ITEM 1. BUSINESS.
Cala Corporation (formerly Magnolia Foods, Inc.) was incorporated on September 13, 1985 under the laws of the State of Oklahoma. The Registrant's sole industry segment was the business of owning, operating, licensing and joint venturing restaurants. In addition, the Registrant operated restaurants under lease which were discontinued during the year. Currently, the Registrant is in the development stage of building an underwater resort and casino.
Business Development.
The Registrant has designed an undersea resort. The Registrant, through the expertise of Mr. Ray Francis has solved the naval engineering problems originally presented by the project. Mr. Francis, brings to the table over 40 years of maritime experience that is second to none in the maritime industry. Mr. Francis talents allow for a design that benefits the customer’s safety, maximizes the openness and space of the facility, and maintains the primary focus of human contact with marine life. This coupled with Joseph Cala’s knowledge and experience in the hospitality industry, along with eight years of intensive study and seemingly endless trial and error, enabled the Registrant to finalize two naval engineered designs for the Undersea Resort and Residence. The Registrant engaged Mr. Clive Jones, a former senior executive with Economic Research Associates, to help with business development. Mr. Jones has over 40 years of experience in worldwide leisure travel and tourism development, and he was the visionary behind of many landmark resorts and theme parks. In addition, the Company is working with prestigious maritime companies such as Stodga of Poland and FinCantieri of Italy.
The Registrant plans to build the first UnderSea Resort & Casino, the first Undersea Residence, and the first Residence Fractional Ownership. The development will be the residence and the fractional ownership, and the project will be financed from pre-selling individual units. Management believes that the project has a great chance of success. The Registrant is in discussions with members of the timeshare and fractional unit industry to explore the possibility of a partnership or contractual arrangement with the Registrant. The undersea residences have the entire ocean available with no purchase costs, and without the limitations of land. According to the Future Timeshare Buyers 2004 Market Profile, 13.4 million adults are interested in purchasing some form of timeshare during the next two years. The next generation of owners is well educated and the highest concentration of interest in purchasing is among GenXers. In addition, the study documents that prospective owners are experienced and enthusiastic travelers.
The Registrant completed the design phase of development and is seeking financing to begin the construction phase of the project. Included in the financing stage is the concept of pre-selling the vessels prior to the beginning of construction. As of this date the Registrant does not have any commitments for financing or purchase of any units. The Registrant initiated a contract with a shipyard for building the units.
Management believes that the project has a great chance of success however; there can be no assurance that (i) such individual unit or fractional ownership will be sold or significant revenue will be generated, and (ii) anticipated costs will not be significantly exceeded by actual costs incurred.
The Registrant owns no patents or trademarks, and has no employees.
ITEM 1A
ITEM 1A RISK FACTORS
Risk Factors Connected 	with Plan of Operation.
(a) Limited Prior Operations, History of Operating Losses, and Accumulated Deficit May Affect Ability of Registrant to Survive.
The Registrant has had limited prior operations to date. Since the Registrant’s principal activities recently have been limited to seeking new business ventures, it has no recent record of any revenue-producing operations. Consequently, there is only a limited operating history upon which to base an assumption that the Registrant will be able to achieve its business plans. In addition, the Registrant has only limited assets. As a result, there can be no assurance that the Registrant will generate significant revenues in the future; and there can be no assurance that the Registrant will operate at a profitable level. Accordingly, the Registrant’s prospects must be considered in light of the risks, expenses and difficulties frequently encountered in connection with the establishment of a new business.
The Registrant incurred General and Administrative expenses of $234,762 for the year ending 2008 and $694,705 for the year ending 2007. Stock for services consisted of zero and $332,000 of the total general and administrative expense for the years ending 2008 and 2007, respectively. Officers salary of $150,000 and legal and accounting of $46,235 were the major components of G&A during the year ended 2008 while consulting expense of $64,241 and legal and accounting of $62,932 were the other major components for the year ending 2007.
The Registrant has incurred net losses: $1,114,398 for the fiscal year ended December 31, 2008 and $721,403 for the fiscal year ended December 31, 2007. The Registrant’s current liabilities exceed its current assets by $320,590 as of December 31, 2008 and $184,366 as of December 31, 2007. At December 31, 2008, the Registrant had an aggregate accumulated deficit and accumulated deficit during the development stage of $13,722,590 ($11,886,789 and $1,835,801, respectively). This raises substantial doubt about the Registrant’s ability to continue as a going concern.
As a result of the fixed nature of many of the Registrant’s expenses, the Registrant may be unable to adjust spending in a timely manner to compensate for any unexpected delays in the development and marketing of the Registrant’s products or any capital raising or revenue shortfall. Any such delays or shortfalls will have an immediate adverse impact on the Registrants business, operations and financial condition.
(b) Need for 	Additional Financing May Affect Operations and Plan of Business.
The working capital requirements associated with any adopted plan of business of the Registrant may be significant. The Registrant anticipates, based on currently proposed assumptions relating to its operations (including with respect to costs and expenditures and projected cash flow from operations), that it must seek financing to continue its operations (an amount which is as yet to be determined). However, such financing, when needed, may not be available, or on terms acceptable to management. The ability of the Registrant to continue as a going concern is dependent on additional sources of capital and the success of the Registrant’s business plan. The Registrant’s independent accountant audit report included in this Form 10-K includes a substantial doubt paragraph regarding the Registrant’s ability to continue as a going concern.
If funding is insufficient at any time in the future, the Registrant may not be able to take advantage of business opportunities or respond to competitive pressures, or may be required to reduce the scope of its planned product development and marketing efforts, any of which could have a negative impact on its business, operating results and financial condition. In addition, insufficient funding may have a material adverse effect on the company’s financial condition, which could require the company to:
 curtail operations significantly;
 sell significant assets;
 seek arrangements with strategic partners or other parties that may require the company to relinquish significant rights to products, technologies or markets; or
 explore other strategic alternatives including a merger or sale of the company. To the extent that the Registrant raises additional capital through the sale of equity or convertible debt securities, the issuance of such securities will result in dilution to existing stockholders. If additional funds are raised through the issuance of debt securities, these securities may have rights, preferences and privileges senior to holders of common stock and the terms of such debt could impose restrictions on the Registrant’s operations. Regardless of whether the Registrant’s cash assets prove to be inadequate to meet the Registrant’s operational needs, the Registrant may seek to compensate providers of services by issuance of stock in lieu of cash, which will also result in dilution to existing shareholders.
(c) Loss of Current Management Could Have Adverse Impact on Business and Prospects for Registrant.
The Registrant’s success is dependent upon the hiring and retention of key personnel. None of the officers or directors has any employment or non-competition agreement with the Registrant. Therefore, there can be no assurance that these personnel will remain employed by the Registrant. Should any of these individuals cease to be affiliated with the Registrant for any reason before qualified replacements could be found, there could be material adverse effects on the Registrant’s business and prospects.
In addition, all decisions with respect to the management of the Registrant will be made exclusively by the officers and directors of the Registrant. Investors will only have rights associated with stockholders to make decisions which affect the Registrant. The success of the Registrant, to a large extent, will depend on the quality of the directors and officers of the Registrant. Accordingly, no person should invest in the shares unless he is willing to entrust all aspects of the management of the Registrant to the officers and directors.
(d) Potential Conflicts of Interest May Affect Ability of Officers and Directors to Make Decisions in the Best Interests of Registrant.
The officers and directors have other interests to which they devote time, either individually or through partnerships and corporations in which they have an interest, hold an office, or serve on boards of directors, and each will continue to do so notwithstanding the fact that management time may be necessary to the business of the Registrant. As a result, certain conflicts of interest may exist between the Registrant and its officers and/or directors which may not be susceptible to resolution.
In addition, conflicts of interest may arise in the area of corporate opportunities which cannot be resolved through arm’s length negotiations. All of the potential conflicts of interest will be resolved only through exercise by the directors of such judgment as is consistent with their fiduciary duties to the Registrant. It is the intention of management, so as to minimize any potential conflicts of interest, to present first to the board of directors to the Registrant, any proposed investments for its evaluation.
(e) Limitations on Liability, and Indemnification, of Directors and Officers May Result in Expenditures by Registrant.
The Registrant’s Certificate of Incorporation contain provisions to eliminate, to the fullest extent permitted by the Oklahoma Corporation Law, as in effect from time to time, the personal liability of directors of the Registrant for monetary damages arising from a breach of their fiduciary duties as directors. The Certificate of Incorporation and the Amended and Restated By-Laws of the Registrant include provisions to the effect that the Registrant may, to the maximum extent permitted from time to time under applicable law, indemnify any director, officer, or employee to the extent that such indemnification and advancement of expense is permitted under such law, as it may from time to time be in effect. Any limitation on the liability of any director, or indemnification of directors, officer, or employees, could result in substantial expenditures being made by the Registrant in covering any liability of such persons or in indemnifying them.
(f) Absence of Cash Dividends May Affect Investment Value of Registrant’s Stock.
The board of directors does not anticipate paying cash dividends on the common stock for the foreseeable future and intends to retain any future earnings to finance the growth of the Registrant’s business. Payment of dividends, if any, will depend, among other factors, on earnings, capital requirements and the general operating and financial conditions of the Registrant as well as legal limitations on the payment of dividends out of paid-in capital.
(g) Non-Cumulative Voting May Affect Ability of Some Shareholders to Influence Mangement of Registrant.
Holders of the shares of common stock of the Registrant are not entitled to accumulate their votes for the election of directors or otherwise. Accordingly, the holders of a majority of the shares present at a meeting of shareholders will be able to elect all of the directors of the Registrant, and the minority shareholders will not be able to elect a representative to the Registrant’s board of directors.
(h) No Assurance of Continued Public Trading Market and Risk of Low Priced Securities May Affect Market Value of Registrant’s Stock.
There has been only a limited public market for the common stock of the Registrant. The common stock of the Registrant is currently quoted on the Pink Sheets LLC. As a result, an investor may find it difficult to dispose of, or to obtain accurate quotations as to the market value of the Registrant’s securities. In addition, the common stock is subject to the low-priced security or so called “penny stock” rules that impose additional sales practice requirements on broker-dealers who sell such securities. The Securities Enforcement and Penny Stock Reform Act of 1990 requires additional disclosure in connection with any trades involving a stock defined as a penny stock (generally, according to recent regulations adopted by the U.S. Securities and Exchange Commission (“SEC”), any equity security that has a market price of less than $5.00 per share, subject to certain exceptions), including the delivery, prior to any penny stock transaction, of a disclosure schedule explaining the penny stock market and the risks associated therewith. The regulations governing low-priced or penny stocks sometimes limit the ability of broker-dealers to sell the Registrant’s common stock and thus, ultimately, the ability of the investors to sell their securities in the secondary market.
(i) Failure to Maintain Market Makers May Affect Value of Registrant’s Stock.
If the Registrant is unable to maintain a Financial Industry Regulatory Authority member broker/dealers as market makers, the liquidity of the common stock could be impaired, not only in the number of shares of common stock which could be bought and sold, but also through possible delays in the timing of transactions, and lower prices for the common stock than might otherwise prevail. Furthermore, the lack of market makers could result in persons being unable to buy or sell shares of the common stock on any secondary market. There can be no assurance the Registrant will be able to maintain such market makers.
(j) Sale of Shares Eligible For Future Sale Could Adversely Affect the Market Price.
All of the shares of common stock that are currently held, directly or indirectly, by significant shareholders of the Registrant as shown in the chart under Part III, Item 11 of this Form 10-K, have been issued in reliance on the private placement exemption under the Securities Act of 1933. Such shares will not be available for sale in the open market without separate registration except in reliance upon Rule 144 under the Securities Act of 1933. In general, under Rule 144 a person, or persons whose shares are aggregated, who has beneficially owned shares acquired in a non-public transaction for at least one year, including persons who may be deemed affiliates of the Registrant, as defined, would be entitled to sell within any three-month period a number of shares that does not exceed 1% of the then outstanding shares of common stock, provided that current public information is then available. If a substantial number of the shares owned by these shareholders were sold under Rule 144 or a registered offering, the market price of the common stock could be adversely affected.
ITEM 2.
ITEM 2. PROPERTY. The Registrant maintains an office at 1314 Texas Street, Suite 400, Houston, TX 77002. It currently does not own any equipment at that location.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS.
In 2003, the Registrant obtained a judgment against I.M.O.I.L, Gisella Manciniand Quirino Caparelli in the amount of $2.7 million. The judgment has not been collected and is not included in the financial statements. During the years ending in 2008 and 2007, the Registrant has not actively pursued the collection of the judgment. The Registrant received the judgment resulting from a lawsuit initiated by the Registrant due to losses incurred from lack of performance by the defendant in a merger agreement with the Registrant. As the defendant is in a foreign jurisdiction the Registrant feels it is unlikely the judgment will be collected without the investment of large legal fees.
The Company is the defendant in a lawsuit filed on February 21, 2008 in Brevard County, Florida Case No: 05-2008-CA-019105 which was brought by the mortgage holder of the property owned by the Company at 13 Main Street Titusville, FL. The matter was heard on March 14, 2008 and the Company was ordered to commence monthly payments of $3,272.32 to the plaintiff beginning on April 16, 2008 and on the same date each month thereafter. The Company did not meet the requirements of the Agreement.
On September 30, 2008, the Company entered into a stipulated settlement agreement with the owner and mortgage holder of the building. An order adopting the stipulation was issued by the Eighth Circuit Court of Brevard County, Florida on October 3, 2008. Under the terms of the agreement the Company was to vacate the building on October 12, 2008 and dismiss any counter claims it has against the mortgage holder of the property. The mortgage holder of the building waived all deficiency against the Company and assumed title of the building.
On January 20, 2009, 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.
ITEM 4.
ITEM 4. SUBMISSION OF 	MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
PART II.
ITEM 5.
ITEM 5. MARKET FOR COMMON 	EQUITY AND RELATED STOCKHOLDER MATTERS.
Market Information.
The Registrant’s common stock trades on the National Quotation Bureaus’ Pink Sheets (now know as Pink Sheets LLC), where it continues to trade under the symbol “CCAA”. The range of closing prices shown below is as reported by this market. The quotations shown reflect inter-dealer prices, without retail mark-up, markdown or commission and may not necessarily represent actual transactions.
Page
Per Share Common Stock Bid Prices by Quarter For the Fiscal Year Ended on December 31, 2008 (1)
High
Low
Quarter 			Ended December 31, 2008
0.006
0.0012
Quarter 			Ended September 30, 2008
0.007
0.0015
Quarter 			Ended June 30, 2008
0.012
0.0030
Quarter 			Ended March 31, 2008
0.020
0.0010
(1) The Registrant’s 	common stock only traded sporadically during this fiscal year
Per Share Common Stock Bid 	Prices by Quarter For the Fiscal Year 	Ended on December 31, 2007
High
Low
Quarter 			Ended December 31, 2007
0.025
0.006
Quarter 			Ended September 30, 2007
0.029
0.012
Quarter 			Ended June 30, 2007
0.028
0.017
Quarter 			Ended March 31, 2007
0.0324
0.019
Holders of Common Equity.
As of December 31, 2008, the Registrant had approximately 515 shareholders of record.
Dividend Information.
The Registrant has not declared or paid a cash dividend to stockholders since it was incorporated. The Board of Directors presently intends to retain any earnings to finance Registrant operations and does not expect to authorize cash dividends in the foreseeable future. Any payment of cash dividends in the future will depend upon the Registrant's earnings, capital requirements and other factors.
Sales of Unregistered Securities.
The Registrant made no sales of unregistered securities (restricted stock) during the year which have not been reported in the 10 Q’s filed for the first three quarters for the year ending December 31, 2008.
ITEM 6.
ITEM 6. SELECTED FINANCIAL 	DATA Not Applicable
ITEM 7.
ITEM 7. MANAGEMENT’S 	DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF 	OPERATION.
The following discussion should be read in conjunction with the financial statements of the Registrant and notes thereto contained elsewhere in this report.
Twelve-Month Plan of 	Operation.
The Registrant intends to take advantage of any reasonable business proposal presented which management believes will provide the Registrant and its stockholders with a viable business opportunity. The board of directors will make the final approval in determining whether to complete any acquisition, and unless required by applicable law, the articles of incorporation or bylaws or by contract, stockholders' approval will not be sought.
The Registrant designed to build the first UnderSea Resort & Casino, the first Undersea Residence, and the first Residence Fractional Ownership. The first development will be the residence and the fractional ownership, and the project will be financed from pre-selling individual units. The Registrant estimates that the average residential development should generate approximately $600 million of revenue from the sale of the units while the total development cost should be approximately $460 million. This is based on initial estimates of unit costs and revenue generated in the sale of the vessels as it is the intent of the Registrant to build the vessels under the Registrants design for sale to prospective buyers. The Registrant does not initially intend to own any of the vessels being built. Therefore, the management believes that the project has a great chance of success however there can be no assurance that (i) such individual unit or fractional ownership will be sold or significant revenue will be generated, and (ii) anticipated costs will not be significantly exceeded by actual costs incurred. The possibilities in this industry are tremendous, because demand for oceanic properties is the highest it has ever been and the supply is scarce. The undersea residences have the ocean available with no purchase costs, and without the limitations of land.
The Registrant plans to finalize plans for securing the financing and construction of the resort. The beginning of construction is dependent on the Registrant completing its plan of financing and contracting for the construction, both of which will highly impact the Registrants ability to carry out its business plan.
The investigation of business opportunities and the negotiation, drafting, and execution of relevant agreements, disclosure documents, and other instruments will require substantial management time and attention and will require the Registrant to incur costs for payment of accountants, attorneys, and others. If a decision is made not to participate in or complete the acquisition of a specific business opportunity, the costs incurred in a related investigation will not be recoverable. Further, even if an agreement is reached for the participation in a specific business opportunity by way of investment or otherwise, the failure to consummate the particular transaction may result in the loss to the Registrant of all related costs incurred.
Capital Expenditures.
On December 1, 2005, the Registrant purchased a building and land for an aggregate amount of $750,000 of which the Registrant paid $150,000 plus closing costs and a mortgage note of $600,000. The mortgage bears an interest rate of eight (8%) percent with 240 monthly principal and interest payments of $5,020.24 stating on January 16, 2006. The note contains a prepayment penalty of $50,000 if the note is paid prior to December 16, 2007.
On July 16, 2006, the mortgage was modified with a principal balance of $592,592.51 extending the mortgage through July 15, 2036. The mortgage was amended to eliminate the prepay penalty of $50,000 in the original mortgage, grant a reduction in the mortgage principal of $100,000 if the mortgage is paid off on or before February 17, 2007 and reduced the interest rate to five and one quarter percent (5.25%). A late fee of five percent (5%) on payment over ten (10) days was added to the mortgage. The prepayment reduction was not realized during the year and has expired.
On September 30, 2008, the Company agreed to vacate the building and return title to the mortgage holder. Upon vacating the building the mortgage holder through a court order relieved the Company of all liabilities connected to the ownership and occupancy of the building. The result of this transaction was a loss on disposal of assets of $121,560.
Critical Accounting Policies.
The SEC has issued Financial Reporting Release No. 60, “Cautionary Advice Regarding Disclosure About Critical Accounting Policies” (“FRR 60”); suggesting companies provide additional disclosure and commentary on their most critical accounting policies. In FRR 60, the Commission has defined the most critical accounting policies as the ones that are most important to the portrayal of a company’s financial condition and operating results, and require management to make its most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Based on this definition, the Registrant’s most critical accounting policies include the use of estimates in the preparation of financial statements. The methods, estimates and judgments the Registrant uses in applying these most critical accounting policies have a significant impact on the results the company reports in its financial statements.
The preparation of these financial statements requires the Registrant to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, the Registrant evaluates these estimates, including those related to revenue recognition and concentration of credit risk. The Registrant bases its estimates on historical experience and on various other assumptions that is believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Forward Looking Statements.
The foregoing plan of operation contains “forward looking statements” within the meaning of Rule 175 of the Securities Act of 1933, as amended, and Rule 3b-6 of the Securities Act of 1934, as amended. The words “believe,” “expect,” “anticipate,” “intends,” “forecast,” “project,” and similar expressions identify forward-looking statements. These are statements that relate to future periods and include, but are not limited to, statements as to the Registrant’s estimates as to the adequacy of its capital resources, its need and ability to obtain additional financing, its operating losses and negative cash flow, and its critical accounting policies. Forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected. These risks and uncertainties include, but are not limited to, those discussed above. These forward-looking statements speak only as of the date hereof. The Registrant expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in its expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS.
Financial statements are audited and included herein beginning on Exhibit 1, page 18 and are incorporated herein by this reference.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
ITEM 9A.
ITEM 9A. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures.
Within the 90 days prior to the end of the period covered by this report, the Registrant carried out an evaluation of the effectiveness of the design and operation of its disclosure controls and procedures pursuant to Rule 13a-15 under the Securities Exchange Act of 1934, as amended (“Exchange Act”). This evaluation was done under the supervision and with the participation of the Registrant’s president. Based upon that evaluation, he concluded that the Registrant’s disclosure controls and procedures are not effective in gathering, analyzing and disclosing information needed to satisfy the Registrant’s disclosure obligations under the Exchange Act.
Changes in Disclosure Controls and Procedures.
There were no significant changes in the Registrant’s disclosure controls and procedures, or in factors that could significantly affect those controls and procedures since their most recent evaluation.
ITEM 9B
ITEM 9B OTHER INFORMATION
None
PART III.
ITEM 10.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
On February 28, 2006, John Del Fevro resigned as a director of the Registrant. On October 1, 2006, Larry Pfautsch was elected to the board of directors and Robert Mosley resigned. On November 1, 2006, Ray Francis was elected to the board of directors of the Registrant.
The name, age, and respective position of the directors and executive officer of the Registrant are set forth below. The director named below will serve until the next annual meeting of the Registrant’s stockholders or until his successors are duly elected and have qualified. Directors are elected for a term until the next annual stockholders’ meeting. Officers will hold their positions at the will of the board of directors, absent any employment agreement, of which none currently exist or are contemplated. There are no arrangements, agreements or understandings between non-management shareholders and management under which non-management shareholders may directly or indirectly participate in or influence the management of the Registrant’s affairs. There are no other promoters or control persons of the Registrant. There are no legal proceedings involving the directors of the Registrant.
Director and Executive 	Officer.
Joseph Cala, 48, Director, Chairman and CEO
Mr. Cala has been an international business owner most of his professional life. He began his career at an early age rising to top management positions in some of the most prestigious and luxurious resorts in the world. Mr. Cala, as Chairman & CEO of Cala Corporation has been involved in various ventures such as: Fila Sportswear USA; Mondi Fashions, USA; L'Italiano Restaurants and Weddings in California, Hawaii and Japan, Cala Hotels, Inc. dba Undersea Resort; and Hydrogen Future, Inc.
Larry S. Pfautsch, 60, 	Director
Mr. Pfautsch is Vice 	President of Corporate Communications for American Century 	Investments, a $100 billion asset manager based in Kansas City, Mo. 	Previously, Mr. Pfautsch was a Partner and Senior Vice President 	with the international communications and public relations firm of 	Fleishman Hillard, Inc., where he was a member of the financial 	communications, investor relations, and corporate reputation 	management practice groups. He began his career as a newspaper 	reporter and editor and later worked in corporate communications for 	a major building materials retailer. He is a U.S. Army veteran and a 	longtime member of the International Association of Business 	Communicators.
Mr. Ray Francis, 72, 	Director
Mr. Francis, President of UnderSea Resort Design, was elected to the Board of Directors of Cala Corporation. Having completed his undersea naval design to the strict maritime rules of Lloyds Register of Shipping, Mr. Francis conducts his day to day operational responsibilities at the UnderSea Resort Headquarters and will commence his role as a director and principal in the Company’s oceanic construction operations.
Compliance with Section 16(a) of the Securities Exchange Act.
Section 16(a) of the Securities Exchange Act of 1934 requires executive officers and directors, and persons who beneficially own more than 10% of any class of the Registrant’s equity securities to file initial reports of ownership and reports of changes in ownership with the Securities and Exchange Commission (“SEC”). Executive officers, directors and beneficial owners of more than 10% of any class of the Registrant’s equity securities are required by SEC regulations to furnish the Registrant with copies of all Section 16(a) forms they file.
Based solely upon a review of Forms 3 and 4 and amendments thereto furnished to the registrant under Rule 16a-3(d) during fiscal 2002, and certain written representations from executive officers and directors, the Registrant is unaware of any required reports that have not been timely filed.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION.
Summary Compensation Table
Mr. Cala was appointed 	a director and president in 1999.
There are no annuity, pension or retirement benefits proposed to be paid to officers, directors, or employees of the Registrant in the event of retirement at normal retirement date as there is no existing plan provided for or contributed to by the Registrant. In addition, no remuneration is proposed to be paid in the future, directly or indirectly, by the Registrant to any officer or director since there is no existing plan as of December 31, 2008 which provides for such payment.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth information regarding the beneficial ownership of shares of the Registrant’s common stock as of March 31, 2010 (320,886,147 issued and outstanding) by (i) all stockholders known to the Registrant to be beneficial owners of more than 5% of the outstanding common stock; and (ii) all officers and directors of the Registrant, individually and as a group (each person has sole voting power and sole dispositive power as to all of the shares shown as beneficially owned by them):
Title of 			Class
Name and 			Address of Beneficial Owner
Amount 			and Nature of Beneficial Owner
Percent 			of Class
Common 			Stock
Joseph 			Cala
1314 Texas Street
Houston, TX 77002
114,042,405
35.5%
Common 			Stock
Larry 			Pfautsch
1314 Texas Street
Houston, TX 77002
11,500,000
3.6%
Common 			Stock
Raymond 			Francis
1314 Texas Street
Houston, TX 77002
12,000,000
3.7%
Common 			Stock
Shares 			of all directors and executive officers as a group (1 person)
137,542,405
42.8 %
(1) None of these security 	holders has the right to acquire any amount of the shares within 	sixty days from options, warrants, rights, conversion privilege, or 	similar obligations.
ITEM 13.
ITEM 13. CERTAIN 	RELATIONSHIPS AND RELATED TRANSACTIONS.
Other than as set forth below, during the last two fiscal years there have not been any transaction that have occurred between the Registrant and its officers, directors, and five percent or greater shareholders.
In 2005, the officer of the Registrant was issued 7,000,000 shares to reduce accrued salary of $112,500. On January 2006, an officer of the Registrant returned 300,000 shares of common stock and received $ 15,000 in cash. The shares were cancelled. On August 2006, an officer of the Registrant returned 7,166,425 shares to the Registrant for a note payable of $ 214,993. The shares were cancelled. On November 21, 2006, the Registrant issued an officer of the Registrant 16,611,111 shares of common stock valued at $ 352,986 for salary for the year ended 2006. On February 2, 2007, the Registrant issued 15,000,000 shares of common stock valued at $ 300,000 for salary for the year ended 2007.
ITEM 14.
ITEM 14. PRINCIPAL 	ACCOUNTANT FEES AND SERVICES.
Audit Fees.
The aggregate fees billed 	for each of the last two fiscal years for professional services 	rendered by De Joya Griffith and Company, LLC for Form 10-K for 2007 	was $20,000 and 2008 was $27,000.
Audit-Related Fees.
The aggregate fees billed 	in each of the last two fiscal years for assurance and related 	services by De Joya Griffith: $0.
Tax Fees.
The aggregate fees billed in each of the last two fiscal years for professional services rendered by De Joya Griffith: $0.
All Other Fees.
The aggregate fees billed in each of the last two fiscal years for products and services provided by De Joya Griffith: $0.
Audit Committee.
The Registrant does 	not have an audit committee.
PART IV
ITEM 15
ITEM 15 EXHIBITS AND REPORTS ON FORM 8-K
Exhibits.
Exhibits included or incorporated by reference herein are set forth under the Exhibit Index.
Reports on Form 8-K.
On February 27, 2007, the Registrant filed an 8-K appointing the accounting firm of the firm De Joya Griffith & Company, LLC, of Henderson, Nevada, as the principal accountant to audit the Registrant's financial statements for the fiscal year of the Registrant ended December 31, 2006.
On March 10, 2008, the Registrant filed an 8-K announcing a contract between the Registrant and Odys Shipyard for building the Undersea vessels. Under the terms of the contract the contract becomes effective when the registrant has place a 50% deposit on the first vessel to be built. The Registrant had 100 days from the date of the contract to make the initial deposit or Odys Shipyard may unilaterally cancel the contract. The Registrant has no financial obligations until the initial payment has been completed. The Registrant has not met its obligations per the contract so the contact could be cancelled by the shipyard.
On November 19, 2008, the Registrant filed an 8-K that the Company had created a new hospitality management division. The new division mission is to sign hospitality management contracts with independent owners.
The Registrant has held discussions and received affirmative agreement with the New York Harbor Department to dock resort ships in the Hudson River. As of this date no written contract has been completed.
SIGNATURE
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.
Cala 									Corporation
Dated: April 23, 2010 By: 	/s/ Joseph Cala
Joseph Cala, 								President
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 date indicated:
Signature
Title
Date
/s/ Joseph Cala Joseph Cala
President 				(principal financial and accounting officer)/Director
April 			23, 2010
/s/ Raymond 				Francis Raymond Francis
Director
April 			23, 2010
/s/ Larry 				Pfautsch Larry Pfautsch
Director
April 			23, 2010
CALA CORPORATION
FINANCIAL STATEMENTS AND ACCOMPANYING FOOTNOTES
REPORT 	OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM …….19
BALANCE 	SHEET……………………………………………………………………. 	.20
STATEMENTS 	OF OPERATIONS……………………………………………… 	……21
STATEMENT 	OF STOCKHOLDERS’ EQUITY (DEFICIT)……………………….….22
STATEMENTS 	OF CASH FLOWS……………………………………………………..23
NOTES TO 	FINANCIAL STATEMENTS………………………………………………
De Joya Griffith & Company, LLC
CERTIFIED PUBLIC ACCOUNTANTS & CONSULTANTS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
Cala Corp
Houston, TX
We have audited the accompanying balance sheets of Cala Corp (A Development Stage Company) as of December 31, 2008 and 2007, and the related statements of operations, stockholders’ equity (deficit), and cash flows for the years then ended and from January 1, 2007 through December 31, 2008. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, based on our audit, the financial statements referred to above present fairly, in all material respects, the financial position of Cala Corp (A Development Stage Company) as of December 31, 2008 and 2007, and the results of its operations and cash flows for the years then ended and from January 1, 2007 through December 31, 2008 in conformity with accounting principles generally accepted in the United States.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 4 to the financial statements, the Company has suffered losses from operations and current liabilities exceed current assets, all of which raise substantial doubt about its ability to continue as a going concern. Management’s plans in regards to these matters are also described in Note 4. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ De Joya Griffith & Company, LLC
De Joya Griffith & Company, LLC
Henderson, NV
April 4, 2010
CALA CORPORATION
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
AS OF DECEMBER 31, 2008 AND 2007
(AUDITED)
ASSETS
The accompanying notes are an integral part to the financial statements
CALA CORPORATION
(A DEVELOPMENT-STAGE COMPANY)
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007, AND FROM JANUARY 1, 2007 TO DECMBER 31, 2008
(AUDITED)
January 			1, 2007 to December 31, 2008
Income
$ --
$ --
$ --
General 			and administrative expense
234,762
694,705
929,467
Depreciation 			and amortization
26,724
24,446
51,170
Total 			operating expenses
261,486
719,151
980,637
Loss from 			operations
(261,486)
(719,151)
(980,637)
Other 			income (expense)
Interest 			expense
(30,698)
(48,443)
(79,141)
Other 			income
23,092
50,915
74,007
Impairment 			loss on fixed asset
(710,205)
(1,612)
(711,817)
Other 			expense
(13,541)
(3,112)
(16,653)
Loss on 			disposal of assets
(121,560)
--
(121,560)
Total 			other income (expense)
(852,912)
(2,252)
(855,164)
Net loss
$ 			(1,114,398)
$ 			(721,403)
$ 			1,835,801)
Earnings 			per share:
Net loss 			per share-basic
$(0.00)
$(0.00)
Weighted 			average number of shares outstanding-basic
300,554,791
280,079,254
The accompanying notes are an integral part to the financial statements
CALA CORPORATION
(A DEVELOPMENT-STAGE COMPANY)
STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007
(AUDITED)
Common 			Stock
Number
Shares
$0.005 			
Amount
Additional 			
Paid-In
Capital
Accumulated 			
Deficit
Development 			Stage
Accumulative
Deficit
Stock 			
Subscription
Treasury 			
Shares
Stock
Total 			Stockholders’ Equity (Deficit)
Balance 			12/31/06
249,251,980
1,246,258
$11,133,380
$ 			(11,886,789)
$ --
(50,000)
$ 			(56,533)
$ (1,116)
$441,733
Shares issued
for 			cash @
$0.01-.35 per share
13,814,167
69,071
133,379
--
--
--
--
--
202,450
Shares 			issued for services
classified as a capitalized cost @
$0.02 			per
share
10,600,000
53,000
215,000
--
--
--
--
--
268,000
Shares 			issued for
Services @
$0.02-0.03 per share
1,250,000
6,250
25,750
--
--
--
--
--
32,000
Shares 			issued for
Salaries @
$0.02 per share
15,000,000
75,000
225,000
--
--
--
--
--
300,000
Shares 			issued in lieu
of debt @$0.01 per share
5,000,000 			
25,000
120,000
--
--
--
--
--
40,000
Allowance 			for outstanding receivable
50,000
50,000
Net Loss
--
--
--
--
(721,403)
--
--
--
(721,403)
Balance 			12/31/07
294,916,147
$ 			1,474,579
$11,852,509
$ 			(11,886,789)
$ 			(721,403)
$ --
$ 			(56,533)
$ 			(1,116)
$ 			717,780
Shares 			issued
for cash $0.01 per share
6,950,000 			
34,750
41,750
--
--
--
--
--
76,500
Stock 			issued in lieu of
Accounts payable
3,000,000 			
15,000
15,000
--
--
--
--
--
30,000
Net Loss
--
--
--
--
(1,114,398)
--
--
--
(1,114,398)
Balance
12/31/08
304,866,147
$ 			1,524,329
$11,909,259
$(11,886,789)
$ 			(1,835,801)
$ --
$ 			(56,533)
$ (1,116)
$(290,118)
The accompanying notes are an integral part of the financial statements
CALA CORPORATION
(A DEVELOPMENT-STAGE COMPANY)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007 AND FROM JANUARY 1, 2007 TO DECEMBER 31, 2008
(AUDITED)
January 			1, 2007 to
December 31, 2008
CASH FLOW 			FROM OPERATING ACTIVITIES
Net loss
$(1,114,398) 			
$(721,403)
$(1,835,801) 			
Adjustments 			to reconcile net loss from continuing operations to net cash used 			in operating activity
Depreciation 			and amortization
26,722
24,445
51,167
Impairment 			on assets
710,205
1,612
711,818
Stock 			issued for services
--
332,000
332,000
Loss on 			disposition of assets
121,560
--
121,560
Bad debt 			expense
--
60,500
60,500
Financing 			cost
--
105,000
105,000
Change in 			operating assets and liabilities:
(Increase) 			in accounts receivable
--
(10,500)
(10,500)
Accounts 			payable and accrued liabilities
(28,279)
72,865
44,585
Officer 			salary payable
133,600
--
133,600
Increase 			(decrease) in taxes payable
--
(28)
(28)
Net cash 			used in operating activities
(150,590)
(135,509)
(286,099)
CASH FLOW 			FROM INVESTING ACTIVITIES:
Cash used 			on development costs
--
(70,001)
(70,001)
Disposal 			of fixed asset
--
4,832
4,832
Net cash 			used in investing activities
--
(65,169)
(65,169)
CASH FLOW 			FROM FINANCING ACTIVITIES:
Proceed 			from note payable
--
60,000
60,000
Proceeds 			on notes payable- related party
64,636
(76,173)
(11,537)
Proceeds 			from issuance of common stock
76,500
202,450
278,950
Payments 			made on mortgage payable
(3,693)
(8,551)
(12,244)
Net cash 			provided by financing activities
137,443
177,726
315,169
NET CHANGE 			IN CASH
(13,147)
(22,952)
(36,099)
CASH AT 			BEGINNING OF YEAR
13,147 			
36,099
36,099 			
CASH AT 			END OF YEAR
$ --
$ 13,147
$ --
The accompanying notes are an integral part of the financial statements
Supplemental schedule of cash flow information:
Interest 			paid
$ 22,508
$ 29,996
$ 52,504
Income tax
$ -
$ -
$ -
Supplemental schedule of 	non monetary transactions
Satisfaction 			of accounts payable with common stock
3,000,000 			shares @ $0.01 per share
$ 30,000
$ --
$ 30,000
Satisfaction 			of note payable with common stock
5,000,000 			shares @ $0.01 per share
$ --
$ 145,000
$ 40,000
Shares 			issued for services classified as a capitalized cost
$ --
$ 268,000
$ 268,000
The accompanying notes are an integral part of the financial statements
CALA CORPORATION
(A DEVELOPMENT-STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(AUDITED)
NOTE 1: DESCRIPTION OF BUSINESS Cala Corporation (formerly Magnolia Foods, Inc.) was incorporated on June 13, 1985 under the laws of the State of Oklahoma. The Company's sole industry segment was the business of owning, operating, licensing and joint venturing restaurants. The Company discontinued this line of business on December 31, 2006. The Company is in the development stage of building an underwater resort and casino. The Company became a Development-Stage Company as of January 1, 2007.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Basis - The Company uses the accrual method of accounting.
B. Cash and cash equivalents - The Company considers all short term, highly liquid investments that are readily convertible within three months to known amounts as cash equivalents. Currently, it has no cash equivalents.
C. Loss per share - Net loss per share is provided in accordance with Statement of Financial Accounting Standards No. 128 "Earnings Per Share". Basic loss per share reflects the amount of losses for the period available to each share of common stock outstanding during the reporting period, while giving effect to all dilutive potential common shares that were outstanding during the period, such as stock options and convertible securities. As of December 31, 2008 and 2007, the Company had no issuable shares qualified as dilutive. Had there been dilutive securities they would be excluded from the loss per share calculation because their inclusion would be antidilutive.
D. Estimates - The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
E. Stock Based Compensation - Stock based compensation is accounted for using Statement of Financial Accounting Standards No. 123R “ Accounting for Stock-Based Compensation”, which establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments. We determine the value of stock issued at the date of grant. We also determine at the date of grant the value of stock at fair market value or the value of services rendered (based on contract or otherwise) whichever is more readily determinable.
F. Shares Returned to Treasury- In 2006, 33,333 shares were repurchased to treasury for $ 1,000. In 2005, 23,200 shares were purchased for treasury at the cost of $ 116. The repurchased treasurer shares are carried at cost and are held for resale.
G. Revenue Recognition- The income received by the Company is rental income from the tenants leasing space in the building owned by the Company which is outside the normal operations of the Company. Rental income is not recognized as revenue by the Company but is a component of Other Income as it is outside the normal revenue producing activity.
H. Property and Equipment-Property and equipment consisting of improvements, equipment and furniture and fixtures are recorded at cost and are depreciated using the straight-line method over the useful estimated life. Expenditures for maintenance and repairs are charged to earnings as incurred; additions, renewals, and betterments are capitalized. When property and equipment are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts, and any gain or loss is included in operations. A summary of estimated useful lives is as follows:
Description
Useful 								life
Vehicles
								years
Building
10-40 								years
I. The Company accounts for the underwater sea resort and ship development costs in accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. The Company reviews its long-lived assets for impairment on an annual basis or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used in measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amounts of the assets exceeds the fair value of the asset. Assets to be disposed of are reported at the lower of the carrying amount or fair market value less costs to sell.
J. The accompanying consolidated financial statements have been prepared in accordance with the Statement of Financial Accounting Standards No. 7 "Accounting and Reporting by Development-Stage Enterprises". A development-stage enterprise is one in which planned principal operations have not commenced or if its operations have commenced, there has been no significant revenue there from. Development-stage companies report cumulative costs from the enterprise's inception.
NOTE 3: RECENT ACCOUNTING PRONOUNCEMENTS
In September 2006, the FASB issued SFAS No. 157 “Fair Value Measurements”. SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosure about fair values. This statement is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. Management believes that the adoption of SFAS No. 157 will not have a material impact on the consolidated financial results of the Company.
In February 2007, the FASB issued Statement No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities, including an amendment of FASB Statement No. 115" (FAS 159). FAS 159 permits companies to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value and establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities. The provisions of FAS 159 become effective as of the beginning of our 2009 fiscal year. We are currently evaluating the impact that FAS 159 will have on our financial statements.
In December 2007, the FASB issued SFAS 160, Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51 which applies to all entities that prepare consolidated financial statements, except not-for-profit organizations, but will affect only those entities that have an outstanding noncontrolling interest in one or more subsidiaries or that deconsolidate a subsidiary. The statement is effective for annual periods beginning after December 15, 2008.
In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities - an amendment of FASB Statement No. 133,” (SFAS “161”) as amended and interpreted, which requires enhanced disclosures about an entity’s derivative and hedging activities and thereby improves the transparency of financial reporting. Disclosing the fair values of derivative instruments and their gains and losses in a tabular format provides a more complete picture of the location in an entity’s financial statements of both the derivative positions existing at period end and the effect of using derivatives during the reporting period. Entities are required to provide enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under Statement 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. SFAS No. 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. Early adoption is permitted.
At December 31, 2007, the Company did not have any derivative instruments or hedging activities. Management is aware of the requirements of SFAS 161 and will disclose when appropriate.
In May 2008, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 163, “Accounting for Financial Guarantee Insurance Contracts - An interpretation of FASB Statement No. 60”. SFAS 163 requires that an insurance enterprise recognize a claim liability prior to an event of default when there is evidence that credit deterioration has occurred in an insured financial obligation. It also clarifies how Statement 60 applies to financial guarantee insurance contracts, including the recognition and measurement to be used to account for premium revenue and claim liabilities, and requires expanded disclosures about financial guarantee insurance contracts. It is effective for financial statements issued for fiscal years beginning after December 15, 2008, except for some disclosures about the insurance enterprise’s risk-management activities. SFAS 163 requires that disclosures about the risk-management activities of the insurance enterprise be effective for the first period beginning after issuance. Except for those disclosures, earlier application is not permitted. The adoption of this statement is not expected to have a material effect on the Company's future reported financial position or results of operations.
In June 2009, the FASB issued Statement of Financial Accounting Standards No. 168, “The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles,” (“SFAS 168”). SFAS 168 replaces FASB Statement No. 162, “The Hierarchy of Generally Accepted Accounting Principles”, and establishes the FASB Accounting Standards Codification (“Codification”) as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with generally accepted accounting principles (“GAAP”). SFAS 168 is effective for interim and annual periods ending after September 15, 2009. The Company will begin to use the new Codification when referring to GAAP in its annual report on Form 10-K for the fiscal year ending December 31, 2009. This will not have an impact on the results of the Company
NOTE 4: GOING 	CONCERN
The Company's financial statements are prepared using generally accepted accounting principles applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has an aggregate deficit and accumulated deficit during the development stage of $13,722,590 ($11,886,789 and $1,835,801, respectively) and has not established revenues sufficient to cover its operating costs. This uncertainty raises substantial doubt about the Company's ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on additional sources of capital and the success of the Company's plan. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might result from this uncertainty.
NOTE 5: RELATED PARTY 	TRANSACTIONS
On February 2, 2007 an officer of the Company was issued 15,000,000 of restricted common stock with a value of $300,000 for salary for the year ended 2007.
During the year ended 2007, the Company issued a director of the Company 10,600,000 shares of common stock valued at $268,000 for consulting fees included in Development Costs.
During the year ended December 2008, the Company accrued $150,000 for salary payable to an officer of the Company; $16,400 of the accrued salary has been paid resulting in an outstanding balance of $133,600 as of December 31, 2008.
During the year ended December 31, 2008, an officer advanced additional funds of $64,636 to the Company for debt reduction and operating expenses for an outstanding Notes payable-officer/stockholder balance of $65,419 as of December 31, 2008.
NOTE 6: COMMITMENTS & CONTINGENCIES
On January 9, 2006, the Company entered into a lease at 3160 Danville Blvd. Suite A, Alamo, CA consisting of 4,500 square feet for a restaurant. The duration of the lease is 10 years with a renewable option for 5 more years. The monthly rent on the space is $ 8,500 plus taxes and common area charges. Monthly rental may be adjusted on an annual basis. On August 1, 2006, the Company assigned the lease to a non-affiliated third party but the Company remains liable for the lease until it terminates on January 8, 2016.
Then following is a schedule by year of the future minimum rental payments required under operating leases that have non-cancelable lease terms in excess of one year as of December 31, 2008:
102,000
102,000
102,000
102,000
102,000
102,000
102,000
2,267
Total
$ 716,267
On April 10, 2006 the Company entered into a lease consisting of approximately 2,450 square feet for a restaurant at 500 Bollinger Canyon Way, Roman CA. The duration of the lease is 10 years. On August 1, 2006, the Company discontinued its operations in the restaurant business. As a result, the Company assigned the lease to a non-affiliated third party on a sub lease basis. The Company is still fully obligated to the terms of this lease. However, the non affiliated party will assume all payments. Under the terms of the agreement, the sub-lessee pays the monthly lease of $ 5,400 per month for the duration of the lease plus an additional 60 equal monthly installments of $1,500 to the Company. The subleasee terminated payment of the $ 1,500 in August 2008. (See Note 11 - Subsequent Events)
The following is a schedule by year of the future minimum rental payments required under operating leases that have non-cancelable lease terms in excess of one year as of December 31, 2008:
70,296
72,396
74,574
76,812
79,113
81,492
83,937
21,138
Total
$ 559,758
NOTE 7- NOTE PAYABLE
In January 2007, the Company issued a note for $60,000 bearing interest at 10% on the principal and accrued interest compounding monthly. As of December 31, 2008 and December 31, 2007, the outstanding principle balance of the note was $60,000 and $60,000 and had accrued interest of $13,923 and $6,283, respectively. On November 1, 2009 the note holder made demand for payment by December 1, 2009. The note including principal and interest is in default and still outstanding.
NOTE 8: LONG TERM 	DEBT
On July 16, 2006, the Company signed a Mortgage Modification Agreement with a lender on a building. Under the terms of the agreement, the mortgage was modified to extend the maturity date to July 15, 2036, the interest rate was adjusted to 5.25% per annum and the prepayment penalty was removed. If the note was paid in full by February 16, 2007, the note would be reduced by $ 100,000. In addition the interest rate was reduced to 5.25% and a late fee penalty of 5% was added on all payment later than 10 days. The prepayment penalty of $ 50,000 was eliminated.
The Company defaulted on the mortgage and was the defendant in a lawsuit brought by the mortgage holder of the property. The Company was ordered to commence monthly payments of $3,272 to the plaintiff beginning on April 16, 2008 and on the same date each month thereafter. The Company was not able to meet the requirements of the Agreement and on September 30, 2008, the Company agreed to vacate the building and return title to the mortgage holder. Upon vacating the building the mortgage holder through a court order relieved the Company of all liabilities connected to the ownership and occupancy of the building. The transaction resulted in a net loss on disposal of assets totaling $121,560.
The loss on disposal 	of assets was calculated as follows:
Historical 			Value-Building
$ 600,000
Historical 			Value-Land
150,000
Depreciation 			
(43,910)
Carrying 			value
706,090
Mortgage 			debt
584,530
Loss on 			disposal of assets
$ (121,560)
NOTE 9 - PROPERTY AND 	EQUIPMENT
Property and equipment at 	December 31, 2008 and 2007 consisted of the following:
12/31/08
12/31/07
Building
--
600,000
Vehicles
45,308
45,308
Land
--
150,000
45,308
795,308
Less 			accumulated depreciation
(38,713)
(62,023)
$ 6,595
$733,285
Depreciation expense for 	the years ended December 31, 2008 and 2007 was $20,599 and $24,446, 	respectively.
NOTE 10 - STOCKHOLDERS EQUITY
During the year ending December 31, 2007 the Company issued the following shares of common stock:
13,814,167 	shares at $0.01-$0.35 per share with a value of $202,450 for cash
11,850,000 shares at $0.02 	- $0.03 per share with a value of $300,000 for service
15,000,000 shares to a 	related party at $0.02 with a value of $300,000 for officers salary
5,000,000 shares at $0.01 	with a value of $40,000 for debt
During the year ending December 31, 2008 the Company issued the following shares of common stock:
6,950,000 	at $0.01-$0.02 with a value of $76,500 for cash.
3,000,000 shares at $0.01 	with a value of 30,000 for accounts payable
NOTE 11 - INCOME 	TAXES
The Company accounts for income taxes using the liability method, under which deferred tax liabilities and assets are determined based on the difference between the financial statement carrying amounts and the tax basis of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse.
As of December 31, 2008, the Company had net operating loss carryforward of approximately $12,837,578, which expire in varying amounts between 2009 and 2028. Realization of this potential future tax benefit is dependent on generating sufficient taxable income prior to expiration of the loss carryforward. The deferred tax asset related to this potential future tax benefit has been offset by a valuation allowance in the same amount. The amount of the deferred tax asset ultimately realizable could be increased in the near term if estimates of future taxable income during the carryforward period are revised.
Deferred income tax assets of $4,493,152 and $4,103,113 at December 31, 2008 and 2007, respectively were offset in full by a valuation allowance
The components of the Company’s net deferred tax assets, including a valuation allowance, are as follows:
As of 			December 31, 2008
As of 			December 31, 2007
Deferred 			tax assets:
Net 			operating loss carryforward
$ 			4,493,152
$ 			4,103,113
Stock 			based compensation
335,049
335,049
Total 			deferred tax assets
4,828,202
4,438,162
Net 			deferred tax assets before valuation allowance
4,828,202
4,438,162
Less: 			Valuation allowance
(4,828,202)
(4,438,162)
Net 			deferred tax assets
$ --
$ --
A reconciliation between the amounts of income tax benefit determined by applying the applicable U.S. and State statutory income tax rate to pre-tax loss is as follows:
As of 			December 31, 2008
As of 			December 31, 2007
Statutory 			federal income tax
(35.0%)
(35.0%)
Statutory 			state income tax
(6.0%)
(6.0%)
Change 			in valuation allowance on deferred tax assets
41.0%
41.0%
Effective 			tax rate
0.0%
0.0%
NOTE 12: 	DEVELOPMENT COSTS
The Company is developing an under sea resort and ship for the recreational use by consumers. The concept is in development stage or as better defined as the “preacquisition phase”. The Company had expensed the development costs through the fiscal year ending December 2005 while in preliminary phase; however, elected to capitalize the costs moving forward in accordance with the preacquisition guidance under statement of Financial Accounting Standard No. 67, “Accounting for Costs and Initial Rental Operations of Real Estate Projects.”
All common costs are allocated to each residential unit benefited and is based on the relative fair value before construction. Construction costs will be allocated to each residential unit on the basis of relative sales value of the unit. The preacquisition phase was completed during the fiscal year ended December 31, 2007. The Company is in the process of finding a buyer and funding the initial construction of a vessel. Once the construction phase has been completed and the residential units are available for sale, the Company planned to allocate all capitalized costs to each residential unit and expense them upon the sale of the residential units.
The Company has incurred the following development costs to date:
Design 							payments to ship yards
$ 660,205
Engineering 							of glass design
25,000
Consulting 							fees to administrator
25,000
Total 							Development Costs
$ 710,205
As of September 30, 2008, the development costs were impaired as the construction of the undersea ship relating to the development costs has not been contracted or started. The asset, including blueprints and construction plans for the undersea ship are feasible and usable but the economic feasibility of financing the project under the present economic conditions have not allowed the Company to go ahead with the project. The Company will still continue to seek the financing to complete the project and build an undersea ship however, there is no assurance that the Company will be successful in obtaining such needed funds.
As the project has not continued into the construction phase during the year ended December 31, 2008; the Company elected to impair the development costs creating an impairment loss totaling $710,205.
NOTE 13: SUBSEQUENT 	EVENTS
On January 20, 2009, 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 November 11, 2009, the Company issued 16,000,000 shares of common stock to four individuals for services with a total value of $32,000.
The Company evaluated 	all subsequent events from January 1, 2009 to April 4, 2010 and 	concluded that there are no significant or material transactions to 	be reported for the subsequent period.
EXHIBIT INDEX
Number
Description
Rule 				13a-14(a)/15d-14(a) Certification of Joseph Cala (filed 				herewith).
Section 				1350 Certification of Joseph Cala (filed herewith).