================================================================================

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-QSB

          |X|  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                  For the quarterly period ended June 30, 2006

                                       OR

          |_|  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

            For the Transition Period from ___________ to ___________


                         Commission File Number: 0-31040


                                  ADSERO CORP.
                                  ------------
             (Exact name of Registrant as specified in its charter)

                  Delaware                                65-0602729
                  --------                                ----------
      (State or other jurisdiction of                  (I.R.S. Employer
       incorporation or organization)                 Identification No.)

                                2101 Nobel Street
                              Sainte Julie, Quebec
                                     J3E 1Z8
                              --------------------
          (Address of principal executive offices, including zip code)

                                 (450) 922-5689
                                 --------------
              (Registrant's telephone number, including area code)

         Check whether the Registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months, and (2) has been subject to such filing requirements for
the past 90 days. Yes [X] No [ ]

         Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act) Yes [ ] No [ X ]

         The number of shares of the Registrant's common stock outstanding at
August 7, 2006, was 34,051,930.

         Transitional Small Business Disclosure Format:Yes [ ] No [X]

================================================================================

<PAGE>

                                  ADSERO CORP.
                  JUNE 30, 2006 QUARTERLY REPORT ON FORM 10-QSB
                                TABLE OF CONTENTS


                                                                            PAGE


         Special Note Regarding Forward Looking Information ................   3


                         PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements ..............................................   4

Item 2.  Management's Discussion and Analysis of Financial Condition
         and Results of Operations .........................................  33

Item 3.  Controls and Procedures ...........................................  37


                           PART II - OTHER INFORMATION

Item 1.  Legal Proceedings .................................................  37

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds .......  37

Item 3.  Defaults Upon Senior Securities ...................................  37

Item 5.  Other Information .................................................  39

Item 6.  Exhibits ..........................................................  40


                                        2
<PAGE>

                SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

         To the extent that the information presented in this Quarterly Report
on Form 10-QSB for the quarter ended June 30, 2006, discusses financial
projections, information or expectations about our products or markets, proposed
financing and acquisition activities, or otherwise makes statements about future
events, such statements are forward-looking. We are making these forward-looking
statements in reliance on the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. 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. These
risks and uncertainties are described, among other places in this Quarterly
Report, in "Management's Discussion and Analysis of Financial Condition and
Results of Operations".

         In addition, we disclaim any obligations to update any forward-looking
statements to reflect events or circumstances after the date of this Quarterly
Report. When considering such forward-looking statements, you should keep in
mind the risks referenced above and the other cautionary statements in this
Quarterly Report.


                                        3
<PAGE>

                         PART I -- FINANCIAL INFORMATION

                                                                            PAGE
                                                                            ----

ITEM 1.  FINANCIAL STATEMENTS

         Condensed Consolidated Balance Sheet
         as of June 30, 2006 (unaudited) ...................................   5

         Condensed Consolidated Statements of Operations
         for the three and six months ended June 30, 2006
         and 2005 (unaudited) ..............................................   6

         Condensed Consolidated Statements of Cash Flows
         for the six months ended June 30, 2006 and 2005 (unaudited) .......   7

         Notes to Condensed Consolidated Financial Statements (unaudited) ..   8


                                        4
<PAGE>
<TABLE>
                                 ADSERO CORP. AND SUBSIDIARIES
                             CONDENSED CONSOLIDATED BALANCE SHEET
                                         June 30, 2006
                                          (unaudited)
<CAPTION>
                                            ASSETS
                                            ------
CURRENT ASSETS
<S>                                                                              <C>
  Cash .......................................................................   $      6,553
  Accounts receivable, net ...................................................      3,120,286
  Inventories ................................................................      1,642,765
  Prepaid expenses and other assets ..........................................        343,813
                                                                                 ------------

       TOTAL CURRENT ASSETS ..................................................      5,113,417

  Property and equipment,net .................................................      1,305,920
  Investment in Turbon AG ....................................................      3,850,000
  Assets held for sale .......................................................      2,600,591
  Intangible assets, net .....................................................        556,668
  Other assets ...............................................................         75,149
                                                                                 ------------

       Total Assets ..........................................................   $ 13,501,745
                                                                                 ============

                           LIABILITIES AND STOCKHOLDERS' DEFICIENCY
                           ----------------------------------------
CURRENT LIABILITIES

  Bank Loans .................................................................   $  2,590,851
  Convertible promissory note ................................................      1,298,652
  Finished goods purchasing line of credit ...................................      2,799,995
  Stock purchase loan ........................................................      2,800,000
  Accounts payable ...........................................................      4,099,479
  Accrued compensation .......................................................        486,008
  Warranties and related accruals ............................................        402,168
  Accrued expenses ...........................................................      1,986,831
  Liabilities of discontinued operation ......................................      2,125,341
  Note payable - former officer (including accrued interest of $60,488) ......        172,988
  Equipment financing obligations ............................................        153,548
                                                                                 ------------
       TOTAL CURRENT LIABILITIES .............................................     18,915,861

  Notes payable - stockholders ...............................................        600,000
  Acquisition debt ...........................................................      2,290,678

                                                                                 ------------
       Total Liabilities .....................................................     21,806,539
                                                                                 ------------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' DEFICIENCY
  Common stock, $.001 par value, 100,000,000 shares authorized,
    34,051,930 shares issued and outstanding .................................         34,052
  Series I exchangeable shares of subsidiary, 6,500,000 shares outstanding,
    exchangeable one for one into common shares of the company ...............      3,250,000
  Series A Preferred Special Voting Stock, $.0001 par value,
  20,000,000 shares authorized, 6,500,000 issued and outstanding .............            650
  Additional paid-In-capital .................................................     19,496,887
  Accumulated other comprehensive loss - foreign currency
    translation adjustment ...................................................       (343,421)
  Accumulated deficit ........................................................    (30,742,962)
                                                                                 ------------
       TOTAL STOCKHOLDERS' DEFICIENCY ........................................     (8,304,794)
                                                                                 ------------

       Total Liabilities and Stockholders' Deficiency ........................   $ 13,501,745
                                                                                 ============

                   SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                               5
</TABLE>
<PAGE>
<TABLE>
                                 ADSERO CORP. AND SUBSIDIARIES
                        CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                          (unaudited)
<CAPTION>
                                          For the three months        For the six months
                                              ended June 30               ended June 30
                                       --------------------------  --------------------------
                                           2006           2005         2006           2005
                                       ------------   -----------  ------------   -----------
<S>                                    <C>            <C>          <C>            <C>
REVENUES ............................  $  5,786,100   $ 6,328,742  $ 13,202,949   $13,746,420

COST OF GOODS SOLD ..................     5,449,327     4,465,272    11,161,728     9,896,151
                                       ------------   -----------  ------------   -----------
  GROSS PROFIT ......................       336,773     1,863,470     2,041,221     3,850,269
                                       ------------   -----------  ------------   -----------

OPERATING EXPENSES
  Salaries and compensation .........       685,941       787,165     1,572,849     1,577,247
  Sales and administrative ..........     1,770,327       767,015     3,098,394     1,354,426
  Fixed asset impairment ............       500,000             -       500,000             -
  Lease abandonment charge ..........       623,178             -       623,178             -
  Goodwill and intangibles impairment     4,306,298             -     4,306,298             -
  Depreciation and amortization .....       357,087       105,876       706,179       236,753
                                       ------------   -----------  ------------   -----------
  TOTAL OPERATING EXPENSES ..........     8,242,831     1,660,056    10,806,898     3,168,426
                                       ------------   -----------  ------------   -----------

(LOSS)INCOME FROM OPERATIONS ........    (7,906,058)      203,414    (8,765,677)      681,843
  GAIN ON EXTINGUISHMENT OF DEBT ....             -             -       460,693             -
  LOSS ON INVESTMENT IN COMMON STOCK      2,548,774             -     2,548,774             -
  INTEREST EXPENSE ..................       206,753       173,175       512,803       288,981
                                       ------------   -----------  ------------   -----------

(LOSS)INCOME BEFORE INCOME TAXES ....   (10,661,585)       30,239   (11,366,561)      392,862

  INCOME TAXES ......................             -        11,188             -        68,794
                                       ------------   -----------  ------------   -----------

NET LOSS ............................  $(10,661,585)  $    19,051  $(11,366,561)  $   324,068
                                       ============   ===========  ============   ===========

NET (LOSS) INCOME PER SHARE, BASIC ..  $      (0.26)  $      0.00  $      (0.28)  $      0.02
                                       ============   ===========  ============   ===========

WEIGHTED AVERAGE NUMBER OF
  SHARES OUTSTANDING ................    40,551,930    23,741,975    40,551,930    22,866,308
                                       ============   ===========  ============   ===========

NET (LOSS) INCOME PER SHARE, DILUTED                  $      0.00                 $      0.01
                                                      ===========                 ===========

WEIGHTED AVERAGE NUMBER OF
  SHARES OUTSTANDING ................                  34,002,428                  33,206,751
                                                      ===========                 ===========

                   SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                               6
</TABLE>
<PAGE>
<TABLE>
                                 ADSERO CORP. AND SUBSIDIARIES
                        CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                          (unaudited)
<CAPTION>
                                                                     For the six months
                                                                        ended June 30,
                                                                -----------------------------
                                                                    2006             2005
                                                                ------------     ------------
<S>                                                             <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:

  Net (Loss)Income .........................................    $(11,366,561)    $    324,068
                                                                ------------     ------------

  Adjustments to reconcile net (loss)income to net cash
  (used in) provided by operating activities:
    Depreciation and amortization ..........................         706,179          228,337
    Stock based compensation ...............................         133,839           55,997
    Fixed asset impairment .................................         500,000                -
    Bad debt expense .......................................         344,079           46,113
    Loss in investment in common stock .....................       2,581,225                -
    Goodwill and Intangibles impairment ....................       4,306,298                -
    Gain on modification of convertible debt ...............        (460,693)               -
    Non-cash interest ......................................         114,656                -
  Changes in operating assets and liabilities:
    Accounts receivable ....................................       1,423,379          359,297
    Inventories ............................................         579,267          116,422
    Prepaid expenses and other assets ......................        (127,921)        (646,048)
    Accounts payable and accrued expenses ..................         477,326         (933,476)
    Income taxes receivable ................................         189,836          637,880
                                                                ------------     ------------
          Total Adjustments ................................      10,767,470         (135,478)
                                                                ------------     ------------

NET CASH (USED IN)PROVIDED BY OPERATING ACTIVITIES .........        (599,091)         188,590
                                                                ------------     ------------

CASH FLOWS USED IN INVESTING ACTIVITIES
    Acquisition of business, net of cash received ..........               -       (3,131,860)
    Investment in prospective acquire ......................               -       (1,001,000)
    Purchase of fixed assets ...............................         (48,204)         (26,236)
    Deferred acquistion costs ..............................               -          (32,451)
                                                                ------------     ------------
NET CASH USED IN INVESTING ACTIVITIES ......................         (48,204)      (4,191,547)
                                                                ------------     ------------

CASH FLOWS (USED IN) PROVIDED BY FINANCING ACTIVITIES

    Repayment on notes payable to related parties ..........               -          (76,079)
    Principal payments on long term debt ...................               -         (270,652)
    Repayments of bank loan ................................        (559,775)        (124,075)
    Proceeds from issuances of common stock ................               -        1,231,000
    Turbon line of credit ..................................          27,485                -
    Proceeds from issuance of Notes Payable ................               -        1,001,000
    Proceeds from issuances of convertible notes ...........               -        2,540,453
    Proceeds (repayments) of loan payable ..................               -         (275,000)
                                                                ------------     ------------
NET CASH (USED IN)PROVIDED BY FINANCING ACTIVITIES .........        (532,290)       4,026,647
                                                                ------------     ------------

EFFECT OF EXCHANGE RATE ON CASH ............................        (116,156)        (127,778)

NET DECREASE IN CASH .......................................      (1,295,741)        (104,088)

CASH AT BEGINNING OF PERIOD ................................       1,302,294          161,700
                                                                ------------     ------------

CASH AT END OF PERIOD ......................................    $      6,553     $     57,612
                                                                ============     ============


SUPPLEMENTAL INFORMATION

    Interest paid ..........................................         398,147     $    288,981
    Income taxes paid ......................................               -                -

                   SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                               7
</TABLE>
<PAGE>

                          ADSERO CORP. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2006

1. BASIS OF INTERIM FINANCIAL STATEMENT PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been
prepared by the Company in conformity with accounting principles generally
accepted in the United States of America and the instructions to Form 10-QSB. It
is management's opinion that these statements include all adjustments,
consisting of only normal recurring adjustments considered necessary to make the
financial position, results of operations, and cash flows not misleading as of
June 30, 2006 and for all periods presented.

Certain information and footnote disclosures normally included in the annual
financial statements prepared in accordance with accounting principles generally
accepted in the United States of America have been condensed or omitted. These
condensed consolidated financial statements should be read in conjunction with
the consolidated financial statements and notes thereto as of December 31, 2005
and for each of the two years in the period then ended, which are included in
the Company's Annual Report on Form 10KSB for the year ended December 31, 2005
filed with the Securities and Exchange Commission.

2. ORGANIZATION

Adsero Corporation ("Adsero"), formerly known as Reink Corp. was incorporated in
Delaware on March 6, 1999. Adsero is the parent of wholly owned subsidiaries
Teckn-O-Laser Global Company, Teckn-O-Laser Inc. and Tecknolaser USA Inc.
(collectively the "Tecknolaser Group") which acquisition was completed effective
January 2, 2005.

Adsero and the Tecknolaser Group (collectively the "Company") manufactures and
distributes remanufactured toner cartridges and inkjet cartridges. These
products are sold through a variety of channels such as distributors and retail
office supply stores, both domestically and internationally.

3. FILING FOR PROTECTION OF OPERATING SUBSIDAIRY AND GOING CONCERN

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern, which contemplates the realization of
assets and satisfaction of liabilities in the normal course of business. At June
30, 2006, the Company had a working capital deficiency of $13,802,444
($11,677,103 excluding liabilities from discontinued operations). In addition,
the Company was not in compliance with certain covenants under a line of credit
obligation and term loans (Note 10) that the National Bank of Canada (the
"Bank") provided to the Company's main operating subsidiary Tecknolaser Global,
Inc. ("Tecknolaser Global"). The Company and the Bank were parties to a series
of standstill agreements that provided the Company with temporary relief from a
demand for repayment; however, these agreements expired on August 11, 2006. On
or about August 15, 2006, the Bank demanded that the Company repay the loans.

                                        8
<PAGE>

On August 15, 2006 Tecknolaser Global filed a Notice of Protection (the
"Notice") under paragraph 50.4(1) of the Companies' Creditors Arrangement Act,
of Canada. Accordingly, the Company is required to submit a Plan of Arrangement
to the Canadian bankruptcy court by September 14, 2006. Under this Arrangement
Tecknolaser Global is (i) required to use all funds it receives from its
collection of accounts receivable to repay amounts due to the Bank and (ii)
restricted to using any funds it receives to pay only those expenses it incurs
subsequent to filing the Notice that are necessary to sustain Tecknolaser
Global's operations. Tecknolaser and the Bank intend to settle these loans
within six weeks based upon current estimates of cash flow. Bank fees under this
arrangement amount to $6,250 per week for the first four weeks and $10,000 per
week for the remaining two weeks. The Company cannot provide any assurance that
it will repay the Bank within this time frame or that it will not incur
additional fees for any time period that may extend beyond this time period. The
Company is also obligated to reimburse the Bank for any costs it incurs in
connection with its recovery of these loans. The Company, with the Bank's
consent, engaged RMS Richter Inc. to assist senior management of the Company in
preparing the Plan of Arrangement.

In addition to the above, Tecknolasers's filing for protection from its
creditors constitutes an event of default under its Convertible Note Agreement
with Barrington Bank (Note 16), equipment financing obligations (Note 13) and
$5.6 million credit facility (Note 12) with Turbon A.G. ("Turbon"). The credit
facility with Turbon is secured by shares of Turbon stock that the Company is
holding for investment purposes (Note 20). Barrington Bank, the lenders under
the equipment financing obligations and Turbon each has the right to demand
repayment of these loans at anytime. An immediate demand for repayment by any of
these lenders would have a further material adverse on the Company's liquidity
and financial condition.

As described in Note 24, the Company sold to Turbon inventory, certain
manufacturing equipment and a royalty free license to its trademarks as part of
its plan to cease manufacturing operations and become a distributor. The
Company's plan to become a distributor as opposed to a manufacturer, combined
with Tecknolaser's filing for protection from its creditors has materially
changed the business. There is significant uncertainty as to whether management
will be successful in its efforts to financially and operationally restructure
the Company's operations. The Company expects to incur substantial expenses in
connection with (i) the formulation of its Plan of Arrangement, (ii) legal
proceedings that will occur as a result of Tecknolaser's Notice, and (iii)
effectuating operational and financial changes in the business that it would not
incur under normal operating circumstances.

The Company's ability to recover its assets and continue its operations is
dependent upon management's ability to formulate a plan that includes
comprehensive financial and operational changes in the business and to
successfully execute such plan. There can be no assurance that the Company will
be successful in its efforts to achieve any of these objectives. The Company
also cannot provide any assurance that it will obtain the financing it needs to
sustain the business until such time that it is able to generate sufficient
revenue and operating cash flow. These material uncertainties could result in a
complete cessation of operations. These matters raise substantial doubt about
the Company's ability to continue as a going concern. The financial statements
do not include any adjustments relating to the recovery of the recorded assets
or the classification of liabilities that might be necessary should the Company
be unable to continue as a going concern.

                                        9
<PAGE>

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Principles of Consolidation
     ---------------------------

         The consolidated financial statements include the accounts of the
         Company and its wholly-owned subsidiaries. All significant
         inter-company transactions have been eliminated.

     Cash and Cash Equivalents
     -------------------------

         The Company considers all highly liquid securities purchased with
         original maturities of three months or less to be cash equivalents.

     Revenue Recognition
     -------------------

         The Company applies the revenue recognition principles set forth in
         Securities and Exchange Commission Staff Accounting Bulletin ("SAB")
         104 "Revenue Recognition" with respect to all of its revenue.
         Accordingly, the Company records revenue when (i) persuasive evidence
         of an arrangement exists, (ii) delivery has occurred, (iii) the
         vendor's fee is fixed or determinable, and (iv) collectability of the
         sale is reasonable assured.

         The Company requires all of its product sales to be supported by
         evidence of a sale transaction that clearly indicates the selling price
         to the customer, shipping terms, payment terms (generally 30 days) and
         refund policy, if any. Selling prices of the products are fixed at the
         time the sale is consummated. The Company recognizes revenue at the
         time in which it receives a confirmation that the goods were either
         tendered at their destination when shipped "FOB destination," or
         transferred to a shipping agent when "FOB shipping point." In addition,
         the Company evaluates the creditworthiness of new customers and
         monitors the creditworthiness of its existing customers to determine
         whether events or changes in their financial circumstances would raise
         doubt as to the collectibility of sales transactions.

         The Company has also made approximately $1,886,741 and $4,203,163 of
         product sales as a distributor of goods under a strategic supply
         arrangement with Turbon AG during the three months and six months ended
         June 30, 2006 respectively. With respect to these sales, the Company
         takes title to the products and bears the risks and rewards of
         ownership, including the risk of loss for collection, delivery or
         returns.

         Accordingly, the Company has determined, in accordance with EITF 99-19
         "Reporting Revenue Gross as a Principal versus Net as an Agent," that
         it acts as a principal in these transactions and therefore records such
         revenue on a gross basis.

                                       10
<PAGE>

         The Company provides its customers with warranty coverage on its
         products as described in Note 18. Provisions for estimated expenses
         related to product warranties are made at the time products are sold.
         These estimates are established using historical information on the
         nature, frequency, and average cost of warranty claims. Management
         actively studies trends of warranty claims and takes action to improve
         product quality and minimize warranty claims.

         The Company has entered into individually negotiated volume rebate
         arrangements with several of its customers. In addition, the Company
         issues sales discounts on product purchases made by customers who
         participate in its Reflexions Private Label Program (Note 18). Sales
         discounts under the Reflexions Private Label Program range from 0% to
         10% based on volumes of products purchased during semi-annual
         measurement periods. All volume rebates and sales discounts are accrued
         and accounted for as a reduction of revenue based on actual rebates and
         discounts earned. Aggregate volume rebates and sales discounts amounted
         to $607,381 and $553,108 for the six months ended June 30, 2006 and
         2005 respectively. The June 30, 2006 amount includes $23,771 included
         in accrued expenses in the accompanying balance sheet.

         The Company periodically permits its customers to return unused goods
         for a restocking fee of 15%. Returns of unused goods amounted to
         $173,100 and $137,720 for the six months ended June 30, 2006 and 2005
         respectively. The June 30, 2006 amount includes $56,592 included in
         accrued expenses in the accompanying balance sheet.

     Accounts Receivable
     -------------------

         The Company has a policy of reserving for uncollectible accounts based
         on its best estimate of the amount of probable credit losses in its
         existing accounts receivable. The Company periodically reviews its
         accounts receivable to determine whether an allowance is necessary
         based on an analysis of past due accounts and other factors that may
         indicate that the realization of an account may be in doubt. Account
         balances deemed to be uncollectible are charged to the allowance after
         all means of collection have been exhausted and the potential for
         recovery is considered remote. As of June 30, 2006, the Company has,
         based on a review of balances outstanding has determined that an
         allowance for doubtful accounts of $480,843 is necessary.

     Inventories
     -----------

         The Company's inventories, which consist of raw materials and finished
         goods, are stated at the lower of cost (first in first out method) or
         market.

                                       11
<PAGE>

     Property and Equipment
     ----------------------

         Property and Equipment are stated at cost less accumulated depreciation
         and amortization. Depreciation and amortization are calculated using
         the straight line methods over the estimated useful lives, which
         generally range from 3 to 10 years.

     Goodwill
     --------

         Goodwill represents the excess of purchase consideration and related
         transaction expenses that are incurred in connection with completing
         acquisitions of businesses accounted for in accordance with SFAS 141

         "Business Combinations." SFAS 142, "Goodwill and Other Intangible
         Assets," requires that goodwill be tested for impairment at the
         reporting unit level (operating segment or one level below an operating
         segment) on an annual basis and between annual tests in certain
         circumstances. Application of the goodwill impairment test requires
         judgment, including the identification of reporting units, assigning
         assets and liabilities to reporting units, assigning goodwill to
         reporting units, and determining the fair value. Significant judgments
         required to estimate the fair value of reporting units include
         estimating future cash flows, determining appropriate discount rates
         and other assumptions.

         As described in Note 9, the Company recorded a $2,388,298 goodwill
         impairment based on conditions that indicate that the carrying amount
         of goodwill that the Company recorded in connection with its
         acquisition of the Teckolaser Group is not recoverable.

     Long Lived Assets
     -----------------

         The Company periodically reviews the carrying values of its long lived
         assets in accordance with SFAS 144 "Long Lived Assets" when events or
         changes in circumstances would indicate that it is more likely than not
         that their carrying values may exceed their realizable values and
         records impairment charges when considered necessary.

         As described in Note 9 the Company recorded $500,000 of impairment
         charges with respect to property and equipment that is being held for
         use, and reduced to net realizable value, the carrying amounts of
         manufacturing assets and a customer list that it sold to Turbon
         subsequent to June 30, 2006 (Note 24).

     Use of Estimates
     ----------------

         The preparation of financial statements in conformity with accounting
         principles generally accepted in the United States of America requires
         management to make estimates and assumptions that affect the reported
         amounts of assets and liabilities and disclosures of contingent assets
         and liabilities at the date of the financial statements and the
         reported amounts of

                                       12
<PAGE>

         revenues and expenses during the reporting period. Significant
         estimates include product warranty, returns and sales rebates and
         discounts, impairment charges, depreciation and amortization, and stock
         based compensation. Actual results could differ from these estimates.

     Fair Value of Financial Instruments
     -----------------------------------

         The carrying amounts reported in the balance sheet for cash, accounts
         receivable, accounts payable and accrued expenses approximate fair
         value based on the short-term maturity of these instruments. The
         carrying amounts of the Company's line of credit obligation, and other
         long term obligations approximate fair value as such instruments
         feature contractual interest rates that are consistent with current
         market rates of interest or have effective yields that are consistent
         with instruments of similar risk.

     Convertible Notes
     -----------------

         The Company accounts for conversion options embedded in convertible
         notes in accordance with Statement of Financial Accounting Standard
         ("SFAS) No. 133 "Accounting for Derivative Instruments and Hedging
         Activities" ("SFAS 133") and EITF 00-19 "Accounting for Derivative
         Financial Instruments Indexed to, and Potentially Settled in, a
         Company's Own Stock" ("EITF 00-19"). SFAS 133 generally requires
         Companies to bifurcate conversion options embedded in convertible notes
         from their host instruments and to account for them as free standing
         derivative financial instruments in accordance with EITF 00-19. SFAS
         133 provides for an exception to this rule when convertible notes, as
         host instruments, are deemed to be conventional as that term is
         described in the implementation guidance under Appendix A to SFAS 133
         and further clarified in EITF 05-2 "The Meaning of "Conventional
         Convertible Debt Instrument" in Issue No. 00-19.

         The Company accounts for convertible notes (deemed conventional) in
         accordance with the provisions of Emerging Issues Task Force Issue
         ("EITF") 98-5 "Accounting for Convertible Securities with Beneficial
         Conversion Features," ("EITF 98-5"), EITF 00-27 "Application of EITF
         98-5 to Certain Convertible Instruments," Accordingly, the Company
         records, as a discount to convertible notes, the intrinsic value of
         such conversion options based upon the differences between the fair
         value of the underlying common stock at the commitment date of the note
         transaction and the effective conversion price embedded in the note.
         Debt discounts under these arrangements are amortized over the term of
         the related debt to their earliest date of redemption.

         The Company convertible notes do not host embedded conversion options
         that are deemed to be free standing derivatives financial instruments
         or beneficial conversion features the commitment date fair value of the
         underlying common stock.

                                       13
<PAGE>

     Common Stock Purchase Warrants and Other Derivative Financial Instruments
     -------------------------------------------------------------------------

         The Company accounts for the issuance of common stock purchase warrants
         issued and other free standing derivative financial instruments in
         accordance with the provisions of EITF 00-19. Based on the provisions
         of EITF 00-19, the Company classifies as equity any contracts that (i)
         require physical settlement or net-share settlement or (ii) gives the
         Company a choice of net-cash settlement or settlement in its own shares
         (physical settlement or net-share settlement). The Company classifies
         as assets or liabilities any contracts that (i) require net-cash
         settlement (including a requirement to net cash settle the contract if
         an event occurs and if that event is outside the control of the
         Company) (ii) give the counterparty a choice of net-cash settlement or
         settlement in shares (physical settlement or net-share settlement).

     Stock Based Compensation
     ------------------------

         Prior to January 1, 2006, the Company accounted for employee stock
         transactions in accordance with Accounting Principle Board, APB Opinion
         No. 25 "Accounting for Stock Issued to Employees." The Company has
         adopted the pro forma disclosure requirements of Statement of Financial
         Accounting Standards No. 123, "Accounting For Stock-Based
         Compensation."

         Effective January 1, 2006, the Company adopted FASB Statement of
         Financial Accounting Standard ("SFAS") No. 123R "Share Based Payment".
         This statement is a revision of SFAS Statement No. 123, and supersedes
         APB Opinion No. 25, and its related implementation guidance. SFAS 123R
         addresses all forms of share based payment ("SBP") awards including
         shares issued under employee stock purchase plans, stock options,
         restricted stock and stock appreciation rights. Under SFAS 123R, SBP
         awards result in a cost that will be measured at fair value on the
         awards' grant date, based on the estimated number of awards that are
         expected to vest that will result in a charge to operations.
         Consequently, during the three and six month periods ended June 30,
         2006, the Company recorded $35,866 and $70,003 respectively, in stock
         based compensation expense, which includes amortization of the fair
         value of the unvested portion of stock options that the Company awarded
         through prior to January 1, 2006 and the fair value of a fully vest and
         non-forfeitable grant of stock options to non-employees for services.

         For the three and six month periods ended June 30, 2005, the Company
         applied APB Opinion No. 25, "Accounting for Stock Issued to Employees."
         As required under SFAS No. 148, "Accounting for Stock-based
         Compensation - Transition and Disclosure," the following table presents
         pro- forma net income and basic and diluted loss per share as if the
         fair value-based method had been applied to all awards during that
         period.

                                       14
<PAGE>

                                                  For the three     For the Six
                                                  Months Ended     Months Ended
                                                  June 30, 2005    June 30, 2005
                                                  -------------    -------------

         Net income, as reported ...............    $ 19,051         $ 324,068

         Incremental amount of stock based
         compensation expense determined
         under the fair value method ...........     (51,080)          (81,781)
                                                    --------         ---------
         Net (loss) income, pro-forma ..........    $(32,029)        $ 242,287
                                                    ========         =========

         Income income per share:
             Basic and diluted, as reported ....    $   0.00         $    0.01
                                                    ========         =========
             Basic and Diluted, pro-forma ......    $   0.00         $    0.01
                                                    ========         =========

         Weighted average assumptions relating to the fair value of stock based
         compensation expense during the three and six month periods ended June
         30, 2005 are as follows: risk-free interest rate of 4%; expected
         dividend yield zero percent; expected option life of four years; and
         current volatility of 150%.

     Non-Employee Stock Based Compensation
     -------------------------------------

         The Company accounts for the cost of stock based compensation awards
         issued to non-employees for services at either the fair value of the
         services rendered or the instruments issued in exchange for such
         services, whichever is more readily determinable, using the measurement
         date guidelines enumerated in Emerging Issues Task Force Issue ("EITF")
         96-18, "Accounting for Equity Instruments That Are Issued to Other Than
         Employees for Acquiring, or in Conjunction with Selling, Goods or
         Services."

         Warrants and options issued to non-employees for services in which
         performance by the counterparty is complete, are accounted for as free
         standing derivative financial instruments in accordance with EITF
         00-19.

     Income Taxes
     ------------

         The Company accounts for income taxes under Statement of Financial
         Accounting Standards No. 109, Accounting for Income Taxes ("SFAS No.
         109"). SFAS No. 109 requires the recognition of deferred tax assets and
         liabilities for both the expected impact of differences between the
         financial statements and tax basis of assets and liabilities and for
         the expected future tax benefit to be derived from tax loss and tax
         credit carry forwards. SFAS No. 109 additionally requires the
         establishment of a valuation allowance to reflect the likelihood of
         realization of deferred tax assets.

                                       15
<PAGE>

     Net Income (Loss) Per Share
     ---------------------------

         The Company presents net income (loss) per share ("EPS") in accordance
         with SFAS No. 128, "Earnings per Share." Accordingly, the Company
         computes basic EPS based upon the weighted average number of common
         shares outstanding. Diluted EPS, when presented is computing using the
         weighted average number of common and potential common shares
         outstanding. Potential common shares would include stock options using
         the treasury stock method, and convertible notes and exchangeable
         shares using the "if converted" method. Potential common shares are
         excluded from the calculation of diluted EPS in loss periods, as the
         impact is anti-dilutive.

         The Company issued, as purchase consideration, 6,500,000 of its Series
         I Exchangeable shares to the sellers of the Tecknolaser Group and the
         same stockholders also hold all 6,500,000 shares of the Company' Series
         A Preferred Special Voting Stock. In accordance with the provisions of
         Issue No. 5 of EITF 03-6 "Participating Securities and the Two-Class
         Method under FASB Statement No. 128," the Company has included the
         Series I Exchangeable shares in its determination of basic loss per
         share for the quarter ended June 30, 2006 because the features of these
         securities, taken together, provide its holders with rights identical
         to those of the Company's stockholders.

         The following table provides a summary of all potentially dilutive
         securities for the quarter ended June 30, 2006 that have been excluded
         from the computation of basic loss per share as their effect would be
         anti-dilutive:

                                                           June 30, 2006
                                                           -------------
         Stock options ...............................          680,000
         Common stock purchase warrants ..............       17,065,313
         Convertible debentures ......................        3,293,966
                                                             ----------
         Total .......................................       21,039,279
                                                             ==========

     Foreign currency translation
     ----------------------------

         The consolidated financial statements are presented in United States
         dollars in accordance with SFAS No. 52, "Foreign Currency Translation".
         The functional currency of the Tecknolaser Group is the Canadian
         dollar. Foreign denominated monetary assets are translated to United
         States dollars using foreign exchange rates in effect at the balance
         sheet date. Revenues and expenses are translated at the average rate of
         exchange during the period. Gain or losses arising on foreign currency
         transactions are included in the determination of operating results for
         the period.

                                       16
<PAGE>

     Reclassifications
     -----------------

         Certain amounts presented in the statement of operations for the
         quarter ended June 30, 2005 have been reclassified to conform to the
         presentation used for the quarter ended June 30, 2006.

     Recently Issued Accounting Pronouncements
     -----------------------------------------

         In February 2006, the FASB issued SFAS No. 155 "Accounting for Certain
         Hybrid Financial Instruments-an amendment of FASB Statements No. 133
         and 140" ("FAS 155"). FAS 155 addresses the following: a) permits fair
         value remeasurement for any hybrid financial instrument that contains
         an embedded derivative that otherwise would require bifurcation; b)
         clarifies which interest-only strips and principal-only strips are not
         subject to the requirements of Statement 133; c) establishes a
         requirement to evaluate interests in securitized financial assets to
         identify interests that are freestanding derivatives or that are hybrid
         financial instruments that contain an embedded derivative requiring
         bifurcation; d) clarifies that concentrations of credit risk in the
         form of subordination are not embedded derivatives; and e) amends
         Statement 140 to eliminate the prohibition on a qualifying
         special-purpose entity from holding a derivative financial instrument
         that pertains to a beneficial interest other than another derivative
         financial instrument. FAS 155 is effective for all financial
         instruments acquired or issued after the beginning of an entity's first
         fiscal year that begins after September 15, 2006. The Company is
         currently evaluating the requirements of FAS 155, but does not expect
         that the adoption will have a material effect on its financial
         statements.

         In March 2006, the FASB issued SFAS 156 - "Accounting for Servicing of
         Financial Assets - an amendment of FASB Statement No. 140" ("SFAS
         156"). SFAS 156 is effective for the first fiscal year beginning after
         September 15, 2006. SFAS 156 changes the way entities account for
         servicing assets and obligations associated with financial assets
         acquired or disposed of. The Company has not yet completed its
         evaluation of the impact of adopting SFAS 156 on its results of
         operations or financial position, but does not expect that the adoption
         of SFAS 156 will have a material impact.

         Other accounting standards that have been issued or proposed by the
         FASB or other standards-setting bodies that do not require adoption
         until a future date are not expected to have a material impact on the
         consolidated financial statements upon adoption.

                                       17
<PAGE>

5. INVENTORIES

     Inventories consist of the following at June 30, 2006:

     Raw materials ...................................         $   769,421
     Finished goods ..................................           2,383,860
                                                               -----------
                                                                 3,153,821
     Less assets held for sale .......................          (1,479,844)
     Less reserves ...................................             (30,672)
                                                               -----------
                                                               $ 1,642,765
                                                               ===========

     As described in Note 24, the Company sold certain inventory under the
     purchase and sale agreement with Turbon. These goods, which amount to
     $1,479,844, have been reduced to their net realizable value and are
     classified as "Assets held for Sale" in the accompanying balance sheet.

6. PREPAID EXPENSES

     Prepaid expenses consist of the following at June 30, 2006:

     Deposit - Barrington Bank .......................         $    53,811
     Insurance .......................................              60,786
     Rent ............................................              24,061
     Industry trade shows ............................              23,049
     Deposit Royal bank ..............................              16,143
     Static Control ..................................             122,380
     Other ...........................................              43,583
                                                               -----------
                                                               $   343,813
                                                               ===========

7. PROPERTY AND EQUIPMENT

     Property and Equipment consists of the following at June 30, 2006:

     Leasehold improvements ..........................         $   143,281
     Machinery and Equipment .........................             550,412
     Furniture and Fixtures ..........................             397,512
     Computer Equipment ..............................           1,375,962
                                                               -----------
                                                                 2,467,167

     Less provision for remaining assets .............            (500,000)
     Less Accumulated Depreciation ...................            (661,247)
                                                               -----------
                                                               $ 1,305,920
                                                               ===========

     Depreciation amounted to $241,846 and $220,004 expense for the six months
     ended June 30, 2006 and 2005, respectively.

     The Company recorded a charge of $ 623,178 for the net present value of
     remaining lease payments due under facilities it abandoned during the
     quarter ended June 30, 2006. This amount is included in accrued expenses in
     the accompanying balance sheet.

                                       18
<PAGE>

8. INTANGIBLE ASSETS

     Intangible assets consists of the following at June 30, 2006:

     Customer Relationships ..........................           1,540,000
     Trademarks ......................................             540,000
                                                               -----------
                                                                 2,080,000
     Less customer list held for sale ................          (1,000,000)
     Less amortization ...............................            (523,332)
                                                               -----------
                                                               $   556,668
                                                               ===========

     These amounts are amortized on a straight-line basis over a 5 year period.
     Amortization expense for the six months ended June 30, 2006 and 2005
     amounted to $464,333 and $8,333 respectively. As described in Note 9, the
     Company wrote-off $1,918,000 in intellectual property during the quarter.

     Subsequent to the quarter the Company sold a portion of its customer list
     to Turbon (see Note 24). These assets are classified as "Assets Held for
     Sale" in the accompanying balance sheet.

9. ASSETS HELD FOR SALE AND IMPAIRMENT CHARGES

     As described in Note 24, the Company completed a sale to Turbon of certain
     assets including finished goods inventory with a book value of $1,808,600,
     manufacturing equipment with a net book value of $120,748 and a portion of
     its customer list with an allocated value of $1,000,000. In addition, the
     Company granted Turbon a royalty free license to the exclusive use of its
     "Evergreen" and "Reflexions" private label trademarks for the distribution
     of these goods in the United States.

     The aggregate purchase price paid by Turbon for these assets, pursuant to a
     June 22, 2006 agreement that was subject to certain closing conditions,
     amounted to $2,808,600. Management, having the authority to approve this
     action, committed to a plan to sell these assets during the quarter ended
     June 30, 2006. The assets were available for immediate sale in their
     present condition subject only to certain closing conditions, including the
     Bank's approval of the sale, as of June 30, 2006. The Company had been in
     active negotiations with Turbon to complete the sale during the quarter
     ended June 30, 2006. Accordingly, the completion of the sale was deemed
     probable to occur prior to August 31, 2006. Based on these circumstances
     and conditions that existed at June 30, 2006, the Company has classified
     these assets as "Assets Held for Sale" in the accompanying balance sheet.

     The Company applied $1,926,500 of the selling price to reduce liabilities
     to Turbon as described in Note 24. The remainder of these funds, which
     amounted to approximately $882,100 were paid to the Bank to reduce the Bank
     loans ( Notes 3, 10 and 24). The Chief Executive Officer of Turbon owns
     approximately 26% of the common shares of Turbon and approximately 17% of
     the common stock of the Company at June 30, 2006.

                                       19
<PAGE>

     The Company effectuated its sale of these assets in connection with a plan
     to cease manufacturing recycled printer cartridges and become a distributor
     of these products. The Company committed to this course of action during
     the quarter ended June 30, 2006 due to the difficulties it experienced with
     respect to manufacturing within this market. The Company ceased
     substantially all of its manufacturing operations in July 2006.

     In accordance with SFAS 142 and SFAS 144, the Company determined, based on
     market conditions and its decision to cease manufacturing operations that
     the remaining carrying amounts of goodwill, intellectual property relating
     to its former manufacturing operations and a portion of the carrying value
     of certain property and equipment is not recoverable. Accordingly, the
     Company recorded a $4,306,298 impairment charge consisting of $2,388,298 of
     non-recoverable goodwill and $1,918,000 relating to intellectual property
     that is deemed to have no further value. The Company also recorded a
     $500,000 impairment charge, related to property and equipment, to reduce
     certain property to management's estimate of net realizable value since
     alternative uses of this property outside of the manufacturing operations
     are limited. The Company will continue monitoring its operations to assess
     whether any changes in circumstances would indicate that additional
     impairment charges may be required in future periods.

10. LINE OF CREDIT AND INSTALLMENT LOANS

     Bank Line of Credit
     -------------------

         That Company had a credit facility with the Bank described in Note 3.
         Outstanding borrowings under this arrangement, which consists of
         amounts drawn under a revolving credit facility and certain term loans
         amounted to $2,590,851 at June 30, 2006. These loans are secured by a
         first ranking lien on all of the Company's assets. The Company was
         required to comply with certain financial ratios under the terms of
         this facility. The Bank, due to the Company's non-compliance with these
         covenants, demanded that the Company repay these loans as described in
         Notes 3 and 24. Accordingly, borrowings under this facilty are
         presented as current liabilities in the accompanying balance sheet.

         The Company used a portion of the proceeds it received in its sale of
         certain assets to Turbon (Notes 9 and 24) to reduce a portion of the
         loan subsequent to June 30, 2006 and has committed, pursuant a letter
         agreement described in Notes 3 and 24 to use any proceeds received from
         the collection of accounts receivable to completely repay these loans
         in September 2006. Although the Company believes that it will be able
         to repay these loans from operating cash flows it expects to generate
         into the third quarter of 2006, there can be no assurance that this
         plan will materialize. If the Company fails to repay these loans within
         the time frame specified in its letter agreement, the Bank will have
         the right to further liquidate any or all of the Company's remaining
         assets. These circumstances could result in a complete cessation of all
         of the Company's operations.

         Interest expense under these obligations amounted to $9,003 and $12,950
         for the six months ended June 30, 2006 and 2005, respectively.

                                       20
<PAGE>

11. LIABILITIES OF DISCONTINUED OPERATION

         In January, 2003 the three largest creditors (the "Petitioners") of
         Reink Imaging USA, Ltd. ("Reink"), a former subsidiary operating
         business, filed a petition to force Reink into Chapter 7 under the US
         Federal Bankruptcy Act. The Company believes that certain of the
         Petitioners and officers of this former business unit formed a new
         business that became a direct competitor of the Company. On July 10,
         2003 the case was converted from Chapter 11 "Reorganization" into
         Chapter 7 "Liquidation", and a Bankruptcy Trustee was appointed to
         administer the estate. As a result, the Company lost control of Reink.

         Reink's remaining liabilities, which consist of $2,125,341 of accounts
         payable and accrued expenses, are presented in the accompanying balance
         sheet as liabilities of discontinued operations until such time that
         the bankruptcy is adjudicated. The Bankruptcy Trustee has commenced
         filings to wind up the bankruptcy case and move for adjudication,
         however; the Company has not received any definitive indication as to
         when these legal proceedings are likely to conclude. The Company
         anticipates that the conclusion of the bankruptcy proceedings will
         result in a complete discharge of these liabilities, however; the
         Company cannot determine their ultimate disposition in the absence of a
         court ruling.

12. TERM LOAN AND STRATEGIC SUPPLY AGREEMENTS WITH TURBON AG

     Term Loans
     ----------

         On November 4, 2005 the Company entered into a $2,800,000 Loan
         Agreement (the "Turbon Loan Agreement") with Turbon International Inc.,
         ("Turbon International"), a wholly owned subsidiary of Turbon AG.
         Proceeds from the term loan were utilized to purchase certain Turbon AG
         shares. In consideration of the $2,800,000 term loan, the Company
         issued a 5% promissory note to Turbon International. Interest is
         payable quarterly on each of January 31, April 30, July 31 and October
         31 during the term of the loan commencing January 31, 2006. Principal,
         and accrued but unpaid interest are due October 31, 2008 subject to
         acceleration upon an event of default. The loan can be prepaid at any
         time prior to maturity without penalty. Upon an event of default the
         interest rate will be increased from 5% to 9% until the default is
         cured.

         Interest expense under this obligation amounted to $68,716 for the six
         months ended June 30, 2006.

     Line of Credit
     --------------

         As of November 4, 2005 the Company entered into a Loan Agreement (the
         "Loan Agreement") with Turbon International Inc., ("Turbon
         International"), a wholly subsidiary of Turbon AG, and Teckn-O-Laser
         Global Company, a wholly owned subsidiary of the Company
         ("Teckn-O-Laser"). Pursuant to the Loan Agreement, Turbon International
         extended a line of credit for up to $2,800,000 until October 2006. The
         line of credit may only be used for the purpose of purchasing products
         from Turbon International and certain affiliated entities. Interest is
         at 5% per annum on all sums advanced under the line of credit, and is
         due and payable on the last day of each quarter starting with the

                                       21
<PAGE>

         quarter ending November 30, 2005. Principal and accrued but unpaid
         interest under the line of credit are due October 31, 2006 subject to
         acceleration upon an event of default. All advances under the line of
         credit will be evidenced by promissory notes. Amounts borrowed under
         the line of credit may be repaid at any time prior to maturity without
         penalty and may be re-borrowed. Upon an event of default under the line
         of credit the interest rate payable under the applicable notes will be
         increased from5% to 9% until cured.

         Interest expense under this obligation amounted to $66,764 for the six
         months ended June 30, 2006.

         The Company's indebtedness to Turbon International under both the line
         of credit and term loan facilities is secured by a first priority lien
         on 400,000 shares of Turbon stock (Note 20). Subsequent to the quarter
         ended June 30, 2006, the line of credit was reduced as described in
         Note 24.

     Strategic Supply Agreement
     --------------------------

         Effective June 22, 2005, the Company entered into a Strategic Supply
         Agreement with Turbon AG, ("Turbon") a leading global imaging supply
         company specializing in the remanufacture of laser cartridges. Pursuant
         to the Agreement, Turbon became a strategic supplier of remanufactured
         laser toner cartridges to the Company. In consideration thereof, the
         Company has given preferred vendor status to Turbon with respect to
         ordering products from Turbon (as opposed to third parties) providing
         Turbon's product quality meets the Company's specifications.

         Subsequent to the end of the quarter, as described in Note 24, the
         Company entered into a new Supply Agreement.

         As described in Notes 3, 10 and 24, Tecknolaser's filing for protection
         from its creditors on August 15, 2006 constituted an event of default
         under the terms of the Company's credit agreement with Turbon. A
         portion of the loan was reduced in connection with the Company's sale
         of certain assets to Turbon in August 2006; however, Turbon reserves
         the right to repossess its stock. In addition, these circumstances
         could complicate the Company's ability to source product for
         distribution from Turbon in future periods (notwithstanding the new
         supply agreement described in Note 24) and/or complete its proposed
         acquisition of Turbon described in Note 20. These matters create
         material uncertainties with respect to the Company's relationship with
         Turbon, the outcome of which management cannot predict at this time.

                                       22
<PAGE>

13. EQUIPMENT FINANCING OBLIGATIONS

     The Company is under the following equipment financing obligations as of
     June 30, 2006:

     Equipment financing, with interest ranging from 6.52% and 10%,
      payable monthly, maturing at various dates until April 2009 ...   $139,534

     Term loans, payable in monthly instalments of $1,600 (CDN$1,921)
      without interest, maturing at various dates through August 2008     14,014
                                                                        --------
     Total long term debt ...........................................   $153,548
                                                                        ========

     Interest expense under these obligations amounted to $8,191 and $3,072 for
     the six months ended June 30, 2006 and 2005 respectively.

     As described in Notes 3, 10 and 24, Tecknolaser's filing for protection
     from its creditors on August 15, 2006 constituted an event of default under
     the terms of these installment loans. Although no demand has been made for
     payment as of the date in which Tecknolaser filed the Notice, the Company
     cannot provide any assurance that the lenders under these obligations will
     not make such demand.

14. NOTES PAYABLE - FORMER OFFICER

     The Company has a note payable to a former CEO and Director of the Company
     in the principal amount of $112,500 that bears interest at 18% per annum.
     The Company commenced and continues to pursue litigation with the former
     officer with the respect to his alleged violations of non-competition and
     confidentiality agreements within his employment contract. The aggregate
     balance of the note, including accrued interest of $60,488 amounted to
     $172,988 at June 30, 2006. The Company is presently unable to determine the
     outcome or possible range of loss, if any, with respect to this matter at
     the current time.

15. NOTES PAYABLE - STOCKHOLDERS

     On November 4, 2005 the Company received aggregate loans of 600,000 from
     three shareholders. In consideration thereof, the Company issued 5%
     convertible promissory notes due December 31, 2006 (the "Maturity Date") to
     Alain Lachambre ($136,198), Yvon Leveille ($328,113) and Manchester
     Consolidated Corp. ($135,689). Interest and principal on the notes are due
     on the Maturity Date. The notes can be prepaid at any time. If all
     principal and interest due on the notes are not paid in full on the
     Maturity Date, the respective holders may, at their sole option, convert
     the total amount of unpaid principal and interest into shares of common
     stock at the rate of $0.50 per share. The loan proceeds were utilized to
     purchase certain Turbon shares.

     Interest expense under these obligations amounted to $14,815 for the six
     months ended June 30, 2006.

     As described in Note 24, the Company and the stockholders reached an
     agreement to convert these loans into common stock. Accordingly, these
     loans are presented as non-current liabilities in the accompanying balance
     sheet.

                                       23
<PAGE>

16.  CONVERTIBLE PROMISSORY NOTE

     Effective January 26, 2005 the Company entered into a 5 year $1,713,649
     (approximately Cdn$2,000,000) convertible loan agreement (the "Loan
     Agreement") with Barrington Bank International Limited ("Barrington Bank")
     with interest payable quarterly at 12% per annum during the first 12 months
     and 20% per annum thereafter. This obligation is subordinated to the Bank
     of Line of Credit and is secured by substantially all the Company's assets.

     Commencing on the 6 month anniversary of the loan, Barrington Bank has the
     right to convert the remaining principal balance into shares of the
     Company's common stock at a conversion price of $1.00 per share. The
     Company also issued 200,000 shares of common stock to the Lender and agreed
     to register these shares within the next registration statement filed by
     the Company. The Company accounted for the issuance of the shares as a
     deferred financing cost, which was being amortized over the term of the
     loan. Effective February 1, 2006 the interest rate has been decreased to 8%
     for the period February 1, 2006 to July 31, 2006. In addition the
     conversion price was adjusted to $0.50 per share. Subsequent to the quarter
     end the interest rate was adjusted to 10% for the period August 1, 2006 to
     August 31, 2006 and 20% thereafter.

     The Company accounted for the modification of this debt instrument in
     accordance with the provisions of EITF 96-19 "Debtors Accounting for a
     Modification or Exchange of Debt Instruments" and EITF 05-07 "Accounting
     for Modifications to Conversion Options Embedded in Debt instruments and
     Related Issues." Under the guidelines of these pronouncements, debtors
     include the fair value of the changes made to the embedded conversion
     options in a comparative analysis of the carrying values of the debt
     instrument immediately before and after the modification. When the change
     in the value under this analysis is deemed substantial, as defined, the
     modification is considered to have been accomplished through an exchange of
     instruments that results in the extinguishment of the debt prior to
     modification.

     The Company performed its analysis of the debt under the guidelines of
     these pronouncements and determined that the modification resulting from
     the change in conversion price and interest rate was substantial.
     Accordingly, the Company recorded a gain on the extinguishment of the debt
     prior to the modification in the amount of $460,693. The difference between
     the carrying value of the modified instrument and its mandatory redemption
     amount is being accreted as interest expenses over the remaining term of
     the loan. Accretion of the discount amounted to $28,794 during the quarter
     ended June 30, 2006 and amounted to $47,990 for the six months ended June
     30, 2006 and is included as a component of interest expense in the
     accompanying statement of operations. In addition the Company wrote off
     deferred financing costs of $66,667 during the quarter ended March 31,
     2006. Contractual interest amounted to $35,156 and $46,153 for the three
     months ended June 30, 2006 and 2005, and amounted to 75,736 and $78,411 for
     the six months ended June 30, 2006 and 2005 respectively.

     As described in Notes 3, 10 and 24, Tecknolaser's filing for protection
     from its creditors on August 15, 2006 constituted an event of default under
     the terms of the convertible note agreement. Although no demand has been
     made for payment as of the date in which Tecknolaser filed the Notice, the
     Company cannot provide any assurance that Barrington will not make such
     demand.

                                       24
<PAGE>

17. COMMITMENTS AND CONTINGENCIES

     Litigation with Former Officers
     -------------------------------

         The Company is involved in ongoing litigation as both a plaintiff and
         as a defendant against three former officers of Reink that arose in
         connection with the involuntary bankruptcy and loss of control of that
         former business unit. In this action the Company is seeking damages and
         other relief in the amount of $1,000,000. The prior officers filed a
         counter-suit against the Company for back wages and other costs. The
         Company considers the former officers claims to be without merit and is
         vigorously contesting their claim, however; the Company is presently
         unable to determine the outcome or possible range of loss, if any, with
         respect to this matter at the current time. On August 18, 2006, related
         to a portion of the litigation outstanding with the prior CEO, a
         judgment of $284,451.77 was entered against the Company for a portion
         of the litigation related to the promissory note which was due to the
         former CEO as noted in the balance sheet as approximately $172,988. The
         Company plans to have the judge reconsider this judgment and reinstate
         our claim in relation to this matter. This judgment relates only to a
         portion of the case on the note and has not addressed the damages
         caused by the CEO by his actions against the Company. The Company will
         ask the court to hold this judgment based on the remaining litigation
         to be heard. The Company cannot, however, provide any assurances as to
         the outcome of our litigation nor to the success of having the judgment
         noted above overturned. The Company is in the process of retaining new
         legal counsel to handle these matters.

     Operating Lease Agreement
     -------------------------

         The lease for the Company's main operating facility in St. Julie,
         Quebec, is being accounted for as an operating lease, which calls for
         equal monthly installments. The base rent is $299,346 (CDN$345,775) per
         annum for the first five years, and $329,280 (CDN$380,352) per annum
         for the next five years. The lease provides for two renewal options to
         extend the term of the lease each by a period of five years.

     Union Collective Bargaining Agreement
     -------------------------------------

         On November 30, 2004, the United Steel Workers Union, local section
         9414, affiliated with the FTQ (Federation des travailleurs du Quebec)
         was accredited to represent the production employees of Teckn-O-Laser
         at the Sainte Julie location. The accreditation certificate covers
         production employees, excluding office and administrative employees and
         all other excluded by law. On January 9, 2005, representatives were
         elected and negotiations commenced February 17, 2005. The first union
         contract was completed and signed on November 5, 2005. The Union has
         negotiated salary increases for the next 2 years at 2% in year 1 and
         2.5% in year 2. All other conditions remain similar to prior to the
         Union contract being implemented. It is expected that the union will
         cease to exist due to the cessation of production and only a few
         employees remaining in the distribution and shipping area.

                                       25
<PAGE>

     Consulting Agreements
     ---------------------

         The Company is a party to certain consulting agreements with certain
         related and unrelated parties that are more fully described in Note 21.

18. WARRANTY, REBATE, AND VOLUME DISCOUNT ARRANGEMENTS

     Warranty
     --------

         The Company maintains a product warranty program whereby defective
         products can be returned any time for a period of 2 years from the date
         of purchase. The Company provides for the estimated cost of product
         warranties at the time it recognizes revenue. The Company engages in
         ongoing product quality programs and processes, including looking at
         the quality of suppliers components, but ongoing product failure rates,
         material usage and service delivery costs incurred in correcting
         product failure, may affect the estimated warranty obligation. If
         actual product failure rates, material usage or service delivery costs
         differ from estimates, revisions to the estimated warranty liability
         would be required. Based on past experience the Company reviews the
         prior approximately 6- 8 months of sales and applies an historical rate
         of approximately 2% - 2.4% depending on the different product
         categories. The Company reviews both the percentage and the historical
         return rates on a quarterly basis in order to adjust the provision for
         warranty expense.

     Reflexion program
     -----------------

         The Company offers a program whereby it agrees to pay to a customer a
         combination of cash and Adsero stock, provided the customer turns over
         the majority of their manufacturing business into Adsero's system for
         manufacturing. The package consists of a combination of cash payments
         and shares in Adsero payable over the life of the contract, which is 3
         years, and is dependent on volume levels. As part of the program the
         Company offers the Reflexion brand name along with economies of scale,
         and numerous advertising and volume discount incentives in order to
         help grow the business. The Reflexion member then continues to manage
         its customer base and grow sales with the additional tools provided by
         the Company. The Company has reviewed the existing contracts and has
         determined no further accrual is needed in the current income statement
         to reflect the remaining liability over the duration of these
         contracts. As payments are made the amounts will be reduced.

                                       26
<PAGE>

19. STOCKHOLDERS' EQUITY

     Private Placement of Equity Securities
     --------------------------------------

         Effective January 31, 2006, the Company issued 2,400,000 shares of its
         common stock (the "Shares") and warrants (the "Warrants") to purchase
         2,400,000 shares of common stock to the holder of the November 4, 2005
         subscription receipts upon the automatic exercise of such subscription
         receipts on such date. No additional consideration was payable to the
         Company upon the exercise and the shares and warrants were already
         included as outstanding for share calculations as at December 31,
         2005,therefore there was no effect during the six months ended June 30,
         2006. Each Warrant entitles the holder to purchase, subject to
         adjustment, one share of common stock at an exercise price of $1.25 per
         share through May 3, 2008.

20. PROPOSED ACQUISITION OF TURBON AG

         In April 2005, the Company expressed its interest to management of
         Turbon AG ("Turbon"), in acquiring all the outstanding shares of
         Turbon, a leading global imaging supply company publicly traded on the
         Frankfurt stock exchange. The aggregate offering price, pursuant to the
         expression of interest, as revised, was approximately US$56.6 million
         in cash. Effective November 4, 2005 the Company completed the purchase
         of 400,000 shares of Turbon. The completion and closing of an
         acquisition of the remaining outstanding shares of Turbon will be
         subject to several conditions, including but not limited to, raising of
         the necessary funds to close the transaction, obtaining the approval of
         Turbon's shareholders, and the submission of a public offering to
         acquire all of Turbon's outstanding shares in accordance with the
         applicable regulations to which the Company and Turbon are subject. The
         Company cannot provide any assurance that it will complete this
         proposed acquisition or that the terms of the transaction if completed
         will not be materially different from the terms that are currently
         proposed. At the present time, the Company has no agreements in place
         with Turbon or any of Turbon's shareholders.

         The $14 per share purchase price for the investment in Turbon includes
         a control premium of approximately 35% over the trading price of
         Turbon's common stock, however; management of the Company believes that
         the quoted market price of Turbon's common stock may not necessarily be
         indicative of its actual fair value due to its low trading volume. In
         addition, the amount paid for these shares is consistent with the
         Company's previously announced proposal to purchase all 4,042,000
         shares of Turbon's outstanding common stock at an aggregate purchase
         price of approximately $56,600,000. The Company is restricted from
         transferring these shares during the term of its credit agreements with
         Turbon. Turbon, in the event of the Company's default under either of
         these agreements, has the right to demand the return of any or all of
         its shares.

         The Company accounted for its investment, which represents
         approximately 9.9% of Turbon, at cost because such investment (a) was
         made in contemplation of the proposed acquisition of Turbon (described
         above), (b) is not held for trading purposes, (c) serves as collateral
         for a loan, and (d) is not significant with respect to influencing the
         affairs or business of Turbon.

                                       27
<PAGE>

         The Company, in the process of trying to obtain the financing needed to
         complete its proposed acquisition became aware of conditions that
         indicate that the proposed acquisition could not be completed at the
         offering price originally stipulated in the Company's expression of
         interest described above. Based on discussions with potential financing
         sources, and ongoing negotiations with significant stockholders of
         Turbon, the Company has determined that its initial investment should
         be reduced to a carrying value of $3,800,000, which represent
         management's estimate of the recoverable value of its initial
         investment, whether it is successful in its efforts to complete its
         acquisition of Turbon or in the event Turbon repossess its stock if the
         Company is unable to repay loans to Turbon. The charge of $2,548,774 in
         connection with the write down of this investment is included in the
         accompanying statements of operations as loss on investment in common
         stock.

         The Company cannot provide assurance that it will be able to raise the
         financing needed to complete its proposed acquisition of Turbon or any
         other potential acquisition candidates due to Tecknolser's filing for
         protection from its creditors as described in Notes 3 and 24.

21. CONSULTING AGREEMENTS

     Westminster Capital Corp.
     -------------------------

         In January 2005, the Company entered into a 3 year consulting agreement
         with Westminster Capital Inc., a shareholder, to provide various
         services to the Company. The Company issued 300,000 shares in exchange
         for the services. No fees were paid to Westminster during the six
         months ended June 30 2006 or June 30, 2005.

     Gregory Belzberg
     ----------------

         In January 2005, the Company entered into a 3 year consulting agreement
         with Gregory Belzberg, a shareholder, to provide various services to
         the Company. The Company issued 50,000 shares in exchange for the
         services. No fees were paid to Mr. Belzberg during the six months ended
         June 30, 2006 or June 30, 2005.

     6327214 Canada Inc. (A Related Party)
     -------------------------------------

         In January 2005, the Company executed a consulting agreement with
         6327214 Canada Inc., a company owned by William Smith, the Company's
         CFO, to provide consulting services to the Company. 6327214 Canada Inc.
         is paid approximately $12,200 per month (Cdn $13,750) based on
         invoicing to the Company. In addition, the Company covers all business
         related expenses incurred by 6327214 Canada Inc. while delivering the
         consulting services. This agreement continues until terminated and can
         be terminated by the Company upon 10 months written notice. Consulting
         fees under this arrangement amounted to $75,618 and $31,700 for the six
         months ended June 30, 2006 and 2005 respectively.

                                       28
<PAGE>

22. MAJOR CUSTOMERS AND FOREIGN AND DOMESTIC OPERATIONS

     During the six months ended June 30, 2006, the Company had no customer who
     represented more than 10% of its sales. Sales to customers in the United
     States represented 51% of total sales and sales to customers outside the
     United States represented 49% of total sales.

     During the six months ended June 30, 2005, one customer represented
     approximately 16% of our total sales. Sales to customers in the United
     States represented 57% of total sales and sales to customers outside the
     United States represented 43% of total sales.

23. STOCK COMPENSATION

     On April 5, 2000 and April 6, 2000, The Company's board of directors and
     its stockholders adopted and approved, respectively the Company's stock
     option plan. The Company reserved 1,500,000 shares of common stock for
     issuance upon exercise of options granted from time to time under this
     stock option plan.

     Under the stock option plan the Company may grant incentive stock options
     only to employees including employee officers and directors, or we may
     grant non-qualified options to our employees, officers, directors, advisors
     and consultants. The stock option plan is presently administered directly
     by our board of directors.

     Subject to the provisions of the stock option plan, either the board or the
     committee, if applicable, determine who shall receive options, the number
     of shares of common stock that may be purchased under the options, the time
     and manner of exercise of options and exercise prices. The term of options
     granted under the stock option plan may not exceed ten years or five years
     for an incentive stock option granted to an optionee owning more than 10%
     of the Company's voting stock. The exercise price for incentive stock
     options shall be equal to or greater than 100% of the fair market value of
     the shares of the common stock at the time granted; provided that incentive
     stock options granted to a 10% holder of the Company's voting stock shall
     be exercisable at a price equal to or greater than 110% of the fair market
     value of the common stock on the date of the grant. The exercise price for
     non-qualified options are set by the board or the committee,in its
     discretion. The exercise price of options granted under the plan may be
     payable in cash or, with the approval of the board or the committee, by
     delivery of shares or by a combination of cash and shares. Shares of common
     stock received upon exercise of options granted under the plan will be
     subject to restrictions on sale or transfer.

     As of June 30, 2006, we had issued options to purchase an aggregate of
     680,000 shares of common stock under the Company's stock options plans at
     exercise prices ranging from $.25 to $13.40 per share.

     As described in Note 4, the fair value of all awards was estimated at the
     date of grant using the Black-Scholes option pricing model. Assumptions
     relating to the estimated fair value of stock options that the Company
     granted prior to January 1, 2006 that were accounted for and recorded under
     the intrinsic value method prescribed under APB 25 are also described in
     Note 3.

                                       29
<PAGE>

     On February 7, 2006, the Company granted an aggregate of 60,000 stock
     options to four sales consultants. Each option is exercisable at a price of
     $1.20 per share for a period of ten years from issuance. All of these
     options were fully vested and non forfeitable on their date of issuance.
     The Company expensed $63,836 as compensation expense during the six months
     ended June 30, 2006 with respect to these options. Assumptions relating to
     the estimated fair value of these stock options, which the Company
     accounted for in accordance with SFAS 123(R) and EITF 96-18 are as follows:
     risk-free interest rate of 3%; expected dividend yield zero percent;
     expected option life of 10 years; and current volatility of 95.3%.

     The risk-free rate is based on the U.S. Treasury yield curve in effect at
     the time of grant. The Company has not paid dividends to date and does note
     expect to pay dividends in the foreseeable future due to its substantial
     accumulated deficit and limited capital resources. Accordingly, expected
     dividends yields are zero. Historical cancellations and forfeitures of
     stock options granted prior to January 1. 2006 are insignificant: however,
     approximately 66% of options granted to employees during 2005 (principally
     employees of an acquired business) were either forfeited or cancelled
     during the six months ended June 30, 2006. Accordingly, the Company expects
     options granted prior to 2005 to vest in accordance with their original
     vesting schedules and options granted to employees during 2005 to vest at
     the rate of 50% per annum. The Company is currently undergoing substantial
     changes in the nature of its business and will prospectively monitor
     employee terminations. The Company will adjust its assumptions relating to
     its expectations of future vesting and terms of options at such times that
     additional data indicates that changes in these assumptions are necessary.
     Expected volatility is principally based on the historical volatility of
     the Company's stock.

     A summary of option activity for the six months ended June 30, 2006 is as
     follows:

                                                          WEIGHTED-
                                             WEIGHTED-     AVERAGE
                                              AVERAGE     REMAINING    AGGREGATE
                                             EXERCISE    CONTRACTUAL   INTRINSIC
OPTIONS                            SHARES      PRICE        TERM         VALUE
-------                            -------   ---------   -----------   ---------
Outstanding at January 1, 2006 ..  784,500     $1.34      8.5 years
Granted .........................   60,000     $1.20        2 years
Exercised .......................        -
Forfeited or expired ............  164,500     $1.57        2 years
                                   -------
Outstanding at June 30, 2006 ....  680,000     $1.25      1.8 years    $150,000
                                   =======
Exercisable at June 30, 2006 ....  393,333     $1.55      8.5 years       Nil

     The weighted-average grant-date fair value of options granted during the
     six months ended June 30, 2006 and 2005 amounted to $1.20 and $ 1.27,
     respectively. There have been no exercises of stock options to date.

                                       30
<PAGE>

     As of June 30, 2006, the Company has $250,998 of unrecognized compensation
     cost related to non-vested share-based compensation arrangements, which
     represents the fair value of stock options that the Company accounted for
     under APB 25 through December 31, 2005. These costs are expected to be
     recognized over a weighted-average period of five years.

24. SUBSEQUENT EVENTS

     Bank Credit Standstill Agreement
     --------------------------------

         Under the Teckn-O-Laser entities, the Company has outstanding loans
         with National Bank of Canada (the "Bank). The Company was required to
         comply with certain financial ratios under the terms of the loans. As
         of December 31, 2005 and subsequent periods including the present, the
         Company has not been in compliance with one of those ratios. On January
         31, 2006 the Company entered into a Standstill Agreement (the
         "Agreement") with the Bank whereby the Bank agreed to suspend its
         rights under the loans until April 30, 2006. On May 1, 2006, the
         Company signed an extension to the standstill agreement under the same
         terms as the original agreement extending to July 31, 2006. On July 28,
         2006 the Company signed a second extension to the Standstill Agreement
         extending the period until August 11, 2006.

         On August 15, 2006 the Company filed a Notice of Protection under the
         provision of paragraph 50.4(1) of the Companies' Creditors Arrangement
         Act, of Canada whereunder the Company is required to file a plan of
         arrangement with the courts within 30 days. Under this Arrangement the
         Company has an agreed with the National Bank of Canada (the "Bank")
         that the proceeds from of any collected accounts receivable will be
         used exclusively to the reduction and to the payment of any sum owed to
         the Bank, and to the payment of current purchases made and expenses
         incurred subsequent to the filing of the notice of Intention and
         necessary to maintain Teckn-o-laser's operations. The Company is
         obligated to pay all costs of the Bank associated with this Arrangement
         including fees to the Bank equal to $6,250 per week for the first four
         weeks and $10,000 per week for the remaining two weeks. It is the
         intention of all parties, based on the cash flow projections, that the
         Bank will be paid out in full within approximately six weeks.

         The Company, with the consent and support of the Bank, has engaged RMS
         Richter Inc. to assist senior management of the Company in preparing
         the Plan of Arrangement. The Company can provide no assurances that the
         Plan of Arrangement would be accepted by the creditors nor that the
         Tecknolaser will be able to continue as a going concern.

     Proposed Financing Transaction
     ------------------------------

         On July 31, 2006 the Company executed a term sheet with respect to its
         proposed issuance of a $2,500,000, 2 year convertible debenture. The
         proceeds from the issuance of this debenture would be used, in part, to
         repay any remaining amounts due to the Bank. The completion and closing
         of the sale of the debenture is subject, among other things, to the
         lender's completion of due diligence. The Company cannot provide any
         assurance that it will complete this financing transaction.

                                       31
<PAGE>

     Sale of Assets
     --------------

         On August 4, 2006 the Company sold to Turbon certain assets for an
         aggregate price of approximately $2,808,600 consisting of approximately
         $1,808,600 in Inventory and Tangible Property, plus $1,000,000 which
         was allocated to the Assumed Contracts and customer lists comprising
         part of the Assets sold. At closing, approximately $1,926,500 was used
         to pay down part of the outstanding balance due to Turbon under an
         outstanding credit line between the Company and Turbon. The balance of
         the Purchase Price in the amount of approximately $882,100 was paid to
         National Bank of Canada to reduce the Companys outstanding loan balance
         with National Bank of Canada. The asset sold under this transaction
         have been classified as "Assets held for resale" on the balance sheet.

     Supply Agreement
     ----------------

         Simultaneously with the closing of the Purchase Agreement, the Company
         entered into a Supply Agreement and Trademark License Agreement with
         Turbon. Pursuant to the Supply Agreement, unless otherwise agreed to in
         writing by Turbon, TOLG will exclusively purchase from Turbon its
         requirements for Products, or substantially similar products, to be
         sold to its customers provided that such Products comply with the
         specification, price, technology, and delivery standards set forth in
         the Supply Agreement. Pursuant to the Trademark License Agreement,
         Teckn-O-Laser Company granted Turbon a worldwide, royalty free,
         exclusive license (the "Licensed Rights") to use certain common law and
         registered trademarks and tradenames in connection with the sale of the
         Products.

     Debt Conversion
     ---------------

         Subsequent to the quarter-end the Company reached an agreement to
         convert the acquisition debt of $2,290,678 into equity resulting in the
         agreement to issue 4,581,355 common shares. In addition the Company
         also reached agreement to convert the $600,000 shareholder loan into
         equity resulting in the agreement to issue 2,000,0000 common shares.
         The legal agreements are being prepared for execution shortly.

                                       32
<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with the
consolidated financial statements and the notes thereto appearing elsewhere in
this Report.

SIX  MONTHS ENDED JUNE 30, 2006 AS
COMPARED TO THE SIX MONTHS ENDED JUNE 30, 2005

REVENUES - Total revenues decreased to $13,202,949 for the six months ended June
30, 2006, compared to $13,746,420 for the same period last year. This decrease
was due to a decrease in volume of units shipped and a price decline of
approximately 2% over the same period last year. We continue to focus on our
cost structure and continue to make the changes needed to compete within the
industry.

GROSS PROFIT - Gross profit decreased to $2,041,221 for the six months ended
June 30, 2006, compared to $3,850,269 for the same period last year. In
addition, the gross profit margin decreased over the same period from 28% to
15%. A large part of the decrease directly relates to the drop in revenues over
the prior year and during the second quarter inventory was written down by
approximately $400,000 to reduce the amount of overhead that had been charged as
a result of the sale of a portion of our inventory to Turbon. As a result of the
increased costs of producing in house, subsequent to the quarter we announced
that we have begun the process to close and outsource 100% of our production
needs to Turbon. It is estimated by September 2006 we will have ceased all in
house production.

OPERATING EXPENSES - Operating expenses increased to $10,806,898 for the six
months ended June 30, 2006, compared to $3,168,426 for the same period last
year. During the quarter we took a charge of $4,306,298 related to the writedown
of certain intangibles including Goodwill. During the quarter we expensed
$623,178 related to the net present value of future lease payments related to
the leases on two facilities which we are no longer occupying the locations.
Salaries and compensation decreased reflecting the restructuring started in
December 2005. Sales and administrative expenses increased 1,743,968 over the
same period last year. The increase was due to an increase in outgoing freight
of approximately $278,000, and an increase in legal and professional fees of
approximately $142,304, combined with the change in the exchange rate from US$
into CDN$. Sales and administrative expenses are expected to be reduced due to
changes in the way we handle freight costs (some customers will be charged on
smaller orders) and as a result of our cost restructuring discussed above.
Depreciation and amortization increased $469,426 over the same period last year.
This is due to having allocated a portion of the purchase price of Tecknolaser
for the amortizable intangible assets of $223,333 which was nil for the same
period last year. At present we have no material commitments for capital
expenditures.

EXTINGUISHMENT OF DEBT - We performed our analysis of the convertible debt, from
Barrington Bank, under the guidelines of the applicable accounting
pronouncements and determined that the modification resulting from the change in
conversion price and interest rate was substantial. Accordingly, we recorded a

                                       33
<PAGE>

gain on the extinguishment of the debt prior to the modification in the amount
of $460,693. The difference between the carrying value of the modified
instrument and its mandatory redemption amount is being accreted as interest
expense over the remaining term of the loan. Accretion of the discount amounted
to $47,989 during the quarter ended June 30, 2006 and is included as a component
of interest expense in the accompanying statement of operations. In addition,
interest expense also includes $66,667 of deferred financing costs written off
as part of the extinguishment of the debt.

NET INCOME - As a result of the above, the Company recorded a net loss of
$11,336,561(including the gain of $460,693 discussed above) for the six months
ended June 30, 2006, compared with net income of $324,068 for the same period
last year.

LIQUIDITY AND FINANCIAL CONDITION

At June 30, 2006, we had a working capital deficiency of $ 13,802,444
($11,677,103) excluding liabilities from discontinued operations) and we were
not in compliance with certain covenants under our line of credit obligation and
certain of our term loans described in Note 10 to our June 30, 2006 condensed
consolidated financial statements. As of December 31, 2005 and subsequent
periods including the present, we were not in compliance with one of those
ratios. On January 31, 2006 we entered into a Standstill Agreement (the
"Agreement") with the Bank whereby the Bank agreed to suspend its rights under
the loans until April 30, 2006. On May 1, 2006, we signed an extension to the
standstill agreement under the same terms as the original agreement extending to
July 31, 2006. On July 28, 2006 we signed a second extension to the Standstill
Agreement extending the period until August 11, 2006.

On August 15, 2006 our subsidiary filed a Notice of Protection under the
provision of paragraph 50.4(1) of the Companies' Creditors Arrangement Act, of
Canada whereunder our subsidiary is required to file a plan of arrangement with
the courts within 30 days. Under this Arrangement we agreed with the National
Bank of Canada (the "Bank") that the proceeds from of any collected accounts
receivable will be used exclusively to the reduction and to the payment of any
sum owed to the Bank, and to the payment of current purchases made and expenses
incurred subsequent to the filing of the notice of Intention and necessary to
maintain Teckn-o-laser's operations. We are obligated to pay all costs of the
Bank associated with this Arrangement including fees to the Bank equal to $6,250
per week for the first four weeks and $10,000 per week for the remaining two
weeks. It is the intention of all parties, based on the cash flow projections,
that the Bank will be paid out in full within approximately six weeks. We cannot
provide any assurance that we will repay the Bank within this time frame or that
we will not incur additional fees for any time period that may extend beyond
this time period. We are also obligated to reimburse the Bank for any costs it
incurs in connection with its recovery of these loans.

We have, with the consent and support of the Bank, engaged RMS Richter Inc. to
assist our senior management in preparing the Plan of Arrangement. We can
provide no assurances that the Plan of Arrangement would be accepted by the
creditors nor that the Tecknolaser will be able to continue as a going concern.

                                       34
<PAGE>

In addition to the above, Tecknolasers's filing for protection from its
creditors constitutes an event of default under its Convertible Note Agreement
with Barrington Bank (Note 16), equipment financing obligations (Note 13) and
$5.6 million credit facility (Note 12) with Turbon A.G. ("Turbon"). The credit
facility with Turbon is secured by shares of Turbon stock that we hold for
investment purposes (Note 20). Barrington Bank, the lenders under the equipment
financing obligations and Turbon each have the right to demand repayment of
these loans at anytime. An immediate demand for repayment by any of these
lenders would have a further material adverse on our liquidity and financial
condition.

Our ability to recover our assets and continue our operations is dependent upon
our ability to raise additional capital and generate revenue and operating cash
flow through the execution of our business plan. There can be no assurance that
we will be successful in our efforts to operate the Tecknolaser Group or any
other prospective acquiree businesses profitably. We also cannot provide any
assurance that we will obtain the financing we need to sustain the business
until such time that we are able to generate sufficient revenue and operating
cash flow through the operations of the Tecknolaser Group or other prospective
acquiree businesses. These matters raise substantial doubt about our ability to
continue as a going concern. The financial statements do not include any
adjustments relating to the recovery of the recorded assets or the
classification of liabilities that might be necessary should we be unable to
continue as a going concern.

The closing of the transaction with Turbon related to the sale of certain
customers as well as inventory and assets allows the Company to focus on certain
areas of sales and move away from manufacturing. Under the supply agreement all
products will be sourced from Turbon and all production will cease within our
facilities. This allows us to leverage on Turbon's cost structure and eliminate
our inefficiencies in production. After this transaction revenues are estimated
to be in the $8-$10 million range annually. Due to the filing for protection in
our subsidiary we can provide no assurances as to the impact on our future
revenues or overall profitability.

CRITICAL ACCOUNTING POLICIES

We prepare our condensed consolidated financial statements in conformity with
accounting principles generally accepted in the United States of America. The
preparation of these financial statements requires us 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.

We have identified the following as critical accounting policies based on the
significant judgment and estimates used in determining the amounts reported in
our condensed consolidated financial statements:

Use of Estimates

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures 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.

                                       35
<PAGE>

Provision for Doubtful Accounts

Periodically, we review the adequacy of our provision for doubtful accounts
based on historical bad debt expense results and current economic conditions
using factors based on the aging of our accounts receivable. In addition, from
time-to-time we estimate specific additional allowances based on indications
that a specific customer may be experiencing financial difficulties. Actual bad
debt results could differ materially from these estimates.

Impairment of Long-Lived Assets

When facts and circumstances indicate that the carrying values of long-lived
assets, including fixed assets, investments in other companies and intangibles,
may be impaired, an evaluation of recoverability is performed by comparing the
carrying value of the assets to projected future cash flows in addition to other
quantitative and qualitative analyses. Upon indication that the carrying value
of such assets may not be recoverable, we recognize an impairment loss as a
charge against current operations. Long-lived assets to be disposed of are
reported at the lower of the carrying amount or fair value, less estimated costs
to sell. Judgments we make related to the expected useful lives of long-lived
assets and our ability to realize undiscounted cash flows in excess of the
carrying amounts of such assets are affected by factors such as the ongoing
maintenance and improvements of the assets, changes in economic conditions, and
changes in operating performance. As we assess the ongoing expected cash flows
and carrying amounts of our long-lived assets, these factors could cause us to
realize a material impairment charge.

Income Taxes

We utilize the asset and liability method of accounting for income taxes, as set
forth in Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes" ("SFAS 109"). SFAS 109 requires the recognition of deferred tax
assets and liabilities for the expected future tax consequences of temporary
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates in effect for the year in which
those temporary differences are expected to be recovered or settled.

Stock based compensation

We adopted Statement of Financial Accounting Standards No. 123 (revised 2004)
Share-Based Payments ("FAS123(R)") at the beginning of our first fiscal quarter
of 2006. FAS123(R) establishes standards for the accounting for transactions in
which an entity exchanges its equity instruments for goods or services.
FAS123(R) requires us to measure the cost of employee services received in
exchange for an award of equity instruments (usually stock options) based on the
grant-date fair value of the award. That cost is recognized over the period
during which an employee is required to provide service in exchange for the
award - the requisite service period (usually the vesting period).

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ITEM 3.  CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures. Under the supervision and
with the participation of our chief executive officer and chief financial
officer, 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,
as of the end of the period covered by this report (the "Evaluation Date").
Based on this evaluation, our chief executive officer and chief financial
officer conclude as of the Evaluation Date that our disclosure controls and
procedures were 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.

(b) Changes in Internal Control over Financial Reporting. There were no changes
in our internal control over financial reporting that occurred during the period
covered by this report that have materially affected or are reasonably likely to
materially affect our internal control over financial reporting.

                          PART II -- OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

On August 18, 2006, related to a portion of the litigation outstanding with our
prior CEO, a judgment of $284,451.77 was entered against us for a portion of the
litigation related to the promissory note which was due to the former CEO as
noted in our balance sheet as approximately $172,988. We plan to have the judge
reconsider this judgment and reinstate our claim in relation to this matter.
This judgment relates only to a portion of the case directly related to the note
and has not addressed the damages caused by the CEO by his actions against us.
We will ask the court to hold this judgment based on the remaining litigation to
be heard. We cannot, however, provide any assurances as to the outcome of our
litigation nor to the success of having the judgment noted above overturned. We
are in the process of retaining new legal counsel to handle these matters. For a
discussion of our outstanding legal proceedings reference is made to Item 3 of
our Form 10-KSB for the year ended December 31, 2005.

ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

No equity securities were sold by us during the quarter ended June 30, 2006.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

Through our Teckn-O-Laser entities, we have outstanding loans with National Bank
of Canada (the "Bank"). As of August 7, 2006, we owed the Bank approximately
US$930,000 (approximately CDN$1,040,000) in principal and interest under such
loans. The loans are secured by a first ranking lien on the remaining assets of
our Teckn-O-Laser entities and are guaranteed by us.

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<PAGE>

We had previously entered into a Standstill Agreement with the Bank on January
31, 2006 which was amended and extended on May 1, 2006. On July 31, 2006 or
sooner, if we did not fully comply with the conditions set forth in the
Standstill Agreement, as amended, the Bank was to again have the right to demand
immediate repayment of the loans.

The financial institution that had provided us with letter of interest and a
letter of offer to enable us to pay off the loans subsequently postponed such
offer and we were unable to pay off the bank loans by July 31, 2006.

On July 28, 2006 we entered into a second amendment to the Standstill Agreement
pursuant to which we have been granted until 5:00 PM on August 11, 2006 (the
"Repayment Date") to repay all of the principal and interest due under the loans
with the Bank. If we fail to make payment by such Repayment Date, the Bank has
advised us that it will not further extend the time limit for repayment and will
at such time realize on its security interest in the Teckn-O-Laser assets.
Pursuant to the second amendment, we agreed to pay the Bank, tolerance and
postponement fees of CDN$50,000. We further agreed to pay the Bank's legal fees
related to the amendment together with related service fees. Except as
specifically provided in the second amendment, the Standstill Agreement
continues with full force and effect. The Bank agreed not to require the payment
of the monthly penalty fee for August 2006 otherwise due August 1, 2006 in the
event the loans are fully repaid by August 11, 2006.

On July 31, 2006 we executed a term sheet with regard to the prospective sale by
us to a lender of a $2,500,000, 2 year convertible debenture. The proceeds from
such sale would be used in part to pay down our remaining loan balance with the
Bank. The completion and closing of the sale of the debenture is subject, among
other things, to the lender's completion of due diligence. No assurance can be
given that the debenture sale will be completed, or that, if completed, it will
be done so in a timely manner that will allow us to pay off our loan with the
Bank on or before August 11, 2006.

On August 15, 2006 we filed a Notice of Protection under the provision of
paragraph 50.4(1) of the Companies' Creditors Arrangement Act, of Canada
whereunder we are required to file a plan of arrangement with the courts within
30 days. Under this Arrangement we have agreed with the National Bank of Canada
(the "Bank") that the proceeds from of any collected accounts receivable will be
used exclusively to the reduction and to the payment of any sum owed to the
Bank, and to the payment of current purchases made and expenses incurred
subsequent to the filing of the notice of Intention and necessary to maintain
Teckn-o-laser's operations. We are obligated to pay all costs of the Bank
associated with this Arrangement including fees to the Bank equal to $6,250 per
week for the first four weeks and $10,000 per week for the remaining two weeks.
It is the intention of all parties that the Bank be paid out in full within the
next six weeks.

We have, with the consent and support of the Bank, engaged RMS Richter Inc. to
assist senior management in preparing the Plan of Arrangement.

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<PAGE>

ITEM 5.  OTHER INFORMATION

On August 4, 2006 our subsidiaries Teckn-O-Laser Global Company ("TOLG") and
Tecknolaser USA, Inc. ("TOLU") completed and closed their June 20, 2006 Asset
Purchase Agreement (the "Purchase Agreement"), as amended on August 2, 2006,
with Turbon International, Inc. ("Turbon"). The August 2, 2006 amendment
principally involved a reallocation of our use of the Purchase Price (as defined
below) and a revision to the termination provision of the Purchase Agreement.
Pursuant to the Purchase Agreement, TOLG and TOLU, hereinafter singly referred
to as "Seller" and collectively referred to as "Sellers", sold to Turbon certain
assets of Sellers (the "Acquired Assets") used or useful in the operation of the
segment of Sellers' businesses (the "Designated Business") that sells and
distributes laser cartridges and other related imaging consumables (collectively
the "Products) to certain original equipment manufacturers, contract
manufacturers, dealers, remanufacturers, wholesalers, buying groups, dealer
networks and retailers. The Acquired Assets consisted of certain tangible
property ("Tangible Property"), inventory ("Inventory") and assumed contracts
("Assumed Contracts") of Sellers.

As consideration for the Acquired Assets and the Licensed Rights (as defined
below), Turbon paid Sellers an aggregate of approximately $2,808,600 consisting
of approximately $1,808,600 in Inventory and Tangible Property, plus $1,000,000
which was allocated to the Assumed Contracts and customer lists comprising part
of the Acquired Assets (collectively, the "Purchase Price"). At closing,
approximately $1,926,500 was used to pay down part of the outstanding balance
due to Turbon under an outstanding credit line between us and Turbon. The
balance of the Purchase Price in the amount of approximately $882,100 was paid
to National Bank of Canada to reduce our outstanding loan balance with National
Bank of Canada. In addition, National Bank of Canada and Barrington Bank
International Limited, another secured lender, each granted its consent to the
sale of the Acquired Assets and released of its lien on the Acquired Assets.

The Purchase Price remains subject to a potential post closing adjustment based
upon the net revenue of Turbon attributable to the Acquired Assets during the
twelve month period immediately following the closing date (the "Period
Revenue"). To the extent the Period Revenue is between $13,875,000 and
$16,125,000 no Purchase Price adjustment will be made. In the event Period
Revenue is less than $13,875,000, the Purchase Price will be adjusted downward
by an amount equal to the product of 10% multiplied by the difference between
Period Revenue and $15,000,000 up to a maximum downward adjustment of $500,000.
In the event Period Revenue is greater than $16,125,000, the Purchase Price will
be adjusted upward by an amount equal to the product of 10% multiplied by the
difference between Period Revenue and $15,000,000 up to a maximum upward
adjustment of $500,000. The amount of any such upward adjustment to the Purchase
Price will be paid by way of a set-off against the then-outstanding balance due
to Turbon under its outstanding term loan with us. The present balance due under
the term loan is $2,800,000. If no amounts are then-outstanding under the term
loan, Turbon will pay the adjustment amount to the Sellers.

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<PAGE>

Simultaneously with the closing of the Purchase Agreement, we entered into a
Supply Agreement and Trademark License Agreement with Turbon. Pursuant to the
Supply Agreement, unless otherwise agreed to in writing by Turbon, TOLG will
exclusively purchase from Turbon its requirements for Products, or substantially
similar products, to be sold to its customers provided that such Products comply
with the specification, price, technology, and delivery standards set forth in
the Supply Agreement. Pursuant to the Trademark License Agreement, our
subsidiary Teckn-O-Laser Company granted Turbon a worldwide, royalty free,
exclusive license (the "Licensed Rights") to use certain common law and
registered trademarks and tradenames in connection with the sale of the
Products.

Effective July 25, 2006 Donald Page resigned as the Chairman of our Board of
Directors. His resignation was not the result of any disagreement with us. Mr.
Page has agreed to provide consulting services to us going forward with terms to
be agreed upon on a project by project basis.

In June 2006 we have received an OTCBB delinquency notice from the NASD advising
that we have been delinquent on two separate occasions with respect to our
obligation to file reports with the Securities and Exchange Commission pursuant
to Section 13 or 15(d) of the Securities Exchange Act of 1934 as such relates to
our filings for periods on or after October 1, 2005. If we do not file required
reports by their due date (including applicable extensions) three times in any
applicable two year period we will be subject to delisting from the NASD OTCBB
and will be ineligible for quotations on the OTCBB for a period of one year. We
intend to make our future filings in timely fashion to avoid delisting.

ITEM 6.  EXHIBITS

Exhibits

The following exhibits are filed as a part of this report on Form 10-QSB:

EXHIBIT NO.                        DESCRIPTION
-----------                        -----------

31.1        Rule 13(a)-14(a)/15(d)-14(a) Certification of Principal Executive
            Officer

31.2        Rule 13(a)-14(a)/15(d)-14(a) Certification of Principal Financial
            Officer

32.1        Rule 1350 Certification of Chief Executive Officer

32.2        Rule 1350 Certification of Chief Financial Officer


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<PAGE>

                                   SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Form 10-QSB to be
signed on its behalf by the undersigned, thereunto duly authorized.


Dated:   August 21, 2006                Adsero Corp.

                                        By: /s/ William Smith
                                            -----------------
                                            William Smith
                                            Secretary, Treasurer, Chief
                                            Financial Officer


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