ITEM 1: LEGAL PROCEEDINGS
On January 20, 2011, a complaint was filed against the Company in the Superior Court of California (case # CIVWS09-0049) terminating the
lease at 500 Bollinger Canyon Way, San Roman, CA due to subleasing the premises without consent of the landlord. A judgment was entered
giving the landlord possession of the premises with no monetary amount awarded.
On February 18, 2009 the Company received a letter demanding payment on the deficiencies of 2 notes totaling $125,000 issued by the
Company. Subsequent to this an action was originated in the District Court of Jefferson County Texas (case # A-183,766). The Plaintiff
contends the Company had not paid the principal or interest on promissory notes issued in 2004. In 2005 the Company issued stock of
3,400,000 and 2,500,000 shares to the plaintiff in full payment of the outstanding notes and interest to the plaintiff. The Company and principal
shareholder has agreed to a judgment of $176,667 plus attorney’s fees of $25,000. As of this date the judgment has not been entered or signed
by the plaintiff and the judge presiding in the case so the liability cannot yet be determined. Until entered the judgment is not in effect and
could change.
The Company and its principal stockholder has agreed to a judgment in Harris Court Texas District Court (Cause# 2011-36988 with the
plaintiff of the case to pay the plaintiff $115,000 plus legal costs of $5,000. The settlement calls for a $50,000 payment on January 12, 2012
plus payments of $2,000 per month thereafter. No payments have been made to date. As of this date the judgment has not been signed by the
plaintiff attorney or the judge presiding over the case so actual liability is hard to determine. Until the order is entered the judgment is not in
effect and could change.
