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


[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES


EXCHANGE ACT OF 1934


Commission File Number: 000-53388


Freedom Environmental Services, Inc.


(Exact name of registrant as specified in its charter)





Delaware
56-2291458(State or other jurisdiction of
(I.R.S. Employer Identification No.)incorporation or organization)





7380 W Sand Lake Rd # 543


Orlando, FL 32819


(Address of principal executive offices)(Zip Code)





(407) 658-6100


(Registrant’s telephone number, including area code)








Securities registered under Section 12(b) of the Exchange Act:


None





Securities registered under Section 12(g) of the Exchange Act:





Common Stock, $0.001 par value per share


(Title of Class)





Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes    x No
  
 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    x No
 
 Indicate by check mark 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 requirements
for the past 90 days. Yes x  No 
 
 Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.

 
 Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
 
 Large accelerated filer  
Non-accelerated filer  

Accelerated filer  
Small Business Issuerx
 Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act. Yes  No x
 
 The registrant had 56,082,093 shares of Common Stock, par value $0.001, issued and outstanding as of September 4, 2009.
 
 The aggregate market value of voting stock held by non-affiliates of the registrant on December 31, 2008 was approximately $1,500,000. Solely for purposes of the foregoing calculation, all of the registrant’s directors and officers as of December 31, 2008, are deemed to be affiliates. This
determination of affiliate status for this purpose does not reflect a determination that any persons are affiliates for any other purposes.
 
 Documents Incorporated By Reference: None


1





EXPLANATORY NOTE:
 
 The board of directors and officers of the Company have decided to revise and amend certain disclosures in this Form 10-K/A for the year ended December 31, 2008.  Note 8 of the attached financial statements outlines the revisions that have been made to the financial statements and we have revised “Item 7.  Management’s
Discussion and Analysis of Financial Condition and Results of Operation” to reflect those changes.  In addition we have revised “Item 9A(T).  Controls and Procedures” to conform to the requirements of Item 308T(a)(1) of Regulation S-K. Other than these changes, the disclosures in this amended report are as of the initial filing date of April 15, 2009 and this report does not include subsequent events.
  Further, as required by Rule 12b-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), new certifications by our principal executive officer and principal financial officer are being filed as exhibits to this Form 10-K/A under Item 15 of Part IV hereof.




2











Freedom Environmental Services, Inc.


FORM 10-K/A ANNUAL REPORT


FOR THE FISCAL YEAR ENDED DECEMBER 31, 2008


TABLE OF CONTENTS





PART IITEM 3.

LEGAL PROCEEDINGS

5PART IIITEM 6.

SELECTED FINANCIAL DATA

5ITEM 7.

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

5ITEM 8.

CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

7ITEM 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

7ITEM 10.

DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT

9ITEM 11.

EXECUTIVE COMPENSATION

11ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANGEMENT.

23PART IIIITEM 14.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

24PART IVITEM 15.

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

26SIGNATURES

27CERTIFICATIONSExhibit 31 – Management certificationExhibit 32 – Sarbanes-Oxley Act





3




Forward Looking Statements — Cautionary Language
   Certain statements made in these documents and in other written or oral statements made by Freedom Environmental Services, Inc. or on Freedom Environmental Services, Inc’s behalf are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 ("PSLRA"). A forward-looking statement is a statement
that is not a historical fact and, without limitation, includes any statement that may predict, forecast, indicate or imply future results, performance or achievements, and may contain words like: "believe", "anticipate", "expect", "estimate", "project", "will", "shall" and other words or phrases with similar meaning in connection with a discussion of future operating or financial performance. In particular, these include statements relating to future actions, trends in our businesses, prospective products, future
performance or financial results. Freedom Environmental Services, Inc. claims the protection afforded by the safe harbor for forward-looking statements provided by the PSLRA.  Forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from the results contained in the forward-looking statements. Risks and uncertainties that may cause actual results to vary materially, some of which are described in this filing.  The risks included herein are
not exhaustive. This annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and other documents filed with the SEC include additional factors which could impact Freedom Environmental Services, Inc.'s business and financial performance. Moreover, Freedom Environmental Services, Inc. operates in a rapidly changing and competitive environment. New risk factors emerge from time to time and it is not possible for management to predict all such risk factors. Further, it is not possible
to assess the impact of all risk factors on Freedom Environmental Services, Inc's business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. In addition, Freedom Environmental Services, Inc. disclaims any obligation to update any forward-looking statements
to reflect events or circumstances that occur after the date of the report.
  Unless otherwise noted, references in this Form 10-K to “Freedom” the “Company,” “we,” “our” or “us” means Freedom Environmental Services,  Inc., a Delaware corporation.
 
 We were incorporated in the State of Delaware October 6, 1978 as United States Aircraft Corp and have undergone numerous name changes, the most recent being on June 11, 2008 when we amended our certificate of incorporation in order that we may change our name from BMXP Holdings, Inc. to Freedom Environmental Services, Inc.





4







PART I


ITEM 3. LEGAL PROCEEDINGS.


We are currently not involved in any litigation that we believe could have a materially adverse effect on our financial condition or results of operations.  There is no action, suit, proceeding, inquiry, or investigation before or by any court, public board, government agency, self-regulatory organization, or
body pending or, to the knowledge of the executive officers of our company or any of our subsidiaries, threatened against or affecting our company, our common stock, any of our subsidiaries, or of our company’s or our company’s subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.

On April 30, 2009, Total Enviro Services, Inc. filed suit against William Lee and  Freedom Environmental Services, Inc. in the Ninth Judicial Circuit in Orange County, Florida . The suit asserts claims for alleged breaches of a covenant not to compete. The plaintiffs are seeking unspecified monetary damages
and injunctive relief. We believe that the lawsuit is without merit and the Company intends to defend this suit vigorously.

PART II

ITEM 6.  SELECTED FINANCIAL DATA.

Not required for smaller reporting Companies.

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OR PLAN OF OPERATION.

The following is management’s discussion and analysis of certain significant factors that have affected our financial position and operating results during the periods included in the accompanying consolidated financial statements, as well as information relating to the plans of our current management. This report
includes forward-looking statements. Generally, the words “believes,” “anticipates,” “may,” “will,” “should,” “expect,” “intend,” “estimate,” “continue,” and similar expressions or the negative thereof or comparable terminology are intended to identify forward-looking statements. Such statements are subject to certain risks and uncertainties, including the matters set forth in this report or other reports
or documents we file with the Securities and Exchange Commission from time to time, which could cause actual results or outcomes to differ materially from those projected. Undue reliance should not be placed on these forward-looking statements which speak only as of the date hereof. We undertake no obligation to update these forward-looking statements.

The following discussion and analysis should be read in conjunction with our consolidated financial statements and the related notes thereto and other financial information contained elsewhere in this Form 10-K.

We prepare our consolidated financial statements in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent
assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Our management periodically evaluates the estimates and judgments made. Management bases its estimates and judgments on historical experience and on various factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates as a result of different assumptions or conditions.

RESULTS OF OPERATIONS

TWELVE MONTHS ENDED DECEMBER 31, 2008 COMPARED TO TWELVE MONTHS ENDED DECEMBER 31, 2007

We had revenue of $293,124 during the year ended December 31, 2008 as compared to no revenue for the comparable period in 2007.   This is due to the fact that we started operations December 27, 2007.

Our cost of goods sold for  the year ended December 31, 2008 was $152,602 as compared to $0 for the same period ended 2007.   The increase in cost of goods sold is due to our starting operations December 27, 2007.

5

Gross margins for the year ended December 31, 2008 was 48%.  Selling, general and administrative expenses were $7,587,735  for the year ended December 31, 2008 as compared to $0 for the same period in 2007.   This is due to the fact that we started operations December 27, 2007.
Selling, general and administrative expenses consisted of approximately $6,761,663  of wages and consulting services that stock was issued for payment. In addition there was approximately $224,000 of compensation expense paid and  $100,000 of professional fees.

Our net loss for the year ended December 31, 2008 was $7,870,565  as compared to $322,622 in net loss for the year ended December 31, 2007.    The loss primarily reflects the costs associated with starting up our business and factors as discussed above.

Liquidity and Capital Resources


Our financial statements have been prepared assuming that we will continue as a going concern.  For the years ended December 31, 2008 and December 31, 2007  through December 31, 2008, we have had a net loss of $7,870,565 and $322,622 respectively, and cash used by operations of $647,876
and $322,484 respectively, and negative working capital of $1,108,078 at December 31, 2008.

Since the predecessor operating company’s  inception, we have financed its activities principally from shareholder advances.  We intend on financing our future development activities and our working capital needs largely from the sale of equity securities, debt financing and loans from our Chief
Executive Officer, until such time that funds provided by operations are sufficient to fund working capital requirements.  There can be no assurance that we will be successful at achieving its financing goals at reasonably commercial terms, if at all.


Unpredictability of future revenues; Potential fluctuations in quarterly operating results; Seasonality

As a result of our limited operating history and the emerging nature of the markets in which we compete, we are unable to accurately forecast future revenues.  Our current and future expense levels are based largely on our investment plans and future revenues and are to a large extent fixed and expected to increase.

Sales and operating results generally depend on a number of factors which are difficult to forecast. We may be unable to adjust spending in a timely manner to compensate for any unexpected revenue  shortfall.  Accordingly, any significant shortfall in revenues in relation to our planned expenditures
would have an immediate adverse effect on our business, prospects, financial condition and results of operations.  Further, as a strategic response to changes in the competitive environment, we may from time to time make certain pricing, service or marketing decisions which could have a material adverse effect on our business, prospects, financial condition and results of operations.

We expect to experience significant fluctuations in our future quarterly operating results due to a variety of factors, many of which are outside our control.


Critical Accounting Policies

Accounting Policies and Estimates

The preparation of our financial statements in conformity with accounting principles generally accepted in the United States of America requires our management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Our management periodically evaluates the estimates and judgments made. Management bases its estimates and judgments on historical experience and on various factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates as a result of different assumptions or conditions.
As such, in accordance with the use of accounting principles generally accepted in the United States of America, our actual realized results may differ from management’s initial estimates as reported.  A summary of significant accounting policies are detailed in notes to the financial statements which are
an integral component of this filing.

6

Revenue Recognition

Revenue from product sales is recognized upon shipment to customers at which time such customers are invoiced.  Units are shipped under the terms of FOB shipping point when determination is made that collectibility is probable.  Revenues for services are recognized upon completion of the services.  For
consulting services and other fee-for-service arrangements, revenue is recognized upon completion of the services.  The Company has adopted the Securities and Exchange Commission’s Staff Accounting Bulletin (SAB) No. 104, which provides guidance on the recognition, presentation and disclosure of revenue in financial statements.

Net Loss Per Share

The Company has adopted Statement of Financial Accounting Standards No. 128, “Earnings Per Share” (“SFAS 128”), specifying the computation, presentation and disclosure of earnings per share information. Basic and fully diluted loss per share have been calculated based upon the weighted average number
of shares outstanding. There is no effect on earning per share for the year ended December 31, 2008 relating to the adoption of this standard


Stock Based Compensation

In December 2004, the FASB issued a revision of SFAS No. 123 ("SFAS No. 123(R)") that requires compensation costs related to share-based payment transactions to be recognized in the statement of operations. With limited exceptions, the amount of compensation cost will be measured based on the grant-date fair value of the
equity or liability instruments issued. In addition, liability awards will be re-measured each reporting period. Compensation cost will be recognized over the period that an employee provides service in exchange for the award. SFAS No. 123(R) replaces SFAS No. 123 and is effective as of the beginning of January 1, 2006. Based on the number of shares and awards outstanding as of December 31, 2008 (and without giving effect to any awards which may be granted in 2009), we do not expect our adoption of SFAS No. 123(R)
to have a material impact on the financial statements.



ITEM 8.  FINANCIAL STATEMENTS

TABLE OF CONTENTS
PageReport of Independent Registered Public Accounting Firm:
F-2Consolidated Balance sheet
F-4Consolidated Statements of Operations
F-5Consolidated Statement of Stockholders’ Deficit
F-6Consolidated Statement of Cash Flows
F-7Notes to Consolidated Financial Statements
F-8





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




We have no changes or disagreements with our auditors.





7





ITEM 9A. CONTROLS AND PROCEDURES





Evaluation of Disclosure Controls and Procedures.





Our principal executive officer and our principal financial officer evaluated the effectiveness of the design and operation of our disclosure controls and procedures as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (Exchange Act), as of the last day
of the fiscal period covered by this report, December 31, 2008. The term disclosure controls and procedures means our controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that
information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to management, including our principal executive and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.




The Company and its newly appointed independent registered public accounting firm identified certain significant internal control deficiencies during their financial audit for the twelve months ended December 31, 2008. We considered these weakness, in the aggregate, to be a material weakness. The primary concerns
were a) the employment agreements which were entered into by our company with two of our officers during the year ended December 31, 2008; and which we were required to accrue for both compensation and related payroll taxes for these two officers, and for which we did not properly accrue for such expenditures for the year ended December 31, 2008; b) the convertible promissory notes agreements which were entered into by us with two related parties during the year ended December
31, 2008; and which we were required to account for the beneficial conversion features of the promissory notes consistent with the agreements, and for which we did not properly account for such beneficial conversion features for the year ended December 31, 2008 and various other accruals and audit adjustments required to present fairly, in all material respects, the consolidated financial position of Freedom Environmental Services, Inc. and subsidiary as of December 31, 2008 and the results
of their operations and their cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. Furthermore, The Company and its newly appointed independent registered public accounting firm also identified that the beginning balances of the statement of equity were also not accurately stated. Specifically, the primary concern was that the audit report issued by the prior auditor on October 17, 2008, for the year ended December, 31 2007 set forth that
35,157,908 common shares were issued and outstanding as of December 31, 2007. However, the transfer agent report set forth that 50,136,668 common shares were issued and outstanding. The prior year auditor report which was reissued on September 2, 2009 and which is set forth in this form 10-K has taken into account the corrections required to present fairly, in all material respects, the consolidated financial position of Freedom Environmental Services, Inc. and subsidiary as of December 31, 2007 and the results
of their operations and their cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. Management intends to rectify these deficiencies. Management plans to publish a Form 8K relating to the restated financial statements for the year ended December 31, 2007.




Our principal executive officer and our principal financial officer have concluded that our disclosure controls and procedures as of  December 31, 2008 may not be effective due to possible material weakness in our internal controls over financial reporting described herein, and other factors related to the Company’s
financial reporting processes. The Company is in the process of evaluating the internal controls and procedures to ensure that the internal controls and procedures satisfy the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control — Integrated Framework.




Our principal executive officer and our principal financial officer, are responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f). Management is required to base its assessment of the effectiveness of our internal control
over financial reporting on a suitable, recognized control framework, such as the framework developed by the Committee of Sponsoring Organizations (COSO). The COSO framework, published in Internal Control-Integrated Framework, is known as the COSO Report. Our principal executive officer and our principal financial officer, have has chosen the COSO framework on which to base its assessment.




It should be noted that any system of controls, however well designed and operated, can provide only reasonable and not absolute assurance that the objectives of the system are met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of certain events. Because of
these and other inherent limitations of control systems, there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.





8





ITEM 9B. OTHER INFORMATION





None.





PART III








ITEM 10 DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE





Set forth below is information regarding the Company’s current directors and executive officers. There are no family relationships between any of our directors or executive officers. The directors are elected annually by stockholders. The executive officers serve at the pleasure of the Board of Directors.








Name
Age
Positions and Offices HeldMichael S. Borish
45
CEO, Acting CFO, DirectorEdmund F. Curtis
55
COO, President, Director











Directors and Executive Officers.





Michael S. Borish,      Chairman of the Board of Directors, Chief Executive Officer, Acting Chief Financial Officer:




Employment History:




From June 2008 to the date of this document Michael S. Borish has served as our Chairman and Chief Executive Officer.




From December, 2007 to June 2008 Michael S. Borish has served as Managing Member of FELC, our wholly owned operating subsidiary.




From 2002 to the date of this document Michael S. Borish has served as President of Resort Marketing Professionals.








Edmund F. Curtis       Director, President, Chief Operating Officer:





Employment History:




From June 2008 to the date of this document Edmund F. Curtis has served as our Director, President and Chief Operating Officer.




From 2004 to 2008, Edmund F. Curtis was self employed and provided services consisting of assistance to companies in matters related to corporate restructing.




From 2003 to 2004 Edmund F. Curtis served as Senior Vice President of sales and Marketing for TRENDWEST RESORTS (a Division of Cendant Corporation). Mr. Curtis has earned   a Bachelor’s of Science Degree from the University of Vermont.






During the past five years, none of our officers or directors has:




Any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;





There are no family relationships between our officers and directors.




9





Audit Committee Financial Expert





The Company does not have an audit committee or a compensation committee of its board of directors.  In addition, the Company’s board of directors has determined that the Company does not have an audit committee financial expert serving on the board.  When the Company develops its operations,
it will create an audit and a compensation committee and will seek an audit committee financial expert for its board and audit committee.





Conflicts of Interest





Members of our management are associated with other firms involved in a range of business activities.  Consequently, there are potential inherent conflicts of interest in their acting as officers and directors of our company.   Although the officers and directors are engaged in other business
activities, we anticipate they will devote an important amount of time to our affairs.




Our officers and directors are now and may in the future become shareholders, officers, or directors of other companies, which may be formed for the purpose of engaging in business activities similar to ours.  Accordingly, additional direct conflicts of interest may arise in the future with respect to such
individuals acting on behalf of us or other entities.  Moreover, additional conflicts of interest may arise with respect to opportunities which come to the attention of such individuals in the performance of their duties or otherwise.  Currently, we do not have a right of first refusal pertaining to opportunities that come to their attention and may relate to our business operations.




Our officers and directors are, so long as they are our officers or directors, subject to the restriction that all opportunities contemplated by our plan of operation which come to their attention, either in the performance of their duties or in any other manner, will be considered opportunities of, and be made available
to us and the companies that they are affiliated with on an equal basis.  A breach of this requirement will be a breach of the fiduciary duties of the officer or director.  If we or the companies with which the officers and directors are affiliated both desire to take advantage of an opportunity, then said officers and directors would abstain from negotiating and voting upon the opportunity.  However, all directors may still individually take advantage of opportunities if we should
decline to do so.  Except as set forth above, we have not adopted any other conflict of interest policy with respect to such transactions.








Compliance With Section 16(A) Of The Exchange Act 9.A. Directors And Executive Officers, Promoters, And Control Persons:





Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our executive officers, directors, and persons who own more than 10% of a registered class of our equity securities to file certain reports with the SEC regarding ownership of, and transactions in, our securities.  Such officers, directors,
and 10% shareholders are also required by the SEC to furnish us with all Section 16(a) forms that they file.




Based solely on our review of such forms furnished to us and written representations from certain reporting persons, we believe that all filing requirements applicable to our executive officers, directors, and more than 10% stockholders were not complied with during the fiscal YEAR ended December 31, 2008.




Code of Ethics




We have adopted a code of ethics that applies to all of our executive officers, directors, and employees.  Code of ethics codifies the business and ethical principles that govern all aspects of our business.  This document will be made available in print, free of charge, to any shareholder requesting
a copy in writing from the Company and it is attached as Exhibit 14.1 to this annual report for December 31, 2008.





Indemnification of Directors and Officers.





Section 145 of the DGCL provides that a corporation may indemnify directors and officers as well as other employees and individuals against expenses including attorneys' fees, judgments, fines and amounts paid in settlement in connection with various
actions, suits or proceedings, whether civil, criminal, administrative or investigative other than an action by or in the right of the corporation, a derivative action, if they acted in good faith and in a manner they reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, if they had no reasonable cause to believe their conduct was unlawful. A similar standard is applicable in the case of derivative actions, except that indemnification
only extends to expenses including attorneys' fees incurred in connection with the defense or settlement of such actions and the statute requires court approval before there can be any indemnification where the person seeking indemnification has been found liable to the corporation. The statute provides that it is not exclusive of other indemnification that may be granted by a corporation's certificate of incorporation, bylaws, agreement, a vote of stockholders or disinterested directors or otherwise.




Pursuant to the foregoing  provisions, Freedom Environmental,  Inc. has been informed that, in the opinion of the  Securities  and Exchange  Commission, such  indemnification  is against public policy as expressed in that Act and is, therefore, unenforceable.




10





ITEM 11 EXECUTIVE COMPENSATION.





The following table sets forth for the year's ended December 31, 2008 and 2007 compensation awarded to, paid to, or earned by, our  Chief Executive Officer, andour other most highly compensated executive
officers whose total compensation during the last fiscal year's exceeded $100,000, if any   11


[FISCAL YEAR] SUMMARY COMPENSATION TABLE





Name and Principal Position

Year
Salary ($)
Bonus ($)
Stock
Awards
($)
Option
Awards
($)
Non-Equity
Incentive Plan
Compensation
($)
Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
($)
All Other
Compensation
($)
Total
($)Michael S. Borish
Chairman and Chief   Executive Officer2008
*  $185,000
-0-
-0-
-0-
-0-
-0-
-0-
$185,000Edmund F. Curtis
President and ChiefOperating  Officer2008
**  $82,500
-0-
-0-
-0-
-0-
-0-
12,500
$95,000





·
* Salaries for executive were accrued in 2008. No salary was paid to executive during the year. Effective in 2009 salaries will be paid. Liabilities for salaries due will be paid back to executive or converted to stock.

** Salaries for executive was paid by a note in 2008. Total paid was $95,000 of which $12,500 is credited toward salary due in 2009. Executive worked with Company  starting June 30, 2008.





12





[FISCAL YEAR] GRANTS OF PLAN-BASED AWARDS TABLE





Name
Grant
Date
Approval
Date
Number of
Non-Equity
Incentive Plan
Units Granted
(#)
Estimated Future Payouts UnderNon-Equity Incentive Plan Awards
Estimated Future Payouts Under
Equity Incentive Plan Awards
All Other
Stock Awards:
Number of
Shares of
Stock or
Units
(#)
All Other
Option Awards:
Number of
Securities
Underlying
Options
(#)
Exercise or
Base Price
of Option
Awards
($ / Sh)
Closing
Price on
Grant
Date
($ / Sh)Threshold
($)
Target
($)
Maximum
($)
Threshold
(#)
Target
(#)
Maximum
(#)Michael S. Borish
Chairman and Chief Executive Officer
n/a
n/a
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-Edmund F. Curtis
President and Chief
Operating  Officer
n/a
n/a
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-





13


[FISCAL YEAR] OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END TABLE





Option Awards
Stock AwardsNumber of
Securities
Underlying
Unexercised
Options
(#)
Number of
Securities
Underlying
Unexercised
Options
(#)
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
($)Name
Exercisable
UnexercisableMichael S. Borish
Chairman and Chief Executive Officer
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-Edmund F. Curtis
President and Chief
Operating  Officer
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-





14


[FISCAL YEAR] OPTION EXERCISES AND STOCK VESTED TABLE





Name
Option Awards
Stock AwardsNumber of Shares
Acquired on Exercise
(#)
Value Realized
on Exercise
($)
Number of Shares
Acquired on Vesting
(#)
Value Realized
on Vesting
($)Michael S. Borish
Chairman and Chief Executive Officer
-0-
-0-
-0-
-0-Edmund F. Curtis
President and Chief
Operating  Officer
-0-
-0-
-0-
-0-





15


[FISCAL YEAR] PENSION BENEFITS TABLE





Name
Plan Name
Number of Years
Credited Service
(#)
Present Value
of Accumulated
Benefit
($)
Payments During Last
Fiscal Year
($)Michael S. Borish
Chairman and Chief Executive
Officer
N/A
-0-
-0-
-0-Edmund F. Curtis
President and Chief
Operating  Officer
N/A
-0-
-0-
-0-





16


[FISCAL YEAR] NONQUALIFIED DEFERRED COMPENSATION TABLE





Name
Executive Contributions
in Last Fiscal Year
($)
Registrant
Contributions in Last
Fiscal Year
($)
Aggregate Earnings
in Last Fiscal Year
($)
Aggregate
Withdrawals /
Distributions
($)
Aggregate Balance at
Last Fiscal Year-End
($)Michael S. Borish
Chairman and Chief Executive Officer
-0-
-0-
-0-
-0-
-0-Edmund F. Curtis
President and Chief
Operating  Officer
-0-
-0-
-0-
-0-
-0-





17


[FISCAL YEAR] DIRECTOR COMPENSATION TABLE





Name
Fees Earned or
Paid in Cash
($)
Stock Awards
($)
Option Awards
($)
Non-Equity
Incentive Plan
Compensation
($)
Change
in Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
($)
All Other
Compensation
($)
Total
($)Michael S. Borish
Chairman and Chief Executive Officer
-0-
-0-
-0-
-0-
-0-
-0-
-0-Edmund F. Curtis
President and Chief
Operating  Officer
-0-
-0-
-0-
-0-
-0-
-0-
-0-





18


[FISCAL YEAR] ALL OTHER COMPENSATION TABLE





Name
Year
Perquisites
and Other
Personal
Benefits
($)
Tax
Reimbursements
($)
Insurance
Premiums
($)
Company
Contributions
to Retirement and
401(k) Plans
($)
Severance
Payments /
Accruals
($)
Change
in Control
Payments /
Accruals
($)
Total ($)Michael S. Borish
Chairman and Chief
Executive Officer
2008
-0-
-0-
-0-
-0-
-0-
-0-
-0-Edmund F. Curtis
President and Chief
Operating  Officer
2008
-0-
-0-
-0-
-0-
-0-
-0-
-0-





19


[FISCAL YEAR] PERQUISITES TABLE





Name
Year
Personal Use of
Company
Car/Parking
Financial Planning/
Legal Fees
Club Dues
Executive Relocation
Total Perquisites and
Other Personal BenefitsMichael S. Borish
Chairman and Chief
Executive Officer
2008
-0-
-0-
-0-
-0-
-0-Edmund F. Curtis
President and Chief
Operating  Officer
2008
-0-
-0-
-0-
-0-
-0-





20


[FISCAL YEAR] POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL TABLE





Before Change in
Control
After Change in
ControlName
Benefit
Termination
w/o Cause or for
Good Reason
Termination
w/o Cause or
for Good Reason
Voluntary
Termination
Death
Disability
Change in
ControlMichael S. Borish
Chairman and Chief
Executive Officer
Employment
Contract to 12/31/10
$370,000
$370,000
-0-
-0-
-0-
$370,000Edmund F. Curtis
President and Chief
Operating  Officer
Employment
Contract to 12/31/10
$330,000
$330,000
-0-
-0-
-0-
$330,000







Employment Agreements





The Company has employment agreements with two of its key officers. The agreements are with Michael S. Borish, Chairman and Chief Executive Officer and Edmund F. Curtis President and Chief Operating  Officer.
    Terms with Mr. Curtis are for three years, effective January 1, 2008 and has a base yearly salary of $165,000 (One Hundred Sixty Five Thousand Dollars per year). In addition as determined by the Board of Directors Mr. Borish is eligible for a yearly bonus and stock options.
 
 We have not adopted a stock option plan, benefits plan, retirement plan or any long term incentive plans and did not have any stock options outstanding as of the date of this filing. We do not provide any Director's Compensation at this time.





Audit Committee and Audit Committee Financial Expert

None of our Directors may be considered independent as all directors are also officers.We are not a "listed company" under Securities and Exchange Commission (“SEC”) rules and are therefore not required to have an audit committee comprised of
independent directors. We do not currently have an audit committee, however, for certain purposes of the rules and regulations of the SEC and in accordance with the Sarbanes-Oxley Act of 2002, Our Board of Directors is deemed to be our audit committee and as such functions as an audit committee and performs some of the same functions as an audit committee including: (1) selection and oversight of our independent accountant; (2) establishing procedures for the receipt, retention and treatment of complaints regarding
accounting, internal controls and auditing matters; and (3) engaging outside advisors. Our Board of Directors has determined that each of its members is able to read and understand fundamental financial statements and has substantial business experience that results in that member's financial sophistication. Accordingly, our Board of Directors believes that each of its members have the sufficient knowledge and experience necessary to fulfill the duties and obligations that an audit committee would have.

Nominating and Compensation Committees

We do not have standing nominating or compensation committees, or committees performing similar functions. Our board of directors believes that it is not necessary to have a compensation committee at this time because the functions of such committee are adequately performed by the board of directors. The board of directors
also is of the view that it is appropriate for us not to have a standing nominating committee because the board of directors has performed and will perform adequately the functions of a nominating committee. We are not a "listed company" under SEC rules and are therefore not required to have a compensation committee or a nominating committee.  21





Shareholder Communications
 
 There has not been any defined policy or procedure requirements for stockholders to submit recommendations or nomination for directors. There are no specific, minimum qualifications that the board of directors believes must be met by a candidate recommended by the board of directors. Currently, the entire board of directors decides on nominees,
on the recommendation of any member of the board of directors followed by the board’s review of the candidates’ resumes and interview of candidates. Based on the information gathered, the board of directors then makes a decision on whether to recommend the candidates as nominees for director. We do not pay any fee to any third party or parties to identify or evaluate or assist in identifying or evaluating potential nominee.
 
 We do not have any restrictions on shareholder nominations under its certificate of incorporation or by-laws. The only restrictions are those applicable generally under Delaware law and the federal proxy rules. The board of directors will consider suggestions from individual shareholders, subject to evaluation of the person's merits. Stockholders
may communicate nominee suggestions directly to the board of directors, accompanied by biographical details and a statement of support for the nominees. The suggested nominee must also provide a statement of consent to being considered for nomination. There are no formal criteria for nominees.
 
 Because our management and directors are the same persons, the Board of Directors has determined not to adopt a formal methodology for communications from shareholders on the belief that any communication would be brought to the board of directors’ attention by virtue of the co-extensive capacities served by Messrs. Borish, Curtis and
Holwell.   22





ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
  The following table lists stock ownership of our Common Stock as of December 31, 2008. The information includes beneficial ownership by (i) holders of more than 5% of our Common Stock, (ii) each of our directors and executive officers and (iii) all of our directors and executive officers as a group. Beneficial
ownership is determined in accordance with Rule 13d-3(a) of the Exchange Act and generally includes voting or investment power with respect to securities. Except as noted below, to our knowledge, each person named in the table has sole voting and investment power with respect to all shares of our Common Stock beneficially owned by them.


Shareholder
Class
Amount
% of shares outstandingDavid R. Koos
Common
3,310,044
9.04%c/o Bombardier Pacific Ventures Inc.1010 University Avenue #40San Diego, CA 92103*Venture Bridge Advisors Inc.
Common
2,207,842
6.02%711 S. Carson Street, Suite 4Carson City, NV89701**Diana Perlman
Common
3,172,868
9.00%5459 Vineland RoadOrlando, FL 32811Michael Borish***
Common
10,559,258
30.00%C/o Freedom Environmental Services, Inc.7395 Hoffner AvenueOrlando, Florida 32822Edmund F.Curtis****
Common
7,039,505
20.00%C/o Freedom Environmental Services, Inc.7395 Hoffner AvenueOrlando, Florida 32822John Holwell*****
Common
3,105,664
8.80%C/o Freedom Environmental Services, Inc.7395 Hoffner AvenueOrlando, Florida 32822All Executive Officers and Directors as a Group
Common
20,704,427
58.9%
 * Includes 202,500 common shares beneficially owned by David Koos and 3,107,544 common shares beneficially owned by Bombardier Pacific Ventures.  David R. Koos is the sole beneficial owner of Bombardier Pacific Ventures.
 
 ** Barbara Koos is the sole shareholder of Venture Bridge Advisors, Inc. and exercises voting and investment power over those shares held by Venture Bridge Advisors, Inc.
 
 ***Michael S. Borish is the Chairman of our Board of Directors and our Chief Executive Officer.
 
 ****Edmund F. Curtis is a Director as well as our President and Chief Operating Officer.
 23


(1) Pursuant to Rule 13-d-3 under the Securities Exchange Act of 1934, as amended, beneficial ownership of a security consists of sole or shared voting power (including the power to vote or direct the voting) and/or sole or shared investment power (including
the power to dispose or direct the disposition) with respect to a security whether through a contract, arrangement, understanding, relationship or otherwise. Unless otherwise indicated, each person indicated above has sole power to vote, or dispose or direct the disposition of all shares beneficially owned. We are unaware of any shareholders whose voting rights would be affected by community property laws.
  (2) This table is based upon information obtained from the Company's stock records. Unless otherwise indicated in the footnotes to the above tables and subject to community property laws where applicable, the Company believes that each shareholder named in the above table has sole or shared voting and investment
power with respect to the shares indicated as beneficially owned.
 
 
 
 ITEM 12. Related Party Transactions:
 
 The Company entered into a convertible promissory note with a shareholder of the Company and a related party on December 11, 2008 in the amount of $600,000. The promissory note had convertible beneficial feature which allowed the holder on the inception of the convertible promissory note into the company’s common
stock equal to 50% of the market price of the corporation’s common stock on the date of conversion. The Company recorded a beneficial interest expense in the amount of $293,250 in the year ended December 31, 2008. The notes have an annual interest rate of 12%.  As of December 31, 2008 the company has a due to related party $299,658.
  The Company entered into a convertible promissory note with a related party company (Resort Marketing) owned by the Company’s chief executive officer on December 22, 2008 in the amount of $95,000. The promissory note had convertible beneficial feature which allowed the holder on the inception of the convertible
promissory note into the company’s common stock equal to 50% of the market price of the corporation’s common stock on the date of conversion. The Company recorded a beneficial interest expense in the amount of $95,000 in the year ended December 31, 2008. The notes have an annual interest rate of 15%. As of December 31, 2008 the Company has a due to related party relating to the following promissory note in the amount of $95,000.
  The Company receives advances from its officers and related parties during the regular course of business. The advances to its officers have an annual rate of 15%. As of December 31, 2008 the Company has a due to its officers and related party members in the amount of $245,756.
  The Company receives advances from its director and vice president and a related party during the regular course of business. The advances to its officers have an annual rate of 15%. As of December 31, 2008 the Company has a due to its officers and related party members in the amount of $3,643.
  On December 15, 2008 the Company entered into an employment agreements with the Company’s two officers for the annual amount of $185,000 and $165,000, respectively. The employment agreements under the reference “Term” specifically set forth that the agreements were to be retroactive to January 1, 2008 “this
agreement will be retroactive to January 1, 2008.”  As of December 31, 2008 the Company has an accrued compensation liability of $350,000 and related payroll tax accrual in the amount of $15,606.
 
 
 
 ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES
 
 Fiscal 2008
 
 (1)     Audit  Fees
 ------------------
 The aggregate fees billed by the independent accountants for the last fiscal YEAR  for professional services for the audit of the Company's annual financial statements  and  the  review  included in the Company's Form 10-Q and services that are normally provided by the
accountants in connection with statutory and regulatory filings or engagements for those fiscal year was $18,000.
  24
 
 (2)     Audit-Related  Fees
 ----------------------------
  The aggregate fees billed in each of the last two fiscal years for assurance and related services by the principal accountants that are reasonably related to the performance of the audit or review of the Company’s financial statements and are not  reported  under  Item  9  (e)(1)  of  Schedule  14A  was  NIL.
  (3)     Tax  Fees
 ----------------
  The  aggregate fees billed in each of the last two fiscal years for professional services  rendered  by the principal accountants for tax compliance, tax advise, and  tax  planning  was  $3,000.
 
  (4)     All  Other  Fees
 ------------------------
  There  were  no other fees charged by the principal  accountants  other  than  those  disclosed  in  (1)  and  (3) above.
 
 
 
 Audit  Committee's  Pre-approval  Policies
 ------------------------------------------
  At  the present time, there are not sufficient directors, officers and employees involved  with  Freedom Environmental  to  make  any  pre-approval policies meaningful.  Once Freedom Environmental has elected more directors and appointed directors
and non-directors to the  Audit  Committee it will have meetings and function in a meaningful manner.
  Audit  Hours  Incurred
 ----------------------
  The  principal  accountants  spent  approximately  50 percent of the total hours spent  on  the accounting.  The hours were about equal to the hours spent by the Company's  internal  accountant.
 
  The Board of Directors has reviewed and discussed with the Company's management and independent registered public accounting firm the audited consolidated financial  statements of the Company contained in the Company's Annual Report on Form 10-K for the Company's 2008 fiscal YEAR. The Board has also discussed
with the auditors the matters required to be discussed pursuant to SAS No. 61 (Codification of Statements on Auditing Standards, AU Section 380), which includes, among other items, matters related to the conduct of the audit of the Company's consolidated financial statements.
  The Board has received and reviewed the written disclosures and the letter from the independent registered public accounting firm required by Independence Standards Board Standard No. 1 (Independence Discussions with Audit Committees), and has discussed with its auditors its independence from the Company. The Board
has considered whether the provision of services other than audit services is compatible with maintaining auditor independence.
  Based on the review and discussions referred to above, the Board approved the inclusion of the audited consolidated financial statements be included in the Company's Annual Report on Form 10-K/A for its 2008fiscal YEAR for filing with the SEC.
  25
 
 Pre-Approval Policies
 
 The Board's policy is now to pre-approve all audit services and all permitted non-audit services (including the fees and terms thereof) to be provided by the Company's independent registered public accounting firm; provided, however, pre-approval requirements for non-audit services are not required if all such services
(1) do not aggregate to more than five percent of total revenues paid by the Company to its accountant in the fiscal YEAR when services are provided; (2) were not recognized as non-audit services at the time of the engagement; and (3) are promptly brought to the attention of the Board and approved prior to the completion of the audit.
  The Board pre-approved all fees described above.


PART IV


ITEM 15.  EXHIBITS AND REPORTS.




Exhibits


3.1

Articles of Incorporation (1)3.2

Amendments to Articles of Incorporation (1)3.1

Bylaws of the Corporation (1)4.1

Employment Agreement with Michael Borish4.2

Employment Agreement with Edmund Curtis4.3

Convertible Note with Diane Perlman4.4

Funding Addendum to Shareholder Loan4.5

Loan Agreement with Diane Perlman4.6

Convertible Note with Edmund Curtis4.7

Note Assignment with Edmund Curtis4.8

Loan Agreement with Resort Marketing Professionals14,
21
23.1
31.1

Code of Ethics
Subsidiaries
Consent of  Independent Registered Accounting Firm
Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act. (2)31.2

Certification of Principal Financial and Accounting Officer Pursuant to Section 302 of the Sarbanes-Oxley Act. (2)32.1

Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act.  (2)32.2

Certification of Chief Accounting Officer Pursuant to Section 906 of the Sarbanes-Oxley Act.  (2)


__________________________________________________


(1). Incorporated by reference to the Company’s filing on Form 10, filed with the Securities and Exchange Commission on August 26, 2008.


(2)  Filed herein.


26




Signatures
 
 In accordance with the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements of filing on Form 10-K and authorized this registration statement to be signed on its behalf by the undersigned, on the 14th day of April, 2009
 
 
 
 Date:        September 9, 2009
 By:           /s/ Michael S.Borish
 Name:      Michael S. Borish
 Title:       Chairman, CEO and Acting CFO
 
 
 
 
 
 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following person on behalf of the Registrant in the capacities indicated, on September 9, 2009.
 
 By:
/s/ Michael S. BorishMichael S. Borish, Chairman, CEO and Acting CFO and Director
 
 
 By:
/s/ Edmund F. CurtisEdmund F. Curtis, COO, President and Director


27







PART F/S.  FINANCIAL STATEMENTS.





FREEDOM ENVIRONMENTAL SERVICES, INC.


AND SUBSIDIARY


CONSOLIDATED FINANCIAL STATEMENTS


FOR THE YEARS ENDED


DECEMBER 31, 2008 AND 2007








TABLE OF CONTENTS
PageReport of Independent Registered Public Accounting Firm:
F-2Consolidated Balance sheet
F-4Consolidated Statements of Operations
F-5Consolidated Statement of Stockholders’ Deficit
F-6Consolidated Statement of Cash Flows
F-7Notes to Consolidated Financial Statements
F-8










F-1







REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM





To the Board of Directors and Stockholders


of Freedom Environmental Services, Inc.


Orlando, Florida





We have audited the accompanying consolidated balance sheets of Freedom Environmental Services, Inc. (Company) and subsidiary as of December 31, 2008, and the related consolidated statements of income, stockholders' equity (deficit), and cash flows for the year then ended. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. The financial statements of Freedom Environmental Services,  Inc. as of  December 31, 2007 were audited by another auditor, whose report dated September 2, 2009 on those statements included an explanatory  paragraph describing conditions that raised substantial doubt as to the Company's ability to continue as a going concern as discussed in Note 2 to the financial statements.
 
 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 includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.
 
 In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Freedom Environmental Services, Inc. and subsidiary as of December 31, 2008 and the results of their operations and their cash flows for the year then ended in conformity with accounting principles
generally accepted in the United States of America.
 
 The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed further in Note 3, the Company has incurred significant losses.  The Company's viability is dependent upon its ability to obtain future financing and the success of its future operations.  These
factors raise substantial doubt about the Company's ability to continue as a going concern.  Management's plan in regard to these matters is also described in Note 3. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
 
 
 /s/ Tarvaran Askelson & Company, LLP
 
 Laguna Niguel, California
 September 8, 2009


F-2





Certified Public Accountants & Consultants





12515 Orange Drive  ■  Suite 814  ■  Davie, Florida  33330  ■  Phone 954.475.1260  ■  Fax 954.475.1221





REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Board of Directors and Stockholders


Freedom Environmental Services, Inc.


Orlando, Florida





We have audited the accompanying  balance sheets of Freedom Environmental Services, Inc. ("the Company") as of December 31, 2007, and the related statements of operations, stockholders' equity and cash flows for the period ended December 31, 2008. These financial statements   are  the   responsibility   of  the   Company's
management.   Our responsibility  is to express an opinion on these financial statements based on our audits.
 
 We conducted  our audits in accordance  with 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 audits 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 purposes 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.
 
 The Company had an accumulated deficit of $12,990,221 and a working capital deficit of $1,108,081 at December 31, 2007 and 2008.  While the Company is continuing to increase sales, other sources of revenue will be necessary for the current year  Management may attempt to raise additional funds by way of a public or
private offering.  While the Company believes in the viability of its strategy to improve sales volume and in its ability to raise additional funds, there can be no assurances to that effect. The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.  Management believes that the actions presently being taken to further implement its business plan and generate additional revenues provide the opportunity
for the Company to continue.
 
 In our opinion,  the financial  statements  referred to above present fairly, in all material respects, the financial position of Freedom Environmental Services, Inc.("the Company") as of December 31, 2007, and the related statements of operations, stockholders' equity and cash flows for the period ended December
31, 2007 in conformity with accounting principles generally accepted in the United States of America.
 
 /s/ Kramer Weisman & Associates, LLP
 
 Davie, Florida
 September 2, 2009


F-3








Freedom Environmental Services, Inc.Consolidated Balance SheetDecember 31,2008


2007(Restated)


(Restated)ASSETSCurrent assets:Accounts receivable



2,675



-Total current assets



2,675



-Property and equipment, net



11,065



-Other assets



11,738



-Total assets


$
25,478


$
-LIABILITIES AND STOCKHOLDERS' DEFICITCurrent liabilities:Bank overdraft


$
20,471


$
-Accounts payable and accrued expenses



449,039



138Line of credit



14,995Note payable-current portion



4,997Due to related party



95,000Shareholder loan



549,057



4,038Total current liabilities



1,133,559



4,176Note payable-noncurrent portion



4,997Total liabilities



1,138,556



4,176Stockholders' deficit:Preferred stock, $.001 par value, 75,000,000 share authorized; none issued



-



-Common Stock, par value $.001 per share, 100,000,000 shares authorized;  50,136,668 and 35,158,093 shares issued and outstanding at December 31, 2007 and 2008, respectively



35,157



50,137Additional paid in capital



11,841,986



5,065,343Accumulated deficit



(12,990,221
)


(5,119,656
)Total Stockholders' deficit



(1,113,078
)


(4,176
)Total liabilities and stockholders' deficit


$
25,478


$
-The accompanying notes are an integral part of these financial statements






F-4





Freedom Environmental Services, Inc.Consolidated Statement of OperationsFor the years endedDecember 31,2008


2007Net sales

$
293,124


$
-Cost of sales


152,602



-Gross Profit

$
140,522


$
-General and administrative


7,587,735



4,176Loss from operations


(7,447,213
)


(4,176
)Other income (expense)Interest expense


(423,352
)


-Loss from disposal of assets


-



(318,446
)Total other income (expense)


(423,352
)


(318,446
)Loss before income taxes


(7,870,565
)


(322,622
)Provision for income taxes


-



-Net Loss


(7,870,565
)


(322,622
)Net loss per share basic and fully diluted


(0.185
)


(0.009
)Basic and fully diluted weighted averagenumber of shares outstanding


42,647,381



37,761,668The accompanying notes are an integral part of these financial statements








F-5











Freedom Environmental Services, Inc.Consolidated Statement of Stockholders' DeficitAdditional


TotalPaid-in

Retained
Stockholder’sShares


Amount


Capital

Earnings
EquityBalance December 31,2006


33,636,668


$
33,637

$
4,736,290

$
(4,797,034)
$
(27,107)Net Loss











(7,870,565)

(7,870,565)Shares issued for Notes Payable to Chairman


16,500,000



16,500


329,053




345,553Balance December 31,2007


50,136,668


$
50,137

$
5,065,343

$
(5,119,656)
$
(4,176)Net Loss -2008











(7,870,565)

(7,870,565)Reverse Stock Split 1:20


(47,629,631)



(47,630)


47,630Shares Issued for consulting fee @ $.50/share


12,746,444



12,746


6,360,476




6,373,222Recapitalization as per Stock Purchase Agreement


20,704,427



20,704


(20,704)




0Shares returned by former Chairman and cancelled


(800,000)



(800)


800




-Miscellaneous Issuance


185



(1)


192




191Value of beneficial conversion feature of convertible note









388,250




388,250Balance December 31, 2008


35,158,093


$
35,157

$
11,841,986

$
(12,990,221)
$
(1,113,078)The accompanying notes are an integral part of these financial statements




F-6
  Freedom Environmental Services, Inc.Consolidated Statement of OperationsFor the years endedDecember 31,2008


2007Cash flows from operating activities:Net loss

$
(7,870,565
)


(322,622
)Adjustments to reconcile net loss to net cash used in operating activities:Depreciation


6,067



-Common stock issued for compensation


6,761,663



-Changes in operating assets and liabilities:Decrease (Increase) in:Accounts receivable


(2,675
)


-Other assets


(11,738
)


-Bank overdraft


20,471Accounts payable and accrued expenses


448,901



138Net cash provided by in operating activities


(647,876
)


(322,484
)Net cash provided by investing activitiesFixed assets purchased


(17,132
)


-Disposal of assets from acquisition


-



318,446Net Cash Used In Investing Activities


(17,132
)


318,446Net cash provided by financing activitiesProceeds from related party


95,000Proceeds from line of credit


14,995Proceeds from note payable-net of payments


9,994



-Proceeds from shareholder loan


545,019



4,038Net cash provided by financing activities


665,008



4,038Net increase (decrease) in cash


-



-Cash, beginning period


-



-Cash, ending period

$
-



-Supplemental disclosure of cash flows information:Interest paid during the period

$
941



-Income taxes paid during the period

$
-



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




F-7





FREEDOM ENVIRONMENTAL SERVICES,  INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2008





Note 1 – General Organization and Business





Freedom Environmental Services, Inc. (“Company”) was incorporated under the laws of the State of Delaware on October 6, 1978 as United States Aircraft Corp and has undergone numerous name changes, the most recent being on June 11, 2008 when the Company amended its certificate of incorporation in order that it may change its
name from BMXP Holdings, Inc. to Freedom Environmental Services, Inc.
 
 Freedom Environmental Services, Inc., formerly known as BMXP Holdings, Inc. from August 2006 to June 2008 ("the Company"), a Delaware corporation, was formerly organized as Neo-vision Corp during the years 2001-2002 and subsequently was Storage Suites America, Inc. from November 2002 to December 2004 and Bio-Matrix Scientific Group, Inc.
from December 2004 to August 2006.
 
 On June 24, 2008 the Company acquired 100% of the membership interests in Freedom Environmental Services, LLC (“FELC”), a Florida Limited Liability Company established December 27, 2007, for consideration consisting of 20,704,427 shares of the common stock of the Company. As a result of this transaction, the former members of
FELC hold approximately 59% of the voting capital stock of the Company immediately after the transaction and the composition of the senior management of the Company became the senior management of FELC. For financial accounting purposes, this acquisition was a reverse acquisition of the Company by FELC under the purchase method of accounting, and was treated as a recapitalization with FELC as the acquirer in accordance with Paragraph 17 of SFAS 141. Accordingly, the historical financial statements presented are
those of FELC.
 
 On June 24, 2008 the former management and directors of the company resigned and the former members of FELC were appointed as follows:
 
 Michael S. Borish was named Chairman of the Board of Directors and was appointed Chief Executive Officer.
 
 Edmund F. Curtis joined the Board of Directors and was appointed President and Chief Operating Officer of the Company.
 
 John Holwell joined the Board of Directors and was appointed Vice President of the Company.
 
 COMMON STOCK OUTSTANDING
 
 The stockholders' equity section of the Company contains the following classes of capital stock as of December 31, 2007 and December 31, 2008 , respectively:
 
 * Preferred stock, $ 0.001 par value; 75,000,000 shares authorized: -0- shares issued and outstanding.
 
 * Common stock, $ 0.001 par value; 100,000,000 shares authorized: 50,136,668 and 35,158,093 shares issued and outstanding at December 31, 2007 and December 31, 2008 respectively.
  F-8
 
 The Company, through its wholly owned subsidiary FELC, is in the business of providing Wastewater and Storm-water System Management, Grease and Organics Collection and Disposition and Commercial Plumbing and Water System Management to commercial customers and wastewater management services to residential customers. The Company also intends
to develop and produce fuels and natural bio-organic products (such as fertilizer) derived from waste and by-products
 
 The Company’s plans in this area consist of attempting to develop Vertical Organic Collection System platforms within regional and super-regional metropolitan areas by acquiring market leading operators as platforms and utilizing this business model in building regional facilities to produce high grade fuel and bio-organic nutrient
products converted from commercial, industrial and residential waste products in the southeast and nationwide. There can be no assurance given that such leading operators will be acquired.
 
 On June 24, 2008 the Company purchased 100% of the membership interests in FELC or consideration consisting of 20,704,427 newly issued shares of common stock representing 59.20% of the issued and outstanding share capital of the Company. On June 24, 2008 the former management and directors of the company resigned and the former members
of FELC were appointed as follows:
 Michael S. Borish was named Chairman of the Board of Directors and was appointed Chief Executive Officer.
 
 Edmund F. Curtis joined the Board of Directors and was appointed President and Chief Operating Officer of the Company.
 
 John Holwell joined the Board of Directors and was appointed Vice President of the Company.
 
 NOTE 2-   ACCOUNTING CHANGES AND ERROR CORRECTIONS
 
 The Company has adopted SFAS 154-Accounting Changes and Error Corrections as a result we have determined that errors in the accounting treatment and reported amounts in our previously filed financial statements. As a result, we determined to restate our financial statements for the year ended December 31, 2008.
 
 In connection with the restatement, we are designing internal procedures and controls for purposes of the preparation and certification of our financial statements going forward. In this process, we identified certain errors in accounting determinations, which have been reflected in the restated financial statements.
 
 These restated financial statements include adjustments related to the following:
 
 On June 30, 2008 the Company issued stock for consulting fees to the former chairman of the Company and other former officers of the Company. The Company did not consider the cost of these 12,746,444 shares.  Accordingly $6,373,222 was added as compensation expense related to the issuance of the the stock and are reflected  in
the restated financial statements for the year ended December 31, 2008.
 
 On December 15, 2008 the Company entered into employment agreements with the Company’s two officers for the annual amount of $185,000 and $165,000, respectively. The employment agreements under the reference “Term” specifically set forth that the agreements were to be retroactive to January 1, 2008  “this
agreement will be retroactive to January 1, 2008.” The Company did not accrue any compensation expenses consistent with the provisions of the agreements. Further the Company did not accrue related payroll tax liability which would have also been required. Accordingly $350,000 was added as accrued compensation liability and $15,606 was added as accrued payroll tax liability in the restated financial statements for the year ended December 31, 2008.
 
 The Company entered into the $95,000 convertible promissory note as a result of a related party company because it had a lack of sufficient capital to pay for its employees and the related party entity; which was owned by the chief executive officer, made direct payments to an employee of the Company for services the employee was performing
on behalf of the Company. During the year ended December 31, 2008 the Company did not record the compensation expense related to the services performed by the employee and also did not record the liability which the company was responsible for as a result of the convertible promissory note in the amount of $95,000. The restated financial statement for the year ended December 31, 2008 has taken into account the compensation expense and liability to the related party in the amount of $95,000.
 
 F-9
 
 The Company entered into a vehicle lease agreement with Ford Credit. During the year ended December 31, 2008 the Company had incorrectly capitalized the vehicle lease. The restated financial statement for the year ended December 31, 2008 has reflected the adjustment in the amount of $21,540 to expense the asset previously recorded incorrectly.
 
 During the year ended December 31, 2008 the Company incorrectly reflected accounts receivable balances of $191,843 which took into account undeposited funds and other trade receivables. The restated financial statements for the year ended December 31, 2008 has reflected accounts receivable balance of $2,675 which took into account expensing
$189,168 in undeposit fund which could not be supported and other write off and reserve of trade receivables which were deemed uncollectible or at risk for uncollectibility.
 
 During the year ended December 31, 2008 the Company incorrectly reflected various other transactions which would have reflected an additional cumulative amount of approximately $38,554 in expenses related to properly recording depreciation expense, booking of a capital lease for equipment with U.S. Bancorp Manifest Funding Services and related
correction of depreciation expense, as well as property recording of consulting and compensation expense. The restated financial statements for the year ended December 31, 2008 has reflected the proper recording of the expenses set forth in the cumulative amount of approximately $38,554.
 
 On December 11, 2008 the Company entered into two convertible promissory note with two related parties in the amount of $600,000 and $95,000 respectively. The two agreements afforded the holder an option on the date of inception of the agreement to convert the note into shares of the Company’s common stock equal to 50% of the market
price of the corporation common stock on the date of the conversion. The Company did not consider beneficial conversion features of the convertible promissory note. Accordingly $388,250 was added as interest expense related to the beneficial conversion feature in the restated financial statements for the year ended December 31, 2008.
 
 The Company entered various convertible notes and advance agreements with the Company’s officers and shareholders. During the year ended December 31, 2008 the Company had not fully considered the interest expense related to the note and advance agreements. The restated financial statement for the year ended December 31, 2008 has reflected
additional interest expense in the amount of $24,400.
 
 The following were corrections made to the Company statement of operations for the year ended December 31, 2008:


As

Restatement

AsOriginally Presented

Adjustment

RestatedRevenue
293,584

(460)

293,124Cost of Sales
147,251

5,351

152,602Gross Profit
146,333

5,811

140,522Selling general and administrative
509,536

7,078,199

7,587,735Net loss before other income and expense
(363,203)

(7,084,010)

(7,447,213)Interest Expense
10,702

412,650

423,352Net Loss
(373,905)

(7,496,660)

(7,870,565)





Note 3 – Going Concern





The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.  As shown in the accompanying financial statements during the years ended December 30, 2008 and 2007, the Company incurred losses
from continuing operations of $7,447,213 million and $4,176, respectively. The Company has a net loss of  $7,870,565 and $322,622 for the year ended December 31, 2008 and 2007 respectively.





As of  December 31, 2008, the Company has negative working capital of $1,113,078, an accumulated deficit of $12,990,221, and notes payable to related parties of $644,057, and accounts payable and accrued expenses of $449,039.





While the Company is continuing to increase sales, other sources of revenue will be necessary for the current year.  Management may attempt to raise additional funds by way of a public or private offering.  While the Company believes in the viability of its strategy to improve sales volume and in its ability to raise
additional funds, there can be no assurances to that effect. The Company shareholders have continued to advance funds to the Company but there can be no assurance that future advances will be made available.





F-10





These factors raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty. The Company’s existence is dependent upon management’s ability to develop profitable operations and
to resolve its liquidity problems. Management anticipates the Company will attain profitable status and improve its liquidity through the continued effort to grow its sales channels.





Note 4 – Summary of Significant Accounting Policies and Practices





Basis of Accounting





The Company prepares its financial statements in conformity with accounting principles generally accepted in the United States of America.  Revenues and expenses are reported on the accrual basis, which means that income is recognized as it is earned and expenses are recognized as they are incurred.





Use of Estimates





The Company’s significant estimates includes allowance for doubtful accounts and accrued expenses. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. While the Company believes that
such estimates are fair when considered in conjunction with the financial statements taken as a whole, the actual amounts of such estimates, when known, will vary from these estimates. If actual results significantly differ from the Company’s estimates, the Company’s financial condition and results of operations could be materially impacted.





Cash and Cash Equivalents





Cash and cash equivalents include all interest-bearing deposits or investments with original maturities of three months or less.





CONCENTRATION OF CREDIT RISK





Financial   instruments   that   potentially   subject   the   Company to concentrations of credit risk consist principally of cash. The Company maintains cash balances at one financial institution, of which is insured by the Federal Deposit Insurance
Corporation (“FDIC”). The FDIC insured institution insures up to $100,000 on account balances. The company has not experienced any losses in such accounts.








Fair value of financial instruments





The Company's financial instruments consist primarily of cash, accounts  payable and  accrued  expenses,  and debt.  The  carrying  amounts of such  financial  instruments  approximate their respective  estimated
fair value due to the short-term  maturities and approximate market interest rates of  these instruments.  The estimated fair value is not necessarily indicative of the amounts the Company would realize in a current market exchange or from future earnings or cash flows.





The Company adopted Statement of Financial Accounting Standards No. 157, Fair Value Measurements (“SFAS 157”), which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements.  The standard provides a consistent definition of fair value which focuses
on an exit price that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  The standard also prioritizes, within the measurement of fair value, the use of market-based information over entity specific information and establishes a three-level hierarchy for fair value measurements based on the nature of inputs used in the valuation of an asset or liability as of the measurement date.





F-11





The three-level hierarchy for fair value measurements is defined as follows:





·
Level 1 – inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or
liabilities in active markets;·
Level 2 – inputs to the valuation methodology include quoted prices for similar assets and liabilities in
active markets, and inputs that are observable or the asset or liability other than quoted prices, either
directly or indirectly including inputs in markets that are not considered to be active;·
Level 3 – inputs to the valuation methodology are unobservable and significant to the fair value measurement





INCOME TAXES





The Company accounts for income taxes using SFAS No. 109,  "Accounting for  Income Taxes," which requires  recognition of deferred tax liabilities and  assets for  expected  future  tax  consequences  of events  that have been included in
the financial  statements  or tax returns.  Under this method, deferred tax liabilities and assets 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.  A valuation allowance is recorded for deferred tax assets if it is more likely than not that some portion
or all of the deferred tax assets will not be realized.








The Company adopted Financial Accounting Standards Board (“FASB”) Interpretation No. (FIN) 48, “Accounting for Uncertainty in Income Taxes.” FIN 48 clarifies the accounting for uncertainty in income taxes recognized in financial statements in accordance with SFAS No. 109, “Accounting for Income Taxes.”
FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 requires that the Company determine whether the benefits of the Company’s tax positions are more likely than not of being sustained upon audit based on the technical merits of the tax position. The provisions of FIN 48 also provide guidance on de-recognition, classification, interest and penalties, accounting in
interim periods, and disclosure. The Company did not have any unrecognized tax benefits and there was no effect on the financial condition or results of operations as a result of implementing FIN 48. The Company does not have any interest and penalties in the statement of operations for the years ended December 31, 2007 and  2008.





In May 2007, the FASB issued FASB Staff Position No. FIN 48-1,Definition of Settlement in FASB Interpretation No. 48   (“the FSP”). The FSP provides guidance about how an enterprise should determine whether a tax position is effectively settled
for the purpose of recognizing previously unrecognized tax benefits. Under the FSP, a tax position could be effectively settled on completion of examination by a taxing authority if the entity does not intend to appeal or litigate the result and it is remote that the taxing authority would examine or re-examine the tax position. The Company does not expect that this interpretation will have a material impact on its financial position, results of operations, or cash flows.





Accounts Receivable





The Company extends credit to its customers in the normal course of business. Further, the Company regularly reviews outstanding receivables, and provides estimated losses through an allowance for doubtful accounts. In evaluating the level of established loss reserves, the Company makes judgments regarding its customers’ ability to make
required payments, economic events and other factors. As the financial condition of these parties change, circumstances develop or additional information becomes available, adjustments to the allowance for doubtful accounts may be required. The Company also performs ongoing credit evaluations of customers’ financial condition. The Company maintains reserves for potential credit losses, and such losses traditionally have been within its expectations.





Property and Equipment





Property and equipment are stated at cost, less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets. Machinery and equipment are depreciated over 10 years. Furniture and fixtures are depreciated over 10 years. Accelerated methods of depreciation are
generally used for income tax purposes. Leasehold improvements are amortized on a straight-line basis over the shorter of the useful life of the improvement or the term of the lease. The Company performs ongoing evaluations of the estimated useful lives of the property and equipment for depreciation purposes. The estimated useful lives are determined and continually evaluated based on the period over which services are expected to be rendered by the asset. Maintenance and repairs are expensed as incurred.




F-12




Impairment of Long-Lived Assets





In accordance with Statement of Financial Accounting Standards (SFAS) No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," The Company periodically reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable. The
Company recognizes an impairment loss when the sum of expected undiscounted future cash flows is less than the carrying amount of the asset. The amount of impairment is measured as the difference between the asset’s estimated fair value and its book value.





Other Intangible Assets





Acquired intangible assets are separately recognized if the benefit of the intangible asset is obtained through contractual or other legal rights, or if the intangible asset can be sold, transferred, licensed, rented or exchanged, regardless of the Company’s intent to do so.





Revenue Recognition





REVENUE RECOGNITION





The Company recognizes revenue in accordance with the Securities and Exchange Commission, Staff Accounting Bulletin (SAB) No. 104, “Revenue Recognition” (“SAB No. 104”). SAB 104 clarifies application of generally accepted accounting principles related to revenue transactions. The Company also follows the guidance
in EITF Issue No. 00-21, Revenue Arrangements with Multiple Deliverables ("EITF Issue No. 00-21"), in arrangements with multiple deliverables.





The Company recognizes revenues when all of the following criteria are met: (1) persuasive evidence of an arrangement exists, (2) delivery of products and services has occurred, (3) the fee is fixed or determinable and (4) collectability is reasonably assured.





The Company receives revenue for services and maintenance agreements. Milestone payments are recognized as revenue upon achievement of contract-specified events and when there are no remaining performance obligations. Revenues from monthly video streaming agreements, as well as equipment maintenance, are recorded when earned. Operating
equipment lease revenues are recorded as they become due from customers.  Revenues from equipment sales and installation are recognized when equipment delivery and installation have occurred, and when collectability is reasonably assured.





In certain cases, the Company enters into agreements with customers that involve the delivery of more than one product or service.  Revenue for such arrangements is allocated to the separate units of accounting using the relative fair value method in accordance with EITF Issue No. 00-21. The delivered item(s) is considered a separate
unit of accounting if all of the following criteria are met: (1) the delivered item(s) has value to the customer on a standalone basis, (2) there is objective and reliable evidence of the fair value of the undelivered item(s) and (3) if the arrangement includes a general right of return, delivery or performance of the undelivered item(s) is considered probable and substantially in the control of the vendor. If all the conditions above are met and there is objective and reliable evidence of fair value for all
units of accounting in an arrangement, the arrangement consideration is allocated to the separate units of accounting based on their relative fair values.





Explicit return rights are not offered to customers; however, the Company may accept returns in limited circumstances. There have been no returns through December 31, 2008.   Therefore, a sales return allowance has not been established since management believes returns will be insignificant.








Advertising Expense





The Company follows the provisions of Statement of Position (SOP) 93-7, “Reporting on Advertising Costs,” in accounting for advertising costs.  Advertising costs are charged to expense as incurred and are included in sales and marketing expenses in the accompanying financial statements.





Income taxes





The Company accounts for income taxes under the liability method in accordance with Statement of Financial





F-13





Accounting Standards No. 109, "Accounting for Income Taxes".  Under this method,  deferred income tax assets and liabilities are determined based on differences  between the financial reporting and tax bases of assets and  liabilities  and are measured using the enacted tax rates and laws  that
will be in effect  when the  differences  are  expected  to reverse.





Had income taxes been determined based on an effective tax rate of 37.6% consistent with the method of SFAS 109, the Company's net losses for all periods presented would not materially change.





EARNINGS (LOSS) PER SHARE





Earnings (loss) per share is computed in accordance with SFAS No. 128, "Earnings per Share". Basic earnings (loss) per share is computed by dividing net income (loss), after deducting preferred stock dividends accumulated during the period, by the weighted-average number of shares of common stock outstanding during each period. Diluted
earnings per share is computed by dividing net income by the weighted-average number of shares of common stock, common stock equivalents and other potentially dilutive securities outstanding during the period. The outstanding warrants at DECEMBER 31, 2007 AND 2008 and 2007 respectively are anti-dilutive and therefore are not included in earnings (loss) per share.





FAIR VALUE OF FINANCIAL INSTRUMENTS





The Company’s financial instruments consist primarily of cash, accounts payable and accrued expenses, and debt.  The carrying amounts of such financial instruments approximate their respective estimated fair value due to the short-term maturities and approximate market interest rates of these instruments.  The
estimated fair value is not necessarily indicative of the amounts the Company would realize in a current market exchange or from future earnings or cash flows.





ACCOUNTING FOR STOCK-BASED COMPENSATION





The Company adopted SFAS No. 123R, "Accounting for Stock-Based Compensation". This statement requires a public entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). That cost will be recognized over the period during
which an employee is required to provide service.








In addition, a public entity is required to measure the cost of employee services received in exchange for an award of liability instruments based on its current fair value. The fair value of that award has been remeasured subsequently at each reporting date through the settlement date. Changes in fair value during the requisite service period
will be recognized as compensation cost over that period.





NON-EMPLOYEE STOCK BASED COMPENSATION





The cost of stock based compensation awards issued to non-employees for services are recorded at either the fair value of the services rendered or the instruments issued in exchange for such services, whichever is more readily determinable, using the measurement date guidelines enumerated in Emerging Issues Task Force Issue (“EITF”)
96-18, “Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services” (“EITF 96-18”).





COMMON STOCK PURCHASE WARRANTS





The Company accounts for common stock purchase warrants in accordance with the provisions of Emerging Issues Tack Force Issue (“EITF”) issue No. 00-19 “Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock” (“EITF 00-19”).  Based
on the provisions of EITF 00-19, the Company classifies as equity any contracts that (i) require physical settlement or net-share settlement, or (ii) gives the company a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement).  The Company classifies as assets or liabilities any contracts that (i) require net-cash settlement (including a requirement to net cash settle the contract if an event occurs and if that event is outside the control of the company),
or (ii) give the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement).


F-14


NOTE 5 - RECENT ACCOUNTING PRONOUNCEMENTS





In December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business Combinations” (SFAS 141(R)), which replaces SFAS No. 141, “Business Combinations” (SFAS 141). SFAS 141(R) retains the underlying concepts of SFAS 141 in that all business combinations are still required to be accounted for at fair
value under the acquisition method of accounting but SFAS 141(R) changed the method of applying the acquisition method in a number of significant aspects. Acquisition costs will generally be expensed as incurred; noncontrolling interests will be valued at fair value at the acquisition date; in-process research and development will be recorded at fair value as an indefinite-lived intangible asset at the acquisition date, until either abandoned or completed, at which point the useful lives will be determined; restructuring
costs associated with a business combination will generally be expensed subsequent to the acquisition date; and changes in deferred tax asset valuation allowances and income tax uncertainties after the acquisition date generally will affect income tax expense. SFAS 141(R) is effective on a prospective basis for all business combinations for which the acquisition date is on or after the beginning of the first annual period subsequent to December 15, 2008, with the exception of the accounting for valuation
allowances on deferred taxes and acquired tax contingencies. SFAS 141(R) amends SFAS No. 109, “Accounting for Income Taxes” (SFAS 109) such that adjustments made to valuation allowances on deferred taxes and acquired tax


contingencies associated with acquisitions that closed prior to the effective date of SFAS 141(R) would also apply the provisions of SFAS 141(R). Early adoption is not permitted. Upon adoption, SFAS 141(R) will not have a significant impact on our consolidated financial position and results of operations; however, any business combination
entered into after the adoption may significantly impact our financial position and results of operations when compared to acquisitions accounted for under existing U.S. Generally Accepted Accounting Principles (GAAP).





In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements—an amendment of ARB No. 51.” This statement is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008, with earlier adoption prohibited.
This statement requires the recognition of a noncontrolling interest (minority interest) as equity in the consolidated financial statements and separate from the parent’s equity. The amount of net income attributable to the noncontrolling interest will be included in consolidated net income on the face of the income statement. It also amends certain of ARB No. 51’s consolidation procedures for consistency with the requirements of SFAS 141(R). This statement also includes expanded disclosure requirements
regarding the interests of the parent and its noncontrolling interest. We have evaluated this new statement and have determined that the statement will not have a significant impact on the reporting of our financial position and results of operations.





In December 2007, the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin (SAB) No. 110. This guidance allows companies, in certain circumstances, to utilize a simplified method in determining the expected term of stock option grants when calculating the compensation expense to be recorded under
Statement of Financial Accounting Standards (SFAS) No. 123(R),Share-Based Payment. The simplified method can be used after December 31, 2007 only if a company’s stock option exercise experience does not provide a reasonable basis upon which to estimate the expected option term. Through 2007, we utilized the simplified method to determine the expected option term, based upon the vesting and original contractual terms of
the option. On January 1, 2008, we began calculating the expected option term based on our historical option exercise data. This change did not have a significant impact on the compensation expense recognized for stock options granted in 2008.





In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133” (SFAS 161). This statement is intended to improve transparency in financial reporting by requiring enhanced disclosures of an entity’s derivative instruments and
hedging activities and their effects on the entity’s financial position, financial performance, and cash flows. SFAS 161 applies to all derivative instruments within the scope of SFAS 133, “Accounting for Derivative Instruments and Hedging Activities” (SFAS 133) as well as related hedged items, bifurcated derivatives, and nonderivative instruments that are designated and qualify as hedging instruments. Entities with instruments subject to SFAS 161 must provide more robust qualitative disclosures
and expanded quantitative disclosures. SFAS 161 is effective prospectively for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application permitted. We are currently evaluating the disclosure implications of this statement; however, the new statement will not have an impact on the determination of our financial results.





In April 2008, the FASB issued FSP No. FAS 142-3, “Determination of the Useful Life of Intangible Assets.” This FSP amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142, “Goodwill and Other
Intangible Assets” (SFAS 142). The objective of this FSP is to improve the consistency between the useful life of a recognized intangible asset under





F-15





SFAS 142 and the period of expected cash flows used to measure the fair value of the asset under SFAS 141(R), and other principles of GAAP. This FSP applies to all intangible assets, whether acquired in a business combination or otherwise, and shall be effective for financial statements issued for fiscal years beginning after December 15,
2008, and interim periods within those fiscal years and applied prospectively to intangible assets acquired after the effective date. Early adoption is prohibited. We have evaluated the new statement and have determined that it will not have a significant impact on the determination or reporting of our financial results.





In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles” (SFAS 162). This statement identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements of nongovernmental entities that are presented in


accordance with GAAP. With the issuance of this statement, the FASB concluded that the GAAP hierarchy should be directed toward the entity and not its auditor, and reside in the accounting literature established by the FASB as opposed to the American Institute of Certified Public Accountants (AICPA) Statement on Auditing Standards No. 69,
“The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles.” This statement is effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411, “The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles.” We have evaluated the new statement and have determined that it will not have a significant impact on the determination or reporting of our financial
results.





In May 2008 the FASB issued FASB Staff Position (FSP) APB 14-1, “Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement).  ” APB 14-1 requires the issuer to separately account for the liability
and equity components of convertible debt instruments in a manner that reflects the issuer’s nonconvertible debt borrowing rate. The guidance will result in companies recognizing higher interest expense in the statement of operations due to amortization of the discount that results from separating the liability and equity components. APB 14-1 will be effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. The Company is
currently evaluating the impact of adopting APB 14-1 on its consolidated financial statements.





In June 2008, the FASB issued FSP No. EITF 03-6-1, "Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities". This FASB Staff Position (FSP) addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting and, therefore, need to be included
in the earnings allocation in computing earnings per share (EPS) under the two-class method described in paragraphs 60 and 61 of FASB Statement No. 128, Earnings per Share. This FSP provides that unvested share-based payment awards that contain non forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of EPS pursuant to the two-class method. The provisions of FSP No. 03-6-1 shall be effective for financial statements
issued for fiscal years beginning after December 15, 2008, and interim periods within those years. All prior-period EPS data presented shall be adjusted retrospectively (including interim financial statements, summaries of earnings, and selected financial data) to conform with the provisions of this FSP. Early application is not permitted. The provisions of FSP No. 03-6-1 are effective for the Company retroactively in the first quarter ended March 31, 2009. The Company is currently assessing the impact of FSP
No. EITF 03-6-1 on the calculation and presentation of earnings per share in its’ consolidated financial statements.





Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption.





Reclassifications





Certain prior periods' balances have been reclassified to conform to the current period's financial statement presentation. These reclassifications had no impact on previously reported results of operations or stockholders' equity.





Note 6 – Line of Credit





The Company has a line of credit with Royal Bank of Canada. The line is for one year and carries an interest rate of LIBOR +3%. The balance outstanding as of December 31, 2008 is $14,995.


F-16




Note 7 – Fixed assets





Major classes of property and equipment at December 31, consist of the following:  2008


2007Furniture and equipment

$
16,241


$
-Leasehold improvements


890Total Notes Payable

$
17,131


$
-Less: accumulated depreciation


(6,066
)


-Net property and equipment

$
11,065


$
-Depreciation expense totaled $6,066 and $0 for the periods ended December 31, 2008 and 2007, respectively.








F-17





Note 8 –Notes / Advances Payable – Related Party




The company had the following notes payable outstanding as of December 31, 2008 and 2007
  2008


2007Notes Payable with Diana Perlman

$
299,658


$
-Notes payable with Resort Marketing.


95,000



-Advance payable with Mike Borish CEO


243,579



-Advance payable with Edmund Curtis COO


2,177



-Advance payable with John Holwel, Director and Vice President


3,643



-Total Notes Payable

$
644,057


$
-less:  Current Portion


(644,057
)


-Long Term Portion

$
-


$
-


The Company entered into a convertible promissory note with a shareholder of the Company and a related party on December 11, 2008 in the amount of $600,000. The promissory note had convertible beneficial feature which allowed the holder on the inception of the convertible promissory note into the company’s common stock equal to 50% of
the market price of the corporation’s common stock on the date of conversion. The Company recorded a beneficial interest expense in the amount of $293,250 in the year ended December 31, 2008. The notes have an annual interest rate of 12%.  As of December 31, 2008 the company has a due to related party $299,658.
 
 The Company entered into a convertible promissory note with a related party company (Resort Marketing) owned by the Company’s chief executive officer on December 22, 2008 in the amount of $95,000. The promissory note had convertible beneficial feature which allowed the holder on the inception of the convertible promissory note into
the company’s common stock equal to 50% of the market price of the corporation’s common stock on the date of conversion. The Company recorded a beneficial interest expense in the amount of $95,000 in the year ended December 31, 2008. The notes have an annual interest rate of 15%. As of December 31, 2008 the Company has a due to related party relating to the following promissory note in the amount of $95,000.
 
 The Company receives advances from its officers and related parties during the regular course of business. The advances to its officers have an annual rate of 15%. As of December 31, 2008 the Company has a due to its officers and related party members in the amount of $245,756.
 
 The Company receives advances from its director and vice president and a related party during the regular course of business. The advances to its officers have an annual rate of 15%. As of December 31, 2008 the Company has a due to its officers and related party members in the amount of $3,643.
 
 Note 9 –Notes Payable - Other
 
 The Company entered into a notes payable with US Bancorp Manifest Funding Services for the capital lease of equipment. As of December 31, 2008 the Company has a notes payable in the amount of $9,994 of which $4,997 is due by December 31, 2009.
 
 
 Note 10 – Other Related Party Transactions
 
 
 On December 15, 2008 the Company entered into an employment agreements with the Company’s two officers for the annual amount of $185,000 and $165,000, respectively. The employment agreements under the reference “Term” specifically set forth that the agreements were to be retroactive to January 1, 2008 “this agreement
will be retroactive to January 1, 2008.”  As of December 31, 2008 the Company has an accrued compensation liability of $350,000 and related payroll tax accrual in the amount of $15,606.
 
 Note 11 – Preferred Stock
 
 As of December 31, 2008 the company had 75,000,000 shares of preferred stock authorized with a par value of $.001. As of December 31, 2008 no shares were issued and outstanding.
  F-18
  Note 12 – Common Stock
  On June 11, 2008, the Company entered into a 1:20 reverse stock split. As of June 11, 2008 the Company had 2,507,037 common shared issued and outstanding after the completion of the reverse stock split.
 
 On June 12, 2008, the Company issued 12,746,444 common shares for services received by the Company. The value of the services was based on the fair market value of the shares on the date of issue. The Company recorded consulting service fees in the amount of $6,373,222.
 
 On  June 27, 2008, The Company issued 20,704,427 as a result of a recapitalization in accordance to a stock purchase agreement. Furthermore on June 27, 2008 the Company cancelled 800,000 shares held by a previous executive.
 
 On July 7, 2008, the Company issued 97 common shares for services received by the Company. The value of the services was based on the fair market value of the shares on the date of issue. The Company recorded consulting service fees in the amount of $102.
 
 On July 10, 2008, the Company issued 88 common shares for services received by the Company. The value of the services was based on the fair market value of the shares on the date of issue. The Company recorded consulting service fees in the amount of $89
 
 Note 13 – Income taxes
 
 The Company adopted Financial Accounting Standard No. 109 which requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statement or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference
between financial statements and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Temporary differences between taxable income reported for financial reporting purposes and income tax purposes are insignificant.
 
 For income tax reporting purposes, the Company’s aggregate unused net operating losses approximate $12,990,000 which expire in various years through 2028, subject to limitations of Section 382 of the Internal Revenue Code, as amended. The Company has provided a valuation reserve against the full amount of the net operating loss benefit,
because in the opinion of management based upon the earning history of the Company, it is more likely than not that the benefits will not be realized.
  Under the Tax Reform Act of 1986, the benefits from net operating losses carried forward may be impaired or limited on certain circumstances. Events which may cause limitations in the amount of net operating losses that the Company may utilize in any one year include, but are not limited to, a cumulative ownership change of more than 50%
over a three-year period. The impact of any limitations that may be imposed for future issuances of equity securities, including issuances with respect to acquisitions have not been determined.
 
 The provision (benefit) for income taxes from continued operations for the years ended December 31, 2008 and 2007 consist of the following:


December 31,
2008


December 31,
2007Current:Federal
$
-


$
-StateDeferred:Federal
$
4,000,000


$
1,750,000State

100,000



50,0004,100,000



1,800,000Benefit from the operating loss carryforward

(4,100,000
)


(1,800,000
)(Benefit) provision for income taxes, net
$
-


$
-






F-19





The difference between income tax expense computed by applying the federal statutory corporate tax rate and actual income tax expense is as follows:




December 31,
2008


December 31,
2007Statutory federal income tax rateState income taxes and other

34.0%



34.0%Effective tax rate

5.5%



5.5%39.5%



39.5%


Deferred income taxes result from temporary differences in the recognition of income and expenses for the financial reporting purposes and for tax purposes. The tax effect of these temporary differences representing deferred tax asset and liabilities result principally from the following:


December 31,
2008


December 31,
2007Net operating loss carryforward

12,990,000



5,119,100Valuation allowance

(12,990,000
)


(5,119,100
)Deferred income tax asset
$
-


$
-





In assessing the amount of deferred tax asset to be recognized, management considers whether it is more likely than not that some of the losses will be used in the future.  Management expects that they will not have benefit in  the  future. Accordingly, a full valuation  allowance  has  been  established.





Note 14 – Losses per ShareThe following table represents the computation of basic and diluted losses per share at December 31:  2008


2007Losses available for common shareholders


(7,870,565
)


(322,622
)Weighted average common shares outstanding


(0.185
)


(0.009
)Basic and fully diluted loss per share


42,647,381



37,761,668Net loss per share is based upon the weighted average shares of common stock outstanding




F-20





Note 15 – Commitment and Contingencies
  On January 1, 2008, FELC entered into an agreement to lease a 6,000 square foot facility and seventy feet of additional land at a rate of $3,700 per month. The lease is for a period of one years commencing on January 1, 2008 and expired on January 1, 2009. On January 1, 2009 the company entered into a month to month lease
with Regus at a rate of $1,200 per month.
  On May 15, 2009 the Company entered into a lease agreement for office space. The term of the agreement set forth that a monthly rent is $1.927 with lease term is through June 1, 2011.




F-21