Annual Report (10-k)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

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

For the fiscal year ended March 31, 2013

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

For the transition period from ________________ to ________________

Commission file number: 000-52983

VGTEL, INC.

(Exact name of registrant as specified in its charter)


New York	01-0671426
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

400 Rella Blvd., Suite 174, Suffern, NY	10901
(Address of principal executive offices)	(Zip Code)

360-836-0368

(Registrant’s telephone number, including area code)

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

Yes . No X .

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 . No X .

Indicate by check mark whether the registrant(1) has filed all reports required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 day.

Yes X . No .

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-K (§229.405 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 X . No .

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulations 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. X .

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


Large accelerated filer	.	Accelerated filer	.
Non-accelerated filer	. (Do not check if a smaller reporting company)	Smaller reporting company	X .

The aggregate market value of the 21,042,947 shares of Common Stock held by non-affiliates of the Registrant as of September 30, 2012 (the last business day of its most recently completed second fiscal quarter) based on the average between the bid and asked price of such common equity was, $20,622,088.06. The Company had 21,282,947 shares of Common Stock outstanding as of June 28, 2013.

TABLE OF CONTENTS


PART I	Page
Note About Forward-Looking Statements	3
Item 1. Business	3
Item 1A. Risk Factors	7
Item 1B. Unresolved Staff Comments	17
Item 2. Properties	17
Item 3. Legal Proceedings	17
Item 4. Mine Safety Disclosures	17

PART II
Item 5. Market for Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	18
Item 6. Selected Consolidated Financial and Other Data	22
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 7A. Quantitative and Qualitative Disclosures about Market Risk	26
Item 8. Financial Statements and Supplementary Data	27
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	27
Item 9A. Controls and Procedures	27
Item 9B. Other Information	28

PART III
Item 10. Directors, Executive Officers and Corporate Governance	29
Item 11. Executive Compensation	29
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	31
Item 13. Certain Relationships and Related Transactions, and Director Independence	32
Item 14. Principal Accounting Fees and Services	32

PART IV
Item 15. Exhibits and Financial Statement Schedules	32

PART I

FORWARD LOOKING STATEMENTS

This Annual Report on Form 10-K contains forward-looking statements, including statements regarding our future results of operations and financial position, business strategy and plans and our objectives for future operations. The words “may,” “will,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “forecast,” “believe,” “estimate,” “predict,” “propose,” “intend,” “potential,” “continue”, or the negative of these terms, and other similar expressions or comparable terminology are intended to identify forward-looking statements. We have based these forward-looking statements largely on current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy, short term and long-term business operations and objectives, and financial needs. These forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from those expressed or implied in our forward-looking statements. Such risks and uncertainties include, among others, those discussed in “Item 1A: Risk Factors” of this Annual Report on Form 10-K, as well as in our consolidated financial statements, related notes, and the other financial information appearing elsewhere in this report and our other filings with the Securities and Exchange Commission, or the SEC. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. We do not intend, and undertake no obligation, to update any of our forward-looking statements after the date of this report to reflect actual results or future events or circumstances. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. All forward-looking statements in this Annual Report are made as of the date hereof, based on information available to us as of the date hereof. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we do not guarantee future results, levels of activity, performance or achievements, and we caution you not to rely on these statements without also considering the risks and uncertainties associated with these statements and our business that are addressed in this Annual Report. Among the key factors that may have a direct bearing on the company’s operating results are risks and uncertainties described under “risk factors,” including those attributable to our lack of operations and concerns about our ability to raise capital.

As used herein, “VGTel,” “VGTL,” “we,” “our,” the “Company” and similar terms include VGTel, Inc. and its subsidiaries, if any, unless the context indicates otherwise.

ITEM 1: BUSINESS

Overview

Our Company’s mission is to become the leader in the internet sweepstakes gaming industry. VGTel seeks to develop gaming platforms, both as a distributor of software and as a supplier of hardware and equipment, by providing local operators with a suite of products and services, including point-of-sale solutions to help them attract more customers and run their operations more effectively, efficiently and more profitably.

By leveraging the Company’s global relationships, we intend to distribute our products to operators based on their location and demographics throughout North America and in certain International markets. We may also distribute our products through a mobile platform, on iPhones, iPads, Blackberry, Android and Windows devices, as well as through our websites, as the markets permit.

We are a New York corporation, incorporated on February 5, 2002 under the name Tribeka Tek, Inc. In January 2006, we officially changed our name to VGTel, Inc. by filing an amended certificate of incorporation. Our principal executive offices are located at 400 Rella Boulevard, Suite 174, Suffern, New York 10901, and our telephone number at this address is 360-836-0368. Our current website www.360entertainmentandproductions.com and our new website is currently under construction. Information contained on our website is not a part of this annual report. Our common stock is quoted on OTC Markets under the symbol “VGTL.”

Our Strategy

Our primary objective is to become the industry leader in computer gaming technology. Key elements of our strategy include the following:

Acquire successful technology providers and distributors and cutting-edge software developers. To build this business, a key part of this strategy is to develop relationships with established local and regional leaders rather than build the business organically. To drive growth, we will need to expand the number of locations within which our equipment can be installed and provide continuously updated software to our operators and end-users. Our efforts will be focused on providing operators and their end-users with a positive experience by offering engaging and stimulating games within a user-friendly platform, targeted placement of our products, high quality customer service and tools to manage operations more effectively. We also provide operators with an array of tools that they can use to run their businesses more efficiently and compete more effectively. We intend to continue to invest heavily in these efforts.

Globalize our platforms and processes. Because our growth and expansion will be accomplished largely through acquisitions, we will probably inherit a host of different technology platforms and business processes. As we reach those milestones, we will develop a program aimed at globalizing our technology platforms and processes, and internal tools aimed at increasing our efficiency.

Grow our active customer base. As we develop our business, we will need to add new customers at a rate which will offset the loss or inactivation of existing customers, either through regulatory changes or through changes in demographics. As we mature into a more complete business, we will have to focus more of our efforts toward retaining existing customers and expanding our geographic reach. We will do so by delivering high quality customer service and expanding the number and categories of products we offer.

Position ourselves to benefit from, and drive, technological changes that may affect consumer behavior. As the business continues to grow, we will need to invest significantly in mobile technology in order to capitalize on the growing trend of consumers playing games on their smartphones and tablets. As our customer base matures, we believe our end-users will use mobile platforms not only as a communication and search tool, but also as a connection point for gaming.

Expand with acquisitions and business development partnerships. We seek to build our core assets from acquisitions of local and regional businesses, to which we can then apply our expertise, resources and brand to scale the business. During 2014, our focus will be expanded to acquire businesses with technology and technology talent that can help us expand our business. We intend to continue to expand our business with acquisitions and business development partnerships.

Distribution

Our primary distribution channels will be through the businesses we acquire, either utilizing the existing sales force or by utilizing our own sales force. We also offer commissions to operators when they refer another operator to VGTel. We expect to continue to leverage affiliate relationships to extend the distribution of our platforms.

We will also use various incentive programs to build brand loyalty, generate traffic to our website and provide operators with incentives to join convert to our platform. We will also publicize our platforms through various social networks, and our notifications will be adapted to the particular format of each of these social networking platforms. Our website and future mobile applications will enable our customers to disseminate the attractiveness of our platform.

Marketing

Marketing will be an important element of our business operations. Online marketing will consist of search engine marketing, display advertisements, referral programs and affiliate marketing. Our offline marketing programs will include traditional television, billboard and radio advertisements, public relations as well as sponsored events to increase our visibility and build our brand.

Our Customers/Operators

To drive growth over the long term, we will expand the number and variety of gaming products available through our sales force. We will solicit feedback from our customers/operators to ensure their objectives are met and they are satisfied with our services.

Operations

Our business operations will be divided into the following core functions to address the needs of our customers.

Sales Force. The sales force will be responsible for sales inventory management, packaging, approval and delivery scheduling. As the business develops, they will use performance historical data to analyze and identify trends and opportunities for revenue improvement.

Operations. Once a contract is signed, one of our operations representatives will initiate the first of several communications with the customer/operator to schedule delivery and introduce the customer/operator to the equipment, its operation and management system that we provide. Before the delivery is made, the representative will work with the customer/operator to ascertain that the location is suitable and ready for delivery and will train the staff in anticipation of the equipment being activated. The representative communicates with the customer/operator on the day the delivery is scheduled and again after delivery to support the customer/operator and to address any issues or questions that may arise. We will also offer several tools to help customer/operators manage their operations. These tools include status updates on performance, analytics that measure purchase traffic and demographic information of purchasers, and a return on investment calculator that estimates the return on investment that the customer/operator may receive from the equipment. Each of these tools will be accessible through an online account that is personal to the customer/operator and accessed through our website.

Customer Service. Our customer service department will be responsible for answering questions from customers. They will process requests via phone and email. The customer service team will also work with our information technology team to improve the customer experience on the website and mobile applications based on customer feedback.

Technology. We will employ technology to improve the experience we offer to end-users and customer/operators and enhance the efficiency of our business operations. A component of our strategy is to continue developing and refining our technology.

We will devote a substantial portion of our resources to developing new technologies and features and improving our core technologies. Our technology team will be focused on the design and development of new features and products, maintenance of our websites and development and maintenance of our internal operations systems.

Competition

A small number of competing companies are in the (estimated) over $16 billion internet sweepstakes industry in the US. As we build our business through acquisition, we will continue to compete with other outfits offering similar products and services. We believe the principal competitive factors in our market include the following:

breadth of active customer base and customer/operator relationships;

local focus and understanding of local business trends;

ability to structure deals to generate positive return on investment for customer/operator; and

strength and recognition of brand.

Although we believe we will be able to compete favorably on the factors described above, we anticipate that larger, more established companies may directly compete with us. Our potential competitors have longer operating histories, significantly greater financial, technical, marketing and other resources and larger customer bases than we will have initially. These factors may allow our competitors to benefit from their existing customer base with lower acquisition costs or to respond more quickly than we can to new or emerging technologies and changes in customer requirements. These competitors may engage in more extensive research and development efforts, undertake more far-reaching marketing campaigns and adopt more aggressive pricing policies, which may allow them to build a larger subscriber base or to monetize that subscriber base more effectively than we do. Our competitors may develop products or services that are similar to our products and services or that achieve greater market acceptance than our products and services.

Regulation

The internet sweepstakes business is subject to a number of domestic (and, as we expand internationally, foreign) laws and regulations. As a company in a relatively new and rapidly innovating industry, we are exposed to the risk that many of these laws may evolve, or be interpreted by regulators or in the courts in ways that could materially affect our business. These laws and regulations may involve gaming, taxation, intellectual property, product liability, distribution, electronic contracts and other communications, competition, consumer protection, the provision of various online payment and point of sale services, employee, merchant and customer privacy and data security.

The Credit Card Accountability Responsibility and Disclosure Act of 2009 (the “CARD Act”), as well as the laws of most states, contain provisions governing gift cards, gift certificates, stored value or pre-paid cards or coupons (“gift cards”). Vouchers or other forms of gaming credits may be included within the definition of “gift cards” under many laws. In addition, certain foreign jurisdictions have laws that govern disclosure and certain product terms and conditions, including restrictions on expiration dates and fees that may apply to vouchers or other forms of gaming credits as well as warranty requirements. There are also a number of legislative proposals pending before various state legislative bodies and foreign governments that could affect us, and our global operations may be constrained by regulatory regimes and laws in Europe and other jurisdictions outside the United States that may be more restrictive and adversely impact the development and growth of our business.

Various US laws and regulations, such as the Bank Secrecy Act, the Dodd-Frank Act, the USA PATRIOT Act and the CARD Act impose certain anti-money laundering requirements on companies that are financial institutions or that provide financial products and services. These laws and regulations broadly define financial institutions to include money services businesses such as money transmitters, check cashers, and sellers or issuers of stored value. Requirements imposed on financial institutions under these laws include customer identification and verification programs, record retention policies, and procedures and transaction reporting. We do not believe that we are a financial institution subject to these laws and regulations.

Intellectual Property

We will protect our intellectual property rights by relying on federal, state and common law rights, as well as contractual restrictions. We will control access to our proprietary technology by entering into confidentiality and invention assignment agreements with our employees and contractors, and confidentiality agreements with third parties.

In addition to these contractual arrangements, we will also rely on a combination of trade secrets, copyrights, trademarks, service marks, trade dress, domain names and patents to protect our intellectual property.

Circumstances outside our control could pose a threat to our intellectual property rights. For example, effective intellectual property protection may not be available in the United States or other countries in which we operate. In addition, the efforts we have taken to protect our proprietary rights may not be sufficient or effective. Any significant impairment of our intellectual property rights could harm our business or our ability to compete. In addition, protecting our intellectual property rights is costly and time-consuming. Any unauthorized disclosure or use of our intellectual property could make it more expensive to do business and harm our operating results.

Companies in the Internet, social media technology and other industries may own large numbers of patents, copyrights and trademarks or other intellectual property rights and may request license agreements, threaten litigation or file suit against us based on allegations of infringement or other violations of intellectual property rights. We are currently subject to, and expect to face in the future, lawsuits and allegations that we have infringed the intellectual property rights of third parties, including our competitors and non-practicing entities. As we face increasing competition and as our business grows, we will likely face more claims of infringement, and may experience an adverse result, which could impact our business, and/or our operating results.

Employees

As of June 28, 2013, we only have one employee, our Chief Executive Officer.

Available Information

The Company electronically files reports with the SEC. The public may read and copy any materials the Company has filed with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains an Internet site (www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. Copies of the Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are also available free of charge through the Company’s website (www.360entertainmentandproductions.com), as soon as reasonably practicable after electronically filing with or otherwise furnishing such information to the SEC, and are available in print to any stockholder who requests it.

ITEM 1A: RISK FACTORS

Our business, prospects, financial condition, operating results and the trading price of our common stock could be materially adversely affected by any of these risks, as well as other risks not currently known to us or that we currently consider immaterial. In assessing the risks described below, you should also refer to the other information contained in this Annual Report on Form 10-K, including Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) and the consolidated financial statements and the related notes in Part II, Item 8. Financial Statements and Supplementary Data of this Annual Report on Form 10-K.

Risks Related to Our Business

An investment in our securities is highly speculative in nature and involves an extremely high degree of risk.

Our business is difficult to evaluate because we have only begun our operations and currently have no operating history.

As we currently have only minimal operations, minimal revenues and only minimal assets, there is a risk that we will be unable to continue as a going concern and start up a viable business or consummate a business combination. We spun out our previous business that was not successful. We have only minimal operations, and no revenues or earnings from operations since the spin-off of our previous business. We have no significant assets or financial resources. We will, in all likelihood, continue to sustain operating expenses without corresponding revenues, at least until we are successful in either starting up a business or through the consummation of a business combination. This may result in our incurring a net operating loss that will increase continuously until we can start up a successful business or consummate a business combination with a profitable business opportunity. We may never be able to identify a suitable business opportunity and or consummate a business combination.

Many of our potential competitors have longer operating histories, significantly greater financial, marketing and other resources and larger customer bases than we do. These factors may allow our competitors to benefit from their existing customer base with lower customer acquisition costs or to respond more quickly than we can to new or emerging technologies and changes in end-user habits. These competitors may engage in more extensive research and development efforts, undertake more far-reaching marketing campaigns and adopt more aggressive pricing policies, which may allow them to build larger customer bases or generate revenue from their customer bases more effectively than we do. Our competitors may offer deals that are similar to the deals we offer or that achieve greater market acceptance than the deals we offer. This could attract customers away from our software and equipment, reduce our market share and adversely impact our gross margin.

There is intense competition for business start-ups and private companies suitable for a merger transaction of the type we contemplate.

We are in a highly competitive market for a small number of business opportunities. A large number of established and well-financed entities, including small public companies and venture capital firms, are active in mergers and acquisitions of companies that may be desirable target candidates for us. Nearly all these entities have significantly greater financial resources, technical expertise and managerial capabilities than we do; consequently, we will be at a competitive disadvantage in identifying possible business opportunities and successfully completing a business combination. This reduces the likelihood of our consummating a successful business combination.

The growth of our business depends on the successful development and introduction of innovative new products.

Our growth depends on the success of our entry into the internet sweepstakes industry as well as the successful development and introduction of innovative new products and line extensions, which face the uncertainty of consumer acceptance and reaction from competitors. In addition, our ability to create new products and line extensions and to sustain existing products is affected by whether we can successfully:

develop and fund innovations,

obtain locations for our software and gaming units, and

anticipate consumer needs and preferences.

The failure to develop and launch successful new products could hinder the growth of our business and any delay in the development or launch of a new product could result in the Company not being the first to market, which could compromise our competitive position.

Our business is subject to regulation in the U.S.

The internet sweepstakes business is subject to extensive regulation both domestically and abroad. Such regulation applies to most aspects of our software and other gaming units, including their manufacture, labeling, distribution, installation, advertising and operation. State and local level authorities regulate different aspects of our business.

While it is our policy and practice to comply with all regulatory requirements applicable to our business, a finding that we are in violation of, or out of compliance with, applicable laws or regulations could subject us to civil remedies, including fines, damages, injunctions or criminal sanctions, any of which could have a material adverse effect on our business. Even if a claim is unsuccessful, is without merit or is not fully pursued, the negative publicity surrounding such assertions regarding our products, processes or business practices could adversely affect our reputation and brand image.

In addition, new or more stringent regulations, or more restrictive interpretations of existing regulations, could have a material adverse impact on our business. For example, from time to time, various regulatory authorities in the U.S., have sought to regulate or license such gaming activities or have issued a moratorium on the opening of internet sweepstakes cafés. As two examples, the State of Ohio recently instituted a one-year moratorium on the opening of new internet sweepstakes cafes, and just this past April, the State of Florida banned internet sweepstakes cafés. Similar legislative efforts or otherwise newly enacted adverse regulations, could have a material adverse impact on our business.

A failure of a key information technology system could adversely impact the Company’s ability to conduct business.

The Company relies extensively on information technology systems, including some which rely on third-party service providers, in order to conduct its business. These systems include, but are not limited to, programs and processes relating to communicating within the Company and with other parties, ordering and managing materials from suppliers, shipping products to customers and distributors, processing transactions, summarizing and reporting results of operations, complying with regulatory legal or tax requirements and other processes involved in managing the business. Although the Company has network security measures in place, the systems may be vulnerable to computer viruses, security breaches and other similar disruptions from unauthorized users. While the Company will have business continuity plans in place, if the systems are damaged or cease to function properly due to any number of causes, including the poor performance or failure of third-party service providers, catastrophic events, power outages, security breaches, network outages, failed upgrades or other similar events, and if the business continuity plans do not effectively resolve such issues on a timely basis, the Company may suffer interruptions in the ability to manage or conduct business which may adversely impact the Company’s business.

The time and cost of preparing a private company to become a public reporting company may preclude us from entering into a merger or acquisition with the most attractive private companies.

Target companies that fail to comply with SEC reporting requirements may delay or preclude acquisition. Sections 13 and 15(d) of the Exchange Act require reporting companies to provide certain information about significant acquisitions, including certified financial statements for the company acquired, covering one, two, or three years, depending on the relative size of the acquisition. The time and additional costs that may be incurred by some target entities to prepare these statements may significantly delay or essentially preclude consummation of an acquisition. Otherwise suitable acquisition prospects that do not have or are unable to obtain the required audited statements may be inappropriate for acquisition so long as the reporting requirements of the Exchange Act are applicable.

We may become subject to additional regulations or rules which would adversely affect our operations or ability to consummate a transaction.

Although we are subject to the reporting requirements under the Exchange Act, we do not expect to become subject to regulation under the Investment Company Act of 1940, as amended (the “Investment Company Act”), since we do not intend to engage in the business of investing or trading in securities. If we engage in business combinations which result in our holding passive investment interests, we could be subject to regulation under the Investment Company Act. If so, we would be required to register as an investment company and could be expected to incur significant registration and compliance costs.

Any potential acquisition or merger with a foreign company may subject us to additional risks.

If we enter into a business combination with a foreign concern, we will be subject to risks inherent in business operations outside of the United States. These risks include, for example, currency fluctuations, regulatory problems, punitive tariffs, unstable local tax policies, trade embargoes, risks related to shipment of raw materials and finished goods across national borders and cultural and language differences. Foreign economies may differ favorably or unfavorably from the United States economy in growth of gross national product, rate of inflation, market development, rate of savings, and capital investment, resource self-sufficiency and balance of payments positions, and in other respects.

We may be subject to certain tax consequences in our business, which may increase our cost of doing business.

We may not be able to structure our acquisition to result in tax-free treatment for us or our transaction partner or their stockholders, which could deter third parties from entering into certain business combinations with us or result in being taxed on consideration received in a transaction. We intend to structure any business combination so as to minimize the federal and state tax consequences to both us and the target entity; however, we cannot guarantee that the business combination will meet the statutory requirements of a tax-free reorganization or that the parties will obtain the intended tax-free treatment upon a transfer of stock or assets. A non-qualifying reorganization could result in the imposition of both federal and state taxes that may have an adverse effect on both parties to the transaction.

Our business will have no revenues unless and until we start up a successful company or merge with or acquire an operating business.

We are a development stage company and currently have had no revenues from operations. We will not realize any revenues unless and until we successfully start up a successful business or merge with or acquire a successful operating business.

We intend to issue more shares to either recruit highly talented individuals in our management team or for a merger or acquisition, which will result in substantial dilution.

Our Certificate of Incorporation authorizes the issuance of a maximum of 200,000,000 shares of common stock and a maximum of 10,000,000 shares of preferred stock. Recruitment of highly qualified management personnel suitable for a business start up or a merger or acquisition effected by us may result in the issuance of additional securities without stockholder approval and may result in substantial dilution in the percentage of our common stock held by our then existing stockholders. Moreover, the common stock issued in any merger or acquisition transaction may be valued on an arbitrary or non-arm’s-length basis by our management, resulting in an additional reduction in the percentage of common stock held by our then existing stockholders. Our Board of Directors has the power to issue any or all of such authorized but unissued shares without stockholder approval. To the extent that additional shares of common stock or preferred stock are issued in connection with a business start up or business combination or otherwise, dilution to the interests of our stockholders will occur and the rights of the holders of common stock might be materially and adversely affected.

Because we may seek to start up a new business or complete a business combination through a “reverse merger”, following such a transaction, we may not be able to attract the attention of major brokerage firms.

Additional risks may exist in starting a new business and/or if we acquire a privately held business in a “reverse merger.” Securities analysts of major brokerage firms may not provide coverage of us since there is no incentive to brokerage firms to recommend the purchase of our common stock. Additionally, brokerage firms may not want to conduct any secondary offerings on behalf of our post-merger company in the future.

Authorization of preferred stock.

Our Certificate of Incorporation authorizes the issuance of up to 10,000,000 shares of preferred stock with designations, rights and preferences determined from time to time by its Board of Directors. Accordingly, our Board of Directors is empowered, without stockholder approval, to issue preferred stock with dividend, liquidation, conversion, voting, or other rights which could adversely affect the voting power or other rights of the holders of the common stock. In the event of issuance, the preferred stock could be utilized, under certain circumstances, as a method of discouraging, delaying or preventing a change in control. There can be no assurance that we will not issue such preferred stock in the future.

At times, our stock is thinly traded, you may be unable to sell at or near ask prices or at all if you need to liquidate your shares.

In the past the shares of our common stock were not traded on the OTC Bulletin Board, meaning that the number of persons interested in purchasing our common shares at or near ask prices at any given time may be relatively small or non-existent. This situation is attributable to a number of factors, including the fact that we are a small company which is relatively unknown to stock analysts, stock brokers, institutional investors and others in the investment community that generate or influence sales volume, and that even if we came to the attention of such persons, they tend to be risk-averse and would be reluctant to follow an unproven, early stage company such as ours or purchase or recommend the purchase of our shares until such time as we became more seasoned and viable. Consequently, there may be periods of several days or more when trading activity in our shares is minimal or non-existent, as compared to a seasoned issuer, which has a large and steady volume of trading activity that will generally support continuous sales without an adverse effect on share price. A broader or more active public trading market for our common shares may never develop or, if developed, be sustained, or even that current trading levels will be sustained. Due to these conditions, you may not be able to sell your shares at or near ask prices or at all. This risk may increase if more investors attempt to sell stock over a short time period.

Broker-dealer requirements applicable to “penny stocks” may affect trading and liquidity.

Section 15(g) of the Securities Exchange Act of 1934, as amended, and Rule 15g-2 promulgated thereunder by the SEC, require broker-dealers dealing in penny stocks, such as ours, to provide potential investors with a document disclosing the risks of penny stocks and to obtain a manually signed and dated written receipt of the document before effecting any transaction in a penny stock for the investor’s account. Potential investors in our common stock are urged to obtain and read such disclosure carefully before purchasing any shares that are deemed to be “penny stocks.” Moreover, Rule 15g-9 requires broker-dealers in penny stocks to approve the account of any investor for transactions in such stocks before selling any penny stock to that investor. This procedure requires the broker-dealer to (i) obtain from the investor information concerning his or her financial situation, investment experience and investment objectives; (ii) reasonably determine, based on that information, that transactions in penny stocks are suitable for the investor and that the investor has sufficient knowledge and experience as to be reasonably capable of evaluating the risks of penny stock transactions; (iii) provide the investor with a written statement setting forth the basis on which the broker-dealer made the determination in (ii) above; and (iv) receive a signed and dated copy of such statement from the investor, confirming that it accurately reflects the investor’s financial situation, investment experience and investment objectives. Compliance with these requirements may make it more difficult for holders of our common stock to resell their shares to third parties or to otherwise dispose of them in the market or otherwise.

The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prepared by the SEC relating to the penny stock market, which, in highlight form, sets forth:

The basis on which the broker or dealer made the suitability determination; and

That the broker or dealer received a signed, written agreement from the investor prior to the transaction.

Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.

Because of these regulations, broker-dealers may not wish to engage in the above-referenced necessary paperwork and disclosures and/or may encounter difficulties in their attempt to sell shares of our common stock, which may affect the ability of selling shareholders or other holders to sell their shares in any secondary market and have the effect of reducing the level of trading activity in any secondary market. These additional sales practice and disclosure requirements could impede the sale of our common stock, if and when our common stock becomes publicly traded. In addition, the liquidity for our Common Stock may decrease, with a corresponding decrease in the price of our common stock.

Our common stock may be volatile, which substantially increases the risk that you may not be able to sell your shares at or above the price that you may pay for the shares.

Because of the limited trading market expected to develop for our common stock, and because of the possible price volatility, you may not be able to sell your shares of common stock when you desire to do so. The inability to sell your shares in a rapidly declining market may substantially increase your risk of loss because of such illiquidity and because the price for our common stock may suffer greater declines because of its price volatility.

Additionally, in recent years the stock market in general, and the over-the-counter markets in particular, have experienced extreme price and volume fluctuations. In some cases, these fluctuations are unrelated or disproportionate to the operating performance of the underlying company. These market and industry factors may materially and adversely affect our stock price, regardless of our operating performance. In the past, class action litigation often has been brought against companies following periods of volatility in the market price of those companies’ common stock. If we become involved in this type of litigation in the future, it could result in substantial costs and diversion of management attention and resources, which could have a further negative effect on your investment in our stock.

If we fail to remain current on our reporting requirements, we could be removed from the OTC Bulletin Board, which would limit the ability of broker-dealers to sell our securities and the ability of shareholders to sell their securities in the secondary market.

Companies trading on the OTCQB must be reporting issuers under Section 12 of the Exchange Act, and must be current in their reports under Section 13 of the Exchange Act, in order to maintain price quotation privileges on the OTCQB. This Annual Report on Form 10-K is being filed before the applicable deadline. If we fail to remain current on our reporting requirements, we could be removed from the OTCQB. As a result, the market liquidity for our securities could be adversely affected by limiting the ability of broker-dealers to sell our securities and the ability of shareholders to sell their securities in the secondary market.

We do not expect to pay dividends and investors should not buy our common stock expecting to receive dividends.

We have paid dividends on our common stock only once in the past, this past fiscal year, when we declared a 20% stock dividend to our stockholders. However, we do not anticipate that we will declare or pay any dividends in the foreseeable future. Consequently, you will only realize an economic gain on your investment in our common stock if the price appreciates. You should not purchase our common stock expecting to receive cash dividends. Since we do not anticipate paying future dividends, and there may be limited trading, then you may not have any manner to liquidate or receive any payment on your investment. Therefore, our failure to pay dividends may cause you to not see any return on your investment even if we are successful in our business operations. In addition, because we do not anticipate paying dividends in the future, we may have trouble raising additional funds that could affect our ability to expand business operations.

Provisions in our charter documents and under New York law could discourage a takeover that stockholders may consider favorable.

Provisions in our certificate of incorporation and bylaws may have the effect of delaying or preventing a change of control or changes in our management. These provisions include the following:

Our board of directors has the right to elect directors to fill a vacancy created by the expansion of the board of directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors.

Our certificate of incorporation does not provide for cumulative voting in the election of directors. This limits the ability of minority stockholders to elect director candidates.

Our board of directors may issue, without stockholder approval, shares of undesignated preferred stock. The ability to issue undesignated preferred stock makes it possible for our board of directors to issue preferred stock with voting or other rights or preferences that could impede the success of any attempt to acquire us.

As a New York corporation, we are also subject to certain New York anti-takeover provisions. Under New York law, a corporation may not engage in a business combination with any holder of 15% or more of its capital stock unless the holder has held the stock for three years or, among other things, the board of directors has approved the transaction. Our board of directors could rely on New York law to prevent or delay an acquisition of us.

The concentration of our capital stock ownership with our founders, executive officers and our directors and their affiliates may limit our stockholders’ ability to influence corporate matters.

In January 2013, the Law Offices of Bruce W. Minsky, P.C., an entity owned by Bruce Minsky, a director, was issued 855,714 shares of common stock to settle $85,571.35 for legal fees owed by the Company through May 31, 2012. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Results of Operations – Fiscal Years Ended March 31, 2013 and March 31, 2012 – Loss on settlement of debt.” The loan settlement terms were based on current market conditions and on the same terms and conditions as the settlement of loans from non-affiliated parties. Mr. Minsky is the only independent member of our board of directors, under NASDAQ’s independence standards.

As of June 24, 2013, Peter Shafran, our CEO and a director, does not own shares of common stock in the Company.

If we start up a business or enter into a business combination, we may need to issue a substantial number of shares to newly named executive officers and other highly talented individuals to be recruited in our management team. The aggregate number of shares held by management may be in excess of 50% of our outstanding common stock. These individuals in aggregate may have significant influence over management and affairs and over all matters requiring stockholder approval, including the election of directors and significant corporate transactions, such as a merger or other sale of our company or its assets, for the foreseeable future. This concentrated control limits our stockholders’ ability to influence corporate matters and, as a result, we may take actions that our stockholders do not view as beneficial. As a result, the market price of our common stock could be adversely affected.

We may incur losses in the future as we expand our business.

We had an accumulated deficit of $5,162,320 as of March 31, 2013. We anticipate that our profitability will be impacted as we continue to invest in our growth, through increased spending in some areas and through accepting a lower percentage of the proceeds from our deals, as we attempt to place our software and equipment in the field. These efforts may prove more difficult than we currently anticipate, and we may not succeed in realizing the benefits of these efforts in a short time frame, or at all. Many of our efforts to generate revenue from our business are new and unproven, and any failure to increase our revenue could prevent us from attaining or increasing our profitability. We cannot be certain that we will be able to attain or increase profitability on a quarterly or annual basis. If we are unable to effectively manage these risks and difficulties as we encounter them, our business, financial condition and results of operations may suffer.

We are subject to inventory management and order fulfillment risk.

We will have to purchase much of the equipment that we place in the field. The demand for equipment can change for a variety of reasons, including customer preference, quality, and the perceived value from operators obtaining the equipment through us. In addition, this is a new business for us, and therefore we have a limited historical basis upon which to predict demand for the products. If we are unable to adequately predict demand and efficiently manage our inventory, we could either have an excess or a shortage of inventory, either of which would have a material adverse effect on our business.

Purchasing the equipment ourselves prior to its deployment also means that we will be required to fulfill orders on an efficient and cost-effective basis. Our competitors may have significantly larger inventory balances and therefore are able to rely on past experience and economies of scale to optimize their order fulfillment. Delays or inefficiencies in our processes could subject us to additional costs, as well as customer dissatisfaction, which would adversely affect our business.

The loss of one or more key members of our management team, or our failure to attract, integrate and retain other highly qualified personnel in the future, could harm our business.

The loss of key personnel, including key members of management as well as our marketing, sales, product development and technology personnel, could disrupt our operations and have an adverse effect on our ability to grow our business. Moreover, many members of our management will be new to our team or will have been recently promoted to new roles. As we become a more mature company, we may find our recruiting and retention efforts more challenging. If we do not succeed in attracting, hiring and integrating excellent personnel, or retaining and motivating existing personnel, we may be not be able to manage our business effectively.

We may be subject to additional unexpected regulation, which could increase our costs or otherwise harm our business.

The application of certain laws and regulations to internet sweepstakes is uncertain. In addition, from time to time, we may be notified of additional laws and regulations that governmental organizations or others may claim should be applicable to our business. If we are required to alter our business practices as a result of any laws and regulations, our revenue could decrease, our costs could increase and our business could otherwise be harmed. In addition, the costs and expenses associated with defending any actions related to such additional laws and regulations and any payments of related penalties, judgments or settlements could adversely impact our profitability. As we expand into new geographies, we will become subject to additional laws and regulations.

We may have exposure to greater than anticipated tax liabilities.

Our income tax obligations are based on our corporate operating structure, including the manner in which we develop, value, and use our intellectual property and the scope of our international operations. The tax laws applicable to our international business activities, including the laws of the United States and other jurisdictions, are subject to interpretation. The taxing authorities of the jurisdictions in which we operate may challenge our methodologies for valuing developed technology or intercompany arrangements, which could increase our worldwide effective tax rate and harm our financial position and results of operations. In addition, our future income taxes could be adversely affected by greater earnings in jurisdictions that have higher statutory tax rates, by changes in the valuation of our deferred tax assets and liabilities, or by changes in tax laws, regulations, or accounting principles. We are subject to regular review and audit by both U.S. federal and state and foreign tax authorities. Any adverse outcome of such a review or audit could have a negative effect on our financial position and results of operations. In addition, the determination of our worldwide provision for income taxes and other tax liabilities requires significant judgment by management, and there are many transactions where the ultimate tax determination is uncertain. Although we believe that our estimates are reasonable, the ultimate tax outcome may differ from the amounts recorded in our financial statements and may materially affect our financial results in the period or periods for which such determination is made.

Government regulation of the Internet and e-commerce is evolving, and unfavorable changes or failure by us to comply with these regulations could substantially harm our business and results of operations.

We are subject to general business regulations and laws as well as regulations and laws specifically governing the Internet and e-commerce. Existing and future regulations and laws could impede the growth of the Internet or other online services. These regulations and laws may involve taxation, tariffs, subscriber privacy, anti-spam, data protection, content, copyrights, distribution, electronic contracts and other communications, consumer protection, the provision of online payment services and the characteristics and quality of services. It is not clear how existing laws governing issues such as property ownership, sales and other taxes, libel and personal privacy apply to the Internet as the vast majority of these laws were adopted prior to the advent of the Internet and do not contemplate or address the unique issues raised by the Internet or e-commerce. In addition, it is possible that governments of one or more countries may seek to censor content available on our websites and applications or may even attempt to completely block our emails or access to our websites. Adverse legal or regulatory developments could substantially harm our business. In particular, in the event that we are restricted, in whole or in part, from operating in one or more countries, our ability to retain or increase our customer base may be adversely affected and we may not be able to maintain or grow our revenue as anticipated.

New tax treatment of companies engaged in Internet commerce may adversely affect the commercial use of our services and our financial results.

Due to the global nature of the Internet, it is possible that various states or foreign countries might attempt to regulate our transmissions or levy sales, income or other taxes relating to our activities. Tax authorities at the international, federal, state and local levels are currently reviewing the appropriate treatment of companies engaged in Internet commerce. New or revised international, federal, state or local tax regulations may subject us or our customers to additional sales, income and other taxes. We cannot predict the effect of current attempts to impose sales, income or other taxes on commerce over the Internet. New or revised taxes and, in particular, sales taxes, VAT and similar taxes would likely increase the cost of doing business online and decrease the attractiveness of advertising and selling goods and services over the Internet. New taxes could also create significant increases in internal costs necessary to capture data, and collect and remit taxes. Any of these events could have an adverse effect on our business and results of operations.

Failure to comply with federal, state and international privacy laws and regulations, or the expansion of current or the enactment of new privacy laws or regulations, could adversely affect our business.

A variety of federal, state and international laws and regulations govern the collection, use, retention, sharing and security of consumer data. The existing privacy-related laws and regulations are evolving and subject to potentially differing interpretations. In addition, various federal, state and foreign legislative and regulatory bodies may expand current or enact new laws regarding privacy matters. Several Internet companies have incurred substantial penalties for failing to abide by the representations made in their privacy policies and practices. In addition, several states have adopted legislation that requires businesses to implement and maintain reasonable security procedures and practices to protect sensitive personal information and to provide notice to consumers in the event of a security breach. Any failure, or perceived failure, by us to comply with our posted privacy policies or with any data-related consent orders, Federal Trade Commission requirements or orders or other federal, state or international privacy or consumer protection-related laws, regulations or industry self-regulatory principles could result in claims, proceedings or actions against us by governmental entities or others or other liabilities, which could adversely affect our business. In addition, a failure or perceived failure to comply with industry standards or with our own privacy policies and practices could result in a loss of subscribers or merchant partners and adversely affect our business. Federal, state and international governmental authorities continue to evaluate the privacy implications inherent in the use of third party web “cookies” for behavioral advertising. The regulation of these cookies and other current online advertising practices could adversely affect our business.

Our business will depend on our ability to maintain and scale the network infrastructure necessary to send our emails and operate our websites and remote management systems, and any significant disruption in service on our email infrastructure, websites or systems could result in a loss of customers/operators.

Customers/operators will access our remote management systems through our websites. Our reputation and ability to acquire, retain and serve our customers/operators are dependent upon the reliable performance of our websites and the underlying network infrastructure. As the amount of information shared on our websites continue to grow, we will need an increasing amount of network capacity and computing power. We will have to spend substantial amounts on data centers and equipment and related network infrastructure to handle the traffic on our websites. The operation of these systems is expensive and complex and could result in operational failures. In the event that the amount of traffic on our websites grows more quickly than anticipated, we may be required to incur significant additional costs. Interruptions in these systems, whether due to system failures, computer viruses or physical or electronic break-ins, could affect the security or availability of our websites, and prevent our customers/operators from accessing our services. A substantial portion of our network infrastructure will be hosted by third party providers. Any disruption in these services or any failure of these providers to handle existing or increased traffic could significantly harm our business. Any financial or other difficulties these providers face may adversely affect our business, and we would have little control over these providers, which would increase our vulnerability to problems with the services they provide. If we would be unable to maintain or expand our network infrastructure successfully or if we would experience operational failures, we could lose current and potential customers/operators, which could harm our operating results and financial condition.

We may be subject to breaches of our information technology systems, which could harm our relationships with our customers/operators, subject us to negative publicity and litigation, and cause substantial harm to our business.

Our business model will require us to obtain confidential information about our customers/operators and end-users, including names, email addresses and bank account, credit card and other payment account information. Because of the amount of information that we would store, we would be at an increased risk of attacks on our system, notwithstanding the fact that we would have invested heavily in systems to protect such information.

Like other internet-based businesses, we would use encryption and authentication technology to help provide the security and authentication to effectively secure transmission of confidential information, including credit card numbers. While these techniques are effective in maintaining confidentiality, we cannot guarantee that this would prevent all potential breaches of our system, including by means of technologies developed to bypass these securities measures. In addition, outside parties may attempt to fraudulently induce employees or customers/operators to disclose sensitive information in order to gain access to our information or our customers’/operators’ information.

Because the techniques used to gain access to, or sabotage, systems often are not recognized until launched against a target, we may be unable to anticipate the correct methods necessary to defend against these types of attacks. Any breach, or the perceived threat of a breach, could cause our customers/operators to cease doing business with us, subject us to lawsuits, regulatory fines or other action or liability, which would harm our business, financial condition and results of operations.

We may not be able to adequately protect our intellectual property rights or may be accused of infringing intellectual property rights of third parties.

As we develop our business, we would regard our customers/operators list, trademarks, service marks, copyrights, patents, trade dress, trade secrets, proprietary technology, merchant lists, sales methodology and similar intellectual property as critical to our success, and we would rely on trademark, copyright and patent law, trade secret protection and confidentiality and/or license agreements with our employees and others to protect our proprietary rights. Effective intellectual property protection may not be available in every country in which our products are made available. We also may not be able to acquire or maintain appropriate domain names or trademarks in all countries in which we would do business. Furthermore, regulations governing domain names may not protect our trademarks and similar proprietary rights. We may be unable to prevent third parties from acquiring and using domain names that are similar to, infringe upon or diminish the value of our trademarks and other proprietary rights. We may be unable to prevent third parties from using and registering our trademarks, or trademarks that are similar to, or diminish the value of, our trademark in some countries.

We may not be able to discover or determine the extent of any unauthorized use of our proprietary rights. Third parties that license our intellectual property rights also may take actions that diminish the value of our proprietary rights or reputation. The protection of our intellectual property may require the expenditure of significant financial and managerial resources. Moreover, the steps we take to protect our intellectual property may not adequately protect our rights or prevent third parties from infringing or misappropriating our proprietary rights. We may be subject to lawsuits and disputes related to our intellectual property and service offerings. The costs of engaging in such litigation and disputes are considerable, and there can be no assurances that favorable outcomes will be obtained.

We may expect to be subject to third party claims that we infringe on others’ proprietary rights or trademarks in the future. Such claims, whether or not meritorious, may result in the expenditure of significant financial and managerial resources, injunctions against us or the payment of damages by us. We may need to obtain licenses from third parties who allege that we have infringed their rights, but such licenses may not be available on terms acceptable to us or at all. These risks have been amplified by the increase in third parties whose sole or primary business is to assert such claims.

Our business will depend on a strong brand, and if we are not able to maintain and enhance our brand, or if we receive unfavorable media coverage, our ability to expand our base of customers and operators will be impaired and our business and operating results will be harmed.

We believe that the brand identity that we will have developed will significantly contribute to the success of our business. We also believe that maintaining and enhancing our brand will be critical to expanding our base of customers and operators. Maintaining and enhancing our brand may require us to make substantial investments and these investments may not be successful. If we fail to promote and maintain our brand, or if we incur excessive expenses in this effort, our business, operating results and financial condition will be materially and adversely affected. We anticipate that, as our market becomes increasingly competitive, maintaining and enhancing our brand may become increasingly difficult and expensive. Maintaining and enhancing our brand will depend largely on our ability to be an industry leader and to continue to provide reliable, trustworthy and high quality products and services, which we may not do successfully.

The internet sweepstakes industry receives a fairly high degree of media coverage. Unfavorable publicity or public perception of our websites, practices or service offerings, could adversely affect our reputation, resulting in difficulties in recruiting, decreased revenue and a negative impact on the number of customers/operators we attract and maintain, their loyalty and the number and variety of products and services we offer. As a result, our business, financial condition and results of operations could be materially and adversely affected.

Acquisitions, joint ventures and strategic investments could result in operating difficulties, dilution and other harmful consequences.

Our strategy has been based on acquiring a number of companies. We expect to continue to evaluate, consider and potentially consummate a wide array of potential strategic transactions, including acquisitions and dispositions of businesses, joint ventures, technologies, services, products and other assets and minority investments. We may not realize the anticipated benefits of any or all of our acquisitions and investments, or we may not realize them in the timeframe expected. In addition, the integration of an acquisition could divert management’s time and the company’s resources. If we pay for an acquisition or a minority investment in cash, it would reduce our cash available for operations or cause us to incur debt, and if we pay with our stock, it could be dilutive to our stockholders. Additionally, we may not have the ability to exert control over our joint ventures and minority investments, and therefore we would be dependent on others in order to realize their potential benefits.

We will be subject to payments-related risks.

Our business model includes our acceptance of payments primarily through ACH debits. As we offer new payment options to customers, we may be subject to additional regulations, compliance requirements and fraud. We may also be subject to requirements and rules governing electronic funds transfers, which could change or be reinterpreted to make it difficult or impossible for us to comply. If we fail to comply with these rules or requirements, we may be subject to fines, and our business and operating results could be adversely affected.

We may also be subject to or voluntarily comply with a number of other laws and regulations relating to money laundering, international money transfers, privacy and information security and electronic fund transfers. If we were found to be in violation of applicable laws or regulations, we could be subject to civil and criminal penalties.

Federal laws and regulations, such as the Bank Secrecy Act and the USA PATRIOT Act and similar foreign laws, could be expanded to include our operations.

Various federal laws, such as the Bank Secrecy Act and the USA PATRIOT Act and foreign laws and regulations, such as the European Directive on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing, impose certain anti-money laundering requirements on companies that are financial institutions or that provide financial products and services. For these purposes, financial institutions are broadly defined to include money services businesses such as money transmitters, check cashers and sellers or issuers of stored value cards. Examples of anti-money laundering requirements imposed on financial institutions include subscriber identification and verification programs, record retention policies and procedures and transaction reporting. We do not believe that we will be a financial institution subject to these laws and regulations based, in part, upon the characteristics of our business. However, the Financial Crimes Enforcement Network, a division of the U.S. Treasury Department tasked with implementing the requirements of the Bank Secrecy Act, recently proposed amendments to the scope and requirements for parties involved in stored value or prepaid access cards, including a proposed expansion of financial institutions to include sellers or issuers of prepaid access cards. In the event that this proposal is adopted as proposed, it is possible that our company could be considered a financial institution. In the event that we become subject to the requirements of the Bank Secrecy Act or any other anti-money laundering law or regulation imposing obligations on us as a money services business, our regulatory compliance costs to meet these obligations would likely increase which could reduce our net income.

We will continue to incur significant costs as a result of being a public company.

We face increased legal, accounting, administrative and other costs and expenses as a public company that we would not incur as a private company. The Sarbanes-Oxley Act of 2002, including the requirements of Section 404, as well as new rules and regulations subsequently implemented by the Securities and Exchange Commission, or the SEC, the Public Company Accounting Oversight Board and the exchange on which our common stock is quoted, impose additional reporting and other obligations on public companies. Compliance with these public company requirements increases our costs and makes some activities more time-consuming. In connection with the preparation of our financial statements for the year ended March 31, 2012, our independent registered accounting firm identified a material weakness because of certain deficiencies involving internal controls. The material weakness identified did not result in the restatement of any previously reported financial statements or any other related financial disclosures, nor does management believe that it had any effect on the accuracy of our financial statements for that reporting period. The existence of this issue could adversely affect us, our reputation or investor perceptions of us. It also may be more difficult for us to attract and retain qualified persons to serve on our board of directors or as executive officers. Advocacy efforts by stockholders and third parties may also prompt even more changes in corporate governance and reporting requirements. The additional reporting and other obligations imposed on us by these rules and regulations have increased our legal and financial compliance costs and the costs of our related legal, accounting and administrative activities significantly. These increased costs require us to divert a significant amount of money that we could otherwise use to expand our business and achieve our strategic objectives.

Our ability to raise capital in the future may be limited, and our failure to raise capital when needed could prevent us from growing.

We may in the future be required to raise capital through public or private financing or other arrangements. Such financing may not be available on acceptable terms, or at all, and our failure to raise capital when needed could harm our business. Additional equity financing may dilute the interests of our common stockholders, and debt financing, if available, may involve restrictive covenants and could reduce our profitability. If we cannot raise funds on acceptable terms, we may not be able to grow our business or respond to competitive pressures.

Risks Related to Ownership of Our Common Stock

The trading price of our common stock is highly volatile

Our common stock began trading on the OTCQB Market on February 14, 2011 and since that date has fluctuated from a high of $14.00 per share to a low of $.15 per share. We expect that the trading price of our stock will continue to be volatile due to variations in our operating results and also may change in response to other factors, including factors specific to technology companies, many of which are beyond our control. Among the factors that could affect our stock price are:

our earnings announcements, including any financial projections that we may choose to provide to the public, any changes in these projections or our failure for any reason to meet these projections or projections made by research analysts;

the amount of shares of our common stock that are available for sale;

the relative success of competitive products or services;

the public’s response to press releases or other public announcements by us or others, including our filings with the SEC and announcements relating to litigation;

speculation about our business in the press or the investment community;

future sales of our common stock by our significant stockholders, officers and directors;

changes in our capital structure, such as future issuances of debt or equity securities;

our entry into new markets;

regulatory developments in the United States or foreign countries;

strategic actions by us or our competitors, such as acquisitions, joint ventures or restructuring; and

changes in accounting principles.

We expect the stock price volatility to continue for the foreseeable future as a result of these and other factors.

ITEM 1B: UNRESOLVED STAFF COMMENTS

None.

ITEM 2: PROPERTIES

Our corporate headquarters is located in leased property at 400 Rella Boulevard, Suite 174, Suffern, NY 10901. The facility we operate is well maintained and adequate for the purpose for which they are intended.

We have no policy with respect to investments or interests in real estate, real estate mortgages or securities of, or interests in, persons primarily engaged in real estate activities.

We believe that our properties are generally suitable to meet our needs for the foreseeable future; however, we will continue to seek additional space as needed to satisfy our growth.

ITEM 3: LEGAL PROCEEDINGS

Based on current knowledge, we know of no material, existing or pending legal proceedings against us, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial stockholder, is an adverse party or has a material interest adverse to our interest.

ITEM 4: MINE SAFETY DISCLOSURES

Not applicable.

PART II

ITEM 5: MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock trades on OTCQB, the marketplace for companies that are current in their reporting with a U.S. regulator, under the symbol “VGTL” since February 14, 2011. Prior to that time, there was no public market for our common stock. The table below sets forth the high and low prices for our common stock as reported by OTCQB for each full quarterly period within the two most recent fiscal years. Quotations reflect inter-dealer prices, without retail mark-up, mark-down commission, and may not represent actual transactions.


FY 2011	High	Low
First Quarter (April.1 – June 30)	$14.00	$2.25
Second Quarter (July 1 – Sept. 30)	$5.15	$0.25
Third Quarter (Sept. 1 – Dec. 31)	$1.10	$0.15
FY 2012	High	Low
Fourth Quarter (Jan. 1 – Mar. 31)	$0.74	$0.20
First Quarter (Apr. 1 – June 30)	$0.76	$0.33
Second Quarter (July 1 – Sept. 30)	$1.13	$0.54
Third Quarter (Sept. 1 – Dec. 31)	$1.03	$0.53
FY 2013	High	Low
Fourth Quarter (Jan. 1 – Mar. 31)	$0.845	$0.25

Holders

As of June 13, 2013, there were 258 holders of record of our common stock, excluding shareholders whose shares are held at brokerage firms through the DTC system.

Dividend Policy

We currently do not anticipate paying dividends on our common stock in the foreseeable future. Any future determination to declare cash dividends will be made at the discretion of our board of directors, subject to applicable laws and will depend on our financial condition, results of operations, capital requirements, general business conditions and other factors that our board of directors may deem relevant.

2011 Equity Incentive Plan

In the previous fiscal year, the Board of Directors voted to authorize the 2011 Equity Incentive Plan. No grants or awards have been made pursuant to the plan as of March 31, 2013.

The Plan reserves 10,000,000 shares of common stock for issuance in accordance with the Plan’s terms. With the exception of the employment agreement with Peter Shafran as Chief Executive Officer, the Company has made no other plans for granting of any awards under the 2011 Equity Incentive Plan and no other employment agreement exists as yet which include granting of awards under the 2011 Equity Incentive Plan. Consequently, with the exception of the employment agreement with Peter Shafran, neither weighted average exercise price, nor payment of benefits to any other Executive Officers or others is as yet determinable.

The purpose of the Plan is to enable us to offer our employees, officers, directors and consultants whose past, present and/or potential contributions to us and our subsidiaries have been, are or will be important to our success, an opportunity to acquire a proprietary interest in the Company. The various types of long-term incentive awards that may be provided under the Plan are intended to enable us to respond to changes in practices, tax laws, accounting regulations and the size and diversity of our business.

A summary of the principal features of the Plan was provided in the Form 10-K filed for the previous fiscal year, but is qualified in its entirety by reference to the full text of the Plan, which was attached to that Form 10-K. The capitalized terms, if not defined in this Form 10-K, are defined as in the Plan.

Administration

The Plan is administered by the Plan committee (“Committee”) which shall consist of either (i) the Board of Directors of the Company or (ii) or a Committee of the Board of Directors designated to administer the Plan which is comprised solely of two or more outside directors all of whom are “outside directors” within the meaning of the regulations issued under Section 162(m) of the Internal Revenue Code (“Code”).

Subject to the provisions of the Plan, the Committee determines, among other things, the persons to whom from time to time awards may be granted, the specific type of awards to be granted, the number of shares subject to each award, share prices, any restrictions or limitations on the awards, and any vesting, exchange, deferral, surrender, cancellation, acceleration, termination, exercise or forfeiture provisions related to the awards.

Stock Subject to the Plan

If any share are subject to an award that is forfeited, settled in cash, or expires, any unissued shares covered by such award will be available for issuance under the Plan. If a holder pays the exercise price of a stock option by surrendering any previously owned shares or arranges to have the appropriate number of shares otherwise issuable upon exercise withheld to cover the withholding tax liability associated with the stock option exercise, then, in the Committee’s discretion, the number of shares available under the Plan may be increased by the lesser of (i) the number of shares surrendered and shares used to pay taxes and (ii) the number of shares purchased under the stock option.

Under the Plan, on a change in the number of shares of common stock as a result of a dividend on shares of common stock payable in shares of common stock, common stock forward split or reverse split, combination or exchange of shares of common stock or other extraordinary or unusual event that results in a change in the shares of common stock as a whole, the Committee shall determine, in its sole discretion, whether the terms of the outstanding award require adjustment.

Eligibility

Awards may be granted under the Plan to officers, directors employees and consultants who are deemed to have rendered, or to be able to render significant services to us or our subsidiaries and who are deemed to have contributed, or to have the potential to contribute, to our success.

Types of Awards

Options . The Plan provides both for “incentive” stock options as defined in Section 422 of the Code, and for options not qualifying as incentive options, both of which may be granted with any other award under the Plan. The Committee determines the exercise price per share of common stock purchasable under an incentive or non-qualified stock option, which may not be less than 100% of the fair market value on the day of the grant or, if greater, the par value of a share of common stock. However, the exercise price of an incentive stock option granted to a person possessing more than 10% of the total combined voting power of all classes of stock may not be less than 110% of the fair market value on the date of grant. The aggregate fair market value of all shares of common stock with respect to which incentive stock options are exercisable by a participant for the first time during any calendar year (under all of our Plans), measured at the date of the grant, may not exceed $100,000 or such other amount as may be subsequently specified under the Code or the regulations thereunder.

An incentive stock option may only be granted within a ten-year period beginning January 1, 2011 and may only be exercised within ten years from the date of the grant, or within five years in the case of an incentive stock option granted to a person who, at the time of the grant, owns common stock possessing more than 10% of the total combined voting power of all classes of our stock. Subject to any limitations or conditions the Committee may impose, stock options may be exercised, in whole or in part, at any time during the term of the stock option by giving written notice of exercise to us specifying the number of shares of common stock to be purchased. The notice must be accompanied by payment in full of the purchase price, either in cash or, if provided in the agreement, in our securities or in combination of the two or such other means which the committee determines are consistent with the Plan’s purpose and applicable law.

Generally, stock options granted under the Plan may not be transferred other than by will or by the laws of descent and distribution and all stock options are exercisable during the holder’s lifetime, or in the event of legal incapacity or incompetency, the holder’s guardian or legal representative. However, a holder, with the approval of the Committee, may transfer a non-qualified stock option by gift, for no consideration, to a family member of the holder, by domestic relations order to a family member of the holder or by transfer to an entity in which more than 50% of the voting interests are owned by family members of the holder or the holder, in exchange for an interest in that entity.

Generally, if the holder is an employee, no stock options granted under the Plan may be exercised by the holder unless he or she is employed by us or our subsidiaries at the time of the exercise and has been so employed continuously from the time the stock options were granted. However, in the event the holder’s employment is terminated due to disability, the holder may still exercise his or her vested stock options for a period of one year or such other greater or lesser period as the Committee may determine, from the date of termination or until the expiration of the stated term of the stock option, whichever period is shorter. Similarly, should a holder die while employed by us or one of our subsidiaries, his or her legal representative or legatee under his or her will may exercise the decedent holder’s vested stock options for a period of one year from the date of his or her death, or such other greater or lesser period as the Committee may determine or until the expiration of the stated term of the stock option, whichever period is shorter. If the holder’s employment is terminated due to normal retirement, the holder may still exercise his or her vested stock options for a period of one year from the date of termination or until the expiration of the stated term of the stock option, whichever period is shorter. If the holder’s employment is terminated for any reason other than death, disability or normal retirement, the stock option will automatically terminate, except that if the holder’s employment is terminated without cause, then the portion of any stock option that is vested on the date of termination may be exercised for the lesser of three months after termination of employment, or such other greater or lesser period as the Committee may determine but not beyond the balance of the stock option’s term.

The Committee may at any time, in its sole discretion, offer to repurchase a stock option previously granted, based upon such terms and conditions as the Committee shall establish and communicate to the holder at the time that such offer is made.

Stock Appreciation Rights . Under the Plan, stock appreciation rights may be granted to participants who have been, or are being, granted stock options under the Plan as a means of allowing the participants to exercise their stock options without the need to pay the exercise price in cash. In conjunction with non-qualified stock options, stock appreciation rights may be granted either at or after the time of the grant of the non-qualified stock options. In conjunction with incentive stock options, stock appreciation rights may be granted only at the time of the grant of the incentive stock options. A stock appreciation right entitles the holder to receive a number of shares of common stock having a fair market value equal to the excess fair market value of one share of common stock over the exercise price of the related stock option, multiplied by the number of shares subject to the stock appreciation rights. The granting of a stock appreciation right will not affect the number of shares of common stock available for awards under the Plan. The number of shares available for awards under the Plan will, however, be reduced by the number of shares of common stock acquirable upon exercise of the stock option to which the stock appreciation right relates.

Restricted Stock . Under the Plan, shares of restricted stock may be awarded either alone or in addition to other awards granted under the Plan. The Committee determines the persons to whom grants of restricted stock are made, the number of shares to be awarded, the price if any to be paid for the restricted stock by the person receiving the stock from us, the time or times within which awards of restricted stock may be subject to forfeiture, the vesting schedule and rights to acceleration thereof, and all other terms and conditions of the restricted stock awards.

Restricted stock awarded under the Plan may not be sold, exchanged, assigned, transferred, pledged, encumbered or otherwise disposed of, other than to us, during the applicable restriction period. In order to enforce these restrictions, the Plan requires that all shares of restricted stock awarded to the holder remain in our physical custody until the restrictions have terminated and all vesting requirements with respect to the restricted stock have been fulfilled. We will retain custody of all dividends and distributions made or declared with respect to the restricted stock during the restriction period. A breach of any restriction regarding the restricted stock will cause a forfeiture of the restricted stock and any retained distributions. Except for the foregoing restrictions, the holder will, even during the restriction period, have all of the rights of a shareholder, including the right to vote the shares.

Other Stock-Based Awards . Under the Plan, other stock-based awards may be granted, subject to limitations under applicable law that are denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or related to, shares of common stock, as deemed by the Committee to be consistent with the purposes of the Plan. These other stock-based awards may be in the form of purchase rights, shares of common stock awarded that are not subject to any restrictions or conditions, convertible or exchangeable debentures or other rights convertible into shares of common stock and awards valued by reference to the value of securities of, or the performance of, one of our subsidiaries. These other stock-based awards may include performance shares or options, whose award is tied to specific performance criteria. These other stock-based awards may be awarded either alone, in addition to, or in tandem with any other awards under the Plan or any of our other plans.

Accelerated Vesting and Exercisability

If any one person, or more than one person acting as a group, acquires the ownership of stock of the company that, together with the stock held by such person or group, constitutes more than 50% of the total fair market value or combined voting power of the stock of our company, and our board of directors does not authorize or otherwise approve such acquisition, then the vesting periods of any and all stock options and other awards granted and outstanding under the Plan shall be accelerated and all such stock options and awards will immediately and entirely vest, and the respective holders thereof will have the immediate right to purchase and/or receive any and all common stock subject to such stock options and awards on the terms set forth in the Plan and the respective agreements respecting such stock options and awards. An increase in the percentage of stock owned by any one person, or persons acting as a group, as a result of a transaction in which we acquire our stock in exchange for property is not treated as an acquisition of stock for the foregoing purposes.

The Committee may, in the event of an acquisition by any one person, or more than one person acting as a group, together with acquisitions during the 12-month period ending on the date of the most recent acquisition by such person or persons, of assets from us that have a total gross fair market value equal to or more than 50% of the total gross fair market value of all of the assets of our company immediately before such acquisition or acquisitions, or if any one person, or more than one person acting as a group, acquires the ownership of stock of our company that, together with the stock held by such person or group, constitutes more than 50% of the total fair market value or combined voting power of the stock of our company, which has been approved by our board of directors, (i) accelerate the vesting of any and all stock options and other awards granted and outstanding under the Plan, or (ii) require a holder of any award granted under the Plan to relinquish such award to us upon the tender by us to the holder of cash in an amount equal to the repurchase value of such award. For this purpose, gross fair market value means the value our assets, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets.

Notwithstanding any provisions of the Plan or any award granted thereunder to the contrary, no acceleration shall occur with respect to any award to the extent such acceleration would cause the Plan or an award granted thereunder to fail to comply with Section 409A of the Code.

Other Limitations

The Committee may not modify or amend any outstanding option or stock appreciation right to reduce the exercise price of such option or stock appreciation right, as applicable, below the exercise price as of the date of grant of such option or stock appreciation right. In addition, no option or stock appreciation right may be granted in exchange for, or in connection with, the cancellation or surrender of an option or stock appreciation right or other award having a higher exercise price.

Withholding Taxes

Upon the exercise of any award granted under the Plan, the holder may be required to remit to Company an amount sufficient to satisfy all federal, state and local withholding tax requirements prior to delivery of any certificate or certificates for shares of Common Stock.

Amendments

Subject to the approval of the Board, where required, the Committee may at any time, and from time to time, amend the Plan, provided that no amendment will be made that would impair the rights of a holder under any agreement entered into pursuant to the Plan without the holder’s consent (except to the extent necessary to comply with Section 409A of the Code). In addition, the Committee may not increase the shares available under the Plan, increase the individual limits on awards, allow for an exercise price below fair market value, permit the repricing of options or stock appreciation rights, or adopt any other amendment that would require shareholder approval.

Federal Income Tax Consequences

The material U.S. Federal Income Tax consequences of awards under the Plan, based on the current provisions of the Code and the regulations thereunder, with respect to employees who are subject to U.S. income tax are as follows:

(a)

The grant of an option to an employee will have no tax consequences to the employee or to the Company or its subsidiaries or affiliates. In general, upon the exercise of an incentive stock option (“ISO”), the employee will not recognize income, and the employer will not be entitled to a tax deduction. However, the excess of the acquired shares’ fair market value on the exercise date over the exercise price is included in the employee’s income for purposes of the alternative minimum tax. When an employee disposes of ISO shares, the difference between the exercise price and the amount realized by the employee will, in general, constitute capital gain or loss, as the case may be. However, if the employee fails to hold the ISO shares for more than one year after exercising the ISO and for more than two years after the grant of the ISO: (i) the portion of any gain realized by the employee upon the disposition of the shares that does not exceed the excess of the fair market value of the shares on the exercise date over the exercise price generally will be treated as ordinary income, (ii) the balance of any gain or any loss will be treated as a capital gain or loss, and (iii) the employer generally will be entitled to a tax deduction equal to the amount of ordinary income recognized by the employee. If an employee exercises an ISO more than three months after his termination of employment with the Company and any subsidiary in which the Company owns at least 50% of the voting power (or one year after his termination of employment if the reason for the termination is disability), the option will be treated for tax purposes as a non-qualified stock option, as described below.

(b)

In general, upon the exercise of a non-qualified stock option, the employee will recognize ordinary income equal to the excess of the acquired shares’ fair market value on the exercise date over the exercise price, and the employer generally will be entitled to a tax deduction in the same amount.

(c)

With respect to other awards that are settled either in cash or in shares that are transferable or are not subject to a substantial risk of forfeiture, the employee will recognize ordinary income equal to the excess of (a) the cash or the fair market value of any shares received (determined as of the date of settlement) over (b) the amount, if any, paid for the shares by the employee, and the employer generally will be entitled to a tax deduction in the same amount.

In the case of an award to an employee that is settled in shares that are nontransferable and subject to a substantial risk of forfeiture, the employee generally will recognize ordinary income equal to the excess of (a) the fair market value of the shares received (determined as of the date on which the shares become transferable or not subject to a substantial risk of forfeiture, whichever occurs first) over (b) the amount, if any, paid for the shares by the employee, and the employer generally will be entitled to a tax deduction in the same amount.

An employee whose shares are both nontransferable and subject to a substantial risk of forfeiture may elect under Section 83(b) of the Code to recognize income when the shares are received, rather than upon the expiration of the transfer. A participant may make a Section 83(b) election, within 30 days of the transfer of the restricted stock. If a participant makes an election and thereafter forfeits the shares, no ordinary loss deduction will be allowed. The forfeiture will be treated as a sale or exchange upon which there is realized loss equal to the excess, if any, of the consideration paid for the shares over the amount realized on such forfeiture. The loss will be a capital loss if the shares are capital assets. If a participant makes an election under Section 83(b), the holding period will commence on the day after the date of transfer and the tax basis will equal the fair market value of shares, as determined without regard to the restrictions, on the date of transfer.

ITEM 6: SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA

As a “smaller reporting company”, we are not required to provide the information required by this Item.

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

The following discussion and analysis of our financial condition and results of operations should be read together with our consolidated financial statements and related notes included under Item 8 of this Annual Report on Form 10-K. This discussion contains forward-looking statements about our business and operations. Our actual results may differ materially from those we currently anticipate as a result of many factors, including those we describe under “Risk Factors” and elsewhere in this Annual Report.

Overview

Our mission is to be the leader in the internet sweepstakes industry. As part of that vision, we intend to acquire businesses that operate in the industry as software developers, software providers, equipment installers, distributors and operators, to provide customers internet sweepstakes software, equipment and service. Traditionally, our competitors have served local or regional areas, or have only provided equipment installations and operations. By acquiring software developers and equipment distributors and operators, VGTel will try to build a nationwide provider of cutting-edge internet sweepstakes games and the best equipment to local operators.

Our revenue from this business will primarily come from an agreed upon portion of the internet access fees paid to the customers/operators, net any credits given to the end-users, and any applicable taxes. We generated minimal revenues during the year ended March 31, 2013 and none for the prior year.

We have an accumulated deficit of $5,162,320 as of March 31, 2013.

Recent History

At the end of our last fiscal year, we acquired a nationwide distribution agreement for the distribution of Internet Kiosks - arcade style sweepstake gaming systems, software and hardware units, and completed negotiations to directly purchase, distribute and install Internet Kiosks into designated locations. The purchase and distribution of the kiosks was expected to establish our entry into the internet gaming industry. Unfortunately, the kiosks did not meet our expectations and we decided not to pursue that line of business. However, as a result of that first exploration into the internet sweepstakes industry, we were introduced to other operators and manufacturers in the industry.

In our third quarter, we executed a Letter of Intent (“LOI”) with a company in the charitable video gaming industry with respect to a proposed acquisition in that company. The target company had manufacturing capabilities, software licensing for raffle games, distribution and maintenance components in place with staffing and warehousing. It also claimed to have a five-year contract to place charitable video raffle kiosks in participating veterans and fraternal organizations’ locations in Ohio, which would enable the expansion of raffle units and locations to meet and exceed more than 5,000 units in 1500+ locations. We anticipated closing the transaction within the fourth quarter but the target company was unable to meet the conditions of the contract and the transaction was terminated.

In the fourth quarter, we executed an agreement to acquire another business in the internet sweepstakes company. The target company had distribution and maintenance components in place with staffing and warehousing. We anticipated closing the transaction within the first quarter of our next fiscal year but the target company was unable to meet the conditions of the contract and the transaction was terminated.

We are currently in negotiations with another company to acquire its business with the goal of completing the transaction by the third quarter of our fiscal year.

Outlook

Our principal business objective for the next 12 months and beyond such time will be to achieve long-term growth potential through our penetration into the Internet gaming industry. Looking forward, we expect the conditions to compete within the Internet gaming industry conditions to be highly challenging. While the national marketplace in which we operate is highly competitive, the Company continues to experience heightened competitive activity in certain markets from other larger manufacturers and distributors, many, if not all, of which have greater resources than we do. Such activities have included more aggressive product claims and marketing challenges, as well as increased promotional spending. While the Company has taken, and will continue to take, measures to mitigate the effect of these conditions, should they persist, they could adversely affect the Company’s future results.

The Company believes it is well prepared to meet the challenges ahead due to its experience operating in challenging environments and continued focus on the Company’s recently updated strategic initiatives: engaging to build our brands; market penetration; innovation for growth; and effectiveness and efficiency.

Alternative Plans. In the event our entry into the internet gaming industry is not successful, we will achieve long-term growth potential through starting up a new business or a combination with a business rather than immediate, short-term earnings. We will not restrict our potential candidate target companies to any specific business, industry or geographical location and, thus, may acquire any type of business.

The analysis of new business opportunities has and will be undertaken by or under the supervision of our officers and directors. We have unrestricted flexibility in seeking, analyzing and participating in potential business opportunities. In our efforts to analyze potential acquisition targets, we will consider the following kinds of factors:

Potential for growth, indicated by new technology, anticipated market expansion or new products;

Competitive position as compared to other firms of similar size and experience within the industry segment as well as within the industry as a whole;

Strength and diversity of management, either in place or scheduled for recruitment;

Capital requirements and anticipated availability of required funds, to be provided by us or from operations, through the sale of additional securities, through joint ventures or similar arrangements or from other sources;

The cost of participation by us as compared to the perceived tangible and intangible values and potentials;

The extent to which the business opportunity can be advanced;

The accessibility of required management expertise, personnel, raw materials, services, professional assistance and other required items; and

Other relevant factors.

In applying the foregoing criteria, no one of which will be controlling, we will attempt to analyze all factors and circumstances and make a determination based upon reasonable investigative measures and available data. Potentially available business opportunities may occur in many different industries, and at various stages of development, all of which will make the task of comparative investigation and analysis of such business opportunities extremely difficult and complex. Due to our limited capital available for investigation, we may not discover or adequately evaluate adverse facts about the opportunity to be acquired.

We do not currently engage in any business activities that provide cash flow. The costs of investigating and analyzing business combinations for the next 12 months and beyond such time will be paid with money in our treasury.

During the next 12 months, we anticipate incurring costs related to:

(i)

Filing of Exchange Act reports, and

(ii)

Costs relating to growing our internet gaming business as it relates to licensing and/or revenue participation agreements.

None of our officers or directors has had any preliminary contact or discussions with any representative of any other entity regarding a business combination with us. Any target business that is selected may be a financially unstable company or an entity in its early stages of development or growth, including entities without established records of sales or earnings. In that event, we will be subject to numerous risks inherent in the business and operations of financially unstable and early stage or potential emerging growth companies. In addition, we may effect a business combination with an entity in an industry characterized by a high level of risk, and, although our management will endeavor to evaluate the risks inherent in a particular target business, there can be no assurance that we will properly ascertain or assess all significant risks.

We anticipate that the selection of a business combination will be complex and extremely risky. Because of general economic conditions, rapid technological advances being made in some industries and shortages of available capital, our management believes that there are numerous firms seeking even the limited additional capital that we will have and/or the perceived benefits of becoming a publicly traded corporation. Such perceived benefits of becoming a publicly traded corporation include, among other things, facilitating or improving the terms on which additional equity financing may be obtained, providing liquidity for the principals of and investors in a business, creating a means for providing incentive stock options or similar benefits to key employees, and offering greater flexibility in structuring acquisitions, joint ventures and the like through the issuance of stock. Potentially available business combinations may occur in many different industries and at various stages of development, all of which will make the task of comparative investigation and analysis of such business opportunities extremely difficult and complex.

Future Financings

We will need to raise a minimum of $500,000 to pay for our ongoing expenses while investigating opportunities. These expenses include legal, accounting and audit fees as well as general and administrative expenses. These cash requirements are in excess of our current cash and working capital resources. Accordingly, we will require additional financing in order to enable us to startup and maintain a business, continue operations and to repay our liabilities. There is no assurance that any party will advance additional funds to us in order to enable us to sustain our plan of operations or to repay our liabilities.

On March 23, 2012, we entered into a funding agreement with a third party, which provides an advance of $500,000 in working capital to be paid in installments. As of March 31, 2013, the third party had funded $206,000.

On May 22, 2012, we entered into an additional funding agreement with another third party, which provides an advance of $500,000 in working capital to be paid in installments. As of March 31, 2013, the third party had not provided any funds.

On March 21, 2013, we entered into an additional funding agreement with a third party, which provides $32,500 in working capital. As of April 5, 2013, the third party had funded $32,500. On May 31, 2013, we entered into an additional funding agreement with the same third party, which provides an additional $32,500 in working capital. As of June 19, 2013, the third party has funded $32,500.

These funding agreements are strictly a short-term arrangement to provide working capital while the Company continues to negotiate the funding of additional capital.

We anticipate continuing to rely on equity sales of our common stock in order to continue to fund our business operations. Issuances of additional shares will result in dilution to our existing stockholders. There is no assurance that we will achieve any additional sales of our equity securities or arrange for debt or other financing to fund our planned business activities.

We presently do not have any arrangements for additional financing, and no potential lines of credit or sources of financing are currently available for the purpose of proceeding with our plan of operations .

Results of Operations

Fiscal Years Ended March 31, 2013 and March 31, 2012

Revenues. Revenues for the fiscal year ending March 31, 2013 was $42,334 compared to $0 for the fiscal year ended March 31, 2012. The increase in revenues resulted from the search for new business opportunities.

Expenses. Total operating expenses for the fiscal year ended March 31, 2013 was $295,952 as compared to $1,772,688 for the fiscal year ended March 31, 2012 The decrease was attributed to stock based compensation for an aggregate of $140,000 for the period ended March 31, 2013 as compared to $900,001 for the period ending March 31, 2012. Expenses included General and Administrative expenses of $62,776 for the period ended March 31, 2013 as compared to $70,932 for fiscal year ending March 31, 2012. Officers Compensation & Rent amounted to $212,750 during the fiscal year ended March 31, 2013 as compared to $942,393 during the fiscal year ended March 31, 2012.

Loss on settlement of debt. The Company incurred a loss on settlement of debt of $2,916,129 for the fiscal year ended March 31, 2013 as compared to $0 in 2012. The Company issued 3,940,714 shares of common stock to settle $394,071 of accounts payable which resulted in the loss on settlement of debt.

Interest Expense . The Company incurred interest expense of $219,885 for the fiscal year ended March 31, 2013 as compared to $0 in 2012. The increase was attributed to the borrowing of an additional $119,300 in short term debt, and the amortization of debt discount of $211,895.

Net loss. The Company reported a net loss for the twelve month period ending March 31, 2013 of $3,389,632 as compared to a net loss of $1,772,688 for the fiscal year period ending March 31, 2012.

Liquidity and Capital Resources:

For the Fiscal Years Ended March 31, 2013 and March 31, 2012.

As of March 31, 2013, the Company had $30,011 in cash as compared to $714 as of March 31, 2012.

Net cash used by operating activities for the fiscal year period ended March 31, 2013 was $87,503 as compared to $25,145 for the fiscal year ended March 31, 2012.

Net cash used by investing activities during fiscal year ending March 31, 2013 was $2,500 as compared to $35,000 for the fiscal year ended March 31, 2012.

Net cash provided by financing activities during fiscal year ending March 31, 2013 was $119,300 as compared to $58,000 for the fiscal year ended March 31, 2012.

See “Future Financings” above with regard to our liquidity requirements.

Off-Balance Sheet Arrangements

We did not have any off-balance sheet arrangements as of March 31, 2013 that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.

Recent Accounting Pronouncements

The Company does not expect any recent account pronouncements to have a significant impact on its financial position or results of operations.

Critical Accounting Policies and Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles of the United States, or U.S. GAAP, requires estimates and assumptions that affect the reported amounts and classifications of assets and liabilities, revenue and expense, and the related disclosures of contingent liabilities on the consolidated financial statements and accompanying notes. In certain instances, accounting principles generally accepted in the United States of America allow for the selection of alternative accounting methods. The SEC has defined a company’s critical accounting policies as the ones that are most important to the portrayal of the company’s financial condition and results of operations, and which require the company to make its most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Although we believe that our estimates, assumptions, and judgments are reasonable, they are based upon information available at the time. Actual results may differ significantly from these estimates under different assumptions, judgments, or conditions.

Basic and diluted net income (loss) per share

We compute net income (loss) per share in accordance with ASC 260, “Earnings per Share”. ASC 260 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common stockholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excluded all dilutive potential shares if their effect is anti-dilutive.

Use of estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenditures during the reporting period. Actual results could differ from these estimates.

Cautionary Statement on Forward-Looking Statements

This Annual Report on Form 10-K may contain forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995 or by the SEC in its rules, regulations and releases. Such statements may relate, for example, to sales or volume growth, financial goals, tax rates, new product introductions or commercial investment levels, among other matters. These statements are made on the basis of the Company’s views and assumptions as of this time and the Company undertakes no obligation to update these statements. Moreover, the Company does not, nor does any other person, assume responsibility for the accuracy and completeness of those statements. The Company cautions investors that any such forward-looking statements are not guarantees of future performance and that actual events or results may differ materially from those statements. Actual events or results may differ materially because of factors that affect businesses and economic conditions, as well as matters specific to us and the markets we serve, including increased competition and evolving competitive practices, changes in domestic laws or regulations or their interpretation, and political, legislative and fiscal developments. For information about these and other factors that could impact our business and cause actual results to differ materially from forward-looking statements, refer to Item 1A, “Risk Factors”.

Recently Issued Accounting Standards

There are no accounting standards that have been issued but not yet adopted that we believe will have a material impact on our financial position or results of operations.

ITEM 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

As a “smaller reporting company”, we are not required to provide the information required by this Item.

ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The response to this Item is submitted as a separate section of this report beginning on page F-1.

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

None.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer (who is also our Chief Financial Officer), has evaluated the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act), as of the end of the period covered by this Annual Report on Form 10-K.

Based on that evaluation, our principal executive officer concluded that our disclosure controls and procedures were not effective because of certain deficiencies involving internal controls which constituted a material weakness as discussed below. The material weakness identified did not result in the restatement of any previously reported financial statements or any other related financial disclosures, nor does management believe that it had any effect on the accuracy of our financial statements for the current reporting period. We have identified the following material weakness of our internal controls:

There is a lack of sufficient staff due to the size of the Company which results in a lack of segregation of duties necessary for a good system of internal control.

There is a lack of control processes which provide for multiple levels of supervision and review.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) of the Exchange Act. Our management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Our internal control over financial reporting includes policies and procedures that provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with U.S. generally accepted accounting principles. Based on its evaluation, our Chief Executive Officer (who is also our Chief Financial Officer), concluded that our controls are not effective and there is a material weakness in our internal control over financial reporting. A material weakness is a deficiency, or a 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 will not be prevented or detected on a timely basis.

The material weakness relates to the monitoring and review of work performed by our limited accounting staff in the preparation of financial statements, footnotes and financial data provided to our independent registered public accounting firm in connection with the annual audit. More specifically, the material weakness in our internal control over financial reporting is due to the fact that:

The Company lacks proper segregation of duties. We believe that the lack of proper segregation of duties is due to our limited resources.

The Company does not have a system of processes to allow for multiple levels of supervision and review.

Management has concluded that until we have sufficient financial resources to supplement our accounting personnel, this material weakness will continue.

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 us to provide only management’s report in this annual report.

This report shall not be deemed to be filed for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that section, and is not incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the three months ended March 31, 2013 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Limitations on Effectiveness of Controls and Procedures

In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

ITEM 9B: OTHER INFORMATION

None.

PART III

ITEM 10: DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The following sets forth our directors, executive officers, promoters and control persons, their ages, and all offices and positions held as of June 28, 2013. Directors are elected for a period of two years and thereafter serve until their successor is duly elected by the shareholders. Officers and other employees serve at the will of the Board of Directors.

Peter Shafran, Age 55, Chief Executive Officer, Chief Financial Officer, Director.

Peter Shafran was appointed as Chief Executive Officer, Chief Financial Officer and Director on August 26, 2011.

Peter Shafran

400 Rella Blvd., Suite 174

Suffern, NY 10901

Age – 55

Chief Executive Officer,

Chief Financial Officer,

Director

Peter Shafran was brought on as Chief Executive Officer, Chief Financial Officer and Director on August 26, 2011. Mr. Shafran has been practicing law for over 28 years. In 1990, he founded the Law Offices of Peter W. Shafran, LLC, where he has practiced law with an emphasis on real estate matters, transactional arrangements, lending representation, and business acquisitions. The firm has offices in New York and New Jersey. Since 2010, Mr. Shafran has also been the Executive Producer of River Spirit Music, producing, promoting and presenting musical shows for venues in the Lower Hudson Valley region. Mr. Shafran received a Bachelor of Arts degree in Psychology from SUNY Binghamton, and his Juris Doctor from Hofstra University School of Law. Based on his professional experience, Mr. Shafran is qualified to serve as Chief Executive Officer and Chief Financial Officer and as a director.

Bruce Minsky, Age 49, Director.

Bruce Minsky, Age 49, was appointed as Director on June 28, 2011.

Bruce Minsky

112 Brick Church Road

New Hempstead, NY 10977

Age – 49

Director

Since May 2004, Mr. Minsky has been engaged in the private practice of law at Law Offices of Bruce W. Minsky, P.C. in New Hempstead, New York, specializing in corporate organization, governance, operational, compliance and regulatory scenarios; real estate matters; transactional arrangements; commercial lending representation; and, business/portfolio acquisitions. From July 1991 through April 2004, Mr. Minsky was employed by Banco Popular North America, New York NY, the U.S. banking subsidiary of Popular, Inc, a full-service international financial services provider [NASD – BPOP], for which he served as Vice President and In-House Counsel. Mr. Minsky is a member of the Bar of the States of California, Connecticut and New York, and admitted in the U.S. District Court of the State of New York, Southern and Eastern Districts, as well as the U.S. Court of Appeals, Second Circuit. Mr. Minsky received a Bachelor of Arts degree from Boston University in 1985. In 1988, he received a Juris Doctor degree from Southwestern University School of Law. He received a Master of Laws degree in American Banking Law from Boston University in 1989. Based on his professional experience Mr. Minsky is qualified to serve as a director.

Code of Ethics

We have not adopted a code of ethics applicable to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. Additionally, we do not currently have an “audit committee financial expert”. We believe that based on our limited resources and small number of directors and officers, the cost of taking such actions outweighs potential benefits to stockholders.

ITEM 11: EXECUTIVE COMPENSATION

Stock Options/SAR Grants. On February 24, 2011, our Board of Directors adopted the VGTel 2011 Equity Incentive Plan. No grants of stock options or stock appreciation rights have been made as of the year ended March 31, 2013.

Outstanding Equity Awards at Fiscal Year-end. As of the year ended March 31, 2013, no named executive officer had unexercised options, stock that has not vested, and equity incentive plan awards.

Summary Compensation Table. The table set forth below summarizes the annual and long-term compensation for services in all capacities to us payable to our principal executive officer during the years ending March 31, 2012 and March 31, 2013:


Name and Principal Position	Year Ended March 31	Salary $	Bonus $	Stock Awards $	Option Awards $	Non-Equity Incentive Plan Compensation $	Nonqualified Deferred Compensation Earnings $	All Other Compensation $	Total $
Peter Shafran, CEO	2013	$60,000¹	-	180,000 ² shares @.33/share	-	-	-	-	$120,000 ¹
Peter Shafran, CEO	2012	$15,000¹	-	-	-	-	-	-	$15,000¹

^1.

This amount represents such officer’s compensation incurred for the fiscal years ended March 31, 2012 and March 31, 2013.

^2.

These shares were not issued to Mr. Shafran directly, but were assigned to an entity owned by a family member.

Long-Term Incentive Plans .

DIRECTOR COMPENSATION

Director Compensation. Our directors received the following compensation for their service as directors during the fiscal year ended March 31, 2013:


Name	Fees Earned or Paid in Cash	Stock Awards $	Option Awards $	Non-Equity Incentive Plan Compensation $	Nonqualified Deferred Compensation Earnings $	All Other Compensation $	Total $
Peter Shafran	0	120,000 ¹ shares @$.33/share	-	-	-	-	$40,000
Bruce Minsky	0	120,000 shares @$.33/share	-	-	-	-	$40,000

^1.

These shares were not issued to Mr. Shafran directly, but were assigned to an entity owned by a family member.

CORPORATE GOVERNANCE

Nominations to the Board of Directors

The Company’s directors take a critical role in guiding the Company’s strategic direction and oversee the management of the Company. Board of Director candidates are considered based upon various criteria, such as their broad-based business and professional skills and experiences, a global business and social perspective, concern for the long-term interests of the stockholders, diversity, and personal integrity and judgment. Accordingly, we seek to attract and retain highly qualified directors.

In carrying out its responsibilities, the Board of Directors will consider candidates suggested by stockholders. If a stockholder wishes to formally place a candidate’s name in nomination, however, such stockholder must do so in accordance with the provisions of the Company’s Bylaws.

Employment Agreements

On August 26, 2011, the Board of Directors executed an employment agreement with Peter Shafran. The Agreement provided a one-year term, and an annual base salary of $60,000, of which the first three payments were deferred for ninety days. Mr. Shafran has been performing his duties since the expiration of the employment agreement under an extension agreement.

Outstanding Equity Awards

None.

Bonuses and Deferred Compensation

The Company does not have any bonus, deferred compensation or retirement plan. Decisions regarding compensation will be determined by our compensation committee once established; our compensation committee will consist of our three independent directors effective until the expiration of the ten-day period following the mailing of the Schedule 14f-1 to the Company’s shareholders.

Compensation of Directors

In May 2012, we implemented a compensation program for our directors, which includes an annual retainer of 60,000 shares to be issued to each Director quarterly. By March 31, 2013, 30,000 shares were issued to our two Directors. There are no other arrangements, standard or otherwise, with any director or officer wherein the director or officer is compensated other than as stated above.

Compensation Committee Interlocks and Insider Participation

We do not have a Compensation Committee. All compensation matters are approved by the full Board.

Board Leadership Structure and Role on Risk Oversight

As of March 31, 2013, Peter Shafran held the positions as Chief Executive Officer and Director.

At present, we have determined this leadership structure is appropriate for the Company due to the Company’s small size and limited operations and resources. As a result, no policy exists requiring the combination or separation of leadership roles and the Company’s governing documents do not mandate a particular structure. This has allowed the Company’s Board of Directors the flexibility to establish the most appropriate structure for the Company at any given time.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Exchange Act requires our directors, executive officers, and stockholders holding more than 10% of our outstanding Common Stock to file with the SEC initial reports of ownership and reports of changes in beneficial ownership of our Common Stock. Executive officers, directors, and persons who own more than 10% of our Common Stock are required by SEC regulations to furnish us with copies of all Section 16(a) reports they file.

Based solely upon a review of Forms 3, 4, and 5 delivered to us as filed with the SEC during our most recent fiscal year, none of our executive officers and directors failed to timely file the reports required pursuant to Section 16(a) of the Exchange Act.

ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth information regarding the beneficial ownership of shares of the Company’s Common Stock as of June 28, 2013 by (1) all directors and executive officers of the Company, individually and collectively as a group, and (2) all stockholders known to the Company to be beneficial owners of more than five percent (5%) of the outstanding Common Stock;


Name and Address of Beneficial Owner	Office	Title of Class	Amount and Nature of Beneficial Ownership	Percentage of Class
Peter Shafran 400 Rella Blvd. Montebello, NY 10901	CEO, Director	Common Stock	300,000 ⁽¹⁾	1.1
Bruce Minsky 400 Rella Blvd. Montebello, NY 10901	Director	Common Stock	879,714 ⁽¹⁾	4.1
Officers and Directors Total		Common Stock	1,179,714	5.2

Sergey Zaprudnov 1407 Lake Shore Drive Columbus, OH 43204	Stockholder	Common Stock	1,541,265	7.24

^1.

Includes 300,000 shares of Common Stock held by an entity owned solely by Mr. Shafran’s spouse.

^2.

Includes 855,714 shares of Common Stock held by the Law Offices of Bruce W. Minsky, P.C.

ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDEDNCE

ITEM 14: PRINCIPAL ACCOUNTANT FEES AND SERVICES

(a) Audit Fees. During the years ended March 31, 2013 and 2012, fees billed by the Company’s auditors, MaloneBailey LLP for services rendered for the audit of our annual financial statements and estimated fees for the audit of our financial statements was $17,500 and $10,090, respectively.

(b) None

PART IV

ITEM 15: EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(1) EXHIBIT INDEX TO ANNUAL REPORT ON FORM 10-K


Exhibit Number	Description	Incorporated by Reference to:	Filed Herewith
31.1	Certification of Peter Shafran, Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.		X
32.1	Certification of Peter Shafran, Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.		X

VGTEL, INC. 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.


Date: June 28, 2013	By:	/s/ Peter Shafran
		Peter Shafran
		Chief Executive Officer and Chief Financial Officer

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



Date: June 28, 2013	By:	/s/ Peter Shafran
		Peter Shafran
		Chief Executive Officer and Director (Principal Executive, Financial and Accounting Officer)



Date: June 28, 2013	By:	/s/ Bruce Minsky
		Bruce Minsky
		Director

We have filed the following documents as part of the Annual Report on Form 10-K


	Schedules

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	F-1
BALANCE SHEETS	F-2
STATEMENTS OF OPERATIONS	F-3
STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)	F-4
STATEMENTS OF CASH FLOWS	F-5
NOTES TO FINANCIAL STATEMENTS	F-6

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors

VGTel, Inc.

(A Development Stage Company)

Suffern, New York

We have audited the accompanying balance sheets of VGTel, Inc. (a development stage company) (the “Company”) as of March 31, 2013 and 2012, and the related statements of operations, shareholders’ equity, and cash flows for each of the years then ended and for the period from April 1, 2011 (inception) through March 31, 2013. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform an audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of VGTel, Inc. as of March 31, 2013 and 2012 and the results of its operations and its cash flows for each of the years then ended, in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that VGTel, Inc. will continue as a going concern. As discussed in Note 2 to the financial statements, VGTel, Inc. suffered losses from operations and has a working capital deficiency, which raises substantial doubt about its ability to continue as a going concern. Management’s plans regarding those matters also are described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ MaloneBailey, LLP

www.malone-bailey.com

Houston, Texas

June 28, 2013

F-1

VGTEL, INC.

(A Development Stage Company)

Balance Sheets


ASSETS		2013		2012


CURRENT ASSETS
Cash and cash equivalents	$	30,011	$	714
Total Current Assets		30,011		714

Other assets		37,500		35,000

Total Assets	$	67,511	$	35,714



LIABILITIES AND STOCKHOLDERS’ DEFICIT

CURRENT LIABILITIES
Accounts payable	$	428,579	$	746,116
Accounts payable to related parties		52,333		102,751
Short term debt		69,000		92,595

Total Current Liabilities		549,912		941,462

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS’ DEFICIT
Preferred Stock, $.001 par value, Authorized 10,000,000 shares, none issued		-		-
Common stock, $.0001 par value, Authorized 200,000,000 shares, issued and outstanding 21,282,947 and 15,413,387 as of March 31, 2013 and 2012		2,129		1,541
Additional paid in capital		5,602,153		1,789,762
Deficit accumulated since re-entering the development stage on April 1, 2011		(5,162,320)		(1,772,688)
Retained Deficit		(924,363)		(924,363)

Total Stockholders’ Deficit		(482,401)		(905,748

Total Liabilities and Stockholders’ Deficit	$	67,511	$	35,714

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

F-2

VGTel, Inc.

(A Development Stage Company)

Statements of Operations

Years Ended March 31, 2013 and 2012


						Accumulated
		2013		2012		From Inception April 1, 2011 to March 31, 2013

REVENUES	$	42,334	$	-	$	42,334

OPERATING EXPENSES
General and administrative		62,776		70,932		133,708
Officers’ compensation & rent		212,750		942,393		1,155,143
Legal Services		2,860		240,982		243,842
Professional Services - Consulting		17,566		518,381		535,947

Total operating expenses		295,952		1,772,688		2,068,640

Loss on settlement of debt		2,916,129		-		2,916,129
Interest Expense		219,885		-		219,885
NET LOSS FROM CONTINUING OPERATIONS	$	(3,389,632)	$	(1,772,688)	$	(5,162,320)

INCOME (LOSS) PER COMMON SHARE Basic and Diluted
INCOME (LOSS) PER COMMON SHARE Basic and Diluted	$	(0.18)	$	(0.12)	$

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING		18,354,956		15,114,371

The accompanying notes are an integral part of these financial statements

F-3

VGTel, Inc.

(A Development Stage Company)

Statement of Shareholders Deficit


									Accumulated Deficit
	Common		Stock		Paid-in		(Accumulated		Subscriptions Discontinued
	Shares		Amount		Capital		Deficit)		Receivable		Operations		Totals
Balances - March 31, 2010	7,720,680	$	772	$	367,924	$	(420,083)	$	-	$		$	(51,387)

Officers’ compensation & rent charged for the year	-		-		42,000		-		-		-		42,000

Imputed Interest for Ron Kallus	-		-		1,005		-		-		-		1,005
Sale of assets to related party	-		-		43,952		-		-		-		43,952
Shares cancelled by R Kallus	(1,495,200)		(150)		150		-		-		-		-
Shares cancelled Hyman & Ethel Schwartz	(1,260,092)		(126)		126		-		-		-		-
Warrants Exercised	8,328,000		833		6,107		-		(2,981)		-		3,959
Warrant Exercise Price valuation	-		-		124,024		-		-		-		124,024
Contributed Capital - The Hyett Ltd. loan write-off	-		-		16,000		-		-		-		16,000
Shares issued for services rendered	1,399,999		140		291,526		-		-		-		291,666
Net loss	-		-		-		(504,280)		-				(504,280)

Balances - March 31, 2011	14,693,387		1,469		892,814		(924,363)		(2,981)				(33,061)

Adjustment of deficit prior to inception	-		-		-		924,363		-		(924,363)		-

Shares issued for services rendered	720,000		72		899,929		-		-		-		900,001

Subscriptions receivable reclassed to APIC	-		-		(2,981)		-		2,981		-		-

Net loss	-		-		-		(1,772,688)		-		-		(1,772,688)

Balances - March 31, 2012	15,413,387		1,541		1,789,762		(1,772,688)		-		(924,363)		(905,748)

Shares issued for services	420,000		42		139,958		-		-		-		140,000

Shares issued for settlement of account payables	3,940,714		395		3,309,805		-		-		-		3,310,200

Shares issued for the conversion of debt	1,508,846		151		150,733		-		-		-		150,884

Debt discount from beneficial conversion feature	-		-		211,895		-		-		-		211,895

Net loss	-		-		-		(3,389,632)		-		-		(3,389,632)

Balances – March 31, 2013	21,282,947	$	2,129	$	5,602,153	$	(5,162,320)	$	-	$	(924,363)	$	(482,401)

The accompanying notes are an integral part of these financial statements

F-4

VGTel, Inc.

(A Development Stage Company)

Statements of Cash Flows

Years Ended March 31, 2013 and 2012


		March 31, 2013		March 31, 2012		Accumulated from Inception April 1, 2011 to March 31, 2013

Cash flows from operating activities
Net Income (Loss)	$	(3,389,632)	$	(1,772,688)	$	(5,162,320)
Adjustments to reconcile net loss to net cash used by operating activities:
Amortization of debt discount		211,895		-		211,895
Loss on settlement of debt		2,916,129		-		2,916,129
Issuance for common stock for services rendered		140,000		900,001		1,040,001
Changes in operating assets and liabilities:
Accounts receivable		-		-		-
Accounts payable		(1,048)		744,791		743,743
Accounts payable – related party		35,153		102,751		137,904
Net cash used in operating activities		(87,503)		(25,145)		(112,648)

Cash flows from investing activities
Cash paid for purchase of other assets		(2,500)		(35,000)		(37,500)
Cash used in investing activities		(2,500)		(35,000)		(37,500)

Cash flows from financing activities
Proceeds from debt		119,300		58,000		177,300
Cash provided by financing activities		119,300		58,000		177,300

Net increase (decrease ) in cash		29,297		(2,145)		27,152

Cash and cash equivalents, beginning of period		714		2,859		2,859

Cash and cash equivalents, end of period	$	30,011	$	714	$	30,011

Supplemental disclosures
Cash paid for interest and income taxes	$	-	$	-	$	-

Noncash investing and financing activities:
Debt discount due to beneficial conversion feature of short term debt	$	211,895	$	-	$	211,895
Common stock issued for accounts payable	$	394,071	$	-	$	394,071
Common stock issued for short term debt and accrued interest	$	150,884	$	-	$	150,884
Reclassification of subscription receivable to APIC	$	-	$	2,981	$	2,981
Reclassification of AP to debt	$	-	$	34,595	$	34,595

The accompanying notes are an integral part of these financial statements

F-5

VGTel, Inc.

(A Development Stage Company)

Notes to Financial Statements

March 31, 2013

NOTE 1 – GENERAL ORGANIZATION AND BUSINESS

VGTel Inc. (the “Company”) was organized on February 5, 2002 in New York. We are considered a development stage company since ceasing our previous operations in early 2011.

On March 7, 2012, we executed an agreement with Western Capital Ventures, Inc. (WCV) to purchase its nationwide Distribution Agreement with Visual Entertainment Systems, LLC (VES), a manufacturer, for the distribution of its NetStar Internet Kiosks - arcade style sweepstake gaming systems, software and hardware units. On March 15, 2012, we also completed negotiations with VES to directly purchase, distribute and install its NetStar Internet Kiosks into designated locations. As of the close of this fiscal year, the Company had not yet received revenues from this segment of the Company’s business. As the kiosks did not meet our expectations, we decided not to pursue that line of business.

NOTE 2 – GOING CONCERN

As a result of the termination of the Exchange Agreement prior to closing, we remained a Shell Company, as defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended, and had been seeking appropriate business opportunities. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company has had recurring net losses and a working capital deficit as of March 31, 2013 and 2012. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Without realization of additional capital, it would be unlikely for the Company to continue as a going concern. The financial statements do not include any adjustments that might result from this uncertainty.

The Company’s activities to date have been supported by equity financing and shareholder loans. Management plans to seek funding from its shareholders and other qualified investors to pursue its business plan. In the alternative, the Company may be amenable to a sale, merger or other acquisition in the event such transaction is deemed by management to be in the best interests of the shareholders.

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Cash and Cash Equivalents

For the purpose of the statements of cash flows, cash equivalents include all highly liquid investments with maturity of three months or less.

Property and Equipment

Property and equipment are carried at the cost of acquisition or construction and depreciated over the estimated useful lives of the assets. Costs associated with repair and maintenance are expensed as incurred. Costs associated with improvements which extend the life, increase the capacity or improve the efficiency of our property and equipment are capitalized and depreciated over the remaining life of the related asset. Gains and losses on dispositions of equipment are reflected in operations. Depreciation is provided using the straight-line method over the estimated useful lives of 5 years.

F-6

Impairment of Long-Lived Assets

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable through the estimated undiscounted cash flows expected to result from the use and eventual disposition of the assets. Whenever any such impairment exists, an impairment loss will be recognized for the amount by which the carrying value exceeds the fair value. During 2013 and 2012, there was no impairment of long-lived assets due to the minimal value of such assets.

Stock Based Compensation

Under ASC 718, the Company measures the compensation costs of share-based compensation arrangements based on the grant-date fair value and recognize the costs in the financial statements over the respective vesting periods of the option grant.

Income Taxes

The Company provides for income taxes under ASC 740 “Accounting for Income Taxes”. ASC 740 requires the use of an asset and liability approach in accounting for income taxes.

ASC 740 requires the reduction of deferred tax assets by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. No provision for income taxes is included in the financial statements due to its immaterial amount.

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 disclosure 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 from those estimates.

Net Income (Loss) per Common Share

Net income (loss) per common share is computed based on the weighted average number of common shares outstanding and common stock equivalents, if not anti-dilutive. The Company has not issued any potentially dilutive securities.

Revenue and Cost Recognition

The Company recognizes revenue on arrangements in accordance with ASC 605. In all cases, revenue is recognized only when the price is fixed or determinable, persuasive evidence of an arrangement exists, the service is performed and collectability is reasonably assured. During the fiscal year 2013, the Company recognized revenues of $42,334. The Company temporarily took over the operations of another entity and operated its internet sweepstakes and gaming machines. The Company received excess proceeds of $42,334 over what was invested into the entity and has discontinued that customer contract as of March 31, 2013. The Company is actively pursuing other similar contracts.

Recent Accounting Pronouncements

The Company does not expect any recent account pronouncements to have a significant impact on its financial position or results of operations.

NOTE 4 – RELATED PARTY TRANSACTIONS

There is a $52,333 related party payable owed to an Officer as of March 31, 2013.

On September 11, 2012, the Company issued 855,714 shares of common stock to retire outstanding related party payables of $85,571.

F-7

NOTE 5 – NOTE PAYABLE

During the year ended March 31, 2013, the Company borrowed $119,300 of short term debt that was due on demand, carried an interest rate of 8% per annum, and is convertible into shares of common stock at $0.10 per share. The Company analyzed the conversion option for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that derivative accounting does not apply. The Company also analyzed the instruments under ASC 470-20 “Debt with Conversion and Other Options” for consideration of any beneficial conversion features. The Company determined that the short term debt had an intrinsic value of $211,895, which was recorded into interest expense and APIC as of March 31, 2013.

During the year ended March 31, 2013, short term debt holders converted $150,884 of short term debt and accrued interest into common shares.

During the years ended March 31, 2013 and 2012, the Company had a short term debt balance of $69,000 and $92,595, respectively.

NOTE 6 – INCOME TAXES

The total net operating loss carryforward as of March 31, 2013 was $1,096,183, which expires in the years 2027 - 2032. The Company has recorded a full valuation allowance for its deferred tax assets as of March 31, 2013 and 2012. Deferred taxes are calculated at a 34% rate:


	2013		2012

Deferred tax assets	$	372,702	$	331,356
Less: valuation allowance		(372,702)		(331,356)
Net deferred tax asset	$	-	$	-

NOTE 7 – COMMITMENTS AND CONTINGENCIES

The Company has signed a lease agreement for its current office space and will pay $1,250 per month through August 31, 2013, and will then pay $1,400 per month through April 30, 2014.

NOTE 8 – STOCKHOLDERS’ DEFICIT

During the twelve months ended March 31, 2013, a total of 420,000 shares valued at $140,000 were issued to individuals for services provided. The entire fair value was recorded to expense during that same period.

During the twelve months ended March 31, 2013, 3,940,714 shares were issued to settle $394,071 of accounts payable. These shares were fair valued at $3,310,200, resulting in a $2,916,129 loss on settlement of debt.

During the twelve months ended March 31, 2013, 1,508,846 shares were issued to settle $150,884 of short term debt and accrued interest.

NOTE 9 – SUBSEQUENT EVENTS

The Company entered into two convertible promissory note agreements totaling $65,000. These notes are due on December 26, 2013 and March 3, 2014. The notes incur interest at a rate of 8% per annum, and are convertible 180 days following the issuance date of the note at 58% of the average of the lowest three trading prices for the Company’s common stock during the ten trading day periods prior to the conversion date.

F-8

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