UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549










(Mark One)





þ
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


For the fiscal year ended December 31, 2009


Or





o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


For the transition period from ____________ to ______________





Commission file number 333-140257





Phoenix International Ventures, Inc(Exact name of registrant as specified in its charter)








Nevada

20-8018146(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)





61B Industrial Parkway


Carson City, NV 89706


(Address of principal executive offices) (Zip Code)





(775) 882 9700


(Registrant’s telephone number, including area code)





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





None.





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


Common Stock, par value $0.001


(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 o No þ





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





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 þ No o





Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   Yes o   No  o








Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) 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. o





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





Large accelerated filer     o
Accelerated filer        oNon-accelerated filer       o

(Do not check if smaller reporting company)
Smaller reporting company þ





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





As of June 30, 2009, 8,052,040 shares of common stock were outstanding. The aggregate market value of the common stock held by non-affiliates of the registrant, as of June 30, 2009, the last business day of the 2nd fiscal quarter, was approximately $2,996,284 based on the close price for the registrant’s common stock as quoted on the Over-the-Counter Bulletin Board on that date. Shares of common stock held by each director, each officer and each person who owns 10% or more of the outstanding common stock have been excluded from this calculation in that such persons may be deemed to be affiliates. The determination of affiliate status is not necessarily conclusive.





As of March 31, 2010, there were 8,137,947 shares of our common stock issued and outstanding.





DOCUMENTS INCORPORATED BY REFERENCE





None.





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TABLE OF CONTENTS





Part IItem 1.
Business
3Item 1A.
Risk Factors
11Item 1B.
Unresolved Staff Comments
16Item 2.
Properties
16Item 3.
Legal Proceedings
16Item 4.
(Removedand Reserved)
16Part IIItem 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
17Item 6.
Selected Financial Data
19Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
19Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
25Item 8.
Financial Statements and Supplementary Data
26Item 9.
Changes In and Disagreements with Accountants on Accounting and Financial Disclosure
43Item 9A[T].
Controls and Procedures
43Item 9B.
Other Information
44Part IIIItem 10.
Directors, Executive Officers, and Corporate Governance
45Item 11.
Executive Compensation
47Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
50Item 13.
Certain Relationships and Related Transactions, and Director Independence
51Item 14.
Principal Accounting Fees and Services
52Part IVItem 15
Exhibits, Financial Statement Schedules
54Signatures

55





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PART I





ITEM 1.BUSINESS





Corporate Information





Phoenix International ventures, Inc. (“we,” “us,” “our” or the “Company”) was incorporated on August 7, 2006 under the laws of the State of Nevada. Phoenix Aerospace, Inc. was incorporated on April 18, 2003 under the laws of the State of Nevada. The Company, Zahir Teja, and Phoenix Aerospace, Inc. entered into a Share Exchange Agreement dated as of December 1, 2006. Under the Share Exchange Agreement, Mr. Teja, the sole owner and principal of Phoenix Aerospace, Inc. exchanged all the issued and outstanding shares of Phoenix Aerospace, Inc.’s common stock for 3,000,000 shares of the common stock of the Company. As a result of this transaction, Phoenix Aerospace, Inc. became a wholly owned subsidiary of the Company, and Mr. Teja became a principal stockholder of and continued to be a principal of the Company. The effective date of this transaction was January 1, 2007.





General





Phoenix International Ventures, Inc. was formed to invest and develop business in the fields of aerospace and defense. We, through our wholly owned subsidiary, Phoenix Aerospace, Inc., design, manufacture, upgrade and remanufacture electrical, hydraulic and mechanical support equipment primarily for the United States Air Force and Navy and the United States defense-aerospace industry. Currently our support equipment is used to maintain or operate various aircrafts or aircraft systems, such as the F-22 fighter and F-16 fighter, which are in current production; and the P-3 surveillance plane and various other `legacy' aircraft which are no longer in production.





Some of the support equipment for a number of weapon systems in current production, as well as `legacy' weapon systems are in need of overhaul or are obsolete and need to be replaced. We remanufacture some of the existing support equipment, and also manufacture new support equipment.  Frequently new support equipment is not available, has long delivery lead times, or is very expensive to purchase. Upgrading and remanufacturing of existing support equipment thus becomes an alternative. Our remanufacturing process for existing support equipment is designed to respond to this market.





Our remanufacturing process involves breaking down the support equipment for analysis, replacing or refurbishing broken or defective components, rebuilding the support equipment, and finally testing the support equipment so that it has the same form, fit and function of the original support equipment in accordance with the original manufacturer's specifications.





We also design and manufacture new ground support equipment.  In this process, we generally bid on a government contract after conducting an internal cost analysis and pricing plan. We then submit a formal proposal based on our estimated budget.  Once the contract has been awarded, we design the requested unit and test a prototype before producing the units.





The Military Market





The U.S. military market which we contract with and seek to contract with includes two branches of the U.S. military-the U.S. Air Force (the “USAF”) and the U.S. Navy-and a number of contractors who have extensive business relationships with branches of the U.S. military.





The U.S. military market is largely dependent upon government budgets, particularly the defense budget. The funding of government programs is subject to Congressional appropriation. While U.S. defense contractors have benefited from an upward trend in overall defense spending in the last few years, the ultimate size of future defense budgets remains uncertain. Current indications are that the total defense budget will remain the same or decrease over the next few years. However, Department of Defense programs in which we participate, or in which we may seek to participate in the future, must compete with other programs for consideration during our nation's budget formulation and appropriation processes. Budget decisions made in this environment may have long-term consequences for our size and structure and that of the defense industry. While we believe that our programs are a high priority for national defense, there remains the possibility that one or more of our programs will be reduced or terminated. Reductions in our existing programs, unless offset by other programs and opportunities, could adversely affect our ability to grow our revenues and profitability. Although multi-year contracts may be authorized in connection with major procurements, Congress generally appropriates funds on a fiscal year basis even though a program may be expected to continue for several years. Consequently, programs are often only partially funded and additional funds are committed only as Congress makes further appropriations.


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The U.S. Government and U.S. Defense Contractors Contracting Process





Our U.S. government contracts are obtained through the Department of Defense procurement process as governed by the Federal Acquisition Regulations and related regulations and agency supplements, and are historically fixed-price contracts. This means that the price is agreed upon before the contract is awarded and we assume complete responsibility for any difference between estimated and actual costs.  Subsequent to September 30, 2006, we entered into several cost plus contracts. This means that under the applicable agreement, we are entitled to be reimbursed for our costs and are entitled to be paid a fixed rate of return. What constitutes reimbursable costs and the prescribed rate of return is ordinarily subject to negotiation.





Under the Truth in Negotiations Act of 1962 (the “Negotiations Act”), the U.S. government has the right for three years after final payment on certain negotiated contracts, subcontracts and modifications, to determine whether we furnished the U.S. government with complete, accurate and current cost or pricing data as defined by the Negotiations Act. If we fail to satisfy this requirement, the U.S. government has the right to adjust a contract or subcontract price by the amount of any overstatement as defined by the Negotiations Act.





U.S. government contracts permit the U.S. government to unilaterally terminate these contracts at its convenience. In the event of such termination, we are entitled to reimbursement for certain expenditures and overhead as provided for in applicable U.S. government procurement regulations. Generally, this results in the contractor being reasonably compensated for work actually done, but not for anticipated profits. The U.S. government also may terminate contracts for cause if we fail to perform in strict accordance with contract terms. Termination of, or elimination of appropriation for, a significant government contract could have a material adverse effect on our business, financial condition and results of operations in subsequent periods. Similarly, U.S. government contracts typically permit the U.S. government to change, alter or modify the contract at its discretion. If the U.S. government were to exercise this right, we could be entitled to reimbursement of all allowable and allocable costs incurred in making the change plus a reasonable profit.





Depending on the size, complexity, and duration of the particular agreement, the U.S. government may either pay for the manufactured or remanufactured product upon delivery and acceptance thereof or pay for the manufactured or remanufactured product in installments upon the accomplishment of specified milestones and/or an agreed payment timetable.





Ordinarily, a prospective vendor seeking to do business with the U.S. Department of Defense or with U.S. defense contractors is required to prepare the company to be International Standard Organization (“ISO”) certified. This means that it has to have proper written management procedures on all facets of its business including but not limited to, quoting to a customer, receiving purchase orders, issuing purchase orders, issuing work orders, tracking work orders, quality control for incoming materials and outgoing finished goods and inspections and acceptance, etc. and that the vendor is operating its business following these procedures.





Once a vendor has these management procedures in place, it has to engage the services of an independent certified company that is qualified to audit these procedures and confirm that the vendor is following them in its day-to-day operations. This will result in a vendor being ISO certified. This certification does not mean that the vendor has technical capabilities or the ability to perform on a contract. This certification informs a potential customer that the company has written procedures which it follows when conducting its day-to-day business.





Obtaining this certification is burdensome and time-consuming because the vendor has to have a full complement of personnel in different departments who are able to perform tasks per the written procedures; all the while no revenues are generated. Our subsidiary, Phoenix Aerospace Inc. (PAI), received this certification in 2003.  Our certification was renewed effective June 12, 2008 for an additional three year period.





Once a vendor is ISO-certified, a vendor is in a position to solicit business from a defense contractor (customer), who frequently has its own quality assurance program. Typically, for the first contract/purchase order, if the customer decides it wants to procure goods and services from a vendor, then the customer prior to issuing a contract/purchase order would schedule to send (generally at its own expense), an inspector or team of inspectors to go to the vendor facility and determine for itself, using its own criteria: the technical capabilities, facilities, quality assurance procedures etc. Once satisfied, then and only then they will issue a purchase order. This is done at the expense of the customer and the customer will only spend money for this expense, if it determines that the vendor has the possibility to supply goods and services that are beneficial to the customer.


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This appraisal of the vendor by a customer prior to issuing a contract/purchase order to the vendor gives the customer reasonable assurance that the goods and services it is procuring from a vendor will be delivered to them in the manner prescribed in the contract/purchase order.





Products and Services





Our support equipment is used to maintain or operate various aircrafts or aircraft systems, such as the F-22 fighter and F16 fighter, each of which is in current production and the P-3 surveillance plane and various other `legacy' aircraft which are no longer in production.





We have remanufactured or are currently remanufacturing:





(a) for the U.S. Navy, BR-61 electrical/electronic Test Sets, used to test aircraft environmental systems for the P-3 surveillance plane;





(b) for Lockheed Martin, MJ1A Weapons loaders (multi-platform) for use by the U.S. Air Force; and





(c) for Lockheed Martin, A/M32A-95 Air Start Carts (multi-platform) for the U. S. Air Force's F-22 fighter.





With respect to each of the previously described programs, we break down the support equipment for analysis, replacing or refurbishing broken or defective components, rebuilding the support equipment, and finally testing the support equipment so that it has the same form, fit and function of the original support equipment in accordance with the original manufacturer's specifications.





We are currently designing and manufacturing for the USAF, two aircraft engine trailers applicable to multi-platform aircrafts, including the F-16, from a $2,450,450 contract awarded to us in September 2008.  Under this contract, we will be designing and producing two new types of aircraft engine trailers and manufacturing nine units in total.  This contract also has an awarded, but not yet exercised, option to purchase an additional 25 trailers, for a price of $2,900,000.





We are also currently designing and remanufacturing certain test boxes for the U.S. Navy, and Air Start Carts units for a major Defense company.





On occasion over the past three years, we have been engaged by a branch of the U.S. military, to perform a feasibility study for various different items of support equipment to address obsolescence issues and recommend solutions to extend service life for the item of support equipment analyzed. Once the recommended solution is approved by the branch of the U.S. military, then we would be requested to manufacture several units of each item as proof of concept. One of the outgrowths of such a study is the potential to be awarded a contract to implement the study's recommendations.





Market Opportunity and Strategy





Management believes that the scope of the market opportunity for manufacturing and remanufacturing/refurbishing support equipment for the U.S. military market is viable. The viability of the business opportunity is supported by the following market characteristics:





·
the aging support equipment in the field at large – we were contracted by the U.S. Air Force to design new engine trailers that can replace aging support equipment still in use;·
the growing demand for U.S. military preparedness given the current global political climate;·
the surge in defense spending from a little over $300 billion before the September 11, 2001 attacks on the United States to over $400 billion annually; and





·
the U.S. military's insistence that defense contractors operate efficiently and timely to deliver the much needed military equipment.





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It is difficult to determine what portion of the above-referenced defense spending will be allocated to manufacturing, remanufacturing, and refurbishing of support equipment. Moreover, there is no assurance that the previously set forth market characteristics will not change. See additional discussion in Item 1A - “Risk Factors”.





The military market is currently dominated by major players such as Lockheed Martin Corporation, Honeywell International Inc, Northrop Grumman Corporation, and DRS, Inc. We do not intend to compete with these large defense contractors, rather we seek to establish approved contractor, licensing, and teaming relationships with defense contractors. Management believes that these contractual relationships, coupled with our designation as a U.S. Navy and U.S. Air Force “Prime Contractor” and a U.S. Navy Designated Repair Depot for certain support equipment, will facilitate our ability to successfully bid on and timely complete contracts with branches of the U.S. military.





Customization





Customization of our products is not a material aspect of our business.





Supply and Manufacturing





Our design, engineering and assembly facilities are located in our Carson City, Nevada headquarters. These facilities comply with certain U.S. military requirements necessary for the manufacture and assembly of products supplied to it and we have qualified our facility in order to meet the quality management and assurance standards (ISO-9001)/2000) of the International Organization for Standardization.





In the course of our remanufacturing process for a particular product, we must obtain replacement parts for worn out or defective components. In this circumstance, we may seek to purchase the replacement component from the original manufacturer or a distributor. Except as described below, we are not ordinarily a party to any formal written contract regarding the deliveries of supplies and components or their fabrication. We usually purchase such items pursuant to written purchase orders of both individual and blanket variety. Blanket purchase orders usually entail the purchase of a larger amount of items at fixed prices for delivery and payment on specific dates.





We rely on suppliers located in the United States and Europe. Certain components used in our products are obtained from sole sources. We have occasionally experienced delays in deliveries of components and may experience similar problems in the future. In an attempt to minimize such problems when we secure a contract, which involves parts that are generally more difficult to obtain, we may obtain the parts and keep them in inventory. However, any interruption, suspension or termination of component deliveries from our suppliers could have a material adverse effect on our business.





Ordinarily, we will not agree to remanufacture a particular support unit unless Management believes that there are readily available sources of supply. Although Management believes that in nearly every case alternate sources of supply can be located, inevitably a certain amount of time would be required to find substitutes. During any such interruption in supplies, we may have to curtail the production and sale of the affected products for an indefinite period.





We entered into an arrangement with a defense equipment manufacturer in October, 2003 concerning licensing such manufacturer's technical data in connection with the repair/refurbishment of P-3 support equipment for sale to the U.S. government. This agreement is a non-transferable, non-exclusive royalty bearing license. We are required to pay royalties related to sales of the support equipment to the particular licensor for a term of five years. The respective parties' performance is subject to other terms, conditions and restrictions, including, without limitation, the maintenance of certain quality standards.





Warranty and Customer Service





We generally provide one-year warranties on all of our products covering both parts and labor, although extended warranties may be purchased by customers. At our option, we repair or replace products that are defective during the warranty period if the proper usage and preventive maintenance procedures have been followed by our customers. Repairs that are necessitated by misuse of such products or are required beyond the warranty period are not covered by our normal warranty.


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In cases of defective products, the customer typically returns them to our Carson City, Nevada facility. Our service personnel then replace or repair the defective items and ship them back to the customer. Generally, all servicing is done at our plant, and we charge our customers a fee for those service items that are not covered by warranty. Except for our extended warranties, we currently do not offer our customers any formal written service contracts.





Marketing and Sales





We market our products and services through direct contact with officials of branches of the U.S. military and officials of various major defense contractors. In addition, we promote our products and services through the dissemination of product literature to potential customers and the attendance and exhibition at trade shows and seminars. We do not have an internal sales force specifically dedicated to the sales and marketing of our products and services. We do not advertise in trade periodicals. Management believes that most of our sales leads are generated by word-of-mouth referrals.





In the military market, the sales cycle for our products usually entails a number of complicated steps and can take from six months to two years. The sales cycle in the commercial markets is generally not as complex or time consuming, but still may take as long as two years. Sales to the military and government markets are greatly influenced by special budgetary and spending factors pertinent to these organizations.





Customers





We sell our products, directly or indirectly, primarily to the U.S. military market and large aerospace and military contractors. We also sell to various European customers.





The following chart sets forth for the fiscal period indicated the names of our five largest customers and their respective percentages of our total sales





Name
Fiscal Period
% of Total SalesTwelve Months Ended:2009U.S. Air Force

32Northrop Grumman

16APV

11Astrotek

11US  Navy

112008U.S. Air Force

34Northrop Grumman

17MSI GMBH

27U.S.  Navy

9Langa

8





The loss of any of these customers could have a material adverse impact on our business.





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Competition





We compete in our market against other concerns, most of which are larger and have greater financial, technical, marketing, distribution and other resources than we do. We compete on the basis of service, performance, reliability, price and deliveries.





We encounter competition from Lockheed Martin Corporation, Boeing Corporation, Honeywell Aerospace GmbH, United Technologies Corporation, Northrop Grumman Corporation, and DRS, Inc. as well as from Engineered Support Systems, Inc. and Logistical Support, Inc.





In the military and government markets, we will often be engaged, directly or indirectly, in the process of seeking competitive bid or negotiated contracts with government departments and agencies. These government contracts are subject to the Federal Acquisition Regulations with which we may have difficulty complying. However, we are often one of only a few companies whose products meet the required specifications designated by such customers.





Management believes that there are a number of barriers to entry into the military market. A would-be entrant would ordinarily, first need to obtain ISO9000 or applicable ISO certification. Then, customers in the U.S. defense industry and U.S. government departments would then certify such entrant's facilities, technical capabilities, and quality assurance program before such entrant can qualify to do business. The startup costs, Management believes, to get certified and to become an approved vendor are substantial. In addition, the would-be entrant must become familiar with and be willing to accept the risks of the U.S. government military procurement system. Management believes that we have the following competitive advantages over would-be entrants into the U.S. military markets. We are a:





·
Lockheed Martin Aeronautics Company Licensee;·
Lockheed Martin Aeronautics Company approved vendor;·
Lockheed Martin Simulation, Training and Support approved vendor;





·
Lockheed Martin Air Logistics Center approved vendor;·
U.S. Navy Prime Contractor;·
U.S. Navy Designated Depot Repair Center for Certain Support Equipment;·
U.S. Air Force Prime Contractor;





·
U.S. Army Prime Contractor·
Honeywell Aerospace GmbH approved vendor;





·
Northrop Grumman approved vendor;·
Boeing approved vendor·
ISO 9001/2000 Certified; and·
Experienced with the U.S. government contracting process.





-8-


Backlog





As of December 31, 2009, our backlog was approximately $8,303,245, as compared with a backlog of approximately $5,693,160 as of December 31, 2008. Four customers accounted for approximately 53%, 12%, 8%, and 7% of such backlog as of December 31, 2009. We presently expect to manufacture and deliver a significant portion of the products in our backlog within the next 12 months.


Substantially all of our backlog figures are based on written purchase orders or contracts executed by the customer and involve product deliveries. All orders are subject to cancellation. However, in that event, we are generally entitled to reimbursement of our cost and negotiated profits; provided that such contracts would have been profitable.





Research and Development Activities





We do not devote a material amount of time to separate research and development activities.





Intellectual Property





To date, our generated proprietary information and know-how are an important aspect of our commercial success. Although we do not have a separate research and development department, we nevertheless obtain important proprietary information and know-how in connection with the fulfillment of our obligations under our agreements with the U.S government and defense contractors. We have entered into two licensing arrangements whereby the specified U.S. defense contractor has agreed to share its technical data under licensing agreements concerning the sale of particular support equipment to a branch of the U.S. military. We hold no patents or copyrights and do not have trademark protection for the Phoenix International Ventures or Phoenix Aerospace names. We require each of our employees to sign confidential information agreements. There can be no assurance that others will not either develop independently the same or similar information or obtain and use proprietary information used by us.





Management believes that our products do not infringe the proprietary rights of third parties. In this regard, we seek to obtain representations and warranties of non-infringement from persons with respect to whom we enter into technical data licensing agreements. There can be no assurance, however, that third parties will not assert infringement claims against us in the future or be successful in asserting such claims.





Subsidiaries





We have two wholly owned subsidiaries: Phoenix Aerospace, Inc., a Nevada corporation, and Phoenix Europe Ventures, Ltd., an Israeli corporation.





Government Regulations and Contracts; Compliance with Government Regulation





Due to the nature of the products we design, manufacture and sell for military applications, we are subject to certain U.S. Department of Defense regulations. In addition, commercial enterprises engaged primarily in supplying equipment and services, directly or indirectly, to the United States government are subject to special risks such as dependence on government appropriations, termination without cause, contract renegotiation and competition for the available Department of Defense business. We have no material Department of Defense contracts that are subject to renegotiation in the foreseeable future and are not aware of any proceeding to terminate material Department of Defense contracts in which we may be indirectly involved. In addition, many of our contracts provide for customer rights to audit our cost records and are subject to regulations providing for price reductions if we submitted inaccurate cost information.





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Government contracts are often subject to termination, negotiation or modification in the event of changes in the government's requirements or budgetary constraints. A majority of the products we sell for government applications are sold to companies acting as contractors or subcontractors and not directly to government entities. Agreements with such contractors or subcontractors generally are not conditioned upon completion of the contract by the prime contractor. To the extent that such contracts are so conditioned, a failure of completion may have a material adverse effect on our business. Currently, we do not have any contracts so conditioned.





The contracts for sale of our products are generally fixed-priced contracts. This means that the price is set in advance and generally may not be varied. Such contracts require us to properly estimate our costs and other factors prior to commitment in order to achieve profitability and compliance. Our failure to do so may result in unreimbursable cost overruns, late deliveries or other events of non-compliance.





Under certain circumstances, we are also subject to certain U.S. State Department and U.S. Department of Commerce requirements involving prior clearance of foreign sales. Such export control laws and regulations either ban the sale of certain equipment to specified countries or require U.S. manufacturers and others to obtain necessary federal government approvals and licenses prior to export. As a part of this process, we, in the event we engage foreign distributors, would generally require such foreign distributors to provide documents which indicate that the equipment is not being transferred to, or used by, unauthorized parties abroad.





We and our agents are also governed by the restrictions of the Foreign Corrupt Practices Act of 1977, as amended, ("FCPA") which prohibits the promise or payments of any money, remuneration or other items of value to foreign government officials, public office holder, political parties and others with regard to the obtaining or preserving commercial contracts or orders. We have required our foreign distributors to comply with the requirements of FCPA All these restrictions may hamper us in our marketing efforts abroad.





Our manufacturing operations are subject to various federal, state and local laws, including those restricting or regulating the discharge of materials into the environment, or otherwise relating to the protection of the environment. We are not involved in any pending or threatened proceedings which would require curtailment of, or otherwise restrict our operations because of such regulations, and compliance with applicable environmental laws has not had a material effect upon our capital expenditures, financial condition or results of operations.





Management believes that although we are required to implement certain additional procedures that would not otherwise be required in order to comply with applicable federal laws and regulations, such compliance has not generally inhibited or limited our ability to enter into material contracts.





Employees





During our fiscal year ended December 31, 2009, we hired five new employees, bringing the total number of full time employees to eleven at December 31, 2009, including two officers, we also had  two part time employees. Nine of these full time employees were engaged in operations and three of the full time employees were engaged in administration, marketing, and business development. The increase in our revenues during 2009 required us to increase our work force.





None of our employees are covered by a collective bargaining agreement or are represented by a labor union. We consider our relationships with our employees to be satisfactory.





The design and manufacture of our equipment requires substantial technical capabilities in many disparate disciplines from engineering, mechanics and electronics. While Management believes that the capability and experience of our technical employees compares favorably with other similar manufacturers, there can be no assurance that we can retain existing employees or attract and hire the highly capable technical employees necessary in the future on terms we deem favorable, if at all.





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ITEM 1A.   RISKFACTORS





Investing in our common stock involves a high degree of risk. Prospective investors should carefully consider the risks described below, together with all of the other information included or referred to in this Annual Report on Form 10-K, before purchasing shares of our common stock. There are numerous and varied risks, known and unknown, that may prevent us from achieving our goals. The risks described below are not the only ones we will face. If any of these risks actually occur, our business, financial condition or results of operation may be materially adversely affected. In such case, the trading price of our common stock could decline and investors in our common stock could lose all or part of their investment.





Risks Related To Our Business





We have a limited operating history and therefore it may be difficult to evaluate our Company and our prospects.





We were organized in 2006, and our principal operating subsidiary, founded in April, 2003, has only a limited operating history upon which an evaluation of our Company and our prospects can be based. Our prospects for financial success must be considered in light of the risks, expenses and difficulties frequently encountered by companies in highly competitive and evolving markets, such as the defense-aerospace industry market.





We have incurred losses and have a working capital deficit and there can be no assurance that such losses will not continue in the future.





For the fiscal year ended December 31, 2009, we had a net loss of $(246,490) and for the fiscal year ended December 31, 2008, we had a net income of $360,774 which was caused by a non recurring reversal of a contingency in the amount $566,164.  As of December 31, 2009, we had a working capital deficit of $1,491,303 and an accumulated  deficit of $3,172,086.  Our capital needs during 2009 have been met by the cash flow from operations, loans and by issuing promissory note arrangements.  However, there can be no assurance that such losses will not continue in the future.





We may fail to continue as a going concern, in which event you may lose your entire investment in our shares.





We have historically operated at a loss and may continue to do, however, the recent receipt of additional orders, our current backlog, and other factors indicate we will be able to continue as a going concern for at least the next twelve months.  Failure to properly execute our current business plan may result in our inability to continue as a going concern.








We may be unable to manage our growth or implement our business strategy.





Although we have experienced significant growth in a relatively short period of time, we cannot assure you that our growth will continue, nor can we assure you that we will be able to expand our facilities, our client base and markets or implement the other features of our business strategy at the rate or to the extent presently planned. Our rapid growth to date has placed, and in the future will continue to place, a significant strain on our administrative, operational and financial resources.





Our ability to generate revenue is dependent upon our success in obtaining awards for a very narrow category of contracts.





Our ability to generate all of our revenues is dependent upon our success in obtaining awards for a very narrow category of aerospace and defense contracts. If we are not successful in receiving contracts from the U.S. government and/or U.S. defense industry contractors for any reason, including our failure to meet eligibility requirements, competition, our failure to perform under prior contracts, and/or changes in government and/or defense industry contracting policies, we would not generate sufficient revenue to continue in business.





-11-


In addition to the foregoing, we are subject to the following risks in connection with government contracts:





·
The frequent need to bid on programs prior to completing the necessary design, which may result in unforeseen technological difficulties and/or cost overruns;·
The difficulty in forecasting long-term costs and schedules and the potential obsolescence of products related to long term fixed-price contracts;·
The risk of fluctuations or a decline in government expenditure due to any changes in the US Department of Defense budget or appropriation of funds;·
When we act as a subcontractor, the failure or inability of the primary contractor to perform its price contract may result in an inability to obtain payment of fees and contract costs;·
Restriction or potential prohibition on the export of products based on licensing requirements; and·
Government contract awards can be contested by other contractors.





We are dependent on major customers and any loss of these customers could have a substantial adverse effect on our business, results of operations or financial condition.





Our business is also substantially dependent on a relatively small number of customers and United States Department of Defense programs. In the twelve months ended December 31, 2009, our five largest customers in terms of sales accounted for an aggregate of 81% of our total sales. During 2008, our five largest customers in terms of sales accounted for an aggregate of 95% of total sales. Although we are increasing our customer base, the loss of any of the foregoing businesses as a customer could have a material adverse effect on our results of operations or financial condition.


Demand for our defense-related products depends on government spending and any re-allocation or reduction in such spending could have a material adverse effect on our business and results of operations.





The U.S. military market is largely dependent upon government budgets, particularly the defense budget. The funding of government programs is subject to Congressional appropriation. Although multi-year contracts may be authorized in connection with major procurements, Congress generally appropriates funds on a fiscal year basis even though a program may be expected to continue for several years. Consequently, programs are often only partially funded and additional funds are committed only as Congress makes further appropriations. We cannot assure you that an increase in defense spending will be allocated to programs that would benefit our business. A decrease in levels of defense spending or the government's termination of, or failure to fully fund, one or more of the contracts for the programs in which we participate could have a material adverse effect on our financial position and results of operations.





The risk that governmental purchases of products may decline stems from the nature of the our  business with the U.S. government, in which the U.S. government may:





·
terminate contracts at its convenience;·
terminate, reduce or modify contracts or subcontracts if its requirements or budgetary constraints change;·
cancel multi-year contracts and related orders if funds become unavailable;·
shift its spending priorities;·
adjust contract costs and fees on the basis of audits done by its agencies; and·
inquire about and investigate business practices and audit compliance with applicable rules and regulations.





-12-


Our failure to obtain and maintain required certifications could impair our ability to bid on aerospace and defense contracts.





We are required to maintain quality certification and to meet production standards in order to be eligible to bid on government contracts. If we fail to maintain these certifications or any additional certification which may be required, we will be ineligible to bid for contracts which would impair our ability to continue in business.





Because many of our contracts provide for a fixed price, our failure to accurately estimate costs could result in losses on the contracts.





In bidding on fixed price contracts, we must accurately estimate the cost of performance. To the extent that our costs exceed our estimate, we will lose money on the contracts. Such cost overruns could result from a number of factors including increases in costs of materials, an underestimation of the amount of labor required and design or production problems.





To the extent that we subcontract work under our contracts, any failures by our subcontractors could impair our relations with the contracting agencies.





We frequently use subcontractors to perform work or provide materials for our contracts. We are dependent upon the subcontractors to meet the quality and delivery requirements of the contracting agency. To the extent that the products or services provided by the subcontractors do not meet the required specifications or are delivered late, the contract may be terminated by the U.S. government for default. Such a default could result in our disqualification from bidding on contracts.





Product malfunctions or breakdowns could expose us to liability, particularly in connection with our remanufacturing of obsolete and old support equipment.





The risk that our support equipment may malfunction and cause loss of man hours, damage to, or destruction of, equipment or delays is significant. Consequently, we, as a manufacturer or remanufacturer of such support equipment, may be subject to claims if such malfunctions or breakdowns occur. In remanufacturing activities, we deal with obsolete and old equipment which increases the chance of product malfunctions or breakdowns. We do not presently maintain product liability insurance.





If we are unable to attract and retain qualified engineering personnel, our ability to continue our business could be impaired.





Our business is dependent upon our engaging and retaining engineering personnel with experience in the aerospace and defense industries. To the extent that we are unable to hire and retain these engineers, our ability to bid on and perform contracts will be impaired.





We rely on our senior executive officer, the loss of whom would materially impair our operations.





We are dependent upon the continued employment of certain key employees, including our President and Chief Executive Officer, Zahir Teja because of his experience and his contacts in this industry. We have entered into an employment agreement with Mr. Teja; however, the agreement does not assure us that he will continue to work for us since he may terminate his employment agreement on 90 days' notice. The loss of Mr. Teja would materially impair our operations.





Because of our small size and our relative lack of capital and resources, we may have difficulty competing for business.





We compete for contract awards directly with a number of large and small domestic and foreign defense contractors, including some of the largest national and international defense companies, as well as a large number of smaller companies.  Many of these competitors have greater financial, technical, marketing, distribution and other resources than we do.  Our relative lack of capital and resources may continue to place us in a competitive disadvantage.  If we are unable to compete successfully, our business may fail.


-13-





A default under the Kellstrom Settlement Agreement could have an adverse effect on our business.





The Company and Mr. Teja have entered into a settlement agreement with Kellstrom Defense Aerospace, Inc. As of December 31, 2009 the balance of the trade credits stands at approximately $384,000. If the Company fails to make the required trade credits deliveries, Kellstrom may seek to collect the total unpaid balance of the final judgment, approximately $1,173,913. The Company does not currently have the financial resources to pay off the total unpaid balance of the final judgment.





Risks Relating To Our Common Stock





Any additional funding we arrange through the sale of our common stock will result in dilution to existing stockholders.





We may raise additional capital in order to effectuate our business plan. Our most likely source of additional capital will be through the sale of additional shares of common stock. Such stock issuances will cause stockholders' interests in our Company to be diluted and such dilution will negatively affect the value of an investor's shares.





Because of our small size, we may be exposed to potential risks resulting from requirements under Section 404 of the Sarbanes-Oxley Act of 2002.





Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, we are required to include in our Annual Report on Form 10-K our assessment of the effectiveness of our internal control over financial reporting as of the end of fiscal 2009. Furthermore, we expect that, beginning with our fiscal year ended December 31, 2010, our independent registered public accounting firm will be required to attest to whether our assessment of the effectiveness of our internal control over financial reporting is fairly stated in all material respects and separately report on whether it believes we have maintained, in all material respects, effective internal control over financial reporting as of the end of the fiscal year. We expect to incur additional expenses and diversion of management's time as a result of performing the system and process evaluation, testing and remediation required in order to comply with the certification requirements.





We have identified certain deficiencies in our internal control over financial reporting.  See Item 9AT – Controls and Procedures.  During the course of our testing, we may identify other deficiencies that we may not be able to remediate in time to meet the deadline imposed by the Sarbanes-Oxley Act for compliance with the requirements of Section 404. In addition, if we fail to achieve and maintain the adequacy of our internal controls, as such standards are modified, supplemented or amended from time to time, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controls over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act. Moreover, effective internal controls  are necessary for us to produce reliable financial reports and are important to help prevent financial fraud. Although Management believes that the material weaknesses did not have an effect on our financial reports, if we cannot provide reliable financial reports or prevent fraud, our business and operating results could be harmed, investors could lose confidence in our reported financial information, and the trading price of our common stock, if a market ever develops, could drop significantly.





Members of the Teja family and the Nissenson family make and control corporate decisions that may be disadvantageous to the minority stockholders.





Mr. Zahir Teja, our President, Chief Executive Officer and Director, and Neev Nissenson, our Vice President, Secretary, and Director, directly or through their respective members of their families, own an aggregate of approximately 53% of the outstanding shares of our common stock. Accordingly, they have and will have significant influence in determining the outcome of all corporate transactions or other matters, including the election of directors, mergers, consolidations and the sale of all or substantially all of our assets, and a change in control. The interests of Mr. Teja and/or Mr. Nissenson may differ from the interests of the other stockholders and thus result in corporate decisions that are disadvantageous to other stockholders.





-14-


Currently, there is a limited public market for our securities, and there can be no assurances that any substantial public market will ever develop.





Currently, our stock is admitted for quotation of our common stock on the Over-the-Counter Bulletin Board; however, there is presently no substantial public market for our common stock.  We cannot predict the extent to which investor interest in us will lead to the development of an active, liquid trading market. Active trading markets generally result in lower price volatility and more efficient execution of buy and sell orders for investors. Even if we are successful in developing a public market, there may not be enough liquidity in such market to enable stockholders to sell their stock. If an active public market for our common stock does not develop, investors may not be able to re-sell the shares of our common stock that they have purchased, rendering their shares effectively worthless and resulting in a complete loss of their investment.





In addition, our common stock is initially unlikely to be followed by any market analysts, and there may be few institutions acting as market makers for the common stock. Either of these factors could adversely affect the liquidity and trading price of our common stock. Until our common stock is fully distributed and an orderly market develops in our common stock, if ever, the price at which it trades is likely to fluctuate significantly. Prices for our common stock will be determined in the marketplace and may be influenced by many factors, including the depth and liquidity of the market for shares of our common stock, developments affecting our business, including the impact of the factors referred to elsewhere in these Risk Factors, investor perception of our company, and general economic and market conditions. No assurances can be given that an orderly or liquid market will ever develop for the shares of our common stock.





Because many of our shares are eligible for future sale, the selling of a substantial amount might adversely affect the market price of the shares.





Sales of a substantial number of shares of common stock in the public market could adversely affect the market price of such shares. As of December 31, 2009 we had 8,113,307shares of common stock outstanding, of which the 3,768,750 shares of common stock free trading without restriction pursuant to registration statement that was declared effective in August, 2007. All of the remaining 4,344,557 shares of common stock outstanding are "restricted securities," as that term is defined under Rule 144 promulgated under the Securities Act, and in the future may only be sold pursuant to a registration statement under the Securities Act, in compliance with the exemption provisions of Rule 144 (including, without limitation, certain volume limitations and holding period requirements thereof) or pursuant to another exemption under the Securities Act. Our CEO, Zahir Teja, and his family and affiliates own an aggregate of approximately 2,596,000 shares. Our Vice President, Neev Nissenson, and his affiliates own approximately 1,687,000 shares.





Because we may be subject to “Penny Stock” rules, the level of trading activity in our stock may be reduced.





Broker-dealer practices in connection with transactions in "penny stocks" are regulated by penny stock rules adopted by the Securities and Exchange Commission. Penny stocks generally are equity securities with a price of less than $5.00 (other than securities registered on some national securities exchanges). The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document that provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, and, if the broker-dealer is the sole market maker, the broker-dealer must disclose this fact and the broker-dealer's presumed control over the market, and monthly account statements showing the market value of each penny stock held in the customer's account. In addition, broker-dealers who sell these securities to persons other than established customers and "accredited investors" must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction. Consequently, these requirements may have the effect of reducing the level of trading activity, if any, in the secondary market for a security subject to the penny stock rules, and investors in our common stock may find it difficult to sell their shares.





Our stock price may be volatile because of factors beyond our control. As a result, the value of your shares may decrease significantly.





The market price of our securities may fluctuate significantly in response to a number of factors, many of which are beyond our control, including, but not limited to, the following:





·
our ability to obtain securities analyst coverage;·
changes in securities analysts' recommendations or estimates of our financial performance;·
changes in market valuations of companies similar to us; and announcements by us or our competitors of significant contracts, new offerings, acquisitions, commercial relationships, joint ventures or capital commitments; and·
the failure to meet analysts' expectations regarding financial performances.


-15-


Furthermore, in the past, companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation. A securities class action lawsuit against us, regardless of its merit, could result in substantial costs and divert the attention of our management from other business concerns, which in turn could harm our business.





The provisions of our charter documents and Nevada law may inhibit potential acquisition bids that a stockholder may believe are desirable, and the market price of our common stock may be lower as a result.





Our articles of incorporation provide us with the ability to issue "blank check" preferred stock enabling our Board of Directors to fix the price, rights, preferences, privileges and restrictions of preferred stock without any further action or vote by our stockholders. The issuance of preferred stock may delay or prevent a change in control transaction. As a result, the market price of our common stock and the voting and other rights of our stockholders may be adversely affected. The issuance of preferred stock may result in the loss of voting control to other stockholders.





The Nevada Business Corporation Law contains a provision governing “Acquisition of Controlling Interest.” This law provides generally that any person or entity that acquires 20% or more of the outstanding voting shares of a publicly-held Nevada corporation in the secondary public or private market may be denied voting rights with respect to the acquired shares, unless a majority of the disinterested stockholders of the corporation elects to restore such voting rights in whole or in part. The provisions of the control share acquisition act may discourage companies or persons interested in acquiring a significant interest in or control of the Company, regardless of whether such acquisition may be in the interest of our stockholders.





ITEM 1B.   UNRESOLVED STAFF COMMENTS





Not applicable.





ITEM 2.   PROPERTIES





Effective as of March 1, 2009, we lease a production facility located at 61B Industrial Parkway, Carson City, NV 89706, under a lease that expires on February 28, 2011, at a monthly rent of $4,120. Minimum payments on this lease for the next 12 months will be $49,440.  Our principal executive offices were moved to this location effective as of March 19, 2009.





Management believes that these facilities will meet our operational needs for the near future.





ITEM 3.   LEGAL PROCEEDINGS





The Company knows of no material litigation or proceeding, pending or threatened, to which it is or may become a party.





ITEM 4.   (REMOVED AND RESERVED)





-16-








PART II





ITEM 5.   MARKET FOR REGISTRANT’SCOMMONEQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES





Market Information





Our common stock is quoted on the Over-the-Counter Bulletin Board (the “OTC Bulletin Board”) under the symbol, PIVN.OB. Our shares of common stock began being quoted on the OTC Bulletin Board effective September 21, 2007.





The following table contains information about the range of high and low bid prices for our common stock for each quarterly period of 2009 and 2008.





Fiscal Quarter End

Low Bid


High Bid31-Mar-09

$
0.57


$
1.7930-Jun-09

$
0.45


$
1.2430-Sep-09

$
0.75


$
1.0931-Dec-09

$
1.00


$
1.0531-Mar-08

$
0.85


$
1.7530-Jun-08

$
1.76


$
2.6030-Sep-08

$
1.98


$
2.6231-Dec-08

$
1.35


$
2.30





The source of these high and low prices was Yahoo.com. These quotations reflect inter-dealer prices, without retail mark-up, markdown or commissions and may not represent actual transactions. The high and low prices listed have been rounded up to the next highest two decimal places.





It is anticipated that the market price of our common stock will be subject to significant fluctuations in response to variations in our quarterly operating results, general trends in the market for the products we distribute, and other factors, over many of which we have little or no control. In addition, broad market fluctuations, as well as general economic, business and political conditions, may adversely affect the market for our common stock, regardless of our actual or projected performance.





Holders of Our Common Stock





As of December 31, 2009, we had 68 stockholders of record.





-17-


Dividends





There are no restrictions in our articles of incorporation or by-laws that prevent us from declaring dividends. The Nevada Revised Statutes, however, do prohibit us from declaring dividends where, after giving effect to the distribution of the dividend:





·
we would not be able to pay our debts as they become due in the usual course of business; or·
our total assets would be less than the sum of our total liabilities plus the amount that would be needed to satisfy the rights of stockholders who have preferential rights superior to those receiving the distribution.





We have not paid any dividends on our common stock. We currently intend to retain any earnings for use in our business, and therefore do not anticipate paying cash dividends in the foreseeable future.





Securities Authorized for Issuance under Equity Compensation Plans





Equity Compensation Plan Information as of December 31, 2009





The Company does not currently have a formal equity compensation plan.





A

B

CPlan Category
Number of Securities to Be Issued upon Exercise of Outstanding Options, Warrants and Rights

Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights

Number of Securities Remaining Available for Future Issuance under Equity Compensation Plans (Excluding Securities Reflected in Column A)Equity compensation plans approved by security holders


$Equity compensation plans not approved by security holders
1,160,000


--

--Total
1,160,000

$
0.58

(1)


(1) Options not issued pursuant to a plan with shares available for future issuance.





Options OutstandingRange price ($)
Number of Options
Weighted Average Remaining Life
Weighted Average Exercise Price$0.50
990,000
1.0
$0.50$1.00
170,000
0.7
1.00




-18-





Recent Sales of Unregistered Securities





In July and August 2009, two investors extended their promissory note arrangements that were entered into in the previous year in the aggregate principal amount of $89,474 for an additional one year bearing 15% interest per annum. These notes will now mature in the fiscal quarter ending September 30, 2010. These notes were discounted by the issuance of shares of the Company’s common stock equal to 5% of the principal amount of the notes. In total the Company issued an aggregate of 4,110 shares in connection with this discount.





In June and August 2009, the Company entered into three new promissory note agreements with related parties, an Israeli individual and two notes with Cyprus Corporation, in the aggregate amount of $125,000. These notes are to be paid in full at various dates between June 18, 2010 and August 23, 2010 and bear 15% interest per annum. In addition, these notes were discounted by the issuance of shares of the Company’s common stock equal to 5% of the principal amount of the note. In total the Company issued an aggregate of 6,479 shares in connection with this discount.





There will be no penalties for early repayment of the notes.





The offering of the promissory notes, the shares of common stock and the warrants was not registered under the Securities Act of 1933, as amended (the “Securities Act”), in reliance upon the exemptions from the registration requirements of the Securities Act set forth in Section 4(2) thereof as a transaction by the Company not involving any public offering, the investors met the “accredited investor” criteria required by the rules and regulations promulgated under the Securities Act, there was no underwriter and no general solicitation related to the offering.





On December 31, 2009, Anney Business Corp, a consultant, exercised an option to purchase 56,000 shares in redemption of $28,000 of accrued expenses in accordance with a consulting agreement.





In February and March 2010, the Company entered into a new promissory note agreements with related parties in the aggregate amount of $175,000. These notes are to be paid in full at various dates between February and March of  2012  and bear 11% interest per annum. In addition, these notes were discounted by the issuance of shares of the Company’s common stock equal to 7% of the principal amount of the note per year. In total the Company issued an aggregate of 24,640 shares in connection with this discount.





ITEM 6.   SELECTED FINANCIAL DATA





Not applicable.





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





Forward-Looking Statements





The information set forth in Management's Discussion and Analysis or Plan of Operations ("MD&A") may contains certain "forward-looking statements" including, among others (i) expected changes in the Company's revenues and profitability, (ii) prospective business opportunities and (iii) the Company's strategy for financing its business. Forward-looking statements are statements other than historical information or statements of current condition. Some forward-looking statements may be identified by, among other things, the use of forward-looking terminology such as “believes,” “estimates,” “intends,” “plan” “expects,” “may,” “will,” “should,” “predicts,” “anticipates,” “continues,” or “potential,” or the negative thereof or other variations thereon or comparable terminology, and similar expressions are intended to identify forward-looking statements.  These forward-looking statements relate to the plans, objectives and expectations of the Company for future operations. Although the Company believes that its expectations with respect to the forward-looking statements are based upon reasonable assumptions within the bounds of its knowledge of its business and operations, in light of the risks and uncertainties inherent in all future projections, the inclusion of forward-looking statements in this Annual Report on Form 10-K should not be regarded as a representation by the Company or any other person that the objectives or plans of the Company will be achieved.





You should read the following discussion and analysis in conjunction with the Financial Statements and Notes attached hereto, and the other financial data appearing elsewhere in this Annual Report on Form 10-K..





The Company's revenues and results of operations could differ materially from those projected in the forward-looking statements as a result of numerous factors, including, but not limited to, the following: the risk of significant natural disaster, the inability of the Company to insure against certain risks, inflationary and deflationary conditions and cycles, currency exchange rates, changing government regulations domestically and internationally affecting our products and businesses.





-19-


Overview





Phoenix International Ventures, Inc. (“we,” “us,” “our,” “PIV” or the “Company”) was incorporated on August 7, 2006. The financial statements are consolidated with those of our wholly owned subsidiaries, Phoenix Aerospace, Inc. (“PAI”) and Phoenix Europe Ventures Ltd. (“PEV”)





PAI was incorporated on April 18, 2003. The Company, Zahir Teja, and Phoenix Aerospace, Inc. entered into a Share Exchange Agreement dated as of December 1, 2006. As a result of this transaction, PAI became a wholly owned subsidiary of the Company. The effective date of this transaction was January 1, 2007. The foregoing transaction has been treated for accounting purposes as a “reverse merger.” The principal business reason for the share exchange was to establish a holding company structure.  This structure, we believe, facilitates future acquisitions and the opening up of new lines of business.  Of course, there can be no assurance that we will make any such acquisitions or open up any such new lines of business.





The Company manufactures and remanufactures aircraft ground support equipment. This equipment is needed to operate and maintain military aircraft.   Our customers are United States military and aerospace companies.  Our facilities are located in our Carson City, Nevada headquarters.  The Company is ISO 9001/2000 certified, which is due to  expire on June 11, 2011.




The Company finances production primarily through contract revenues. There are several types of contracts/revenue streams detailed below:




·
Long term manufacturing and design contract – generally, contracts which have expected durations of more than twelve months.·
Short term manufacturing contracts and orders – generally, orders for a specific unit which require less than twelve months of work to complete.·
Remanufacturing orders and contracts  – generally, orders for a specific unit and requires less than twelve months of work to complete.
 
 ·
Parts trading – generally, these orders are for parts that are not manufactured by the Company; and the Company buys and sells these parts with limited added value.


·
Study contracts – generally, these contracts are for general services related to the conducting of feasibility and proof of concept studies on items requested by the customer.





Management believes that the scope of the market opportunity for manufacturing and remanufacturing/refurbishing support equipment for the U.S. military market is viable. The viability of the business opportunity is supported by the following market characteristics:





·
the aging support equipment in the field at large – we were contracted by the U.S. Air Force to design new engine trailers that can replace aging support equipment still in use;·
the growing demand for U.S. military preparedness given the current global political climate;·
the surge in defense spending from a little over $300 billion before the September 11, 2001 attacks on the United States to over $400 billion annually; and





·
the U.S. military's insistence that defense contractors operate efficiently and timely to deliver the much needed military equipment.





It is difficult to determine what portion of the above-referenced defense spending will be allocated to manufacturing, remanufacturing, and refurbishing of support equipment. Moreover, there is no assurance that the previously set forth market characteristics will not change.


-20-





The military market is currently dominated by major players such as Lockheed Martin Corporation, Honeywell International Inc, Northrop Grumman Corporation, and DRS, Inc. We do not intend to compete with these large defense contractors, rather we seek to establish approved contractor, licensing, and teaming relationships with defense contractors such as Lockheed Martin and Honeywell. Management believes that these contractual relationships, coupled with our designation as a U.S. Navy and U.S. Air Force “Prime Contractor” and a U.S. Navy Designated Repair Depot for certain support equipment, will facilitate our ability to successfully bid on and timely complete contracts with branches of the U.S. military.




COMPARISON OF THE PERIOD ENDED DECEMBER 31, 2009 AND DECEMBER 31, 2008


Financial Information - Percentage of RevenueTwelve Months ended December 31, 20092009

2008Sales


100
%
100
%Cost of sales


-73
%
-61
%Gross profit


27
%
39
%Operating expenses:General and administrative expenses


-31
%
-45
%Total operating expenses


-31
%
-45
%Other income (expense)


-2
%
23
%Net Income (loss)


-7
%
17
%





Results of  Operations-Fiscal Summary





Revenues Revenues increased 68% to $3,663,429 for the twelve months ended December 31, 2009, compared to $2,180,804 for the twelve months ended December 31, 2008.





Revenue increased in our manufacturing and remanufacturing streams and decreased in the study and parts trading during 2009.





For the twelve months ended December 31, 2009, remanufacturing contracts accounted for 43% of our revenues, manufacturing and design were 32%, parts trading were 12%, and study contracts were 13% of our sales. This compares to manufacturing of 10%, remanufacturing accounting for 34% of our revenues, study contracts for 28% and parts trading accounting for 27% of our total revenues for the twelve months ended December 31, 2008.





There was a notable increase in remanufacturing revenue as a result of increased demand for the remanufactured air start carts, as well as demand for remanufactured mobile air condition units a product we started to produce only in 2009.  These units are typically of high dollar volume. Management believes although there can be no assurance that demand for these items will remain consistent during the year ended December 31, 2010.





In  manufacturing and design , we were in the primary execution of a large manufacturing and design contract in the twelve months ended December 31, 2009 which contributed to our significant increase in revenues. Management believes that this order will be a significant portion of our near future revenues. This order also contains an option for the customer to order additional units, which if exercised will lead to additional revenues.





Parts trading revenue decreased in the year ended December 31, 2009 as compared to the year ended December 31, 2008, as a result of decreased demand. We expect, although there can be no assurance, that this revenue stream might continue to decrease in the twelve months ended December 31, 2010.


-21-





Revenue from study orders decreased as we reached the final stages of performance. As we did not receive additional study type orders in the twelve months ended December 31, 2009, management believes that revenue from this stream will decrease in the near future. Management believes, although there can be no assurance, that these study order may spawn additional orders to remanufacture and/or manufacture the equipment types that were studied, increasing manufacturing and remanufacturing revenue in the future.





We tend to have few diverse contracts with typically large customers which make up significant portions of our revenue. The United States Air Force and  Navy represented 43% of the Company’s revenues for the year ended December 31, 2009.  The remaining 57% of sales was to aerospace companies and military contractors. Two customers represented 49% of the Company’s revenues for the year ended December 31, 2009. Management feels that similar trends will continue in the near future.





Cost of SalesCost of sales consists primarily of sub contractors and raw materials used in the manufacturing and remanufacturing processes, along with labor and allocations of indirect labor and overhead. Cost of sales increased to $2,691,198 for the twelve months ended December 31, 2009, compared to $1,334,162 for the twelve months ended December 31, 2008, representing 73% and 61% of the total revenues for the twelve months ended December 31, 2009 and December 31, 2008, respectively.  These costs rose because we had more contracts, higher revenue volume, and as a result more materials costs and labor costs as streams such as manufacturing, remanufacturing and parts trading require more direct materials cost.  However, since there are significant variations between many of our orders and contracts it is difficult to identify trends in material costs.





There was an increase in costs of sales as a percentage of total sales in the twelve months ended December 31, 2009 as compared to the same period in 2008 primarily due to a couple of atypical high margin sales orders in remanufacturing and manufacturing during 2008.  The orders required less material purchases.  These atypical orders did not reoccur in 2009 and management believes they are unlikely to reoccur in the near future. In addition we had lower gross profit on our manufacturing and design contracts which are 32% of our 2009 revenues. Management believes, although there can be no assurance, that such gross margins in manufacturing and design will remain consistent in the twelve months ended December 31, 2010 as the design and prototype costs associated with the long term contract tend to lower gross profits.





General and Administrative Expenses. General and administrative expenses increased by 17% from $989,030 for the twelve months ended December 31, 2008 to $1,153,355 for the twelve months ended December 31, 2009.  The increase in general and administrative costs is primarily attributable increase of salaries, audit fees, travel, entertainment, and professional fees.  Management believes, although there can be no assurance, that we will see a slow climb in general and administrative expenses as the Company matures.





As a percentage of revenues, general and administrative expenses decreased to 31% of the total revenue for the twelve months ended December 31, 2009, as compared to 45% of the total revenue for the twelve months ended December 31, 2008.  Management further believes, although there can be no assurance, that the general and administrative infrastructure we currently have can support significantly higher revenue volume without significantly increasing general and administrative costs.





Interest Expense. Interest expense increased by 44% to $91,330 for the twelve months ended December 31, 2009, as compared to $62,992 for the twelve months ended December 31, 2008. The increase in interest expense is primarily attributed to having to pay the expenses associated with the promissory note arrangement for the entire year of 2009 in comparison to approximately seven months of similar expenses for similar notes in 2008. The interest rate stayed at 15% APR for the 2008 and 2009 notes, however the incentive discount changed. The 2008 notes received a more significant discount of shares and warrants as incentive whereas the notes entered into in 2009 had only shares as incentive. We expect total interest expenses to increase in the near future.





Taxes on Income We had no tax liabilities for the twelve months ended December 31, 2009 or 2008.





Net Loss  Net loss for the twelve months ended December 31, 2009 amounted to ($246,490)  as compared to a net income of $360,774 for the twelve months ended December 31, 2008. The decrease in income is primarily attributed to a recovery of contingency in the amount of $566,154 the twelve months ended December 31, 2008 which did not recur in 2009.





-22-


Summary of Liquidity





Although we experienced improved financial results in 2009 and plan to finance most of our operations through revenues, we are still burdened by a significant working capital deficit. We did find it necessary to extend or issue new debt through promissory notes to replace previous note arrangements.  Management believes, although there can be no assurance, that the Company is nearing the point of breaking even. However, the significant liabilities accrued in this year and in past years will continue to burden the Company’s cash flow.





We have diverse customer payment arrangements in some of our contracts. Some payments are contingent upon delivery and have a net 30 payment schedule while some customers make advances or allow milestone billing which allows financing of the production process; this is typical in all of our revenue streams.  Still, there are large outlays for materials and engineering that on occasion have caused delays in payments to vendors.





Cash Flows (Operating, Investing, and Financing)





Cash as of December 31, 2009, amounted to $148,478 as compared with $225,767 as of December 31, 2008, a decrease of $77,289.





Cash used in operating activities decreased to $42,455 from $67,842 for the twelve months ended December 31, 2009.. The change in the cost in excess of billings decreased cash flow when we incurred costs on a long term contract. Inventory and work in process increased significantly and decreased cash as delivery of certain products was deferred to 2010. To summarize, we had unbilled long term contracts and inventory costs that caused us to accumulate account payables.





As our products tend to be large, changes in the cash flow items year over year are subject to great fluctuations which might not be attributed to a trend but rather to specific circumstances of a delivery and cutoff date.





Net cash decreased from investing activities by $45,902 due to the purchase of a new vehicle, and  software.





Net cash provided by financing activities for the twelve months ended December 31, 2009 was $11,068. This is primarily due to the payoff of previous promissory note arrangements to private investors and the issuance of new or extended promissory notes.  These notes also contained stock incentives and stock warrants.





Capital Expenditures and Other Obligations





Management believes that there is no need for material capital investments in order to execute the current backlog. Our capital investments are primarily for the purchase of equipment for the services and products that we provide or intend to provide. This equipment includes vehicles, shop tools, and shop machinery. Although this may change, we currently do not expect to make material capital investments in the next twelve months.





On January 29, 2009, we entered into an agreement to lease a new production facility starting from March 1, 2009 until February 28, 2011 at a monthly rent of $4,120. Minimum payments on this lease for the next 12 months will be $49,440.





Sources of Liquidity





We shall continue to finance most of our operations through monetizing our current backlog, supplemented by financing activities through the issuances of debt and / or equity instruments as necessary.





-23-


We are able to obtain cash from orders in the form of progress billings and cash advances from some of our customers. For these types of orders, many times there is little need for us to finance materials and labor.  One of the manufacturing orders is for the design and manufacturing of new aircraft engine trailers for the approximate amount of $1,110,549. We collected a significant amount of these revenues on a monthly basis or progress toward milestones. However, significant portions of payments are reserved for reaching specific mile stones and resulted in significant costs in excess of billings.We also typically negotiate with customers to receive cash advances in order to facilitate the processing of their orders.





As of December 31, 2009, we had backlog orders of approximately $8,303,245 as compared to a backlog of $5,693,160 for December 31, 2008. Management believes that a significant portion of our revenue will be delivered in the the twelve months ended December 31, 2010. Additionally, management is expecting, although there can be no assurance, that additional orders will come in. Of our 2009 backlog, $4,800,000 is a Department of  Defense program designated to Phoenix Aerospace projects. In this program we will supply the Department of Defense various remanufactured and newly manufactured ground support equipment. We expect, although there can be no assurance, to see significant revenue from this program in 2010.


Debt and Capital





We may consider raising additional capital through private and/or public placements to fund possible acquisitions and other business development activities and for working capital.





We have issued promissory note arrangements in the amount of $214,474 maturing in 2010. Management believes, although there can be no assurance, that we will be able to repay or extend the notes or enter into new note arrangements at terms that are favorable to the Company.





In February and March 2010, the Company entered into a new long term promissory note agreements with related parties in the aggregate amount of $175,000. These notes are to be paid in full at various dates between February and March of  2012  and bear 11% interest per annum. In addition, these notes were discounted by the issuance of shares of the Company’s common stock equal to 14% of the principal amount of the note. In total the Company issued an aggregate of 24,640 shares in connection with this discount.





Recent Issued Accounting Pronouncements





Please refer to note 1 of the financial statement.




Critical accounting policies:





Our discussion and analysis of our financial condition and results of operation are based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of the financial statements requires management to make estimates and assumptions that 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. Since these estimates are inherently uncertain, actual results may materially differ.





The following is a discussion of our accounting policies that are both most important to the portrayal of our financial condition and results, and that require managements most difficult, subjective, or complex judgments.










-24-
 
 Revenue Recognition
 
 Certain of the Company’s revenue stream require the use of management judgment and estimation.  A description of those revenue streams is as follows:·  Long term manufacturing and design contract – generally, contracts which have expected durations of more than twelve months are accounted for using the percentage of completion method. The Company estimates its cost to complete the contract and recognizes its revenues based on the total cost incurred at the period as percentage of the total expected cost of the contract. The Company from time to time reviews its assumptions relating to the contract estimates.


·  Long term manufacturing and design contract – generally, contracts which have expected durations of more than twelve months are accounted for using the percentage of completion method. The Company estimates its cost to complete the contract and recognizes its revenues based on the total cost incurred at the period as percentage of the total expected cost of the contract. The Company from time to time reviews its assumptions relating to the contract estimates


·  Short term manufacturing contracts and orders – generally, orders for a specific unit which require less than twelve months of work to complete. The Company recognizes revenue on these types of contract based on the completed contract method when delivery has occurred.





·  Remanufacturing orders and contract  – generally, orders for a specific unit and requires less than twelve months of work to complete. The Company recognizes revenue on these types of contract based on the completed contract method when delivery has occurred.





·  Study contracts – generally, these contracts are for general services related to the conducting of feasibility and proof of concept studies on items requested by the customer. The Company recognizes revenue on these types of contract  as a service and product transaction based on performance of milestones.





Income Taxes





Deferred tax assets and liabilities are determined based on the difference between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Our provision for income taxes is based on current statutory income tax rates. Significant judgment is required in determining income tax provisions as well as deferred tax asset and liability balances, including the estimation of valuation allowances and the evaluation of tax positions. Stock based compensation can create temporary differences between book and tax expenses. Accrued expenses to related parties which are not deductible until paid are also a source for temporary differences between book and tax value.  In addition the company makes an assessment whether it is expected to realize tax benefits for the use of the carry forward losses in the near future. This assessment is partially based on historical data as well as future expectations.





ITEM 7A.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK





Not applicable.




-25-


ITEM 8.   FINANCIAL STATEMENTS ANDSUPPLEMENTARY DATA





REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM





To the Board of Directors and


Stockholders of Phoenix International Ventures, Inc.





We have audited the accompanying consolidated balance sheets of Phoenix International Ventures, Inc. as of December 31, 2009 and 2008, and the related consolidated statements of income, stockholders’ equity,  and cash flows for the years ended December 31, 2009 and 2008. Phoenix International Ventures, Inc.’s management is responsible for these consolidated financial statements. Our responsibility is to express an opinion on these consolidated 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 audits 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 purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.








In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Phoenix International Ventures, Inc. as of December 31, 2009 and 2008, and the consolidated results of its operations and its cash flows for each of the years then ended in conformity with accounting principles generally accepted in the United States of America.





/s:/ Mark Bailey & Company, Ltd.


Reno, Nevada





March 31, 2010





-26-


Phoenix International Ventures, Inc.Condensed Consolidated Balance Sheet as ofDecember 31, 2009

December 31, 2008AssetsCurrent  AssetsCash

$
148,478


$
225,767Accounts receivable, net


61,329



367,074Cost in excess of  billings


277,519



-Inventory


437,595



186,516Prepaid and other current assets


7,306



17,650Total current assets


932,227



797,007Property and equipment, net


73,514



47,943Other assets


118,200



-Total assets

$
1,123,941


$
844,950
 Liabilities and Stockholders' (Deficit)Current liabilitiesLine of credit

$
13,087


$
48,340Accounts payable


599,167



379,693Other accrued expenses


146,979



236,060Customer deposits


450,835



447,202Notes payable, current potion net of discounts


253,721



212,751Legal settlement


384,000



384,000Due related party


536,280



232,304Officer loans


39,461



39,461Total current liabilities


2,423,530



1,979,811Long term liabilitiesNotes payable, net of discounts


67,849



24,811Officer advances


369,375



369,375Total liabilities


2,860,754



2,373,997Commitments and ContingenciesStockholders' (deficit)Preferred stock - $0.001 par value; 1,000,000 shares authorized; zero shares issued and outstanding at December 31, 2009 and December 31, 2008


-



-Common stock - $0.001 par value; 50,000,000 shares authorized; 8,113,307 and 8,046,718 shares issued and outstanding at December 31, 2009 and December  31, 2008.


8,113



8,046Additional paid in capital


1,427,160



1,388,503Accumulated deficit


(3,172,086
)


(2,925,596
)Total stockholders’ deficit


(1,736,813
)


(1,529,047
)Total liabilities and stockholders' (deficit)

$
1,123,941


$
844,950The accompanying notes are an integral part of the financial statements


-27-





Phoenix International Ventures, Inc.Condensed Consolidated Income StatementFor The Twelve Months EndedDecember 31,


December 31,2009


2008Sales


$
3,663,429


$
2,180,804Cost of sales


2,691,198



1,334,162Gross margin


972,231



846,642Operating expensesGeneral and  Administrative


1,153,335



989,030Total operating expenses


1,153,335



989,030Loss from operations


(181,104
)


(142,388
)Other Income


25,944



566,154Interest expense


(91,330
)


(62,992
)Net income (loss) before taxes


(246,490
)


360,774Income taxes


-



-Net income (loss)

$
(246,490
)

$
360,774Net  income (loss) per common share:Basic

$
(0.03
)

$
0.05Diluted

$
(0.03
)

$
0.04Weighted average shares outstanding:Basic


8,051,742



7,823,549Diluted


8,051,742



9,809,149The accompanying notes are an integral part of the financial statements





-28-




Phoenix International Ventures, IncConsolidated Statements of Stockholders' DeficitFor the years December 31, 2009 and 2008Additional Paid In


SubscriptionShares


Amount


Capital


Receivable


(Deficit)


TotalBalance - December 31, 2007


7,746,143


$
7,746


$
1,145,397


$
(63,020
)

$
(3,286,370
)

$
(2,196,247
)Payment of $50,000 towards subscription receivable at January 4, 2008














50,000







50,000Payment of $13,020 towards subscription receivable at January 18, 2008














13,020







13,020Issuance of 3,750 shares and warrants to purchase 15,000 shares at $2.47 for two years as part of a note agreement at June 22, 2008


3,750



4



30,409











30,413Issuance of 1,200 shares and warrants to purchase 4,800 shares at $2.58 per share as part of a note agreement at July 2, 2008


1,200



1



10,055











10,056Issuance of 2,500 shares and warrants to purchase 10,000 at $2.60 as part of a note agreement at July 21, 2008


2,500



3



21,098











21,101Issuance of 1,050 shares and warrants to purchase 4,150 at $2.40 as part of a note agreement at July 24, 2008


1,050



1



8,122











8,123Issuance of 1,875 shares as part of a note agreement at August 8, 2008


1,875



1



4,648











4,649Issuance of 3,200 shares as part of a note agreement at August 18, 2008


3,200



3



8,061











8,064Exercise of warrants to purchase 1,900 shares at $1.00 per share at September 29, 2008


1,900



2



1,898











1,900Exercise of options to purchase 274,000 shares at $0.50 per share at September 30, 2008


274,000



274



136,726











137,000Exercise of warrants to purchase 2,100 shares at $1.00 per share at October 27, 2008


2,100



2



2,098











2,100Issuance of 9,000 shares at $2.22 for debt reduction in October 27, 2008


9,000



9



19,991











20,000Net Income


















360,774



360,774Balance December 31, 2008


8,046,718


$
8,046


$
1,388,503


$
-


$
(2,925,596
)

$
(1,529,047
)Issuance of  2,381 shares as part of a note agreement at June 30, 2009


2,381



3



2,498











2,501Issuance of  2,941 shares as part of a note agreement at June 30, 2009


2,941



3



2,497











2,500Issuance of  2,294 shares as part of a note agreement at July 21, 2009


2,294



2



2,498











2,500Issuance of  1,157 shares as part of a note agreement at August 29, 2009


1,157



1



1,249











1,250Issuance of  1,816 shares as part of a note agreement at August 29, 2009


1,816



2



1,971











1,973Exercise of  Options to purchase 56,000 shares at $0.50 per share at December 30, 2009


56,000



56



27,944











28,000Net  (Loss)


















(246,490
)


(246,490
)Balance - December 31, 2009


8,113,307



8,113


$
1,427,160






$
(3,172,086
)

$
(1,736,813
)





The accompanying notes are an integral part of the financial statements




-29-


Phoenix International Ventures, Inc.Consolidated Statements of Cash FlowsFor the Twelve Months Ended





December 31,

2009


December 31,

2008Cash flows from operating activitiesNet income (loss)

$
(246,490)


$
360,774Adjustments to reconcile net income (loss) to net cash used in operating activitiesDepreciation


20,331



13,638Amortization of debt discount


45,430



43,397Recovery of contingent liability


-



(566,154)Accrued interest


2,981



-Change in accounts receivable


308,782



(248,098)Accounts receivables service fees


(3,037
)


(32,047)Cost in excess of billings


(277,519)



-Change in inventory


(365,079)



(22,268)Changes in prepaid expenses


10,344



(13,120)Change in other assets


(4,200)



-Change in customer deposits


3,633



140,096Change in accounts payable


219,474



264,511Change in accrued expenses


(89,081)



-Change in related party payable


331,976



(8,571)Net cash used in operating activities


(42,455)



(67,842)Cash flows from investing activitiesPurchase of property and equipment


(45,902)



-Net cash used in investing activities


(45,902)



-Cash flows from financing activitiesProceeds from subscription receivable


-



63,020Proceeds from notes payable


195,777



236,536Repayments on notes payable


(149,456)



(84,451)Repayments related party notes


-



(9,149)Issuance of common stock


-



3,999Proceeds from (payments on) line of credit


(35,253)



13,340Net cash provided by (used in) financing activities


11,068



223,295Decrease in cash


(77,289)



155,453Cash, beginning of year


225,767



70,314Cash, end of period

$
148,478


$
225,767Cash paid forInterest

$
42,920


$
8,098Income taxes


-



-Non cash investing and financing activities:Issuance of  10,589 shares of common stock with promissory notes


10,724



-Issuance of  3,750 shares of common stock with promissory notes as debt discount


-



9,263Issuance of  15,000 warrants with promissory notes as debt discount


-



21,150Issuance of 274,000 shares of common stock in redemption of accrued expenses


-



137,000Issuance of 274,000 shares of common stock in redemption of accrued expensesIssuance of 9,000 share of common stock in redemption of accrued expenses





20,000Issuance of 13,575 shares of common stock with promissory notes





34,093Issuance of 33,950 warrants with promissory notes





44,313Issuance of 56,000 shares of common stock in redemption of accrued expenses


28,000





The accompanying notes are an integral part of the financial statements


-30-


Phoenix International Ventures, Inc.


Notes to Consolidated Financial Statements


December 31, 2009





Note 1 - Summary of Significant Accounting Policies





Nature of Activities





Phoenix International Ventures, Inc. (PIV) was organized August 7, 2006 as a Nevada Corporation to develop business in the market of defense and aerospace.  Our primary business is manufacturing, re-manufacturing and upgrading of Ground Support Equipment (GSE) used in military and commercial aircraft.





Basis of Presentation





The consolidated financial statements include the accounts of the Company and its wholly owned US subsidiary Phoenix Aerospace, Inc. (PAI) and an Israeli subsidiary, Phoenix Europe Ventures, Ltd. (PEV). Significant intercompany accounts and transactions have been eliminated in consolidation. The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (US GAAP).





Cash and Cash Equivalents





The Company considers cash in banks, deposits in transit, as well as all highly liquid investments purchased with an original maturity from the date of purchase of three months or less to be cash and cash equivalents.





From time to time the Company maintains amounts on deposit with financial institutions which exceed federally insured limits. The Company has not experienced any significant losses in such accounts, nor does management believe it is exposed to any significant credit risk.





Segments





The Company is active only in the segment of manufacturing, re-manufacturing and upgrading of Ground Support Equipment (GSE) used in military and commercial aircraft.





Use of Estimates





The preparation of financial statements in conformity with the generally accepted accounting principles requires management to make estimates and assumptions that affect certain amounts of assets, liabilities, revenues and expenses during the period. Actual results could differ from those estimates.





Accounts Receivable





Accounts receivable include amounts billed and billable to customers.  Accounts receivable are recorded at net realizable value consisting of the carrying amount less an allowance for uncollectible accounts if applicable. Historically, the Company has been successful at collecting amounts billed.





-31-


During 2008, the Company sold a portion of its receivables to an intermediary to provide shortened collection periods. The intermediary charged a fee of approximately ten percent of the total receivables purchased.  For the year ended December 31, 2008, the Company sold $325,621 of the then outstanding receivables.  The Company paid the intermediary $32,047 during the year ended December 31, 2008, that is included in general and administrative expenses.  During 2009 the company did not sell any of its receivables; however an additional cost of $3,037 associated with the 2008 costs was recorded in the year ended 2009. The Company does not have any future obligation to repurchase the receivables sold to the intermediary.





The Company uses the allowance method to account for uncollectible accounts receivable balances. Under the allowance method, an estimate of uncollectible customer balances is made using factors such as the credit quality of the customer and the economic conditions in the market. Accounts are considered past due once the unpaid balance is 90 days or more outstanding, unless payment terms are extended. When an account balance is past due and attempts have been made to collect the receivable through legal or other means, the amount is considered uncollectible and is written off against the allowance balance.





As of December 31, 2009 and 2008, management believes that all accounts receivable are collectible, and thus the amount of the allowance for doubtful accounts was zero. There was no bad debt expense for the years ended December 31, 2009 or 2008.





Inventory





Inventory is stated at the lower of cost or market, based on the specific identification method of inventory valuation. The Company periodically reviews inventory for obsolescence based on an assessment as to continued use of such equipment by the Company’s customers and potential customers.


Inventory consists of accumulated contract costs for items not yet delivered to the customer.  These costs include purchases of direct materials, direct labor, and allocations of indirect production costs.   Inventory also includes items purchased that are held for resale.





Property, Plant and Equipment





Property and equipment are stated at cost, less accumulated depreciation. Acquisitions of property and equipment in excess of $500 are capitalized. Depreciation is calculated using the straight-line method over estimated useful lives. Maintenance, repairs and renewals that do not materially prolong the useful life of an asset are expensed when incurred.





The estimated useful lives are as follows:





Equipment
5-7 yearsFurniture and fixtures
7 yearsComputer software
3-5 yearsAuto
5 years





Income Taxes





Deferred tax assets and liabilities are recorded to reflect temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements that will result in taxable or deductible amounts in future years. The tax rate used to determine the deferred tax assets and liabilities is the enacted tax rate for the year in which the differences are expected to reverse. Valuation allowances are recorded to reduce deferred tax assets to the amount that will more likely than not be realized.





-32-


Concentrations





The Company generates significant amounts of its revenue from a small number of customers.  The United States Government, specifically the Air Force and Navy, represented 43% of the Company’s revenues for the year ended December 31, 2009.  The remaining 57% of sales was to aerospace companies and military contractors. Two customers represented 49% of the Company’s revenues for the year ended December 31, 2008.





US Navy and Air Force represented 43% of the Company’s revenues for the year ended December 31, 2008.  The remaining 57% of sales was to aerospace companies and military contractors.





Financial Instruments





Financial instruments, including cash equivalents, marketable securities, accounts receivable and accounts payable are carried in the consolidated financial statements at amounts that approximate fair value at December 31, 2009 and 2008. Fair values are based on market prices and assumptions concerning the amount and timing of estimated future cash flows and assumed discount rates, reflecting varying degrees of perceived risk.





Generally accepted accounting principles prescribe methods for measuring fair value, establish a fair value hierarchy based on the inputs used to measure fair value and expands disclosures about the use of fair value measurements.





The valuation techniques utilized are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect internal market assumptions. These two types of inputs create the following fair value hierarchy:





Level 1 – Quoted prices for identical instruments in active markets.





Level 2 – Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.





Level 3 – Significant inputs to the valuation model are unobservable.





Stock Based Compensation.





The Company records the cost of employee and non-employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. That cost is recognized over the period during which an employee is required to provide service in exchange for the award—the requisite service period (usually the vesting period). No compensation cost is recognized for equity instruments for which employees do not render the requisite service. The grant-date fair value of employee share options and similar instruments is estimated using a Black-Scholes option-pricing model. The company did not issue any stock based compensation during the periods presented.  Prior awards were fully vested on the date of grant with the corresponding expense recognized in previous periods,





Revenue Recognition





The Company accounts for its different revenue streams according to the following methods:




·  Long term manufacturing and design contract – generally, contracts which have expected durations of more than twelve months are accounted for using the percentage of completion method. The Company estimates its cost to complete the contract and recognizes its revenues based on the total cost incurred at the period as percentage of the total expected cost of the contract. The Company from time to time reviews its assumptions relating to the contract estimates.


-33-





·  Short term manufacturing contracts and orders – generally, orders for a specific unit which require less than twelve months of work to complete. The Company recognizes revenue on these types of contracts based on the completed contract method when delivery has occurred.





·  Remanufacturing orders and contract - – generally, orders for a specific unit and requires less than twelve months of work to complete. The Company recognizes revenue on these types of contracts based on the completed contract method when delivery has occurred.





·  Parts trading – generally, these orders are for parts that are not manufactured by the Company; and the Company buys and sells these parts with relatively small added value. The Company recognizes revenue on these types of contracts when delivery has occurred.





·  Study contracts – generally, these contracts are for general services related to the conducting of feasibility and proof of concept studies on items requested by the customer. The Company recognizes revenue on these types of contract  as a service and product transaction based on performance of milestones.





Cost of sales includes purchase of direct materials, freight, receiving, inspection, manufacturing labor and engineering, certain insurances, production supplies and allocated depreciation which to date has not been material.




Earnings (loss) per Common Share





The Company calculates its basic earnings (loss) per share based on the weighted-average effect of all common shares issued and outstanding.  Net earnings (loss) is divided by the weighted average common shares outstanding during the period to arrive at the basic earnings (loss) per share. Diluted earnings  per share is calculated by dividing net earnings  by the sum of the weighted average number of common shares used in the basic earnings  per share calculation and the weighted average number of common shares that would be issued assuming exercise or conversion of all potentially dilutive securities, excluding those securities that would be anti-dilutive to the earnings  per share calculation. Both basic earnings (loss) and diluted earnings  per share amounts are calculated for all periods presented.





Recent Issued Accounting Pronouncements





In October 2009, an update was made to “Revenue Recognition – Multiple Deliverable Revenue Arrangements.”This update removes the objective-and-reliable-evidence-of-fair-value criterion from the separation criteria used to determine whether an arrangement involving multiple deliverables contains more than one unit of accounting, replaces references to “fair value” with “selling price” to distinguish from the fair value measurements required under the “Fair Value Measurements and Disclosures”guidance, provides a hierarchy that entities must use to estimate the selling price, eliminates the use of the residual method for allocation, and expands the ongoing disclosure requirements. This update is effective for the company beginning January 1, 2011 and can be applied prospectively or retrospectively. Adoption is not expected to materially impact the company’s consolidated financial position, results of operations or cash flows directly when it becomes effective, as the company will not elect retrospective adoption. However, this update may impact how the company reflects multiple-element arrangements entered into subsequent to January 1, 2011.  .





Note 2 - Financial Condition, Liquidity, and Going Concern





At December 31, 2009, the Company assessed its ability to continue as a going concern. The Company has a working capital deficit of $1,491,303 and accumulated deficit of $3,172,086, along with a net loss for the twelve months ended December 31, 2009 of $246,490.  Various other factors support the Company’s viability as a going concern including  the procurement of new contracts and sales orders.  The Company has developed a plan to address its financial situation and believes it can finance most of its operations through monetizing its current backlog. The plan is based on the Company’s current financial assets, backlog and expectations regarding revenues and operating costs.





-34-


The  Company may need to depend on additional capital raising efforts, in addition to obtaining and maintaining favorable contracts, and the ability to achieve future operating efficiencies anticipated with increased production levels. There can be no assurance that the Company’s future efforts and anticipated operating improvements will be successful. However, management believes that the company is viable for the next twelve months.





Note 3 - Geographical Segments





Product revenues are attributed to regions based on the location of the customer. The following table summarizes the Company’s geographical customer concentration of total product revenue.





Region:


2009



2008United States


92
%


65
%Europe


8
%


35
%Total:


100
%


100
%





Note 4 - Inventory




Inventory consists of used equipment that can be remanufactured for re-sale and parts used in fulfilling current customer orders. Non-current inventory consists of parts with limited current demand that are of limited supply. Management periodically reviews these parts for impairment as potential future application diminishes.
  At December 31, 2009 and 2008 inventory consists of the following:
 2009

2008Raw  materials

$
136,589

$
114,000Work in process


415,006


72,516Total

$
551,595

$
186,516Non-current(classified as other asset)


114,000


-Inventory, current

$
437,595

$
186,516





Note 5 – Long-Term Contracts





The Company recognizes revenues and reports profits from long-term contracts under the percentage of completion method of accounting. The percentage of completion method involves cost estimates to compute the contract profit which are subject to review and revision.





Cost and estimated earnings on these  contracts for the years ended December 31, 2009 and 2008 were as follows:





2009


2008Costs incurred to date

$
1,120,484


$
171,810Estimated contract profit


258,577



51,254Less: billings to date


(1,101,542
)


(234,274
). Costs in excess of  billings and recognized profit

$
277,519


$
(11,210
)





-35-


Note 6 - Property and Equipment





At December 31, 2009 and 2008 property and equipment consisted of the following:





2009


2008Equipment

$
10,075


$
5,200Office equipment


14,205



14,205Auto


83,337



45,355Trailer


2,500



2,500Software system


22,426



19,381132,543



86,641Less accumulated depreciation


(59,029)



(38,698
)Total

$
73,514


$
47,943





Depreciation for the years ended December 31, 2009 and 2008 was $20,331 and $13,638, respectively.





Note 7 - Notes Payable





The Company has a revolving line of credit from a foreign financial institution totaling $13,087.  The line of credit bears a monthly interest ranging from 10%-13% based upon the amount extended, at December 31, 2009 the line of credit was fully extended and the interest was at 13%. This item has been classified as a line of credit.





The Company has a revolving line of credit from a financial institution totaling $35,000.   In October 2009, the line of credit converted to an installment note payable of equal installments $883 per month which includes interest ( 9.75% annual percentage rate) and principal payments until September 30, 2013. As of December 31, 2009 the Company owed $33,186 on this note payable. .





In July and August 2009, two investors extended their promissory note arrangements that were entered into in the previous year in the aggregate principal amount of $89,474 for an additional one year bearing 15% interest per annum. These notes will now mature in the fiscal quarter ending September 30, 2010. These notes were discounted by the issuance of shares of the Company’s common stock equal to 5% of the principal amount of the notes for a total value of $4,473. In total the Company issued an aggregate of 4,110 shares in connection with this discount. The discount is amortized throughout the life of the note and is included in the interest expenses line item in the statement of income.




In June and August 2009, the Company entered into three new promissory note agreements with related parties in the aggregate amount of $125,000. These notes are to be paid in full at various dates between June 18, 2010 and August 23, 2010 and bear 15% interest per annum. In addition, these notes were discounted by the issuance of shares of the Company’s common stock equal to 5% of the principal amount of the note for a total value of $6,250. In total the Company issued an aggregate of 6,479 shares in connection with this discount. The discount is amortized throughout the life of the note and is included in the interest expenses line item in the statement of income.





-36-


At December 31, 2009 and 2008 notes payable consist of the following:





2009

2008Unsecured note payable to a financial institution in a foreign country; 12.4% per annum

$
7,387

$
1,736Secured note payable to a financial institution; monthly payments of $756 until 2012; collateralized by an automobile


25,702


34,638Unsecured promissory note agreements, less unamortized discount $5,915 of  in 2009; effective interest rates are approximately 15%


210,636


188,568Unsecured note payable to an individual;  interest at  7%


12,644


12,620Secured note payable to a financial institution; monthly payments of $671 until October 2014; interest at 7.99%;collateralized by an automobile


32,015


-Unsecured note payable to a financial institution; 9.75% per annum; monthly payments of $883 until October 2013


33,186


-$
321,570

$
237,562





Following are maturities of long-term debt for each of the next five years:2010


253,7212011


23,1002012


23,1002013


15,9992014


5,649Total principal payments

$
321,570Less current portion of notes


253,721Non-current portion of notes

$
67,849





Note 8 - Related Party Transactions





As of December 31, 2009,  the Company owed a total of $536,280 to related parties, including $62,311 due to a consultant, $169,865 due in respect to deferred payment of salaries to certain of the Company’s current and former officers, 57,126 of accrued vacation to officers and $1,978 due to another related party for various out of pocket expenses. These related parties and officers have agreed not to demand payment until the Company’s financial resources and cash reserves are sufficient enough to permit payment.


During 2009, the Company purchased inventory  from a related party totaling  $745,000.  At December 31, 2009, the Company owed that related party $245,000. This amount is recorded in related parties on the balance sheet.





The Company’s former CFO’s employment contract expired in April 2009.  The Company solicited his consulting services through  December 31 2009 for $2,000 per month. For the twelve months ended December 31, 2009, the Company  paid $17,500 of salaries, $16,000 in consulting fees, and $24,000 as a reduction of his previously deferred salary.





On April 26, 2007, the Company entered into a consulting agreement with a related party to assist the Company with its business development.  At December 31, 2009 the Company owes $62,311 to the related party. Consulting fees under the agreement require a minimum annual payment of $120,000.  At December 31, 2009, the Consultant exercised an option to purchase 56,000 shares of the Company’s common stock resulting in a $28,000  reduction of previously accrued fees.


-37-





Additionally, as of December 31, 2009, the Company owed an officer for his advances the total balance of $408,836 of which $39,461 is current. These advances are non-interest bearing and the officer has agreed not to demand payment of the long term portion during 2010.





Note 9- Share Capital





Between June and August 2009 we issued 10,589 shares of common stock related to the issuance of debt instruments resulting in the recognition of debt discounts totaling $10,724.







In December 2009, a related party consultant exercised options for 56,000 shares at $0.50 per shares in redemption of $28,000 of previously accrued fees.


Note 10 Stock Based Compensation and Warrants





The Company does not have a formally approved stock based compensation plan.  The Company’s Board periodically compensates officers, employees, and certain service providers with stock options.  These option issuances are not required to be approved by shareholders.  The Company did not issue any stock options during the twelve months ended December 31, 2009 and the twelve months ended December 31, 2008..





The grant date fair value of stock options is estimated  using a Black- Scholes model.  The exercise price of option grants approximates the closing price of the Company’s common stock on the date of the grant.





Since the Company did not have a trading history equal to the expected term of option grants, the estimated volatility was based on the volatility of several companies which are from similar industry and share certain characteristics.





The Company estimated the expected term of option awards using the simplified method for “plain vanilla” issuances to employees while the expected term for non-employees approximates the contractual term.  The expected term under the simplified method is the average of the contractual term and vesting period. .





All outstanding options are fully vested with the resulting compensation expense recognized in previous periods.  As of December 31, 2009 there was no unrecognized compensation expense related to unvested options.


The following table illustrates the option activity as of December 31, 2009:





Shares

Weighted Average Exercise PriceOutstanding at December  31, 2007


–


–Granted


1,490,000

$
0.5Exercised


(274,000)


0.5Forfeited/Expired


–


–Outstanding at December 31, 2008


1,216,000


0.55Granted


–


–Exercised


(56,000)


0.5Forfeited/Expired


–


–Outstanding at December 31, 2009


1,160,000


0.57





-38-





The following table summarizes information about options outstanding and exercisable at December 31, 2009





Options OutstandingRange price ($)
Number of Options
Weighted Average Remaining Life
Weighted Average Exercise Price$0.50
990,000
1.0 years
$0.50$1.00
170,000
0.7 years
$1.00





The intrinsic value of the outstanding options was $529,800 as of December 31, 2009.





Warrants





From time to time the Company issues warrants in connection with private placements of debt and equity.


The Company estimated the fair value of the warrants issued during the year ended December 31, 2008 using a Black- Scholes model.  The Company used an estimated volatility of 107%.  The Company does not have a sufficient history of warrant exercises, therefore, the expected term is the contractual term, 1 year.  Risk free interest rate was determined to be 4.5%, and no dividends are expected to be paid over the term of the warrants.





The following table illustrates the warrant activity as of December 31, 2009:





Warrants

Weighted Average Exercise PriceOutstanding at December 31, 2007


325,072

1.0Granted


33,950

2.5Exercised


(4,000)

1.0Forfeited/Expired




–Outstanding at December 31, 2008


355,022

1.2Granted




3Exercised




1Forfeited/Expired


321,072

–Outstanding at December 31, 2009


33,950

2.5





-39-


The following table summarizes information about warrants outstanding and exercisable at December 31, 2009





Price
Number
Weighted Average Remaining Life
Weighted Average Exercise Price2.47
15,000
.50 years
2.472.58
4,800
.50 years
2.582.60
10,000
.58 years
2.602.40
4,150
.58 years
2.40





Note 11- Income Taxes





Significant components of the Company’s net deferred tax asset as of December 31, 2009 and 2008 were as follows:





2009


2008Deferred tax assets:Net operating loss carryforwards

$
847,000


$
742,000Uniform capitalization


26,000



8,000Accrued vacation pay


24,000



19,000Non qualified stock options


95,000



102,000Subpart F losses


3,000



4,000Related party accrued expenses


209,000



220,000Property plant & equipment


(7,000
)


(7,000
)Net deferred tax asset (liability)


1,197,000



1,088,000Less: Current Portion


(50,000
)


(27,000
)Non-current Portion


1,147,000



1,061,000Less valuation allowance


(1,197,000
)


(1,088,000
)Deferred tax asset after valuation allowance

$
-


$
-





As of December 31, 2009 and 2008, the Company had federal net operating loss carry forwards of approximately $2.4 million and $2.1 million, respectively. These operating losses will be available to reduce future taxable income and begin to expire in 2023. In addition, the Company also has temporary timing differences between its book income and tax income that will generate future tax benefits. The Company evaluated whether it is expected to realize tax benefits for the use of the carry forward items in the near future, based on historical data as well other information the company believes that a 100% valuation analysis is appropriate. Following is a reconciliation of income tax at the statutory rate to the Company’s effective rate:





-40-


2009


2008Computed at the expected statutory rate


35.00
%


35.00
%Meals & Entertainment


(1.99
)


1.11Stock Options


1.37



(38.12
)Fines & Penalties


(0.97
)


0.90Total permanent differences


33.41



(1.11
)Depreciation


0.13



(0.59
)Accrued Vacation


(2.36
)


2.58Accrued Officer's salaries


2.65



5.77Stock Options


2.84



(9.43
)Contingency


0.00



(50.51
)Foreign Losses


0.32



4.50Section 263A Adjustment


(7.88
)


0.44Total temporary differences


(4.30
) %


(47.24
)Total tax before valuation allowance


29.11



(48.35
)Valuation allowance/NOL carryforward


(29.11
)


48.35Income tax expense – effective rate


0.00
%


0.00
%





The Company has considered its previously taken tax positions for uncertainty  and believes that all positions taken in tax filings will more likely than not to be sustained on examination by tax authorities. As of December 31, 2009 and 2008, the Company did not have any  interest and penalties accrued for uncertain tax positions The Company is open to audit for 2006, 2007 and 2008.





Note 12 – Commitments and Contingencies





The Company leases a 10,300 square foot operating facility under a lease term which commenced on March 1, 2009 and expires on February 28, 2011.  Minimum lease payments remaining for the facility total  $57,680.  Lease expense through December 31, 2009 for this facility was $41,200.





As of May 26, 2006, the Company entered into a settlement agreement with Kellstrom totaling $1,173,913 plus interest.  In the settlement, the contingent amount of $566,154 became payable only in the event the Company was awarded an Air Start Cart development contract prior to May 26, 2008 in the minimum amount of $10,000,000.  The contingent payment was directly tied to the contract award, not the satisfaction of the trade credits. At May 26, 2008, the contract was not received and all other terms of the settlement, with the exception of the remaining trade credits outstanding and included in the Company’s current liabilities, were satisfied.  Correspondingly, the contingency expired without being met; therefore, the Company recovered the previously recognized contingent liability in the amount of $566,154. In accordance with the Settlement Agreement, the Company agreed to provide Kellstrom a total of $500,000 towards the purchase of any materials, repairs, maintenance, or overhaul services.   The credit is due upon receipt of any order from Kellstrom, and the Settlement Agreement does not provide a specific termination date in lieu of full satisfaction.  While there is not a specific requirement to pay Kellstrom cash in lieu of the trade credits, Kellstrom has reserved the right to pursue any remaining settlement amounts in the event the Company fails to honor the remaining trade credit obligation.


-41-


Note 13 –Quarterly Financial Information





During the preparation of the financial statements for the twelve months ended December 31, 2009, the Company discovered  certain errors related to  revenue recognized in the  three months ended March 31, 2009 that should have been deferred to the three months ended June 30, 2009.





The Company discovered that revenue totaling $420,000 recognized during the three months ended March 31, 2009 should not have been recognized until the subsequent quarterly period due to the products not being shipped until early April 2009.  The impacts of the correction of the error in the interim financial information as reported on Forms 10-Q for the three months ended March 31, 2009 and June 30, 2009 are reflected in the following table:





Three months ended March 31, 2009As Reported


Change


As RestatedSales

$
931,842



(420,000
)


511,842Cost of sales


661,067



(297,859
)


363,208Gross margin


270,775



(122,141
)


148,634Loss from operations


(38,825
)


(122,141
)


(160,966
)Net loss


(59,977
)


(122,141
)


(182,118
)Net  (loss) per common share:Basic and diluted


(0.01
)


(0.02
)


(0.03
)
 Three months ended June 30, 2009As Reported


Change


As RestatedSales

$
646,533



420,000



1,066,533Cost of sales


437,800



297,859



735,659Gross margin


208,733



122,141



330,874Loss from operations


(113,744
)


122,141



8,397Net loss


(151,198
)


122,141



(29,057
)Net loss per common share:Basic and diluted


(0.02
)


0.02



(0.00
)




The correction in the interim revenue recognition did not have any impact on the revenue as reported for the six months ended June 30, 2009 or any future periods included in the fiscal year ended December 31, 2009.  Forms 10-Q for periods ended March 31, 2010 and June 30, 2010 will reflect the comparative correction of the error along with appropriate disclosure in accordance with US GAAP.




Note 14 - Subsequent Events





Subsequent events were evaluated through March 31, 2010.





In February and March 2010, the Company entered into a new promissory note agreements with related parties in the aggregate amount of $175,000. These notes are to be paid in full at various dates between February and March of  2012  and bear 11% interest per annum. In addition, these notes were discounted by the issuance of shares of the Company’s common stock equal to 7% of the principal amount of the note per year. In total the Company issued an aggregate of 24,640 shares in connection with this discount for a total value of $24,500.





-42-





ITEM 9.   CHANGESIN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE





Not applicable.





ITEM 9AT.   CONTROLS AND PROCEDURES





(a)           Management’s Evaluation of Disclosure Controls and Procedures





As of the end of the period covered by this Annual Report, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures. Disclosure controls and procedures are designed to ensure that information required to be disclosed is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow for timely decisions regarding required disclosure of material information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934 as amended (the “Exchange Act”). Our disclosure controls and procedures are designed to provide reasonable assurance of achieving these objectives. Based upon this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are not effective to a reasonable assurance level of achieving such objectives.





(b)           Management’s Report on Internal Control over Financial Reporting





Our management is responsible for establishing and maintaining adequate internal control over financial reporting.  Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, the Company’s Chief Executive Officer and Chief Financial Officer and effected by the Company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America and includes those policies and procedures that:





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





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





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





Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.  All internal control systems, no matter how well designed, have inherent limitations.  Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.  Because of the inherent limitations of internal control, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process.  Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.





As of December 31, 2009, management assessed the effectiveness of our internal control over financial reporting based on the criteria for effective internal control over financial reporting established in Internal Control--Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") and SEC guidance on conducting such assessments.  Based on that evaluation, they concluded that, as of the end of the period covered by this report, such internal controls over financial reporting were not effective.  This was due to deficiencies that existed in the design or operation of our internal controls over financial reporting that adversely affected our internal controls and that may be considered to be material weaknesses.


-43-





The matters involving internal controls over financial reporting that our management considered to be material weaknesses under the standards of the Public Company Accounting Oversight Board were: ineffective controls over period end financial disclosure and reporting processes including not having a functioning audit committee consisting of independent Board members as well as lack of expertise with respect to the application of US GAAP and SEC rules and regulations.





Management believes that the material weaknesses set forth above did not have an effect on our financial results.





This annual report does not include an attestation report of the Company's registered public accounting firm regarding internal control over financial reporting.  Management's report was not subject to attestation by the Company's registered public accounting firm pursuant to temporary rules of the SEC that permit the Company to provide only the management's report in this annual report.





Management’s Remediation Initiatives





In an effort to remediate the identified material weaknesses and other deficiencies and enhance our internal controls, we have initiated, or plan to initiate, the following series of measures:





We plan to update some of our current procedures to better address period end financial disclosure. In addition greater controls will be implemented to oversee cutoff date transactions which we feel was a part of the material weaknesses. Management also plans to update controls relating to other processes.





We anticipate that these initiatives will be at least partially, if not fully, implemented by December 31, 2010.  Additionally, we plan to test our updated controls in order to remediate our deficiencies by December 31, 2010.





(c)           Changes in Internal Control over Financial Reporting





Aside from updating some procedures there were no changes in our internal control over financial reporting during our fiscal quarter ended December 31, 2009 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.





ITEM 9B.   OTHER INFORMATION





None.


-44-





PART III





ITEM 10.   DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE





Our officers and directors and further information concerning them are as follows:





Name
Age
PositionZahir Teja
55
President, Chief Executive Officer, DirectorNeev Nissenson
31
Vice President, Chief Financial Officer, Secretary, Director





Zahir Teja - President, Chief Executive Officer, Director





Zahir Teja, age 55, has served as our President and Chief Executive Officer since our inception. He holds this position at the pleasure of the Board of Directors. He has also been a member of the Board of Directors since our inception. His term as a board member is one year until the next meeting of stockholders and until his successor has been duly elected and qualified. From April, 2003 to the present, Mr. Teja was the founder and sole owner of Phoenix Aerospace, Inc., a company engaged in the business of design, modifications and manufacturing of support equipment of military aircraft. Prior to that engagement, Mr. Teja was engaged from June, 2000 to March, 2003 as a consultant with American Valley Aviation, Inc., a manufacturer and remanufacturer of ground support equipment. His primary responsibilities were in the areas of marketing and sales and business development in ground support equipment.





Mr. Teja is not a director of any other public company. Mr. Teja’s lifelong business experience and significant knowledge and expertise in the ground support equipment industry make him a suitable person to serve on the Company’s Board of Directors.





Under a consulting agreement dated October 2, 2006, as amended (the “October 2006 Consulting Agreement”), among the Company, Mr. Teja, and Anney Business Corp., a British Virgin Islands corporation (“Anney”), the parties agreed, among other things, to vote their shares to nominate Zahir Teja and Neev Nissenson as directors and appoint Mr. Teja as President and Mr. Nissenson as Vice President. See “Item 13 - Certain Relationships And Related Transactions, And Director Independence - Consulting Agreement” below.





Neev Nissenson - Vice President, Chief Financial Officer, Secretary and Director





Neev Nissenson, age 31, has serves as our Vice President and Chief Financial Officer. He holds this position at the pleasure of the Board of Directors. He has also been a member of the Board of Directors since our inception. His term as a board member is one year until the next meeting of stockholders and until his successor has been duly elected and qualified. For at least the past five years, Mr. Nissenson currently serves as a director for Dionysos Investments Ltd., a privately owned consulting company.  Until November 2006, Mr. Nissenson was also a consultant with Dionysos Investments Ltd., where he was responsible for numerous business development projects for private and public companies.”. Mr. Nissenson is an armored platoon commander in the Israeli Defense Forces (Reserve) Armored Corps with a rank of Captain. He holds an Executive Master's degree in Business Administration specializing in Integrative Management from the Hebrew University of Jerusalem and a bachelor of the arts degree in General History and Political Science from Tel Aviv University.





Mr. Nissenson is not a director of any other public company. Mr. Nissenson’s executive master degree  in business administration as well his past experience with investment banking and consulting to public companies make him a suitable person to serve on the Company’s board of directors.








Under the October 2006 Consulting Agreement, the parties agreed, among other things, to vote their shares to nominate Zahir Teja and Neev Nissenson as directors and appoint Mr. Teja as President and Mr. Nissenson as Vice President. See “Item 13 - Certain Relationships And Related Transactions, And Director Independence - Consulting Agreement” below.


-45-





Significant Employees





As of December 31, 2009, the Company believes that almost all employees are important to the success of the Company but the only significant individuals are the Company’s’ officers and directors referenced above.





Family Relationships





There are no family relationships among our directors, executive officers, or persons nominated or chosen by us to become directors or executive officers.





Involvement in Certain Legal Proceedings





To the best of our knowledge, during the past ten years, none of the following occurred with respect to a present or former director, executive officer, or employee: (1) 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; (2) any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); (3) being subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his or her involvement in any type of business, securities or banking activities; (4) being found by a court of competent jurisdiction (in a civil action), the SEC or the Commodities Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated, or any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order; or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; and (5) been the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member. (covering stock, commodities or derivatives exchanges, or other SROs)





Section 16(a) Beneficial Ownership Reporting Compliance





Section 16(a) of the Exchange Act requires our directors and executive officers and persons who beneficially own more than ten percent of a registered class of our equity securities to file with the SEC initial reports of ownership and reports of changes in ownership of common stock and our other equity securities. Officers, directors and greater than ten percent beneficial shareholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file. Based solely on copies of such reports provided to us, all such forms were filed on time.





Code of Ethics





We have adopted a Code of Ethics within the meaning of Item 406 of Regulation S-K. This Code of Ethics applies to our principal executive officer, our principal financial officer, our principal accounting officer as well as all other employees, and is filed herewith. If we make substantive amendments to this Code of Ethics or grant any waiver, including any implicit waiver, we will disclose the nature of such amendment or waiver on our website or in a report on Form 8-K within four business days of such amendment or waiver.





Security Holder Nominating Procedures





We do not have any formal procedures by which our stockholders may recommend nominees to our board of directors.





-46-


Committees of the Board of Directors





We do not have a nominating, compensation or audit committee, nor do we have an audit committee financial expert. As such, our entire Board of Directors acts as our audit committee and handles matters related to compensation and nominations of directors.





Compensation of the Board of Directors





Directors are not paid any fees or compensation for services as members of our Board of Directors.





Audit Committee





We do not have a separately-designated standing audit committee, and none of our Board members are “independent.”  The entire Board of Directors performs the functions of an audit committee, but no written charter governs the actions of the Board of Directors when performing the functions of that would generally be performed by an audit committee. The Board of Directors approves the selection of our independent accountants and meets and interacts with the independent accountants to discuss issues related to financial reporting. In addition, the Board of Directors reviews the scope and results of the audit with the independent accountants, reviews with management and the independent accountants our annual operating results, considers the adequacy of our internal accounting procedures and considers other auditing and accounting matters including fees to be paid to the independent auditor and the performance of the independent auditor.





For the year ended December 31, 2009, the Board of Directors:





1.
Reviewed and discussed the audited financial statements with management, and





2.
Reviewed and discussed the written disclosures and the letter from our independent auditors on the matters relating to the auditor's independence.





Based upon the Board of Directors’ review and discussion of the matters above, the Board of Directors authorized inclusion of the audited financial statements for the year ended December 31, 2009 to be included in this Annual Report on Form 10-K and filed with the Securities and Exchange Commission.




ITEM 11.   EXECUTIVE COMPENSATION





The table below summarizes all compensation awarded to, earned by, or paid to our current executive officers for each of the last three completed fiscal years.





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Summary Compensation Table





Name and Principal Position
Year
Salary
Bonus
Stock Awards
Option awards
Non-Equity Incentive Plan Comp.
All other compensation
Total($)
($)
($)
($)
($)
($)
($)Zahir Teja(1)
2009
180,000





180,000President, CEO, Director2008
120,000





120,000Neev Nissenson(2)
2009
126,000





126,000VP, CFO, Secretary, Director2008
109,000





109,000Teja N. Shariff(3)Former CFO, Treasurer, CAO
2009
17,500




42,500
60,0002008
60,000





60,000





(1) Pursuant to Mr. Teja's employment agreement with the Company (described below), Mr. Teja is due an annual salary of  $180,000 per year starting from April 26, 2008.   In 2008, some of Mr. Teja salary was not paid and deferred. No salary payments were deferred in 2009. The amount of the deferred salary owed to Mr. Teja at December 31, 2009 is $97,898.





(2) Pursuant to Mr. Nissenson's employment agreement with the Company (described below) Mr. Nissenson is due an annual salary of $126,000 per year starting from April 26, 2008.  In 2008, some of Mr. Nissenson’s salary was not paid and deferred. No salary payments were deferred in 2009. The amount of the deferred salary at December 31, 2009 is $39,548.





(3)  On January 22, 2009, the Board of Directors decided not to extend the employment agreement with Teja Shariff as CFO following its expiration in April 26, 2009. The Company has retained Mr. Shariff as a consultant to the Company for $2,000 per month.The Company has paid down in 2009 previously deferred salary in the amount of $24,000. At December 31, 2009 the Company owed Mr. Shariff   $16,000 in respect of deferred salaries.





Employment Agreements





Zahir Teja Employment Agreement





The Company has entered into an employment agreement with Zahir Teja to serve as the Company's Chief Executive Officer and President. The term of the Agreement is 36 months commencing on April 26, 2007 (the “Effective Date”). The term shall be automatically extended for additional one year periods, unless either party notifies the other in writing at least 90 days prior to the expiration of the then existing term of its intention not to extend the term.





Mr. Teja's base compensation is $120,000 for the first 12 months, $180,000 for the second 12 months, and no less than $180,000 for the third 12 months during the term. Mr. Teja shall be entitled to receive annually a bonus and success fee calculated as follows: the product of (A) one percent (1%) and (B) all revenues from the Company's operations in excess of $4,000,000. The foregoing bonus and success fee shall not exceed $130,000 during any twelve month period. Mr. Teja is also entitled to certain fringe benefits and reimbursement of expenses. The employment agreement may be terminated by the Company for “Cause” and may be terminated by Mr. Teja for “Good Reason” or on 90 days' notice.





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Under the employment agreement, the Company has granted Mr. Teja an option to purchase 660,000 shares of the Company's common stock for an exercise price of $.50 per share. The options terminate December 31, 2010.





Neev Nissenson Employment Agreement





The Company has entered into an employment agreement with Neev Nissenson to serve as the Company's Vice President. The term of the Agreement is 36 months commencing on the Effective Date. The term shall be automatically extended for additional one year periods, unless either party notifies the other in writing at least 90 days prior to the expiration of the then existing term of its intention not to extend the term.





Mr. Nissenson's base compensation is $75,000 for the first 12 months, $126,000 for the second 12 months, and no less than $126,000 for the third 12 months during the term. Mr. Nissenson is also entitled to certain fringe benefits and reimbursement of expenses. The employment agreement may be terminated by the Company for “Cause” and may be terminated by Mr. Nissenson for “Good Reason” or on 90 days' notice.





Under the employment agreement, the Company has granted Mr. Nissenson an option to purchase 330,000 shares of the Company's common stock at an exercise price of $.50 per share. The options terminate December 31, 2010.





Teja N. Sharriff Employment Agreement





The Company had previously entered into an employment agreement with Teja N. Shariff to serve as the Company's Chief Financial Officer.





On January 22, 2009, the Board of Directors resolved not to extend the employment agreement with Teja Shariff as CFO. Neev Nissenson will take the place as CFO, in addition to his role as Vice President. The Board intends  retained Mr. Shariff as a consultant to the Company.








Outstanding Equity Awards at 2009 Fiscal Year End





The following table sets forth the stock options held by the named executives as of December 31, 2009.





Options Awards

Stock AwardsName

Number of Securities Underlying Unexercised Options

(# Exercisable)

Number of Securities Underlying Unexercised Options

(# Unexercis-able)

Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options

(#)

Option Exercise Price

($)

Option Expiration Date

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

($)Zahir Teja


660,000(1)








0.50


12/31/10Neev Nissenson


330,000(1)








0.50


12/31/10Teja N. Shariff





(1)           All options vested immediately upon grant on April 26, 2007.





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Stock Options





Other than the options described above and certain options to purchase an aggregate of 170,000 shares of our common stock at an option price of $1.00 per share granted under a retainer agreement between the Company and its securities counsel and an option to purchase an aggregate of 330,000 of our common stock at an option price of $0.50 granted under a consulting agreement, there were no other options granted in the last two fiscal years.





Compensation to Directors





Directors are not paid any fees or compensation for services as members of our board of directors.





ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS





The following table provides the names and addresses of each person known to us to own more than 5% of our outstanding common stock as of the date of this Annual Report on Form 10-K, and by the officers and directors, individually and as a group. Except as otherwise indicated, all shares are owned directly.





Title Of Class
Name and Address of Beneficial Owner(1)(2)
Position with the Company
Amount Of Beneficial Ownership
Percent Of ClassCommon Stock
Zahir Teja(3)
President, CEO, Director
6,035,000
68%Common Stock
Neev Nissenson(4)
Vice President, Secretary, Director, and CFO
3,268,000
39%Common Stock
Anney Business Corp.(6)

Rue Arnold Winkelried 8,

Case postale 1385,

1211 Geneve 1, Switzerland
5% Stockholder
5,235,000
64%Common Stock
All Officers and Directors as a group that consists of 2 persons

7,061,000
77%Common Stock
Teja N. Shariff(5)
Former CFO, Treasurer
296,000
4%


______________________________


(1) Unless otherwise indicated, the address is care of Phoenix International Ventures, Inc., 61B Industrial Parkway, Carson City, Nevada 89706.





(2) Pursuant to the rules and regulations of the Securities and Exchange Commission, shares of common stock that an individual or group has a right to acquire within 60 days pursuant to the exercise of options or warrants are deemed to be outstanding for the purposes of computing the percentage ownership of such individual or group, but are not deemed to be outstanding for the purposes of computing the percentage ownership of any other person shown in the table.





(3) Mr. Teja's share holdings consist of 2,150,000 shares of the Company's common stock beneficially owned by him. Under his employment agreement, Mr. Teja owns an option to purchase up to 660,000 shares of the Company's common stock at an exercise price of $.50 per share. This option is currently exercisable and expires December 31, 2010. Under irrevocable proxies signed by the holders of 2,538,000 shares of the Company's common stock, Mr. Teja and Neev Nissenson have been appointed, jointly and severally, as attorneys-in-fact to vote such holders' shares for a period of seven years. Under the Consulting Agreement among the Company, Anney Business Corp. and Mr. Teja, Mr. Teja and Anney have an understanding to vote their shares at shareholders meetings; accordingly, Mr. Teja may be deemed to be the beneficial owner of the 687,000 shares of the Company's common stock beneficially owned by Anney. Mr. Teja and Mr. Shariff are brothers.


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(4) Neev Nissenson's share holdings consist of 395,000 shares of the Company's common stock beneficially owned by him and 5,000 shares of the Company's common stock beneficially owned by his wife. Mr. Nissenson disclaims beneficial ownership of the shares owned by his wife. Under his employment agreement, Mr. Nissenson owns an option to purchase up to 330,000 shares of the Company's common stock at an exercise price of $.50 per share. This option expires December 31, 2010. Under irrevocable proxies signed by the holders of 2,538,000 shares of the Company's common stock, Mr. Teja and Mr. Nissenson have been appointed, jointly and severally, as attorneys-in-fact to vote such holders' shares for a period of seven years.





(5) Mr. Shariff's share holdings consist of 296,000 shares of the Company's common stock beneficially owned by him. Under a Debt Conversion Agreement, Mr. Shariff was issued 96,000 shares of the Company's common stock in consideration of the cancellation of the Company's Note in the outstanding principal amount of $48,000. Mr. Shariff and Mr. Teja are brothers.





(6) Anney Business Corp.'s share holdings consist of 687,000 shares of the Company's common stock beneficially owned by it. Under a consulting agreement, Anney and Mr. Teja have an understanding to vote their shares at shareholders meetings; accordingly, Anney may be deemed to be the beneficial owner of the 2,150,000 shares of the Company's common stock beneficially owned by Mr. Teja and the 2,538,000 shares of the Company's common stock with respect to which Mr. Teja has been appointed an attorney-in-fact.





The percent of class is based on 8,137,947 shares of common stock issued and outstanding as of the date of this Annual Report on Form 10-K.





Equity Compensation Plans





The information with respect to our equity compensation plan is incorporated herein by reference to Item 5 of Part II of this Annual Report.





ITEM 13.   CERTAIN RELATIONSHIPS AND RELATEDTRANSACTIONS, AND DIRECTOR INDEPENDENCE





Except as described below, none of the following parties has, since our date of incorporation, had any material interest, direct or indirect, in any transaction with us or in any presently proposed transaction that has or will materially affect us:





·
Any of our directors or officers;·
Any person proposed as a nominee for election as a director;·
Any person who beneficially owns, directly or indirectly, shares carrying more than 10% of the voting rights attached to our outstanding shares of common stock·
Any of our promoters; and·
Any relative or spouse of any of the foregoing persons who has the same house as such person





The company submits all related party transactions to the board of directors for approval. The  related party abstains in the vote.




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The Company and Phoenix Aerospace, Inc. entered into a Share Exchange Agreement dated as of December 1, 2006. Under the Share Exchange Agreement, Zahir Teja, the sole owner and principal of Phoenix Aerospace, Inc. exchanged all the issued and outstanding shares of Phoenix Aerospace, Inc. common stock for 3,000,000 shares of the common stock of the Company. As a result of this transaction, Phoenix Aerospace, Inc. became a wholly owned subsidiary of the Company, and Mr. Teja became a principal stockholder of and continued to be a principal of the Company. The effective date of this transaction was January 1, 2007.





In December, 2006, Phoenix Aerospace, Inc. entered into a Debt Conversion Agreement with Teja N. Shariff, the Company's CFO and a creditor. Under this agreement, Phoenix Aerospace, Inc. agreed to cause the Company to issue to Mr. Shariff 96,000 shares of the Company's common stock in consideration of the cancellation of a Note in the outstanding principal amount of $48,000. Mr. Shariff represented in the agreement that the common stock was purchased for investment and that he was an accredited investor under Regulation D. These shares of common stock are restricted shares as defined in the Securities Act.





As described in more detail above under “Employment Agreements” in Item 11 above, the Company has entered into employment agreements with its executive officers.





In 2009 the Company purchased inventory in connection with the performance on remanufacturing contracts from Mawenzi, Inc. a company owned by the brother in law of our CEO, President and Director, Mr. Zahir Teja. In aggregate the Company purchased from Mawenzi $745,000 worth of parts. At December 31, 2009 the Company owed Mawenzi, Inc. $245,000. The Company believes that all purchases were made at fair market value.





Consulting Agreement





The Company entered into a Consulting Agreement dated October 2, 2006 with Mr. Teja, and Anney Business Corp., a British Virgin Islands company (“Anney”), which is wholly owned and controlled by the Nissenson family. Haim Nissenson, who is the father of Neev Nissenson, is the Chairman of Anney. The term of the Agreement shall run so long as Mr. Teja and the Nissenson family are stockholders of the Company. The Agreement's effective date was April 26, 2007 (“Effective Date”). Under the Agreement, Anney agreed to provide consulting services to the Company. For providing these services, Anney will receive a fee of $10,000 per month. Anney is also entitled to receive annually a bonus and success fee calculated as follows: the product of (A) one percent (1%) and (B) all revenues from the Company's operations in excess of $4,000,000. The foregoing bonus and success fee shall not exceed $130,000 during any twelve month period. The Company granted Anney an option to purchase 330,000 shares of the Company's common stock at an exercise price of $.50 per share. The option terminates December 31, 2010.AS of December 31, 2009 Anney has exercised all of its options.





The parties also agreed to vote their shares to nominate Zahir Teja and Neev Nissenson as directors and to appoint Mr. Teja as President and Mr. Nissenson as Vice President. Each of Mr. Teja and Anney further agreed to give the other the right of first refusal if he wants to sell any of his shares. The Agreement contains other terms and conditions.





Director Independence





Our determination of independence of directors is made using the definition of “independent director” contained in the rules of the NYSE Amex LLC (the “NYSE Alternext”), even though such definitions do not currently apply to us because we are not listed on the NYSE Alternext. We have determined that none of our directors currently meet the definition of “independent” as within the meaning of such rules as a result of their current positions as our executive officers.





ITEM 14.   PRINCIPAL ACCOUNTING FEESAND SERVICES





Mark Bailey & Company, Ltd. (“MBC”) is our independent public accountants.  MBC audited our financial statements for the twelve months ended December 31, 2008 and 2009, contained in the corresponding fiscal periods.


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Audit and Non-Audit Fees





Aggregate fees for professional services rendered to the Company by MBC as of or for the two fiscal years ended December 31, 2009 and 2008 are set forth below.





Fiscal Year2009


2008Audit Fees

$
80,700


$
49,500Audit-Related Fees


0



0Tax Fees


10,000



15,000All Other


10,650



-Total

$
101,350


$
64.500





Audit Fees Aggregate fees billed by our auditors for professional services rendered in connection with a review of the financial statements included in our quarterly reports on Form 10-Q and the audit of our annual consolidated financial statements for the fiscal years ended December 31, 2009 and December 31, 2008.





Audit-related Fees Our auditors did not bill any additional fees for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements.





Tax Fees Aggregate fees billed by our auditors for professional services for tax compliance, tax advice, and tax planning, and related filings.





All OtherAggregate fees billed by our auditors for all other non-audit services, such as attending meetings and other miscellaneous financial consulting.





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 PART IV


ITEM 15.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES


ExhibitNumber
Description3.1
Articles of Incorporation (incorporated by reference to Exhibit 3.1 of Phoenix International Ventures, Inc.’s Registration Statement on Form SB-2 (File No. 333-140257)).3.2
By-Laws (incorporated by reference to Exhibit 3.2 of Phoenix International Ventures, Inc.’s Registration Statement on Form SB-2 (File No. 333-140257)).4.1
Specimen Stock Certificate (incorporated by reference to Exhibit 4.1 of Phoenix International Ventures, Inc.’s Registration Statement on Form SB-2 (File No. 333-140257)).4.2
Form of collateralized Promissory Note (incorporated by reference to Exhibit 4.1 of Phoenix International Ventures, Inc.’s Current Report on Form 8-K filed September 5, 2008).4.3
Form of uncollateralized Promissory Note (incorporated by reference to Exhibit 4.2 of Phoenix International Ventures, Inc.’s Current Report on Form 8-K filed September 5, 2008).4.4
Form of Warrant (incorporated by reference to Exhibit 4.3 of Phoenix International Ventures, Inc.’s Current Report on Form 8-K filed September 5, 2008).4.5
Form of uncollateralized promissory note (incorporated by reference to Exhibit 4.1 of the Company’s Quarterly Report on Form 10-Q filed with the SEC on August 11, 2009)4.6
Form of uncollateralized promissory note extension (incorporated by reference to Exhibit 4.2 of the Company’s Quarterly Report on Form 10-Q filed with the SEC on August 11, 2009).10.1
Share Exchange Agreement dated as of December 1, 2006 among Phoenix International Ventures, Inc., Phoenix Aerospace, Inc. and Zahir Teja (incorporated by reference to Exhibit 10.1 of Phoenix International Ventures, Inc.’s Registration Statement on Form SB-2 (File No. 333-140257)).10.2
Consulting Agreement dated October 2, 2006 among Phoenix International Ventures, Inc., Zahir Teja, and Anney Business Corp. (incorporated by reference to Exhibit 10.2 of Phoenix International Ventures, Inc.’s Registration Statement on Form SB-2 (File No. 333-140257)).10.3
Debt Conversion Agreement dated December 13, 2006 between Phoenix Aerospace, Inc. and LeRoy Moser (incorporated by reference to Exhibit 10.3 of Phoenix International Ventures, Inc.’s Registration Statement on Form SB-2 (File No. 333-140257)).10.4
Debt Conversion Agreement dated December 12, 2006 between Phoenix Aerospace, Inc. and Erik Kudlis (incorporated by reference to Exhibit 10.4 of Phoenix International Ventures, Inc.’s Registration Statement on Form SB-2 (File No. 333-140257)).10.5
Debt Conversion Agreement dated December 14, 2006 between Phoenix Aerospace, Inc. and Teja N. Shariff (incorporated by reference to Exhibit 10.5 of Phoenix International Ventures, Inc.’s Registration Statement on Form SB-2 (File No. 333-140257)).10.6
Employment Agreement dated December 14, 2006 between Phoenix International Ventures, Inc. and Zahir Teja (incorporated by reference to Exhibit 10.6 of Phoenix International Ventures, Inc.’s Registration Statement on Form SB-2 (File No. 333-140257)).10.7
Employment Agreement dated December 14, 2006 between Phoenix International Ventures, Inc. and Neev Nissenson (incorporated by reference to Exhibit 10.7 of Phoenix International Ventures, Inc.’s Registration Statement on Form SB-2 (File No. 333-140257)).10.8
Employment Agreement dated December 14, 2006 between Phoenix International Ventures, Inc. and Teja N. Shariff (incorporated by reference to Exhibit 10.7 of Phoenix International Ventures, Inc.’s Registration Statement on Form SB-2 (File No. 333-140257)).10.9
Commercial Lease and Deposit Receipt (incorporated by reference to Exhibit 10.1 of Phoenix International Ventures, Inc.’s Current Report on Form 8-K filed October 2, 2007).10.10
Form of Subscription Agreement (incorporated by reference to Exhibit 10.1 of Phoenix International Ventures, Inc.’s Current Report on Form 8-K filed January 3, 2008).10.11
Form of Warrant (incorporated by reference to Exhibit 10.2 of Phoenix International Ventures, Inc.’s Current Report on Form 8-K filed January 3, 2008).10.12
Conversion Agreement with Zahir Teja (incorporated by reference to Exhibit 10.4 of Phoenix International Ventures, Inc.’s Current Report on Form 8-K filed January 3, 2008).14.1
Code of Ethics (incorporated by reference to Exhibit 14.1 of Phoenix International Ventures, Inc.’s Registration Statement on Form SB-2 (File No. 333-140257)).21.1
Subsidiaries of the Small Business Issuer (incorporated by reference to Exhibit 21.1 of Phoenix International Ventures, Inc.’s Registration Statement on Form SB-2 (File No. 333-140257)).23.1
Consent of Mark Bailey & Company, Ltd.31.1
Certification of Chief Executive Officer pursuant to Securities Exchange Act Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
Certification of Chief Financial Officer pursuant to Securities Exchange Act Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 200232.2
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002


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SIGNATURES





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





PHOENIX INTERNATIONAL VENTURES, INC.Date: March 31, 2010
By:
/s/ Zahir TejaZahir Teja

President and Chief Executive Officer








Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.





March 31, 2010
By:
/s/ Zahir TejaZahir TejaPresident, CEO, DirectorMarch 31, 2010
By:
/s/ Neev NissensonNeev NissensonCFO, Principal Accounting and Financial Officer, Vice President, Director





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EXHIBIT INDEX


ExhibitNumber
Description3.1
Articles of Incorporation (incorporated by reference to Exhibit 3.1 of Phoenix International Ventures, Inc.’s Registration Statement on Form SB-2 (File No. 333-140257)).3.2
By-Laws (incorporated by reference to Exhibit 3.2 of Phoenix International Ventures, Inc.’s Registration Statement on Form SB-2 (File No. 333-140257)).4.1
Specimen Stock Certificate (incorporated by reference to Exhibit 4.1 of Phoenix International Ventures, Inc.’s Registration Statement on Form SB-2 (File No. 333-140257)).4.2
Form of collateralized Promissory Note (incorporated by reference to Exhibit 4.1 of Phoenix International Ventures, Inc.’s Current Report on Form 8-K filed September 5, 2008).4.3
Form of uncollateralized Promissory Note (incorporated by reference to Exhibit 4.2 of Phoenix International Ventures, Inc.’s Current Report on Form 8-K filed September 5, 2008).4.4
Form of Warrant (incorporated by reference to Exhibit 4.3 of Phoenix International Ventures, Inc.’s Current Report on Form 8-K filed September 5, 2008).4.5
Form of uncollateralized promissory note (incorporated by reference to Exhibit 4.1 of the Company’s Quarterly Report on Form 10-Q filed with the SEC on August 11, 2009)4.6
Form of uncollateralized promissory note extension (incorporated by reference to Exhibit 4.2 of the Company’s Quarterly Report on Form 10-Q filed with the SEC on August 11, 2009).10.1
Share Exchange Agreement dated as of December 1, 2006 among Phoenix International Ventures, Inc., Phoenix Aerospace, Inc. and Zahir Teja (incorporated by reference to Exhibit 10.1 of Phoenix International Ventures, Inc.’s Registration Statement on Form SB-2 (File No. 333-140257)).10.2
Consulting Agreement dated October 2, 2006 among Phoenix International Ventures, Inc., Zahir Teja, and Anney Business Corp. (incorporated by reference to Exhibit 10.2 of Phoenix International Ventures, Inc.’s Registration Statement on Form SB-2 (File No. 333-140257)).10.3
Debt Conversion Agreement dated December 13, 2006 between Phoenix Aerospace, Inc. and LeRoy Moser (incorporated by reference to Exhibit 10.3 of Phoenix International Ventures, Inc.’s Registration Statement on Form SB-2 (File No. 333-140257)).10.4
Debt Conversion Agreement dated December 12, 2006 between Phoenix Aerospace, Inc. and Erik Kudlis (incorporated by reference to Exhibit 10.4 of Phoenix International Ventures, Inc.’s Registration Statement on Form SB-2 (File No. 333-140257)).10.5
Debt Conversion Agreement dated December 14, 2006 between Phoenix Aerospace, Inc. and Teja N. Shariff (incorporated by reference to Exhibit 10.5 of Phoenix International Ventures, Inc.’s Registration Statement on Form SB-2 (File No. 333-140257)).10.6
Employment Agreement dated December 14, 2006 between Phoenix International Ventures, Inc. and Zahir Teja (incorporated by reference to Exhibit 10.6 of Phoenix International Ventures, Inc.’s Registration Statement on Form SB-2 (File No. 333-140257)).10.7
Employment Agreement dated December 14, 2006 between Phoenix International Ventures, Inc. and Neev Nissenson (incorporated by reference to Exhibit 10.7 of Phoenix International Ventures, Inc.’s Registration Statement on Form SB-2 (File No. 333-140257)).10.8
Employment Agreement dated December 14, 2006 between Phoenix International Ventures, Inc. and Teja N. Shariff (incorporated by reference to Exhibit 10.7 of Phoenix International Ventures, Inc.’s Registration Statement on Form SB-2 (File No. 333-140257)).10.9
Commercial Lease and Deposit Receipt (incorporated by reference to Exhibit 10.1 of Phoenix International Ventures, Inc.’s Current Report on Form 8-K filed October 2, 2007).10.10
Form of Subscription Agreement (incorporated by reference to Exhibit 10.1 of Phoenix International Ventures, Inc.’s Current Report on Form 8-K filed January 3, 2008).10.11
Form of Warrant (incorporated by reference to Exhibit 10.2 of Phoenix International Ventures, Inc.’s Current Report on Form 8-K filed January 3, 2008).10.12
Conversion Agreement with Zahir Teja (incorporated by reference to Exhibit 10.4 of Phoenix International Ventures, Inc.’s Current Report on Form 8-K filed January 3, 2008).14.1
Code of Ethics (incorporated by reference to Exhibit 14.1 of Phoenix International Ventures, Inc.’s Registration Statement on Form SB-2 (File No. 333-140257)).21.1
Subsidiaries of the Small Business Issuer (incorporated by reference to Exhibit 21.1 of Phoenix International Ventures, Inc.’s Registration Statement on Form SB-2 (File No. 333-140257)).23.1
Consent of Mark Bailey & Company, Ltd.31.1
Certification of Chief Executive Officer pursuant to Securities Exchange Act Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
Certification of Chief Financial Officer pursuant to Securities Exchange Act Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 200232.2
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002


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