’s independent
registered public accounting firm was approved by the Company’s Board of
Directors, and ratify the selection of Robison Hill & Co. as our independent
auditors for the fiscal year ending December 31, 2007, by our shareholders
meeting that took place on December 7, 2007.




During
the two most recent fiscal years and through April 26, 2007, the Company has not
consulted with RHC regarding either:




1. the
application of accounting principles to any specified transaction, either
completed or proposed, or the type of audit opinion that might be rendered on
the Company’s financial statements, and neither a written report was provided to
the Company nor oral advice was provided that RHC concluded was an important
factor considered by the Company in reaching a decision as to the accounting,
auditing or financial reporting issue; or




2. any
matter that was either subject of disagreement or event, as defined in Item
304(a)(1)(iv)(A) of Regulation S-B and the related instruction to Item 304 of
Regulation S-B, or a reportable event, as that term is explained in Item
304(a)(1)(iv)(A) of Regulation S-B.





ITEM 9A.   CONTROLS AND
PROCEDURES





The term
disclosure controls and procedures means controls and other procedures of an
issuer that are designed to ensure that information required to be disclosed by
the issuer in the reports that it files or submits under the Exchange Act (15
U.S.C. 78a, et seq.) is
recorded, processed, summarized and reported, within the time periods specified
in the Commission’s rules and forms.  Disclosure controls and
procedures include, without limitation, controls and procedures designed to
ensure that information required to be disclosed by an issuer in the reports
that it files or submits under the Exchange Act is accumulated and communicated
to the issuer’s management, including its principal executive and principal
financial officers, or persons performing similar functions, as appropriate to
allow timely decisions regarding required disclosure.





The term
internal control over financial reporting is defined as a process designed by,
or under the supervision of, the issuer’s principal executive and principal
financial officers, or persons performing similar functions, and effected by the
issuer’s board of directors, management and other personnel, to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
generally accepted accounting principles and includes those policies and
procedures that:


23





·
            Pertain to the maintenance of
      records that in reasonable detail accurately and fairly reflect the
      transactions and dispositions of the assets of the
      issuer;





·
            Provide reasonable assurance that
      transactions are recorded as necessary to permit preparation of financial
      statements in accordance with generally accepted accounting principles,
      and that receipts and expenditures of the issuer are being made only in
      accordance with authorizations of management and directors of the issuer;
      and





·
            Provide reasonable assurance
      regarding prevention or timely detection of unauthorized acquisition, use
      or disposition of the issuer’s assets that could have a material effect on
      the financial statements.





Our
management, including our chief executive officer and principal financial
officer, does not expect that our disclosure controls and procedures or our
internal controls over financial reporting will prevent all error and all
fraud.  A control system, no matter how well conceived and operated,
can provide only reasonable, not absolute, assurance that the objectives of the
control system are met.  Further, the design of a control system must
reflect the fact that there are resource constraints, and the benefits of
controls must be considered relative to their costs.  Because of
inherent limitations in all control systems, internal control over financial
reporting may not prevent or detect misstatements, and no evaluation of controls
can provide absolute assurance that all control issues and instances of fraud,
if any, within the registrant have been detected.  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.





Evaluation of Disclosure and
Controls and Procedures.   Our management is responsible for
establishing and maintaining adequate internal control over financial reporting
as defined in Rule 13a-15(f) under the Exchange Act.  Our internal
control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with accounting
principles generally accepted in the United States.  We carried out an
evaluation, under the supervision and with the participation of our management,
including our chief executive officer and principal financial officer, of the
effectiveness of the design and operation of our disclosure controls and
procedures as of the end of the period covered by this report.  The
evaluation was undertaken in consultation with our accounting
personnel.  Based on that evaluation and for the reasons set forth
below, our chief executive officer and principal financial officer concluded
that our disclosure controls and procedures are currently not effective to
ensure that information required to be disclosed by us in the reports that we
file or submit under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified in the SEC’s rules and
forms.




Management’s Report on
Internal Control over Financial Reporting





Management
is responsible for establishing and maintaining adequate internal control over
financial reporting of the Company. 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 and
procedures may deteriorate.





Management,
with the participation of our principal executive officer, financial and
accounting officer, has evaluated the effectiveness of our internal control
over financial reporting as of December 31, 2008 based on criteria
established in Internal Control—Integrated Framework issued by the Committee of
Sponsoring Organizations . Based on this evaluation, because of the Company’s
limited resources and limited number of employees, management concluded that, as
of December 31, 2008, our internal control over financial reporting is
not effective in providing reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external
purposes in accordance with U.S. generally accepted accounting
principles.   The ineffectiveness of our disclosure controls and
procedures is the result of certain deficiencies in internal controls that
constitute material weaknesses as discussed below. Except for the restatement of
the consolidated financial statements for the year ended December 31, 2009,
material weaknesses identified did not result in the restatement of any
previously reported financial statements or any other related financial
disclosure, nor does management believe that it had any effect on the accuracy
of the Company's financial statements for the current reporting period. We lack
segregation of duties in the period-end financial reporting
process.  The Company has historically had limited accounting and
minimal operating revenue and, as such, all accounting and financial reporting
operations have been and are currently performed by one
individual.  The party that performs the accounting and financial
reporting operations is the only individual with any significant knowledge of
generally accepted accounting principles.  The person is also in
charge of the general ledger (including the preparation of routine and
non-routine journal entries and journal entries involving accounting estimates),
the selection of accounting principles, and the preparation of interim and
annual financial statements (including report combinations, consolidation
entries and footnote disclosures) in accordance with generally accepted
accounting principles.  In addition, the lack of additional staff with
significant knowledge of generally accepted accounting principles has resulted
in ineffective oversight and monitoring.  The company intends to add
accounting staff, subject to adequate financing, in order to assist in reducing
its risk in these areas and plans to add additional personnel in accounting and
internal auditing in the near future, which is subject to obtaining the required
financing.


24





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.





Changes in internal
controls





There
have been no changes in our internal control over financial reporting identified
in connection with the evaluation required by paragraph (d) of Rule 13a-15 or
15d-15 under the Exchange Act that occurred during the quarter ended December
31, 2008 that has materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting.


25




ITEM 9B.   OTHER INFORMATION





Trafalgar:




The
Company entered into a Securities Purchase Agreement (the “Agreement”) with
Trafalgar Capital Specialized Investment Fund, Luxembourg (“Buyer”) on September
25, 2008 for the sale of up to $2,750,000 in convertible notes (the “Notes”).
Pursuant to the terms of the Agreement, the Company and the Buyer closed on the
sale and purchase of $1,600,000 in Notes on September 25, 2008, with escrow
instruction to be closed on October 1, 2008. The Buyer, at its sole discretion,
has the option to close on a second financing for $400,000 in Notes (which has
been exercised as discussed below) and a third financing for $750,000 in Notes.
Pursuant to the terms of the Agreement, the Company agreed to pay to the Buyer a
commitment fee of 4% of the commitment amount, a structuring fee of $15,000, a
facility draw down fee of 4%, issue the Buyer 150,000 shares of common stock,
pay a due diligence fee to the Buyer of $15,000 and pay an advisory fee of
$100,000 to TAS Holdings Limited. The Notes bear interest at 8.5% with such
interest payable on a monthly basis with the first two payments due at closing.
The Notes are due in full in September 2010. In the event of default, the Buyer
may elect to convert the interest payable in cash or in shares of common stock
at a conversion price using the closing bid price of when the interest is due or
paid. The Notes are convertible into  common stock, at the Buyer’s
option, at a conversion price equal to 85% of the volume weighted average price
for the ten days immediately preceding the conversion but in no event below a
price of $2.00 per share. If on the conversion or redemption of the Notes, the
Euro to US dollar spot exchange rate (the “Exchange Rate”) is higher that the
Exchange Rate on the closing date, then the number of shares shall be increased
by the same percentage determined by dividing the Exchange Rate on the date of
conversion or redemption by the Exchange Rate on the closing date. The Company
is required to redeem the Notes starting on the fourth month in equal
installments of $56,000 with a final payment of $480,000 with respect to the
initial funding of $1,600,000. We are also required to pay a redemption premium
of 7% on the first redemption payment, which will increase 1% per month. The
Company may prepay the Notes in advance, which such prepayment will include a
redemption premium of 15%. In the event the Company closes on a funding in
excess of $4,000,000, the Buyer, in its sole election, may require that the
Company redeem the Notes in full. On any principal or interest repayment date,
in the event that the Euro to US dollar spot exchange rate is lower than the
Euro to US dollar spot exchange rate at closing, then we will be required to pay
additional funds to compensate for such adjustment.




Pursuant
to the terms of the Notes, the Company shall default if (i) the Company fails to
pay amounts due within 15 days of maturity, (ii) failure of the Company to
comply with any provision of the Notes upon ten days written notice; (iii)
bankruptcy or insolvency or (iv) any breach of the Agreement and such breach is
not cured upon ten days written notice. Upon default by the Company, the Buyer
may accelerate full repayment of all Notes outstanding and all accrued interest
thereon, or may convert all Notes outstanding (and accrued interest thereon)
into shares of common stock (notwithstanding any limitations contained in the
Agreement and the Notes). The Buyer has a secured lien on three of our wells and
would be entitled to foreclose on such wells in the event an event of default is
entered. In the event that the foregoing was to occur, significant adverse
consequences to the Company would be reasonably anticipated.




So long
as any of the principal or interest on the Notes remains unpaid and unconverted,
the Company shall not, without the prior written consent of the Buyer, (i) issue
or sell any common stock or preferred stock, (ii) issue or sell any Company
preferred stock, warrant, option, right, contract, call, or other security or
instrument granting the holder thereof the right to acquire Common Stock, (iii)
incur debt or enter into any security instrument granting the holder a security
interest in any of the assets of the Company or (iv) file any registration
statement on Form S-8.




The Buyer
has contractually agreed to restrict their ability to convert the Notes and
receive shares of our common stock such that the number of shares of the Company
common stock held by a Buyer and its affiliates after such conversion or
exercise does not exceed 9.9% of the Company’s then issued and outstanding
shares of common stock.




The Buyer
exercised its option to close on a second financing for $400,000 in Notes on
October 28, 2008 and still holds an option to close on additional financing for
$750,000 in Notes.  The terms of the second financing for $400,000 are
identical to the terms of the $1,600,000 Note, as disclosed in detail on the
Company filing on October 2, 2008 on Form 8-K - Unregistered Sale of Equity
Securities, Financial Statements and Exhibits. The Notes are convertible into
our common stock, at the Buyer’s option, at a conversion price equal to 85% of
the volume weighed average price for the ten days immediately preceding the
conversion but in no event below a price of $2.00 per share. As of the date
hereof, the Company is obligated on the Notes issued to the Buyer in connection
with this offering. The Notes are a debt obligation arising other than in the
ordinary course of business, which constitute a direct financial obligation of
the Company.




The Notes
were offered and sold to the Buyer in a private placement transaction made in
reliance upon exemptions from registration pursuant to Section 4(2) under the
Securities Act of 1933 and Rule 506 promulgated there under. The Buyer is an
accredited investor as defined in Rule 501 of Regulation D promulgated under the
Securities Act of 1933.




26




The
estimated value of the conversion feature was approximately $210,000 and will be
reported as interest expense over the anticipated repayment period of the
debt.





As
reported under Legal proceedings, the Company notified Trafalgar that Trafalgar
is in breech with regard to the services to be performed in accordance with the
$2,000,000 loan agreement. Pursuant to FASB 5, the $2,000,000 is recorded as a
liability on the balance sheet, and interest is being accrued on the note, since
the outcome of the legal actions is undeterminable at this time. On April 14,
2009 the Company filled a complaint against Trafalgar and its
affiliates.





Star




On
September 1, 2008, the Company entered into a note payable with Star Equity
Investments LLC (“STAR”), a third party, for $1 million was effective January 1,
2008. The proceeds from this note were used to pay off the Company’s debt to Mr.
Attia, a related party.  The note bears 12% interest commencing
October 1st, 2008 and can be converted (including interest) into common shares
of the Company at an established conversion price of $0.75 per
share.  Per Star’s position the Company is default under said note,
and the parties in negotiation to resolve adversaries’ procedure among them,
based on issuing 8.5 million common shares of the Company for conversion the
note and interest into equity. On March 11, 2009, the Company entered and closed
an agreement with Star pursuant to which Star agreed to convert all principal
and interest associated with the Debt into 8,500,000 shares of common stock and
released the Company from any further claims. The shares of common stock were
issued in connection with this transaction in a private placement transaction
made in reliance upon exemptions from registration pursuant to Section 4(2)
under the Securities Act of 1933 and/or Rule 506 promulgated thereunder. Each of
the parties are accredited investors as defined in Rule 501 of Regulation D
promulgated under the Securities Act of 1933.





Short
Term Loan – by Investor





On
September 5, 2008 the Company entered a short term loan memorandum, with Mehmet
Haluk Undes, for a short term loan (“bridge”) of $220,000 to bridge the drilling
program of the Company. As a consideration for said facility, the Company grants
the investor with 100% cashless warrants coverage for two years at exercise
price of $1.50 per share. The investor made a loan of $220,000 to the company on
September 15, 2008 (where said funds were wired to the company drilling
contractor), that was paid in full on October 8, 2008. Accordingly the investor
is entitled to 200,000 cashless warrants from September 15, 2008 at exercise
price of $1.50 for a period of 2 years.  The Company contest said
warrants entitlements to the investor, based on a cause.


27





PART
III




ITEM 10.   DIRECTORS, EXECUTIVE OFFICERS,
PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE
ACT




The
following table sets forth certain information regarding the executive officers
and directors of the Company as of August 19, 2009:





Name
              
              Age
              
              Position with
      CompanyYossi
      Attia
              
              47
              
              Director,
      Chief Executive Officer, Principal Financial Officer and
      PresidentStewart
      Reich
              
              65
              
              Director
      and Audit and Compensation Committees ChairmanRobin
      Ann Gorelick
              
              51
              
              Secretary
      and Company Counsel  (1)Mace
      Miller
              
              41
              
              Director
      and Audit and Compensation Committee’s member (2)Gerald
      Schaffer
              
              85
              
              Director
      and Audit and Compensation Committee’s memberGregory
      Rubin
              
              49
              
              Director,
      Board Chairman




(1)
            Resigned
      as an executive officer on December 30,
2009


(2)
            Resigned
      as a director on October 7, 2009.





Directors
are elected annually and hold office until the next annual meeting of the
stockholders of the Company and until their successors are elected. Officers are
elected annually and serve at the discretion of the Board of
Directors.





Yossi Attia has been self
employed as a real estate developer since 2000. Mr. Attia was appointed to the
Board of Directors (“Board”) on February 1, 2005, as CEO of ERC on June 15, 2006
and as the CEO and President of the Company on August 14, 2006. Prior to
entering into the real estate development industry, Mr. Attia served as the
Senior Vice President of Investments of Interfirst Capital from 1996 to 2000.
From 1994 through 1996, Mr. Attia was a Senior Vice President of Investments
with Sutro & Co. and from 1992 through 1994. Mr. Attia served as the Vice
President of Investments of Prudential Securities. Mr. Attia received a Bachelor
of Arts (“BA”) in economics and marketing from Haifa University in 1987 and
a Masters of Business Administration (“MBA”) from Pepperdine University in
1995. Mr. Attia held Series 7 and 63 securities licenses from 1991 until 2002.
Effective March 21, 2005, Mr. Attia was appointed as a member of the Audit
Committee and the Compensation Committee. In June 2006, Mr. Attia was appointed
as the CEO of ERC. Upon his appointment as the CEO of ERC, Mr. Attia was not
considered an independent Director. Consequently, Mr. Attia resigned from all
committees. In August 2006, Mr. Attia was appointed as the CEO and President of
the Company. Upon closing the acquisition of AGL Mr. Attia was appointed as the
CEO of AGL. Mr. Yossi Attia serves as chairmen of the board of AGL.





Stewart Reich, was Chairman of
the Board since June 2004 until August 2008, was CEO and President of Golden
Telecom Inc., Russia’s largest alternative voice and data service provider as
well as its largest ISP, since 1997. In September 1992, Mr. Reich was employed
as Chief Financial Officer (“CFO”) at UTEL (Ukraine Telecommunications), of
which he was appointed President in November 1992. Prior to that, Mr. Reich held
various positions at a number of subsidiaries of AT&T Corp. Mr. Reich have
been a Director of the Company since 2002. Mr. Reich is head of the Audit and
the Compensation Committees.





Gerald Schaffer was
unanimously appointed to the Board of Directors of the Company on June 22, 2006,
as well as a member of the Audit and Compensation Committees. Mr. Schaffer has
been extensively active in corporate, community, public, and government affairs
for many years, having served on numerous governmental boards and authorities,
as well as public service agencies, including his current twenty-one year
membership on the Board of Directors for the American Lung Association of
Nevada. Additionally, Mr. Schaffer is a past member of the Clark County
Comprehensive Plan Steering Committee, as well as a former Commissioner for
Public Housing on the Clark County Housing Authority. For many years he served
as a Planning Commissioner for the Clark County Planning Commission, which
included the sprawling Las Vegas Strip. His tenure on these various governmental
entities was enhanced by his extensive knowledge of the federal government. Mr.
Schaffer is Chairman Emeritus of the Windsor Group and a founding member of both
Windsor and its affiliate - Gold Eagle Gaming. Over the years the principals of
Windsor have developed shopping and marketing centers, office complexes,
hotel/casinos, apartments, residential units and a wide variety of large land
parcels. Mr. Schaffer continues to have an active daily role in many of these
subsidiary interests. He is also President of the Barclay Corporation, a
professional consulting service, as well as the Barclay Development Corporation,
dealing primarily in commercial land acquisitions and sales. Mr. Schaffer
resides in Nevada and oversees the Company’s interest in the Verge project,
specifically with compliance and obtaining governmental
licensing.


28





Mace Miller was appointed
 on July 28, 2008
as a director of the Company, received his BBA in Accounting and an MBA with
International Concentration from the University of Texas at El Paso in 1989 and
1992, respectively. Further, Mr. Mace received his law degree from the
University of Texas at El Paso in 1992. From 2001 to 2006, Mr. Miller has been a
principal with Raymond James Financial Services. Mr. Miller, since 2006, has
been a partner with Coronado Capital Advisers, where he has been responsible for
the administration and creation of proprietary hedge fund. He has been a
frequent speaker at various international venues, including the Raymond James
National Conference, on tax mitigation and anti-money laundering issues related
to hedge funds. Recognized as an expert in international finance, Mr. Miller has
consulted on numerous bond offerings in the United States and the Dominican
Republic on behalf of institutions and investors alike. Mr. Miller is a licensed
Attorney with the State of Texas.




Gregory Rubin,  Dr.
Rubin is the Chairman of the Board of Directors of the Company. Dr. Rubin has
been a self employed dentist for the last 25 years. During the last 25 years,
Dr. Rubin also has served various companies in industries ranging from health
care management to oil and gas in various consulting roles. Dr. Rubin serves as
the director for Central Asia Franchise Holdings, Ltd., Central Asia
Construction and Development, Ltd., Nadir Energy & Mining Corporation, Grand
Pacarama Gold Corporation and ADR OTC Markets, LLC. Based on agreements that the
company is not side too, Dr. Rubin is partial owner of T.A.S – which is
preferred shareholder of the Company, which has super power voting
rights.





Robin Ann Gorelick from 1992
to the present, has served as the Managing Partner at the Law Offices of
Gorelick & Associates, specializing in the representation of various public
and private business entities. Ms. Gorelick received her Juris Doctor (“JD”) and
her BA in economics and political science from the University of California, Los
Angeles in 1982 and 1979, respectively. Ms. Gorelick is admitted to practice law
in California, the District of Columbia and Texas. On October 4, 2007, Robin
Gorelick, resigned as a director of Emvelco the Company. Ms. Gorelick continues
to act as general counsel and corporate secretary for the Company




ROLE
OF THE BOARD





Pursuant
to Delaware law, our business, property and affairs are managed under the
direction of the Board. The Board has responsibility for establishing broad
corporate policies and for the overall performance and direction of Vortex, but
is not involved in day-to-day operations. Members of the Board keep informed of
the business by participating in Board and committee meetings, by reviewing
analyses and reports sent to them regularly, and through discussions with the
executive officers.





2008
BOARD MEETINGS





In 2008,
the Board had three (3) meetings telephonically and twenty (20) meetings through
unanimous written consents and additional resolutions. No director attended less
than 75% of all of the combined total meetings of the Board and the committees
on which they served in 2008.





The Board
has determined that Messrs Reich, Miller and Schaffer, are independent directors
as such term is defined in rule 4200(a) (15) of the listing standards of the
National Association of Securities Dealers.




Audit
Committee Financial Expert




The Board
has determined that Mr. Reich qualifies as “audit committee financial expert” as
such term is defined in Item 407 of Regulation S-K, and is independent as
defined in rule 4200(a) (15) of the listing standards of the National
Association of Securities Dealers..





BOARD
COMMITTEES





Audit
Committee




The Audit
Committee of the Board reviews the internal accounting procedures of the Company
and consults with and reviews the services provided by our independent
accountants. The Audit Committee consists of Gerald Schaffer, Stewart Reich and
Mace Miller is independent members of the Board. The Audit Committee held two
meetings in 2008.




The audit
committee has reviewed and discussed the audited financial statements with
management; the audit committee has discussed with the independent auditors the
matters required to be discussed by the statement on Auditing Standards No. 61,
as amended (AICPA, Professional Standards, Vol. 1, AU section 380), as adopted
by the Public Company Accounting Oversight Board in Rule 3200T; and the audit
committee has received the written disclosures and the letter from the
independent accountants required by Independence Standards Board Standard No. 1
(Independence Standards Board Standard No. 1, Independence Discussions with
Audit Committees), as adopted by the Public Company.




29





Compensation Committee





The
Compensation Committee of the Board performs the following: i) reviews and
recommends to the Board the compensation and benefits of our executive officers;
ii) administers the stock option plans and employee stock purchase plan; and
iii) establishes and reviews general policies relating to compensation and
employee benefits. The Compensation Committee consisted of Messrs Reich,
Schaffer and Miller. No interlocking relationships exist between the Board or
Compensation Committee and the Board or Compensation Committee of any other
company. During the past fiscal year the Compensation Committee met one (1)
time.





SECTION
16(A) BENEFICIAL OWNERSHIP COMPLIANCE




Section
16(a) of the Securities Exchange Act of 1934 requires the Company’s Directors
and executive officers, and persons who own more than 10 percent of the
Company’s common stock, to file with the SEC the initial reports of ownership
and reports of changes in ownership of common stock. Officers, Directors and
greater than 10 percent stockholders are required by SEC regulation to furnish
the Company with copies of all Section 16(a) forms they file.




Specific
due dates for such reports have been established by the SEC and the Company is
required to disclose in this Proxy Statement any failure to file reports by such
dates during fiscal 2007. Based solely on its review of the copies of such
reports received by it, or written representations from certain reporting
persons that no Forms 5 were required for such persons, the Company believes
that during the fiscal year ended December 31, 2008, there was no failure to
comply with Section 16(a) filing requirements applicable to its officers,
Directors and ten percent stockholders.




POLICY
WITH RESPECT TO SECTION 162(m)




Section
162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), provides
that, unless an appropriate exemption applies, a tax deduction for the Company
for compensation of certain executive officers named in the Summary Compensation
Table will not be allowed to the extent such compensation in any taxable year
exceeds $1 million. As no executive officer of the Company received compensation
during 2007 approaching $1 million, and the Company does not believe that any
executive officer’s compensation is likely to exceed $1 million in 2008, the
Company has not developed an executive compensation policy with respect to
qualifying compensation paid to its executive officers for deductibility under
Section 162(m) of the Code.




CODE OF ETHICS




The
Company has adopted its Code of Ethics and Business Conduct for Officers,
Directors and Employees that applies to all of the officers, Directors and
employees of the Company, which is currently not available on the Company’s
website.  A copy of the Company’s Code of Ethics may be obtained from
the Company, free of charge, upon written request to the Company at 9107
Wilshire Blvd., Suite 450, Beverly Hills, CA 90210 Attn:
Secretary.




30





ITEM
11.    EXECUTIVE
COMPENSATION




The
following table sets forth the cash compensation (including cash bonuses) paid
or accrued and equity awards granted by us for years ended December 31, 2008 and
2007 to the Company’s CEO and our most highly compensated officers other than
the CEO at December 31, 2008 and 2007 whose total compensation exceeded
$100,000.





SUMMARY
COMPENSATION TABLE




Name & Principal
                      Position
                    Year
                    
                    Salary ($)
                    
                    
                    Bonus ($)
                    
                    
                    Stock
                      Awards($)
                    
                    
                    Option
                      Awards ($)
                    
                    
                    All Other
                      Compensation ($)
                    
                    
                    Total ($)Yossi
      Attia
                    2008
                    
                    $
                    240,000
                    
                    
                    $
                    120,000
                    
                    
                    $
                    —
                    
                    
                    $
                    —
                    
                    
                    
                    —
                    
                    
                    $
                    360,0002007
                    
                    
                    240,000
                    
                    
                    
                    120,000
                    
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    $
                    360,000Robin
      Gorelick
                    2008
                    
                    
                    168,000
                    
                    
                    
                    —
                    
                    
                    
                    24,048
                    
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    $
                    192,0482007
                    
                    $
                    155,000
                    
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    $
                    155,000




OUTSTANDING
EQUITY AWARDS





Option Awards
                      
                      Stock AwardsName
                      
                      Number
                        of
                        Securities
                        Underlying
                        Unexercised
                        Options
                        (#)
                        Exercisable
                      
                      
                      Number
                        of
                        Securities
                        Underlying
                        Unexercised
                        Options
                        (#)
                        Unexercisable
                      
                      
                      Equity
                        Incentive
                        Plan
                        Awards:
                        Number
                        of
                        Securities
                        Underlying
                        Unexercised
                        Unearned
                        Options
                        (#)
                      
                      
                      Option
                        Exercise
                        Price
                        ($)
                      
                      Option
                        Expiration
                        Date
                      
                      Number
                        of Shares
                        or Units
                        of Stock
                        That
                        Have
                        Not
                        Vested
                        (#)
                      
                      
                      Market
                        Value of
                        Shares or
                        Units of
                        Stock
                        That
                        Have
                        Not
                        Vested
                        ($)
                      
                      
                      Equity
                        Incentive
                        Plan
                        Awards:
                        Number
                        of
                        Unearned
                        Shares,
                        Units or
                        Other
                        Rights
                        That Have
                        Not
                        Vested
                        (#)
                      
                      
                      Equity
                        Incentive
                        Plan
                        Awards:
                        Market or
                        Payout
                        Value
                        of
                        Unearned
                        Shares,
                        Units or
                        Other
                        Rights
                        That Have
                        Not
                        Vested
                        ($)Yossi
      Attia (1)
                      
                      
                      1,000
                      (2)
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      $
                      3.40
                      
                      03/12/2011
                      
                      
                      —
                      (3)
                      
                      $
                      —
                      (3)
                      
                      
                      —
                      
                      
                      
                      —




(1)
            Mr. Attia was appointed as Chief
      Executive Officer of the Company on August 14,
  2006.





(2)
            On
      March 22, 2005, the Company granted 1,000 options to Yossi Attia. The
      stock options granted vest at the rate of 250 options on each September 22
      of 2005, 2006, 2007 and 2008, respectively. The exercise price of the
      options ($3.40) is equal to the market price on the date the options were
      granted.


31





(3)
            In
      accordance with Mr. Attia’s employment agreement, Mr. Attia was entitled
      to receive 111,458 shares of common stock for the first year. No shares
      have been issued and Mr. Attia has waived his right to these
      shares.





Except as
set forth above, no other named executive officer has received an equity
award.





DIRECTOR
COMPENSATION





The
following table sets forth with respect to the named Director, compensation
information inclusive of equity awards and payments made in the year end
December 31, 2008.




Name
                
                Fees Earned
                  or Paid in
                  Cash
                
                
                Fees Earned
                  or Accrued
                  but not Paid
                  in CashStewart
      Reich
                
                $
                
                
                
                $
                57,504Ilan
      Kenig (Resigned during 2008)
                
                
                
                
                
                
                25,002Darren
      C Dunckel*
                
                
                120,000Gerald
      Schaffer
                
                
                
                
                
                
                50,004Total
                
                $
                120,000
                
                
                $
                132,510




* – As
salary via Verge, a former subsidiary of the Company.




OPTIONS/SAR GRANTS IN LAST
FISCAL YEAR





There
were other grants of Stock Options/SAR made to the named Executive and President
during the fiscal year ended December 31, 2007.





AGGREGATED
OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION/SAR
VALUES




Name
                                
                                Shares
                                  acquired on
                                  exercise (#)
                                
                                Value realized ($)
                                
                                Number of securities
                                  underlying unexercised
                                  options/SARs at FY-end (#)
                                  Exercisable/ Unexercisable
                                
                                
                                Value of the
                                  unexercised in the
                                  money
                                  options/SARs at
                                  FY-end ($)*
                                  Exercisable/
                                  UnexercisableYossi
      Attia, CEO, Director
                                
                                None
                                
                                None
                                
                                
                                1,000
                                
                                
                                $
                                0.00




* Fair
market value of underlying securities (calculated by subtracting the exercise
price of the options from the closing price of the Company’s common stock quoted
on the OTC as of December 31, 2008, which was about $0.02 per share. None of Mr.
Attia’s options are presently in the money.




EMPLOYMENT
AND MANAGEMENT AGREEMENTS




Effective
July 1, 2006, the Company entered into a five-year employment agreement with
Yossi Attia as the President and provides for annual compensation in the amount
of $240,000, an annual bonus not less than $120,000 per year, and an annual car
allowance. On August 14, 2006, the Company amended the agreement to provide that
Mr. Attia shall serve as the Chief Executive Officer of the Company for a term
of two years commencing August 14, 2006 and granting annual compensation of
$250,000 to be paid in the form of Company shares of common stock. The number of
shares to be received by Mr. Attia is calculated based on the average closing
price 10 days prior to the commencement of each employment year. Mr. Attia has
waived his rights to these shares.




32


On
August 19, 2008, the Company entered into that certain Employment Agreement with
Mike Mustafoglu, effective July 1, 2008, pursuant to which Mr. Mustafoglu agreed
to serve as the Chairman of the Board of Directors of the Company for a period
of five years. Mr. Mustafoglu will receive (i) a salary of $240,000; (ii) a
performance bonus of 10% of net income before taxes, which will be allocated by
Mr. Mustafoglu and other key executives at the sole discretion of Mr.
Mustafoglu; and (iii) a warrant to purchase 10 million shares of common stock of
the Company at an exercise price equal to  the lesser of $.50 or 50%
of the average market price of the Company’s common stock during the 20 day
period prior to exercise on a cashless basis (the “Mustafoglu Warrant”). The
Mustafoglu Warrant shall be released from escrow on an equal basis over the
employment period of five years. As a result, 2,000,000 shares of the Mustafoglu
Warrant will vest per year.  Effective July 16, 2008, the Board of
Directors of the Company approved that certain Mergers and Acquisitions
Consulting Agreement (the “M&A Agreement”) between the Company and
TransGlobal Financial LLC, a California limited liability company
(“TransGlobal”). Pursuant to the M&A Agreement, TransGlobal agreed to assist
the Company in the identification, evaluation, structuring, negotiation and
closing of business acquisitions for a term of five years. As compensation for
entering into the M&A Agreement, TransGlobal shall receive a 20% carried
interest in any transaction introduced by TransGlobal to the Company that is
closed by the Company. At TransGlobal’s election, such compensation may be paid
in restricted shares of common stock of the Company equal to 20% of the
transaction value. Mike Mustafoglu, who is the Chairman of TransGlobal
Financial, was elected on July 28, 2008 at a special shareholder meeting as the
Company’s Chairman of the Board of Directors.  On December 24, 2008,
Mr. Mustafoglu resigned as Chairman of the Board of Directors of Company to
pursue other business interests. Further, that certain Mergers and Acquisitions
Consulting Agreement between the Company and TransGlobal was terminated. Mr.
Mustafoglu is the Chairman of TransGlobal




The board
of directors of AGL approved an employment agreement between the Company and Mr.
Shalom Attia, the controlling shareholder and CEO of AP Holdings
Ltd.  The agreement goes into effect on the date that the
aforementioned allotments are consummated and stipulates that Mr. Shalom Attia
will serve as the VP – European Operations of AGL in return for a salary that
costs the Company an amount of US$ 10 thousand a month.  Mr. Attia is
also entitled to reimbursement of expenses in connection with the affairs of the
Company, in accordance with Company policy, as set from time to
time.  In addition, Mr. Shalom Attia is entitled to an annual bonus of
2.5% of the net, pre-tax income of AGL in excess of NIS 8 million. The agreement
was ratified by the general shareholders meeting of AGL on 30 October
2007.




Effective
July 1, 2006, Verge entered into a non written year employment agreement with
Darren C Dunckel as the President of Verge which commenced on July 11, 2006 and
provides for annual compensation in the amount of $120,000, the employment
expense which was capitalized related to such agreement was $120,000 for each
year ended December 31, 2008 and 2007.  Mr. Dunckel subsequently
resigned as a director of the Company and Verge was disposed of.





The
Company has no pension or profit sharing plan or other contingent forms of
remuneration with any officer, Director, employee or consultant, although
bonuses are paid to some individuals.




DIRECTOR
COMPENSATION




Before
June 11, 2006, Directors who are also officers of the Company were not
separately compensated for their services as a Director. Directors who were not
officers received cash compensation for their services: $2,000 at the time of
agreeing to become a Director; $2,000 for each Board Meeting attended either in
person or by telephone; and $1,000 for each Audit and Compensation Committee
Meeting attended either in person or by telephone. Non-employee Directors were
reimbursed for their expenses incurred in connection with attending meetings of
the Board or any committee on which they served and were eligible to receive
awards under the Company’s 2004 Incentive Plan.




The Board
has approved the modification of Directors’ compensation on its special meeting
held on June 11, 2006. Directors who are also officers of the Company are not
separately compensated for their services as a Director. Directors who are not
officers receive cash compensation for their services as follows: $40,000 per
year and an additional $5,000 if they sit on a committee and an additional
$5,000 if they sit as the head of such committee. Non-employee directors are
reimbursed for their expenses incurred in connection with attending meetings of
the Board or any committee on which they serve and are eligible to receive
awards under our 2004 Incentive Plan.





During
2008 the Board modified its member’s compensation to include only compensation
only to committee’s member that was appointed by the prior board, as following:
each member: $4,167 per month and chairman $4,792 per month.


33




STOCK
OPTION PLAN




2004
Incentive Plan





a) Stock
option plans





In 2004,
the Board of Directors established the “2004 Incentive Plan” (“the Plan”), with
an aggregate of 800,000 shares of common stock authorized for issuance under the
Plan. The Plan was approved by the Company’s Annual Meeting of Stockholders in
May 2004. In 2005, the Plan was adjusted to increase the number of shares of
common stock issuable under such plan from 800,000 shares to 1,200,000 shares.
The adjustment was approved at the Company’s Annual Meeting of Stockholders in
June 2005. The Plan provides that incentive and nonqualified options may be
granted to key employees, officers, directors and consultants of the Company for
the purpose of providing an incentive to those persons. The Plan may be
administered by either the Board of Directors or a committee of two directors
appointed by the Board of Directors (the “Committee”). The Board of Directors or
Committee determines, among other things, the persons to whom stock options are
granted, the number of shares subject to each option, the date or dates upon
which each option may be exercised and the exercise price per share. Options
granted under the Plan are generally exercisable for a period of up to ten years
from the date of grant. Incentive options granted to stockholders that hold
in excess of 10% of the total combined voting power or value of all classes of
stock of the Company must have an exercise price of not less than 110% of the
fair market value of the underlying stock on the date of the grant. The Company
will not grant a nonqualified option with an exercise price less than 85% of the
fair market value of the underlying common stock on the date of the
grant.





The
Company has granted the following options under the Plan:





On April
26, 2004, the Company granted 125,000 options to its Chief Executive Officer, an
aggregate of 195,000 options to five employees and an aggregate of 45,000
options to two consultants of the Company (which do not qualify as employees).
The stock options granted to the Chief Executive Officer vest at the rate of
31,250 options on November 1, 2004, October 1, 2005, October 1, 2006 and October
1, 2007. The stock options granted to the other employees and consultants vest
at the rate of 80,000 options on November 1, 2004, October 1, 2005 and October
1, 2006. The exercise price of the options ($4.78) was equal to the market price
on the date of grant. The options granted to the Chief Executive Officer were
forfeited/ cancelled in August 2006 due to the termination of his employment. Of
the 195,000 options originally granted to employees, 60,000 options were
forfeited or cancelled during 2005, while the remaining 135,000 options were
forfeited or cancelled in August 2006 due to termination of the five employee
contracts. 15,000 options granted to one of the consultants were also forfeited
or cancelled in April 2006 due to the termination of the consultant’s
contract.





Through
December 31, 2005, the Company did not recognize compensation expense under APB
25 for the options granted to the Chief Executive Officer and the five employees
as the options had a zero intrinsic value at the date of grant. The adoption of
SFAS 123R on January 1, 2006 resulted in a compensation charge of $36,817 and
$21,241 for the years ended December 31, 2007 and 2006,
respectively.





In
accordance with SFAS 123, as amended by SFAS 123R, and EITF Issue No. 96-18,
“Accounting for Equity Instruments That Are Issued to Other Than Employees for
Acquiring, or in Conjunction with Selling, Goods or Services”, the Company
computed total compensation charges of $162,000 for the grants made to the two
consultants. Such compensation charges are recognized over the vesting period of
three years. Compensation expense for the year ended December 31, 2006 was
$9,921.





On March
22, 2005, the Company granted an aggregate of 200,000 options to two of the
Company’s Directors. These stock options vest at the rate of 50,000 options on
each September 22 of 2005, 2006, 2007 and 2008, respectively. The exercise price
of the options ($3.40) was equal to the market price on the date the options
were granted. Through December 31, 2005, the Company did not recognize
compensation expense under APB 25 as the options had a zero intrinsic value at
the date of grant. The adoption of SFAS 123R on January 1, 2006 resulted in a
compensation charge of $36,817 and $128,284 for the years ended December 31,
2007 and 2006, respectively. One of the directors was elected as Chief Executive
Officer from August 14, 2006.




On June
2, 2005, the Company granted 100,000 options to a director of the Company, which
vests at the rate of 25,000 options on December 2 of 2005, 2006, 2007, and 2008,
respectively. Through December 31, 2005, the Company did not recognize
compensation expense under APB 25 as the options had a zero intrinsic value at
the date of grant. The adoption of SFAS 123R on January 1, 2006 resulted in a
compensation charge of $89,346 for the year ended December 31, 2006. On November
13, 2006, the Director filed his resignation. His options were vested
unexercised in February 2007.





(b) Other
Options





On
October 13, 2003, the Company granted two Directors 100,000 options each, at an
exercise price (equal to the market price on that day) of $4.21 per share, with
25,000 options vesting on each April 13, 2004, 2005, 2006 and 2007. There were
100,000 options outstanding as of December 31, 2006. The adoption of SFAS 123R
on January 1, 2006 resulted in a compensation charge of $6,599 and $31,824
during the years ended December 31, 2007 and 2006, respectively.





As of
December 31, 2008, there were 330,000 options outstanding with a weighted
average exercise price of $3.77.





No
options were exercised during the year ended December 31, 2008 and the year
ended December 31, 2007.





The
following table summarizes information about shares subject to outstanding
options as of December 31, 2008, which was issued to current or former
employees, consultants or directors pursuant to the 2004 Incentive Plan and
grants to Directors:




34




Options Outstanding
                                
                                
                                Options ExercisableNumber
                                  Outstanding
                                
                                Range of
                                  Exercise Prices
                                
                                
                                Weighted-
                                  Average
                                  Exercise Price
                                
                                
                                Weighted-
                                  Average
                                  Remaining
                                  Life in Years
                                
                                
                                Number
                                  Exercisable
                                
                                
                                Weighted-
                                  Average
                                  Exercise Price100,000
                                
                                $
                                4.21
                                
                                
                                $
                                4.21
                                
                                
                                
                                1.79
                                
                                
                                
                                100,000
                                
                                
                                $
                                4.2130,000
                                
                                $
                                4.78
                                
                                
                                $
                                4.78
                                
                                
                                
                                2.32
                                
                                
                                
                                30,000
                                
                                
                                $
                                4.78200,000
                                
                                $
                                3.40
                                
                                
                                $
                                3.40
                                
                                
                                
                                3.31
                                
                                
                                
                                150,000
                                
                                
                                $
                                3.40330,000
                                
                                $
                                3.40-$4.78
                                
                                
                                $
                                3.77
                                
                                
                                
                                2.66
                                
                                
                                
                                280,000
                                
                                
                                $
                                3.84




(c)
Warrants





On June
7, 2005, the Company granted 100,000 warrants to a consulting company as
compensation for investor relations services at exercise prices as follows:
40,000 warrants at $3.50 per share, 20,000 warrants at $4.25 per share, 20,000
warrants at $4.75 per share and 20,000 warrants at $5 per share. The warrants
have a term of five years and increments vest proportionately at a rate of a
total 8,333 warrants per month over a one year period. The warrants are being
expensed over the performance period of one year. In February 2006, the Company
terminated its contract with the consultant company providing investor relation
services. The warrants granted under the contract were reduced
time-proportionally to 83,330, based on the time in service by the consultant
company.





As part
of some Private Placement Memorandums the Company issued warrants that can be
summarized in the following table:





Name
                        
                        Date
                        
                        Terms
                        
                        No. of Warrants
                        
                        
                        Exercise PriceParty
      1
                        
                        3/30/2008
                        
                        2
      years from Issuing
                        
                        
                        200,000
                        
                        
                        $
                        1.50Party
      1
                        
                        3/30/2008
                        
                        2
      years from Issuing
                        
                        
                        200,000
                        
                        
                        $
                        2.00Party
      2
                        
                        6/05/2008
                        
                        2
      years from Issuing
                        
                        
                        300,000
                        
                        
                        $
                        1.50Party
      3
                        
                        6/30/2008
                        
                        2
      years from Issuing
                        
                        
                        200,000
                        
                        
                        $
                        1,50Party
      4
                        
                        9/5/2008
                        
                        2
      years from Issuing
                        
                        
                        200,000
                        
                        
                        $
                        1.50





Cashless
Warrants:





On
September 5, 2008 the Company entered a short term loan memorandum, with Mehmet
Haluk Undes a third party, for a short term loan (“bridge”) of up to $275,000 to
bridge the drilling program of the Company. As a consideration for said
facility, the Company grants the investor with 100% cashless warrants coverage
for two years at exercise price of 1.50 per share. The investor made a loan of
$220,000 to the company on September 15, 2008 (where said funds were wired to
the company drilling contractor), that was paid in full on October 8, 2008.
Accordingly the investor is entitled to 200,000 cashless warrants as from
September 15, 2008 at exercise price of $1.50 for a period of 2 years. The
Company contests the validity of said warrants.





(d)
Shares





On May 6,
2008 the Company issued 500,000 shares of its common stock, $0.001 par value per
share, to Stephen Martin Durante in accordance with the instructions provided by
the Company pursuant to the 2004 Employee Stock Incentive Plan registered on
Form S-8 Registration





On June
11, 2008, the Company entered into a Services Agreement with Mehmet Haluk Undes
(the “Undes Services Agreement”) pursuant to which the Company engaged Mr. Undes
for purposes of assisting the Company in identifying, evaluating and structuring
mergers, consolidations, acquisitions, joint ventures and strategic alliances in
Southeast Europe, Middle East and the Turkic Republics of Central Asia. Pursuant
to the Undes Services Agreement, Mr. Undes has agreed to provide us services
related to the identification, evaluation, structuring, negotiating and closing
of business acquisitions, identification of strategic partners as well as the
provision of legal services. The term of the agreement is for five years and the
Company has agreed to issue Mr. Undes 525,000 shares of common stock that shall
be registered on a Form S8 no later than July 1, 2008.





On August
13, 2008, the Company issued 16,032 shares of its common stock, $0.001 par value
per share, to Robin Ann Gorelick, the Company Secretary, in accordance with the
instructions provided by the Company pursuant to the 2004 Employee Stock
Incentive Plan registered on Form S-8 Registration





Following
the above securities issuance, the 2004 Plan was closed, and no more securities
can be issued under this plan.


35





2008
Stock Incentive Plan:





On July
28, 2008 - the Company held a special meeting of the shareholders for four
initiatives, consisting of approval of a new board of directors, approval of the
conversion of preferred shares to common shares, an increase in the authorized
shares and a stock incentive plan. All initiatives were approved by the majority
of shareholders.  The 2008 Employee Stock Incentive Plan (the “2008
Incentive Plan”) authorized the board to issue up to 5,000,000 shares of Common
Stock under the plan.





On August
23, 2008, the Company issued 100,000 shares of its common stock 0.001 par value
per share, to Robert M. Yaspan, the Company lawyer, in accordance with the
instructions provided by the Company pursuant to the 2008 Employee Stock
Incentive Plan registered on Form S-8 Registration





On
November 4, 2008, the Company issued 254,000 shares of its common stock 0.001
par value per share, to one consultant (200,000 shares) and two employees
(54,000 shares), in accordance with the instructions provided by the Company
pursuant to the 2008 Employee Stock Incentive Plan registered on Form S-8
Registration.





ITEM
      12.
            SECURITY
      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
    MANAGEMENT





The
following table sets forth certain information relating to the ownership of our
voting securities by (i) each person known by us be the beneficial owner of more
than five percent of the outstanding shares of our common stock, (ii) each of
our directors, (iii) each of our named executive officers, and (iv) all of our
executive officers and directors as a group. Unless otherwise indicated, the
information relates to these persons, beneficial ownership as of August 19,
2009. Except as may be indicated in the footnotes to the table and subject to
applicable community property laws, each person has the sole voting and
investment power with respect to the shares owned.





Title of Class
                  
                  Name of Beneficial Owner (1)
                  
                  Amount of Class
                    Beneficially Owned
                  
                  
                  Percentage of
                    ClassCommon
                  
                  Yossi
      Attia (2)(3)(4)
                  
                  
                  1,000
                  
                  
                  
                  *Common
                  
                  Robin
      Ann Gorelick  **
                  
                  
                  0
                  
                  
                  
                  *Common
                  
                  Stewart
      Reich (3) (4)
                  
                  
                  1,000
                  
                  
                  
                  *Common
                  
                  Mace
      K. Miller **
                  
                  
                  0
                  
                  
                  
                  *Common
                  
                  Gerald
      Schaffer (3)
                  
                  
                  0
                  
                  
                  
                  *Common
                  
                  Dr.
      Gregory Rubin (3)
                  
                  
                  0
                  
                  
                  
                  *Common
                  
                  Yasheng
      Group (6)
                  
                  
                  50,000,000
                  
                  
                  
                  47.2
                  %Common
                  
                  Capitol
      Properties LLC (7)
                  
                  
                  38,461,538
                  
                  
                  
                  36.3
                  %All
      executive officers and directors as a group (consisting of 6
      individuals)
                  
                  
                  7,700,000
                  
                  
                  
                  6.7
                  %





*
            less than
      1.00%




**
            Resigned subsequent to the date
      of this table.





(1)
Unless otherwise indicated, each person has sole investment and voting power
with respect to the shares indicated. For purposes of this table, a person or
group of persons is deemed to have “beneficial ownership” of any shares which
such person has the right to acquire within 60 days after August 19, 2009. For
purposes of computing the percentage of outstanding shares held by each person
or group of persons named above on  August 19, 2009, any security
which such person or group of persons has the right to acquire within 60 days
after such date is deemed to be outstanding for the purpose of computing the
percentage ownership for such person or persons, but is not deemed to be
outstanding for the purpose of computing the percentage ownership of any other
person.





36




(2) An
officer of the Company.




(3) A
director of the Company.




(4)
Includes an option to purchase 1,000 shares of common stock at an exercise price
of $3.40 per share.




(5)
Intentionally left blank.





(6)
Yasheng Group is a publicly traded company listed on the
pinksheets.  As a result, its board of directors of Yasheng has voting
and dispositive control over the securities held by it.


(7)
Haggai Ravid has voting and dispositive control over the securities held by
Capitol.  Capitol has agreed to restructure its ownership upon closing
of the transaction with Yasheng Group (BVI).





The
foregoing table is based upon 113,430,807 shares of common stock outstanding as
of August 19, 2009.


37




ITEM
      13.
            CERTAIN
      RELATIONSHIPS AND RELATED
TRANSACTIONS




During
2007 The Company via ERC rented its office premises in Las Vegas from Yossi
Attia for a monthly fee.




Mr.
Darren Dunckel, a former member of the Board, serves as CEO and President of ERC
as well as Verge, which are both Nevada corporations and former subsidiaries of
the Company. As President, he oversees management of real estate acquisitions,
development and sales in the United States and in Croatia where ERC holds
properties. Concurrently, Mr. Dunckel is the Managing Director of The
International Holdings Group Ltd. ("TIHG"), the sole shareholder of ERC and as
such manages the investment portfolio of this holding company. Mr. Dunckel has
entered into various transactions and agreements with the Company on behalf of
ERC, Verge and TIHG (all of which are related entities given Mr. Dunckel’s
involvement as their CEO). On December 31, 2006, Mr. Dunckel executed the
Agreement and Plan of Exchange on behalf of TIHG which was issued shares in ERC
in consideration for the exchange of TIHG's interest in Verge. Pursuant to that
certain Stock Transfer and Assignment of Contract Rights Agreement dated as of
May 14, 2007, the Company transferred its shares in ERC in consideration for the
assignment of rights to that certain Investment and Option Agreement, and
amendments thereto, dated as of June 19, 2006 which gives rights to certain
interests and assets. Mr. Dunckel has represented and executed the foregoing
agreements on behalf of ERC, Verge and TIHG as well as executed agreements on
behalf of Verge to transfer 100% of Verge. Effective July 1, 2006, Verge entered
into a non written year employment agreement with Darren C Dunckel as the
President of Verge which commenced on July 11, 2006 and provides for annual
compensation in the amount of $120,000, the employment expense of which was
capitalized related to such agreement was $120,000 for each year ended December
31, 2008 and 2007. Verge loaned to Mr. Darren Dunckel, the sum of $93,822, of
which $90,000 was paid-off via Mr. Dunckel’s employment agreement, and the
balance of $3,822 is included in Prepaid and other current assets as of December
31, 2006. As of December 31, 2007, the balance for advances to Mr. Dunckel was
paid off. On October 2008 a group of investors associated with Mr. Dunckel
acquired Verge from AGL in a transaction to which the company is not a
party.




Upon
closing the acquisition of AGL Mr. Attia was appointed as the CEO of AGL. Mr.
Yossi Attia serves as chairmen of the board of AGL.





The board
of directors of AGL approved an employment agreement between the Company and Mr.
Shalom Attia, the controlling shareholder and CEO of AP Holdings
Ltd.  The agreement goes into effect on the date that the
aforementioned allotments are consummated and stipulates that Mr. Shalom Attia
will serve as the VP – European Operations of AGL in return for a salary that
costs the Company an amount of US$ 10 thousand a month.  Mr. Attia is
also entitled to reimbursement of expenses in connection with the affairs of the
Company, in accordance with Company policy, as set from time to
time.  In addition, Mr. Shalom Attia is entitled to an annual bonus of
2.5% of the net, pre-tax income of AGL in excess of NIS 8 million. The agreement
was ratified by the general shareholders meeting of AGL on 30 October
2007.




On March
31, 2008, the Company raised $200,000 from a private offering of its securities
pursuant to a Private Placement Memorandum (“PPM”). The private placement was
for Company common stock which shall be “restricted securities” and were sold at
$1.00 per share. The offering included 200,000 warrants to be exercised at $1.50
for two years (for 200,000 shares of the Company common stock), and an
additional 200,000 warrants to be exercised at $2.00 for four years (for 200,000
shares of the Company common stock). Said Warrants may be exercised to ordinary
common shares of the Company only if the Company issues subsequent to the date
of the PPM, 25 million or more shares of its common stock. The money raised from
the private placement of the Company’s shares will be used for working capital
and business operations of the Company. The PPM was done pursuant to Rule 506. A
Form D has been filed with the Securities and Exchange Commission in compliance
with Rule 506 for each Private Placement. The investor is D’vora Greenwood
(Attia), the sister of Mr. Yossi Attia. Mr. Attia abstained from voting on this
matter in the board meeting which approved this PPM.




On
September 5, 2008 the Company entered a short term loan memorandum, with Mehmet
Haluk Undes, for a short term loan (“bridge”) of $220,000 to bridge the drilling
program of the Company. As a consideration for said facility, the Company grants
the investor with 100% cashless warrants coverage for two years at exercise
price of $1.50 per share. The investor made a loan of $220,000 to the company on
September 15, 2008 (where said funds were wired to the company drilling
contractor), that was paid in full on October 8, 2008. Accordingly the investor
is entitled to 200,000 cashless warrants from September 15, 2008 at exercise
price of $1.50 for a period of 2 years.  The Company contest said
warrants entitlements to the investor, based on a cause.




On
December 5, 2008 the Company entered into and closed an
Agreement  with T.A.S. Holdings Limited (“TAS”) (the “TAS Agreement”)
pursuant to which TAS agreed to cancel the debt payable by the Company to TAS in
the amount of approximately $1,065,000 and its 15,000,000 shares of common stock
it presently holds in consideration of the Company issuing TAS 1,000,000 shares
of Series B Convertible Preferred Stock, which such shares carry a stated value
equal to $1.20 per share (the “Series B Stock”).


38





The
Series B Stock is convertible, at any time at the option of the holder, into
common shares of the Company based on a conversion price of $0.0016 per share.
The Series B Stock shall have voting rights on an as converted basis multiplied
by 6.25. Holders of the Series B Stock are entitled to receive, when declared by
the Company’s board of directors, annual dividends of $0.06 per share of Series
B Stock paid semi-annually on June 30 and December 31 commencing June 30,
2009.




In the
event of any liquidation or winding up of the Company, the holders of Series B
Stock will be entitled to receive, in preference to holders of common stock, an
amount equal to the stated value plus interest of 15% per year.




The
Series B Stock restricts the ability of the holder to convert the Series B Stock
and receive shares of the Company’s common stock such that the number of shares
of the Company common stock held by TAS and its affiliates after such conversion
does not exceed 4.9% of the Company’s then issued and outstanding shares of
common stock.




The
Series B Stock was offered and sold to TAS in a private placement transaction
made in reliance upon exemptions from registration pursuant to Section 4(2)
under the Securities Act of 1933 and Rule 506 promulgated there under. TAS is an
accredited investor as defined in Rule 501 of Regulation D promulgated under the
Securities Act of 1933. The Company filed its Certificate of Designation of
Preferences, Rights and Limitations of Series B Preferred Stock with the State
of Delaware




Based on
agreements that the company is not side too, Dr. Rubin is partial owner of
T.A.S.





ITEM
      14.
            PRINCIPAL
      ACCOUNTANTS FEES AND
SERVICES





The
following table presents aggregate fees for professional audit services rendered
by Deloitte Auditing and Consulting Kft. and affiliates, Fahn Kanne and Company,
and Robison Hill and Company for the audits of the Company’s annual financial
statements for the fiscal years ended December 31, 2008 and 2007,
respectively, and fees billed for other services rendered.




2008
                
                
                2007Audit
      Fees
                
                $
                41,800
                
                
                $
                213,400Audit-Related
      Fees
                
                
                
                
                
                
                38,000Tax
      Fees
                
                
                
                
                
                
                20,570Total
                
                $
                41,800
                
                
                $
                181,500





Fee
of the independent Auditors in AGL:




The
following is a breakdown of the fees, which are included in the totals above, of
the external independent auditors of AGL:




2007Hours
                
                
                NIS’000
                
                
                $US ‘000Auditing
      services
                
                
                1,510
                
                
                
                375
                
                
                
                94Tax
      services
                
                
                20
                
                
                
                5
                
                
                
                1Total
                
                
                1,530
                
                
                
                380
                
                
                
                95




The
following is a breakdown of the fees of the independent Auditors of the Croatian
subsidiary, Sitnica:




2007Hours
                
                
                NIS ‘000
                
                
                $US ‘000Auditing
      services
                
                
                18
                
                
                
                15
                
                
                
                4





The
Company’s Audit Committee’s policy is to pre-approve all audit and permissible
non-audit services provided by the independent auditors. These services may
include audit services, audit-related services, tax services and other services.
All services rendered have been approved by the Audit
Committee.


39





ITEM
      15.
            EXHIBITS




Exhibit No.
                  
                  Description2.1
                  
                  Amendment
      No. 1 to that certain Share Exchange Agreement by and
      between  Vortex Resources Corp. and Trafalgar Capital
      Specialized Investment Fund, Luxembourg dated April 29
      2008  (15)2.2
                  
                  Agreement
      and Plan of Exchange with Davy Crockett Gas Company, LLC and the members
      of Davy Crockett Gas Company, LLC dated May 1, 2008
(16)2.3
                  
                  Amendment
      No. 1 to the Agreement and Plan of Exchange with Davy Crockett Gas
      Company, LLC and the members of Davy Crockett Gas Company, LLC dated June
      11, 2008 (19)2.4
                  
                  Shares
      Purchase Agreement between Vitonas Investments Limited, a
      Hungarian corporation, Certus Kft., a Hungarian corporation, Rumed
      2000 Kft., a Hungarian corporation and Euroweb International Corp., a
      Delaware corporation, dated as of February 23, 2004.
  (33)2.5
                  
                  Share
      Purchase Agreement by and between Euroweb International Corp. and Invitel
      Tavkozlesi Szolgaltato Rt. (34)2.6
                  
                  Shares
      Purchase Agreement between Vitonas Investments Limited, a Hungarian
      corporation, Certus Kft., a Hungarian corporation, Rumed 2000 Kft., a
      Hungarian corporation and Euroweb International Corp., a Delaware
      corporation, dated as of February 23, 2004. (33)3.1
                  
                  Certificate
      of Incorporation filed November 9, 1992 (1)3.2
                  
                  Amendment
      to Certificate of Incorporation filed July 9, 1997 (2)3.3
                  
                  Bylaws(1)3.4
                  
                  Certificate
      of Designation of Preferences, Rights, and Limitations of Series A
      Preferred Stock (19)3.5
                  
                  Certificate
      of Designation of Preferences, Rights and Limitations of Series B
      Preferred Stock (26)3.6
                  
                  Restated
      Certificate of Incorporation (33)3.7
                  
                  Certificate
      of Amendment to the Restated Certificate of Incorporation, dated July 29,
      2008 (22)3.8
                  
                  Certificate
      of Ownership of Emvelco Corp. and Vortex Resources
    Corp.(23)3.9
                  
                  Certificate
      of Amendment to the Certificate of Incorporation , dated February 24, 2009
      (28)3.10
                  
                  Form
      of Common Stock Certificate (1)4.1
                  
                  Convertible
      Note issued to Trafalgar Capital Specialized Investment Fund, Luxembourg,
      dated September 2008 (24)4.2
                  
                  Form
      of Convertible Note dated May 1, 2008 issued to the members of Davy
      Crockett Gas Company, LLC (16)4.3
                  
                  All
      Inclusive Promissory Note, dated November 27, 2007, issued by 13059
      Dickens LLC in the name of Kobi Louria  (14)4.4
                  
                  Form
      of Warrant to Purchase 200,000 Shares of Common Stock issued in the name
      of Vortex One, LLC (20)10.1
                  
                  Share
      Purchase Agreement, dated February 2004, by and between PANTEL TAVKOZLESI
      ES KOMMUNIKACIOS RT. And Euroweb International Inc. (3)10.2
                  
                  Form
      of Guaranty,dated
      February 23, 2004 by EuroWeb International, Inc. in favor of  PANTEL
      TAVKOZLESI ES KOMMUNIKACIOS RT. (3)10.3
                  
                  Securities
      Purchase Agreement entered by and between Vortex Resources Corp. and
      Trafalgar Capital Specialized Investment Fund, Luxembourg dated September
      25, 2008 (24)


40





10.4
              
              Security
      Agreement entered by and between Vortex Resources Corp. and Trafalgar
      Capital Specialized Investment Fund, Luxembourg dated September 25, 2008
      (24)10.5
              
              Pledge
      Agreement entered by and between Vortex Resources Corp. and Trafalgar
      Capital Specialized Investment Fund, Luxembourg dated September 25, 2008
      (24)10.6
              
              Investment
      Agreement, dated as of June 19, 2006, by and between EWEB RE Corp. and AO
      Bonanza Las Vegas, Inc. (4)10.7
              
              Sale
      and Purchase Agreement, dated as of February 16, 2007, by and between
      Emvelco Corp. and Marivaux Investments Limited (5)10.8
              
              Stock
      Transfer and Assignment of Contract Rights Agreement, dated as of May 14,
      2007 among Emvelco Corp., Emvelco RE Corp., The International Holdings
      Group Ltd., and Verge Living Corporation (6)10.9
              
              Agreement,
      dated as of June 5, 2007, among Emvelco Corp., Yossi Attia, Darren
      Dunckel, and Upswing, Ltd.(7)10.10
              
              Agreement,
      dated July 5, 2007 by and between Emvelco Corp and Emvelco RE
      Corp.(8)10.11
              
              All-Inclusive
      Purchase Money Deeds of Trust with Assignment of Rents - Edinburgh Avenue,
      dated July 5, 2007 by and between Emvelco Corp and Emvelco RE
      Corp.(8)10.12
              
              All-Inclusive
      Purchase Money Deeds of Trust with Assignment of Rents - Harper
      Avenue,  dated July 5, 2007 by and between Emvelco Corp and
      Emvelco RE Corp. (8)10.13
              
              All-Inclusive
      Purchase Money Deeds of Trust with Assignment of Rents - Laurel
      Avenue,  dated July 5, 2007 by and between Emvelco Corp and
      Emvelco RE Corp. (8)10.14
              
              Agreement,
      dated as of June 5, 2007, among Emvelco Corp., Yossi Attia, Darren
      Dunckel, and Upswing, Ltd.(9)10.15
              
              Agreement,
      dated July 2007, by and among Emvelco Corp., Appswing Ltd. and AP Holdings
      Ltd. (10)10.16
              
              Agreement,
      dated July 19, 2007, by and among Emvelco Corp., Kidron Industrial
      Holdings Ltd and AP Holdings Ltd. (10)10.17
              
              Indemnification
      Agreement, dated September 18, 2007 by and between Emvelco Corp. and Verge
      Living Corporation (11)10.18
              
              Notice
      of Exercise of Options, dated October 15, 2007 from Emvelco Corp. to
      Emvelco RE Corp. (12)10.19
              
              Settlement
      and Release Agreement and Amendment No. 1 to that certain Term Sheet by
      and between Emvelco Corp and  Dr. Danny Rittman, dated
      November 15, 2007. (13)10.20
              
              All
      Inclusive Deed of Trust, dated November 27, 2007 by and between 13059
      Dickens LLC and Kobi Louria (14)10.21
              
              Services
      Agreement dated June 11, 2008 by and between EMVELCO Corp. and Mehmet
      Haluk Undes (18)10.22
              
              Limited
      Liability Company Operating Agreement of Vortex Ocean One, LLC, a Nevada
      limited liability company, dated June 30, 2008 (20)10.23
              
              Term
      Assignment of Oil and Gas Lease issued to Davy Crockett Gas Company, LLC
      (20)10.24
              
              Drilling
      Agreement, dated July 1, 2008, by and between Davy Crockett Gas Company,
      LLC and Ozona Natural Gas Company, LLC (20)10.25
              
              Mergers
      and Acquisitions Consulting Agreement, dated July 1, 2008, by and between
      the Company and TransGlobal Financial LLC (21)10.26
              
              Agreement
      dated December 3, 2008 and is made by and between Vortex Resource Corp.
      and T.A.S. Holdings Limited (26)10.27
              
              Form
      of Agreement, dated December 19, 2009, by and between Vortex Resources
      Corp. and the assignees of those persons party to that certain
      Registration Rights Agreement, dated July 21, 2005
  (27)


41





10.28
              
              Agreement
      by and between Vortex Resources Corp. and Star Equity Investments, LLC,
      dated March 11, 2009 (29)10.29
              
              Form
      of Subscription Agreement, dated January 23, 2009 related to the sale of
      shares of the Company’s Common Stock (30)10.30
              
              Employment
      Agreement by and between the Company and Yossi Attia effective July 1,
      2006 (31)10.31
              
              Pledge
      Agreement by and between Vortex Ocean One LLC and Tiran Ibgui dated
      November 18, 200810.32
              
              Amendment
      No, 1 Dated as of August 14, 2006 to the Employment Agreement between
      Yossi Attia and Euroweb International Corp.10.33
              
              Employment
      Agreement by and between Emvelco Corp. and Mike M. Mustafoglu
      (35)21.1
              
              List
      of Subsidiaries31
              
              Certification
      of the Chief Executive Officer and Principal Financial Officer of Vortex
      Resources Corp. pursuant to Section 302 of the Sarbanes-Oxley Act of
      2002.32
              
              Certification
      of the Chief Executive Officer and Principal Financial Officer of Vortex
      Resources Corp. Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to
      Section 906 of the Sarbanes-Oxley Act of 2002.


(1)
Incorporated by reference to Registrant’s Registration Statement on Form SB-2
dated May 12, 1993 (Registration No. 33-62672-NY, as amended)




(2)
Incorporated by reference to the exhibit filed with the Registrant’s Form 10-QSB
for quarter ended June 30, 1998.




(3)
Incorporated by reference to the exhibit filed with the Registrant’s Current
Report on Form 8-K on February 27, 2004.




(4)
Incorporated by reference to the exhibit filed with the Registrant’s Current
Report on Form 8-K on March 9, 2004.




(5)
Incorporated by reference to the exhibit filed with the Registrant’s Current
Report on Form 8-K on December 21, 2005.




(6)
Incorporated by reference to the exhibit filed with the Registrant’s Current
Report on Form 8-K on May 16, 2007




(7)
Incorporated by reference to the exhibit filed with the Registrant’s Current
Report on Form 8-K on June 11, 2007




(8)
Incorporated by reference to the exhibit filed with the Registrant’s Current
Report on Form 8-K on July 12, 2007




(9)
Incorporated by reference to the exhibit filed with the Registrant’s Current
Report on Form 8-K on June 11, 2007




(10)  Incorporated
by reference to the exhibit filed with the Registrant’s Current Report on Form
8-K on July 26, 2007




(11)
Incorporated by reference to the exhibit filed with the Registrant’s Current
Report on Form 8-K on September 26, 2007




(12)
Incorporated by reference to the exhibit filed with the Registrant’s Current
Report on Form 8-K on October 19, 2007




(13)
Incorporated by reference to the exhibit filed with the Registrant’s Current
Report on Form 8-K on November 19, 2007




(14)
Incorporated by reference to the exhibit filed with the Registrant’s Current
Report on Form 8-K on December 21, 2007




(15)  Incorporated
by reference to the exhibit filed with the Registrant’s Current Report on Form
8-K on  May 5, 2008




(16)
Incorporated by reference to the exhibit filed with the Registrant’s Current
Report on Form 8-K on  May 7, 2008




(17)
Incorporated by reference to the exhibit filed with the Registrant’s Current
Report on Form 8-K on  June 10, 2008




(18)
Incorporated by reference to the exhibit filed with the Registrant’s Current
Report on Form 8-K on  June 13, 2008


42


(19
Incorporated by reference to the exhibit filed with the Registrant’s Current
Report on Form 8-K on  June 17, 2008




(20)
Incorporated by reference to the exhibit filed with the Registrant’s Current
Report on Form 8-K on  July 9, 2008




(21)
Incorporated by reference to the exhibit filed with the Registrant’s Current
Report on Form 8-K on  July 17, 2008




(22)
Incorporated by reference to the exhibit filed with the Registrant’s Current
Report on Form 8-K on  August 1, 2008





(23)
Incorporated by reference to the exhibit filed with the Registrant’s Current
Report on Form 8-K on  September 4, 2008




(24)
Incorporated by reference to the exhibit filed with the Registrant’s Current
Report on Form 8-K on  October 2, 2008




(25)
Incorporated by reference to the exhibit filed with the Registrant’s Current
Report on Form 8-K on  November 20, 2008




(26)
Incorporated by reference to the exhibit filed with the Registrant’s Current
Report on Form 8-K on  December 5, 2008




(27)
Incorporated by reference to the exhibit filed with the Registrant’s Current
Report on Form 8-K on  December 31, 2008




(28)
Incorporated by reference to the exhibit filed with the Registrant’s Current
Report on Form 8-K on  February 25, 2009




(29)
Incorporated by reference to the exhibit filed with the Registrant’s Current
Report on Form 8-K on  March 19, 2009





(30)
Incorporated by reference to the exhibit filed with the Registrant’s Current
Report on Form 8-K on  January 28, 2009





(31)
Incorporated by reference to the exhibit filed with the Registrant’s Current
Report on Form 8-K on  July 5, 2006




(32)
Incorporated by reference to the exhibit filed with the Registrant’s Schedule
14A Proxy Statement on May 7, 2003





(33) Incorporated by reference to the exhibit filed
with the Registrant’s Current Report on Form 8-K on  March 9,
2004





(34)
Incorporated by reference to the exhibit filed with the Registrant’s Current
Report on Form 8-K on  December 21, 2005




(35)
Incorporated by reference to the exhibit filed with the Registrant’s Quarterly
Report on Form 10-Q filed on  August 19, 2008


43





SIGNATURES





Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, as amended, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.




VORTEX
      RESOURCES CORP.By
              /s/ Yossi AttiaYossi
      AttiaDated:
      March 26, 2010
              
              Chief
      Executive Officer and Director(Principal
      Executive Officer and Principal Financial Officer)




Pursuant
to the requirements of the Securities Exchange of 1934, as amended, this Report
has been signed below by the following persons in the capacities and on the
dates indicated.




SIGNATURE
                                        
                                        TITLE
                                        
                                        DATEBy: /s/ Yossi Attia
                                        
                                        Chief
      Executive Officer and Director
                                        
                                        March
      26, 2010Yossi
      Attia
                                        
                                        (Principal
      Executive Officer, Principal
                                          Financial
      and Accounting Officer)By: /s/ Stewart Reich
                                        
                                        Director
                                        
                                        March
      26, 2010Stewart
      ReichBy: /s/ Gerald Schaffer
                                        
                                        Director
                                        
                                        March
      26, 2010Gerald
      SchafferBy: /s/ Gregory Rubin
                                        
                                        Chairman
      of the Board and Director
                                        
                                        March
      26, 2010Gregory
      Rubin


44





VORTEX
RESOURCES CORP.





Consolidated
Financial Statements





As of
December 31, 2008 and As of December 31, 2007 and for the Years Ended December
31, 2008 and 2007




TABLE OF
CONTENTS





PageReport
      of the Independent Registered Public Accounting Firm
                
                F-2Consolidated
      Financial Statements:Consolidated
      Balance Sheet
                
                F-3Consolidated
      Statements of Operations and Comprehensive Income
                
                F-4Consolidated
      Statements of Stockholders’ Equity
                
                F-5Consolidated
      Statements of Cash Flows
                
                F-6Notes
      to Consolidated Financial Statements
                
                F-8


F-1




REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS
  To the
Board of Directors and Shareholders
 Yasheng
Eco-Trade Corporation and subsidiaries
  We have
audited the accompanying consolidated balance sheets of Yasheng Eco-Trade
Corporation (f/k/a Vortex Resources Corp. and f/k/a Emvelco Corp.) and
Subsidiaries as of December 31, 2008 and 2007 and the related consolidated
statements of operations, comprehensive income, stockholder’s equity 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 did not audit the
financials statements of Atia Group Ltd., a 58.3% owned subsidiary, which
statements reflect total assets of $11,748,000 as of December 31, 2007 and total
revenues of $-0- for the period from November 2, 2007 (date of acquisition) to
December 31, 2007. Those statements were audited by other auditors whose report
has been furnished to us, and our opinion, insofar as it relates to the amounts
included for Atia Group Ltd., is based solely on the report of the other
auditors.
  We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company 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 also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
  In our
opinion, based on our audit and the report of the other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Yasheng Eco-Trade Corporation, and
Subsidiaries as of December 31, 2008 and 2007 and the results of its operations
and its cash flows for the years ended December 31, 2008 and 2007 in conformity
with accounting principles generally accepted in the United States of
America.
  The
accompanying consolidated financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 13 to the
financial statements, the financing of the Company’s projects is dependent on
the future effect of the so called sub-prime mortgage crisis on financial
institutions. This sub-prime crisis may affect the availability and terms of
financing of the completion of the projects as well as the availability and
terms of financing may affect the Company’s ability to obtain relevant
financing, if required. The sub-prime mortgage crisis has raised substantial
doubt about the Company’s ability to continue as a going concern. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
  As
discussed in Note 21 to the financial statements, the Company has restated their
balance sheet, statement of income, stockholders’ equity and cash flows for the
year ended December 31, 2008.
 
 Certified
      Public Accountants
 Salt Lake
City, Utah
 April 13,
2009 except as to the restatement discussed in Note 21 to the financials
statements which is as of March 5, 2010.
  
 F-2


Vortex Resources
Corp.


Consolidated
Balance Sheet


As
of December 31, 2008 and 2007


Amounts in US
dollars


2008
                        
                        
                        2007ASSETSCurrent
      assets:Cash
      and cash equivalents
                        
                        $
                        123,903
                        
                        
                        $
                        369,576Accounts
      receivable
                        
                        
                        —
                        
                        
                        
                        218,418Intangible,
      debt discount on Notes with conversion option, current (Note
      7)
                        
                        
                        —
                        
                        
                        
                        0Total
      current assets from continued operations
                        
                        
                        123,903
                        
                        
                        
                        587,994Total
      current assets from discontinued operations (Note 10)
                        
                        
                        
                        
                        
                        
                        17,547,196Total
      current assets
                        
                        
                        123,903
                        
                        
                        
                        18,135,190Fixed
      assets, net
                        
                        
                        —
                        
                        
                        
                        32,425Total
      Non Current assets from discontinued operations (Note 10,
      Note19)
                        
                        
                        2,100,000
                        
                        
                        
                        36,450,777Total
      assets
                        
                        $
                        2,223,903
                        
                        
                        $
                        54,618,392LIABILITIES
      AND STOCKHOLDERS’ EQUITYCurrent
      liabilities:Accounts
      payable and accrued expenses
                        
                        
                        813,064
                        
                        
                        
                        —Convertible
      notes payable to third party – current portion (Note 7)
                        
                        
                        212,290
                        
                        
                        
                        —Other
      current liabilities
                        
                        
                        89,400
                        
                        
                        
                        305,520Total
      current liabilities from continued operations
                        
                        
                        1,114,754
                        
                        
                        
                        305,520Total
      current liabilities from discontinued operations (Note 10)
                        
                        
                        —
                        
                        
                        
                        24,297,443Total
      current liabilities
                        
                        
                        1,114,754
                        
                        
                        
                        24,602,963Convertible
      Notes Payable to Third Party (Note 7)
                        
                        
                        3,440,119
                        
                        
                        
                        2,277,633Total
      Non Current liabilities from discontinued operations (Note
    10)
                        
                        
                        —
                        
                        
                        
                        8,715,884Total
      non Current liabilities
                        
                        
                        4,554,873
                        
                        
                        
                        35,596,480Commitments
      and contingencies (Note 13)
                        
                        
                        —
                        
                        
                        
                        —Minority
      interest in subsidiary’s net assets
                        
                        
                        525,000
                        
                        
                        
                        6,145,474Stockholders'
      equityPreferred
      stock, 1,000,000 series B convertible, $1.20 stated value - Authorized and
      outstanding 1,200,000 and 0 shares, respectively
                        
                        
                        1,200,000
                        
                        
                        
                        —Common
      stock, $0.001 par value - Authorized 400,000,000 shares; 872,809 and
      46,092 shares issued; 872,809 and 46,092 shares outstanding,
      respectively
                        
                        
                        873
                        
                        
                        
                        46Additional
      paid-in capital
                        
                        
                        85,467,283
                        
                        
                        
                        53,285,959Accumulated
      deficit
                        
                        
                        (89,497,091
                        )
                        
                        
                        (38,289,630
                        )Accumulated
      other comprehensive loss
                        
                        
                        (2,226
                        )
                        
                        
                        (2,226Treasury
      stock – 1,000 and 12,799 common shares at cost, respectively (Note
      16)
                        
                        
                        (24,809
                        )
                        
                        
                        (2,117,711
                        )Total
      stockholders' equity
                        
                        
                        (2,855,970
                        )
                        
                        
                        12,876,438Total
      liabilities and stockholders' equity
                        
                        $
                        2,223,903
                        
                        
                        $
                        54,618,392





See
accompanying notes to consolidated financial statements.


F-3


Vortex Resources
Corp.


Consolidated
Statements of Operations and Comprehensive Income


Years
Ended December 31, 2008 and 2007


Amounts
in US dollars





2008
                    
                    
                    2007Revenues
      from Sales
                    
                    $
                    —
                    
                    
                    $
                    —Cost
      of revenues
                    
                    
                    —
                    
                    
                    
                    —Operating
      expensesCompensation
      and related costs
                    
                    
                    558,073
                    
                    
                    
                    762,787Consulting,
      professional and directors fees
                    
                    
                    13.049,759
                    
                    
                    
                    1,195,922Other
      selling, general and administrative expenses
                    
                    
                    413,576
                    
                    
                    
                    —Software
      development expense
                    
                    
                    —
                    
                    
                    
                    136,236Depreciation
      and amortization
                    
                    
                    —
                    
                    
                    
                    —Total
      operating expenses
                    
                    
                    14,021,409
                    
                    
                    
                    2,094,945Operating
      loss
                    
                    
                    (14,021,409
                    )
                    
                    
                    (2,094,945
                    )Interest
      income
                    
                    
                    729,097
                    
                    
                    
                    1,665,379Interest
      expense
                    
                    
                    (1,922,983
                    )
                    
                    
                    —Net
      interest income (expense)
                    
                    
                    (1,193,886
                    )
                    
                    
                    1,665,379Other
      income
                    
                    
                    —
                    
                    
                    
                    13,899Bad
      debt expense
                    
                    
                    0
                    
                    
                    
                    —Loss
      before income taxes
                    
                    
                    (15,215,295
                    )
                    
                    
                    (415,667
                    )Income
      tax expense
                    
                    
                    —
                    
                    
                    
                    —Loss
      from continuing operations
                    
                    
                    (15,215,295
                    )
                    
                    
                    (415,667
                    )Loss
      from discontinued operations & Goodwill impairment, net of tax (Note
      10)
                    
                    
                    (35,935,635
                    )
                    
                    
                    (10,656,933
                    )Net
      Loss before minority interest in loss of consolidated
      subsidiary
                    
                    
                    (51,150,930
                    )
                    
                    
                    (11,072,600
                    )Less
      minority interest in loss of consolidated subsidiary
                    
                    
                    (56,531
                    )
                    
                    
                    172,810Net
      loss
                    
                    
                    (51,207,461
                    )
                    
                    
                    (10,899,790
                    )Other
      comprehensive loss
                    
                    
                    —
                    
                    
                    
                    (7,765
                    )Comprehensive
      (loss)
                    
                    $
                    (51,207,461
                    )
                    
                    $
                    (10,907,555
                    )Loss
      per share from continuing operations, basic
                    
                    
                    (78.04
                    )
                    
                    
                    (8.78
                    )Loss
      per share from discontinued operations, basic
                    
                    
                    (184.32
                    )
                    
                    
                    (225.10
                    )Net
      Loss per share, basic
                    
                    
                    (262.36
                    )
                    
                    
                    (233.88
                    )Loss
      per share from continuing operations, diluted
                    
                    
                    (76.01
                    )
                    
                    
                    (8.78
                    )Loss
      per share from discontinued operations, diluted
                    
                    
                    (179.52
                    )
                    
                    
                    (225.10
                    )Net
      Loss per share, diluted
                    
                    
                    (255.53
                    )
                    
                    
                    (233.88
                    )Weighted
      average number of shares outstanding, basic
                    
                    
                    194,967
                    
                    
                    
                    47,343Weighted
      average number of shares outstanding, diluted
                    
                    
                    200,175
                    
                    
                    
                    47,343





See
accompanying notes to consolidated financial statements.


F-4





VORTEX
RESOURCES CORP.


CONSOLIDATED
STATEMENTS OF STOCKHOLDERS' EQUITY


YEARS
ENDED DECEMBER 31, 2008 and 2007


Amounts
in US dollars




Preferred Stock
                                                                                
                                                                                CommonStock
                                                                                
                                                                                
                                                                                Additional
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                Other
                                                                                    Comprehensive
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                TotalNumber ofshares
                                                                                
                                                                                
                                                                                Amount
                                                                                
                                                                                Number ofshares
                                                                                
                                                                                
                                                                                Amount
                                                                                
                                                                                
                                                                                Paid-inCapital
                                                                                
                                                                                
                                                                                AccumulatedDeficit
                                                                                
                                                                                
                                                                                Income(Loss)
                                                                                
                                                                                
                                                                                TreasuryStock
                                                                                
                                                                                
                                                                                Stockholders'EquityBalances,
      January 1, 2007