UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





FORM 10-K





x
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED MAY 31, 2011





 ̈
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ____ TO ____





Commission file Number:  000-52511





BIZZINGO, INC.


(Exact name of registrant as specified in its charter)











Nevada


(State or other jurisdiction of incorporation or organization)





98-0471052


(I.R.S. Employer Identification Number)





63 Main Street, #202, Flemington, New Jersey 08822


(Address of principal executive offices)


(908) 968-0838


(Issuer's telephone number)





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





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





Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.


 ̈ Yes  x No





Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.


 ̈ Yes  x No





Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.


x Yes    ̈ No





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    ̈ No


(Does not currently apply to the Registrant)





Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ̈





Indicate by check mark whether the registrant is a large accelerated file, 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. (Check one):





Large accelerated filer   ̈
Accelerated filer  ̈Non–accelerated filer  ̈      (Do not check if a smaller reporting company)
Smaller reporting company x





Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).


 ̈ Yes x No





At August 15, 2011, the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the quoted price of $0.40 at which the common equity was sold was approximately $15,222,090. Shares of common stock held by each officer and director and by each person who owns 5%or more of the outstanding Common Stock have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.





As of August 15, 2011, the number of shares outstanding of our common stock was 66,780,576 shares.





TABLE OF CONTENTS




PART I
3Item 1.  Business
3Product Development
7Item 1A.  Risk Factors.
8Item 1B. Unresolved Staff Comments.
18Item 2.  Properties.
18Item 3.  Legal Proceedings.
18Item 4.  [Removed and Reserved.]
18PART II
18Item 5.  Market for Registrant’s Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
18Item 6.  Selected Financial Data.
23Item 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operations.
23Item 7A.  Quantitative and Qualitative Disclosures about Market Risk.
30Item 8.  Financial Statements.
30Item 9.  Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
50Item 9A.  Controls and Procedures.
51Item 9B.  Other Information.
53PART III
54Item 10.  Directors, Executive Officers and Corporate Governance.
54Item 11.  Executive Compensation.
58Item 12.  Security Ownership of Certain Beneficial owners and Management and Related Stockholder Matters.
59Item 13.  Certain Relationships and Related Transactions, and Director Independence.
60Item 14.  Principal Accounting Fees and Services.
60PART IV
61Item 15.  Exhibits and Financial Statement Schedules.
61


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PART I





CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS




This Annual Report on Form 10-K of Bizzingo, Inc. contains forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995.  These statements relate to anticipated future events, future results of operations or future financial performance.  These forward-looking statements include, but are not limited to, statements related to our ability to raise sufficient capital to finance our planned operations, our ability to develop or market our products, our ability to successfully compete in the marketplace, our ability to secure additional technologies and licenses relevant to our business, our ability to protect our intellectual property, and estimates of our cash expenditures for the next 12 to 36 months. In some cases, you can identify forward-looking statements by terminology such as “may,” “might,” “will,” “should,” “intends,” “expects,” “plans,” “goals,” “projects,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” or “continue” or the negative of these terms or other comparable terminology.




These forward-looking statements are only predictions, are uncertain and involve substantial known and unknown risks, uncertainties and other factors which may cause our (or our industry’s) actual results, levels of activity or performance to be materially different from any future results, levels of activity or performance expressed or implied by these forward-looking statements. The “Risk Factors” section of this Form 10-K  sets forth detailed risks, uncertainties and cautionary statements regarding our business and these forward-looking statements.




We cannot guarantee future results, levels of activity or performance.  You should not place undue reliance on these forward-looking statements, which speak only as of the date that they were made.  These cautionary statements should be considered with any written or oral forward-looking statements that we may issue in the future.  Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to reflect actual results, later events or circumstances or to reflect the occurrence of unanticipated events.




Item 1.  Business





The following describes the business of Bizzingo, Inc. (formerly Phreadz, Inc.) Whenever the terms “our,” “we” “us” and the “Company” are used herein they refer to Bizzingo, Inc., a Nevada corporation, together with UDM USA, LLC (“UDM”) and Phreadz USA, LLC (“Phreadz”), our wholly-owned subsidiaries, unless the context otherwise provides.




Corporate Overview and History of Bizzingo, Inc




Organization and Company History




Bizzingo, Inc., was incorporated in the State of Nevada on May 12, 2005.




On June 16, 2010, we filed an amendment to our certificate of incorporation with the Nevada Secretary of State to change our name to “Phreadz, Inc.” This amendment was unanimously approved by our board of directors and by a majority of our stockholders by written consent. An information statement on Form 14C notifying shareholders of action taken by written consent was mailed to shareholders (of record on April 28, 2010) on May 25, 2010.





On June 17, 2010, we received notice from FINRA/OTC Corporate Actions that the name change will take effect at the open of business on June 17, 2010. On July 6, 2010, we received notice that our common stock would trade under the symbol “PHDZ”.




On March 30, 2011, we filed a Certificate of Amendment with the Nevada Secretary of State to change our name to “Bizzingo, Inc.” The name change was effective on that same date. This amendment was unanimously approved by our board of directors and by a majority of our stockholders (52.6%) by written consent. An Information Statement filed on Schedule14C notifying shareholders of action taken by written consent was mailed to shareholders (of record on February 15, 2011) on March 10, 2011.


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On April 29, 2011, we received notice from FINRA/OTC Corporate Actions that our name change would be effective on the open of business on May 2, 2011 and our common stock will trade under the new symbol “BIZZ”.





Exploration Stage Activities




The Company was previously in the mineral exploration stage since its formation and had at no time since its formation realized any revenues from its planned operations.  Prior to the Company’s acquisitions of Phreadz and UDM, the Company was primarily engaged in the acquisition and exploration of mining claims.  Had it located a commercial minable reserve, the Company previously expected to prepare the site for extraction operations and enter a planned further development stage.




In June 2005, the Company acquired a 100% interest in the STEP mineral claim located in the Nicola Mining Division, British Columbia, and Canada for $5,000.  The claim was registered in the name of the vendor (the “Trustee”), who had executed a trust agreement to hold the claim in trust on behalf of the Company.




At November 30, 2005, the Company recognized an impairment loss of $5,000 as it had not been determined whether there were proven or probable reserves on the property.




On December 4, 2008, the Trustee advised the Company that he had performed work on the claim costing $4,750 and that unless the Company notified him of its desire to maintain the claim and pay him $4,750 by December 8, 2008, he would either allow the claim to expire on December 9, 2008 or take control of the claim and apply the work to extend the expiry date of the claim.  On December 9, 2008, the Trustee applied the work as assessment to extend the expiry date to December 9, 2009.  On May 24, 2009, the Trustee acquired control over the claim, at which time we no longer had any interest in the claim or any operating business.  As a result, we became a “shell” corporation and began to seek an attractive operating business with which to merge or otherwise acquire.




On April 27, 2010, pursuant to share purchase agreements (the “Purchase Agreements”), Bizzingo, Inc., (formerly Phreadz, Inc.) completed the acquisitions of Phreadz USA, LLC (“Phreadz”) and UDM USA, LLC (“UDM”).  The acquisitions were accounted for as a recapitalization effected by a reverse merger, wherein Phreadz and UDM were considered the acquirer for accounting and financial reporting purposes.  The pre-merger assets and liabilities of the acquired entities have been brought forward at their book value and no goodwill has been recognized.  The consolidated accumulated deficit of Phreadz and UDM has been brought forward, and common stock and additional paid-in-capital of the combined Company have been retroactively restated to give effect to the exchange rates as set forth in the Purchase Agreements.




As set forth above, on April 27, 2010 and pursuant to the terms and conditions of the Purchase Agreements, we: (i) consummated the acquisitions of Phreadz and UDM, and (ii) each of Phreadz and UDM became our wholly owned subsidiary. More specifically, pursuant to and in connection with the Purchase Agreements:




·
in exchange for 100% of the issued and outstanding membership interests of Phreadz, we issued to the holders of the Phreadz membership interests an aggregate of 21,659,200 shares of our common stock; and




·
In exchange for 100% of the issued and outstanding membership interests of UDM, we issued to the holders of the UDM membership interests an aggregate of 21,659,200 shares of our common stock.




·
In addition, pursuant to the terms of the Purchase Agreements, 32,712,176 shares of our issued and outstanding common stock previously held by certain stockholders were cancelled.




As a result of the Company’s acquisitions of Phreadz and UDM, we experienced a change in control and ceased to be a “shell” company as defined in Rule 12b-2 promulgated under the Exchange Act.




Business Development Overview




Social Media is often misconstrued as a medium for business-to-consumer or B2C engagement and discounted as a viable communications network for those companies focused on business-to-business or B2B engagement transactions. However, B2B, as in any other field is impacted by online activity and is faced with a prime opportunity to not only cultivate communities in social networks and other social channels, but also amplify awareness, increase lead generation, reduce sales cycles, and perhaps most importantly, learn and adapt to market dynamics in real-time.


4





The development of Phreadz and UDM since our acquisition described in our Corporate History above has evolved into Bizzingo. This development has culminated in www.bizzingo.com (“Bizzingo”) and is a social network designed for business and commerce. We are currently in discussions with a number of enterprise’s which we intend to launch on a limited alpha basis. We think of it as an “internet hub” where social networking, e-commerce and marketing will converge within one domain. It is commonly accepted that B2B and B2C social media marketing will focus on three key areas: video, mobile and engagement. We expect Bizzingo to deliver this.





We believe B2B and B2C social media marketing is still in its infancy. Facebook, Twitter, YouTube and most of the social tools we use today are just a few years old. The Bizzingo platform will provide the ability for business to promote product and service with real-time feedback, changing the current social media platforms from that of just “broadcasting” to engaging customers as partners in real-time. Additionally business will be able to real-time assess their analytics, in terms of: 1) how many conversations, and, 2) What was the reach of a product launch.





Bizzingo will provide a business a way to;





1.
Cost effectively introduce their product and/or service to a global network of users;


2.
Leverage and expand their brand and image;


3.
Effectively communicate their marketing “message” to a targeted audience; and,


4.
Sell their product or service.





Bizzingo is a collection of product and service profiles for businesses, much likeFacebookTM and LinkednTM are a collection of personal profiles for individuals. Each Bizzingo page will include the following information and functionality;





·a product description
·links to additional information·a video introduction
·social network interaction·A picture and video library
·tools for marketing·A posting wall
·advertising





Bizzingo’s goal is to provide the missing link that will lend purpose to social media by facilitating a value proposition for each participant, and give businesses a social network marketing platform to reach their users and encourage transactions





To make a comparison, Bizzingo is a collection of product and service profiles for businesses. By example, GrouponTM  was developed in response to the needs of businesses to sell their goods and services.





Each Bizzingo page includes information and functionality that includes product description, social network interaction, video presentations, pictures, posting walls, links to additional information, and most importantly, the ability to transact a sale. Bizzingo’s goal is to provide the link that will lend purpose to social media by facilitating a value proposition for each participant, and give business enterprises a social network-marketing platform to reach their users and encourage transactions.





For the consumer, Bizzingo is a social network that provides online buyers a platform to search, engage and buy, from a global universe of sellers. Using a phonebook as a legacy model, Bizzingo is to the yellow pages what FacebookTM is to the white pages.





For Business’s, Bizzingo will offer direct communication and contact with consumers, without the hassle of distribution agreements, advertising expenses, and costly overhead. It is a market where dialogue between sellers and buyers is encouraged.





For the larger established businesses, Bizzingo will be a medium for launching new product lines directly to buyers, doing away with the "middleman."


5





For content providers (musicians, film makers, artists), Bizzingo offers a unified domain for launching and marketing products directly to all social networks, thereby increasing exposure and potential for monetization of their content.





Bizzingo will provide a mall like atmosphere on the web for retail transactions wherein sellers utilize social media to proactively access potential buyers from their existing communities.





Bizzingo will provide an environment where sellers are connected with a targeted audience.  By nature, it eliminates the obstacles of geography, demographics, and socioeconomics.  Although FacebookTM is attempting to make its user model monetizable by incorporating advertising and the FacebookTM marketplace into its site, FacebookTM remains an awkward sales tool as it was not initially designed for commerce and its infrastructure is not set up to grow in that direction within social networking.





By example, selling on FacebookTM is akin to interrupting a call between two friends who are talking about their vacation and offering to sell them cheap tickets. The "interruption" is an intrusion and does not represent a welcomed exchange. By contrast, Bizzingo will be a "place" for shoppers to go to when they want to buy - it is like a virtual trip to the mall. This simple distinction will revolutionize the ways in which retail is conducted on the web.





For the consumer, unlike the flagship e-Commerce platforms that are "flat" and impersonal, Bizzingo will provide a medium that is a dynamic, interactive visual experience, within a "safe" environment for retail transactions.  Further, the experience may be shared through the Bizzingo posting wall, text capabilities, video sharing, etc. As such, Bizzingo will deliver a comparable "real life" shopping experience back to the consumer with the convenience of "home shopping”.





Jacques, a struggling author, has written a series of short stories that he wishes to get published. After searchingfor publishing houses and analyzing the costs associated with them, he concludes that it is unlikely he will be published. Fortunately, he discovers Bizzingo. After signing up and logging on to the network, he was able to design and build a specific social networking site for his stories – all in about 20 minutes. He included functions such as a video reading of his stories, a download feature, a wall where fans may post comments, an area for video conversation, a gallery of pictures and a donate feature for use by people who liked the stories and wished to reward him as the author. Upon uploading his stories to the site the authorship with appropriate legal disclaimers becomes a form of copy-written material. Jacques will use the Bizzingo marketing functions to let everyone in his communities know where to find his book of short stories — urging them to tell their communities to do the same. Jacques is able to manage his success with Bizzingo analytics and looks forward to posting more Things on Bizzingo.





This story, while an example, can be imagined in many Zones: a musician looking to be discovered, a film producer not picked up by a major studio, a treasure hunter with a few unusual items to sell, or simply a user who wishes to sell a product or service.  Bizzingo believes that Music may become the predominant Zones at the launch because of the Universal Database of Music (UDM) database that was acquired in our acquisition, April 27, 2010.





Marketing





To market the Bizzingo platform we will be: (1)  hiring a sales team to solicit business leaders and offer packages and incentives to become anchor clients on Bizzingo; (2) developing programs for the anchors to drive their existing followers to Bizzingo; (3) advertising and marketing to existing networks; (4) launching a high energy public relations campaign that is “edgy” and exciting;  (5) establishing  strategic alliances with advertisers and marketers; (6) hosting events related to specific Zones using prepaid sponsorship fees from these advertisers and money raised from various corporate financing.  The events are intended to draw audiences by way of; singing competitions within the Music Zone, a trick golf shot competitions within the Sport Zone, a dance competition within the Entertainment Zone.  Cash prizes and media recognition will be the incentives for participants.





Competitive Edge





Bizzingo will improve the online distributed systems by leveraging the inherent trust built into social links. In particular, Bizzingo will augment the online marketplaces with social networking features that should improve the “trust” factor between transaction partners and improve user satisfaction. Customers on traditional online marketplaces such as eBayTM and CraigslistTM routinely transact with complete strangers, thus marking them vulnerable to malicious and predatory transactions. Despite their integration of reputation systems, studies show malicious users can artificially inflate their reputation values. In contrast, Bizzingo will integrate features of social networks into an online shopping community, allowing customers to seek out purchases from trusted merchants. In addition, the personalized format of the platform provides additional transparency about the business.


6





The Technology





Bizzingo, Inc. will use a "Cloud" computing model for its domain Bizzingo.com.  In this model of computing, all the servers, networks, applications and other elements related to data centres are made available to the end users via the Internet, in a way that allows Bizzingo to use only the type and amount of computing services that they need for its traffic, thus increasing efficiency. The cloud model differs from traditional server models in that Bizzingo doesn’t hand over its IT resources to be managed. Instead it plugs into the "cloud" for infrastructure services, platform (operating system) services, or software services (such as SaaS apps); treating the "cloud" much as it would an internal data center or computer providing the same functions.





Product Development





We are continually developing new products, as well as optimizing our existing platform and feature set in order to meet the expected evolving needs of our audience; consumers, businesses and advertisers.





We will, purchase technology and license intellectual property rights in the event that it is strategically important, operationally compatible, and economically advantageous to do so. We are not materially dependent upon licenses and other agreements with third parties relating to product development.





Our technology team consists of an outsourced development team from Internet Business Group (“IBG”). This team is responsible for feature enhancements to and general maintenance of the Bizzingo site. Our technology team is located primarily in Dallas Texas.





Intellectual Property





Our intellectual property includes our brands, products and services; copyrights in software and creative content; trade secrets; and other intellectual property rights and licenses of various kinds. We will seek to protect our intellectual property assets through copyright, trade secret, trademark and other laws of the U.S., and through contractual provisions.





We consider the Bizzingo trademark and our related trademarks to be valuable to Bizzingo and we will aggressively seek to protect them.





Competition





We operate in the internet products, services, and content markets, which are highly competitive and characterized by rapid change, converging technologies, and increasing competition. Our most significant competition for users, advertisers, business’s, and developers comes from other social networking sites, such as Facebook, Groupon, Linkedin, and Twitter.  We also compete with these companies to distribute and promote our services to their users, advertisers and business’s.





Our principal considerations related to attracting and retaining online users include functionality, performance, ease of use, usefulness, accessibility, integration, and personalization of the online services that we offer, as well as the overall user experience and quality of support on Bizzingo properties. Our principal considerations related to attracting users, advertisers and businesses are the reach, effectiveness, and efficiency of our marketing and advertising services as well as the creativity of the marketing solutions that we offer. “Reach” refers to the audience and/or demographic that can be accessed through the Bizzingo platform. “Effectiveness” for advertisers refers to our ability to deliver against advertisers’ targets and to measure and optimize our achievements against those targets. “Effectiveness” for publishers refers to our advertising technology and the monetization opportunities we are able to offer through our technology and marketing services. Many large media companies have developed, or are developing, social networking or social media tools to reach their audiences online. As these companies develop such portal or community sites, we could lose a substantial portion of our expected user traffic.


7





Employees





As of June 30, 2011, we have no employees.  Our future success is substantially dependent on the performance of our senior management and key technical personnel, and our continuing ability to attract and retain highly qualified technical and managerial personnel.





Government Regulation





In the United States, advertising and promotional information presented to visitors on our website and our other marketing activities are subject to federal and state consumer protection laws that regulate unfair and deceptive practices. There are a variety of state and federal restrictions on the marketing activities conducted by email, or over the Internet, including U.S. federal and state privacy laws and the CAN-SPAM Act of 2003. The rules and regulations are complex and may be subject to different interpretations by courts or other governmental authorities. We might unintentionally violate such laws, such laws may be modified and new laws may be enacted in the future. Any such developments (or developments stemming from enactment or modification of other laws) or the failure to anticipate accurately the application or interpretation of these laws could create liability to us, result in adverse publicity and negatively affect our businesses. See our risk factors found elsewhere in this report for further discussion of government regulations.





Item 1A.  Risk Factors.





An investment in our common stock involves various risks. You should carefully consider the risk factors set forth below in conjunction with the other information contained in this report before purchasing our common stock. If any of the risks discussed in this report actually occur, our business, operating results, prospects and/or financial condition could be adversely impacted.  This could cause the market price of our common stock to decline and could cause you to lose all or part of your investment.




Risks Related to our Business and Our Industry




We have no operating history on which to evaluate our potential for future success.




Phreadz and UDM were formed in April 2009 and have had no material operations to date.  Consequently, evaluating an investment in us and predicting our future results based upon our past performance is not possible, particularly with respect to our ability to develop our products and services, to generate and sustain a revenue base sufficient to cover operating expenses or to achieve profitability.  We face many of the risks and uncertainties encountered by early stage companies, and our future operating results may differ from what we expect due to many factors, including: (i) slower than expected growth, or a downturn in the “real-time” communications industry; (ii) the uncertain adoption by consumers of the services that we intend to provide; and (iii) potential competition from other service providers.




Based on our historical financials, there is uncertainty as to our ability to continue as a going concern.




In the event that we are unable to achieve or sustain profitability or are otherwise unable to secure additional external financing, we may not be able to meet our obligations as they come due, raising substantial doubts as to our ability to continue as a going concern.  Any such inability to continue as a going concern may result in our security holders losing their entire investment.  Our financial statements, which have been prepared in accordance with generally accepted accounting principles, contemplate that we will continue as a going concern and do not contain any adjustments that might result if we were unable to continue as a going concern. Notwithstanding the foregoing our cash flow deficiencies raise substantial doubt as to our ability to continue as a going concern. Also, changes in our operating plans, our existing and anticipated working capital needs, the acceleration or modification of our expansion plans, lower than anticipated revenues, increased expenses, potential acquisitions or other events may also affect our ability to continue as a going concern.


8




We anticipate incurring operating losses and negative cash flows in the foreseeable future resulting in uncertainty of future profitability and limitation on our operations.




We anticipate that the Company will incur operating losses and negative cash flows in the foreseeable future, and to accumulate increasing deficits as we increase our expenditures for (i) our website and database expansions, (ii) infrastructure, (iii) sales and marketing, (iv) research and development, (v) personnel, and (vi) general business enhancements.  Any increases in our operating expenses will require us to achieve significant revenue before we can attain profitability.  In the event that we are unable to achieve profitability or raise sufficient funding to cover our losses, we may not be able to meet our obligations as they come due, raising substantial doubts as to our ability to continue as a going concern.




We will need additional capital to pursue our marketing strategies, conduct our operations and develop our products, and our ability to obtain the necessary funding is uncertain.




We will require significant additional capital resources from outside sources including equity and/or debt financings, license arrangements, grants and/or collaborative research arrangements in order to execute on our marketing strategy, develop products and continue operations, and we intend to seek to raise such additional capital.  In addition, we anticipate needing additional capital for our anticipated need to hire additional employees, increase our marketing budget, lease additional office space and increase our research and development investment.  However, we do not know if such capital will be available to us on reasonably favorable terms, or at all.  If we are able to raise such additional capital, our existing stockholders will experience dilution.  If we fail to obtain additional capital as and when required, our business will not succeed.




Our business model depends on our ability to successfully develop and operate our networks and deploy new offerings and technology.




There can be no assurances that we will be able to successfully design or engineer our networks or that we will not experience problems with the reliability of our network if we are able to make it operational in the future.  Any reliability problems that adversely affect our ability to operate our networks would likely reduce revenues and restrict the growth of our business.  Our future success will also depend in part on other factors, including, but not limited to, our ability to:




·
Find secure hosting;




·
Enhance our offerings;




·
Address the needs of our prospective users;




·
Respond to technological advances and emerging industry standards and practices on a timely and cost-effective basis; and




·
Develop, enhance and improve the responsiveness, functionality and features of our infrastructure services and networks.




If we are unable to integrate and capitalize on new technologies and standards effectively, our business could be adversely affected.


9




Our business model is new and unproven, and, therefore, we can provide no assurance that we will be successful in pursuing it.




Our Bizzingo operations represent new and untested business models, for which there are no assurances that we will succeed in building a profitable business.  Our ability to generate advertising is highly dependent on market adoption of our services and products.  If we are unable to attract revenues, our operations and financial condition will be adversely affected.




The departure of our Chairman, Chief Executive Officer and /or other key personnel could compromise our ability to execute our strategic plan and may result in additional severance costs to us.




Our success largely depends on the skills, experience and efforts of our key personnel, including Douglas Toth, our Chairman and CEO and Gordon Samson, our CFO.  The loss of these person(s), or our failure to retain other key personnel, would jeopardize our ability to execute our strategic plan and materially harm our business.  We have currently entered into employment agreements with each of Messrs. Toth and Samson.  In addition, we intend to enter into a written employment agreement with each of our other key executives that can be terminated at any time by us or the executives.




We will need to recruit and retain additional qualified personnel to successfully grow our business.




Our future success will depend in part on our ability to attract and retain qualified operations, marketing and sales personnel as well as engineers.  Inability to attract and retain such personnel could adversely affect the growth of our business.  We expect to face competition in the recruitment of qualified personnel, and we can provide no assurance that we will attract or retain such personnel.




We will rely on third parties for software and hardware development, manufacturing content and technology services.




We expect to rely on third party developers to provide software and hardware.  If we experience problems with any of our third party technology or products, our customers’ satisfaction could be reduced, and our business could be adversely affected.  In addition, we expect to rely on third parties to provide content through strategic relationships and other arrangements.  If we experience difficulties in maintaining these relationships or developing new relationships on a timely basis and on terms favorable to us, our business and financial condition could be adversely affected.




Malfunctions of third party hosting services could adversely affect their business, which may impede our ability to attract and retain strategic partners and customers.




To the extent the number of users of networks utilizing our products suddenly increases, the technology platform and hosting services which will be required to accommodate a higher volume of traffic may result in slower response times or service interruptions.  System interruptions or increases in response time could result in a loss of potential or existing users and, if sustained or repeated, could reduce the appeal of our networks to users.  In addition, since users depend on real time communication, outages caused by increased traffic could result in delays and system failures.  These types of occurrences could cause users to perceive that our solution does not function properly and could therefore adversely affect our ability to attract and retain licensees, strategic partners and customers.




There has been increased competition in the “real-time” communications industry. As more companies seek to provide products and services similar to our proposed products and services, and because larger and better-financed competitors may affect our ability to operate our business and achieve profitability, our business may fail.




Competition for securing IM and VoIP services is intense.  We are aware of similar products and services that will compete directly with our proposed products and services, and some of the companies developing these similar products and services are larger, better-financed companies that may develop products superior to our proposed products.  Many of our prospective competitors are larger and have greater financial resources, which could create significant competitive advantages for those companies.  Our future success depends on our ability to compete effectively with our competitors.  As a result, we may have difficulty competing with larger, established competitor companies. Generally, these competitors have:




·
substantially greater financial, technical and marketing resources;


10




·
larger customer bases;




·
better name recognition; and




·
Potentially more expansive product offerings.




These competitors are likely to command a larger market share, which may enable them to establish a stronger competitive position than we have, in part, through greater marketing opportunities.  Further, our competitors may be able to respond more quickly than us to new or emerging technologies and changes in user preferences and to devote greater resources than us to developing and operating networks of affinity websites.  These competitors may develop products or services that are comparable or superior.  If we fail to address competitive developments quickly and effectively, we may not be able to remain a viable entity.




Growth of internal operations and business may strain our financial resources.




We will be significantly expanding the scope of our operating and financial systems in order to build out our business.  Our growth rate may place a significant strain on our financial resources for a number of reasons, including, but not limited to, the following:




·
The need for continued development of the financial and information management systems;




·
The need to manage relationships with licensees, resellers, distributors and strategic partners;




·
Difficulties in hiring and retaining skilled management, technical and other personnel necessary to support and manage our business; and




·
The need to train and manage our growing employee base.




The addition of new infrastructure services, networks, vertical categories and affinity websites, as well as the attention they demand, may also strain our management resources.  We cannot give you any assurance that we will adequately address these risks and, if we do not, our ability to successfully expand our business could be adversely affected.




If we do not successfully enhance existing products and services or fail to develop new products and services in a cost-effective manner to meet customer demand in the rapidly evolving market for Internet and IP-based communications services, our business may fail.




The market for communications services is characterized by rapidly changing technology, evolving industry standards, changes in customer needs and frequent new service and product introductions.  We are currently focused on securing “real-time” communications.  Our future success will depend, in part, on our ability to use new technologies effectively, to continue to develop our technical and marketing expertise, to enhance our existing services and to develop new services that meet changing customer needs on a timely and cost-effective basis.  We may not be able to adapt quickly enough to changing technology, customer requirements and industry standards.  If we fail to use new technologies effectively, to develop our technical expertise and new services, or to enhance existing services on a timely basis, either internally or through arrangements with third parties, our product and service offerings may fail to meet customer needs, which would adversely affect our revenues and prospects for growth.




Our services may have technological problems or may not be accepted by consumers.  To the extent we pursue commercial agreements, acquisitions and/or strategic alliances to facilitate new product or service activities, the agreements, acquisitions and/or alliances may not be successful.  If any of these events were to occur, they could damage our reputation, limit our growth, negatively affect our operating results and harm our business.




In addition, if we are unable, for technological, legal, financial or other reasons, to adapt in a timely manner to changing market conditions or customer requirements, we could lose customers, strategic alliances and market share.  Sudden changes in user and customer requirements and preferences, the frequent introduction of new products and services embodying new technologies and the emergence of new industry standards and practices could render our existing products, services and systems obsolete.  The emerging nature of products and services in the technology and communications industry and their rapid evolution will require that we continually improve the performance, features and reliability of our products and services. Our success will depend, in part, on our ability to:


11




·
Enhance our existing products and services;




·
Design, develop, launch and/or license new products, services and technologies that address the increasingly sophisticated and varied needs of our current and prospective customers; and




·
Respond to technological advances and emerging industry standards and practices on a cost-effective and timely basis.




The development of additional products and services and other proprietary technology involves significant technological and business risks and requires substantial expenditures and lead time.  We may be unable to use new technologies effectively.  Updating our technology internally and licensing new technology from [strategic partners and other third parties may not occur, which could adversely affect our ability to develop and expand our business.]




If the market for our services does not develop as anticipated, our business would be adversely affected.




The success of our products and services depend on the growth of social network site (SNS) users, which in turn depends on wider public acceptance of our websites and offerings.  Potential new users may view our offerings as unattractive relative to other traditional services for a number of reasons, including better perceived offerings or pricings than we currently offer. Potential users may also view more familiar services as sufficient for their SNS and music search needs. There is no assurance that our offerings will ever achieve broad public acceptance.




If our products do not gain market acceptance, we may not be able to fund future operations.




A number of factors may affect the market acceptance of our products or any other products we develop or acquire, including, among others:




·
the price of our products relative to other products that seek to secure “real-time” communication;




·
the perception by users of the effectiveness of our products;




·
our ability to fund our sales and marketing efforts; and




·
the effectiveness of our sales and marketing efforts.




If our products do not gain market acceptance, we may not be able to fund future operations, including the development of new products and/or our sales and marketing efforts for our current products, which inability would have a material adverse effect on our business, financial condition and operating results.




If we are not able to adequately protect our proprietary rights, our operations would be negatively impacted.




Our ability to compete partly depends on the superiority, uniqueness and value of our technology and intellectual property.  To protect our proprietary rights, we rely on a combination of patent, trademark, copyright and trade secret laws, confidentiality agreements with our employees and third parties, and protective contractual provisions.  Despite these efforts, any of the following may reduce the value of our intellectual property:




·
Our applications for patents, trademarks and copyrights relating to our business may not be granted and, if granted, may be challenged or invalidated;




·
Issued trademarks, copyrights, or patents may not provide us with any competitive advantages;




·
Our efforts to protect our intellectual property rights may not be effective in preventing misappropriation of our technology; or


12




·
Our efforts may not prevent the development and design by others of products or technologies similar to or competitive with, or superior to those we develop.




In addition, we may not be able to effectively protect our intellectual property rights in certain foreign countries where we may do business in the future or from which competitors may operate.  While we have numerous pending international patents, obtaining such patents will not necessarily protect our technology or prevent our international competitors from developing similar products or technologies.  Our inability to adequately protect our proprietary rights would have a negative impact on our operations.




If we are forced to litigate to defend our intellectual property rights, or to defend against claims by third parties against us relating to intellectual property rights, legal fees and court injunctions could adversely affect our financial condition or end our business.




Disputes regarding the ownership of technologies and intellectual property rights are common and likely to arise in the future.  We may be forced to litigate against other competitors to enforce or defend our intellectual property rights, to protect our trade secrets or to determine the validity and scope of other parties’ proprietary rights.  Any such litigation could be very costly and could distract our management from focusing on operating our business.  The existence and outcome of any such litigation could harm our business.  Additionally, any such costs we incur to defend or protect our intellectual property rights could greatly impact our financial condition.




Further, we can give no assurances that infringement or invalidity claims (or claims for indemnification resulting from infringement claims) will not be asserted or prosecuted against us or that any such assertions or prosecutions will not materially adversely affect our business.  Regardless of whether any such claims are valid or can be successfully asserted, defending against such claims could cause us to incur significant costs and could divert resources away from our other activities.  In addition, assertion of infringement claims could result in injunctions that prevent us from distributing our products.




We could be subject to liability for hacking or spam on our networks.




The nature and breadth of the content on our networks could result in liability in various areas, including claims relating to:




·
Defamation, libel, negligence, personal injury and other legal theories based on the nature and content of the material appearing on our networks;




·
Copyright or trademark infringement or other wrongful acts due to the actions of third parties; and




·
Identity theft, misuse of personal data or information.




Any such claims could likely result in the Company incurring substantial costs and would be a drain on our financial and other resources.  In addition, such claims could disrupt our relationships with licensees, resellers, strategic partners and other third parties.  This would negatively affect our user base and could reduce our revenues as a result.




The laws governing online secure communications are largely unsettled, and if we are or become subject to various government regulations, costs associated with those regulations may materially adversely affect our business.




The current regulatory environment for our services remains unclear.  We can give no assurance that we will be in or have been in compliance with local, state and/or federal laws or other laws.  Further, we can give no assurance that we will not unintentionally violate such laws or that such laws will not be modified, or that new laws will be enacted in the future which would cause us to be in violation of such laws.




It is possible that Congress and some state legislatures may seek to impose increased fees, regulations and administrative burdens on the services that we provide. Added consumer protection requirements and other obligations could be imposed. Such regulations could result in substantial costs depending on the technical changes required to accommodate the requirements, and any increased costs could erode our pricing advantage over competing forms of communication and may adversely affect our business.


13




In addition to regulations addressing our services, other regulatory issues relating to the Internet in general could affect our ability to provide services.  Congress has adopted legislation that regulates certain aspects of the Internet, including online content, user privacy, taxation, liability for third-party activities and jurisdiction.  In addition, a number of initiatives pending in Congress and state legislatures would prohibit or restrict advertising or sale of certain products and services on the Internet, which may have the effect of raising the cost of doing business on the Internet generally.




Telephone carriers have petitioned governmental agencies to enforce regulatory tariffs, which, if granted, would increase the cost of online communications, and such increase in cost may impede the growth of secure online communication and adversely affect our business.




The growing popularity and use of online secure communications has burdened the existing telecommunications infrastructures, and many high traffic areas have begun to experience interruptions in service.  As a result, certain local telephone carriers have petitioned governmental agencies to enforce regulatory tariffs on IP telephony traffic that crosses over the traditional time division multiplexing (TDM) telephony networks.  If any of these petitions or the relief that they seek is granted, the costs of communicating online could increase substantially, potentially adversely affecting the growth in the use of online networks and communications. Any of these developments could have an adverse effect on our business.




If there are large numbers of business failures and mergers in the communications industry, our ability to manage costs or increase our subscriber base may be adversely affected.




The intensity of competition in the communications industry has resulted in significant declines in pricing for communications services.  The intensity of competition and its impact on communications pricing have caused some communications companies to experience financial difficulty.  Our prospects for maintaining or further improving communications costs could be negatively affected if one or more key communications providers were to experience serious enough difficulties to impact service availability, if communications companies merge reducing the number of companies from which we purchase wholesale services, or if communications bankruptcies and mergers reduce the level of competition among database, SNS and other service providers.




If we expand into international markets, our inexperience outside the United States would increase the risk that our international expansion efforts will not be successful, which would in turn limit our prospects for growth.




We may explore expanding our business to other countries.  Expansion into international markets requires significant management attention and financial resources.  In addition, we may face the following risks associated with any expansion outside the United States:




·
challenges caused by distance, language and cultural differences;




·
legal, legislative and regulatory restrictions;




·
currency exchange rate fluctuations;




·
economic instability;




·
longer payment cycles in some countries;




·
credit risk and higher levels of payment fraud;




·
potentially adverse tax consequences; and




·
higher costs associated with doing business internationally.




These risks could harm our international expansion efforts, which could in turn harm our business prospects.


14




Climate change poses both regulatory and physical risks that could harm our operations or the way we expect to conduct business.




In addition to the possible direct economic impact that climate change could have on us, climate change mitigation programs and regulations could increase our costs. We see the potential for higher energy costs driven by climate change regulations. Our costs could increase if utility and communication companies pass on their costs, such as those associated with carbon taxes, emission cap and trade programs, or renewable portfolio standards. While we maintain business recovery plans that are intended to allow us to recover from natural disasters or other events that can be disruptive to our business, we cannot be sure that our plans will fully protect us from all such disasters or events.


We are subject to management risks.




New ventures have substantial inherent risks including, but not limited to, development, marketing, sales, distribution, human factors and the coordination of any and all of these activities.  Notwithstanding our due diligence and any pre-planning, our products and services may encounter unexpected problems in connection with any of these activities that could not be foreseen or accurately predicted and which could have a material adverse effect on our business, financial condition and results of operations.




We have agreed to indemnify our directors and officers





Our officers and directors are required to exercise good faith and high integrity in our management affairs. Our articles of incorporation, our bylaws and the Nevada Revised Statutes provide, however, that our officers and directors will have no liability to our stockholders for losses sustained or liabilities incurred which arise from any transaction in their respective managerial capacities unless they:





·
violated their duty of loyalty,·
did not act in good faith,·
engaged in intentional misconduct or knowingly violated the law,·
approved an improper dividend or stock repurchase, or·
Derived an improper benefit from the transaction.





Our articles of incorporation, our bylaws and the Nevada Revised Statutes also provide for the indemnification by us of our officers and directors against any losses or liabilities they may incur as a result of the manner in which they operate our business or conduct the internal affairs, provided that in connection with these activities they act in good faith and in a manner that they reasonably believe to be in, or not opposed to, our best interests, and their conduct does not constitute gross negligence, misconduct or breach of fiduciary obligations. We have also entered into indemnity agreements with our officers and directors.  These indemnification obligations could result in the Company incurring substantial expenditures to cover the cost of settlement or damage awards against directors and officers, which we may be unable to recoup. These provisions and resultant costs may also discourage our company from bringing a lawsuit against directors and officers for breaches of their fiduciary duties, and may similarly discourage the filing of derivative litigation by our stockholders against our directors and officers even though such actions, if successful, might otherwise benefit our company and stockholders.





We have and will continue to incur increased costs as a result of being a public company, compared to the Company’s historical operations as a private company.




As a public company, we have and will continue to incur significant legal, accounting and other expenses that UDM and Phreadz did not incur as private companies.  We expect the laws, rules and regulations governing public companies to increase our legal and financial compliance costs and to make some activities more time-consuming and costly.  Additionally, with the Acquisitions and the termination of our status as a shell company, we will incur additional costs associated with our public company reporting requirements.


15




Risks Related to our Stock




Trading in our common stock is limited and the price of our common stock may be subject to substantial volatility.




Our common stock is traded on the OTC Bulletin Board, and therefore the trading volume is more limited and sporadic than if our common stock were traded on a national stock exchange such as The Nasdaq Stock Market or the NYSE Amex. Additionally, the price of our common stock may be volatile as a result of a number of factors, including, but not limited to, the following:




·
quarterly variations in our operating results;




·
large purchases or sales of our common stock;




·
actual or anticipated announcements of new products or services by us or competitors;




·
general conditions in the markets in which we compete; and




·
economic and financial conditions.




“Penny stock” regulations may impose certain restrictions on the marketability of our securities.




The SEC has adopted regulations which generally define a “penny stock” to be any equity security that has a price of less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions (including the issuer of the securities having net tangible assets (i.e., total assets less intangible assets and liabilities) in excess of $2,000,000 or average revenue of at least $6,000,000 for the last three years). As a result, our common stock could be subject to these rules that impose additional sales practice requirements on broker-dealers who sell our securities to persons other than established customers and accredited investors (generally persons with a net worth in excess of $1,000,000 or annual income exceeding $200,000, or $300,000 together with their spouse).  For transactions covered by these rules, the broker-dealer must make a special suitability determination for the purchase of such securities and have received the purchaser’s written consent to the transaction prior to the purchase.  Additionally, for any transaction involving a “penny stock,” unless exempt, the rules require the delivery, prior to the transaction, of a risk disclosure document mandated by the SEC relating to the “penny stock” market.  The broker-dealer must also disclose the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities 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.  Finally, monthly statements must be sent disclosing recent price information for the “penny stock” held in the account and information on the limited market in “penny stocks.”  Consequently, although the “penny stock” rules do not currently apply to our securities, if these rules do become applicable in the future, this may restrict the ability of broker-dealers to sell our securities.




Securities analysts may not cover our common stock and this may have a negative impact on our common stock’s market price.




The trading market for our common stock may depend on the research and reports that securities analysts publish about us or our business.  We do not have any control over these analysts.  There is no guarantee that securities analysts will cover our common stock.  If securities analysts do not cover our common stock, the lack of research coverage may adversely affect our common stock’s market price, if any. If we are covered by securities analysts, and our stock is downgraded, our stock price would likely decline.  If one or more of these analysts ceases to cover us or fails to publish regularly reports on us, we could lose visibility in the financial markets, which could cause our stock price or trading volume to decline.




We may seek to raise additional funds, finance acquisitions or develop strategic relationships by issuing capital stock.




We have financed our operations, and we expect to continue to finance our operations, acquisitions and develop strategic relationships, by issuing equity or convertible debt securities, which could significantly reduce or dilute the percentage ownership of our existing stockholders.  Furthermore, any newly issued securities could have rights, preferences and privileges senior to those of our existing stock.  Moreover, any issuances by us of equity securities may be at or below the prevailing market price of our stock and in any event may have a dilutive impact on your ownership interest, which could cause the market price of stock to decline.


16




We may also raise additional funds through the incurrence of debt, and the holders of any debt we may issue would have rights superior to your rights in the event we are not successful and are forced to seek the protection of the bankruptcy laws.




We have no current intention of declaring or paying any cash dividends on our common stock.




We do not plan to declare or pay any cash dividends on our common stock. Our current policy is to retain all funds and any earnings for use in the operation and expansion of our business.


17


Item 1B. Unresolved Staff Comments.





None.





Item 2.  Properties.





Our principal executive offices are located at 63 Main Street, Flemington, New Jersey 08858. This office space has been provided by Groupmark Financial Services Ltd., with no cost to the Company. This arrangement began on April 1, 2009, and as at December 1, 2010 we started paying rent of $805.00 per month on a month to month basis. The telephone number at this address is (908) 968-0838.





Item 3.  Legal Proceedings.





We are not a party to any legal proceedings. Management is not aware of any legal proceedings proposed to be initiated against the Company. However, from time to time, the Company may become subject to claims and litigation generally associated with any business venture operating in the ordinary course.





Item 4.  [Removed and Reserved.]





Not applicable.





PART II





Item 5.  Market for Registrant’s Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.





The Company’s common stock is traded on the Over-the-Counter Bulletin Board. On June 18, 2010 we changed our Company name to Phreadz, Inc. and on July 6, 2010 our symbol changed from “AWDM” to “PHDZ”.On April 29, 2011, we received notice from FINRA/OTC Corporate Actions that our name change would be effective on the open of business on May 2, 2011 and our common stock will trade under the new symbol“BIZZ”.All share prices have been adjusted to provide for the 7-1 forward stock split affected on September 28, 2009. We consider our stock to be “thinly traded” and any reported sale prices may not be a true market–based valuation of its stock. The following table sets forth, for the periods indicated, the high and low bid prices of a share of our common stock for the last two fiscal years.





HIGH BID


LOW BID2011Quarter Ended August 2010

$
1.010


$
0.580Quarter Ended November 30, 2010

$
0.750


$
0.600Quarter Ended February 28, 2011

$
0.600


$
0.510Quarter Ended May 31, 2011

$
1.500


$
0.6502010Quarter Ended August 31, 2009

$
0.179


$
0.146Quarter Ended November 30, 2009

$
0.146


$
0.021Quarter Ended February 28, 2010

$
0.146


$
0.146Quarter Ended May 31, 2010

$
1.000


$
0.146





The above quotations are taken from information provided by OTCMarkets.com and may not represent actual transactions.


18





Common Stock





We are authorized to issue 525,000,000 shares of common stock, with a par value of $0.001. The closing price of our common stock on August 15, 2011, as quoted by the OTC was $0.40. There are 66,780,576 shares of common stock issued and outstanding as of August 15, 2011. All shares of common stock have one vote per share on all matters including election of directors, without provision for cumulative voting. The common stock is not redeemable and has no conversion or pre-emptive rights. The common stock currently outstanding is validly issued, fully paid and non- assessable. In the event of liquidation of the company, the holders of common stock will share equally in any balance of the Company's assets available for distribution to them after satisfaction of creditors and preferred shareholders, if any. The holders of common stock of the company are entitled to equal dividends and distributions per share with respect to the common stock when, as and if, declared by the board of directors from funds legally available.





Record Holders





At June 30, 2011, the Company had 123 shareholders of record, and an unknown number of additional holders whose stock is held in "street form".  The transfer agent of our common stock is Island Stock Transfer.





Recent Sales of Unregistered Securities





The acquisition of Phreadz and UDM by the Company on April 27, 2010 was accounted for as a recapitalization by the Company. The recapitalization was the merger of two private LLCs into a non-operating public shell corporation (the Company) with nominal net assets and as such is treated as a capital transaction, rather than a business combination. The transaction is the equivalent to the issuance of stock by the private company for the net monetary assets of the shell corporation. The pre-acquisition consolidated financial statements of Phreadz and UDM are treated as the historical financial statements of the consolidated Company. Therefore, the capital structure of the consolidated enterprise, being the capital structure of the legal parent, is different from that appearing in the financial statements of Phreadz and UDM in earlier periods due to the recapitalization.





1.
On April 3, 2009, 1,920,000 shares were issued for property.





2.
On May 28, 2009, 12,480,000 shares were issued for cash.





3.
On August 25, 2009, 23,136,000 shares were issued for cash.





4.
On March 10, 2010, 5,782,400 shares were issued for cash.





5.
On April 27, 2010, 42,700,000 shares were issued and 32,712,176 shares were cancelled upon the recapitalization due to the reverse merger.





6.
On May 20, 2010, 1,933,333 shares were issued at $0.15 per share, for an aggregate cash amount of $290,000.





7.
On May 31, 2010, 6,514,310 shares were issued in settlement of $892,147.34 in notes assigned to the Company with one note-holder also receiving the “right” with their settled note to receive the equivalent amount of the face amount of their note in consideration of their note.





8.
On June 8, 2010 1,333,333 shares were issued at $0.15 for cash of $200,000.





9.
On June 22, 2010 1,334,176 net shares were issued on account of an April 27, 2010 Exchange Agreement.


10.
On July 16, 2010 2,520,000 shares were issued at $0.15 for cash of $378,000.





11.
On November 1, 2010 1,080,000 shares were issued at $0.15 for cash of $162,000.





12.
On December 3, 2010 720,000 shares were issued at $0.15 for cash of $108,000.





13.
On January 31, 2011 by resolution the Board caused 2,000,000 shares to be issued for services.





14.
On March 15, 2011 2,500,000 shares were issued for the acquisition of computer code.


19




On April 27, 2010, we completed the acquisitions under the Purchase Agreements entered into with both Phreadz and UDM. As a condition of closing, 32,712,176 shares of our issued and outstanding common stock previously held by certain stockholders were cancelled pursuant to the terms of the Purchase Agreements. We issued 21,659,200 shares of our common stock in exchange for 100% of the membership units of Phreadz and 21,659,200 shares of our common stock in exchange for 100% of the membership units of UDM, at which time Phreadz and UDM became our wholly owned subsidiaries.





On May 20, 2010, we entered into a Unit Purchase Agreement with a single accredited investor (the “May 20th Purchaser”) pursuant to which the May 20th Purchaser purchased 10.74074 Units (each, a “Unit”) at a purchase price of $27,000 per Unit, for an aggregate purchase price of $290,000.  Each Unit purchased consisted of: (a) one hundred eighty thousand (180,000) shares of the Company’s common stock; (b) a Series A Warrant  (the “Series A Warrants”) to purchase ninety thousand (90,000) shares of common stock at an exercise price of $0.30 per share; and (c) a Series B Warrant (the “Series B Warrants”) to purchase ninety thousand (90,000) shares of common stock at an exercise price of $0.60 per share.  Accordingly, the May 20th Purchaser received 1,933,333 shares of common stock (the “Shares”); a Series A Warrant to purchase 966,666 shares of common stock and a Series B Warrant to purchase 966,666 shares of common stock.





On May 31, 2010, we entered into Unit Purchase Agreements with nine (9) accredited investors (the “May 31st Purchasers) pursuant to which the May 31st Purchasers purchased 33.0425 Units at a purchase price of $27,000 per Unit, for an aggregate purchase price of $892,147.34.  The purchase price for the Units was paid via assignment of certain outstanding promissory notes originally issued by our subsidiaries UDM and Phreadz.  In addition, one May 31st Purchaser also received the “right” with its note to receive the equivalent amount of the face amount of such note in Units with the consideration of such May 31st Purchaser’s original note. Each Unit purchased consisted of: (a) one hundred eighty thousand (180,000) shares of the Company’s common stock; (b) a Series A Warrant to purchase ninety thousand (90,000) shares of common stock at an exercise price of $0.30 per share; and (c) a Series B Warrant to purchase ninety thousand (90,000) shares of common stock at an exercise price of $0.60 per share.  Accordingly, in total, the May 31st Purchasers received 6,514,310 shares of common stock; Series A Warrants to purchase 3,257,154 shares of common stock; and Series B Warrants to purchase 3,257,154 shares of common stock.





On June 8, 2010, we entered into a Unit Purchase Agreement with a single accredited investor pursuant to which the Purchaser purchased 7.4074 Units at a Purchase Price of $27,000 per Unit for an aggregate purchase price of $200,000.  Each Unit purchased consisted of (a) one hundred eighty thousand (180,000) shares of the Company’s common stock, par value $0.001 per share (“Common Stock”); (b) a Series A Warrant  (the “Series A Warrants”) to purchase ninety thousand (90,000) shares of Common Stock at an exercise price of $0.30 per share; and (c) a Series B Warrant (the “Series B Warrants”, together with the Series A Warrants, the “Warrants”) to purchase ninety thousand (90,000) shares of Common Stock at an exercise price of $0.60 per share.  Accordingly, Purchaser received 1,333,333 shares of Common Stock (the “Shares”); a Series A Warrant to purchase 666,666 shares of Common Stock and a Series B Warrant to purchase 666,667 shares of Common Stock.





On July 16, 2010, we entered into a Unit Purchase Agreements with thirteen (13) accredited investors pursuant to which the Purchasers purchased 14 Units at a Purchase Price of $27,000 per Unit for an aggregate purchase price of $378,000. Each Unit purchased consisted of (a) one hundred eighty thousand (180,000) shares of the Company’s common stock, par value $0.001 per share (“Common Stock”); (b) a Series A Warrant  (the “Series A Warrants”) to purchase ninety thousand (90,000) shares of Common Stock at an exercise price of $0.30 per share; and (c) a Series B Warrant (the “Series B Warrants”, together with the Series A Warrants, the “Warrants”) to purchase ninety thousand (90,000) shares of Common Stock at an exercise price of $0.60 per share.  Accordingly, in total, purchasers received 2,520,000 shares of Common Stock (the “Shares”); a Series A Warrant to purchase 1,260,000 shares of Common Stock and a Series B Warrant to purchase 1,260,000 shares of Common Stock





Southridge Investment Group LLC. an SEC Registered Broker/Dealer, Member FINRA/SIPC (“Southridge”) acted as placement agent in connection with the sale of the 13 Units referred to above in the preceding paragraph.  Southridge received $22,140 in commissions and expenses and 54,000 Series A Warrants and 54,000 Series B Warrants.  We also paid $3,500 in escrow fees.  The net proceeds of the offering after payments of the commissions and expenses and escrow fees were approximately $352,360.


20





In April 2007 the Company entered into an Exchange Agreement (“Exchange Agreement”) with Professional Capital Partners, Ltd. ("PCP"),  pursuant to which the Company and PCP agreed to exchange 5,325,824 shares of the Company's common stock (the “Original Shares”) for $1,000,000 worth of Units in its next financing. The Company has offered and sold Units in a financing, with each Unit consisting of: (i) 180,000 shares of the Company's common stock; (ii) a Series A warrant to purchase 90,000 shares of common stock at an exercise price of $0.30 per share; and (iii) a Series B Warrant to purchase 90,000 shares of common stock at an exercise price of $0.60 per share.





On June 22, 2010 PCP exercised this Exchange Agreement and exchanged its Original Shares for 37 Units. As a result, PCP received 6,660,000 shares of common stock; a Series A Warrant to purchase 3,330,000 shares of common stock; and a Series B Warrant to purchase 3,330,000 shares of common stock.





A financing expense of $1,000,632 was recorded at May 31, 2010 as a stock issuance liability with the exercise of the Exchange Agreement on June 22, 2010 because this cost became known prior to the report date of this disclosure. The financing cost was determined using the last trade of $0.75 as reported on OTCBB.com on June 11, 2010, prior to the June 22, 2010 exercise date, on the additional 1,334,176 shares of common stock issued to PCP pursuant to the Exchange Agreement.





On November 1, 2010 we entered into Unit Purchase Agreements with five (5) accredited investors pursuant to which the Purchasers (the November 1st Purchasers) pursuant to which the November 1st Purchasers purchased 6.00 Units at a purchase price of $27,000 per Unit, for an aggregate purchase price of $162,000.00. Each Unit purchased consisted of: (a) one hundred eighty thousand (180,000) shares of the Company’s common stock; (b) a Series A Warrant to purchase ninety thousand (90,000) shares of common stock at an exercise price of $0.30 per share; and (c) a Series B Warrant to purchase ninety thousand (90,000) shares of common stock at an exercise price of $0.60 per share.  Accordingly, the November 1st Purchasers received 1,080,000 shares of common stock; a Series A Warrant to purchase 540,000 shares of common stock; and a Series B Warrant to purchase 540,000 shares of common stock.





Southridge Investment Group LLC., a SEC Registered Broker/Dealer, Member FINRA/SIPC (“Southridge”) acted as placementagent in connection with the sale of the six (6) Units referred to above in the preceding paragraph.  Southridge received $15,390 in commissions and 45,000 Series A Warrants and 45,000 Series B Warrants.  We also paid $2,000 in escrow fees in the offering.  The net proceeds of the offering after payments of the commissions and expenses were approximately $144,610.





On December 3, 2010 we entered into a Unit Purchase Agreement with one (1) accredited investor pursuant to which the Purchaser (the December 3, 2010 Purchaser) pursuant to which the Purchaser purchased 4.00 Units at a purchase price of $27,000 per Unit, for an aggregate purchase price of $108,000.00. Each Unit purchased consisted of: (a) one hundred eighty thousand (180,000) shares of the Company’s common stock; (b) a Series A Warrant to purchase ninety thousand (90,000) shares of common stock at an exercise price of $0.30 per share; and (c) a Series B Warrant to purchase ninety thousand (90,000) shares of common stock at an exercise price of $0.60 per share.  Accordingly, the December 3, 2010 Purchaser received 720,000 shares of common stock; a Series A Warrant to purchase 360,000 shares of common stock; and a Series B Warrant to purchase 360,000 shares of common stock.





For certain of the Purchasers described above the Unit Purchase Agreement granted Registration Rights which contained certain rights which included Liquidated Damages. “The Company will be obligated to pay investor a fee equal to 1.0% (which will increase to 2.0% after the first 30 days)  of such investor's purchase price for each 30 day period (pro-rated for partial periods); provided that such damages shall be capped at 12% of such investor’s total purchase price.





If the Company fails to pay any partial liquidated damages pursuant to paragraph 2) b) & c) of the Registration Rights Agreement in full within 7 days after the date payable, the Company will pay interest thereon at a rate of 18% per annum (or such lesser maximum amount that is permitted to be paid by applicable law) to the Holder, accruing daily from the date such partial liquidated damages are due until such amounts, plus all such interest thereon, are paid in full.





We have not yet filed a Registration Statement, we have a certain number of the Purchaser’s who are entitled to Liquidated Damages as described herein. Accordingly, we have accrued an interest expense as Liquidated Damages for those Purchaser’s that this applies to in the amount of $118,017.86. We expect to file a Registration Statement in the near term.


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Dividends





The Company has never paid a cash dividend on its common stock nor does it anticipate paying cash dividends on its common stock in the near future. It is the present policy of the Company not to pay cash dividends on the common stock but to retain earnings, if any, to fund growth and expansion. Any payment of cash dividends on the common stock in the future will be dependent upon the Company’s financial condition, results of operations, current and anticipated cash requirements, plans for expansion, as well as other factors the Board of Directors deems relevant.





Warrants





The fair value of the 10,479,488 Series A Warrants, with an exercise price of $0.30 per share, issued in connection with the Unit Purchase Agreements described herein during the period April 3, 2009 (Inception) to May 31, 2011 was estimated using the Black-Scholes option pricing model and based on the following assumptions:





Series A Warrants

2010Risk-free interest rate (based on US Treasury Note Yield (2 year)


1.35
%Dividend yield


0.00
%Expected stock price volatility (Cumulative)


91.71
%Weighted average expected warrants life

8 years





The Company analyzed the beneficial nature of the conversion terms and determined that no material beneficial conversion feature exists.





The fair value of the 10,479,488 Series B Warrants, with an exercise price of $0.60 per share, issued in connection with the Unit Purchase Agreements described herein during the period April 3, 2009 (Inception) to May 31, 2011 was estimated using the Black-Scholes option pricing model and based upon the following assumptions:





Series B Warrants

2010Risk-free interest rate (based on US Treasury Note Yield (2 year)


1.35
%Dividend yield


0.00
%Expected stock price volatility (Cumulative)


91.71
%Weighted average expected warrants life

8 years





The Company analyzed the beneficial nature of the conversion terms and determined that no material beneficial conversion feature exists.





Securities Authorized for Issuance Under Equity Compensation Plans




As of May 31, 2011, the Company had no equity securities authorized for issuance under any compensation plans (including individual compensation arrangements).





Section 15(g) of the Securities Exchange Act of 1934





Our shares are covered by section 15(g) of the Securities Exchange Act of 1934, as amended, and Rules 15g-1 through 15g-6, and 15g-9 promulgated thereunder. They impose additional sales practice requirements on broker/dealers who sell our securities to persons other than established customers and accredited investors (generally institutions with assets in excess of $5,000,000 or individuals with net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouses).





Rule 15g-1 exempts a number of specific transactions from the scope of the penny stock rules.





Rule 15g-2 declares unlawful broker/dealer transactions in penny stocks unless the broker/dealer has first provided to the customer a standardized disclosure document.


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Rule 15g-3 provides that it is unlawful for a broker/dealer to engage in a penny stock transaction unless the broker/dealer first discloses and subsequently confirms to the customer current quotation prices or similar market information concerning the penny stock in question.





Rule 15g-4 prohibits broker/dealers from completing penny stock transactions for a customer unless the broker/dealer first discloses to the customer the amount of compensation or other remuneration received as a result of the penny stock transaction.





Rule 15g-5 requires that a broker/dealer executing a penny stock transaction, other than one exempt under Rule 15g-1, disclose to its customer, at the time of or prior to the transaction, information about the sales persons compensation.





Rule 15g-6 requires broker/dealers selling penny stocks to provide their customers with monthly account statements.





Rule 15g-9 requires broker/dealers to approve the transaction for the customer’s account; obtain a written agreement from the customer setting forth the identity and quantity of the stock being purchased; obtain from the customer information regarding his investment experience; make a determination that the investment is suitable for the investor; deliver to the customer a written statement for the basis for the suitability determination; notify the customer of his rights and remedies in cases of fraud in penny stock transactions; and, the FINRA’s toll free telephone number and the central number of the North American Administrators Association, for information on the disciplinary history of broker/dealers and their associated persons.





The application of the penny stock rules may affect a stockholder’s ability to resell his, her or its shares.





Item 6.  Selected Financial Data.





We are a smaller reporting company as defined in Rule 12b-2 of the Exchange Act and are not required to provide the information required under this Item.





Item 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operations.





The information contained in this Management's Discussion and Analysis of Financial Condition and Results of Operation contains “forward looking statements.” Actual results may materially differ from those projected in the forward-looking statements as a result of certain risks and uncertainties set forth in this report. Although management believes that the assumptions made and expectations reflected in the forward looking statements are reasonable, there is no assurance that the underlying assumptions will, in fact, prove to be correct or that actual future results will not be materially different from the expectations expressed in this Annual Report. The following discussion should be read in conjunction with the audited Consolidated Financial Statements and related Notes thereto included in Part II, Item 8 of this Annual Report on Form 10-K, with the Risk Factors section under Part I, Item 1A of this Annual Report on Form 10-K, and the Special Note regarding forward-looking statements included elsewhere in this Annual Report on Form 10-K.





Company Overview





We are a development stage company and since our acquisition of Phreadz and UDM we have evolved into Bizzingo. This development has culminated inwww.bizzingo.com(“Bizzingo”) and is a social network designed for business and commerce.Bizzingo will take advantage of the present environment by differentiating itself from other social networks by addressing the many inadequacies currently existing within the system. Instead of creating another unavailing network of captive consumers, Bizzingo will launch a platform of businesses that will leverage the existing communities to market their products and services.





Bizzingo will provide the following benefits and solutions to the world of social networking:





1.
The democratization of the Bizzingo social community, giving equal access to all who use it, thereby allowing smaller businesses the ability to compete with larger, established companies.




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2.
The ability for both the B2B and B2C users to monetization their interaction within social media.





3.
The enhancement of privacy through its user interface structure and the targeted audience feature. By design, at the time a user signs up for an account he/she does not need to be "profiled" for targeted advertising. Instead, a user is assessed by the Zones he/she visits (i.e.: A user surfing the Travel Zone is more likely to rent a hotel room).





4.
The consolidation of many networks, providing users a more efficient way to use their communities for commerce. In other words, Bizzingo allows the consolidation of most social networks under its single domain.





5.
The function of selling back in the hands of the businesses, because a Bizzingo page is a business and product profile page, not a personal profile page. Bizzingo will attract sellers of products and services from around the world - Bizzingo is a true free market.





Corporate Events





On April 27, 2010 we entered into an Employment Agreement with Georges Daou, which, by agreement was rescinded effective the same day. It was intended that the aforementioned Employment Agreement was to be replaced with a Consulting Agreement to be entered into by and between the Company and GJD Holdings, LLC, a wholly owned subsidiary of Georges Daou, on substantially the same terms as found in the Employment Agreement of April 27, 2010.  Due to Mr. Daou’s resignation on October 5, 2010, we no longer intend to enter into such consulting agreement.





On June 15, 2010, our Board of Directors appointed Christina Domecq to serve as our chief executive officer.  Ms. Domecq’s employment commenced on July 5, 2010 and we entered into an employment agreement with Ms. Domecq.  The agreement provides for an annual base salary during the term of the agreement of $250,000, subject to potential upwards adjustments at the discretion of the compensation committee of the Board of Directors. Ms. Domecq is eligible to receive a bonus of up to 100% of her then current base salary, with 50% of such bonus to be awarded at the discretion of the Board of Directors or the compensation committee and the remaining 50% subject to achievement of milestones to be established by Ms. Domecq, the Board of Directors and the compensation committee.  Immediately upon our establishment of an employee stock option plan, we agreed to grant Ms. Domecq an option to purchase 6,748,316 shares of our common stock.  The option shall have an exercise price equal to the fair market value of our common stock as of the date of the employment agreement.  The option shall vest as follows:  (1) 25% on July 5, 2011 and (2) the remaining 75% in 18 equal monthly installments beginning July 5, 2011.





On November  9, 2010, Christina Domecq submitted her resignation as Director and CEO. The resignation was accepted. Ms. Domecq’s resignation was not based upon any disagreement with us on any matter relating to our operations, policies or practices. Due to Ms. Domecq’s resignation no options were granted.





On August 4, 2010, Jonathan Kossmann submitted his resignation.





On October 4, 2010 Mr. Toth was appointed to our Board of Directors and as Chairman. Mr. Toth has been working as an independent management consultant where he identified, evaluated opportunities and assisted companies and individuals within a variety of industries including: manufacturing, retail and distribution, media, advertising and technology. In addition he managed special projects for financial, compliance, operations and information systems of the companies for which he consulted





On October 15, 2010, John Larkin was appointed to our Board of Directors. Mr. Larkin earned a bachelor’s degree in Business Administration from California State University, Northridge, in 1970. Mr. Larkin is active in LarkinRivero Business Management, LLC., and  also serves as a Director with the Bergen Foundation, the Light Foundation, the Raising Malawi Foundation and the Susan Strong Davis Foundation.





On January 28, 2011, John Larkin submitted his resignation as Director. The resignation was accepted. Mr. Larkin’s resignation was not based upon any disagreement with us on any matter relating to our operations, policies or practices.




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On February 7, 2011, Gilbert Davila was appointed to our Board of Directors. Mr. Dávilais the CEO of DávilaMulticultural Insights (DMI) - a consulting company specializing in providing strategic guidance and opportunities to corporations on Multicultural Marketing and Business Development. Prior to founding DMI, Mr. Dávila led some of America’s top blue chip companies in their general and multicultural marketing and strategies, and business development efforts. His executive experience in all aspects of marketing, brand management, strategic planning, sales promotions, and customer relationship management helped companies like Procter & Gamble, Coca Cola USA, Sears, Roebuck and Company, and The Walt Disney Company increase their revenue by targeting new and growing demographics.





Results of Operations and Going Concern





The Company is in the development stage and consequently is subject to the risks associated with development stage companies, including the need for additional financing; the uncertainty of the Company’s technology and intellectual property resulting in successful commercial products or services as well as the marketing and customer acceptance of such products or services; competition from larger organizations; dependence on key personnel; and dependence on corporate partners and collaborators.  To achieve successful operations, the Company will require additional capital to continue research and development and marketing efforts.  No assurance can be given as to the timing or ultimate success of obtaining future funding.





The processes of developing new approaches to social media are inherently highly complex, time-consuming, expensive and uncertain.  The Company must make long-term investments and commit significant resources before knowing whether its development programs will result in products that will achieve market acceptance.  Product candidates that may appear to be promising at all stages of development may not reach the market.  For these reasons, the Company is unable to predict the period in which material net cash inflows from its products and services.




The following discussions are based on the consolidated operations of Bizzingo, Inc. and its subsidiaries, UDM and Phreadz and should be read in conjunction with our audited financial statements for the years ended May 31, 2011 and May 31, 2010. These financial statements are included in this report at Part II, Item 8, below.




We incurred a net loss of$4,381,404for the year ended May 31, 2011 and had a working capital deficit of ($871,366) as of May 31, 2011.  We have incurred losses of ($17,559,049) since inception (April 3, 2009) and do not anticipate having positive net income in the immediate future. Net cash used by operations for the year ended May 31, 2011 was $2,897,924 . These conditions create an uncertainty as to our ability to continue as a going concern. As the Company has been in the development/organization stage and there has been no sales and marketing expenses. For the period from inception (April 3, 2009) to May 31, 2011, we have been in the development stage and therefore have not generated any revenues.





We anticipate that our existing cash and cash equivalents will not be sufficient to fund operations. The Company intends to seek additional financing to fund the Company’s continued operations.  There can be no assurance that the Company will be successful in raising this additional financing on acceptable terms, if at all.





To obtain additional capital when needed, the Company will evaluate alternative financing sources, including, but not limited to, the issuance of equity or debt securities, corporate alliances, joint ventures and licensing agreements; however, there can be no assurance that funding will be available on favorable terms, if at all.  The Company cannot assure you that it will successfully commercialize its products under development or that its products, if successfully developed, will generate revenues sufficient to enable it to earn a profit.  If the Company is unable to obtain additional capital, management may be required to explore alternatives to reduce cash used by operating activities, including the termination of development efforts that may appear to be promising to the Company, the sale of certain assets, possibly including the Company’s IP property, and the reduction in overall operating activities.




The auditors’ report on the Company's May 31, 2011 consolidated financial statements contains an explanatory paragraph that states that the Company has suffered losses and negative cash flows from operations that raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.




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Impact of Inflation




Inflation has not had a significant effect on the Company’s operations during the periods from April 3, 2009 (date of inception) to May 31, 2011.  However, there can be no assurance that future inflation would not have an adverse impact on our operating results and financial condition.




Results of Operations for the year ended May 31, 2011 and May 31, 2010




For the year ended May 31, 2011, we incurred operating expenses of ($2,453,272) compared to the year ended May 31, 2010 operating expenses of ($2,479,369).  Although total operating expenses for both year-ends they are very different in their distribution. For the period ending May 31, 2010 more of these expenses were related to legal and professional fees related to the April 2010 reverse merger. Operating expenses for the period ending May 31, 2011 relate more to operations and development of operations. We expect operating expenses to further increase as we hire additional personnel, assume the costs for full time senior personnel, and incur additional professional fees due to the significantly higher costs for outside counsel and accounting associated with becoming a public company.





For the year ended May 31, 2010 we recognized other expense,non-cash items of; (i) a $5,000,000 impairment of the UDM music database to fully impair the original attributed value, (ii) a $5,537,163 loss on settlement of debt and, (iii)  a deemed stock issuance financing expense of $1,000,632 and a rights conversion expense of $481,666. For the year ended May 31, 2011 we recognized other expense, non-cash items of; (i) $1,200,000 in Consulting Fees for a stock issuance at market value, (ii) an $1,875,000 impairment to some computer code we purchased with our common stock.  Interest expense was $195,720 for May 31, 2010 compared to $ $121,541for the year ended May 31, 2011. The interest expense for the year ended May 31, 2011 includes $118,018 of liquidated damages as an interest accrual related to an unfiled registration statementWe continue to rely on loans and selling our stock  to fund operating shortfalls and do not foresee a change in this situation in the immediate future. There can be no assurance that we will continue to have such loans available. We will not be able to continue operations without them.





Liquidity and Capital Resources





As of May 31, 2011, we had a working capital deficit of ($871,366) compared to a working capital deficit of ($1,413,594 as of May 31, 2010. This decrease is primarily a result of an increase in accounts payable consisting of legal fees and of accrued management fees, a stock issuance liability of $1,000,632, and the repayment of short term note payables that were used to fund initial working capital requirements.





Operating Activities





As of May 31, 2011 net cash used in operating activities was ($2,897,924) compared net cash used in operating activities as of May 31, 2010 of ($1,053,460).  The consolidated Company expects net cash used in operating activities to increase going forward as the Company pursues its business plan and undertakes additional product development and the enforcing of IP claims.





Financing Activities





As of May 31, 2011 and May 31, 2010 net cash provided by financing activities was approximately $868,000 and $1,143,135 respectively, which consisted of net proceeds received from the issuance of notes payable and for the year ended May 31, 2011 shares issued for cash.




Research and Development Expenses




Future Research and development costs will include expenses paid to outside development consultants and compensation related expenses for our technical staff.  Research and development costs are expensed as incurred.




Additional Financing




From inception, we have financed operations through notes payable.  We expect to finance future cash needs primarily through proceeds from equity financings, loans, and/or collaborative agreements with corporate partners.  We have used net proceeds from the issuance of notes payable for general corporate purposes, which has been funding working capital needs.




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Material Off-Balance Sheet Arrangements





None.





Critical Accounting Policies





Our discussion and analysis of the financial condition and results of operations are based upon Bizzingo, Inc.’s  financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”). The Company is a development-stage entity and has disclosed inception-to-date information within these financial statements.The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We believe that the estimates, assumptions and judgments involved in the accounting policies described below have the greatest potential impact on our financial statements, so we consider these to be our critical accounting policies. Because of the uncertainty inherent in these matters, actual results could differ from the estimates we use in applying the critical accounting policies. Within the context of these critical accounting policies, we are not currently aware of any reasonably likely events or circumstances that would result in materially different amounts being reported.





Basis of Presentation





The consolidated financial statements have been prepared on the going concern basis, which assumes the realization of assets and liquidation of liabilities in the normal course of operations. If we were not to continue as a going concern, we would likely not be able to realize on our assets at values comparable to the carrying value or the fair value estimates reflected in the balances set out in the preparation of the consolidated financial statements. There can be no assurances that we will be successful in generating additional cash from equity or other sources to be used for operations. The consolidated financial statements do not include any adjustments relating to the recoverability of assets and classification of assets and liabilities that might be necessary should the Company be unable to continue as a going concern.





Development Stage Company




The Company is considered to be in the development stage as defined in ASC 915, “Accounting and Reporting by Development Stage Enterprises”. The Company has devoted substantially all of its efforts to the corporate formation, the raising of capital and attempting to generate initial revenues.





Use of Estimates





The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ.





Cash and Cash Equivalents





The Company considers all highly liquid debt instruments and other short-term investments with maturity of three months or less, when purchased, to be cash equivalents. The Company maintains cash and cash equivalent balances at one financial institution that is insured by the FDIC.





Net Income (Loss) per share





Earnings (loss) per share are computed in accordance with current accounting literature. Basic earnings (loss) per share are calculated by dividing the net income (loss) available to common stockholders by the weighted average number of shares outstanding during the year. Diluted earnings per share reflect the potential dilution of securities that could share in earnings of an entity. In a loss year, dilutive common equivalent shares are excluded from the loss per share calculation as the effect would be anti-dilutive.




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Contingencies





We accrue for contingent obligations, including legal costs, when the obligation is probable and the amount can be reasonably estimated. As facts concerning contingencies become known we reassess our position and make appropriate adjustments to the financial statements. Estimates that are particularly sensitive to future changes include those related to tax, legal, and other regulatory matters that are subject to change as events evolve and additional information becomes available.





Income Taxes





We use the asset and liability method to account for income taxes. Under this method, deferred income taxes are determined based on the differences between the tax basis of assets and liabilities and their reported amounts in the consolidated financial statements which will result in taxable or deductible amounts in future years and are measured using the currently enacted tax rates and laws. A valuation allowance is provided to reduce net deferred tax assets to the amount that, based on available evidence, is more likely than not to be realized.





Recent Accounting Pronouncements





In June 2009, FASB issued SFAS No. 168, “The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles – a replacement of FASB Statement No. 162”. The FASB Accounting Standards Codification (“Codification”) has become the source of authoritative GAAP recognized by FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. On the effective date of this statement, the Codification superseded all then-existing non-SEC accounting and reporting standards. All other non-grandfathered non-SEC accounting literature not included in the Codification has become non-authoritative. This statement is effective for financial statements issued for interim and annual periods ending after September 30, 2009. The adoption of this statement is not expected to have a material effect on the Company’s financial statements.





In May 2009, the FASB issued SFAS No. 165 (Codification reference ASC 855), “Subsequent Events.” SFAS No. 165 sets standards for the disclosure of events that occur after the balance-sheet date, but before financial statements are issued or are available to be issued. SFAS No. 165 sets forth the following: (1) the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements; (2) the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements; and (3) the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. SFAS No. 165 is effective for interim and annual periods ending after June 15, 2009. The Company adopted SFAS No. 165 effective April 1, 2009. The Company uses the date of the filing of its periodic report with the SEC as the date through which subsequent events have been evaluated, which is the same date as the date the financial statements are issued. The adoption of SFAS No. 165 did not have a material impact on the Company’s consolidated financial statements.





ASU No. 2010-09, Subsequent Events (Topic 855): Amendments to Certain Recognition and Disclosure Requirements. This update is to remove the requirement for an SEC filer to disclose a date through which subsequent events have been evaluated in both issued and revised financial statements. Revised financial statements include financial statements revised as a result of either correction of an error or retrospective application of U.S. GAAP. The FASB also clarified that if the financial statements have been revised, then an entity that is not an SEC filer should disclose both the date that the financial statements were issued or available to be issued and the date the revised financial statements were issued or available to be issued. The FASB believes these amendments remove potential conflicts with the SEC’s literature.





In addition, the amendments in the ASU requires an entity that is a conduit bond obligor for conduit debt securities that are traded in a public market to evaluate subsequent events through the date of issuance of its financial statements and must disclose such date. All of the amendments in the ASU were effective upon issuance (February 24, 2010) except for the use of the issued date for conduit debt obligors. That amendment is effective for interim or annual periods ending after June 15, 2010. The adoption of this standard did not have a material impact on the Company’s financial statements.




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In September 2006, the FASB issued SFAS No. 157 (Codification reference ASC 820), “Fair Value Measurements.” SFAS No. 157 defines fair value, establishes a framework for measuring fair value and expands disclosure about fair value measurements. It applies to other pronouncements that require or permit fair value measurements but does not require any new fair value measurements. The statement defines fair value as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.” SFAS No. 157 establishes a fair value hierarchy (i.e., Levels 1, 2 and 3) to increase consistency and comparability in fair value measurements and disclosures. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007. In February 2008, the FASB issued FASB Staff Position (“FSP”) 157-2 (Codification reference ASC 820), “Effective Date of FASB Statement No. 157” (“FSP SFAS 157-2”), which permits a one-year deferral of the application of SFAS No. 157 for all non-financial assets and non-financial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). The Company adopted SFAS No. 157 and FSP SFAS 157-2 for financial assets and liabilities effective January 1, 2008, which did not have a material impact on the Company’s consolidated financial statements. The Company adopted SFAS No. 157 for non-financial assets and non-financial liabilities effective January 1, 2009, which did not have a material impact on the Company’s consolidated financial statements. In October 2008, the FASB issued FSP 157-3 (Codification reference ASC 820), “Determining the Fair Value of a Financial Asset When the Market for That Asset is Not Active” (“FSP SFAS 157-3”), which clarifies the application of SFAS No. 157 in a market that is not active. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.





Determination of Fair Value





At May 31, 2010, the Company applied fair value to all assets based on quoted market prices, where available. For financial instruments for which quotes from recent exchange transactions are not available, the Company determines fair value based on discounted cash flow analysis and comparison to similar instruments. Discounted cash flow analysis is dependent upon estimated future cash flows and the level of interest rates. Valuation adjustments may be made to ensure that financial instruments are recorded at fair value.





The methods described above may produce a current fair value calculation that may not be indicative of net realizable value or reflective of future fair values. If readily determined market values became available or if actual performance were to vary appreciably from assumptions used, assumptions may need to be adjusted, which could result in material differences from the recorded carrying amounts. The Company believes its methods of determining fair value are appropriate and consistent with other market participants. However, the use of different methodologies or different assumptions to value certain financial instruments could result in a different estimate of fair value.





Valuation Hierarchy





SFAS No. 157 establishes a three-level valuation hierarchy for the use of fair value measurements based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date:





Level 1.   Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. Level 1 assets and liabilities include debt and equity securities and derivative financial instruments actively traded on exchanges, as well as U.S. Treasury securities and U.S. Government and agency mortgage-backed securities that are actively traded in highly liquid over the counter markets.





Level 2.   Observable inputs other than Level 1 prices such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, and inputs that are observable or can be corroborated, either directly or indirectly, for substantially the full term of the financial instrument. Level 2 assets and liabilities include debt instruments that are traded less frequently than exchange traded securities and derivative instruments whose model inputs are observable in the market or can be corroborated by market observable data. Examples in this category are certain variable and fixed rate non-agency mortgage-backed securities, corporate debt securities and derivative contracts.





Level 3.   Inputs to the valuation methodology are unobservable but significant to the fair value measurement. Examples in this category include interests in certain securitized financial assets, certain private equity investments, and derivative contracts that are highly structured or long-dated.




29


Application of Valuation Hierarchy





A financial instrument's categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.





In April 2009, the FASB issued updated guidance relating to intangible asset valuation, which is included in the Codification in ASC 350-30-55, General Intangibles Other Than Goodwill – Implementation (“ASC 350-30-55”). ASC 350-30-55 amends ASC 350-30, Intangibles – Goodwill and Other, to identify the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset. ASC 350-30-55 is effective for fiscal years beginning after December 31, 2008. The Company adopted the amendment to ASC 350-30 effective January 1, 2009, and such amendment did not have a material effect on the Company’s results of operations, financial position or liquidity.





Item 7A.  Quantitative and Qualitative Disclosures about Market Risk.





We are a smaller reporting company as defined in Rule 12b-2 of the Exchange Act and are not required to provide information required under this Item.





Item 8.  Financial Statements.





The financial statements of the Company and related schedules described under “Item 15. Financial Statements and Financial Statement Schedules” are included following this page.




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BIZZINGO,  INC.


(Formerly Phreadz, Inc.)





Audited Financial Statements(Expressed in U.S. Dollars)May 31, 2011IndexReport of Independent Registered Public Accounting FirmsConsolidated Balance SheetsConsolidated Statement of Stockholders’ DeficiencyConsolidated Statements of OperationsConsolidated Statements of Cash FlowsNotes to Consolidated Financial Statement




31




REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM




To the Board of Directors and


Stockholders of Bizzingo, Inc. & Subsidiaries




We have audited the accompanying consolidated balance sheets of Bizzingo, Inc. & Subsidiaries as of May 31, 2010 and 2011, and the related consolidated statements of operations, stockholders’ equity, and cash flows for the years ended May 31, 2010 and 2011, and for the period from April 3, 2009 (inception) to May 31, 2011. Bizzingo, Inc.’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.




We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.




In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Bizzingo, Inc. & Subsidiaries as of May 31, 2011 and 2010, and the results of its operations and its cash flows for the years ended May 31, 2011 and 2010, and for the period from April 3, 2009 (inception) to May 31, 2011 in conformity with accounting principles generally accepted in the United States of America.




The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has suffered recurring losses from operations, net capital deficiencies, and negative cash flows from operations that raise substantial doubt about its ability to continue as a going concern. Management’s plan in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.




De Leon & Company, P.A.




Pembroke Pines





August 16, 2011




32





BIZZINGO, INC.(A Development Stage Company)Consolidated Balance SheetsMay 31, 2011 and 2010(Expressed in U.S. Dollars)





2011


2010ASSETSCurrentCash and cash equivalents

$
4,101


$
159,025Prepaid


10,000



25,000Total current assets


14,101



184,025Intangible (database)


-



-Total assets

$
14,101


$
184,025LIABILITIESCurrentAccounts payable

$
483,180


$
336,448Accrued liabilities


-



2,829Interest payable


139,241



14,664Member holder loan


2,046



2,046Notes payable


261,000



241,000Stock issuance liability


-



1,000,632Total current liabilities


885,467



1,597,619Long term loan payable


-



-Total Liabilities

$
885,467


$
1,597,619STOCKHOLDERS' (DEFICIENCY) EQUITYShare capitalAuthorized:525,000,000 shares of common stock  par value  $0.001Issued, allotted and outstanding:73,241,376 and 61,753,867 shares as of May 31, 2011 and 2010


73,241



61,754Additional paid-in capital


16,614,442



11,702,297Deficit accumulated during development stage


(17,559,049
)


(13,177,645
)Total stockholders' (deficiency) equity


(871,366
)


(1,413,594
)Total liabilities and stockholders' (deficiency) equity

$
14,101


$
184,025





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




33


BIZZINGO, INC.(A Development Stage Company)Consolidated Statement of Stockholders' (Deficiency) EquityFor the period April 3, 2009 (Inception) to May 31, 2011
Page 1 of 2(Expressed in U.S. Dollars)





TotalCommon stock


Additional


Subscription


Deficit


Stock-holders'Shares


Amount


paid-in capital


Receivable


accumulated


(deficiency)Shares issued for property April 3, 2009


1,920,000


$
1,920


$
4,998,092


$
(90
)

$
-


$
4,999,922Shares issued for cash May 28, 2010


12,480,000


$
12,480


$
(12,390
)


-



-


$
90Net Loss April 3, 2009 (Inception) to May 31, 2010


-



-



-



-


$
(186,902
)

$
(186,902
)Balance, May 31, 2009


14,400,000


$
14,400


$
4,985,702


$
(90
)

$
(186,902
)

$
4,813,110Subscription receivable


-



-



-


$
90



-


$
90Shares issued for cash August 25, 2009


23,136,000


$
23,136


$
(22,991
)


-



-


$
145Shares issued for cash March 10, 2010


5,782,400


$
5,782


$
(5,746
)


-



-


$
36Recapitalization due to reverse merger


42,700,000


$
42,700


$
(83,243
)


-



-


$
(40,543
)Shares cancelled due to reverse merger


(32,712,176
)

$
(32,712
)

$
32,712



-



-


$
-Issuance of common stock @ $0.15 May 20, 2010


1,9333,333


$
1,933


$
288,067



-



-


$
290,000Settlement of notes payable May 31, 2010


6,514,310


$
6,515


$
6,507,796



-



-


$
6,514,311Net loss for the year ending May 31, 2010


-



-



-



-


$
(12,990,743
)

$
(12,990,743
)Balance, May 31, 2010


61,753,867


$
61,754


$
11,702,297


$
-


$
(13,177,645
)

$
(1,413,594
)





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




34





BIZZINGO, INC.(A Development Stage Company)Consolidated Statement of Stockholders' (Deficiency) EquityFor the period April 3, 2009 (Inception) to May 31, 2011
Page 2 of 2(Expressed in U.S. Dollars)





TotalCommon stock


Additional


Subscription


Deficit


Stock-holders'Shares


Amount


paid-in capital


Receivable


accumulated


(deficiency)Shares issued for cash on June 8, 2010 @ $0.15


1,333,333


$
1,333


$
198,667



-



-


$
200,000Exchange agreement issuance June 22, 2010


1,334,176


$
1,334


$
999,298



-



-


$
1,000,632Shares issued for cash on July 16, 2010 @ $0.15


2,520,000


$
2,520


$
375,480



-



-


$
378,000Shares issued for cash on  November 1, 2010 @ $0.15


1,080,000


$
1,080


$
160,920



-



-


$
162,000Shares issued for cash on  December 3, 2010


720,000


$
720


$
107,280



-



-


$
108,000Shares issued for services on January 31, 2011


2,000,000


$
2,000


$
1,198,000



-



-


$
1,200,000Shares issued for asset acquisition March 15, 2011


2,500,000


$
2,500


$
1,872,500



-



-


$
1,875,000Net loss for the year ending May 31, 2011

















$
(4,381,404
)

$
(4,381,404
)Balance, May 31, 2011


73,241,376


$
73,241


$
16,614,442


$
-


$
(17,559,049
)

$
(871,366
)





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




35





BIZZINGO, INC.(A Development Stage Company)Consolidated Statements of OperationsFor the year ended May 31, 2011 and 2010, andFor the period April 3, 2009 (Inception) to May 31, 2011(Expressed in U.S. Dollars)





From Inception Date

of April 3, 2009 to

May 31, 2011


For the Year

Ended May 31,

2011


For the Year

Ended May 31,

2010Revenue

$
-


$
-


$
-Accounting


93,707



40,068



53,853Consulting


3,042,284



1,951,610



939,624Corporate finance fees


52,530



37,530



15,000Financing expense


1,000,632



-



1,000,632G&A


250,090



209,972



39,447Legal


411,714



89,730



321,985Travel


247,453



124,362



109,098Operating loss


(5,098,410
)


(2,453,272
)


(2,479,369
)Other expenseImpairment of IP music database


(5,000,000
)


-



(5,000,000
)Impairment of Computer Code


(1,875,000
)


(1,875,000
)Interest expense (related party)


(342,482
)


(125,629
)


(195,720
)Gain on forgiveness of debt


294,006



72,497



221,509Loss on settlement of debt


(5,537,163
)


-



(5,537,163
)Net loss for the year

$
(17,559,049
)

$
(4,381,404
)


(12,990,743
)Loss per share –basic and dilutedNet loss





$
(0.06
)

$
(0.38
)Weighted average number of commonshares outstanding - basic and diluted






68,676,503



34,269,637





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




36





BIZZINGO, INC.(A Development Stage Company)Consolidated Statements of Cash FlowsFor the year ended May 31, 2011 and 2010, and,the period from April 3, 2009 (Inception) to May 31, 2011(Expressed in U.S. Dollars)





From Inception Date of

April 3, 2009 to May

31, 2011


For the Year

Ended May

31, 2011


For the Year

Ended May 31,

2010Cash flows from (used in) operating activitiesNet loss for the year

$
(17,559,049
)

$
(4,381,404
)

$
(12,990,743
)Adjustments to reconcile net loss to net cashProvided by operating activities:- Impairment of IP music database


5,000,000



-



5,000,000- Loss on acquisition of Atwood


(44,361
)


-



(44,361
)- Loss on settlement of debt


5,537,163



-



5,537,163- Shares issued for services


1,200,000



1,200,000



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


-



(2,829
)


2,829- (Increase) Decrease in Accounts payable


483,180



146,732



336,342- (Increase) Decrease in Capitalized Interest


121,147



-



101,147- (Increase) Decrease in Interest payable


139,242



124,577



13,533- (Increase) Decrease in Prepaids


(10,000
)


15,000



(10,000
)- (Increase) Decrease in Stock issuance liability


1,000,632



-



1,000,632Net cash provided by operating activities


(4,132,046
)


(2,897,924
)


(1,053,460
)Cash flows from (used in) investing activitiesPurchase of Capital Assets

$
1,875,000


$
1,875,000


$
-Net cash (used) provided by investing activities


1,875,000



1,875,000



-Cash flows from (used in) financing activitiesProceeds from note(s) payable (net)


245,000



20,000



851,000Proceeds from Shareholder  loan


2,046



-



2,045Shares issued in settlement of debt


876,000



-Shares issued for cash


1,138,102



848,000



290,090Net cash (used) provided by financing activities


2,261,148



868,000



1,143,135Increase in cash and cash equivalents


4,101



(154,924
)


89,675Effect of exchange rate on cash


-



-



-Cash and cash equivalents,beginning of year


-



159,025



69,350Cash and cash equivalents, end of year

$
4,101


$
4,101


$
159,025Cash and cash equivalents  represented by:Cash

$
4,101


$
4,101


$
159,025





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





The Company did not expend any cash for interest or taxes for the year ended May 31, 2011 and May 31, 2010.




37





BIZZINGO, INC.(A Development Stage Company)Notes to Financial StatementsFor the period from April 3, 2009 (Inception) to May 31, 2011(Expressed in U.S. Dollars)




Note 1.
Organization and Summary of Significant Accounting Policies




On April 27, 2010 pursuant to share purchase agreements (the “Purchase Agreements”), Phreadz, Inc. completed the acquisitions of Phreadz USA, LLC (“Phreadz”) and UDM USA, LLC (“UDM”).The acquisitions were accounted for as a recapitalization effected by a reverse merger, wherein Phreadz and UDM were considered the acquirer for accounting and financial reporting purposes.  The pre-merger assets and liabilities of the acquired entities have been brought forward at their book value and no goodwill has been recognized.  The consolidated accumulated deficit of Phreadz and UDM has been brought forward, and common stock and additional paid-in-capital of the combined Company have been retroactively restated to give effect to the exchange rates as set forth in the Purchase Agreements.




As set forth above, on April 27, 2010 (the “Closing Date”) and pursuant to the terms and conditions of the Purchase Agreements, we: (i) consummated the acquisitions of Phreadz and UDM, and (ii) each of Phreadz and UDM became our wholly owned subsidiary. More specifically, pursuant to and in connection with the Purchase Agreements:




·
in exchange for 100% of the issued and outstanding membership interests of Phreadz, we issued to the holders of the Phreadz membership interests an aggregate of 21,659,200 shares of our common stock; and




·
in exchange for 100% of the issued and outstanding membership interests of UDM, we issued to the holders of the UDM membership interests an aggregate of 21,659,200 shares of our common stock.




·
in addition, pursuant to the terms of the Purchase Agreements, 32,712,176 shares of our issued and outstanding common stock previously held by certain stockholders were cancelled..




As a result of the acquisitions of Phreadz and UDM, we experienced a change in control and ceased to be a “shell” company as defined in Rule 12b-2 promulgated under the Exchange Act.




Phreadz was organized as a limited liability company in the State of Nevada in April 2009.  Its principal place of business is located at 63 Main Street #202, Flemington, New Jersey 08822.  Phreadz had not undertaken any material business activities.




UDM was organized as a limited liability company in the State of Nevada in April 2009.  Its principal place of business is located at 63 Main Street, Flemington, New Jersey 08858.  On May 29, 2009, UDM consummated an asset purchase agreement with Jacques Krischer and UDM, Ltd., pursuant to which it acquired a music database and search tools.  Since its inception, UDM had not undertaken any material business activities.




Nature of Operations and Going Concern





The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate the Company’s continuation as a going concern. Since April 3, 2009 (inception), the Company has reported net losses of ($17,559,049), operating activities have used cash of ($4,132,046), and the Company has a stockholders’ deficit of ($871,366) as of May 31, 2011.   These factors raise substantial doubt about the Company’s ability to continue as a going concern.




The Company is actively involved in discussions and negotiations with investors. Management does not believe the Company has sufficient working capital to operate beyond May 31, 2011 without additional funding.  Assuming we raise the necessary capital through the sale of equity or equity equivalents, we expect that we will have adequate working capital through 2011.  However, any equity financing may be very dilutive to our existing shareholders.




38





BIZZINGO, INC.(A Development Stage Company)Notes to Financial StatementsFor the period from April 3, 2009 (Inception) to May 31, 2011(Expressed in U.S. Dollars)




Note 1.
Organization and Summary of Significant Accounting Policies(continued)




There is no assurance that continued financing proceeds will be obtained in sufficient amounts necessary to meet the Company's needs. In view of these matters, continuation as a going concern is dependent upon the Company's ability to meet its financing requirements, raise additional capital, and the future success of its operations.  The accompanying consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the possible inability of the Company to continue as a going concern.




Principles of Consolidation




The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Phreadz and UDM. All intercompany accounts and transactions have been eliminated in consolidation.




Note 2.
Significant Accounting Policies




(a)
Accounting Estimates




The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the period.  Actual results may differ from those estimates.




(b)
Cash Equivalents




For purposes of the statement of cash flows cash equivalents usually consist of highly liquid investments which are readily convertible into cash with maturity of three months or less when purchased.




(c)
Concentration of Credit Risk




The Company has no significant off-balance-sheet concentrations of credit risk such as foreign exchange contracts, options contracts or other foreign hedging arrangements.  The Company maintains the majority of its cash balances with one financial institution, in the form of demand deposits.




(d)
Income Taxes




The Company uses the asset and liability method to account for income taxes. Under this method, deferred income taxes are determined based on the differences between the tax basis of assets and liabilities and their reported amounts in the consolidated financial statements which will result in taxable or deductible amounts in future years and are measured using the currently enacted tax rates and laws. A valuation allowance is provided to reduce net deferred tax assets to the amount that, based on available evidence, is more likely than not to be realized.




39




BIZZINGO, INC.(A Development Stage Company)Notes to Financial StatementsFor the period from April 3, 2009 (Inception) to May 31, 2011(Expressed in U.S. Dollars)





Note 2.
Significant Accounting Policies(continued)





(e)
Net Loss per Share





Net loss per share is computed by dividing net loss attributable to common stockholders by the weighted average number of shares of common stock outstanding during the applicable period. Diluted loss per share is determined in the same manner as basic loss per share, except that the number of shares is increased to include potentially dilutive securities using the treasury stock method. Since the Company incurred a net loss in all periods presented, all potentially dilutive securities were excluded from the computation of diluted loss per share since the effect of including them is anti-dilutive.





Recent accounting pronouncements





In June 2009, FASB issued SFAS No. 168, “The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles – a replacement of FASB Statement No. 162”. The FASB Accounting Standards Codification (“Codification”) has become the source of authoritative GAAP recognized by FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. On the effective date of this statement, the Codification superseded all then-existing non-SEC accounting and reporting standards. All other non-grandfathered non-SEC accounting literature not included in the Codification has become non-authoritative. This statement is effective for financial statements issued for interim and annual periods ending after September 30, 2009. The adoption of this statement is not expected to have a material effect on the Company’s financial statements.





In May 2009, the FASB issued SFAS No. 165 (Codification reference ASC 855), “Subsequent Events.” SFAS No. 165 sets standards for the disclosure of events that occur after the balance-sheet date, but before financial statements are issued or are available to be issued. SFAS No. 165 sets forth the following: (1) the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements; (2) the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements; and (3) the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. SFAS No. 165 is effective for interim and annual periods ending after June 15, 2009. The Company adopted SFAS No. 165 effective April 1, 2009. The Company uses the date of the filing of its periodic report with the SEC as the date through which subsequent events have been evaluated, which is the same date as the date the financial statements are issued. The adoption of SFAS No. 165 did not have a material impact on the Company’s consolidated financial statements.





ASU No. 2010-09, Subsequent Events (Topic 855): Amendments to Certain Recognition and Disclosure Requirements. This update is to remove the requirement for an SEC filer to disclose a date through which subsequent events have been evaluated in both issued and revised financial statements. Revised financial statements include financial statements revised as a result of either correction of an error or retrospective application of U.S. GAAP. The FASB also clarified that if the financial statements have been revised, then an entity that is not an SEC filer should disclose both the date that the financial statements were issued or available to be issued and the date the revised financial statements were issued or available to be issued. The FASB believes these amendments remove potential conflicts with the SEC’s literature.




40





BIZZINGO, INC.(A Development Stage Company)Notes to Financial StatementsFor the period from April 3, 2009 (Inception) to May 31, 2011(Expressed in U.S. Dollars)





Recent accounting pronouncements(continued)





In addition, the amendments in the ASU requires an entity that is a conduit bond obligor for conduit debt securities that are traded in a public market to evaluate subsequent events through the date of issuance of its financial statements and must disclose such date. All of the amendments in the ASU were effective upon issuance (February 24, 2010) except for the use of the issued date for conduit debt obligors. That amendment is effective for interim or annual periods ending after June 15, 2010. The adoption of this standard did not have a material impact on the Company’s financial statements.





In September 2006, the FASB issued SFAS No. 157 (Codification reference ASC 820), “Fair Value Measurements.” SFAS No. 157 defines fair value, establishes a framework for measuring fair value and expands disclosure about fair value measurements. It applies to other pronouncements that require or permit fair value measurements but does not require any new fair value measurements. The statement defines fair value as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.” SFAS No. 157 establishes a fair value hierarchy (i.e., Levels 1, 2 and 3) to increase consistency and comparability in fair value measurements and disclosures. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007. In February 2008, the FASB issued FASB Staff Position (“FSP”) 157-2 (Codification reference ASC 820), “Effective Date of FASB Statement No. 157” (“FSP SFAS 157-2”), which permits a one-year deferral of the application of SFAS No. 157 for all non-financial assets and non-financial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). The Company adopted SFAS No. 157 and FSP SFAS 157-2 for financial assets and liabilities effective January 1, 2008, which did not have a material impact on the Company’s consolidated financial statements. The Company adopted SFAS No. 157 for non-financial assets and non-financial liabilities effective January 1, 2009, which did not have a material impact on the Company’s consolidated financial statements. In October 2008, the FASB issued FSP 157-3 (Codification reference ASC 820), “Determining the Fair Value of a Financial Asset When the Market for That Asset is Not Active” (“FSP SFAS 157-3”), which clarifies the application of SFAS No. 157 in a market that is not active. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.





Determination of Fair Value





At May 31, 2010, the Company applied fair value to all assets based on quoted market prices, where available. For financial instruments for which quotes from recent exchange transactions are not available, the Company determines fair value based on discounted cash flow analysis and comparison to similar instruments. Discounted cash flow analysis is dependent upon estimated future cash flows and the level of interest rates. Valuation adjustments may be made to ensure that financial instruments are recorded at fair value.





The methods described above may produce a current fair value calculation that may not be indicative of net realizable value or reflective of future fair values. If readily determined market values became available or if actual performance were to vary appreciably from assumptions used, assumptions may need to be adjusted, which could result in material differences from the recorded carrying amounts. The Company believes its methods of determining fair value are appropriate and consistent with other market participants. However, the use of different methodologies or different assumptions to value certain financial instruments could result in a different estimate of fair value.





Valuation Hierarchy





SFAS No. 157 establishes a three-level valuation hierarchy for the use of fair value measurements based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date:




41





BIZZINGO, INC.(A Development Stage Company)Notes to Financial StatementsFor the period from April 3, 2009 (Inception) to May 31, 2011(Expressed in U.S. Dollars)





Recent accounting pronouncements(continued)





Level 1.   Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. Level 1 assets and liabilities include debt and equity securities and derivative financial instruments actively traded on exchanges, as well as U.S. Treasury securities and U.S. Government and agency mortgage-backed securities that are actively traded in highly liquid over the counter markets.





Level 2.   Observable inputs other than Level 1 prices such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, and inputs that are observable or can be corroborated, either directly or indirectly, for substantially the full term of the financial instrument. Level 2 assets and liabilities include debt instruments that are traded less frequently than exchange traded securities and derivative instruments whose model inputs are observable in the market or can be corroborated by market observable data. Examples in this category are certain variable and fixed rate non-agency mortgage-backed securities, corporate debt securities and derivative contracts.





Level 3.   Inputs to the valuation methodology are unobservable but significant to the fair value measurement. Examples in this category include interests in certain securitized financial assets, certain private equity investments, and derivative contracts that are highly structured or long-dated.





Application of Valuation Hierarchy





A financial instrument's categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.





In April 2009, the FASB issued updated guidance relating to intangible asset valuation, which is included in the Codification in ASC 350-30-55, General Intangibles Other Than Goodwill – Implementation (“ASC 350-30-55”). ASC 350-30-55 amends ASC 350-30, Intangibles – Goodwill and Other, to identify the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset. ASC 350-30-55 is effective for fiscal years beginning after December 31, 2008. The Company adopted the amendment to ASC 350-30 effective January 1, 2009, and such amendment did not have a material effect on the Company’s results of operations, financial position or liquidity.




42





BIZZINGO, INC.(A Development Stage Company)Notes to Financial StatementsFor the period from April 3, 2009 (Inception) to May 31, 2011(Expressed in U.S. Dollars)





Note 3.
Intangible





The Company has valuation reports from Cethial Bossche Content Network (Montreal, Canada) dated January 22, 2007 and Copiliot Partners (France) dated January 19, 2007.  The two firms have placed a valuation of between €9.5 and €17 million Euros and €12 million Euros, respectively, on the assets described as UDM music databases and related tools.  Based on the above and other comparables, a pro forma five year cash flow analysis, the Company determined that a fair deemed value of $5,000,000 was appropriate with that deemed value attributable to the music database at April 3, 2009 (Inception).  As the Company did not obtain a third party valuation report at the end of the fiscal period ended February 28, 2010, we fully impaired the $5,000,000 carrying value of this intellectual property as at that date.





Note 4.
Income Taxes





As of May 31, 2011, the Company had a net operating loss carryforward for income tax reporting purposes of approximately $17,554,961 that may be offset against future taxable income through 2031.  Current tax laws limit the amount of loss available to be offset against future taxable income when a substantial change in ownership occurs.  Therefore, the amount available to offset future taxable income may be limited.  No tax benefit has been reported in the financial statements, because the Company believes there is a 50% or greater chance the carryforwards will expire unused.  Accordingly, the potential tax benefits of the loss carryforwards are offset by a valuation allowance of the same amount.





2011


2010Operating loss carry forward

$
17,559,049


$
13,177,645Statutory rates


34
%


34
%Deferred income tax asset


5,970,076



4,480,399Less: valuation allowance


(5,970,076
)


(4,480,399
)-



-





The valuation allowance reflects the realization of the tax assets is unlikely.





Note 5.
Notes Payable and Related Party Transactions





A member of the Company loaned $250,000 to the Company pursuant to a Note(s) Payable Agreement dated May 15, 2009. The loan included a $20,000 interest bonus and accrued simple interest at a rate of 8% per annum. The note was to mature on April 30, 2012 and become due and payable at that time, including accrued interest and the interest bonus. The $250,000 was received in two parts on May 5, 2009 and May 18, 2009. Interest accrued at the rate of 8% annually and was $22,140.43 for the period April 3, 2009 (inception) to May 31, 2010. The note was assigned by the holder on May 31, 2010 and settled with 1,947,601 shares of our common stock and 973,801 Series A Warrants, with an exercise price of $0.30 per share, expiring June 30, 2019, and 973,801 Series B Warrants, with an exercise price of $0.60 per share, expiring June 30, 2019.




43





BIZZINGO, INC.(A Development Stage Company)Notes to Financial StatementsFor the period from April 3, 2009 (Inception) to May 31, 2011(Expressed in U.S. Dollars)





Note 5.
Notes Payable and Related Party Transaction(continued)





A member of the Company loaned $200,000 to the Company pursuant to a Note(s) Payable Agreement dated August 10, 2009. The loan terms include a $16,000 interest bonus and accrues simple interest at a rate of 8% per annum. The note matured on December 31, 2009 and by agreement was extended to March 31, 2010. Interest accrued at the rate of 8% annually and was $16,924.35 for the period April 3, 2009 (inception) to May 31, 2011. As of May 31, 2011, this Note(s) Payable was in default and as of August 3, 2010, $190,000 of the outstanding amount has been repaid with $26,000 outstanding.





A member of the Company loaned $150,000 to the Company pursuant to a Note(s) Payable Agreement dated August 20, 2009. The loan included a $12,000 interest bonus and accrued simple interest at a rate of 8% per annum. The note matured on December 31, 2009 and by agreement was extended to March 31, 2010 and then to May 31, 2010. Interest accrued at the rate of 8% annually and was $9,799.90 for the period from April 3, 2009 (inception) to May 31, 2010. The notes were assigned by the holder on May 31, 2010 and settled with 1,145,332 shares of our common


stock,  572,666 Series A Warrants, with an exercise price of $0.30 per share, expiring June 30, 2019, and 572,666 Series B Warrants, with an exercise price of $0.60 per share, expiring June 30, 2019.





A member of the Company loaned $25,000 to the Company pursuant to a Note(s) Payable Agreement dated September 29, 2009. The loan included a $2,000 interest bonus and accrued simple interest at a rate of 8% per annum. The note matured on December 31, 2009 and by agreement was extended to March 31, 2009 and then to May 31, 2010. Interest accrued at the rate of 8% annually and was $1,355.18 for the period from April 3, 2009 (inception) to May 31, 2010.  The notes were assigned by the holder on May 31, 2010 and settled with 189,034 shares of our common shares and 94,516 Series A Warrants, with an exercise price of $0.30 per share, expiring June 30, 2019, and 94,516 Series B Warrants, with an exercise price of $0.60 per share, expiring June 30, 2019.





A member of the Company loaned $100,000 to the Company pursuant to a Note(s) Payable Agreement dated September 29, 2009. The loan included a $8,000 interest bonus and accrued simple interest at a rate of 8% per annum. The note matured on December 31, 2009 and by agreement was extended to March 31, 2009 and then to May 31, 2010. Interest accrued at the rate of 8% annually was $5,610.10 for the period from April 3, 2009 (inception) to May 31, 2010. The note was assigned by the holder on May 31, 2010 and settled with 757,400 shares of our common stock, 378,700 Series A Warrants, with an exercise price of $0.30 per share, expiring June 30, 2019, and 378,700 Series B Warrants, with an exercise price of $0.60 per share, expiring June 30, 2019.





A member of the Company loaned $50,000 USD to the Company pursuant to a Note(s) Payable Agreement dated November 15, 2009. The loan included a $4,000 interest bonus and accrued simple interest at a rate of 8% per annum. The note matured on December 31, 2009 and by agreement was extended to March 31, 2009 and then to May 31, 2010. Interest accrued at the rate of 8% annually and was $2,236.92 for the period from April 3, 2009 (inception) to May 31, 2010. The note was assigned by the holder on May 31, 2010 and settled with 374,912 shares of our common stock, 187,456 Series A Warrants, with an exercise price of $0.30 per share, expiring June 30, 2019, and 187,456 Series B Warrants, with an exercise price of $0.60 per share, expiring June 30, 2019.





A member of the Company loaned $100,000 to the Company pursuant to a Note(s) Payable Agreement dated December 11, 2009. The loan included a $8,000 interest bonus and accrued simple interest at a rate of 8% per annum. The note matured on January 31, 2010 and by agreement was extended to March 31, 2009 and then to May 31, 2010. Interest accrued at the rate of 8% annually and was $3,929.44 for the period from April 3, 2009 (inception) to May 31, 2010.  The note was assigned by the holder on May 31, 2010 and settled with 746,196 shares of our common stock, 373,098 Series A Warrants, with an exercise price of $0.30 per share, expiring June 30, 2019, and 373,098 Series B Warrants, with an exercise price of $0.60 per share, expiring June 30, 2019.




44





BIZZINGO, INC.(A Development Stage Company)Notes to Financial StatementsFor the period from April 3, 2009 (Inception) to May 31, 2011(Expressed in U.S. Dollars)





Note 5.
Notes Payable and Related Party Transaction(continued)





A member of the Company loaned $100,000 to the Company pursuant to a Note(s) Payable Agreement dated March 26, 2010. The loan included a $75,000 forgiveness clause on the completion of our reverse merger as of April 27, 2010. Interest accrued on a simple basis at a rate of 8% per annum. The note held a maturity date of June 30, 2010. Interest accrued at the rate of 8% annually and was $887.68 for the period from April 3, 2009 (inception) to May 31, 2010. On June 30, 2010, $26,052.06 was paid in settlement of this note, including $164.38 in additional interest for the period from June 1, 2010 to June 30, 2010.





A member of the Company loaned $100,000 to the Company pursuant to a Note(s) Payable Agreement dated April 9, 2010. The loan included a $75,000 forgiveness clause on the completion of our reverse merger as of April 27, 2010. Interest accrued on a simple basis at a rate of 8% per annum. The note held a maturity date of June 30, 2010. Interest accrued at the rate of 8% annually and was $580.82 for the period from April 3, 2009 (inception) to May 31, 2010. The note was assigned by the holder on May 31, 2010 and settled with 170,538 shares of our common stock, 85,269 Series A Warrants, with an exercise price of $0.30 per share, expiring June 30, 2019, and 85,269 Series B Warrants, with an exercise price of $0.60 per share, expiring June 30, 2019.





A member of the Company loaned $10,000 to the Company pursuant to a Note(s) Payable Agreement dated March 18, 2010. The loan terms included a $7,000 forgiveness clause on the completion of our reverse merger as of April 27, 2010. Interest accrued on a simple basis at a rate of 8% per annum. The note held a maturity date of June 30, 2010. Interest accrued at the rate of 8% annually and was $110.02 for the period from April 3, 2009 (inception) to May 31, 2010. The note was assigned by the holder on May 31, 2010 and settled with 20,734 shares of our common stock, 10,368 Series A Warrants, with an exercise price of $0.30 per share, expiring June 30, 2019, and 10,368 Series B Warrants, with an exercise price of $0.60 per share, expiring June 30, 2019.





A member of the Company loaned $10,000 USD to the Company pursuant to a Note(s) Payable Agreement dated March 23, 2010. The loan included a $7,000 forgiveness clause on the completion of our reverse merger as of April 27, 2010. Interest was accrued on a simple basis at a rate of 8% per annum. The note held a maturity date of June 30, 2010. Interest accrued at the rate of 8% annually and was $99.06 for the period from April 3, 2009 (inception) to May 31, 2010. The note was assigned by the holder on May 31, 2010 and settled with 20,660 shares of our common stock, 10,330 Series A Warrants, with an exercise price of $0.30 per share, expiring June 30, 2019, and 10,330 Series B Warrants, with an exercise price of $0.60 per share, expiring June 30, 2019.





On March 23, 2010 the Company entered into an $85,000 Note(s) Payable Agreement. The loan terms also included a “right” with the note to receive the equivalent amount of the face amount of such note on such terms that notes were settled in consideration of the note.The original note had a maturity date of June 30, 2010 and accrued interest at 8% per annum. The “right” did not accrue interest.Interest accrued was $1,285.48 for the period from April 3, 2009 (inception) to May 31, 2010. The note was assigned by the holder on May 31, 2010 and settled with 1,141,902 shares of our common stock, 570,951 Series A Warrants, with an exercise price of $0.30 per share, expiring June 30, 2019, and 570,951 Series B Warrants, with an exercise price of $0.60 per share, expiring June 30, 2019, including the “right” described above.





On April 27, 2010, Professional Opportunity Fund Ltd. (“POOF”) forgave and cancelled $57,509 that the Company owed to POOF for expenses paid on behalf of the Company.  This amount was unsecured, non-interest bearing and had no specific terms of repayment.





On October 31, 2010, Gordon Samson and Groupmark Financial Services, Ltd. forgave $12,976.00 and $24,128.26 respectively in outstanding amounts owed. On February 28, 2011 our former CEO, Christina Domecq forgave $35,393.10 in outstanding accrued management fees. This has created a total gain on forgiveness of debt of $72,497.36.


45




BIZZINGO, INC.(A Development Stage Company)Notes to Financial StatementsFor the period from April 3, 2009 (Inception) to May 31, 2011(Expressed in U.S. Dollars)





Note 5.
Notes Payable and Related Party Transaction(continued)




On February 21, 2011 the Company entered in a promissory note for $110,000.00 The note terms are for 1 year and carry an interest rate of 10% per annum. Interest expense of $2,983.56 was accrued to May 31, 2011.





On April 7, 2011 the Company entered in a promissory note for $50,000.00 The note terms are for 1 year and carry an interest rate of 10% per annum. Interest expense of $739.73 was accrued to May 31, 2011.





On May 3, 2011 the Company entered in a promissory note for $75,000.00 with a related party. The note terms are for 1 year and carry an interest rate of 10% per annum. Interest expense of $575.34 was accrued to May 31, 2011.





A member of the Company loaned $2,046 to the Company on no terms.





Note 6.
Commitments





As of May 31, 2011 we have consulting agreements with Groupmark Financial Services Ltd., and Jacques Krischer, each providing for $10,000 per month for services rendered each month.





(a) Employment Agreements





The following agreements were terminated with the incumbent’s resignation.





1.
On April 27, 2010, we entered into an employment agreement with Jonathan Kossmann to serve as President – Phreadz division (the “Kossmann Agreement”).  The Kossmann Agreement has an initial term of two (2) years from the Closing Date, after which it will automatically renew for successive one (1) year periods unless either party terminates the Kossmann Agreement on not less than thirty (30) days notice.  The Kossman Agreement provides for Mr. Kossmann to be paid a monthly salary of $10,000 while he provides services to the Company pursuant to the Kossman Agreement.  Additionally, the Kossman Agreement provides that Mr. Kossmann is eligible to receive a cash bonus, at the discretion of the Board.  The Kossman Agreement provides that, for so long as he is an employee of the Company, Mr. Kossmann is allowed to participate in such employee benefit plans of the Company that may be in effect from time to time and that are offered to the Company’s other similarly situated, full-time employees to the extent he is eligible under the terms of those plans.


Mr. Kossman submitted his resignation August 4, 2010, which resignation was accepted by the Board of Directors, at which time the Kossman Agreement was terminated.





2.
On April 27, 2010 we entered into an Employment Agreement with Georges Daou, which, by agreement was rescinded effective the same day. It was intended that the aforementioned Employment Agreement was to be replaced with a Consulting Agreement to be entered into by and between the Company and GJD Holdings, LLC, a wholly owned subsidiary of Georges Daou, on substantially the same terms as found in the Employment Agreement of April 27, 2010.





Due to Mr. Daou’s resignation on October 5, 2010, we did not enter into such consulting agreement.




46




3.
On July 5, 2010 we entered into an employment agreement with Christina Domecq to serve as our Chief Executive Officer.  The agreement provides for an annual base salary during the term of the agreement of $250,000, subject to potential upwards adjustments at the discretion of the compensation committee of the Board of Directors.  Ms. Domecq is eligible to receive a bonus of up to 100% of her then current base salary, with 50% of such bonus to be awarded at the discretion of the Board of Directors or the compensation committee and the remaining 50% subject to achievement of milestones to be established by Ms. Domecq, the Board of Directors and the compensation committee.  Immediately upon our establishment of an employee stock option plan, we agreed to grant Ms. Domecq an option to purchase 6,748,316 shares of our common stock.  The option shall have an exercise price equal to the fair market value of our common stock as of the date of the employment agreement.  The option shall vest as follows:  (1) 25% on July 5, 2011 and (2) the remaining 75%  in 18 equal monthly installments beginning July 5, 2011.





On November 9, 2010, Christina Domecq submitted her resignation as Director and CEO. The resignation was accepted. Ms. Domecq’s resignation was not based upon any disagreement with us on any matter relating to our operations, policies or practices. Due to Ms. Domecq’s resignation no options were issued.





Note 7.
Warrants





The value of the warrants have been calculated using the Black–Scholes method as of the date of grant based on the following assumptions: an average risk free rate of 1.00%; a dividend yield of 0.00%; a cumulative volatility factor of the expected market price of the Company’s common stock of 91.71%; and an expected life of 8 years.





The Company analyzed the beneficial nature of the 10,479,488 Series A Warrants and 10,479,488 Series B Warrants based on the conversion terms described above and determined that no material beneficial conversion feature exists.





For certain of the Purchasers described above the Unit Purchase Agreement granted Registration Rights which contained certain rights which included Liquidated Damages. “The Company will be obligated to pay investor a fee equal to 1.0% (which will increase to 2.0% after the first 30 days)  of such investor's purchase price for each 30 day period (pro-rated for partial periods); provided that such damages shall be capped at 12% of such investor’s total purchase price.





If the Company fails to pay any partial liquidated damages pursuant to paragraph 2) b) & c) of the Registration Rights Agreement in full within 7 days after the date payable, the Company will pay interest thereon at a rate of 18% per annum (or such lesser maximum amount that is permitted to be paid by applicable law) to the Holder, accruing daily from the date such partial liquidated damages are due until such amounts, plus all such interest thereon, are paid in full.





We have not yet filed a Registration Statement, we have a certain number of the Purchaser’s who are entitled to Liquidated Damages as described herein. Accordingly, we have accrued an interest expense as Liquidated Damages for those Purchaser’s that this applies to in the amount of $118,017.86. We expect to file a Registration Statement in the near term.




47




BIZZINGO, INC.(A Development Stage Company)Notes to Financial StatementsFor the period from April 3, 2009 (Inception) to May 31, 2011(Expressed in U.S. Dollars)





Note 8.
Common Stock





The acquisition of Phreadz and UDM by the Company on April 27, 2010 was accounted for as a recapitalization by the Company. The recapitalization was the merger of two private LLCs into a non-operating public shell corporation (the Company) with nominal net assets and as such is treated as a capital transaction, rather than a business  combination. The transaction is the equivalent to the issuance of stock by the private company for the net monetary assets of the shell corporation. The pre-acquisition consolidated financial statements of Phreadz and UDM are treated as the historical financial statements of the consolidated Company. Therefore the capital structure of the consolidated enterprise, being the capital structure of the legal parent, is different from that appearing in the financial statements of Phreadz and UDM in earlier periods due to the recapitalization.





1.
On April 3, 2009, 1,920,000 shares were issued for property.


2.
On May 28, 2009, 12,480,000 shares were issued for cash.


3.
On August 25, 2009, 23,136,000 shares were issued for cash.


4.
On March 10, 2010, 5,782,400 shares were issued for cash.


5.
On April 27, 2010, 42,700,000 were issued and 32,712,176 shares were cancelled upon recapitalization due to the reverse merger.


6.
On May 20, 2010 1,933,333 shares were issued at $0.15 for cash of $290,000


7.
On May 31, 2010, 6,514,310 shares were issued in settlement of $892,147.34 in notes assigned to the Company with one note-holder also receiving the “right” with their settled note to receive the equivalent amount of the face amount of their note in consideration of their note.


8.
On June 8, 2010 1,333,333 shares were issued at $0.15 for cash of $200,00


9.
On June 22, 2010 1,334,176 net shares were issued on account of an April 27, 2010 Exchange Agreement


10.
On July 16, 2010 2,520,000 shares were issued at $0.15 for cash of $378,000


11.
On November 1, 2010 1,080,000 shares were issued at $0.15 for cash of $162,000.


12.
On December 3, 2010 720,000 shares were issued at $0.15 for cash of $108,000.


13.
On January 31, 2010 by resolution the Board caused 2,000,000 shares to be issued for services


14.
On March 15, 2011 2,500,000 shares were issued for an asset acquisition (Zonein2 code)





Note 9.
Contingencies




Approximately August 14, 2010, a dispute arose between former Phreadz-division President Jonathan Kossmann and Phreadz, regarding certain intellectual property and confidential information of the Company. Mr. Kossmann has claimed that $30,000 is owed to him pursuant to his 2009-2010 Consulting Agreement with the Company. The Company has conducted an investigation into Mr. Kossmann's claim with the assistance of counsel and does not believe any money is due to him. Management believes it is unlikely that the outcome of this matter will have an adverse impact on its result of operations and financial condition.




We are subject to, and may become a party to, a variety of litigation or other claims and suits that arise from time to time in the ordinary course of our business. Adverse judgments or settlements in some or all of these legal disputes may result in significant monetary damages, injunctive relief against us or damage to our reputation. Potential litigation and other claims are subject to inherent uncertainties and management’s view of these matters may change in the future.




48


BIZZINGO, INC.(A Development Stage Company)Notes to Financial StatementsFor the period from April 3, 2009 (Inception) to May 31, 2011(Expressed in U.S. Dollars)




Note 11.
Subsequent Events




On June 1, 2011 we entered into consulting agreements with each of Mr. Douglas Toth and Mr. Gordon Samson, our CEO and CFO,  pursuant to which each has agreed to terms with the Company. Both Mr. Toth and Mr. Samson previously provided services to the Company with no agreement. These agreements provide for a base salary of no less than $240,000 and 180,000 per annum respectively.





Both agreements provide that Mr. Toth and Mr. Samson are eligible for an annual, performance-based bonus if and when the Company implements an applicable annual incentive plan. The Agreements specified that the Compensation Committee of the Board of Directors would establish such a plan.





As an inducement to enter into these Agreements, Mr. Toth and Mr. Samson will be awarded not less than 1,000,000 shares of our common stock under an S-8 plan to be filed. Additionally on the origination of a company stock option plan they are each to be awarded stock options, with a seven year term, in respect of 3,000,000 shares of the Company’s common stock. The exercise price for these stock option’s will be the market price at time of grant or such other amount as established by a plan. The options are scheduled to vest in two equal annual instalments. If Mr. Toth or Mr. Samson were to terminate their agreements voluntarily without good reason as defined in the agreement, they would forfeit any unvested shares related to this option grant.




Additionally, the termination provisions of these agreements, define “Termination for Cause” and “Termination for Good Reason”. Included in the Termination for Good Reason clauses is a triggering event provision pursuant to a “change of control”.  A triggering event is defined to include a termination of the agreement by the participant following a reduction in position, pay or other “constructive termination,” or a failure by a new control group to assume or continue any plan awards.





The termination benefit provided to Mr. Toth and Mr. Samson  upon an involuntary termination by the Company without cause, or a termination by either Mr. Toth or Mr. Samson  for good reason, is a cash severance payment in an amount equal to the sum of (a) the then current base salary and (b) the average of the annual bonuses payable (including in such average a zero for any year for which no such bonus is payable) to him with respect to each of the last three completed fiscal years of the Company for which the amount of such bonus has been determined at the date of such termination.





To qualify for the cash severance benefit, any applicable bonus amounts and opportunity to vest in unvested equity awards available under a stock option plan following an involuntary termination by the Company without cause, or a termination for good reason, Mr. Toth and/or Mr. Samson must execute a release in favour of the Company and agree to provide the Company with certain consulting services for a period of six months after termination. Additionally, during the period of these consulting services, Mr. Toth and/or Mr. Samson, must also agree not to provide any services to entities that compete with any of the Company’s business.





These agreements became effective June 1, 2011 and have stated terms through May 31, 2012.





Both these Agreements contain covenants for the benefit of the Company relating to non-competition during the terms, protection of the Company’s confidential information, and non-solicitation of Company employees for one year following termination for any reason.





On July 26, 2011 GJD Holdings, LLC directed by Georges Daou (our former CEO) as the Manager and sole member of GJD Holdings, LLC cancelled the 6,460,800 common shares held by GJD Holdings, LLC.


49




On July 14, 2011, eight of our shareholders, including our largest shareholder and our Chief Financial Officer, owning 37,562,628 shares, or approximately 51.2% of the total outstanding shares on the record date, approved an amendment to our articles of incorporation to authorize the creation of 100,000,000 shares of preferred stock, in one or more classes, having such designations, preferences, and relative, participating, optional, or other rights (including preferential voting rights), and qualifications, limitations, and/or restrictions thereof, all as may be determined by from time to time by the Board of Directors of the Corporation (the "Charter Amendment"). This type of preferred stock is known as “blank check” preferred. The amendment to the articles of incorporation will be effective twenty days following the mailing of the information statement. On August 3, 2011 a DEF 14C was filed regarding this change.





Item 9.  Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.





On April 27, 2010, we dismissed Michael Studer, CPA (“Studer”) as our independent registered public accounting firm in connection with the reverse merger. We engaged a new independent registered public accounting firm, Julio Le Deon, CPA (“De Leon”). Pursuant to Item 304(a) of Regulation S-K promulgated under the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, we report as follows:





(a)
(i)
Studer was dismissed as our independent registered public accounting firm effective on April 27, 2010.




(ii)
The Company’s financial statements for its previous fiscal years ended November 30, 2009 and 2008 were audited by Studer.  Studer’s 2009 and 2008 reports did not contain any adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope or accounting principles.  However, both Studer’s 2009 and 2008 reports included explanatory paragraphs regarding the Company’s ability to continue as a going concern.




(iii)
The termination of Studer and engagement of De Leon was approved by our Board of Directors.




(iv)
We and Studer did not have any disagreements with regard to any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure for the audited financials for the Company’s previous fiscal years ended November 30, 2009 and 2008, and subsequent interim period from December 1, 2009 through the date of dismissal, which disagreements, if not resolved to the satisfaction of Studer, would have caused it to make reference to the subject matter of the disagreements in connection with its reports.





(v)
During the Company’s previous fiscal years ended November 30, 2009 and 2008, and subsequent interim period from December 1, 2009 throughout the date of dismissal, we did not experience any reportable events.





(b)
On April 27, 2010, in connection with the reverse merger entered into by the Company, we engaged De Leon as  our new independent registered public accounting firm.





(i)
The appointment of De Leon was approved by our Board.  During our two (2) most recent fiscal years and the subsequent interim periods through April 27, 2010 (the date of engagement of De Leon), we did not consult De Leon regarding either: (i) the application of accounting principles to a specific completed or contemplated transaction, or the type of audit opinion that might be rendered on the Company’s financial statements; or (ii) any matter that was the subject of a disagreement as defined in Item 304(a)(1)(iv) of Regulation S-K.





(ii)
We did not have any disagreements with Studer and therefore did not discuss any past disagreements with Studer.


50




(c)
The dismissal of Studer as our independent registered public accounting firm and our engagement of De Leon as our new independent registered public accounting firm was previously disclosed in our Current Report on Form 8-K filed with the SEC on April 27, 2010 (the “April 27th Form 8-K”).  We made the contents of the April 27th Form 8-K available to Studer and requested it to furnish a letter addressed to the SEC as to whether Studer agreed or disagreed with, or wished to clarify our expression of, our views, or that contained any additional information.  A copy of Studer’s letter to the SEC is attached as Exhibit 16.1 to the April 27th Form 8-K.





Item 9A.  Controls and Procedures.





The Company’s Chief Executive Officer and Chief Financial Officer are responsible for establishing and maintaining disclosure controls and procedures for the Company.





(a) Evaluation of Disclosure Controls and Procedures




Based on their evaluation as of the end of the period covered by this Annual Report on Form 10-K, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are not effective to ensure that information required to be disclosed by us in report that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.





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





The Company’s management is responsible for establishing and maintaining internal control over financial reporting and disclosure controls.  Internal control over financial reporting is a process designed by, or under the supervision of, the Company’s principal executive and principal financial officers, or persons performing similar functions, 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 generally accepted accounting principles and includes those policies and procedures that:





1.
Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;


2.
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and


3.
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.





Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed by the Company under the Exchange is appropriately recorded, processed, summarized and reported within the specified time periods.





Management has conducted an evaluation of the effectiveness of our internal control over financial reporting as of May 31, 2011 based on the framework established in the Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).





Based on this assessment, management concluded that as of May 31, 2011 the Company had material weaknesses in its internal control procedures.


51




A material weakness is a control deficiency, or combination of control deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements would not be prevented or detected on a timely basis.





We have concluded that our internal control over financial reporting was ineffective as of May 31, 2011.




The Company’s assessment identified certain material weaknesses which are set forth below:





Financial Statement Close Process





1.
During the fiscal year ended May 31, 2011, the Company maintained its accounting books and records in two different locations.





2.
There are insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of US GAAP and SEC disclosure requirements.





3.
There is insufficient supervision and review by our corporate management, particularly relating to complex transactions requiring analysis of equity and debt instruments.





4.
There is a lack of formal processes and timelines for closing the books and records at the end of each reporting period.





5.
The Company currently has an insufficient level of monitoring and oversight controls for review and recording of stock issuances, agreements and contracts, including insufficient documentation and review of the selection and application of US GAAP to significant non-routine transactions. In addition this has resulted in a lack of controls over the issuance of the Company's stock which resulted in names of holders being spelt incorrectly.





These weaknesses restrict the Company’s ability to timely gather, analyze and report information relative to the financial statements.





Entity Level Controls





1.
There are insufficient corporate governance policies. Our corporate governance activities and processes are not always formally documented. While we have adopted specific corporate governance policies (see Form 8-K filed on March 28, 2011) we do not yet have a sufficient number of independent directors.





2.
The Company currently has insufficient resources and an insufficient level of monitoring and oversight, which may restrict the Company’s ability to gather, analyze and report information relative to the financial statements in a timely manner, including insufficient documentation and review of the selection and application of US GAAP to significant non-routine transactions. In addition, the limited size of the accounting department makes it impractical to achieve an optimum segregation of duties.





3.
There are limited processes and limited or no documentation in place for the identification and assessment of internal and external risks that would influence the success or failure of the achievement of entity-wide and activity-level objectives.





Functional Controls and Segregation of Duties





1.
There is an inadequate segregation of duties consistent with control objectives.  The Company’s management is composed of a small number of individuals resulting in a situation where limitations on segregation of duties exist.  In order to remedy this situation we would need to hire additional staff to provide greater segregation of duties.  Currently, it is not feasible to hire additional staff to obtain optimal segregation of duties.  Management will reassess this matter in the following year to determine whether improvement in segregation of duties is feasible.


52




2.
There is a lack of top level reviews in place to review targets, product development, joint ventures or financing.  All major business decisions are carried out by the Company’s officers with Board of Directors approval when needed.





Accordingly, as the result of identifying the above material weaknesses, we have concluded that these control deficiencies resulted in a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis by the company’s internal controls.





Management believes that the material weaknesses set forth above were the result of the scale of our operations and are intrinsic to our small size.  Management believes these weaknesses did not have a material effect on our financial results and intends to take remedial actions upon receiving appropriate funding for the Company’s business operations.





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





Plan of Remediation





We are committed to improving our financial organization. Management believes that preparing and implementing sufficient written policies and checklists will remedy the material weaknesses pertaining to insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of US GAAP and SEC disclosure requirements.  Further, management believes that the hiring of additional personnel who have the technical expertise and knowledge will result in proper segregation of duties and provide more checks and balances within the department. These personnel will provide the depth of knowledge and time commitment to provide a greater level of review for corporate activities.  The appointment of additional outside directors with industry expertise will greatly decrease any control and procedure issues the company may encounter in the future.





We will continue to monitor and evaluate the effectiveness of our internal controls and procedures and our internal controls over financial reporting on an ongoing basis and are committed to taking further action and implementing additional enhancements or improvements, as necessary and as funds allow.





We intend to take appropriate and reasonable steps to make the necessary improvements to remediate these deficiencies, including:





1)
We will revise processes to provide for a greater role of independent board members in the oversight and review until such time that we are adequately capitalized to permit hiring additional personnel to address segregation of duties issues, ineffective controls and insufficient supervision and review by our corporate management.


2)
We will continue to update the documentation of our internal control processes, including formal risk assessment of our financial reporting processes


3)
Centralize accounting books and records to one primary location


4)
Consolidate all books and records into one accounting system


5)
Commence the development of internal controls and procedures surrounding the financial reporting process, primarily through the use of account reconciliations, and supervision.




Item 9B.  Other Information.





None


53




PART III





Item 10.  Directors, Executive Officers and Corporate Governance.





The following table sets forth the names, ages, and positions of our executive officers and directors as of May 31, 2011. Executive officers are appointed annually by our Board of Directors. Each executive officer holds his office until he resigns, is removed by the Board, or his successor is elected and qualified. Directors are elected annually by our stockholders at the annual meeting. Each director holds his office until his successor is elected and qualified or his earlier resignation or removal.





Name

Age

Position(s)Douglas Toth

50

Chairman, CEO & DirectorGordon A. Samson

53

CFO, Secretary, Treasurer and DirectorGilbert Davilia

48

Director





Mr. Douglas Toth, Chairman & CEO, Director




Mr. Toth has been working as an independent management consultant where he identified, evaluated opportunities and assisted companies and individuals within a variety of industries including: manufacturing, retail and distribution, media, advertising and technology. In addition he managed special projects for financial, compliance, operations and information systems of the companies for which he consulted. He worked closely with external auditors and legal council to ensure professional propriety and business compliance for the publicly traded companies he represented.





[Mr. Toth’s depth of experience in developing and growing companies, as well as his expertise in the area of technology, led to the conclusion he should serve as a director of the Company.]





Mr. Gordon A. Samson, CFO, Director





Mr. Samson was appointed as our Chief Financial Officer and as a director in connection with the consummation of the Company’s acquisitions of Phreadz and UDM.  From October 2002 to December, 2005, Mr. Samson was a Director and Chief Financial Officer of CYOP Systems International Inc. (“OTC BB - CYOS”), a Nevada media service corporation.  From July, 2003 to May, 2005, Mr. Samson was President, Chief Financial Officer and Director of UpSnap, Inc. (“OTC BB – UPSN”) (formerly Manu Forti Group Inc.), a Nevada mining company.  From January 31, 2006 to August 30, 2006, Mr. Samson was a Director and Chief Financial Officer of Cascade Energy Inc. (“OTC BB - CSCE”), an oil and gas company.  From February 7, 2006 to June 30, 2006, Mr. Samson was an independent Director of Fidelis Energy Inc. (“OTC BB - FDEI”), an oil and gas company.  From January 17, 2006 to August 30, 2006, Mr. Samson was an independent Director of Silver Star Energy Inc. (“OTC BB - SVSE”), an oil and gas company. From March 24, 2006 to September 1, 2006, Mr. Samson was a Director and the Chief Financial Officer of Tao Minerals Ltd., (“OTC BB – TAOL”), a gold exploration company.





From January 2006 to December 2007, Mr. Samson was President, CFO and Director of Future Now Group Inc. (OTC BB – “FUTR”) (formerly Reperio Exploration Inc.), a Nevada mining company.  From October 2008 to present, Mr. Samson has been the CFO and Director of Star Oil, a private Nevada oil and gas company.





Mr. Samson received a Diploma of Technology in Business Administration from the British Columbia Institute of Technology in 1982.  He received his Certified General Accountant (“CGA”) designation in 1991.  Mr. Samson also achieved a Certified Financial Planner designation (“CFP”) in 1998 that he does not maintain.  Mr. Samson has been engaged in a financial capacity for the past 24 years, through his involvement initially as a financial officer and Manager of Finance with Revenue Canada, (1985-1989) now Canada Customs Revenue Agency, as a Senior Banker with TD Canada Trust, a major Canadian institution (from 1989 - 1996) and as a consultant providing Chief Financial Officer services to a wide range of public and private companies.


54




[Mr. Samson’s extensive background and broad experience serving as an officer and director of various companies, and his expertise in corporate finance, led to the conclusion he should serve as a director of the Company]





Mr. Gilbert Davila, Director





Mr. Davila, a former Disney executive, also serves on the board of the Association of National Advertisers, where he is a founding member and current chairman of the ANA Multicultural Marketing and Diversity Committee.





Mr. Davila has been a featured speaker at Harvard University program entitled “Beyond the Niche Market”. Mr. Davila  has also written numerous articles that have appeared in several publications, including  The Wall Street Journal, The Advertiser, Advertising Age and The Los Angeles Times. Gilbert also heads the Board of Advisors of the National Hispanic Media Coalition.





[Mr. Davila’s extensive background and broad experience serving in senior marketing roles, and his relationships with business communities, led to the conclusion he should serve as a director of the Company]





Indemnity Agreements





The Company entered into Indemnity Agreements with each person who became one of the Company’s directors or officers in connection with the consummation of the acquisitions of Phreadz and UDM, pursuant to which, among other things, the Company will indemnify such directors and officers to the fullest extent permitted by applicable law, and provide for advancement of legal expenses under certain circumstances.





Board Composition and Committees





Our Board of Directors currently consists of Douglas Toth, Gordon Samson and Gilbert Davila.  We are planning to expand the number of members constituting our Board of Directors and will seek persons who are “independent” within the meaning of the rules and regulations of The NASDAQ Stock Market to fill vacancies created by any expansion.  Because of our current stage of development, we do not have any standing audit, nominating or compensation committees, or any committees performing similar functions.  The Board will meet periodically throughout the year as necessity dictates.  No current director has any arrangement or understanding whereby they are or will be selected as a director or nominee.




Audit Committee Financial Expert





The Company’s Board of Directors does not have an independent “audit committee financial expert,” within the meaning of such phrase under applicable regulations of the SEC, serving on its audit committee. The Company does not have a separately designated audit committee.  The entire Board of Directors serves as the audit committee.  The Board of Directors believes that all members of its audit committee are financially literate and experienced in business matters, and that one or more members of the audit committee are capable of (i) understanding generally accepted accounting principles ("GAAP") and financial statements, (ii) assessing the general application of GAAP principles in connection with our accounting for estimates, accruals and reserves, (iii) analyzing and evaluating our financial statements, (iv) understanding our internal controls and procedures for financial reporting; and (v) understanding audit committee functions, all of which are attributes of an audit committee financial expert. Like many small companies, however, it is difficult for the Company to attract and retain independent Board members who qualify as “audit committee financial experts,” and competition for these individuals is significant.  The Board believes that its current audit committee is able to fulfill its role under SEC regulations despite not having a designated independent “audit committee financial expert.”




55




Indebtedness of Directors and Executive Officer





None of our directors or our executive officers or their respective associates or affiliates are indebted to us.





Compensation Committee





The Company does not maintain a standing compensation committee.  Due to the Company’s small size at this point in time, the Board of Directors has not established a separate compensation committee. All members of the Board of Directors (with the exception of any member about whom a particular compensation decision is being made) participate in the compensation award process.





The Company understands that in order to attract executive management talent, it will need to offer competitive market salaries to senior management and Board members.





Nominating Committee





The Company does not maintain a standing Nominating Committee and does not have a Nominating Committee charter.  Due to the Company’s small size at this point in time, the Board has not established a separate nominating committee and feels that all directors should have input into nomination decisions. As such, all members of the Board generally participate in the director nomination process. Under the rules promulgated by the SEC, the Board of Directors is, therefore, treated as a “nominating committee.”





With respect to the nominations process, the Board does not operate under a written charter, but under resolutions adopted by the Board of Directors.  The Board is responsible for reviewing and interviewing qualified candidates to serve on the Board, for making recommendations for nominations to fill vacancies on the Board, and for selecting the nominees for selection by the Company’s shareholders at each annual meeting.  The Board has not established specific minimum age, education, experience or skill requirements for potential directors.  The Board takes into account all factors they consider appropriate in fulfilling their responsibilities to identify and recommend individuals as director nominees.  Those factors may include, without limitation, the following:





1.
an individual’s business or professional experience, accomplishments, education, judgment, understanding of the business and the industry in which the Company operates, specific skills and talents, independence, time commitments, reputation, general business acumen and personal and professional integrity or character;





2.
the size and composition of the Board of Directors and the interaction of its members, in each case with respect to the needs of the Company and its shareholders; and





regarding any individual who has served as a director of the Company, his or her past preparation for, attendance at, and participation in meetings and other activities of the Board of Directors or its committees and his or her overall contributions to the Board and the Company.





The Board may use multiple sources for identifying and evaluating nominees for directors, including referrals from the Company’s current directors and management as well as input from third parties, including executive search firms retained by the Board.  The Board will obtain background information about candidates, which may include information from directors’ and officers’ questionnaires and background and reference checks, and will then interview qualified candidates.  The Board will then determine, based on the background information and the information obtained in the interviews, whether to recommend that a candidate be nominated to the Board of Directors.  We strongly encourage and, from time to time actively survey, our shareholders to recommend potential director candidates.





Family Relationships





There are no family relationships among the directors or executive officers of the Company.


56




Conflicts of Interest





Certain potential conflicts of interest are inherent in the relationships between our officers and directors, and us. From time to time, one or more of our affiliates may form or hold an ownership interest in and/or manage other businesses both related and unrelated to the type of business that we own and operate. These persons expect to continue to form, hold an ownership interest in and/or manage additional other businesses which may compete with ours with respect to operations, including financing and marketing, management time and services and potential customers. These activities may give rise to conflicts between or among the interests of us and other businesses with which our affiliates are associated. Our affiliates are in no way prohibited from undertaking such activities, and neither we nor our shareholders will have any right to require participation in such other activities.





Further, because we intend to transact business with some of our officers, directors and affiliates, as well as with firms in which some of our officers, directors or affiliates have a material interest, potential conflicts may arise between the respective interests of us and these related persons or entities. We believe that such transactions will be effected on terms at least as favorable to us as those available from unrelated third parties.




With respect to transactions involving real or apparent conflicts of interest, we will adopt policies and procedures which require that: (i) the fact of the relationship or interest giving rise to the potential conflict be disclosed or known to the directors who authorize or approve the transaction prior to such authorization or approval, (ii) the transaction be approved by a majority of our disinterested outside directors, and (iii) the transaction be fair and reasonable to us at the time it is authorized or approved by our directors.





Term of Office





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





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





Involvement in Certain Legal Proceedings





None of our directors or executive officers has, during the past ten years, been:





1)
the subject of 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)
convicted in a criminal proceeding or is subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);





3)
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 involvement in any type of business, securities or banking activities; or





4)
found by a court of competent jurisdiction (in a civil action), the SEC or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law.


57




Section 16(a) Beneficial Ownership Reporting Compliance





Section 16(a) of the Securities Exchange Act of 1934 requires the Company’s directors and executive officers, and persons who own more than ten percent of a registered class of the Company's equity securities, to file with the Securities and Exchange Commission (the “SEC”) initial reports of ownership and reports of changes in ownership of common stock and other equity securities of the Company.





Officers, directors and greater than ten percent stockholders are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms they file.





To the Company’s knowledge, based solely on review of the copies of such reports furnished to the Company and representations that no other reports were required during the year ended May 31, 2010, and except as disclosed elsewhere in this document, the Company's officers, directors and greater than ten percent beneficial owners have complied with all Section 16(a) filing requirements in a timely manner through May 31, 2010.





Code of Ethics





The Company has adopted and filed a written code of ethics (see Form 8-K dated February 28, 2011).





Item 11.  Executive Compensation.





The following summary compensation table shows certain compensation information for services rendered in all capacities for the fiscal years ended May 31, 2011 and 2010, respectively. Other than as set forth herein, no executive officer’s cash salary and bonus exceeded $100,000 in any of the applicable years. The following information includes the dollar value of base salaries, bonus awards, the value of restricted shares issued in lieu of cash compensation and certain other compensation, if any, whether paid or deferred:





Name &

Principal Position

Year

Salary

($)


Bonus

($)


Stock

Awards


Option

Awards

($)


Non-Equity Incentive

Plan Compensation

($)


Nonqualified

Deferred

Compensation

Earnings ($)


All Other

Compensation

($)

Total

($)Georges Daou, Former Chairman

2011


75,000



—



—



—



—



—



—2010


50,000



—



—



—



—



—



—Christina Domecq, Former CEO

2011


20,000



—



—



—



—



—



—2010


—



—



—



—



—



—



—Douglas Toth, Chairman & CEO (1)

2011


120,0002010


—Gordon Samson, CFO

2011


100,000



—



—



—



—



—



—2010


50,055



—



—



—



—



—



—Jacques Krischer, President

2011


125,000



—



—



—



—



—



—2010


90,965



—



—



—



—



—



—Jonathan Kossmann, President

2011


20,000



—



—



—



—



—



—2010


106,726



—



—



—



—



—



—Groupmark Financial

2011


140,000







1,200,000





* (1) Includes amounts paid through Groupmark Financial Services Ltd., (“Groupmark”) prior to Douglas Toth’s resignation from Groupmark.





Outstanding Equity Awards at Fiscal Year-End




There have been no stock option grants, Stock Appreciation Rights (SARs) grants, options/SAR exercises, Long Term Incentive Plans (LTIPs) or any other equity awards granted to the named executive officers during the prior two fiscal years.





Director Compensation




No compensation has been paid to Directors for their capacity as a Director.


58




Defined Benefit or Actuarial Plan





The Company does not have a defined benefit or actuarial plan in place.





Securities Authorized for Issuance Under Equity Compensation Plans




As of May 31, 2011, the Company had no equity securities authorized for issuance under any compensation plans (including individual compensation arrangements).




Item 12.  Security Ownership of Certain Beneficial owners and Management and Related Stockholder Matters.





The following table contains information about the beneficial ownership of our common stock, as of June 30, 2011, for:





(i)
each person who beneficially owns more than five percent of our common stock;




(ii)
each of our directors;




(iii)
the named executive officers; and




(iv)
all directors and executive officers as a group.




Name and Address of

Beneficial Owner

Title of Class

Number of Shares

Beneficially Owned(1)


Percent of

Class(1) (2)5% or Greater Stockholders:GJD Holdings LLC

18632 Via Catania

Rancho Santa Fe, CA (2)

Common Stock


6,460,800



8.82
%GJ Daou & Company LLC

18632 Via Catania

Rancho Santa Fe, CA (3)

Common Stock


960,000



1.31
%Groupmark Financial Services, Ltd.

Jianwai Soho

39 East 3rd Ring Road, Building 4, Room 1104

Chaoyang District, Beijing PR China 100738

Common Stock


4,645,160



6.345
%Orions Digital Technology, Inc.

915 118th Ave. S.E. Suite 290

Bellevue, WA

98005

Common Stock


5,000,000



6.83
%Orions Digital Technology, Inc.

48 Rosemead Court

Danville, CA

94506

Common Stock


17,120,190



23.38
%Directors and Named

Executive Officers:Gordon Samson

Common Stock


1,000,000



1.37
%Douglas Toth

Common Stock


-



-Gilbert Davila

Common Stock


-



-Kim Cranston

Common Stock


-



-All directors and executive officers as a group

(2 persons):

Common Stock


1,000,000



1.37
%




59




*Less than 1%


(1) Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. The indication herein that shares are beneficially owned is not an admission on the part of the listed stockholder that he, she or it is or will be a direct or indirect beneficial owner of those shares.





(2) Georges Daou is the Manager and sole member of GJD Holdings, LLC and as such has the power to direct the vote and disposition of these shares.





(3) Georges Daou owns 64.632% of GJDaou & Company, LLC and is the sole Manager of such company.  Mr. Daou has the power to direct the vote and disposition of the shares owned by GJDaou & Company, LLC. .





Item 13.  Certain Relationships and Related Transactions, and Director Independence.





A note holder of the Company loaned $75,000 to the Company pursuant to a Note(s) Payable Agreement dated May 3, 2011. The loan accrues simple interest at a rate of 10% per annum and has a 1 year term.




A note holder of the Company loaned $25,000 to the Company pursuant to a Note(s) Payable Agreement dated March 26, 2010. On June 30, 2010 this note was paid out, including $1,052.06 of accumulated interest.





Director Independence





We currently have one director who is “independent” within the meaning of the rules and regulations of The NASDAQ Stock Market.  We are planning to expand the number of members constituting our Board of Directors and will seek persons who are “independent” to fill vacancies created by such an expansion of our Board of Directors.





Item 14.  Principal Accounting Fees and Services.





The following table sets forth the fees billed to the Company for professional services rendered by the Company's principal accountant, for the period from April 3, 2009 (the date of inception of Phreadz and UDM) through May 31, 2010 and the fiscal year ended May 31, 2011:





Services

2011


2010Audit fees


40,000



40,000Audit related fees


-



-Tax fees


-



-All other fees


-



-Total fees


40,000



40,000





Audit Fees. Consist of fees billed for professional services rendered for the audits of our financial statements, reviews of our interim consolidated financial statements included in quarterly reports, services performed in connection with filings with the SEC and related comfort letters and other services that are normally provided by Julio De Leon, CPA in connection with statutory and regulatory filings or engagements.





Tax Fees. Consist of fees billed for professional services for tax compliance, tax advice and tax planning. These services include assistance regarding federal, state and local tax compliance and consultation in connection with various transactions and acquisitions.


60




Board of Directors Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditors





The Board of Directors is to pre-approve all audit and non-audit services provided by the Company’s independent auditors.  These services may include audit services, audit-related services, tax services and other services as allowed by law or regulation.  Pre-approval is generally provided for up to one year and any pre-approval is detailed as to the particular service or category of services and is generally subject to a specifically approved amount.  The independent auditors and management are required to periodically report to the Board of Directors regarding the extent of services provided by the independent auditors in accordance with this pre-approval and the fees incurred to date.  The Board of Directors may also pre-approve particular services on a case-by-case basis.





The Board of Directors pre-approved 100% of the Company’s 2010 audit fees, audit-related fees, tax fees, and all other fees to the extent the services occurred after May 31 2010, the effective date of the Securities and Exchange Commission’s final pre-approval rules.





PART IV





Item 15.  Exhibits and Financial Statement Schedules.





The following documents are filed herewith or have been included as exhibits to previous filings with the SEC and are incorporated herein by this reference:





(a)           Financial Statements and Schedules





See the Company’s financial statements and notes thereto included in this Annual Report on Form 8-K under “Item 8. Financial Statements and Supplementary Data.”





(b)           Exhibits





EXHIBIT INDEX





Exhibit No.

Exhibit31.1

Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*31.2

Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*32.1

Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*32.2

Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*




* Filed herewith.


61




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.





BIZZINGO, INC.Date:      August 18, 2011
By:       /s/ Douglas TothDouglas Toth, 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.




Signature

Title

Date/s/ Douglas Toth

Chief Executive Officer

August 18, 2011Douglas Toth

(Principal Executive Officer)/s/ Gordon A. Samson

Chief Financial Officer, Secretary, Treasurer and Director

August 18, 2011Gordon A. Samson

(Principal Accounting and Financial Officer)/s/ Gilbert Davila

Director

August 18, 2011Gilbert Davila/s/ Kim Cranston

Director

August 18, 2011Kim Cranston




62