U. S. Securities and Exchange Commission Washington, D. C.  20549  FORM 10-KSB  SANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934  For the calendar years ended December 31, 2005, 2004, 2003 and 2002.  £TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934  For the transition period from _________________ to __________________  Commission File No.  0-23806   I/NET, INC. (Name of Small Business Issuer in its Charter)  Delaware87-0046720(State or Other Jurisdiction of(I.R.S. Employer I.D. No.)incorporation or organization)  1608 W 2225 S Woods Cross, UT 84087 (Address of Principal Executive Offices)  Issuer's Telephone Number:  (801) 295-3400  Not Applicable (Former name and former address, if changed since last Report)  Securities Registered under Section 12(b) of the Exchange Act:  None.  Securities Registered under Section 12(g) of the Exchange Act:  Common Stock, $0.001 par value  Check whether the Issuer is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. £  Check whether the Issuer (1) 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 Issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  (1) Yes £  No S    (2) Yes S  Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained in this form, and no disclosure will 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-KSB or any amendment to this Form 10-KSB.  £  Indicate by check mark whether the Issuer is a shell company (as defined in Rule 12b-2 of the Exchange Act.)  Yes S  No £  State Issuer's revenues for its most recent calendar year: December 31, 2005 - $39,746; $300,672 for 2004; $395,646 for 2003; $788,404 for 2002.  State the aggregate market value of the voting and non-voting common stock of the Issuer held by non-affiliates computed by reference to the price at which the stock was sold, or the average bid and asked prices of such stock, as of a specified date within the  1   past 60 days. October 12, 2006  131,439.  There are approximately 18,777,149 shares of voting stock of the Issuer held by non-affiliates.  These shares have been valued at $0.007 per share.  Issuers Involved in Bankruptcy Proceedings During the past Five Years  None; not applicable.  Applicable Only to Corporate Registrants  State the number of outstanding shares of each of the Issuer's classes of common equity, as of the latest practicable date: October 12, 2006  Common stock  50,000,000 shares.  Documents Incorporated by Reference  None  Transitional Small Business Issuer Format:  No S   2   Item 1. Description of Business.  I/NET, Inc. (the "Company" or "I/NET") was organized under the laws of the state of Delaware in 1986 under the name of a predecessor corporation. The Company registered its initial public offering with the Securities and Exchange Commission in 1987. The Company provides professional services in the areas of software development and Internet-related consulting for businesses. I/NET also developed and marketed computer software for mid-range computers, including International Business Machine's (IBM) AS/400 model.  The Company has a wholly owned subsidiary, I/NET, Inc. (a Michigan corporation).  I/NETs business consisted of supporting software licenses to various customers employing the IBM AS/400  iSeries computers. The business has been declining over the years, and there are no plans to replace this business.  Subsequent to December 31, 2005, the Company accepted an offer from Tryant, LLC for the acquisition of the Company.  Sources and Availability of Raw Materials and Principal Suppliers  Developing software requires few tangible raw materials. I/NET consistently hired the best talent available. There can be no assurances that I/NET will continue to be able to attract and retain qualified personnel. The Company no longer has any employees as of December 31, 2005.  Dependence on Major Customers  The Company provided Internet products, contract development services, web site consulting services and support services to two major customers, IBM and NASA. In June 2002, the IBM contracts were terminated. In November 2004 the NASA contracts terminated.  IBM related contracts accounted for 20% of revenue in 2002, and 0% in subsequent years.  For 2004, 2003 and 2002, NASA contract revenue accounted for approximately 71%, 77%, and 57% of the Companys revenue, respectively.  In 2003, one additional customer accounted for 11% of revenue.  In 2005, two customers accounted for 56% of revenues, with various other customers accounting for the balance.  Patents and Trademarks  None  Need for Any Government Approval of Principal Products or Services  The performance of services and the supply of products by the Company are not subject to governmental approval or unusual regulation except as they relate to strong encrypted software products, which are under government regulation.  Effect of Existing or Probable Governmental Regulations on the Business  No present governmental regulations have any adverse significant impact on the present or contemplated business operations of the Company, and no such probable governmental regulations are anticipated to have any adverse effect. However, there are numerous proposals pending to regulate the Internet. The Company cannot predict the impact that the adoption of any of these proposals could have on the Company's business. Research and Development Activities  There were minimal research and development costs incurred by the Company during the calendar years ended December 31, 2005, 2004, 2003 and 2002.   3   Cost and Effects of Compliance with Environmental Laws  There are no foreseeable adverse effects on the Company's present or contemplated business operations resulting from environmental laws, rules, or regulations.  Employees  As of December 31, 2002, the Company had 7 full time employees. As of December 31, 2003, the Company had 4 full time employees. As of December 31, 2004, the Company had 3 full time employees. As of December 31, 2005, the Company had 0 full time employees.  We file annual, quarterly and special reports, proxy statements and other information with the SEC.  We have not filed quarterly or annual reports with the SEC since the quarter ended September 30, 2002. This document incorporates audited financial statements for the years ended December 31, 2005, 2004, 2003, and 2002 and unaudited quarterly financial information for each of the periods covered. Our SEC filings are available to the public over the SECs website at http://www.sec.gov.  You may also read and copy any document we file at the SECs Public Reference Room at:  Public Reference Section Securities and Exchange Commission 100 F. Street, N.E., Washington D.C. 20549 Attention: Secretary  Please call the SEC at (800) SEC-0330 for further information on the operating rules and procedures for the public reference room.  Item 2. Description of Property.  In 2004, our Crosstown Offices were closed. Our office moved to 5587 Texas Dr., Kalamazoo, Michigan 49009. The office is approximately 2,500 sq. ft.  The Company closed its Chicago, Illinois office at the end of 2004. The rent was approximately $1,760/month at the time.  Our mailing address is 1608 W. 2225 South, Woods Cross, Utah 84087.  Item 3. Legal Proceedings.  None.  Item 4. Submission of Matters to a Vote of Security Holders.  None.  Part II  Item 5. Market for Common Equity and Related Stockholder Matters.  The Company's common stock is listed on the Pinksheets under the ticker "INNI". The approximate high and low bid prices for 2001 through 2005 were summarized by quarter below:   4    20012002Q1Q2Q3Q4Q1Q2Q3Q4Hi$0.19$0.17$0.13$0.12$0.14$0.13$0.11$0.10Low$0.08$0.09$0.07$0.05$0.06$0.06$0.06$0.0520032004Q1Q2Q3Q4Q1Q2Q3Q4Hi$0.06$0.06$0.07$0.045$0.035$0.06$0.045$0.04Low$0.02$0.01$0.017$0.016$0.007$0.008$0.03$0.022005Q1Q2Q3Q4Hi$0.035$0.03$0.02$0.015Low$0.02$0.015$0.015$0.008  These bid prices are quotations of broker-dealers that reflect inter-dealer prices, without retail mark-up, markdown or commission and may not represent actual transactions.  Holders  The number of record holders of the Company's common stock as of December 31, 2005, was 285. There were approximately 3,000 beneficial holders as of that date.  Dividends  There are currently present material restrictions that limit the ability of the Company to pay dividends on its common stock as it has a deficit in its stockholders' equity. The Company has not paid any dividends with respect to its common stock nor does it intend to do so in the foreseeable future.  Item 6. Managements Discussion and Analysis or Plan of Operation.  Results of Operations  Overview  Subsequent to December 31, 2005, the Company accepted an offer from Tryant, LLC for the acquisition of the Company. As contracts with major customers have been terminated, revenues have significantly decreased in recent years as have associated costs as the Company is no longer pursuing software product revenue opportunities. Remaining costs primarily consist of the winding down of operations.  For the Calendar Years Ended December 31, 2005, 2004, 2003 and 2002  Revenues for the year ended December 31, 2005 decreased by $260,926 (87%) as compared to the year ended 2004. Revenues for the year ended December 31, 2004 decreased by $94,974 (24%) as compared to the year ended 2003. Revenues for the year ended December 31, 2003 decreased by $392,758 (50%) as compared to the year ended 2002. Revenues for the year ended December 31, 2002 decreased by $600,793 (43%) as compared to the year ended 2001.  Cost of revenue for the year ended December 31, 2005 decreased by 267,713 (88%) as compared to the year ended 2004. Cost of revenue for the year ended December 31, 2004 decreased by $72,434 (19%) as compared to the year ended 2003. Cost of revenue for the year ended December 31, 2003 decreased by $339,602 (47%) as compared to the year ended 2002. Cost of revenue for the year ended December 31, 2002 decreased by $556,068 (44%) as compared to the year ended 2001.  In June 2002, the Company terminated its contracts with IBM. Revenues with IBM were $159,000 and account for 20% of revenues in 2002.  5   In November 2004, the Company terminated its contracts with NASA. From 2004 through 2002, NASA contract revenue accounted for approximately 71%, 77%, and 57% of the Companys revenue, respectively.  With no new significant contracts to replace the IBM and NASA contracts, the Companys revenues and cost of revenue and related expenses decreased significantly, as discussed above. The Company is no longer pursuing opportunities for future revenues with software products.  General and administrative expenses for the year ended December 31, 2005 decreased by $11,335 (64%) as compared to year ended 2004. General and administrative expenses for the year ended December 31, 2004 decreased by $38,059 (68%) as compared to year ended 2003. General and administrative expenses for the year ended December 31, 2003 decreased by $318,742 (85%) as compared to year ended 2002. General and administrative expenses for the year ended December 31, 2002 decreased by $27,738 (7%) as compared to year ended 2001.  General and administrative expenses have decreased with the scale of revenues. As the business has declined, fewer expenses are incurred. General and administrative expenses relate to the winding down of operations.  Net loss for the year ended December 31, 2005 was $4,360 compared to net losses of $27,997, $56,823, and $179,134 for the years ended December 31, 2004, 2003 and 2002, respectively and net income of $399,114 in 2001.  Financial Condition and Liquidity  As of December 31, 2005, the Company's working capital deficit was $130,352, compared to deficits of $125,992, $698,731, $641,908 and $418,425 as of December 31, 2004, 2003, 2002 and 2001, respectively.  The Company estimates that it will require $100,000 in the next 12 months. To meet its working capital needs, the Company will rely on advances from shareholders or equity investments from new or existing shareholders.  The Companys financial statements have been presented on the basis that is a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has suffered recurring losses from operations, has a significant working capital deficit, and requires additional capital to continue is product development. Accordingly, the Companys independent public accountants have included a modification in their report on the Companys financial statements for the years ended December 31, 2005, 2004, 2003 and 2002, discussing the Companys ability to continue as a going concern.  Subsequent to December 31, 2005, the Company accepted an offer from Tryant, LLC for the acquisition of the Company.  For the three months ended March 31, 2005, 2004 and 2003, compared to the same period in prior year.  Revenue for the three months ended March 31, 2005 decreased by $82,728 (87%) as compared to the same period in 2004. This substantial decrease was primarily a result of the Company electing to terminate its contracts with NASA in November 2004, which had accounted for $75,000 in the first quarters of both 2004 and 2003.  Revenue for the three-month period in 2004 represented a minor decrease of $2,379 (3%) as compared to the same period in 2003.  Revenue for the three-month period in 2003 represented a decrease of $183,810 (65%) as compared to the same period in 2002. This substantial decrease was primarily a result of the Company electing to terminate its contracts with IBM, which had accounted for $130,000 in the first quarter of 2002.  The cost of revenue for the three months ended March 31, 2005 decreased by $75,049 (82%) as compared to the same period in 2004. Cost of revenue for the three-month period in 2004 represented a decrease of $29,208 (24%) as compared to the same period in 2003. Cost of revenue for the three-month period in 2003 represented a decrease of $157,362 (57%) as compared to the same period in 2002. Cost of revenue for these periods decreased in conjunction with the decline in revenues, as explained above.  General and administrative expenses for the three months ended March 31, 2005 decreased by $2,151 (34%) as compared to the same period in 2004. General and administrative expenses for the three-month period in 2004 represented a decrease of $20,820 (77%) as compared to the same period in 2003.  General and administrative expenses for the three-month period in 2003 represented decrease of $31,720 (54%) as compared to the same period in 2002.   6   Net loss for the three months ended March 31, 2005 increased by $2,690 (40%) as compared to the same period in 2004. Net loss for the three-month period in 2004 represented a decrease of $52,238 (89% improvement) as compared to the same period in 2003.  Net loss for the three-month period in 2003 represented an increase of $148,024 as compared to the same period in 2002.  Financial Condition  As of March 31, 2005, the Company's working capital deficit was $135,403, as compared to deficits of $104,716, and $700,866, at March 31, 2004 and 2003, respectively.  This decrease in working capital deficit in 2004 is largely attributable to $600,736 of forgiven debt in the first quarter and associated accrued interest that was forgiven.  During March 2002, the Company obtained an unsecured $35,000 line of credit from a bank of which $15,000 was outstanding as of March 31, 2002. $34,500 was outstanding as of March 31, 2005, 2004 and 2003.  For the six months ended June 30, 2005, 2004 and 2003, compared to the same period in prior year.  Revenue for the six months ended June 30, 2005 decreased by $182,094 (90%) as compared to the same period in 2004. This substantial decrease was primarily a result of the Company electing to terminate its contracts with NASA in November 2004, which had accounted for $150,000 in the first half of 2004 and $154,862 in the first half of 2003.  Revenue for the six-month period in 2004 represented a minor increase of $2,425 (1%) as compared to the same period in 2003.  Revenue for the six-month period in 2003 represented decrease of $267,761 (57%) as compared to the same period in 2002. This substantial decrease was primarily a result of the Company electing to terminate its contracts with IBM, which had accounted for $159,000 in the first half of 2002. NASA contract revenue also decreased $60,318 from $215,000.  The cost of revenue for the six months ended June 30, 2005 decreased by $162,667 (88%) as compared to the same period in 2004. Cost of revenue for the six-month period in 2004 represented a decrease of $21,919 (11%) as compared to the same period in 2003. Cost of revenue for the six-month period in 2003 represented a decrease of $281,904 (58%) as compared to the same period in 2002. The decline in the cost of revenue for these periods is for same reasons as the decline in revenues, as explained above.  General and administrative expenses for the six months ended June 30, 2005 decreased by $7,161 (57%) as compared to the same period in 2004. General and administrative expenses for the six-month period in 2004 represented a decrease of $25,032 (66%) as compared to the same period in 2003.  General and administrative expenses for the six-month period in 2003 represented decrease of $67,305 (64%) as compared to the same period in 2002.  Net loss for the six months ended June 30, 2005 increased by $9,206 as compared to the same period in 2004. Net income for the six-month period in 2004 represented an increase of $59,229 as compared to the same period in 2003.  Net loss for the six-month period in 2003 represented an increase of $72,408 as compared to the same period in 2002.  For the three months ended June 30, 2005, 2004 and 2003, compared to the same period in prior year.  Revenue for the three months ended June 30, 2005 decreased by $99,366 (93%) as compared to the same period in 2004. This substantial decrease was primarily a result of the Company electing to terminate its contracts with NASA in November 2004, which had accounted for $75,000 in the second quarter of 2004 and $79,862 in the second quarter of 2003.  Revenue for the three-month period in 2004 represented a minor increase of $4,804 (5%) as compared to the same period in 2003.  Revenue for the three-month period in 2003 represented a decrease of $83,950 (45%) as compared to the same period in 2002. This decrease was primarily a result of the Company electing to terminate its contracts with IBM, which had accounted for $29,000 in the second quarter of 2002.  The cost of revenue for the three months ended June 30, 2005 decreased by $87,618 (94%) as compared to the same period in 2004. Cost of revenue for the three-month period in 2004 represented an increase of $7,289 (9%) as compared to the same period in 2003. Cost of revenue for the three-month period in 2003 represented a decrease of $124,542 (59%) as compared to the same period in 2002. The decline in the cost of revenue for these periods is for same reasons as the decline in revenues, as explained above.  7   General and administrative expenses for the three months ended June 30, 2005 decreased by $5,010 (79%) as compared to the same period in 2004. General and administrative expenses for the three-month period in 2004 represented a decrease of $4,212 (40%) as compared to the same period in 2003.  General and administrative expenses for the three-month period in 2003 represented decrease of $35,585 (77%) as compared to the same period in 2002.  Net income for the three months ended June 30, 2005 decreased by $6,516 (85%) as compared to the same period in 2004. Net income for the three-month period in 2004 represented an increase of $6,991 as compared to the same period in 2003.  Net income for the three-month period in 2003 represented an increase of $75,616 as compared to the same period in 2002.  Financial Condition  As of June 30, 2005, the Company's working capital deficit was $134,263, as compared to deficits of $97,059 and $700,201 at June 30, 2004 and 2003, respectively.  During March 2002, the Company obtained an unsecured $35,000 line of credit from a bank of which $15,000 was outstanding as of March 31, 2002. $34,500 was outstanding as of June 30, 2005, 2004 and 2003.  For the nine months ended September 30, 2005, 2004 and 2003, compared to the same period in prior year.  Revenue for the nine months ended September 30, 2005 decreased by $253,379 (88%) as compared to the same period in 2004. This substantial decrease was primarily a result of the Company electing to terminate its contracts with NASA in November 2004, which had accounted for $214,499 in the same period of 2004 and $229,862 in the same period of 2003.  Revenue for the nine-month period in 2004 represented a decrease of $5,135 (2%) as compared to the same period in 2003.  Revenue for the nine-month period in 2003 represented a decrease of $315,709 (52%) as compared to the same period in 2002. This substantial decrease was primarily a result of a decrease in revenue from IBM, NASA contracts, and other revenue sources.  The cost of revenue for the nine months ended September 30, 2005 decreased by $241,928 (89%) as compared to the same period in 2004. Cost of revenue for the nine-month period in 2004 represented a decrease of $23,002 (8%) as compared to the same period in 2003. Cost of revenue for the nine-month period in 2003 represented a decrease of $352,433 (54 %) as compared to the same period in 2002. The decline in the cost of revenue for these periods is for same reasons as the decline in revenues, as explained above.  General and administrative expenses for the nine months ended September 30, 2005 decreased by $11,253 (64%) as compared to the same period in 2004. General and administrative expenses for the nine-month period in 2004 represented a decrease of $29,630 (63%) as compared to the same period in 2003.  General and administrative expenses for the nine-month period in 2003 represented decrease of $79,530 (63%) as compared to the same period in 2002.  Net loss for the nine months ended September 30, 2005 decreased by $4,416 (87% improvement) as compared to the same period in 2004. Net loss for the nine-month period in 2004 represented a decrease of $64,781 (93% improvement) as compared to the same period in 2003.  Net loss for the nine-month period in 2003 represented an increase of $37,832 as compared to the same period in 2002.  For the three months ended September 30, 2005, 2004 and 2003, compared to the same period in prior year.  Revenue for the three months ended September 30, 2005 decreased by $71,285 (83%) as compared to the same period in 2004. This substantial decrease was primarily a result of the Company electing to terminate its contracts with NASA in November 2004, which had accounted for $64,499 in the third quarter of 2004 and $75,000 in the third quarter of 2003.  Revenue for the three-month period in 2004 represented a decrease of $7,560 (8%) as compared to the same period in 2003.  Revenue for the three-month period in 2003 represented decrease of $47,949 (34%) as compared to the same period in 2002. Revenues from other (non-IBM) services decreased during this period.  The cost of revenue for the three months ended September 30, 2005 decreased by $79,261 (91%) as compared to the same period in 2004. Cost of revenue for the three-month period in 2004 represented a decrease of $1,083 (1%) as compared to the same period in 2003. Cost of revenue for the three-month period in 2003 represented a decrease of $70,529 (45%) as compared to the same period in 2002. The decline in the cost of revenue for these periods is for same reasons as the decline in revenues, as explained above.  8   General and administrative expenses for the three months ended September 30, 2005 decreased by $4,092 (82%) as compared to the same period in 2004. General and administrative expenses for the three-month period in 2004 represented a decrease of $4,598 (48%) as compared to the same period in 2003.  General and administrative expenses for the three-month period in 2003 represented decrease of $12,225 (56%) as compared to the same period in 2002.  Net income for the three months ended September 30, 2005 increased by $13,622 as compared to the same period in 2004. Net income for the three-month period in 2004 represented an increase of $5,552 (48% improvement) as compared to the same period in 2003.  Net Income for the three-month period in 2003 represented an increase of $34,576 (75% improvement) as compared to the same period in 2002.  Financial Condition  As of September 30, 2005, the Company's working capital deficit was $126,677, as compared to deficits of $103,095, $711,789, and $429,590 at September 30, 2004, 2003 and 2002, respectively.  The Company obtained an unsecured $35,000 line of credit from a bank of which $15,000 was outstanding as of March 31, 2002. $34,500 was outstanding as of September 30, 2005, 2004 and 2003.  Contractual Obligations and Commercial Commitments  As of December 31, 2005, the Company had contractual obligations as follows:  Payments due by December 31,Total20062007200820092010Debt Maturities$57,000$57,000$-$-$-$-Interest Expense4,0004,000----Total$61,000$61,000$-$-$-$-  Safe Harbor Provisions Under the Private Securities Litigation Act of 1995  Statements in this filing that are not historical facts are forward-looking statements, which involve risks and uncertainties that could affect the Companys results of operations, financial position and cash flows. Actual results may differ materially from those projected in the forward-looking statements, due to a variety of factors, some of which may be beyond the control of the Company.  The Company faces the challenge of rapid technological change and competition. Rapid change, uncertainty due to new and emerging technologies, and market competition characterize the software industry, which means that I/Nets market position is always at risk. I/Nets ability to satisfy customer requirements and to develop and introduce new products and achieve market acceptance is a challenge, which the Company must continue to meet.  Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this report.  Item 7. Financial Statements  The financial statements follow Item 14 beginning at page F-1  Item 8.Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.  None.   9   Item 8A. Disclosure Controls and Procedures.  Disclosure Controls and Procedures. Our chief executive officer and our chief financial officer, after evaluating our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the Exchange Act)) have concluded that as of December 31, 2005, our disclosure controls and procedures are effective to ensure that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that information is accumulated and communicated to our management, including our chief executive officer and our chief financial officer, as appropriate to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.  Changes in Internal Controls. During the year ended December 31, 2005, there was no change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that has materially affected, or is reasonable likely to materially affect, our internal control over financial reporting.  Item 8B. Other Information.  During the year ended December 31, 2005, there was no information required to be disclosed in a report on Form 8-K that was not reported on Form 8-K.  Part III  Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance With Section 16(a) of the Exchange Act.  Identification of Directors and Executive Officers  The following table sets forth the names and offices held by all directors and executive officers of the Company for the year ended December 31, 2005, and to the date hereof, and the year since which each such director or executive officer has served in their respective positions.  NamePosition HeldDate of Election
or DesignationJames C. KnappChairman of the Board of Directors1986Stephen J. MarkeePresident and Chief Executive Officer1985And Director1986Jeff D. JensonPresident and Director2006Alex FerriesSecretary, Treasurer, and Director2006  Term of Office  The terms of office of the current directors and executive officers shall continue until their replacements are duly qualified and elected.  Business Experience  James C. Knapp, Chairman: Mr. Knapp, one of I/NET's initial founders, is 55 years of age, and received a BBA Degree from the University of Maryland in 1972. He began his computer education at the age of 15 in a special program sponsored by IBM, and served in the United States Air Force as a teacher for missile computer guidance systems. He has been listed in the ACR Directory of Top Computer Executives since 1981, and was inducted into the "Who's Who in the Computer Industry" in 1990. His efforts in digital imaging and voice recognition have been recognized internationally. Mr. Knapp has been a featured speaker at the Massachusetts Institute of Technology and the Harvard Business School. He is also an international speaker on Internet security.   10   Stephen J. Markee, President and CEO: Mr. Markee is 60 years of age. He received a BS Degree from Ferris State University in 1970 and an MBA from Western Michigan University ("WMU") in 1971. He is a licensed certified public accountant in the state of Michigan. Mr. Markee served in the United States Army during the Viet Nam conflict, and was decorated and medically retired in 1968. After completing his education, he served as assistant Auditor General for the State of Michigan before joining WMU as Director of Internal Auditing in 1976. While at WMU, he also taught accounting classes in the MBA program. He then changed directions, from public to private sector, as Vice President of Planning and Control for a division of Standex International Corporation, where he was responsible for information systems, accounting, and human resources. He joined I/NET in 1985 as President and CEO. He has guided I/NET to a successful equity partnership with IBM, and engineered the sale of intellectual property rights to IBM. Mr. Markee has served on the Board of Directors of the Kalamazoo County Chamber of Commerce, Chairman of the Kalamazoo County Convention and Visitors Bureau, Past President of the local chapter of the Institute of Management Accountants, and President of the Parchment Schools Foundation. He is a frequent speaker to civic and business groups, and has appeared on the Financial News Network ("FNN").  On July 7, 2006, upon execution of the Stock Purchase Agreement, Stephen Markee, the sole director, adopted resolutions electing Jeff Jenson and Alex Ferries to the Companys board of directors. The Board of Directors subsequently appointed Mr. Jeff Jenson as President and Mr. Alex Ferries as Secretary/Treasurer.  Below is information on the business experience of Mr. Jeff Jenson and Mr. Alex Ferries.  Jeff Jenson: Jeff D. Jenson, 35 years old, is the Managing Director of Tryant, LLC. Mr. Jenson has been a financial consultant to development stage businesses and public corporations for ten years. Formerly, Mr. Jenson was president of Jenson Services, a Utah merger and acquisition corporation. During his tenure at Jenson Services, Inc., Mr. Jenson completed upwards of 30 reorganizations at a rate of three to five transactions per year. Mr. Jenson was the founder of Vics Nutritional Products, Inc., which owned interests in twenty retail locations in shopping malls throughout the U.S.  Alex Ferries: Alex Ferries, 32 years old, has been an associate at Tryant, LLC since February of 2004. From July 2003 to January 2004, he worked part-time as an independent consultant, evaluating the merits of a potential retail pharmacy chain, which never materialized. He was not actively employed from June 2002 to July 2003. From September 2000 to June 2002, he attended the Tuck School of Business at Dartmouth and graduated with an MBA. Mr. Ferries is President and Director of Wrap-N-Roll USA, Inc., and Secretary and Director of West Coast Car Company.  Family Relationships  None.  Involvement in Certain Legal Proceedings.  Except as indicated below and to the knowledge of management, during the past five years, no present or former director, person nominated to become a director, executive officer, promoter or control person of our Company:  (1)  Was a general partner or executive officer of any business by or against which any bankruptcy petition was filed, whether at the time of such filing or two years prior thereto;  (2)  Was convicted in a criminal proceeding or named the subject of a pending criminal proceeding (excluding traffic violations and other minor offenses);  (3)  Was the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from or otherwise limiting, the following activities:  (i)  Acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity;  (ii)  Engaging in any type of business practice; or  (iii) Engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of federal or state securities laws or federal commodities laws;  11    (4)  Was the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any federal or state authority barring, suspending or otherwise limiting for more than 60 days the right of such person to engage in any activity described above under this Item, or to be associated with persons engaged in any such activity;  (5)  Was found by a court of competent jurisdiction in a civil action or by the Securities and Exchange Commission to have violated any federal or state securities law, and the judgment in such civil action or finding by the Securities and Exchange Commission has not been subsequently reversed, suspended, or vacated; or  (6)  Was found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended or vacated.  Item 10. Executive Compensation.  Cash Compensation.  The following table sets forth the aggregate compensation paid by the Company for services rendered during the periods indicated:  SUMMARY COMPENSATION TABLE  Name and
Principal Position
Of Officers/DirectorsYear
EndedAnnual CompensationLong Term CompensationAll Other Compen-
sation
($)AwardsPayoutsSalary
($)Bonus($)Other Annual
Compen-
sation ($)Restricted Stock Awards
($)Securities Underlying Options/
SARs (#)LTIP Payouts ($)Steven Markee
Director
President, CEO
Secretary12/31/05
12/31/04
12/31/03
12/31/02-0-
-0-
-0-
-0--0-
-0-
-0-
-0--0-
-0-
-0-
-0--0-
-0-
-0-
175,000-0-
-0-
-0-
-0--0-
-0-
-0-
-0--0-
-0-
-0-
-0-  Stock Option Plans.  No cash compensation, deferred compensation or long-term incentive plan awards were issued or granted to our Company's management during the calendar years ending December 31, 2005, 2004, 2003 or 2002, or the period ending on the date of this Annual Report.  Further, no member of our Company's management has been granted any option or stock appreciation right; accordingly, no tables relating to such items have been included within this Item.  Pension Plan  The Company has a profit sharing and defined contribution pension plan covering substantially all employees. Under the plan, employees may make tax deferred voluntary contribution which, at the discretion of the Companys Board of Directors, may be matched within certain limits by the Company. In addition, the Company may make additional discretionary contributions to the plan as profit sharing contributions. All contributions to the plan are limited by applicable Internal Revenue Code regulations. There were no Company contributions charged against operations in 2005, 2004 or 2003.  Compensation of Directors.  There are no standard arrangements pursuant to which our Company's directors are compensated for any services provided as director.  No additional amounts are payable to our Company's directors for committee participation or special assignments.  There are no arrangements pursuant to which any of our Company's directors was compensated during our Company's last completed calendar year or the previous two calendar years for any service provided as director.  See the Summary Compensation Table of this Item.  12   Employment Contracts  There are no employment contracts for any employees or officers as of December 31, 2005.  Termination of Employment and Change of Control Arrangement.  There are no compensatory plans or arrangements, including payments to be received from our Company, with respect to any person named in the Summary Compensation Table set out above which would in any way result in payments to any such person because of his or her resignation, retirement or other termination of such person's employment with our Company or its subsidiaries, or any change in control of our Company, or a change in the person's responsibilities following a change in control of our Company.  Section 16(a) Beneficial Ownership Reporting Compliance  To the Companys knowledge, based solely on a review of such materials as are required by the Securities and Exchange Commission, no officer, director or beneficial holder of more than ten percent of the Companys issued and outstanding shares of Common Stock failed to file in a timely manner with the Securities and Exchange Commission any form or report required to be so filed pursuant to Section 16(a) of the Securities Exchange Act of 1934, as amended, during the years ended December 31, 2005, 2004, 2003 and 2002.  Item 11. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.  The following table sets forth the share holdings of the Company's directors and executive officers and those persons or entities who own more than 5% of the Company's outstanding common stock as of December 31, 2005, 2004, 2003 and 2002.   Amount and Nature ofNameAddressBeneficial OwnershipPercent of ClassJames C. Knapp*Grand Cayman Islands5,417,71915.45%Stephen J. Markee*Richland, MI7,989,18722.78%All directors and officers as a group13,406,90638.23%  * indicates a Director or officer of the Company  Item 12. Certain Relationships and Related Transactions.  During 2004, the Company negotiated the extinguishment of notes payable to James Knapp and Stephen Markee. Mr. Knapp forgave $91,448 in principal and $78,072 in interest and Mr. Markee forgave $267,900 in principal and $163,316 in interest for a total of $600,736 between the two parties.  With the exception of this transaction, there were no material transactions to which the Company or any of its subsidiaries was or is to be a party, in which the amount involved exceeded $60,000 and in which any promoter, founder, director or executive officer, or any security holder who is known to the Company to own of record or beneficially more than 5% of any class of the Company's common stock, or any member of the immediate family of any of the foregoing persons, had an interest during the calendar years ended December 31, 2005, 2004, 2003 and 2002.  Item 13. Exhibits  None   13   Item 14. Principal Accountant Fees and Services.  The following is a summary of the fees billed to I/NET, Inc. by its principal accountants during the calendar years ended December 31, 2005, 2004, 2003 and 2002:  Fee category2005200420032002Audit fees$       -$       -$        -$40,000Audit-related fees$       -$       -$        -$          -Tax fees$       -$       -$3,000$  6,000All other fees$       -$       -$        -$          -Total fees$       -$       -$3,000$46,000  Audit fees.  Consists of fees for professional services rendered by our principal accountants for the audit of our annual financial statements and the review of financial statements included in our Forms 10-QSB or services that are normally provided by our principal accountants in connection with statutory and regulatory filings or engagements.  Audit-related fees.  Consists of fees for assurance and related services by our principal accountants that are reasonably related to the performance of the audit or review of our financial statements and are not reported under "Audit fees."  Tax fees.  Consists of fees for professional services rendered by our principal accountants for tax compliance, tax advice and tax planning.  All other fees.  Consists of fees for products and services provided by our principal accountants, other than the services reported under "Audit fees," "Audit-related fees" and "Tax fees" above.    14    SIGNATURES  In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.  I NET, INC  Date:   11/30/2006 By /s/ Jeff Jenson  Jeff Jenson, President and  Director  Date:   11/30/2006 By /s/ Alex Ferries  Alex Ferries, Secretary/Treasurer and  Director  In accordance with the Exchange Act, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:  I NET, INC.  Date:   11/30/2006 By /s/ Jeff Jenson  Jeff Jenson, President and  Director  Date:   11/30/2006 By /s/ Alex Ferries  Alex Ferries, Secretary/Treasurer and  Director     15


I/NET, Inc.       Financial Statements  Years Ended December 31, 2005, 2004, 2003, and 2002        F-1   I/NET, Inc.  Contents     Independent Auditors Report3Financial Statements:Balance Sheets4 and 5Statements of Operations6Statements of Capital Deficit7Statements of Cash Flows8Summary of Accounting Policies9 and 10Notes to Financial Statements11 - 15       F-2


Report of Independent Registered Public Accounting Firm   Board of Directors I/NET, Inc. Kalamazoo, Michigan   We have audited the accompanying balance sheets of I/NET, Inc. (the Company), as of December 31, 2005, 2004, 2003, and 2002, and the related statements of operations, capital deficit, and cash flows for the years then ended.  These financial statements are the responsibility of the Company's management.  Our responsibility is to express an opinion on these financial statements based on our audits.  We conducted our audits in accordance with the standards of the Public Company 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. The Company is not required to have, nor were we engaged to perform, and audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Companys internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.  In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of I/NET, Inc., at December 31, 2005, 2004, 2003, and 2002, and the results of its operations and cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.  The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.  As discussed in Note 13 to the financial statements, the Company has suffered recurring losses from its operations and has a net capital deficiency that raise substantial doubt about its ability to continue as a going concern. Managements plans in regard to these matters are also described in Note 13. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.   /s/  BDO Seidman, LLP  Certified Public Accountants BDO Seidman, LLP Kalamazoo, Michigan  September 5, 2006   F-3


I/NET, Inc.   Balance Sheets     December 31,2005200420032002Assets(Notes 3 and 4)Current:Cash and cash equivalents$       1,656$       4,115$      37,788$       3,978Trade receivables8,86715,02729,84366,341Deposits-2,5523,0903,090Total Current Assets10,52321,69470,72173,409Property and Equipment(Note 9):Office furniture and equipment---15,695Intellectual property30,99330,99330,99330,99330,99330,99330,99346,688Less accumulated depreciation30,99330,99330,99344,060Net Property and Equipment---2,628$      10,523$      21,694$      70,721$      76,037  See accompanying report of independent registered public accounting firm, summary of accounting policies and notes to financial statements.   F-4   I/Net, Inc.   Balance Sheets    December 31,2005200420032002Liabilities and Capital DeficitCurrent Liabilities:Note payable to bank (Note 2)$      34,500$      34,500$      34,500$      34,500Accounts payable73,87582,48678,52477,370Accruals:Compensation and related taxes10,00010,00032,52514,432Interest--238,946210,295Other-2005,109-Advances from stockholders (Note 3)13,50013,50089,80091,300Current maturities of long-term debt (Note 4)9,0007,000290,048290,048Total Current Liabilities140,875147,686769,452717,945Commitments and Contingencies (Note 9)Capital Deficit:Common stock, $.001 par value - shares authorized,50,000,000; issued and outstanding, 35,070,509(Note 10)35,07135,07135,07135,071Additional paid-in capital12,808,63912,808,63912,207,90312,207,903Deficit (Note 12)(12,974,062)(12,969,702)(12,941,705)(12,884,882)Total Capital Deficit(130,352)(125,992)(698,731)(641,908)$      10,523$      21,694$      70,721$      76,037  See accompanying report of independent registered public accounting firm, summary of accounting policies and notes to financial statements.    F-5   I/NET, Inc.   Statements of Operations      Year ended December 31,2005200420032002Revenues (Note 6)$     39,746$     300,672$   395,646$   788,404Cost of Sales37,937305,650378,084717,6861,809(4,978)17,56270,718Gross Profit (loss)Selling, General, and Administrative Expenses6,34317,67855,737374,479Operating loss(4,534)(22,656)(38,175)(303,761)Other Income (Expense):Gain on extinguishment of debt (Notes 5)1,010-13,066156,672Interest Expense, net of interest income(1,028)(5,497)(30,957)(32,045)Miscellaneous192156(757)-Total Other Incomes (Expense)174(5,341)(18,648)124,627Net Loss$     (4,360)$     (27,997)$    (56,823)$  (179,134)Net Earnings per Share - Basic and Diluted(Note 12)$             -$               -$             -$       (0.01)Average Number of Basic Common SharesOutstanding (Note 12)35,070,50935,070,50935,070,50932,555,509Average Number of Diluted Common SharesOutstanding (Note 12)35,070,50935,070,50935,070,50932,555,509   See accompanying report of independent registered public accounting firm, summary of accounting policies and notes to financial statements.    F-6   I/NET, Inc.   Statements of Capital Deficit     Common StockAdditionalPaid-InSharesAmountCapitalDeficitTotalBalance, January 1, 200232,075,509$    32,076$ 12,015,661$ (12,705,748)$(658,011)Net loss for the year---(179,134)(179,134)Issuance of stock2,995,0002,995192,242-195,237Balance, December 31, 200235,070,50935,07112,207,903(12,884,882)(641,908)Net loss for the year---(56,823)(56,823)Balance, December 31, 200335,070,50935,07112,207,903(12,941,705)(698,731)Net loss for the year---(27,997)(27,997)Forgiveness of debt (Note 4)--600,736-600,736Balance, December 31, 200435,070,50935,07112,808,639(12,969,702)(125,992)Net loss for the year---(4,360)(4,360)Balance, December 31, 200535,070,509$    35,071$ 12,808,639$ (12,974,062)$(130,352)  See accompanying report of independent registered public accounting firm, summary of accounting policies and notes to financial statements.   F-7   I/NET, Inc.   Statements of Cash Flows    December 31,2005200420032002Operating Activities:Net loss$          (4,360)$          (27,997)$        (56,823)$  (179,134)Depreciation and amortization--2,62824,525Stock compensation---175,000Stock issued for services---20,237Gain on extinguishment of debt (Note 5)(1,010)-(13,066)(156,672)Changes in assets and liabilities:Receivables6,16014,81636,49837,663Deposits2,552538--Accounts payable(8,224)3,96214,22013,930Accruals423(24,992)51,85331,559Cash Provided by (Used in) Operating Activities(4,459)(33,673)35,310(32,892)Financing Activities:Proceeds from issuance of notes to stockholders2,000---Net change in note payable to bank---34,500Principal payments on notes to stockholders--(1,500)(4,200)Cash Provided by (Used in) Financing Activities2,000-(1,500)30,300Increase (Decrease) in Cash(2,459)(33,673)33,810(2,592)Cash, beginning of year4,11537,7883,9786,570Cash, end of year$           1,656$              4,115$         37,788$      3,978  See accompanying report of independent registered public accounting firm, summary of accounting policies and notes to financial statements.   F-8   I/NET, Inc.   Summary of Accounting Policies    Basis of PresentationThe financial statements include the accounts of the Company, I/NET, Inc. (a Delaware corporation), and its wholly owned subsidiary, I/NET, Inc. (a Michigan corporation), and its wholly owned subsidiary, Stek, Ltd. (a Caymanian Corporation).  Stek, Ltd., was formed to receive and hold shares of SEGOES, Ltd. (a privately held Caymanian corporation).  These shares were earned for the successful completion of the development, installation, and operation of the SEGOES web site, an Internet-based offshore asset management and trading system.Cash and Cash
EquivalentsFor purposes of the Statements of Cash Flows, the Company considers all highly liquid investments with maturity of three months or less when purchased to be cash equivalents.Accounts ReceivableAccounts receivable are customer obligations due under normal trade terms. The Companys management continually evaluates customers financial condition and credit worthiness. All receivables are deemed collectible and no allowance for doubtful accounts has been established.Office Furniture,
Equipment, and
DepreciationOffice furniture and equipment are stated at cost.  Depreciation is computed principally by the straight-line method for financial reporting purposes and by accelerated methods for tax purposes over the estimated useful lives of the assets ranging from three to seven years.Intellectual PropertyPurchased intellectual property is stated at cost.  Amortization is computed by the straight-line method over the estimated useful life of 24 months.  See accompanying report of independent registered public accounting firm and  notes to financial statements.   F-9   I/NET, Inc.   Summary of Accounting Policies    Developed Computer
SoftwareSoftware development costs and certain product enhancements, when significant, are capitalized subsequent to the establishment of technological feasibility for the product and prior to the products general release to customers.Costs incurred prior to technological feasibility or subsequent to the products general release to customers, as well as selling, general, and administrative costs associated with the products, are expensed as incurred.Revenue RecognitionRevenues for the sale of the Companys Internet products are recognized when the customer has accepted the product.  The Company records its revenues from consulting contracts on a monthly basis, as amounts are invoiced for time and expenses incurred.EstimatesThe preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.Fair Value of
Financial InstrumentsThe Companys financial instruments consist of cash, receivables, notes payable, accounts payable, and long-term debt.  Due to the short-term nature of the items, other than long-term debt, and the variable interest rates on a substantial portion of the long-term debt, management estimates that carrying amounts of the Companys financial instruments approximate their fair values at December 31, 2005, 2004, 2003, and 2002.  See accompanying report of independent registered public accounting firm and  notes to financial statements.  F-10   I/NET, Inc.   Notes to Financial Statements    1.BusinessThe Company operates in one segment consisting of software development and Internet consulting services.  The Company does not operate based upon product lines but as one business unit.2.Note Payable
to BankDuring March, 2002, the Company obtained a $35,000 unsecured line-of-credit from a bank which expired in January, 2006. Interest is payable at the banks prime rate for the first six months and prime plus 3% subsequently (effectively 10.25%, 8.25%, 7.00%, and 7.25% at December 31, 2005, 2004, 2003 and 2002, respectively). The Company had $34,500 outstanding under this agreement as of December 31, 2005, 2004, 2003 and 2002.Subsequent to December 31, 2005, the Company negotiated the extinguishment of this note for $10,000 in cash.3.Short-Term
Advances from
StockholdersAdvances from stockholders consist of the following:  December 31,2005200420032002Non-interest bearing notes payableto stockholders, due on demand$  13,500$  13,500$  13,500$  13,500Stockholders advances bearinginterest at 8%, due on demand andsecured by all the Companys assets(See Note 5)--76,30077,800$  13,500$  13,500$  89,800$  91,300   4.Long-Term DebtLong-term debt consists of the following:  December 31,2005200420032002Notes payable to stockholders,bearing interest at 8%, due inDecember, 2002 and 2003, securedby all the Companys assets(See Note 5)$  9,000$  7,000$ 290,048$ 290,0489,0007,000290,048290,048Less current maturities9,0007,000290,048290,048Total Long-Term Debt$          -$          -$             -$            -   See accompanying report of independent registered public accounting firm.   F-11   I/NET, Inc.   Notes to Financial Statements    During 2004, the Company successfully negotiated the extinguishment of the notes payable to stockholders together with the related accrued interest. The amount of the debt forgiveness was recorded as additional paid-in capital.5.Extinguishment
of DebtDuring 2002  2005, the Company reached agreements with various debt holders.

During the first quarter of 2002, the Company successfully negotiated the extinguishment of notes payable to vendors together with related accrued interest for $10,000 in cash and 100,000 shares of its common stock.6.Major CustomersThe Company provided Internet products, web site consulting services, support services, and contract services to major customers as follows:  Year ended December 31,2005200420032002Customer A46%5%2%1%Customer B10%2%-%-%Customer C-%71%77%57%Customer D-%8%11%8%Customer E-%-%-%20%   7.Taxes on IncomeIncome taxes are calculated using the liability method.Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.Significant components of the Companys deferred tax assets are as follows:  December 31,2005200420032002Deferred Tax Assets:Net operating loss carryforward$ 3,004,000$ 3,004,000$ 2,994,000$ 2,975,000Valuation allowance(3,004,000)(3,004,000)(2,994,000)(2,975,000)$               -$               -$               -$               -  As of December 31, 2005, 2004, 2003, and 2002, the Company had net operating loss carryforwards of approximately $8,832,000, $8,831,000, $8,799,000, and $8,731,000, respectively, available to reduce future taxable income. These carryforwards expire from 2006 through 2011.  See accompanying report of independent registered public accounting firm.   F-12   I/NET, Inc.   Notes to Financial Statements    The net operating loss carryforward requires the Company to record a deferred tax asset. Management has elected to record a valuation allowance for the entire balance of the deferred tax asset due to the uncertainty of its future realization.8.Employee Benefit PlanThe Company has a profit sharing and defined contribution retirement plan covering substantially all employees.  Under the plan, employees may make tax deferred voluntary contributions which, at the discretion of the Companys Board of Directors, may be matched within certain limits by the Company.  In addition, the Company may make additional discretionary contributions to the plan as profit sharing contributions.  All contributions to the plan are limited by applicable Internal Revenue Code regulations.  There were no company contributions charged against operations in 2005, 2004, 2003, or 2002.9.Operating LeaseThe Company leased its facilities and certain equipment under non-cancelable operating leases.  Rental expense under these leases was approximately $10,000, $20,000, $51,000, and $106,000, for each of the years ended December 31, 2005, 2004, 2003, and 2002. All operating leases have expired as of December 31, 2005.  See accompanying report of independent registered public accounting firm.   F-13   I/NET, Inc.   Notes to Financial Statements    10.Incentive Stock
Option PlanThe Company maintained an incentive stock option plan that provided for the granting of options to officers and other key employees at an exercise price not less than 100% of the fair market value on the date of the grant.  Twenty percent of the options became exercisable each year following the date they were granted, and remained outstanding for five years following the day they became fully vested.  Changes in options outstanding are summarized as follows:   Option PriceWeighted AverageSharesPer SharePrice Per ShareDecember 31, 20012,065,000$.07-$2.50$.11Expired during 2002(1,260,000)$.07-$2.50$.10December 31, 2002805,000$.07-$2.50$.08Expired during 2003(125,000)$.07$.07December 31, 2003680,000$.07-$2.50$.09Expired during 2004(680,000)$.07-$2.50$.09December 31, 2004and 2005---   Under SFAS No. 123, Accounting for Stock Based Compensation, the Company is required to provide proforma information regarding net income (loss) and earnings per share as if compensation cost for the Companys stock option plan had been determined in accordance with the fair value based method prescribed in SFAS No. 123.  The Company estimates the fair value of each stock option at the grant date by using the Black-Scholes Option-pricing model. There was no proforma expense for the years ended December 31, 2005, 2004, 2003, and 2002.11.Supplemental
Disclosure of
Cash Flow
InformationInterest paid for the years ended December 31, 2005, 2004, 2003, and 2002, was $1,000, $6,000, $2,000, and $1,000, respectively.  The Company paid no income taxes or received any interest income during 2005, 2004, 2003, and 2002.  See accompanying report of independent registered public accounting firm.  F-14   I/NET, Inc.   Notes to Financial Statements    12.Earnings (Loss) Per ShareA reconciliation of shares used in calculating basic and diluted earnings (loss) per share are as follows:  Year ended December 31,2005200420032002Basic35,070,50935,070,50935,070,50932,555,509Diluted35,070,50935,070,50935,070,50932,555,509   Options discussed in Note 10 were not included in the computation of diluted loss per share as they were anti-dilutive.13.Continued
ExistenceThe Companys financial statements have been presented on the basis that it is a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.  The Company has suffered recurring losses from operations, has a significant working capital deficit, and requires additional capital to continue its product development.  Management believes the Company will continue as a going concern and is actively marketing its products, which would enable the Company to meet its current obligations and provide additional funds for continued new product development.Subsequent to December 31, 2005, the Company accepted an offer from Tryant, LLC for the acquisition of the Company.  See accompanying report of independent registered public accounting firm.   F-15


CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  The financial statements included herein have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Although certain information normally included in the financial statement prepared in accordance with the accounting principals generally accepted in the United States of America has been condensed or omitted, the Registrant believes that the disclosures are adequate to make the information presented not misleading. These reports and filings attempt to advise interested parties of the risks and factors that may affect our business, financial condition and results of operations and prospects. The summary of accounting policies and notes are included in the preceding audited financial statements.  The unaudited condensed consolidated financial statements included herein reflect all adjustments, consisting only or normal recurring items, which, in the opinion of management, are necessary to present a fair statement of the results for the interim periods presented.  The results for interim periods are not necessarily indicative of trends or results to be expected for a full year.     F-16


Unaudited financial statements for interim periods March 31, 2003  September 30, 2005   I/NET, Inc. Condensed Balance Sheets as of March 31, 2005, 2004 and 2003 (Unaudited)  March 31,200520042003ASSETS

Current Assets:Cash and cash equivalents$                631$             4,774$              1,228Trade receivables5,07528,79529,010Deposits2,5523,0903,090TOTAL ASSETS$             8,258$           36,659$            33,328LIABILITIES & CAPITAL DEFICITCurrent Liabilities:Note payable to bank$           34,500$           34,500$            34,500Accounts payable78,46074,55796,846Accruals:
Compensation and related taxes
Interest
Other10,000
-
20011,617
-
20011,617
217,283
-Advances from stockholders20,50020,50083,900Current maturities of long-term debt--290,048Total Current Liabilities143,660141,374734,194Capital Deficit:Common stock35,07135,07135,071Additional paid-in capital12,808,63912,808,63912,207,903Deficit(12,979,112)(12,948,425)(12,943,840)Total Capital Deficit(135,402)(104,715)(700,866)TOTAL LIABILITIES & CAPITAL DEFICIT$             8,258$           36,659$            33,328    F-17      I/NET, Inc. Condensed Consolidated Statements of Operations For the periods ended March 31, 2005, 2004, 2003 and 2002: (Unaudited)   March 31,2005200420032002Revenues$      11,995$      94,723$      97,102$       280,912Cost of Revenues16,66291,711120,919278,281Gross Profit (Loss)(4,667)3,012(23,817)2,631Selling, General and Administrative Expenses4,1746,32527,14558,865Loss from Operations(8,841)(3,313)(50,962)(56,234)Other Income (Expense):Gain on Extinguishment of Debt---156,672Interest Expense, net of interest income
Miscellaneous(569)
-(3,369)
(38)(7,657)
(339)(11,372)
-Total Other Income (Expense)(569)(3,407)(7,996)145,300Net Income (Loss)$      (9,410)$     (6,720)$    (58,958)$         89,066Net Earnings (Loss) per Share Basic and Diluted$                -$                -$                -$                  -Average Number of Basic Common Shares
Outstanding35,070,50935,070,50935,070,50932,100,926Average Number of Diluted Common Shares
Outstanding35,070,50935,070,50935,070,50932,100,926      F-18      I/NET, Inc. Condensed Consolidated Statements of Cash Flows For the Periods ended March 31, 2005, 2004, 2003 and 2002: (Unaudited)  March 31,2005200420032002OPERATING ACTIVITIES:Net income (loss)$    (9,410)$     (6,720)$  (58,958)$     89,066Depreciation and amortization--2,6286,942Gain on extinguishment of debt---(156,672)Changes in assets and liabilities:Trade receivables9,9521,04837,33133,089Accounts payable and accruals(4,026)(27,342)23,6493,643Net Cash Used in Operating Activities(3,484)(33,014)4,650(23,932)FINANCING ACTIVITIES:Net change in note payable to bank---15,000Issuance of common stock---350Principal payments on notes to stockholders--(7,400)(12,400)Proceeds from issuance of notes to stockholders---20,000Net Cash Provided by (Used in) Financing Activities--(7,400)22,950Decrease in Cash(3,484)(33,014)(2,750)(982)Cash, beginning of period4,11537,7883,9786,570Cash, end of period$         631$       4,774$      1,228$       5,588      F-19       I/NET, Inc. Condensed Balance Sheets as of June 30, 2005, 2004 and 2003: (Unaudited)   June 30,200520042003ASSETS

Current Assets:Cash and cash equivalents$              5,532$           1,602$       17,602Trade receivables4,54935,96830,552Deposits2,5253,0903,090TOTAL ASSETS$            12,606$         40,660$       51,244LIABILITIES & CAPITAL DEFICITCurrent Liabilities:Note payable to bank$            34,50034,50034,500Accounts payable81,04569,40598,301Accruals:
Compensation and related taxes
Interest
Other10,000
-
82311,617
-
1,69711,617
224,451
2,728Advances from stockholders20,50020,50089,800Current maturities of long-term debt--290,048Total Current Liabilities146,868137,719751,445Capital Deficit:Common stock35,07135,07135,071Additional paid-in capital12,808,63912,808,63912,207,903Deficit(12,977,972)(12,940,769)(12,943,175)Total Capital Deficit(134,262)(97,059)(700,201)TOTAL LIABILITIES & CAPITAL DEFICIT$            12,606$         40,660$       51,244     F-20      I/NET, Inc. Condensed Consolidated Statements of Operations For the Six Months ended: (Unaudited)   Six Months Ended
June 30,2005200420032002Revenues$     19,604$    201,698$      199,273$    467,033Cost of Revenues21,829184,496206,415488,319Gross Profit (Loss)(2,225)17,202(7,142)(21,286)Selling, General and Administrative Expenses5,49812,65937,691104,996Income (Loss) from Operations(7,723)4,543(44,833)(126,282)Other Income (Expense):Gain on Extinguishment of Debt---156,672Interest Expense, net of interest income
Miscellaneous(547)
-(3,966)
359(15,450)
1,990(16,275)
-Total Other Income (Expense)(547)(3,607)(13,460)140,397Net Income (Loss)$     (8,270)$           936$      (58,293)$      14,115Net Earning (Loss) per Share Basic and Diluted$               -$                -$                  -$               -Average Number of Basic Common Shares
Outstanding35,070,50935,070,50935,070,50932,162,176Average Number of Diluted Common Shares
Outstanding35,070,50935,070,50935,070,50932,627,176    F-21     I/NET, Inc. Condensed Consolidated Statements of Operations For the three months ended: (Unaudited)   Three Months Ended
June 30,2005200420032002Revenues$        7,609$    106,975$    102,171$    186,121Cost of Revenues5,16792,78585,496210,038Gross Profit (Loss)2,44214,19016,675(23,917)Selling, General & Administrative Expenses1,3246,33410,54646,131Income (Loss) from Operations1,1187,8566,129(70,048)Other Income (Expense):Interest Expense, net of interest income22(597)(7,793)(4,903)Miscellaneous-3972,329-Total Other Income (Expense)22(200)(5,464)(4,903)Net Income (Loss)$        1,140$        7,656$           665$    (74,951)Net Earnings (Loss) per Share Basic and Diluted$                -$                -$                -$                -Average Number of Basic Common Shares
Outstanding35,070,50935,070,50935,070,50932,297,176Average Number of Diluted Common Shares
Outstanding35,070,50935,070,50935,070,50932,297,176    F-22      I/NET, Inc. Condensed Consolidated Statements of Cash Flows For the Periods ended: (Unaudited)   Six Months EndedJune 30,2005200420032002OPERATING ACTIVITIES:Net income (loss)$   (8,270)$          936$      (58,293)$     14,115Depreciation and amortization--2,62813,884Gain on extinguishment of debt---(156,672)Changes in assets and liabilities:Trade receivables10,478(6,125)35,78945,159Deposits27---Accounts payable and accruals(818)(30,997)35,00048,490Cash Provided by (Used in) Operating Activities1,417(36,186)15,124(35,024)FINANCING ACTIVITIES:Net change in note payable to bank---34,500Issuance of common stock---350Principal payments on notes to stockholders--(1,500)(14,400)Proceeds from issuance of notes to stockholders---20,000Cash Provided by (Used in) Financing Activities--(1,500)40,450Increase (Decrease) in Cash1,417(36,186)13,6245,426Cash, beginning of period4,11537,7883,9786,570Cash, end of period$     5,532$       1,602$        17,602$     11,996     F-23       I/NET, Inc. Condensed Balance Sheets at September 30, 2005, 2004, 2003: (Unaudited)  Sept 30,200520042003ASSETS

Current Assets:Cash and cash equivalents$                 3,092$                  -$           1,365Trade receivables11,85936,25629,355Deposits-2,5523,090TOTAL ASSETS$               14,951$         38,808$         33,810LIABILITIES & CAPITAL DEFICITCurrent Liabilities:Note payable to bank$               34,500$         34,500$         34,500Accounts payable76,62771,78786,240Accruals:
Compensation and related taxes
Interest
Other10,000
-
-11,617
-
3,49911,617
231,698
1,696Advances from stockholders20,50020,50089,800Current maturities of long-term debt--290,048Total Current Liabilities141,627141,903745,599Capital Deficit:Common stock35,07135,07135,071Additional paid-in capital12,808,63912,808,63912,207,903Deficit(12,970,386)(12,946,805)(12,954,763)Total Capital Deficit(126,676)(103,095)(711,789)TOTAL LIABILITIES & CAPITAL DEFICIT$               14,951$         38,808$         33,810    F-24      I/NET, Inc. Condensed Consolidated Statements of Operations For the Nine Months ended September 30, 2005, 2004, 2003 and 2002 (Unaudited)   For the Nine Months Ended
September 30,2005200420032002Revenues$    34,696$  288,075$  293,210$   608,919Cost of Revenues29,354271,282294,284646,717Gross Profit (Loss)5,34216,793(1,074)(37,798)Selling, General and Administrative Expenses6,38917,64247,272126,802Loss from Operations(1,047)(849)(48,346)(164,600)Other Income (Expense):Gain on Extinguishment of Debt1,010--156,672Interest Expense, net of interest income
Miscellaneous(838)
191(4,584)
333(23,106)
1,571(24,121)
-Total Other Income (Expense)363(4,251)(21,535)132,551Net Loss$       (684)$    (5,100)$  (69,881)$   (32,049)Net Loss per Share Basic and Diluted$              -$              -$              -$              -Average Number of Basic Common Shares Outstanding35,070,50935,070,50935,070,50932,223,426Average Number of Diluted Common Shares Outstanding35,070,50935,070,50935,070,50932,223,426    F-25       I/NET, Inc. Condensed Consolidated Statements of Operations For the Three Months ended September 30, 2005, 2004, 2003 and 2002: (Unaudited)   Three Months Ended
September 30,2005200420032002Revenues$          15,092$      86,377$      93,937$    141,886Cost of Revenues7,52586,78687,869158,398Gross Profit (Loss)7,567(409)6,068(16,512)Selling, General and Administrative Expenses8914,9839,58121,806Income (Loss) from Operations6,676(5,392)(3,513)(38,318)Other Income (Expense):
Gain on Extinguishment of Debt
Interest Expense, net of interest income
Miscellaneous1,010
(291)
191-
(618)
(26)-
(7,656)
(419)-
(7,846)
-Total Other Income (Expense)910(644)(8,075)(7,846)Net Income (Loss)$            7,586$      (6,036)$    (11,588)$   (46,164)Net Earnings (Loss) per Share Basic and Diluted$                   -$                -$                -$                -Average Number of Basic Common Shares
Outstanding35,070,50935,070,50935,070,50932,320,509Average Number of Diluted Common Shares
Outstanding35,070,50935,070,50935,070,50932,320,509    F-26      I/NET, Inc. Condensed Consolidated Statements of Cash Flows For the Nine Months ended September 30, 2005, 2004, 2003 and 2002: (Unaudited)     Nine Months EndedSeptember 30,2005200420032002OPERATING ACTIVITIES:Net loss$           (684)$     (5,100)$      (69,881)$   (32,049)Depreciation and amortization--2,62820,583Gain on extinguishment of debt(1,010)--(156,672)Changes in assets and liabilities:Trade receivables3,168(6,413)36,98650,230Deposits2,552538--Accounts payable and accruals(5,049)(26,813)29,15476,872Cash Used in Operating Activities(1,023)(37,788)(1,113)(41,036)FINANCING ACTIVITIES:Net change in note payable to bank---34,500Issuance of common stock---350Principal payments on notes to stockholders--(1,500)(16,800)Proceeds from issuance of notes to stockholders---20,000Cash Provided by (Used in) Financing Activities--(1,500)38,050Decrease in Cash(1,023)(37,788)(2,613)(2,986)Cash, beginning of period4,11537,7883,9786,570Cash, end of period$           3,092$               -$           1,365$       3,584    F-27