DTRO Deltron Inc (CE)

U.S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)

For Fiscal Year Ended: September 30, 2011

OR

For the transition period _____________________________________--

Commission file number:   333-130197

Registrant's telephone number:   (714) 891-1795

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

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

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

Yes o   No  x

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  x   No  o

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.   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 the “large accelerated filer,” “accelerate filer”, “non-accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act.   (Check one):

Large Accelerated Filer o

Accelerated Filer o

Non-Accelerated Filer o

Smaller reporting company x

(Do not check if a smaller reporting company)

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

Yes  o   No  x

As of March31, 2011, there were 758,478,980 shares of the registrant's common stock, par value $0.001, outstanding.  Of these, 583,478,980 shares were held by non-affiliates of the registrant.  The market value of securities held by non-affiliates was $5,251,310.82 based on the closing price of the Company’s common stock as of March 31, 2011.

As of December 16, 2011, there were 33,641,087 common shares, par value $0.001, issued and outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

If the following documents are incorporated by reference, briefly describe them and identify the part of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is incorporated:  (1) any annual report to security holders; (2) any proxy or information statement; and (3) any prospectus filed pursuant to Rule 424(b) or (c) of the Securities Act of 1933, as amended (“Securities Act”).
Not Applicable.  

The Company is filing this Form 10-K without the consent of the predecessor auditor who audited the consolidated financial statements as of September 30, 2011 and for the nine months then ended. Upon receiving the predecessor’s consent, the Company will amend its Form 10-K.

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TABLE OF CONTENTS

Item Number and Caption

Page

PART I

4

CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING INFORMATION

4

ITEM 1.

BUSINESS

5

ITEM 1A.

RISK FACTORS

9

ITEM 1B.

UNRESOLVED STAFF COMMENTS

9

ITEM 2.

PROPERTIES

9

ITEM 3.

LEGAL PROCEEDINGS

9

ITEM 4.

[ REMOVED AND RESERVED]

9

PART II

10

ITEM 5.

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

10

ITEM 6.

SELECTED FINANCIAL DATA

11

ITEM 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

11

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA

11

ITEM 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE

21

ITEM 9A.

CONTROLS AND PROCEDURES

22

ITEM 9B.

OTHER INFORMATION

23

PART III

19

ITEM 10.

DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE
GOVERNANCE

24

ITEM 11.

EXECUTIVE COMPENSATION

25

ITEM 12.

SECURITY O WNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

27

ITEM 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE     28

ITEM 14.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

32

PART IV

34

ITEM 15.

EXHIBITS, FINANCIAL STATE MENT SCHEDULES

34

3

PART I

CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING INFORMATION

Except for historical information, this report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.  Such forward-looking statements involve risks and uncertainties, including, among other things, statements regarding our business strategy, future revenues and anticipated costs and expenses.  Such forward-looking statements include, among others, those statements including the words “expects,” “anticipates,” “intends,” “believes” and similar language.  Our actual results may differ significantly from those projected in the forward-looking statements.  Factors that might cause or contribute to such differences include, but are not limited to, those discussed in the sections “Business”, “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”  You should carefully review the risks described in this Annual Report and in other documents we file from time to time with the Securities and Exchange Commission.  You are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date of this report.  We undertake no obligation to publicly release any revisions to the forward-looking statements or reflect events or circumstances after the date of this document.

Although we believe that the expectations reflected in these forward-looking statements are based on reasonable assumptions, there are a number of risks and uncertainties that could cause actual results to differ materially from such forward-looking statements.

All references in this Form 10-K to the “Company,” “Deltron,” “we,” “us” or “our” are to Deltron, Inc.

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ITEM 1.  BUSINESS

Business Development

Deltron, Inc. (“Deltron” or “the Company”) was incorporated in the State of Nevada on September 14, 2005.  Deltron is a public company currently listed on the over-the-counter (OTC) exchange under the symbol DTRO.  It was formed as a land development company that intended to construct rental housing units in Costa Rica.  It decided prior to the end of the fiscal year ended September 30, 2009, to redirect the business focus towards identifying and pursuing options regarding the development of a new business plan and direction.

On May 26, 2010, the Company entered into an Asset Purchase Agreement with Blu Vu Deep Oil & Gas Exploration (“Blu Vu”) under which Deltron has acquired all of the assets of Blu Vu, including, but not limited to, all of the stock of Blu Vu’s subsidiary, Elasco, Inc. (“Elasco”), in exchange for 123,978,980 shares of restricted common stock of Deltron.

Blu Vu, originally formed in June of 2008, is a technology company focused on the development of deep-sea exploration breathing technology for the oil and gas industries; as well as for use in fire and rescue, mining, hazardous materials industries, and recreational diving.  Under the technical guidance of internationally renowned deep-sea diver, Dr. Jeffrey Bozanic, the Company expects to manufacture and mass market proprietary breathing equipment developed specifically for the oil & gas, mining, military, and safety industries, as well as the emerging market of recreational divers.  Under the terms of the Agreement, Deltron acquired all of the assets associated with the operation of Blu Vu’s business.

On March 24, 2009, Blu Vu acquired Elasco, an engineered plastics and polyurethane molding company with a production facility in Southern California.  Elasco is a leader in polyurethane and plastics technologies.  Elasco has been in business since 1979 producing a variety of recreational and industrial products used in dynamic applications made mainly from polyurethane.  The Company also has injection molding capability of reinforced and non-reinforced plastics, and produces many parts for its internal use as component parts in various assemblies.  In what is currently a fragmented market, Elasco and Deltron expect to fill the need for improved, safer and more efficient breathing technology.  This acquisition of Elasco is intended to allow Deltron to manufacture its proprietary rebreather technologies, as well as provide new synergies among future acquired companies that may develop, allowing for greater cost effectiveness, thus further enhancing each individual company’s strengths.

The molded polyurethane products segment that Elasco operates in is an industry that is extremely fragmented.  Most companies operate in niche markets providing very specific products to their customer base.  The majority of these companies use a lesser amount of automation than Elasco does.  They also have significantly higher raw material costs because they typically purchase premixed packages through sources that significantly mark-up the price of the base materials.  Elasco has a “vertically integrated” production facility that enables it to purchase raw materials at a significant discount from the typical price of premixed products.  

PRODUCTS

Rebreather Systems

“Normal” scuba is an open circuit system.  Combining a high-pressure cylinder and a demand regulator, a diver inhales gas at ambient pressure, uses a little of the oxygen in the gas, and then exhales.  When the diver exhales the gas, it bubbles to the surface, carrying as much as 98% of the original oxygen it contained.  The “open circuit” comes from the fact that the exhaled gas is released on every breath.

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The advantage that a rebreather has over “normal” scuba system is that it recirculates the gas a diver is breathing, allowing the diver to breath from the same gas over and over again, after removing the carbon dioxide generated by human metabolism.  Rebreathers provide gas to the diver in an optimal mix for the depth at which they are diving.  The system adds oxygen and other gases to make up what is consumed.  Because the gas is reused, instead of being “thrown away” with every breath, a diver can remain underwater far longer on much less gas.  In fact, for some dives, rebreathers can be as much as fifty times more efficient on gas consumption than standard scuba tanks. This minimizes decompression obligations, or in some cases eliminates it for shallower working dives.  Less decompression time means more working time, and greater cost efficiency for the project.

Benefits of Blu Vu Rebreather technology

•Maximizes No-Decompression Time

•Extended diving depth capability

•Stealth - No bubbles

•Negligible limits to Air Travel after Diving

•Ship bottom inspections

•Size & weight of equipment package reduced

•Helium cost and consumption minimized

Products - Polyurethane

Elasco makes products for the recreational roller skate and skateboarding markets.  They are of the high performance type used by dedicated enthusiasts in those sports.  These products are sold to O.E.M. customers, who market and distribute them through channels specific to their individual retail outlets, as well as by direct marketing through their internet sales sites.  Most are sold through distribution channels of specialty stores and roller rinks. They are differentiated from the typical product found in larger retail stores in that they are not considered a toy category, but rather a sporting good.

Elasco also produces a variety of industrial products that are used on assemblies and machinery where a long life cycle is needed.  Some typical products are exercise equipment rollers, bowling pin setter pads and liners, and fire hydrant seals.  Elasco’s polyurethane polymers excel in the gap between rubber and plastics, but can mimic many rubbers and plastics with specific formulations that optimize those characteristics.  A recent formula developed exclusively by Elasco uses a natural soy-based resin as an ingredient to make an elastomer that performs like other hydrocarbon derived polyurethanes.  This reduces related carbon emissions from the manufacturing process for that resin by 36%.  This product is marketed as a green alternative to oil based products, and is finding favor in the youth market that many of Elasco’s products service.  The versatility of its compounding provides Elasco with a wide range of performance characteristics outperforming other materials with:

•Excellent abrasion resistance

•High tensile and tear strengths

•Flexibility over a wide range of temperatures

•Increased elasticity over the entire hardness range

•High impact resistance and vibration dampening

•Excellent resistance to oils, greases, and many solvents

•Good weatherability

•Resistance to fungal and microbial attack

•Ability to bond to metals, other rubbers, plastics, and polymer compounds

•High load bearing capabilities

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MARKETS

Rebreather Systems

Deltron has a strategy of growth through targeted industry marketing of proprietary Rebreather technology solutions that will increase productivity in commercial diving applications as well as improve the diving experience for the recreational diver.

Rebreather products of the type Deltron anticipates producing provide many benefits over conventional open circuit breathing equipment.  Those benefits are even more significant when extended time and greater depth are desired or required.

Mining

Rebreathers were originally developed in the 1700s as safety equipment for the mining industry.  Mine collapses, underground fires, and toxic gas accumulations experienced by miners all demanded a supply of safe breathing gas.  However, it is impossible for a miner to carry an adequate supply in open circuit cylinders, due to the weight and bulk of the equipment.  Rebreathers should provide superior performance, as the efficiency of this equipment far surpasses open circuit options.  However, we have no contracts in place at this time.

Fire & Rescue

Fire fighters generally use rebreathers in fires where more than thirty minutes of air is needed.  Existing air tanks last about one half hour, while rebreathers can last several hours without a substantial weight penalty.  High rises and large building fires require gas supplies with extended durations for fire fighters.  While Deltron will work to secure potential business in this area, we have no contracts in place at this time.

Hazardous Materials

Rebreathers also play a part in industrial safety applications, where people work in hazardous environments.  Industrial settings, such as sewage treatment plants and underground work locations, often accumulate toxic gases.  When these environments need to be accessed, either the entire volume must be ventilated, an expensive and time-consuming job, or workers must wear self-contained breathing apparatus.  While Deltron will work to secure potential business in this area, we have no contracts in place at this time.

Military & Special Ops

For decades the military has used rebreathers for a wide range of activities. Typical operational uses include covert access, defusing explosive munitions, and specialized undercover operations.  A historical example of when mixed gas CCRs were used for espionage purposes was when divers tapped telephone cables used by the Soviet Union during the cold war.  Locked out of submarines at depths of up to 400 fsw / 120 msw, divers using rebreathers placed instrument packages on these cables, allowing United States intelligence units to gather information gleaned from supposedly secure communication sources.  Deltron equipment will be capable of this type of work, with the same advantages of increased depth capability and reduced package size.

The post-9/11 environment has seen the use of rebreathers extend from traditional military users to other paramilitary groups focused on anti-terrorism and drug interdiction activities, such as county SWAT teams, Coast Guard, and other harbor monitoring groups.  It is likely in the years ahead that both the quantity and scope of activities requiring rebreather use by armed forces will increase.

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Mixed gas CCRs are often used by military EOD teams to defuse or explode mines.  Rebreathers can be manufactured to have low noise and magnetic signatures, and also allow divers to spend hours at depths up to 60 fsw / 18 msw with no decompression penalties, ideal for this type of work.  The rebreathers under development by Deltron provide these same capabilities, in a much smaller, lighter, and more reliable package.

Deltron will attempt to capitalize on the continuing drive to upgrade and modernize the equipment being used by today’s military and public safety dive teams.  However, we have no contracts in place at this time.

Recreational Diving

Rebreather technology represents one of the fastest growing segments of the civilian diving market.  About two dozen private makers of rebreather systems and components constitute what is a fragmented market.  Importantly, no single manufacturer is currently capable of mass commercialization.  Deltron is working to fill this market void, however, we have no contracts in place at this time.

POLYURETHANE MARKETS

High load-bearing capacity (two to four times that of conventional rubber), long wear (three to six times that of conventional rubber, cut resistance, low rolling resistance and non-marking of concrete floors are principal reasons why urethanes are preferred.

Sanitary waste facilities create harsh environments, but urethanes outperform other elastomers in these guide wheels.  The mining separator screens are another example in which superior abrasion, impact and cut resistance combine with resilience to provide long service life.

The high compression forces required to deflect urethanes are used in metal-forming operations.  Forming costs are reduced because the need for matched punches and dies is eliminated.  Urethanes do not scratch metal.  Snowplow blades prevent road damage while resisting abrasion and providing impact resistance at very low temperatures.  The castable nature of urethanes permits precision cast locators and fixtures to be used in automated assembly operations.  While holding dimensional tolerances, urethanes resist wear and impact.  Resistance to wear and flex fatigue under extreme weather conditions makes urethane tracks reliable in snowmobiles.

Today’s top-of-the-line bowling balls are cast urethane.  They offer a more consistent level of performance, long life, and less deflection when hitting pins, which translates into higher scores.  Good bowlers find the balls can be made to “hook” more for higher scores.

Silk-screening applications require durability for the straight edges, flexibility, and solvent resistance without damaging the screen itself.  The castable nature of urethanes – which do not require high pressure like typical rubber and plastic – permits quick, low-cost molds and fast response time in many cases.

Urethanes are currently used in the manufacture of everything from skate and roller-coaster wheels to conveyor drive rollers.  Weatherability, shock absorption and abrasion resistance are the principal reasons, but high load-bearing properties, resilience, non-marking characteristics, and strong bonding to metal hubs are also important.

EMPLOYEES

As of the date of this Report on Form 10-K, the Company had 48 full time employees and one part-time employee.

8

BANKRUPTCY OR SIMILAR PROCEEDINGS

The Company has not been involved in any bankruptcy, receivership or similar proceedings.

ITEM 1A.

RISK FACTORS

Because we are a “smaller reporting company” as that term is defined by the SEC, we are not required to present risk factors at this time.

ITEM 1B.

UNRESOLVED STAFF COMMENTS

None.

ITEM 2.

PROPERTIES

Deltron’s principal place of business and corporate offices is located at 11377 Markon Drive, Garden Grove, CA 92841.   The rental fee is $5,533 per month for this 7,000 square foot industrial building.

ITEM 3.

LEGAL PROCEEDINGS

Legal Proceedings

No legal or governmental proceedings are presently pending or, to our knowledge, threatened, to which we are a party.

ITEM 4.

(REMOVED AND RESERVED)

9

PART II

ITEM 5.

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

Market Information

“Bid” and “ask” prices for our common stock have been quoted on the Over-The-Counter Bulletin Board (the “OTCBB”) under the symbol “DTRO.OB” since December 20, 2006. However, our stock did not trade until January 21, 2010.  The following chart shows the high and low trading price from that date until the end of the most recent fiscal year by quarter.  The prices have been adjusted for the one for one-thousand (1:1,000) reverse split in October 2011.

As of October 5, 2011, we had 169 shareholders of record of our common stock.

Dividends

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

1.

we would not be able to pay our debts as they become due in the usual course of business; or

2

 our total assets would be less than the sum of our total liabilities plus the amount that would be needed to satisfy the rights of shareholders who have preferential rights superior to those receiving the distribution.

We have not declared any dividends, and we do not plan to declare any dividend in the foreseeable future.

Recent Sales of Unregistered Securities

None.

10

Securities Authorized For Issuance Under Equity Compensation Plans

Under the Company’s 2010 Stock Incentive Plan for Employees, Contractors, Consultants, Advisors, Board Advisors, Board Members and Others (the “Plan”), the Company is authorized to issue up to 200,000,000 shares of common stock or options to purchase shares of common stock.  As of the date of this filing, the Company has authorized issuance of 148,000,000 shares under the Plan.

ITEM 6.

SELECTED FINANCIAL DATA

Not applicable.

ITEM 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

As previously described, we completed an Asset Purchase under which Deltron acquired the assets of Blu Vu Deep Oil & Gas Exploration, Inc.  The transaction was treated as a reverse recapitalization, with BluVu’s wholly owned subsidiary, Elasco, Inc. (“Elasco”) becoming the accounting acquirer.  Therefore, Deltron assumed the fiscal year end of Elasco of December 31.  On August 13, 2010, following the completion of the Asset Purchase Agreement, the Company adopted the fiscal year end of the former shell Company of September 30 for financial reporting purposes.

The following discussion highlights the principal factors that have affected our financial condition and results of operations as well as our liquidity and capital resources for the periods described.  The discussion reflects the financial condition and results of operations as of and for the period ended September 30, 2011 and 2010.  This discussion contains forward-looking statements.  Please see “Forward-Looking Statements” for a discussion of the uncertainties, risks and assumptions associated with these forward-looking statements.

We are a manufacturing company with two distinct business segments polyurethane and rebreather. Our primary business is Elasco which is focused on manufacturing technology for plastic and

11

polyurethane products.Our secondary business segment is focused on the development of deep-sea exploration breathing technology marketed as Blu Vu.

Polyurethane Products

Our polyurethane products are manufactured and sold by our wholly owned subsidiary, Elasco, which makes products for the recreational roller skate and skateboarding markets.  They are of the high performance type used by dedicated enthusiasts in those sports.  These products are sold to O.E.M. customers, who market and distribute them through channels specific to their individual retail outlets, as well as by direct marketing through their internet sales sites.  Most are sold through distribution channels of specialty stores and roller rinks. They are differentiated from the typical product found in larger retail stores in that they are not considered a toy category, but rather a sporting good.

Elasco also produces a variety of industrial products that are used on assemblies and machinery where a long life cycle is needed.  Some typical products are exercise equipment rollers, bowling pin setter pads and liners, and fire hydrant seals.  Elasco’s polyurethane polymers excel in the gap between rubber and plastics, but can mimic many rubbers and plastics with specific formulations that optimize those characteristics.  A recent formula developed exclusively by Elasco uses a natural soy-based resin as an ingredient to make an elastomer that performs like other hydrocarbon derived polyurethanes.  This reduces related carbon emissions from the manufacturing process for that resin by 36%.  This product is marketed as a green alternative to oil based products, and is finding favor in the youth market that many of Elasco’s products service.  

Rebreather System

“Normal” scuba is an open circuit system.  Combining a high-pressure cylinder and a demand regulator, a diver inhales gas at ambient pressure, uses a little of the oxygen in the gas, and then exhales.  When the diver exhales the gas, it bubbles to the surface, carrying as much as 98% of the original oxygen it contained.  The “open circuit” comes from the fact that the exhaled gas is released on every breath.

The advantage that a rebreather has over “normal” scuba system is that it recirculates the gas a diver is breathing, allowing the diver to breath from the same gas over and over again, after removing the carbon dioxide generated by human metabolism.  Rebreathers provide gas to the diver in an optimal mix for the depth at which they are diving.  The system adds oxygen and other gases to make up what is consumed.  Because the gas is reused, instead of being “thrown away” with every breath, a diver can remain underwater far longer on much less gas.  In fact, for some dives, rebreathers can be as much as fifty times more efficient on gas consumption than standard scuba tanks. This minimizes decompression obligations, or in some cases eliminates it for shallower working dives.  Less decompression time means more working time, and greater cost efficiency for the project.

In February 2011, the Company purchased technology relating to an invention for submersible boat rebreather systems. The Company intends to manufacture and sell these systems for use in non-pressurized sport and military subs.  Typical uses would be in areas where extended times underwater would be beneficial like sport divers, ports and oil and gas equipment inspections, government and military security and university biologist research.

Business operations

As of September 30, 2011, we had an accumulated deficit of approximately $11.0 million, and as of September 30, 2010, our accumulated deficit was approximately $3.1 million. We incurred operating losses of $212,737 for the year ended September 30, 2011 and $189,532 for the nine months ended September 30, 2010.  We incurred net losses of $7,894,159 and $360,590 for those respective periods. We expect our net losses to continue for at least the next couple of years. We anticipate that a

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substantial portion of our capital resources and efforts will be focused on the scale up due to expansion via acquisition, product development and other general corporate purposes, including the payment of legal fees due to our acquisitions.

As of September 30, 2011, our current liabilities of approximately $11.8 million exceeded our current assets of approximately $1,302,500 by $10,497,500 and our net losses will continue for the foreseeable future.  As part of the $11.8 million of current liabilities we have $3,165,741, of convertible notes to unrelated parties. We are currently planning to issue additional stocks and convertible notes to support our expansion. As a result, the additional equity funding may result in significant dilution to existing stockholders. If adequate funds are not available, we may be required to delay or curtail significantly our development and commercialization activities. This would have a material adverse effect on our business, financial condition and/or results of operations and could ultimately cause us to have to cease operations.

Financial Operations Overview

Sales

Our sales are derived from the sale of plastic and polyurethane products. Customers are generally billed at shipping of products. We currently have not generated any revenues from the sale of rebreather system for the year ended September 30, 2011 and the nine months ended September 30, 2010.

Cost of Sales

Cost of sales for plastic and polyurethane products represents the cost of direct labor, raw material, supplies and other miscellaneous support expenses.  No cost of sales for rebreather system is recorded because we have not generated any revenues from the sale of rebreather system.

Selling, General and Administrative

Our selling expenses consist primarily of personnel, media, support and travel costs to inform user organizations and consumers of our products. Our general and administrative expenses consist primarily of personnel, occupancy, legal, consulting and administrative and support costs for our operations.

Critical Accounting Policies and Significant Judgments and Estimates

This discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these consolidated financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as revenues and expenses during the reporting periods. We evaluate our estimates and judgments on an ongoing basis. We base our estimates on historical experience and on various other factors we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results could therefore differ from those estimates under different assumptions or conditions. Our significant accounting policies are described in Note 1 to our unaudited condensed consolidated financial statements included in Item 1 of this report. We believe the following critical accounting policies reflect our more significant estimates and assumptions used in the preparation of our condensed consolidated financial statements.

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Principles of Consolidations

The accompanying consolidated financial statements are presented in accordance with U.S. generally accepted accounting principles. The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary Elasco. All significant intercompany transactions have been eliminated in consolidation.

Use of Estimates

The Company’s consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of the Company’s consolidated financial statements requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and the related disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, the Company evaluates its estimates, including those related to revenue recognition, doubtful accounts, intangible assets, and income taxes, valuation of equity and debt instruments, contingencies and litigation. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Accordingly, actual results may differ significantly from these estimates under different assumptions or conditions.

Cash and Cash Equivalents

For purposes of reporting cash flows, the Company considers all short term investments with a maturity of three months or less to be cash equivalents. The Company deposits its cash with major financial institutions and may at times exceed the federally insured limit of $250,000.  At September 30, 2011 cash did not exceed the federally insured limit.  The Company believes that the risk of loss is minimal. To date, the Company has not experienced any losses related to cash deposits with financial institutions.

Accounts Receivable

The Company estimates the collectability of customer receivables on an ongoing basis by reviewing past-due invoices and assessing the current creditworthiness of each customer.  Allowances are provided for specific receivables deemed to be at risk for collection.

Inventory

Inventory consists of raw material, work in progress, and finished goods.  It is stated at the lower of cost or market on a first in, first out (FIFO) basis. The Company also evaluates and reserves allowance of obsolescence of its inventories.

Property and Equipment and Depreciation Policy

Property and equipment are recorded at cost, less accumulated depreciation.  Cost of repairs and maintenance are expensed as they are incurred. Major repairs that extend the useful life of equipment are capitalized and depreciated over the remaining estimated useful life. When property and equipment are sold or otherwise disposed, the related cost and accumulated depreciation are removed from the respective accounts and the gains or losses realized on the disposition are reflected in operations. The Company uses the straight-line method in computing depreciation for financial reporting purposes.

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Investments

The Company routinely classify certain equity securities as available for sale and measure them at market value (fair value).   Changes in unrealized gains or losses are recorded in other comprehensive income as a component of shareholders' equity.

Intangible asset

Costs paid by the Company related to the establishment, transfer and purchase of patented and unpatented technology and other intangibles are capitalized and amortized, depending on the estimated useful life of the technology. The useful life of the intangible asset is ten years. Amortization is on the straight-line method.

Impairment of Long-Lived Assets

The Company evaluates the recoverability of long-lived assets with finite lives.  The Company assesses potential impairments to its long-lived assets when there is evidence that events or changes in circumstances indicate that the carrying amount of an asset may not be recovered. An impairment loss is recognized when the carrying amount of the long-lived asset is not recoverable and exceeds its fair value. The carrying amount of a long-lived asset is deemed not recoverable if it exceeds the sum of the undiscounted or discounted cash flows expected to result from the use and eventual disposition of the asset. Any required impairment loss is measured as the amount by which the carrying amount of a long-lived asset exceeds its fair value and is recorded as a reduction in the carrying value of the related asset and a charge to operating results. Based upon the most recent assessment as of September 30, 2011, management has determined there was an impairment and has taken a charge of $266,250 to write down long-lived asset to its fair value.

Income Taxes

The Company recognizes the tax effects of transactions in the year in which such transactions enter into the determination of net income, regardless of when reported for tax purposes.  Deferred taxes are provided in the financial statements under ASC 740-20 to give effect to the resulting temporary differences which may arise from differences in the bases of fixed assets, depreciation methods, allowances, and start-up costs based on the income taxes expected to be payable in future years.

The Company follows the provisions of uncertain tax positions as addressed in ASC 740-10-65-1.  The Company recognized no increase in the liability for unrecognized tax benefits.  The Company has no tax position as of September 30, 2011 for which the ultimate deductibility is highly certain but for which there is uncertainty about such timing of such deductibility.  The Company recognizes interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses.  No such interest or penalties were recognized during the periods presented.  The Company had no accruals for interest and penalties at September 30, 2011 and September 30, 2010.  The Company’s utilization of any net operating loss carry forward may be unlikely as a result of its continued losses.

Fair Value of Financial Instruments

The accounting standards regarding fair value of financial instruments and related fair value measurements define financial instruments and require disclosure of the fair value of financial instruments held by the Company. The Company considers the carrying amount of cash, prepaid expenses, accounts payable and accrued liabilities, to approximate their fair values because of the short period of time between the origination of such instruments and their expected realization.

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The Company has also adopted ASC 820-10 (formerly SFAS 157, “Fair Value Measurements”) which  defines fair value, establishes a three-level valuation hierarchy for disclosures of fair value measurement and enhances disclosure requirements for fair value measures. The three levels are defined as follow:

During the nine months ended September 30, 2010, the Company issued convertible notes totaling $175,500. As of September 30, 2010, the carrying value of these convertible notes was $96,167. The Company used level 2 inputs for its valuation methodology and the fair value was determined to be approximately $175,000 using cash flows discounted at relevant market interest rates in effect at year end there is no observable market price. In September 2011, we received shares in a publicly traded company which we classified as available for sale and measured them at market value (fair value).  Changes in unrealized gains or losses are recorded in other comprehensive income as a component of shareholder’s equity.  The Company used level 1 inputs for its valuation methodology and the fair value was determined to be approximately $138,000.

Revenue Recognition

The Company recognizes revenues through its consolidated fully owned subsidiary. Revenues are recognized from product sales upon shipping, at which time title passes to the customer provided that there are no uncertainties regarding customer acceptance, persuasive evidence of an arrangement exists, the sales price is fixed and determinable and collectability is deemed probable.

Advertising Costs

Advertising costs are expensed when incurred.

Share-Based Compensation

The Company has adopted ASC 718-20 (formerly SFAS No. 123R, Share-Based Payment -revised 2004) (“ASC718-20”) and related interpretations which establish the accounting for equity instruments exchanged for employee services. Under ASC 718-20, share-based compensation cost is measured at the grant date based on the calculated fair value of the award. The expense is recognized over the employees’ requisite service period, generally the vesting period of the award.

Segment Information

Based on the criteria established by ASC Topic 280 “Segment report” (formerly SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information”), the Company uses the management approach for determining which, if any, of its products and services, locations, customers or management structures constitute a reportable business segment. The management approach designates the internal organization that is used by management for making operating decisions and assessing performance as the source of any reportable segments. As of September 30, 2011, the Company mainly operated in two principal segments – development of the rebreather system and sales of polyurethane elastomer products. The rebreather system is still under development and has not generated any revenue.

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Significant Recent Accounting Pronouncements

In December 2010, the FASB issued ASU No. 2010-13, Compensation—Stock Compensation (Topic 718), Effect of Denominating the Exercise Price of a Share-Based Payment Award in the Currency of the Market in Which the Underlying Equity Security Trades. This ASU provides amendments to Topic 718 to clarify that an employee share-based payment award with an exercise price denominated in the currency of a market in which a substantial portion of the entity’s equity securities trades should not be considered to contain a condition that is not a market, performance, or service condition. Therefore, an entity would not classify such an award as a liability if it otherwise qualifies as equity. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2010. The Company is evaluating the impact of the adoption of this ASU.

In December 2010, the FASB issued ASU No. 2010-28, Intangibles – Goodwill and Other (Topic 350), When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts. The ASU modifies Step 1 of the goodwill impairment test for reporting units with zero or negative carrying amounts. As a result, current GAAP will be improved by eliminating an entity’s ability to assert that a reporting unit is not required to perform Step 2 because the carrying amount of the reporting unit is zero or negative despite the existence of qualitative factors that indicate the goodwill is more likely than not impaired. As a result, goodwill impairments may be reported sooner than under current practice. This ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2010. The Company is evaluating the impact of the adoption of this ASU.

In April 2011, the FASB issued ASU No. 2011-02, Receivables (Topic 310), A Creditor’s Determination of Whether a Restructuring Is a Trouble Debt Restructuring. Under the amendments of this ASU, in evaluating whether a restructuring constitutes a troubled debt restructuring, a creditor must separately conclude that both of the following exist: 1) the restructuring constitutes a concession; 2) the debtor is experiencing financial difficulties. The amendments also clarify the guidance on a creditor’s evaluation of whether it has granted a concession and on a creditor’s evaluation of whether a debtor is experiencing financial difficulties. This ASU is effective for interim and annual periods beginning on or after June 15, 2011. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.

In May 2011, the FASB issued ASU No. 2011-04, Fair Value Measurement (Topic 820), Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. Under the amendments of this ASU will result in common fair value measurement and disclosure requirements in U.S. GAAP and IFRSs. Consequently, the amendments change the wording used to describe many of the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements. This ASU is effective during interim and annual periods beginning after December 15, 2011. The Company is evaluating the impact of the adoption of this ASU.

In June 2011, the FASB issued ASU No. 2011-05, Comprehensive Income (Topic 220), Presentation of Comprehensive Income. Under the amendments of this ASU, an entity has the option to present the  total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both choices, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. In a single continuous statement, the entity is required to present the components of net income and total net income, the components of other comprehensive income and a total for other comprehensive income, along with the total of comprehensive income in that statement. In the two-statement approach, an entity is required to present components of net income and total net income in the statement of net income. The statement of other comprehensive income should immediately follow the statement of net income and include the components of other comprehensive income and a total for other comprehensive income, along with a

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total for comprehensive income. This ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. The Company is evaluating the impact of the adoption of this ASU.

In September 2011, the FASB issued ASU No. 2011-08, Intangible – Goodwill and Other (Topic 350), Testing Goodwill for Impairment.  Under the amendments of this ASU, an entity has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events or circumstances, an entity determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test is unnecessary. However, if an entity concludes otherwise, then it is required to perform the first step of the two-step impairment test by calculating the fair value of the reporting unit and comparing the fair value with the carrying amount of the reporting unit, as described in paragraph 350-20-35-4. If the carrying amount of a reporting unit exceeds its fair value, then the entity is required to perform the second step of the goodwill impairment test to measure the amount of the impairment loss, if any, as described in paragraph 350-20-35-9. Under the amendments in this Update, an entity has the option to bypass the qualitative assessment for any reporting unit in any period and proceed directly to performing the first step of the two-step goodwill impairment test. An entity may resume performing the qualitative assessment in any subsequent period. This ASU is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. The Company is evaluating the impact of the adoption of this ASU.

Results of Operations for the Year Ended September 30, 2011 and nine months ended September 30, 2010

As earlier described, we operate in two business segments: Polyurethane products and Rebreather system. Our Elasco business focuses on the delivery of plastic and polyurethane product to our customer. Its principal business is manufacturing and selling of open cast molded polyurethane elastomer products such as skateboard, roller skate, and industrial wheels. Our Rebreather system, which is marketed as Blu Vu, is engaged in the potential manufacture and mass-market of proprietary breathing equipment developed specifically for the oil and gas, mining and safety industries, and military and recreational divers.

The following table presents consolidated statement of operations data for each of the periods indicated as:

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Sales

With respect to our polyurethane business, our sales increased by $957,907 for the year ended September 30, 2011, compared to the nine months ended September 30, 2010, due to the period being for a complete year as opposed to nine months.

In respect to our rebreather product, we have not produced sales as of September 30, 2011.

Cost of Sales

Cost of sales consists of payroll, raw material, supplies and other miscellaneous costs for the Polyurethane products. For the year ended September 30, 2011, costs of sales of $2,768,256 consist primarily of labor cost of $926,972, raw material cost of $1,505,208, utilities of $133,155 and other costs of $202,921.   For the nine-month period ended September 30, 2010, costs of sales of $2,269,102 consist primarily of labor cost of $845,120, raw material cost of $1,179,946 and other costs of $244,036.  We expect costs of sales will increase as an absolute number as more plastic and polyurethane products are produced. However, we expect the cost of sales to decrease as a percentage of revenues as we improve our operating efficiency and increase the automation of certain processes.

Selling, General and Administration

Selling, general and administrative expenses associated with our polyurethane business consist primarily of payroll costs, rental fee, professional fee, insurance, and other expense.  For the year ended September 30, 2011, selling, general and administrative expenses included the following: payroll and benefits $128,990, outside services $9,972, professional fees $16,263, rent expense $66,396, insurance expenses $32,043, and other expenses $52,876.   For the nine months ended September 30, 2010 expenses were as follows: payroll and benefits $108,294, rent expense $49,797, consulting $32,127, professional fee $18,435, insurance expenses $20,224 and other expenses $45,281.

Comparing the year ended September 30, 2011, with the nine months ended September 30, 2010, the increase in selling, general and administrative expenses of $481,958 were primarily due to an increase in professional fees of $214,188 and an increase of amortization expense of $183,750. Other expenses remained consistent for the respective periods ended September 30, 2011 and 2010. General and administrative expenses associated with our rebreather system consisted primary of consulting and professional fees.

O ther expense

For the year ended September 30, 2011 we incurred other expenses of $7,678,178 which consisted of: interest expense of $255,467, non-cash derivative expense of $7,159,130 and an impairment charge to intangible assets of $266,250.  For the nine months ended September 30, 2010, we incurred other expenses of $169,458, which consisted primarily of $96,167 amortization of note discount related to the beneficial conversion feature embedded in the $175,500 convertible notes, and total interest of $53,397 paid and accrued on the $125,000 line of credit, $1,095,110 long term promissory notes, and $175,500 convertible notes due to certain shareholders and officer.

Net Loss

The increase in net loss of $7,894,159 for the year ended September 30, 2011, compared to the nine months ended September 30, 2010, was a net result of: an increase in our professional fees, an increase in gross profit due to efficiencies relating to increased sales, an increase in interest expense due to the addition of the $3,150,000 note recorded in 2011 and an increase of derivative expense of $7,159,130 and an impairment charge on the intangible asset of $266,250 in 2011.

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Liquidity and Capital Resources 

Since our inception, we have incurred significant losses. As of September 30, 2011, we had an accumulated deficit of approximately $11.0 million, and as of September 30, 2010, our accumulated deficit was approximately $3.1 million.  We have not yet achieved profitability and anticipate that we will continue to incur net losses for the foreseeable future. We expect that our sales and general and administrative expenses will continue to grow and, as a result, we will need to generate significant product revenues to achieve profitability. We may never achieve profitability.

Due to the continued losses incurred from our operations, as of September 30, 2011, we had approximately $4,496 in cash and cash equivalents and a working capital deficit of $10,497,500 compared to $1,852 in cash and cash equivalents and a working capital deficit of $253,061 at September 30, 2010.

Operating Capital and Capital Expenditure Requirements

Our continued operating losses and limited capital raise substantial doubt about our ability to continue as a going concern, and we need to raise substantial additional funds in the next 12 months in order to continue to conduct our business. Until we can generate a sufficient amount of revenues to finance our cash requirements, which we may never do, we expect to finance future cash needs primarily through public or private equity offerings, debt financings, borrowings or strategic collaborations.

We need additional funds to continue our operations and will need substantial additional funds before we can generate revenue from our Blu Vu rebreather system. We are currently exploring additional sources of capital; however, we do not know whether additional funding will be available on acceptable terms, or at all, especially given the economic conditions that currently prevail. In addition, any additional equity funding may result in significant dilution to existing stockholders, and, if we incur additional debt financing, a substantial portion of our operating cash flow may be dedicated to the payment of principal and interest on such indebtedness, thus limiting funds available for our business activities.

We expect to continue to incur operating losses in the future and to make capital expenditures to expand our polyurethane operations and to market our Blu Vu rebreather system (including upgrading our plant equipment) and to scale up our sales efforts. We expect that our existing cash will be used to fund working capital and for capital expenditures and other general corporate purposes, including the repayment of debt incurred as a result of our acquisitions. Although since September 30, 2010, we have raised gross proceeds of $174,250 through the issuance of convertible promissory notes, we anticipate that our cash on hand (including the proceeds from these promissory notes) and cash generated through our operations will not be sufficient to fund our operations for the next 12 months.  In addition we will have to repay the outstanding notes plus interest. We therefore anticipate raising additional funds in the near future.

Sources of Liquidity

Since our inception substantially all of our operations have been financed primarily from sales of our polyurethane products and equity and debt financings.  For year ended September 30, 2011, we had received $174,250 from issuance of convertible notes.

Cash Flows

Net cash used by operating activities was $154,072 for the year ended September 30, 2011, compared to $214,140 for the nine month period ended September 30, 2010.  The increase in cash of $2,644 was primarily attributable to the collection of accounts receivable and non-cash expenses.

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There was $12,030 net cash used in investing activities for the year ended September 30, 2011 for the purchase of equipment and $0 cash used for the nine months ended September 30, 2010.

Net cash proceeds from financing activities for the year ended September 30, 2011, was $168,746 which was mainly derived from the issuance of convertible notes.

Contractual Obligations and Commercial Commitments

As of September 30, 2011, we have a contractual obligation to pay the line of credit of $100,000 with an interest rate of prime plus 1.5%. There was also a total remaining balance on two promissory notes of $1,095,110 due to a shareholder and officer in connection with our acquisitions. The notes bear interests at a rate of 5% and 4.23% per annum, respectively.  Our total lease obligations are $284,952 for our Southern California facility, which expires on December 31, 2015.

Income Taxes

Since inception, we have incurred operating losses and, accordingly, have not recorded a provision for federal income taxes for any periods presented. As of September 30, 2011, we had net operating loss carry forwards for federal income tax purposes of $155,000. If not utilized, the federal net operating loss carry forwards will expire in 2025. Utilization of net operating loss and credit carry forwards may be subject to a substantial annual limitation due to restrictions contained in the Internal Revenue Code that are applicable if we experience an “ownership change”. The annual limitation may result in the expiration of our net operating loss and tax credit carry forwards before they can be used.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements or financing activities with special purpose entities.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA

Our audited consolidated financial statements are included beginning immediately following the signature page to this report.  See Item 15 for a list of the financial statements included herein.

ITEM 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

On April 14, 2011, the Board of Directors appointed Wilson Morgan LLP (“Wilson”) as Deltron, Inc’s independent auditors for the 2011 fiscal year, replacing Cacciamatta Accountancy Corporation (“Cacciamatta”).

On April 14, 2011, the Company dismissed Cacciamatta as the Company’s independent auditor effective April 14, 2011.  The report of Cacciamatta on the Company’s consolidated financial statements for the nine-month transition period ended September 30, 2010 did not contain an adverse opinion or a disclaimer of opinion and was not qualified or modified as to uncertainty, audit scope, or accounting principles, except that such report on our consolidated financial statements contained an explanatory paragraph with respect to uncertainty as to the Company’s ability to continue as a going concern.

For the year ended September 30, 2010, and through the date of this Form 8-K, there have been no disagreements with Cacciamatta on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements if not resolved to Cacciamatta’s satisfaction would have caused them to make reference to the subject matter of the disagreement in

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connection with their report.   For the year ended September 30, 2010, and the date of this report, there were no “reportable events” as that term is described in Item 304(a)(1)(v) of Regulation S-K.

On June 30, 2010, the Board of Directors appointed Cacciamatta Accountancy Corporation (“Cacciamatta”) as Deltron, Inc.’s independent auditors for the 2010 fiscal year, replacing Seale & Beers, CPAs (“Seale & Beers”).

On June 30, 2010, the Company dismissed Seale & Beers as the Company’s independent auditor effective June 30, 2010.  The report of Seale & Beers on the Company’s consolidated financial statements for the years ended September 30, 2009 and 2008, and the quarters ended December 31, 2009, and March 31, 2010, did not contain an adverse opinion or a disclaimer of opinion and was not qualified or modified as to uncertainty, audit scope, or accounting principles, except that such reports on our financial statements contained an explanatory paragraph with respect to uncertainty as to the Company’s ability to continue as a going concern.

For the years ended September 30, 2009 and 2008, and through June 30, 2010, there have been no disagreements with Seale & Beers on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements if not resolved to Seale & Beers’ satisfaction would have caused them to make reference to the subject matter of the disagreement in connection with their reports. For the years ended September 30, 2009 and 2008, and through June 30, 2010, there were no “reportable events” as that term is described in Item 304(a)(1)(v) of Regulation S-K.

During the years ended September 30, 2009 and 2008, and through June 30, 2010 (the date Cacciamatta was appointed), the Company did not consult Cacciamatta with respect to the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company’s Consolidated Financial Statements, or any other matters or reportable events as defined in Item 304(a)(2)(i) and (ii) of Regulation S-K.

On August 6, 2009, the Board of Directors appointed Seale & Beers, CPAs (“Seal & Beers”) as Deltron, Inc.’s independent auditors for the 2009 fiscal year, replacing Moore & Associates, Chartered (“Moore”).

ITEM 9A.

CONTROLS AND PROCEDURES

Evaluation of Our Disclosure Controls

Under the supervision and with the participation of our senior management, including our chief executive officer and chief financial officer, Henry Larrucea, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 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 (the “Evaluation Date”).  Based on this evaluation, our chief executive officer and chief financial officer concluded as of the Evaluation Date that our disclosure controls and procedures were not effective such that the information relating to us, including our consolidated subsidiaries, required to be disclosed in our Securities and Exchange Commission (“SEC”) reports (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (ii) is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.

Management’s Annual Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting.  Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for

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external purposes of accounting principles generally accepted in the United States.  Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives.  With the participation of Henry Larrucea, our Chief Executive and Financial Officer, our management conducted an evaluation of the effectiveness of our internal control over financial reporting as of September 30, 2011, based on the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control – Integrated Framework.  Based upon such evaluation, our management concluded that we did not maintain effective internal control over financial reporting as of September 30, 2011, based on the COSO framework criteria.  Management identified the following material weaknesses:

1.

The Company has insufficient internal personnel resources and technical accounting and reporting expertise within the Company’s financial closing and reporting functions;

2.

Due to our small size, the Company did not maintain effective internal controls to assure segregation as the same employee was responsible for initiating and recording of transactions, thereby creating the segregation of duties weakness; and

3.

The Company did not have an independent board of directors for oversight of the Company’s operations and financial reporting process.

This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting.  Management’s report was not subject to attestation by our registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit us to provide only management’s report in this annual report.  

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting that occurred during the quarter ended September 30, 2011, that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

Officers’ Certifications

Appearing as exhibits to this Annual Report are “Certifications” of our Chief Executive Officer and Chief Financial Officer.  The Certifications are required pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (the “Section 302 Certifications”).  This section of the Annual Report contains information concerning the Controls Evaluation referred to in the Section 302 Certification.  This information should be read in conjunction with the Section 302 Certifications for a more complete understanding of the topics presented.

ITEM 9B.

OTHER INFORMATION

Not applicable.

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PART III

ITEM 10.

DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE

Executive Officers, Directors and Key Employees

Directors serve until the next annual meeting of the stockholders; until their successors are elected or appointed and qualified, or until their prior resignation or removal.  Officers serve for such terms as determined by our board of directors.  Each officer holds office until such officer’s successor is elected or appointed and qualified or until such officer’s earlier resignation or removal.  No family relationships exist between any of our present directors and officers.

The following table sets forth certain information, as of January 10, 2012 with respect to our directors and executive officers.

Henry Larrucea has held the positions of President, CEO, CFO, Treasurer and a director since February 22, 2010.  He is expected to hold said offices/positions until the next annual meeting of our stockholders.  

Certain biographical information of our directors and officers is set forth below.

Henry Larrucea

Henry Larrucea, currently the CEO and CFO of Deltron, was one of the original founders of Elasco in 1979 and had been its sole shareholder from 2001 thru 2008.  Mr. Larrucea brings over three decades of continuous leadership, management and executive experience in high volume manufacturing environments for consumer recreational markets to Deltron.  He is responsible for overall management oversight and strategic long term planning. Mr. Larrucea’s corporate responsibilities include business development, marketing, and acquisition prospect development and management.

He also has expertise in all aspects of product development. Mr. Larrucea is directly involved in new product design and development including concept validation, engineering review and tooling design. He also has extensive experience in production process implementation and maintenance. He has two patents in his name for roller skate and skateboard related inventions. His experience in polyurethane chemistry over 30 years with the company has enabled Elasco to produce many unique polymers for use in such diverse industries as roller skate and skateboard wheels, exercise equipment, bowling pin setter equipment and fire hydrant seals.

Chris Kelliher

Mr. Kelliher started his career in 1982 in his family’s construction business, Keystone Construction in California, learning various skills applicable to the home construction business.  He worked there for a number of years until, upon moving to the Hawaiian Islands, he worked as a commercial fisherman for ten years.  He then returned to Santa Barbara to manage the family business for a ten year period.  Most recently, in the past six years, Mr. Kelliher has worked on the island of Oahu, Hawaii building military housing.  He graduated from Lahaina Luna High School on Maui in 1982.  He is 46 years old.

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Employment Agreements

The Company has an employment agreement with Jeff Bozanic to develop its re-breather technology.  The agreement is for three years starting January 1, 2010, at a cost of $10,000 per month.  As of September 30, 2011, the Company owed Mr. Bozanic $210,000.

Term of Office

Our directors are appointed for a period of one year or until such time as their replacements have been elected by our shareholders.  The officers of the Company are appointed by our board of directors and hold office until their resignation or removal.

Audit Committee

We do not have a standing audit committee, an audit committee financial expert, or any committee or person performing a similar function.  We currently have limited working capital and no revenues.  Management does not believe that it would be in our best interests at this time to retain independent directors to sit on an audit committee.  If we are able to raise sufficient financing in the future, then we will likely seek out and retain independent directors and form an audit, compensation committee and other applicable committees.

Board of Directors

We do not pay our Directors for attending board meetings.  However, they are reimbursed for expenses, if any, for attendance at meetings of the Board of Directors.  Our Board of Directors may designate from among its members an executive committee and one or more other committees but has not done so to date.  We do not have a nominating committee or a nominating committee charter.  Further, we do not have a policy with regard to the consideration of any director candidates recommended by security holders.  To date this has not been a problem as no security holders have made any such recommendations.  Members of the Board of Directors perform all functions that would otherwise be performed by committees.  Given the present size of our board it is not practical for us to have committees.  If we are able to grow our business and increase our operations we intend to expand the size of our board and allocate responsibilities accordingly.

Compliance with Section 16(a) of the Exchange Act

Our common stock is not registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).  Accordingly, our officers, directors and principal shareholders are not subject to the beneficial ownership reporting requirements of Section 16(a) of the Exchange Act.

Code of Ethics

In 2006 we adopted a Code of Ethics that applies to all of our employees.  A copy of our Code of Ethics will be provided to any person requesting same without charge.  To request a copy of our Code of Ethics, please make written request to our President c/o Deltron, Inc. at 11377 Markon Drive, Garden Grove, CA 92841.

ITEM 11.

EXECUTIVE COMPENSATION

The following table sets forth information concerning the total compensation paid or accrued by us during the two fiscal years ended September 30, 2011 and 2010 to (i) all individuals that served as our principal executive officer or acted in a similar capacity for us at any time during the fiscal year ended September 30, 2011; (ii) all individuals that served as our principal financial officer or acted in a similar capacity for

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us at any time during the fiscal year ended September 30, 2011; and (iii) all individuals that served as executive officers of ours at any time during the fiscal year ended September 30, 2011, that received annual compensation during the fiscal year ended September 30, 2011 in excess of $100,000.

Summary Compensation Table

(1)

Randall Fernandez has served as our President, Chief Executive Officer, Chief Financial Officer, Treasurer and as a Director from September 9, 2008, through February 22, 2010

(2)

Hilda Rivera has served as our Secretary from September 9, 2008, and as a Director from inception through February 22, 2010.

(3)

Henry Larrucea was appointed President, Chief Financial Officer, Chief Executive Officer, and Treasurer on February 22, 2010.  Mr. Larrucea has a total of $120,000 in accrued but unpaid salary.

Under the Company’s 2010 Stock Incentive Plan for Employees, Contractors, Consultants, Advisors, Board Advisors, Board Members and Others (the “Plan”), the Company is authorized to issue up to 200,000,000 shares of common stock, or options to purchase shares of common stock.  As of the date of this filing, the Company had authorized and issued 148,000,000 shares under The Plan.

We have no plans in place and have never maintained any plans that provide for the payment of retirement benefits or benefits that will be paid primarily following retirement including, but not limited to, tax qualified deferred benefit plans, supplemental executive retirement plans, tax-qualified deferred contribution plans and nonqualified deferred contribution plans.  Similarly, we have no contracts, agreements, plans or arrangements, whether written or unwritten, that provide for payments to the named executive officers or any other persons following, or in connection with the resignation, retirement or other termination of a named executive officer, or a change in control of us or a change in a named executive officer’s responsibilities following a change in control.  

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Compensation of Directors

During the fiscal years ended September 30, 2011 and 2010, there were no arrangements between us and our directors that resulted in our making any payments to our directors for any services provided to us by them as directors.

ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets forth information with respect to the beneficial ownership of our common stock known by us as of December 16, 2011 by:

·

each person or entity known by us to be the beneficial owner of more than 5% of our common stock;

·

each of our directors;

·

each of our executive officers; and

·

all of our directors and executive officers as a group.

The percentages in the table have been calculated on the basis of treating as outstanding for a particular person, all shares of our common stock outstanding on such date and all shares of our common stock issuable to such holder in the event of exercise of outstanding options, warrants, rights or conversion privileges owned by such person at said date which are exercisable within 60 days of December 16, 2011.  Except as otherwise indicated, the persons listed below have sole voting and investment power with respect to all shares of our common stock owned by them, except to the extent such power may be shared with a spouse.

(1)

As used herein, the term beneficial ownership with respect to a security is defined by Rule 13d-3 under the Securities Exchange Act of 1934 as consisting of sole or shared voting power (including the power to vote or direct the vote) and/or sole or shared investment power (including the power to dispose or direct the disposition of) with respect to the security through any contract, arrangement, understanding, relationship or otherwise, including a right to acquire such power(s) during the next 60 days.  

(2)

Percentage based upon 33,641,087 shares of common stock issued and outstanding as of December 16, 2011.

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(3)

30,000,000 shares are subject to 3 year lock up agreement, held for services to be rendered.

Beneficial ownership is determined in accordance with the rules of the SEC, and generally includes voting power and/or investment power with respect to the securities held. Shares of common stock subject to options or warrants currently exercisable or exercisable within 60 days of September 30, 2011 and 2010, are deemed outstanding and beneficially owned by the person holding such options for purposes of computing the number of shares and percentage beneficially owned by such person, but are not deemed outstanding for purposes of computing the percentage beneficially owned by any other person. Except as indicated in the footnotes to these tables, and subject to applicable community property laws, the persons or entities named have sole voting and investment power with respect to all shares of our common stock shown as beneficially owned by them.

  The following is the schedule of beneficial ownership as of September 30, 2011:

Securities Authorized for Issuance Under Equity Compensation Plans

On November 9, 2010, the Company filed an S8 Registration Statement registering its 2010 Stock Option Plan for Employees and Consultants.

Under the terms of the Plan, a total of 200,000,000 shares of stock or options to purchase common stock can be issued to compensate directors, employees and consultants of the Company for services rendered to the Company.

The terms of the Plan are fully disclosed in the copy of the Plan filed as an exhibit to the S8, but include the following:

As of the date of this filing, the Company issued 148,000,000 shares to an employee as prepayment for bonus and salaries for the six-month period ended May 7, 2011.

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ITEM 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND

DIRECTOR INDEPENDENCE

Promissory Notes

Concurrent with the sale of Elasco to Blu Vu, the previous owner agreed to exchange his outstanding demand note, with an outstanding balance of $856,750, for a 10 year note at 5% for $600,000.  The difference of $256,750 was recorded as a gain in other income in 2009.  Total interest accrued for the shareholder for the nine months ending September 30, 2010 was $22,039 and the balance of the note as of September 30, 2010 was $587,684. Payments have not been made on this note since July 2009.  There was $65,180 of accrued interest at September 30, 2011.

The same party received a promissory note for the stock of Elasco for $540,000. The note is due in monthly payments of $10,000 and bears interest at 4.23%.  The note is secured by the stock of Elasco.  Total interest for the shareholder for the nine months ending September 30, 2010 was $16,099 and the balance of the note as of September 30, 2010 was $507,426.  Payments have not been made on this note since August 2009.  There is $46,629 of accrued interest at September 30, 2011.

Both of the above notes are currently in default due to non-payment of principal and interest.  Upon default the loans become due on demand.  The noteholder, who is the Company’s president, has granted a waiver which waives the default under the terms of the notes and releases the Company from any liquidated damage provision.

During 2009, the Company issued twelve notes payable (the “2009 Convertible Notes”) for a total of $185,500.  These notes are due ranging from September 17, 2010, to March 28, 2011, all bearing interest at 5.0%. These notes payable are convertible into shares of the Company’s common stock at a conversion discount of 70% of the stock bid price but in no event shall the conversion price be less than the par value of $0.001.  All of these notes are currently in default and are due on demand. During the fiscal year end 2011, the Company converted nine notes payable by issuing 445,486,283 shares of the Company’s common stock. At September 30, 2011 and 2010, the balance of these convertible notes payable was $58,500 and $96,167, respectively.

During the quarter ended December 31, 2010, the Company issued three convertible notes payable (the “Magna Notes”) totaling $77,500. These notes bear interest at 10% and mature at various dates ranging from June 2011 through August 2011.These are convertible into shares of the Company’s common stock at a variable conversion price of 50% of the market price (defined at the average of the lowest three trading prices for the common stock during the ten trading day period ending one trading day prior to th e date of the conversion notice). These notes become convertible at any time during the period beginning on the six month anniversary (the “Initial Conversion Date”) of the date of these notes and end on the later of the maturity dates and the date of payment of a Default Amount, as defined. During year ended September 30, 2011, the Company issued 233,429,533 shares of common stock to fully convert the notes payable.

During the quarter ended June 30, 2011, the Company issued four convertible notes payable totaling $30,100. These notes bear interest at 5% and they are due on demand. These notes payable are convertible under same terms as the 2009 Convertible Notes. At September 30, 2011, the balance of these convertible notes payable was $30,100.

In January 2011, the Company issued a note payable in the amount of $50,000. This note bears interest at 8% and matures on October 24, 2011. This note is convertible into shares of the Company’s common stock under the same terms as the Magna Notes. In July 2011, on the Initial Conversion Date, the Company recorded a derivative liability of approximately $56,000. In August and September 2011, the note holder converted $46,500 of the convertible note payable. In connection with this conversion, the

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Company issued 367,500,000 shares of the Company’s common stock. At September 30, 2011, the balance of the convertible notes payable was $3,500.  The related derivative liability was revalued at $7,000 at September 30, 2011.

In February 2011, the Company purchased technology from an unrelated third party for $3,150,000 by issuing a 5% convertible note payable (the Kaleidoscope Note).  The note is due on demand, but not sooner than six months from the date of issuance, and provides for nominal interest at the rate of five (5.0%) percent per annum. The note may be converted into unregistered shares of the Company’s common stock, par value $0.001 per share at the Conversion Price, as defined below, in whole, or in part, at any time beginning 180 days after the date of the notes, at the option of the holder. The Conversion Price shall be equal to 30% multiplied by the Variable Conversion Rate which is equal to the average of the three (3) lowest closing bid prices of the Common Stock during the ten (10) trading day period prior to the date of conversion. The convertible notes payable only become convertible 180 days from issuance, and until the notes payable become convertible, no derivative liability was recorded as a result of the conversion feature. The note became convertible in August 2011 and accordingly, the Company recorded a derivative liability of $5,430,958. At September 30, 2011, the derivative liability was marked-to-market and the balance was $5,432,887.  As of September 30, 2011 there is a balance on this note of $3,073,641, plus accrued interest of $94,433.

In August 17, 2011, the Company was notified that $500,000 of the Kaleidoscope Note was assigned to an unrelated third party. The assigned note payable retained the same conversion terms as the Kaleidoscope Note. The Company recorded a derivative liability of $1,167,416. On August 19, 2011 and September 22, 2011, the note holder converted $21,906 and $13,013, respectively, and the Company issued 146,039,992 and 216,880,251 shares of the Company’s common stock, respectively. As of September 30, 2011, the balance on this note was $465,081. At September 30, 2011, the derivative liability was marked-to-market and the balance was $1,086,271

In August 23, 2011, the Company was notified that $50,000 of the Kaleidoscope Note was assigned to an unrelated third party. The assigned note payable retained the all the same conversion terms as the Kaleidoscope Note with the exception of the Conversion Price. In connection with the assignment, the Company issued an amendment to the note to change the conversion price to 40% of the average of the three lowest closing bid prices of the Common Stock during the ten trading day period prior to the date of conversion. Upon assignment the note became convertible, and, accordingly, the Company recorded a derivative liability of $75,349. On August 29, 2011 and September 16, 2011, the note holder converted $12,500 and $5,000, respectively, and the Company issued 78,125,000 and 83,333,333 shares of the Company’s common stock, respectively. As of September 30, 2011, the balance on this note was $32,500. At September 30, 2011, the derivative liability was marked-to-market and the balance was $49,057.

In September 2011, the Company was notified that $250,000 of the Kaleidoscope Note was assigned to an unrelated third party. The assigned note payable retained the all the same conversion terms as the Kaleidoscope Note. Upon assignment the note became convertible, and, accordingly, the Company recorded a derivative liability of $583,810. As of September 30, 2011, the balance on this note was $250,000. At September 30, 2011, the derivative liability was marked-to-market and the balance was $583,915.

The Company issued financial instruments in the form of convertible notes payable.  These instruments have variable conversion rates.  The conversion features were analyzed for derivative liabilities under GAAP and the Company has determined that they meet the definition of a derivative liability due to the contracts obligations.  Derivative instruments shall also be measured at fair value at each reporting period with gains and losses recognized in current earnings.  The Company calculated the fair value of these instruments using the Black-Scholes Model due to the short duration of the conversion option (less than

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one year). The significant assumptions used in the calculation of the instrument’s fair value are detailed in the table below.  

These instruments were not issued with the intent of effectively hedging any future cash flow, fair value of any asset, liability or any net investment in a foreign operation.  The instruments do not qualify for hedge accounting, and as such, all future changes in the fair value will be recognized currently in earnings until such time as the instruments are exercised, converted or expire.   The following assumptions were used to determine the fair value of the derivative liabilities at September 30, 2011:

As of September 30, 2011, the Company had authorized unissued common stock of 7,336,687,000 shares, which is not sufficient to cover shares to be issued upon conversion of all convertible notes. As a result, the Company recorded a derivative liability in the amount $7,159,130 on the accompanying consolidated balance sheet.

Current maturities of the notes payable for each of the five years ending September 30 are as follows:

Commitments

The Company leases a manufacturing and office facility from a related party as an operating lease which expires in 2015.  This lease currently requires monthly payments of $5,533 plus related insurance and maintenance.  Rental expense under this lease for the year ended September 30, 2011 was $66,396 all of which was paid to a related party.

Future rental payments required under this operating lease are as follows:

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The Company has an employment agreement with Jeff Bozanic to develop its re-breather technology.  The agreement is for three years starting January 1, 2010 at a cost of $10,000 per month. As of September 30, 2011, the Company owed Mr. Bozanic $210,000.

Prior to the asset purchase agreement  between Blu Vu and Deltron, Blu Vu was in negotiations with Radikal, AS (“Radikal”), the owner of intellectual property involving rebreather technology, to purchase its intellectual property involving said technology.  At that time, Blu Vu did not own any rebreather technology.  No agreement was reached between Blu Vu and Radikal prior to the asset purchase agreement with Deltron.   On August 4, 2010, the Company entered into an agreement with Radikal to purchase its intellectual property involving said technology (the “Radikal Agreement”).  The Radikal Agreement requires the Company to pay $35 per unit fee for at least 500 units per year for 2 years, after which the obligation to Radikal will be fulfilled. The first annual payment of $17,500 is due in January 2012.

Pursuant to the terms of the Radikal Agreement, Radikal has transferred all U.S. and international patent rights to the Company. If the per unit fee payments are not made when due, Radikal has the right to the return of the intellectual property transferred. Payments for these rights are not required to begin until January 2012.

Director Independence

We are not currently subject to listing requirements of any national securities exchange or inter-dealer quotation system which has requirements that a majority of the board of directors be “independent” and, as a result, we are not at this time required to (and we do not) have our Board of Directors comprised of a majority of “Independent Directors.”

ITEM 14.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

Audit Fees .

The aggregate fees billed to us by our principal accountants for services rendered during the fiscal years ended September 30, 2010 and 2009, are set forth in the table below:

(1)

Audit fees consist of fees incurred for professional services rendered for the audit of consolidated financial statements, for reviews of our interim consolidated financial statements included in our quarterly reports on Form 10-Q and for services that are normally provided in connection with statutory or regulatory filings or engagements.

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(2)

Audit-related fees consist of fees billed for professional services that are reasonably related to the performance of the audit or review of our consolidated financial statements, but are not reported under “Audit fees.”

(3)

Tax fees consist of fees billed for professional services relating to tax compliance, tax planning, and tax advice.

(4)

All other fees consist of fees billed for all other services.

Audit Committee’s Pre-Approval Practice .  

We do not have an audit committee.  Our board of directors performs the function of an audit committee.  Section 10A(i) of the Securities Exchange Act of 1934, as amended, prohibits our auditors from performing audit services for us as well as any services not considered to be audit services unless such services are pre-approved by our audit committee or, in cases where no such committee exists, by our board of directors (in lieu of an audit committee) or unless the services meet certain de minimis standards

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PART IV

ITEM 15.

EXHIBITS, FINANCIAL STATEMENT SCHEDULES

The following exhibits are included as part of this report:

(1)

Filed with the Securities and Exchange Commission on December 8, 2005, as an exhibit, numbered as indicated above, to the Registrant’s registration statement on the Registrant’s Registration Statement on Form SB-2 (file no. 333-130197), which exhibit is incorporated herein by reference.

(2)

Filed with the Securities and Exchange Commission on December 28, 2006, as an exhibit, numbered as indicated above, to the Registrant’s Annual Report on Form 10-KSB for the year ended September 30, 2006, which exhibit is incorporated herein by reference.

(3)

The Company filed a Current Report on form 8K on May 28, 2010, reporting the completion of the Asset Purchase Agreement under which the Company acquired the assets and liabilities of Blu Vu Deep Oil & Gas Exploration, Inc. including its ownership of 100% of the outstanding stock of Elasco, Inc. (“Elasco”), and which included the audited consolidated financial statements of Blu Vu, and had attached as Exhibit 10.1 thereto a copy of the Asset Purchase Agreement.  The Agreement is incorporated herein by reference. Mr. O’Donnel has provided his consent for the incorporation by reference of his report on the audited consolidated financial statements of Blu Vu.

* Filed herewith.

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SIGNATURES

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

Date:  January 13, 2012

DELTRON, INC.

By   /s/ Henry Larrucea

Name:

Henry Larrucea

Title:

President

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

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PART IV – FINANCIAL INFORMATION

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of

Deltron, Inc. and Subsidiary

We have audited the accompanying consolidated balance sheet of Deltron, Inc. and Subsidiary (the “Company”) as of September 30, 2011, and the related consolidated statement of operations, stockholders’ deficit, and cash flows for the year then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

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

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Deltron, Inc. and Subsidiary as of September 30, 2011, and the results of its operations and its cash flows for the year ended September 30, 2011, in conformity with accounting principles generally accepted in the United States of America.

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

/s/ WilsonMorgan LLP

Irvine, California

January 13, 2012

F-1

F-2

F-3

F-4

F-5