UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549  FORM 10-KSB xANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 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 000-15216     Homeland Security Network, Inc. (Name of small business issuer in its charter)  Nevada86-0892913(State or other jurisdiction of
incorporation or organization)(I.R.S. Employer
Identification No.)3000 N. Coit Rd, Suite 1200, Richardson, TX 7508075080(Address of principal executive offices)(Zip Code) Registrants telephone number, including area code: (214) 618-6400  Securities registered under Section 12(b) of the Exchange Act: Title of each className of each exchange on which registeredNoneNone  Securities registered under Section 12(g) of the Exchange Act:  Common Stock, Par Value of $.001 per Share (Title of class)  Check whether the issuer is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act.            ̈  Check whether the issuer (1) 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 (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.                 Yes x   No  ̈  Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained in this form, and no disclosure will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB.       ̈  Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  ̈   No x State issuer's revenues for its most recent fiscal year: $54,260.  State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was sold, or the average bid and asked price of such common equity as of a specified date within the past 60 days: $688,297 based on the $0.01 per share price at which common equity was sold on March 29, 2007.  State the number of shares outstanding of each of the issuers classes of common equity, as of the latest practicable date:  199,453,195 shares of Common Stock, $.001 par value, as of March 29, 2007.  HOMELAND SECURITY NETWORK, INC. AND SUBSIDIARIES FORM 10-KSB YEAR ENDED DECEMBER 31, 2006  INDEX PagePART I3Item 1.Description of Business8Item 2.Description of Property8Item 3.Legal Proceedings8Item 4.Submission of Matters to a Vote of Security Holders8PART II8Item 5.Market for Common Equity and Related Stockholder Matters8Item 6.Managements Discussion and Analysis or Plan of Operations10Item 7.Financial Statements14Item 8.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure14Item 8A.Controls and Procedures15Item 8B.Other Information16PART III16Item 9.Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act16Item 10.Executive Compensation17Item 11.Security Ownership of Certain Beneficial Owners and Management18Item 12.Certain Relationships and Related Transactions20Item 13.Exhibits23Item 14.Principal Accountants Fees and Services23INDEX TO FINANCIAL STATEMENTS24SIGNATURES45     Cautionary Statement Regarding Forward Looking Statements  Certain of the statements contained in this Form 10-KSB for the period ended December 31, 2006 should be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the Securities Act) and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act), which reflect the current views of Homeland Security Network, Inc. (collectively, with its subsidiaries, HSNI or the Company) with respect to current events and financial performance. You can identify these statements by forward-looking words such as may, will, expect, intend, anticipate, believe, estimate, plan, could, should, and continue or similar words. These forward-looking statements may also use different phrases. From time to time, HSNI also provides forward-looking statements in other materials HSNI releases to the public or files with the SEC, as well as oral forward-looking statements. You should consult any further disclosures on related subjects in HSNIs quarterly reports on Form 10-QSB and current reports on Form 8-K filed with the SEC.  Such forward-looking statements are and will be subject to many risks, uncertainties and factors relating to HSNIs operations and the business environment in which HSNI operates, which may cause its actual results to be materially different from any future results, express or implied, by such forward-looking statements. Statements in this annual report and the exhibits to this report should be evaluated in light of these important risks, uncertainties and factors. HSNI is not obligated to, and undertakes no obligation to publicly update any forward-looking statement due to actual results, changes in assumptions, new information or as the result of future events.  PART I  ITEM I. DESCRIPTION OF BUSINESS  The Company  The Company is a Nevada corporation formed in 1993. HSNIs principal executive office is located at 3000 N. Coit Rd, Suite 1200, Richardson, TX 75080. HSNIs telephone number is (214) 618-6400. HSNIs website is www.hsni.us.  This report, quarterly reports on Form 10-QSB, current reports on Form 8-K and amendments to these reports filed or furnished pursuant to Section 13(a) of the Exchange Act are made available free of charge through the SECs website (www.sec.gov), which contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC. In addition, these documents are made available on HSNIs website as soon as reasonably practicable after the material is electronically filed with, or furnished to, the SEC. The public may read and copy any material HSNI files with the SEC at the SECs Public Reference Room located at 450 Fifth Street, N.W., Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.  From 1998 until the third quarter of 2004, the Company provided financial products and related services to the new and pre-owned automotive finance industry. The Company primarily purchased and subsequently sold automobile finance receivables collateralized by new and pre-owned automobiles. The receivables were predominately purchased from automobile retailers nationwide and sold to banks and credit unions.  The Company changed its name to Homeland Security Network, Inc. (OTC: HSYN) on March 1, 2005 to reflect the direction of a new course of business. The Company intends `Homeland Security Network, Inc.' to be recognized as a provider of technology products and services for tracking and recovering valuable mobile assets.  The Company anticipates its new course of business will capitalize on rapidly emerging, largely under-served, GPS tracking markets. HSNI plans to serve the concerns and requirements of the individual consumer and corporations. HSNI predominantly targets markets such as commercial trucking and cargo management, commercial fleet management, equipment rental and personal vehicle tracking. These markets could have a potential demand in excess of 100 million units in the United States, Canada and Mexico over the next decade. The Company expects to impact the GPS tracking industry with state-of-the-art software, as with its ability to provide low cost tracking hardware, and its ability to offer a cost-effective data transmission fee. The Company's GPS products incorporate map tracking and trailing, geo-fencing alerts for designated parameter infringements, and the ability to control vehicle functions with voice commands from its customer's web-enabled mobile phones or personal computers, via the company's internet website system software. The Company plans to continually enhance features.  2003 Merger  On June 30, 2003, HSNI (when operating as AutoCorp Equities, Inc.) issued 100,000,000 shares of its Common Stock and 4,086,586 shares of its Series A convertible stock to Pacific Holdings Group, Inc., the parent company of Pacific Auto Group, Inc., resulting in Pacific Holdings Group owning approximately 94.0% of the outstanding HSNI shares.  The form of the transaction was a reverse triangular merger, whereby a newly formed, wholly owned acquisition subsidiary of HSNI merged with and into Pacific Auto Group, with Pacific Auto Group being the surviving corporation in the merger. Pacific Holdings Group was 100% owned by Pacific USA Holdings Group, Inc., which was the primary domestic parent company of the entire group, owning all of the outstanding stock of Pacific Holdings Group. The ultimate parent company was Pacific Electric Wire & Cable Co. in Taiwan. On December 2, 2002, Pacific USA Holdings Group filed a voluntary petition under Chapter 11 of the U.S. Bankruptcy Code. On November 24, 2004, the Debtors' joint plan of reorganization became effective and the Debtors emerged from Chapter 11 of the Bankruptcy Code. Neither Pacific Holdings Group nor Pacific Auto Group was party to the petition under Chapter 11 of the Bankruptcy Code.  2004 Stock Acquisition by AutoCorp Acquisition Partners  In August 2004, Pacific Holdings Group, the then controlling shareholder of the Company, and one of its affiliates, Pacific Financial Group collectively sold their stock to a partnership, AutoCorp Acquisition Partners formed by the then President (and CEO) and Executive Vice President of the Company.  AutoCorp Acquisition Partners designated two persons who were elected to the Board of Directors.  The designees became a majority of the board after the tenth day subsequent to the mailing and filing of the Information Statement pursuant to Section 14(f) of the Exchange Act and Rule 14f-1 promulgated there under. The designees are now the beneficial owners of approximately 49% of the Company's stock and originally constituted 100% of the Company's Board of Directors, however, an additional Director was voted onto the Board on December 30, 2006.  Plan of Operation  In August 2004, the Company began developing plans to "run-off" its operations in the new and pre-owned automotive finance industry by not accepting new business and terminating its business relationships. Its new focus is to transition into several new markets with new products. The Company intends `Homeland Security Network, Inc.' to be recognized as a provider of technology products and services for tracking and recovering valuable mobile assets.  The Company anticipates its new course of business will capitalize on rapidly emerging, largely under-served, GPS tracking markets.  On April 14, 2005, HSNI completed negotiations and entered into a Licensing and Exclusive Distribution Agreement and a Sales Purchase Agreement (collectively "Agreements") with Advantra International NV, a major international electronics developer and manufacturer, to manufacture its products. Under the terms of the Agreements, the Company has certain rights to distribute, develop, market, and sell select hardware devices.  The Company entered into a letter of intent dated as of January 2005 with Rodwell Software Systems, Inc. (RSSI) regarding the Company's acquisition of all of the issued and outstanding capital stock of RSSI subject to certain adjustments at the closing of the acquisition plus assumption of certain transaction and related costs and expenses.  The letter of intent was subject to various conditions and approvals and contemplated that the acquisition would be effected through the merger of RSSI with and into the Company, with the Company as the surviving corporation. The Company's intention to acquire RSSI was to significantly increase its software/firmware development capabilities, which combines GPS tracking with a web interface in one simple device working in tandem with a cell phone, PDA or computer. The acquisition was not consummated by mutual agreement.  On December 26, 2005, the Company, as a prerequisite to a more definitive agreement, entered into an agreement to solely purchase certain software, firmware and product enhancements developed by RSSI. The transaction is subject to the execution and delivery of the more definitive written agreement and other documents between the Company and RSSI. In September 2005, the Company issued 7,000,000 shares of common stock to RSSI as compensation for the purchase of the software, firmware and product enhancements. In December 2005, pursuant to its agreement with RSSI, the Company issued 4,100,000 shares of common stock as additional compensation to RSSI. Further, the Company will provide an intermittent royalty based on the sale of components and usage of the web interface by consumers as compensation to RSSI, subject to certain milestones. The Company incurred product development costs of $313,000 during the year ended December 31, 2005 for software related to the GPS tracking devices. The more definitive agreement will include additional language, without limitation, regarding an exclusive permanent License, attached schedules, representations, warranties and exceptions, and other matters with respect to the transaction.  On September 18, 2006, the Company entered into an agreement to purchase certain firmware and product enhancements developed by RSSI.  The Company received the software code in the fourth quarter of 2006 and began testing the functionality of the software for acceptable integration into its product offerings.  Prior to Decmber 31, 2006, the Company determined it would accept one of three modules it purchased in the software agreement.  Subsequent to December 31, 2006, the Company has continued to evaluate the effectiveness of the software with its product offerings and believes the other two modules will be accepted by the Company in the second quarter of 2007 upon complete integration into its software platform.  The terms of the agreement require the Company to pay RSSI $136,000 upon final acceptance.  The payment includes $11,000 to be paid initially in cash consideration with the remaining $125,000 to be repaid through the issuance of a note payable that is convertible into a fixed amount of shares of the Company at the option of RSSI.  The Company is currently negotiating the terms of the existing agreement and expects certain terms to be amended.  As of December 31, 2006, the Company has recorded the amount owed in accordance with the agreement referenced above, which is reflected as product development expense of $136,000 and is included in accrued expenses for the same amount.  The Company did not capitalize the cost of the purchased software since its recent historical cash flows does not support that their will be adequate cash flows in the future to record as an intangible asset at December 31, 2006.  The general terms and conditions related to the exclusivity of the permanent license are as follows. The exclusivity relates primarily to the retail automotive industry, which encompasses end users of the products. Other unrelated markets are also provided for. The exclusivity, however, is conditional.  The purchase from RSSI provides the Company with technology products and support services for tracking and recovering valuable mobile assets.  HSNI's plan further incorporates engaging and developing strategic alliances with third party sale and installation entities and distributors that have a distinct sales and marketing presence in the automobile retail industry, and the commercial and government sectors. The Company expects these types of engagements to be particularly beneficial and anticipates the results of such alliances to create name recognition for the Company.  Ultimately, the Company expects to generate significant and sustaining revenues derived primarily from the sale and installation of its GPS products and components to domestic and international licensees, the receipt of license fees and royalties. Additionally, the Company expects to generate revenues relating to the sale of service contracts, which terms of service is anticipated to range from 12 to 36 months and are payable in full upon activation of the related tracking unit and subsequently the renewal of a previous service contract.  Costs for product development are expensed as incurred and include salaries, fees to consultants, and other related costs associated with the development of products. The Companys product development effort has thus far been outsourced to third parties. Because the rate of achievement is unpredictable, product development expenses may vary significantly from period to period. Such variability can have a significant impact on the Companys income from operations and cash flows.  Risk Factors  Limited Operating History of Present Business:  In August 2004, as described under Part I, Item 1, the heading Acquisition by AutoCorp Acquisition Partners, the Companys stock was acquired by a partnership formed by the then President (and CEO) and Executive Vice President of the Company. Although the Companys current management has extensive operating experience in the consumer finance industry, the brief operating history as a provider of technology products and services for tracking and recovering valuable mobile assets provides only a limited basis for evaluation. The prospects for the Company must be considered in light of the risks, expenses, difficulties and problems frequently encountered in transitioning a company.  Risks, uncertainties and factors that could cause HSNIs actual results to differ materially from forward-looking statements include, but are not limited to, the following:  The ability to maintain adequate liquidity and produce sufficient cash flow to meet HSNIs capital expenditure requirements;The ability to attract and retain qualified management and other personnel;The number of potential customers in a target market;Changes in the competitive environment in which HSNI operates;Changes in government and regulatory policies;Uncertainty relating to economic conditions generally and in particular affecting the markets in which HSNI operates;Pricing and availability of equipment, materials, inventory and programming;The ability to complete acquisitions or divestitures and to integrate any business or operation acquired;The ability to enter into strategic alliances or other business relationships;The ability to overcome significant operating losses;The ability to reduce costs;The ability to develop HSNIs products and services and to penetrate existing and new markets;Technological developments and changes in the industry; and  Risk Associated with Expansion:  The Company's growth strategy may include future mergers or acquisitions, or expansion of services and products offered. There can be no assurance that management will successfully integrate the refocused operations of the Company with those that may be acquired or established in the future and effectively manage the combined enterprise. There will be a need to limit overhead as additional operations may be acquired while still maintaining sufficient staff. Failure to do so would have a materially adverse effect on the business, financial condition and results of operations of the Company (See Plan of Operations).  General Economic Conditions:  The Company's new business is related, in part, to the sale of new and pre-owned automobiles. Sales are affected by employment rates, prevailing interest rates, and other general economic conditions. Economic slowdown or recession could lead to inventory and production decreases. Adverse economic changes and sluggish sales of new and pre-owned automobiles and weaknesses in the economy could lead to a decline in the sale of tracking devices.  Competition:  The Company will compete with other product and service suppliers in the GPS industries. The GPS tracking industry relies on coordinating the merging of four separate components in order to operate as a GPS tracking system. They are; hardware, firmware, a software or application system, and wireless communication providers. The Company is a GPS tracking company that has adapted a portion of  its hardware and software capabilities to operate on what is currently the least costly type of airtime network provider in the industry. It is possible that a competitor could adapt its hardware and software to also utilize the Companys current airtime provider. This event could reduce the size of the Companys targeted markets.  Dependence on Key Alliances:  Presently, the Company is no longer dependent on a single electronics developer and manufacturer to develop and manufacture the Companys products. However, it is possible that new emerging technologies could render the Companys products obsolete or that procurement of supplies could become scarce or more costly to acquire should the Companys suppliers terminate their alliance with the Company.  Additionally, the Company presently relies on the ability of a wholesale distributor, strategic alliances and a limited in-house sales force to market and sell the products. Many competitors are larger and have greater financial and marketing resources than the Company.  Dependence on Management Information Systems:  The Company's future success depends in part on the ability to continue to adapt technology on a timely and cost-effective basis to meet changing customer and industry standards and requirements.  Dependence on Key Personnel:  The Company is highly dependent on the services of certain key employees. The Company has entered into an employment agreement with some, but not all such employees. The loss of certain key employees' services could have a materially adverse effect on the business and operations of the Company. In addition, the future success of the Company depends upon its ability to attract and retain qualified general personnel, which have sufficient and suited expertise in the GPS tracking industry. There can be no assurance of success in attracting and retaining qualified personnel in the future.  Market for Common Stock; Volatility of Prices:  There has been a limited public trading market for the Companys shares of common stock. There can be no assurance that a regular trading market for the common stock will ever develop or, if developed, that it will be sustained.  The market price of the common stock could also be subject to significant fluctuations in response to such factors as variations in the anticipated or actual results of operations of the Company or other companies in the GPS tracking industries, changes in conditions affecting the economy generally, analyst reports, general trends in industry, and other political or socioeconomic events or factors.  Liquidity and Need for Additional Funding:  Due to recurring operating losses and the Company's current working capital deficit, there is a need to obtain additional funding of working capital for the Company to operate as a going concern. Various types of additional funding such as issuance of additional common or preferred stock, additional lines of credit, or issuance of subordinated debentures on other forms of debt will be pursued. The Company is currently negotiating additional investments in the Company.  However, there can be no assurance that additional funding will be available when needed, or if available, that its terms will be favorable or acceptable.  Substantial Leverage:  Although substantially leveraged at the end of fiscal year 2006, in order to meet the ongoing working capital requirements of the Company, additional indebtedness may have to be incurred, perhaps resulting in a more highly leveraged capital structure. A highly leveraged capital structure could have adverse consequences, including:  Limiting the ability to obtain additional financing;Requiring  the use of operating  cash flow to meet  interest and principal repayment obligations;Increasing  the  Company's  vulnerability  to changes in general  economic conditions and competitive pressures; andLimiting the Company's ability to realize some or all of the benefits of significant business opportunities.  In addition, any indebtedness that would be incurred is expected to contain covenants that limit, among other things, the ability to incur additional indebtedness, engage in mergers and acquisitions, pay dividends or take other actions. These covenants may also require the meeting of certain financial tests and the maintenance of a minimum level of collateral and may give the lender the right to perform periodic audits to ensure compliance with the terms of the applicable loan. Non-compliance with any of the terms of such covenants may result in a suspension of funding, acceleration and consequent demand for repayment and a foreclosure on collateral, as well as the pursuit of other rights and remedies, all of which could have a materially adverse effect on the financial condition, results of operations and prospects of the Company.  Interest Rate Fluctuations:  The Company's profitability is based, in part, on the interest rate charged on interest bearing liabilities. Interest rates with respect to outstanding indebtedness or indebtedness that may be incurred in the future are, or will be, as the case may be, based on interest rates prevailing in the market at the time the debt is incurred. In some cases, the rates may be floating rates. Increases in interest rates paid on outstanding indebtedness would adversely affect the profitability of the Company and consume cash allocated for other operating activities.  Seasonality; Variability of Quarterly Operating Results:  The Company's new business is related, in part, to the sale of new and pre-owned automobiles. The new and pre-owned automobile sales and finance industry is subject to substantial seasonal variations in revenues. Demand for new and pre-owned automobiles is generally lower in the winter than in other seasons. Sales tend to be lower during the holiday and back-to-school seasons, while sales tend to be higher during the late spring and through the summer months. The planned growth strategy may subject the Company's operating results to substantial variables and changes each quarter. Accordingly, given the possibility of such fluctuations, management believes that quarterly comparisons of the results of operations during any fiscal year are not necessarily meaningful and that results for any one fiscal quarter should not be relied upon as an indication of future performance.  Lack of Prospective Dividends:  The Company has not paid any dividends on its Common Stock and anticipates that future earnings, if any, will be used to reduce debt or finance future growth and that dividends will not be paid to shareholders. There can be no assurance that operations will result in sufficient revenues to enable the Company to operate at profitable levels or to generate positive cash flow. Accordingly, the Company does not anticipate the payment of any dividends on Common Stock for the foreseeable future (see Item 5, Market for Common Equity and Related Stockholder Matters).  Inflation:  Higher interest rates, which generally occur with inflation, would tend to increase the cost of credit used by the Company and would thus, decrease profits.  Possible Other Risks:  In addition to all risks and assumptions including, but not limited to, those identified under this "Risk Factors" section, businesses are often subject to risks not foreseen or fully appreciated by management. In reviewing this report, investors and potential investors should keep in mind other possible risks that could be important. Among key factors that may have a direct bearing on the Company's results are competitive practices in GPS tracking industries, the ability to meet existing financial obligations in the event of adverse industry or economic conditions or to obtain additional capital to fund future research and development requirements of GPS products, commitments and expansion, and the impact of current and future laws and governmental regulations on operations.  Employees  At December 31, 2006, the Company employed a total of 4 people. No employees are covered by a collective bargaining agreement.  ITEM 2. DESCRIPTION OF PROPERTY  The principal executive office of the Company is located at 3000 N. Coit Rd, Suite 1200, Richardson, TX 75080. Approximately 3,162 square feet of leased premises are at this location. The rent is approximately $43,000 per year. The lease expires in October 2009.  Prior to July 1, 2006, the Company leased its principal executive office in Frisco, Texas from a related party on a month to month basis, which commenced in September 2004.  Rent expense totaled $68,831 and $45,064 for the years ended December 31, 2006 and 2005, respectively.  ITEM 3. LEGAL PROCEEDINGS  The Company is presently a party to a legal proceeding as follows:  Plus 4 Credit Union FK/A Houston Postal Credit Union (HPCU).  The Company, through its wholly owned subsidiary, Autocorp Financial Services, Inc. (ACFS) had entered into an auto loan servicing agreement dated January 7, 2003. ACFS and HPCU have disputes over collection of certain auto finance receivables and general  performance under the servicing agreement.  HPCU has started a legal action but the attorneys for both sides are in the process of negotiating a settlement. Management believes that a settlement will be reached and this matter will be resolved.  ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS  Not Applicable  PART II  ITEM. 5 MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS  The Common Stock of the Company is on the OTC Bulletin Board. The name of the Company was changed to Homeland Security Network, Inc. on March 1, 2005, and the symbol was changed to HSYN effective March 16, 2005. It can be viewed at http://quotes.nasdaq.com.  Trading in the Companys securities was suspended from April 5, 2005 through April 18, 2005 by the Securities and Exchange Commission because the Company was delinquent in its periodic filing obligations under Section 13(a) of the Exchange Act of 1934 and because of possible manipulative conduct occurring in the market for the Companys stock.  Trading was reinstituted upon filing its delinquent filing obligations on June 19,2006 The table below lists the high and low bid prices for each quarter of the last two fiscal years.   Bid Quotations*   Fiscal 2006:LowHighFirst Quarter$0.06$0.10Second Quarter0.010.10Third Quarter0.010.09Fourth Quarter0.010.03Fiscal 2005:First Quarter0.110.18Second Quarter0.0250.10Third Quarter0.070.08Fourth Quarter0.060.06  *These quotations reflect inter-dealer prices, without retail mark-up, markdown, or commission and thus may not represent actual transactions.  Information Relating to the Companys Voting Securities  Shares of Common Stock are the only voting securities of the Company. Holders of the Common Stock are entitled to one vote on all matters presented to stockholders for each share registered in their respective names. As of March 29, 2007, there were 199,453,195 shares of Common Stock outstanding. The Series A and Series B Preferred Stock have no voting rights.  At December 31, 2006, there were approximately 501 holders of record of the Common Shares of the Company.  The Company has not paid any dividends on its Common Stock and anticipates that future earnings, if any, will be retained to finance future growth.  As part of the 2003 merger transaction, of the 10,000,000 Preferred Shares authorized in the Company's Articles of Incorporation, a total of 4,086,856 of those shares were designated as Series "A".  The terms of the Series "A" Preferred Shares are:  They have no voting rights, sinking fund provision or redemption rights; andThey are convertible into Common Shares on a 10-for-1 basis at any time at the option of the holder. When or if the Company's Common Stock is accepted for trading in the NASDAQ National Marketing System, the Company will obtain conversion rights with respect to the preferred stock.  The Company has authorized 2,000,000 shares of Series "B" Preferred Stock of which 1,621,642 shares have been issued. The terms of the Series "B" Preferred Shares are:  They pay non-cumulative dividends at the rate of 5% per year;They have a liquidation preference of $14.64 per share;They have no voting rights, sinking fund provisions or redemption rights; andThey are convertible into Common Shares on a 1-for-1 basis.  The holder of the preferred shares will have the right and option with the conversion. A required conversion at the Companys election will occur if either of the following events takes place:  When or if the Company's Common Stock is accepted for trading in the NASDAQ National Marketing System; andWhen or if the Company's Common Stock is publicly traded at a price equal to $14.64 per share or more.  From January 1, 2003 through December 31, 2006, the Company issued the following securities without registration under the Securities Act of 1933:  § 50,000 shares of common stock were issued in 2003 to the Chairman of the Board for services rendered as a consultant.  § In January 2005, 100,000 shares of common stock were issued to an executive as a hiring bonus at $0.15 per share ($15,000).  § Under rights obtained pursuant to an Assignment and Assumption Agreement entered into in December 2004, the note holder of a $61,538 note elected to convert principal payments remitted into common stock.  In January 2005, the Company issued 3,429,355 shares at $0.11 per share valued at $377,229. In March 2005, the Company issued 12,000,000 shares at $0.18 per share valued at $2,160,000, totaling $2,537,229 resulting in a charge in the statement of operations.  § In April 2005, 2,070,000 shares of common stock were issued to executives and other employees in payment of performance bonuses; 70,000 shares at $0.11 and 2,000,000 shares at $0.02 (totaling $47,000).  § In April 2005, 380,091 shares of common stock were issued as payment for past due interest due on certain notes payable at $0.11 per share ($41,810).  § In April 2005, 50,000 shares of common stock were issued as payment to an executive as a hiring bonus at $0.11 per share ($5,500).  § In April 2005, 2,207,327 shares of common stock were issued as payment to officers in full satisfaction of notes payable at $0.11 per share ($242,806).  § In April 2005, 1,000,000 shares of common stock were issued in payment for financing costs at $0.175 per share ($175,000).  § In June 2005, 11,000,000 shares of common stock were issued to an executive in lieu of compensable salary for the 2005 year at $0.045 per share ($495,000).  § In July 2005, 2,500,000 shares of common stock were issued at $0.08 per share under a Subscription Agreement (Regulation S Investment) whereby the Company received $200,000.  § In September 2005, the Company issued 7,000,000 shares of common stock at $0.07 per share ($490,000) for the purchase of certain software, firmware and product enhancements.  § In December 2005, 9,200,000 shares of common stock were issued to executives and other employees in payment of performance bonuses: $0.03 per share totaling $276,000.  § In December 2005, 394,793 shares of common stock were issued as compensation and expense reimbursement to an officer: $0.03 per share totaling $11,844.  § In December 2005, 1,478,693 shares of common stock were issued as payment for past due interest due on certain notes payable: $0.03 per share totaling $44,361.  § In December 2005, the Company issued 4,100,000 shares of common stock at $0.08 per share for the purchase of certain software, firmware and product enhancements totaling $328,000.  § In December 2005, the Company issued 5,250,000 shares of common stock at an agreed conversion rate of $0.02 per share as payment in full satisfaction for funds advanced of $105,000, used for working capital needs.  § In December 2005, the Company issued 2,500,000 shares of common stock as compensation paid for services rendered by Securities Acquisition New York, LLC in 2005.  § In February 2006, 500,000 shares of common stock were issued to a party as a settlement for non-payment of a total purchase price paid for certain retail motor vehicle loan contracts: 500,000 shares at $0.05 totaling $25,000.  § In March 2006, the Company obtained $27,000 under a note payable bearing interest at 7% per annum from a third party.  The note matured in May 2006.  The note is unsecured.  Additionally, for and in consideration of the value received, the Company issued 1,000,000 shares of common stock.  In April 2006, such shares of common stock were issued at par value and recorded at $0.05 per share or $50,000.  The proceeds were utilized for working capital.  § In April 2006, 600,000 shares of common stock were issued to two employees in payment of performance bonuses at: 400,000 shares at $0.05 and 200,000 shares at $0.05 (totaling $30,000).  § In April 2006, 12,500 shares of common stock were issued to a third party as payment of technological services performed and rendered at: 12,500 shares at $0.05 (totaling $625).  A provision for an additional 12,500 shares of common stock is authorized for and due upon the completion of additional technological services performed and rendered.  § In April 2006, 1,500,000 shares of common stock were issued to a related third party as payment for consulting services rendered at: 1,500,000 shares at $0.05 (totaling $75,000).  The Company obtained $100,000 under a note payable bearing interest at 10% per annum from a third party as a result of the services rendered by the related third party.  The proceeds were utilized for working capital.  § In June 2006, 600,000 shares of common stock were issued to two employees in payment of performance bonuses at: 400,000 shares at $0.05 and 200,000 shares at $0.05 (totaling $30,000).   ITEM 6. MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION  The Company's consolidated financial statements have been prepared on the assumption that the Company will continue as a going concern. Management is seeking various types of additional funding such as issuance of additional common or preferred stock, additional lines of credit, or issuance of subordinated debentures or other forms of debt. The funding would alleviate the Company's working capital deficiency and increase profitability. However, it is not possible to predict the success of management's efforts to achieve profitability or to secure additional funding. Also, there can be no assurance that additional funding will be available when needed or, if available, that its terms will be favorable or acceptable. Management is also seeking to renegotiate certain present liabilities in order to alleviate the working capital deficiency.  If the additional financing or arrangements cannot be obtained, the Company would be materially and adversely affected and there would be substantial doubt about the Company's ability to continue as a going concern. The consolidated financial statements do not include any adjustments relating to the recoverability and realization of assets and classifications of liabilities necessary if the Company becomes unable to continue as a going concern.  Management's Discussion and Analysis or Plan of Operations should be read in conjunction with the Audited Consolidated Financial Statements and related notes. The results of operations for the period ended December 31, 2006 are not necessarily indicative of operating results expected for future reporting periods.  Forward Looking Statements  As previously stated on page 3, this report contains forward-looking statements. Additional written or oral forward-looking statements may be made by the Company from time to time in filings with the Securities and Exchange Commission or otherwise. Such forward-looking statements are within the meaning of that term in section 27A of the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act). Such statements may include, but are not limited to, projections of revenue, income, or loss, estimates of capital expenditures, plans for future operations, products, or services, financing needs or plans, as well as assumptions relating to the foregoing. The words "believe," "expect," "anticipate," "estimate," and similar expressions identify forward-looking statements, which speak only as of the date the statement was made.  Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified. Future events and actual results could differ materially from those set forth herein. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Aforementioned disclosures, as well as other statements in this Report on Form 10-KSB, including those in the notes to the Companys consolidated financial statements, describe factors, among others, that could contribute to or cause such differences, or that could affect the Companys stock price.  Revenues  Product Sales:  For the year ended December 31, 2006 revenues from product sales decreased by 79%, or $200,800 as compared to the same period a year ago, primarily due to:  The Company elected to broaden its hardware distribution capabilities and protect itself against a concentration with one hardware manufacturer.  In addition, the Company believed that it could (and, in fact did) find a device which was less expensive to purchase.  As a result additional testing and software/firmware changes were necessary.  Management felt it was better to concentrate on this expanded product line and not market until the Companys new devices were thoroughly proven.  Other Income:  For the year ended December 31, 2006 revenue from sources categorized as other income decreased by 85%, or $53,499 as compared to the same period a year ago, primarily due to:  A decrease in interest income of $30,808 or 79%, primarily resulting from a reduction of interest income earned on the Company's portfolio of automobile finance receivables due to terminations of certain servicing and loan pools and sales of certain loan pools;A decrease of $12,304, or 100%, in gain (loss) on sale of loans resulting from a reduction in the Companys portfolio of automobile finance receivables.A decrease in other income of $10,387 resulted from auto sales no longer available to the Company.  Cost of Sales  Product Sales:  For the year ended December 31, 2006 cost of product sales decreased by 74%, or $141,154 as compared to the same period a year ago, primarily due to:  A decrease in the purchase of product while the Company expanded , developed and tested its new devices as described above.  Operating Expenses:  Operating expenses for the year ended December 31, 2006 decreased by $392,736, or 14% as compared to the same periods a year earlier primarily due to:  Interest Expense increased by $78,542 for the year ended December 31, 2006 as compared to the same period a year earlier mainly attributed to the increased borrowing by the company to support its working capital needs.Deferred Financing Costs decreased by $175,000 for the year ended December 31, 2006 as compared to the same period a year earlier primarily as a result of the Company not entering into a similar financing transaction in 2006 as in 2005.Compensation and benefits decreased by $736,560 for the year ended December 31, 2006 as compared to the same period a year earlier primarily due to a decrease in staff and related benefits.Office, occupancy and equipment decreased by $22,552 for the year ended December 31, 2006 as compared to the same period a year earlier primarily due to a decrease in rent and associated rent expense as a result of moving to less expensive space in Richardson Texas.Professional fees increased by $327,822 for the year ended December 31, 2006 as compared to the same period a year earlier primarily due to increased needs related to legal counsel, accounting fee requirements, and consulting fees mostly related to SEC compliance.Loan Servicing expenses decreased by $1,446 for the year ended December 31, 2006 as compared to the same period a year earlier primarily due to a direct result of the Company's sale of a significant portion of the finance receivables portfolio and its termination of the servicing of loan pools with various credit unions.Depreciation and amortization expense increased by  $133,809 for the year ended December 31, 2006 as compared to the same period a year earlier due to a full year of amortization of capitalized software costs as compared to 2005 which included a partial year of amortization.The Company incurred a decrease in product development costs of $152,209 during the year ended December 31, 2006 because the major product development costs were incurred when the systems and technology were in there initial start-up phase. During 2006, changes were made as the new devices came on-line but the costs of this enhancement was not as great as the earlier development.  The Company was able to use the technology they developed in 2005 as a base for the 2006 enhancements.The Company recognized a gain in decrease of provision for loan losses of $43,980 for the year ended December 31, 2006 as compared to the same period a year earlier primarily due to the loan loss reserve requirement calculated on reduced portfolio size.Marketing expense decreased by $63,203 for the year ended December 31, 2006 as compared to the same period a year earlier primarily due to a reduction in the promotion of the products while the new devices were being prepared for market.Other operating expense increased by $63,768 for the year ended December 31, 2006 as compared to the same period a year earlier primarily related to finding and developing the new devices and testing in new markets.The Company incurred an increase in bad debt expense of $110,313 during the year ended December 31, 2006 for accounts receivable losses related to a provision recorded against a related party receivable of $133,000.  Other expenses decreased by $1,948,886 for the year ended December 31, 2006 as compared to the same period a year earlier primarily due to:  Impairment of intangible assets increased by $624,433 for the year ended December 31, 2006 as compared to the same period a year earlier due to an impairment of software development.Interest expense from beneficial conversion feature decreased by $2,521,803 due to a reduction for the necessity of the Company to engage in this type of transaction in 2006.  Liquidity  The Company's consolidated financial statements have been prepared on the assumption that the Company will continue as a going concern. Management is seeking various types of additional funding such as issuance of additional common or preferred stock, additional lines of credit, or issuance of subordinated debentures or other forms of debt will be pursued. The funding should alleviate the Company's working capital deficiency and increase profitability. However, it is not possible to predict the success of management's efforts to achieve profitability. Also, there can be no assurance that additional funding will be available when needed or, if available, that its terms will be favorable or acceptable.  These factors raise substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should the Company be unable to continue in operation. Management is seeking to raise additional capital and to renegotiate certain liabilities in order to alleviate the working capital deficiency.  Due to recurring operating losses and the Company's current working capital deficit, there is a need to obtain additional funding of working capital for the Company to operate as a going concern. The Company incurred operating losses of $2,440,313, and net losses of $2,966,049 for the year ended December 31, 2006. In 2006, the Company has been able to minimally sustain its working capital needs based on capital derived primarily from:  issuances of additional common stock; notes payable; vendor financing; and proceeds from the sale of tracking devices and airtime.  In February 2006, the Company obtained $100,000 under a note payable bearing interest at 10% per annum from a third party.  The note matured in February 2007.  The note is convertible, exercisable by the payee, at any time during the term into 1,000,000 shares of common stock.  Such conversion to shares of common stock will be computed at the market rate on the date of conversion if so exercised.  The proceeds were utilized for working capital.In March 2006, the Company obtained $27,000 under a note payable bearing interest at 7% per annum from a third party.  The note matured in May 2006.  The note is unsecured.In April 2006, the Company issued a note payable to Rodwell Software System (RSSI) in the amount of $165,000 due within one year from the date of the note.  The note bears interest at a rate of 8% per annum.  The note is convertible at any time during the term into shares of common stock at an exercise price of $0.05 per share.   The Company's cash flows from operating, investing and financing activities, as reflected in the consolidated statements of cash flows, are summarized in the following table:  Year Ended
December 31,20062005Cash provided by (used in):Operating activities$(78,027)$(1,044,799)Investing activities-3,108Financing activities77,093$1,023,128Decrease in cash$(934)$(18,563)  During 2005, the Company provided collection and servicing activities on a fee basis for finance receivables sold to credit unions on a non-guaranteed basis in addition to providing such services to credit unions for financing receivables not purchased from the Company.  During 2006, the collection and servicing activities ceased.  Net cash used in operating activities for the year ended December 31, 2006 decreased to $78,027 from cash used in operations of $1,044,799 for the year ended December 31, 2005. The decrease is essentially comprised of the following specifics:  Principal payments collected on finance receivables decreased by $103,933 due to the elimination of loan servicing activities;The credit provision for loan losses decreased by  $190,137 due to the elimination of loan servicing activities;Accounts payable and other accrued expenses increased by $1,241,078 due to an increase in contractual obligations for professional services and other compensation;Proceeds from loans sold decreased by $1,319 due to the reduction of the automobile installment loan portfolio from sales to financial institutions;Depreciation and amortization expense increased by $133,809 due to a full year of amortization of capitalized software in 2006 versus a partial year in 2005;Stock issuances used for compensation and obligations related to notes payable decreased by $819,768 due reduced borrowings from issuances of notes payable;Interest expense relating to a beneficial conversion feature decreased by $2,535,679 due to no similar transaction in 2006;Payments to credit unions decreased by $344,589 due to the release of servicing certain participation pools and monthly collections.  Net cash provided by investing activities was $0 for the year ended December 31, 2006 compared to cash provided by investing activities of $3,108 for the year ended December 31, 2005. The Company purchased fixed assets of approximately $3,142 and sold fixed assets of approximately $6,250 for the year ended December 31, 2005; no such transactions occurred for the year ended December 31, 2006.  Net cash provided by financing activities was $77,093 for the year ended December 31, 2006 compared to cash provided by financing activities of $1,023,128 for the year ended December 31, 2005. Approximately $127,000 received from notes payable, approximately $49,907 principal payments on long term debt, approximately $0 in advances from related parties, and $0 in proceeds from issuance of common stock financed the Company's working capital needs for the year ended December 31, 2006. For the year ended December 31, 2005, the Company paid $27,666 on borrowings under the line of credit, $61,538 in principal payments on long term debt, $672,832 in advances from affiliates, and $134,500 in proceeds from notes payable.  Market for Common Stock; Volatility of Prices  There has been a limited public trading market for Common Shares of the Company. There can be no assurance that a regular trading market for the Common Shares will ever develop or, if developed, that it will be sustained. The market price of the Common Shares could also be subject to significant fluctuations in response to such factors as variations in the anticipated or actual results of operations of the Company or other companies in the GPS tracking industry, changes in conditions affecting the economy generally, analyst reports, general trends in industry, and other political or socioeconomic events or factors.  Critical Accounting Policies  The Company's critical accounting policies are as follows.  Off Balance Sheet Arrangements:  The Company does not have any transactions, agreements or other contractual arrangements that constitute off-balance sheet arrangements.  Deferred Tax Valuation:  The Company continues to incur tax net operating losses, which are available to carry forward and offset future taxable income. These net operating losses were generated, principally as a result of losses resulting from the operations of the Company.  A deferred tax asset results from the benefit of utilizing these net operating loss carry-forwards in future years.  Due to the current uncertainty of realizing the benefits of the tax NOL carry-forward, a valuation allowance equal to the tax benefits for the deferred taxes has been established.  The full realization of the tax benefit associated with the carry-forward depends predominately upon the Company's ability to generate taxable income during future periods, which is not assured.  Auto Finance Receivables:  Finance receivables consist of purchased automobile installment contracts, which were assigned to the Company upon acquisition. The titles to the automobiles, which serve as security for the payment of the purchased contracts, are held either by the company or the financial institution for which the finance receivables serve as collateral.  Finance receivables that management has the intent and ability to hold for the foreseeable future or until maturity of payoff are reported at their outstanding gross contractual balances, net of allowance for losses and unearned finance revenue. Unearned finance revenue consists of unearned interest and discounts realized on contract purchases.  Discounts are amortized as adjustments of the yields on the related contracts.  Allowance for credit losses is increased by allocating a portion of the discount recorded on the acquisition of contracts.. Any increases in the allowance for losses subsequent to the acquisition of the contract are charged to earnings. Consumer loans are ordinarily charged off when they are 120 - 180 days contractually past due.  Intangible Assets:  Software development costs, recorded at cost, are amortized over five years, the expected useful life of the asset. Intangible assets are reviewed for impairment whenever events or circumstances indicate impairment might exist, or at least annually. The Company assesses the recoverability of its assets in accordance with SFAS No. 142 "Goodwill and Other Intangible Assets," comparing projected undiscounted cash flows associated with those assets against their respective carrying amounts. Impairment, if any, is based on the excess of the carrying amount over the fair value of those assets. The Company determined that impairment existed at December 31, 2006 and has recorded such loss on the statement of operations.  Quantitative and Qualitative Disclosures about Market Risk  There has been no material change to the information from what was disclosed in the Companys annual report on Form 10-KSB for the year ended December 31, 2005 and the Companys quarterly reports on Form 10QSB for periods ended September 30, 2006. Refer to the Companys December 31, 2005 annual report on Form 10-KSB and quarterly reports on Form 10QSB for periods ended September 30, 2006 for information regarding quantitative and qualitative disclosures about market risk.  ITEM 7. FINANCIAL STATEMENTS  The following audited consolidated financial statements are attached to and filed as part of this report (please see pages 25-44):  Consolidated Balance Sheets for the Years Ended December 31, 2006 and 2005;Consolidated Statements of Operations for the Years Ended December 31, 2006 and 2005;Consolidated Statements of Cash Flows for the Years Ended December 31, 2006 and 2005;Consolidated Statement of Changes in Shareholders' Equity (Deficit) For the Years Ended December 31, 2006 and 2005; andNotes to Consolidated Financial Statements.  ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE   In October 2005, Friedman LLP, the Company's independent registered public accounting firm notified the Company's Board of Directors that it declined to stand for re-election. The Company's Board of Directors approved the change of its independent registered public accounting firm. The change was not related to any matter concerning the Company, including its selection or application of accounting policies or judgments, the scope of audit, internal controls or integrity of management.  On November 3, 2005, the Company engaged Blaise S. Mazzoni, Certified Public Accountant, of HR Outsourcing Services, Inc. as an independent certified public accountant to review the Company's interim consolidated financial statements on Form 10-QSB for the quarterly reports ended March 31, 2005, June 30, 2005 and September 30, 2005. Prior to the engagement, the Company did not consult with Blaise S. Mazzoni, C.P.A. regarding the application of accounting principles to any completed or contemplated transaction, or the type of audit opinion that may be rendered with respect to the Company's financial statements. No written or oral advise was provided by Blaise S. Mazzoni, C.P.A. that was any factor considered by the Company in reaching a decision as to the accounting, auditing or financial reporting. The Company's Board of Directors approved the engagement with its independent certified public accountant.  Effective November 11, 2005, the Company dismissed Blaise S. Mazzoni, C.P.A. as its independent certified public accountant. Blaise S. Mazzoni, C.P.A. did not render any type of accountants' report on the Company's financial statements during his period of engagement. The Company's Board of Directors approved the change in its independent certified public accountant. The change in the Company's independent certified public accountant was not related to any matter or disagreement with Blaise S. Mazzoni, C.P.A. concerning the Company's selection or application of accounting principles or practices, policies or judgments, the scope of audit, internal controls or integrity of management. There is no matter of disagreement, which would cause the Company to make reference to with its report and there were no "reportable events", other than the engagement and dismissal, as that term is defined in Item 304 (a)(1)(iv) of Regulation S-B.  Effective November 29, 2005, the Company engaged Swalm & Associates, P.C. of Plano, Texas as its independent registered accounting firm of the Company for the fiscal year ending December 31, 2005. Prior to the engagement, the Company did not consult with Swalm & Associates, P.C. regarding the application of accounting principles to any completed or contemplated transaction, or the type of audit opinion that may be rendered with respect to the Company's financial statements. No written or oral advise was provided by Swalm & Associates, P.C. that was any factor considered by the Company in reaching a decision as to the accounting, auditing or financial reporting. The Company's Board of Directors approved the change in its independent registered public accounting firm.  Effective December 1, 2005, the Company dismissed Swalm & Associates, P.C. as its independent registered public accounting firm. Swalm & Associates, P.C. did not render any type of accountants' report on the Company's financial statements during their period of engagement. The Company's Board of Directors approved the change in its independent registered public accounting firm. The change in the Company's independent registered public accounting firm was not related to any matter or disagreement with Swalm & Associates, P.C. concerning the Company's selection or application of accounting principles or practices, policies or judgments, the scope of audit, internal controls or integrity of management. There is no matter of disagreement, which would cause the Company to make reference to with its report and there were no "reportable events", other than the engagement and dismissal, as that term is defined in Item 304 (a)(1)(iv) of Regulation S-B.  Effective December 1, 2005, the Company engaged BKR Cornwell Jackson & Company, P.C. of Plano, Texas as the independent registered public accounting firm of the Company for the fiscal year ending December 31, 2005. Prior to the engagement, the Company did not consult with BKR Cornwell Jackson & Company, P.C. regarding the application of accounting principles to any specific completed or contemplated transaction, or the type of audit opinion that may be rendered with respect to the Company's financial statements. The Company's Board of Directors approved the change in its independent registered public accounting firm.  ITEM 8A. CONTROLS AND PROCEDURES  HSNIs Chief Executive Officer and President, have evaluated the effectiveness of the Company's "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. Based on that evaluation, the Companys Chief Executive Officer and President have identified the following material weaknesses:  Less than adequate staff to prepare financial footnotes in accordance with generally accepted accounting principles;Lack of certain internal controls over period-end reporting related to the identification of significant transactions; primarily equity transactions, and accounting for them in the proper periods; andLack of certain internal controls related to the identification of contractual transactions. The Company is beginning to undertake a review of its disclosure, financial information and internal controls and procedures. The Company believes the appropriate direction to be undertaken is as follows:  The Company will augment, as necessary, such procedures by obtaining concurrence with independent outside accounting experts prior to finalizing financial reporting;A process has been established whereby accounting and operational personnel and an executive management member collectively determine the appropriate accounting and disclosure review of material agreements; andThe Company has instituted regular quarterly meetings to review each department's significant activities and respective disclosure controls and procedures.  The Chief Executive Officer and the President believe these actions have and will further strengthen the internal controls of the Company. Although not yet accomplished, the Company is committed to augment, as necessary, such procedures by obtaining concurrence with independent outside accounting experts prior to finalizing financial reporting. The Company intended and expected to have such in place by the end of the first quarter of 2006; however, the Company now expects to have such in place by the end of the third quarter of 2007.  ITEM 8B. OTHER INFORMATION  None applicable  PART III  ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT  Members of the Board of Directors are elected to serve until the next annual meeting or until their successor is elected and qualified. As of April 15, 2007, the date of the next annual meeting has not been selected. The Company presently contemplates that should a 2007 Annual Meeting of Shareholders be held, the newly elected Directors will hold a regular annual meeting of the Board of Directors. If a regular meeting is not held, the Directors will sign a unanimous consent in lieu of holding the meeting and will re-elect certain current officers and add new officers and directors for the coming year.  The Executive Officers and Directors of the Company as of  April 15, 2007 are:  NameAgePositionDirector SincePeter D, Ubaldi61Chief Executive Officer; President Director2004Charles Norman49Director2003Roy Pardini62Executive Vice President, Director2006  Charles Norman was Chief Executive Officer until December 31, 2006.  He resigned in January 2007 and is currently involved as a Director.  A brief statement setting forth the principal occupation and certain other information for each of them is set forth below.  Mr. Ubaldi has worked in the finance industry for thirty six years. Mr. Ubaldi began his career with a major CPA firm and has since specialized in various finance-related industries as an investment banker and executive manager. Mr. Ubaldi has extensive experience with major banking institutions, as well as specialty finance and equipment leasing companies. Mr. Ubaldi has three years of experience in various senior capacities running publicly traded companies.  In May 2004, (amended and restated January 2005) HSNI entered into an Employment Agreement (Agreement) with Peter Ubaldi. The Agreement provides that Mr. Ubaldi shall serve as the President of HSNI to January 1, 2007. The duration of the Agreement is for a period of two years marked by the amended and restated date of January 1, 2005. At any time prior to the expiration of the Agreement, HSNI and Mr. Ubaldi may mutually agree to extend the duration of employment under the terms of the Agreement for an additional period or periods. As payment for services, HSNI agrees to pay Mr. Ubaldi, as the President, a minimum base salary of $250,000 per annum. As provided in the Agreement, Mr. Ubaldi is eligible to be paid bonuses, from time to time, at the discretion of HSNIs Board of Directors, of cash, stock or other valid form of compensation.  The Company renewed Mr. Ubaldis contract effective January I, 2007 for a period of two years according to the same terms and conditions as covered in the previous Employment Agreement. Upon the resignation of Mr. Norman Mr. Ubaldi was appointed by the Board of Directors to CEO.  Mr. Normans experience includes consumer banking, consumer finance companies, and the automobile industry. Mr. Norman has been involved in raising capital and has served in successful turnaround executive management roles in private and publicly held companies, as well as extensive entrepreneurship as a passive investor and/or managing partner. Mr. Norman has ten years of experience in various senior capacities running publicly traded companies.  In April 2003, (amended and restated January 2004, amended and restated January 2005) HSNI entered into an Employment Agreement (Agreement) with Charles W. Norman. The Agreement provides that Mr. Norman shall serve as the Chief Executive Officer of HSNI to January 1, 2007. The duration of the Agreement is for a period of two years marked by the amended and restated date of January 1, 2005.  On January 22, 2007 the Board of Directors accepted Mr. Normans resignation from his position as CEO. Upon termination of and under the terms of the Agreement, Mr. Norman shall be entitled to severance compensation in an amount equal to twenty-four months of base salary as shall exist at the time of such termination.  At December 31, 2006, upon the resignation by Mr. Norman, the employment agreement was not renewed.   Mr. Pardini has served in various executive capacities with the Company since 2000.  His background was focused on sales and marketing while with HSNI in its present business and previously in the auto finance industry.  Mr. Pardini is a stockholder and has from time to time provided capital for the Company.  Indemnification of Directors and Officers  Subject to and subsequent to an appointment or election as an officer or director, the Company provides contractually indemnification.  The Company agrees to indemnify the positions of directors and officers as follows: A director or officer shall not be liable for any claim or demand on account of damages in any manner. The Company agrees to indemnify and hold directors or officers, without limitation, harmless from any and all damages, losses (which shall include any diminution in value), shortages, liabilities (joint or several), payments, obligations, penalties, claims, litigation, demands, defenses, judgments, suits, proceedings, costs, disbursements or expenses of any kind or nature whatsoever, specifically including without limitation, fees, disbursements and expenses of attorneys, accountants and other professional advisors and of expert witnesses and cost of investigation and preparation. A director or officer will be indemnified from any decision or action taken prior to his or her hire date as a director or officer.  Code of Ethics  The Company has not yet adopted a code of ethics that applies to its principal executive officer, principal financial officer, principal accounting officer, or controller, or persons performing similar functions.  The Company deferred its adoption of a code of ethics due to events such as the change of control, the Company's contraction, and the refocus of the Companys business.  The Company anticipates adopting a code of ethics as soon as is practical and it will be posted on the Companys Web Site.  ITEM 10. EXECUTIVE COMPENSATION   The following table sets forth, for each of the last three fiscal years, cash and certain other compensation paid by the Company for its Chief Executive Officer, President and Chief Financial Officer. None of the next highly compensated officers serving on December 31, 2006 received more than $100,000 for fiscal 2006.  Long Term Compensation  Name/PrincipalFiscal YearAnnual CompensationAwards and PayoutsPositionSalaryBonusStockOptionsLTIPAwardsSARsCharles NormanCEO2006$250,000--------CEO2005$256,000--------CEO2004$250,000------Peter UbaldiCFO & President2006$250,000--------CFO & President2005$256,000--------Exec Vice President2004$206,458--------   Stock Plan  The Company has a non-qualified stock option plan (the Plan) that was adopted by the Board of Directors in March 1997. The Plan, as authorized, provides for the issuance of up to 2,000,000 shares of the Companys stock. Persons eligible to participate in the Plan as recipients of stock options include full and part-time employees of the Company, as well as officers, directors, attorneys, consultants and other advisors to the Company or affiliated corporations.  Options issued under the Plan are exercisable at a price that is not less than twenty percent (20%) of the fair market value of such shares (as defined) on the date the options are granted. The non-qualified stock options are generally non-transferable and are exercisable over a period not to exceed ten (10) years from the date of the grant. Earlier expiration is operative due to termination of employment or death of the issuee. The entire Plan expires on March 20, 2007, except as to non-qualified stock options then outstanding, which will remain in effect until they have expired or have been exercised. As of December 31, 2006, 1,990,289 shares had been exercised and issued under the Plan; 9,711 shares were available for future issuance.  In January 2005, HSNI issued 100,000 shares of common stock with a par value of $.001. They were issued to an executive as a hiring bonus and are reflected in operating expenses of the consolidated financial statements at $0.15 per share ($15,000) for period ended December 31, 2005. No options were granted and no warrants were authorized during 2005.  On November 8, 2006, the Company filed a Non-Statutory Stock Option Plan with the Securities and Exchange Commission.  This 2006 Non-Statutory Stock Option Plan is intended as an employment incentive, to aid in attracting and retaining in the employ or service of Homeland Security Network, Inc., a Nevada Corporation, and any Affiliated Corporation, persons of experience and ability and whose services are considered valuable to encourage the sense of proprietorship in such persons, and to stimulate the active interest of such persons in the development and success of the Company.  This Plan provides for the issuance of non-statutory stock options which are not intended to qualify as incentive stock options within the meaning of section 422 of the Internal Revenue Code of 1986, as amended.  There are a total of 15,000,000 common shares in the Plan.  As of December 31, 2006, no shares had been issued under the Plan.  Compensation of Directors  No Directors fees were paid during fiscal 2006 and 2005.  ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT  The following table sets forth certain information, as of December 31, 2006, concerning the beneficial ownership of Common Stock by all Directors and nominees, officers, all Directors and officers of the Company, as a group, and each person who beneficially owns more than 5% of the 175,536,430 outstanding shares of Common Stock, $.001 par value. Unless otherwise indicated, each person named has sole voting and investment power over the shares indicated;  Number of Shares Beneficially Owned and Percent of Class  Directors, Named
Officers and 5% StockholdersCommon StockPercent of Common StockSeries A PreferredPercent of SeriesSeries B PreferredPercent of SeriesPercent Voting PowerAutoCorp Acquisition Partners (1)24,1310.0001%4,086,856100%1,621,642100%--Charles Norman, Director, Chief Executive Officer (2)40,815,42223.25%2,043,42850%810,82150%23.25%Peter Ubaldi, Director President, Chief Financial Officer, Treasurer (3)44,437,44125.32%2,043,42850%810,82150%25.32%William Merritt (4)9,140,0005.20%--------5.20%Securities Acquisition New York, LLC (5)8,907,0005.07%--------5.07%Roderick Michael Johnson (6)11,100,0006.47%--------6.47%Jay Doleh, Chief Technology Officer (7)2,000,0001.14%--------1.17%Michael R. Dumont, Chief Compliance Officer4,600,0002.62%--------2.62%Donna Blohm, VP of Accounting and Controller1,850,0001.05%--------0.61%Terri Ashley, Secretary, VP of Investor Relations3,024,1311.72%--------1.76%Roy Pardini, VP of Sales5,453,5773.11%3.18%All directors, director
nominees and
officers as a group118,404,15467.45%4,086,856100%1,621,642100%67.45%All 5% beneficial owners130,623,44674.41%4,086,856100%1,621,642100%74.41%  1. Messrs. Norman and Ubaldi each own a 50% interest in AutoCorp Acquisition Partners and constitute 2/3rds of the HSNIs Board of Directors. AutoCorp Acquisition Partners as a company does not have a common equity position in HSNI. The preferred shares, however, reside in the name of AutoCorp Acquisition Partners. As a corporation, AutoCorp Acquisition Partners is not listed on the issuers shareholder list.  2. HSNIs shareholder records reflect that this block of shares is held as follows: Charles Norman, (1,445,422); Charles and/or Desiree and/or Chase Norman, (40,815,422 shares);  HSNI knows these parties to be affiliated.  3. HSNIs shareholder records reflect that this block of shares is held as follows: Peter Ubaldi Revocable Trust, (36,000,000); Peter Ubaldi, (2,437,441 shares); Jason Ubaldi, (3,000,000 shares); and Michael & Allison Louro, (3,000,000). HSNI knows these parties to be affiliated.  4. HSNIs shareholder records reflect that this block of shares is held as follows: William Merritt, (200,000); and BBK Investments (8,940,000). HSNI knows these parties to be affiliated.  5. HSNIs shareholder records reflect that this block of shares is held as follows: Market Connexxions LLC, (5,857,000); W-Two LTD, (1,250,000 shares); and ProMark, Inc., (1,800,000 shares). HSNI believes, but has not been able to ascertain that these parties are affiliated with Securities Acquisition New York, LLC.  6. HSNIs shareholder records reflect that this block of shares is held as follows: Roderick Michael Johnson, (7,000,000); and Rodwell Software Systems, Inc. (4,100,000). HSNI knows these parties to be related parties.  7. HSNIs shareholder records reflect that this block of shares is held as follows: Versa Tech Solutions, (2,000,000). HSNI knows these parties to be affiliated. Mr. Doleh is an officer and a principal of Versa Tech Solutions.  Any of the above parties may wish to disclaim beneficial ownership of any of such shares. Additionally, HSNI has not been able to ascertain any affiliation other than stated, which may have interest in shares of HSNI common stock.  Section 16(a) Beneficial Ownership Reporting Compliance  Section 16(a) of the Securities Exchange Act of 1934 and the rules promulgated there under require that directors and executive officers of the Company and beneficial owners of greater than 10% of the Company's Common Stock file various reports with the Securities and Exchange Commission.  The Company does not file on these individuals behalf and solely reviews reports furnished to HSNI. The Company has reviewed its files with respect to fiscal 2006. The following persons failed to file timely or did not file a Form 3, Form 4 or Form 5 within fiscal year 2006: Charles Norman; and Peter Ubaldi.   ITEM 12. CERTAIN RELATIONSHIPS & RELATED TRANSACTIONS  Pacific Holdings Group, Inc.  On June 30, 2003, Pacific Auto Group, Inc. (PAG) became a wholly owned subsidiary of Homeland Security Network, Inc. (HSNI), and the HSNI securities described below were issued to Pacific Holdings Group, Inc. (PHG), the sole stockholder of PAG. The form of the transaction was a reverse triangular merger, whereby a newly formed, wholly owned, acquisition subsidiary of HSNI merged with and into PAG, with PAG being the surviving corporation in the merger and a subsidiary of HSNI.  On June 30, 2003, PHG was 100% owned by PUSA.  On December 2, 2002, PUSA filed a voluntary petition under Chapter 11 of the U.S. Bankruptcy Code. The ultimate parent company was PEWC.  PAG is the holding company for its wholly owned subsidiary American Finance Company, Inc. (AFCO).  AFCO's principal operations consisted of the purchase of automobile finance receivables, collateralized by new and pre-owned automobiles, from franchised and independent automotive dealers throughout the United States.  PUSA was the primary domestic parent company of the entire group, owning all of the outstanding stock of PHG.  Effective June 30, 2003, HSNI issued 100,000,000 shares of its Common Stock and 4,086,586 shares of its Series A convertible stock to PHG, the parent company of PAG, resulting in PHG owning approximately 94.0% of the outstanding HSNI shares.  Pacific Financial Group, Inc. (PFG), an affiliate of PHG, owned 1,621,642 shares of Series B Non-Cumulative Convertible Preferred Stock of HSNI; par value $0.001 per share (the "Series B Preferred Shares"). Those Series B Preferred Shares were convertible at any time, at the option of the holder on a one-for-one basis, into 1,621,642 HSNI Common Shares. The Series B Preferred is non-voting stock.  Subsequent to the June 30, 2003 merger transaction, on a fully-diluted basis, PFG immediately beneficially owned 1,621,642 HSNI Common Shares, and PHG beneficially owned 136,490,202 HSNI Common Shares. On a fully diluted basis, PHG and PFG together beneficially owned 142,490,202 HSNI Common Shares, which represented 95.66% of the 148,953,873 HSNI Common Shares that would then be outstanding.  On June 30, 2003, Pacific USA Holdings Corp. (PUSA) was the sole stockholder of PFG and PHG and as such beneficially owned 142,490,202 HSNI Common Shares. Pacific Electric Wire and Cable (PEWC) was the sole shareholder of PUSA and as such beneficially owned 142,490,202 HSNI Common Shares, which represented 95.66% of the 148,953,873 HSNI Common Shares then outstanding.  On August 20, 2004, PHG, the then controlling shareholder of the Company, and one of its affiliates, Pacific Financial Group (PFG) and, collectively with PHG, the ("Sellers"), sold their stock to a partnership, AutoCorp Acquisition Partners (AAP, the "Purchaser") formed by the then President (and CEO) and Executive Vice President of the Company.  The Purchaser designated Charles Norman, the then President (and CEO) and Peter Ubaldi, the then Executive Vice President of the Company (the "Purchaser Designees") who were elected to the Board of Directors. The Purchaser Designees became a majority of the Board after the tenth day subsequent to the mailing and filing of the Information Statement pursuant to Section 14(f) of the Exchange Act and Rule 14f-1 promulgated there under. The Purchaser is now the beneficial owner of Company's stock and the Purchaser Designees constitute  2/3rds of the Company's Board of Directors.  Background of Transaction and Change in Control  Pursuant to an acquisition agreement entered into as of August 20, 2004 by and among the Sellers, the Purchaser and the Company, the Sellers sold all of the stock of the Company held by it to the Purchaser. Pursuant to the acquisition agreement, the Board members, all of who had been appointed by PHG as controlling shareholder of the Company, appointed the Purchaser Designees to the Board. Two of the PHG-appointed directors then resigned immediately and the remaining two PHG-appointed directors resigned on September 13, 2004, being more than ten days after the mailing and filing of the Information Statement pursuant to Section 14(f) of the Exchange Act and Rule 14f-1 promulgated there under.  AAP acquired the stock of the Sellers and by its principles (1) delivered their personal guarantee to Far East National Bank ("FENB") to obtain the release of the guarantee by PEWC discussed below; and (2) agreed the Company could make the transfers and give the releases to PHG described (and in the amounts indicated) below; simultaneously with PHG funding and canceling the obligations of the Company described (and in the amounts indicated) below. The Purchasers paid no cash to the Sellers for the stock.  PEWC is PHG's indirect parent. PEWC had provided a guarantee to FENB in connection with a $10 million revolving credit facility from FENB to AFCO Receivables Funding Corp, an indirect subsidiary of the Company. At the date of the closing of the acquisition agreement, there was $661,796 outstanding under the revolving credit facility. It was a condition to the closing that PEWC be released from its guarantee.  The Company transferred to PHG (i) the entire ownership of certain residual interests in securitization assets, which were then on the books of American Finance Company, a PAG subsidiary, in the amount of $2 million; (ii) the balances in certain bank accounts of the Company and its subsidiaries in the amount of $404; and (iii) a 1993 Lexus automobile owned by AutoCorp Financial Services, Inc., a wholly owned subsidiary of HSNI; along with the agreement of the Company to transfer subsequent to the closing any other assets not directly associated with the Company's then primary business of automobile sub-prime receivable acquisition.  The Company released PHG and its affiliates from certain receivables due from them to the Company in the amount of $37,395.  Simultaneously with the transfers and releases by the Company, PHG funded certain payroll obligations in the amount of $173,852 and loan portfolio obligations of the Company in the amount of $56,000, and to cancel certain obligations owed to PHG and its affiliates by the Company and the Company's subsidiaries in the amount of $4,139,880.  As part of the transaction, PHG secured the release of 35 million shares of restricted Company Common Stock pledged to FENB in connection with an outstanding loan to PHG and an affiliate of PHG. Such shares are part of the 94,000,000 Common Shares Sellers sold to Purchaser.  Rodwell Software Systems, Inc.  The Company entered into a letter of intent dated as of January 2005 with Rodwell Software Systems, Inc. (RSSI) regarding the Company's acquisition of all of the issued and outstanding capital stock of RSSI subject to certain adjustments at the closing of the acquisition plus assumption of certain transaction and related costs and expenses.  The letter of intent was subject to various conditions and approvals and contemplated that the acquisition would be effected through the merger of RSSI with and into the Company, with the Company as the surviving corporation. The Company's intention to acquire RSSI was to significantly increase its software/firmware development capabilities, which combines GPS tracking with a web interface in one simple device working in tandem with a cell phone, PDA or computer. The acquisition was not consummated by mutual agreement.  On December 26, 2005, the Company, as a prerequisite to a more definitive agreement, entered into an agreement to solely purchase certain software, firmware and product enhancements developed by RSSI. The transaction is subject to the execution and delivery of the more definitive written agreement and other documents between the Company and RSSI. In September 2005, the Company issued 7,000,000 shares of common stock to RSSI as compensation for the purchase of the software, firmware and product enhancements. In December 2005, pursuant to its agreement with RSSI, the Company issued 4,100,000 shares of common stock as additional compensation to RSSI. Further, the Company will provide an intermittent royalty based on the sale of components and usage of the web interface by consumers as compensation to RSSI, subject to certain milestones. The Company incurred product development costs of $313,000 during the year ended December 31, 2005 for software related to the GPS tracking devices. The more definitive agreement will include additional language, without limitation, regarding an exclusive permanent License, attached schedules, representations, warranties and exceptions, and other matters with respect to the transaction.  The general terms and conditions related to the exclusivity of the permanent license are as follows. The exclusivity relates primarily to the retail automotive industry, which encompasses end users of the products. Other unrelated markets are also provided for. The exclusivity, however, is conditional.  The purchase from RSSI provides the Company with technology products and support services for tracking and recovering valuable mobile assets.  HSNI's plan further incorporates engaging and developing strategic alliances with third party sale and installation entities and distributors that have a distinct sales and marketing presence in the automobile retail industry, and the commercial and government sectors. The Company expects these types of engagements to be particularly beneficial and anticipates the results of such alliances to create name recognition for the Company.  Beneficial Conversion Transaction  In March 2001, the Company issued a note payable with a limited conversion feature in the principal sum of $125,000, bearing interest at 12% per annum, to a related party. In December 2004, the related party endorsed and assigned all rights, title and interest in the remaining obligation of this note payable to another entity. At such time, the outstanding principal balance was $61,538.  In December 2004, subsequent to the assumption of this note payable by Securities Acquisition New York, LLC (SANY), a related party, the Board of Directors of the Company resolved to both convert this note payable and consent to an amended conversion calculation at a rate permitting 10,000 shares of common stock to be issued in exchange for each $1.00 of reduction in the outstanding principal of this note payable.  Based on the aforementioned amendment to the conversion calculation rate, the Company performed two conversions, which were elected by the entity holding the note payable:  January 2005, the Company issued 3,429,355 shares valued at $0.11 per share at $377,229; and in March 2005, the Company issued 12,000,000 shares valued at $0.18 per share at $2,160,000, totaling $2,537,229 resulting in a charge in the statement of operations. See Item 11, Security Ownership of Certain Beneficial Owners and Management. The applied conversion rate was adjusted and recalculated by the Board of Directors.  In August 2005, as a result of a termination and settlement agreement of the assignment and assumption of the note payable by and between the related party and SANY, the Company was relieved of additional debt requiring no further issuances of shares of common stock. And as such, the conversion calculation was corrected and amended to 1,000 shares of common stock having been issued in exchange for each $1.00 deducted from the outstanding principal of this note payable.  Further, under the terms of the termination and settlement agreement no party has any future right nor does the Company have any future obligation to convert or issue shares of common stock in exchange for debt relief related to this note payable.  In the year ended December 31, 2005, $13,876 was recorded as a repayment of the obligation. On December 30, 2005, the Company was entirely relieved of this related party note payable of $46,113 with a recorded balance of $46,311. The Company received an unconditional release by the holder of the note from any and all obligations.  Securities Acquisition New York, LLC  In November 2004, the Company signed a proposal for certain services to be performed by Securities Acquisition New York, LLC to plan and re-capitalize the business. The proposal agreement provided for various services, which included certain merger services and capital sourcing activities and related services. The Company only partially implemented the services provided by the proposal agreement from January 2005 through March 2005, and since then effectively abandoned the core strategy encompassed in the agreement. Formerly, the Company had not agreed to nor had it made any provisions for any additional compensation. The Company and Securities Acquisition New York, LLC concluded their discussions regarding a resolution of the matter.  In December 2005, the Company issued 2,500,000 shares of common stock as compensation paid for services rendered by Securities Acquisition New York, LLC in 2005. Given the additional consideration, Securities Acquisition New York, LLC is fully and entirely compensated.  Monet Acquisition, LLC Agreement On September 26, 2006, the Company entered into an agreement to sell 80% of the total issued and outstanding common stock of its wholly-owned subsidiary Pacific Auto Group, Inc. ("PAG") pursuant to a Stock Purchase Agreement by and between Homeland Security Network, Inc. and Monet Acquisition, LLC, a Delaware limited liability company. Monet agreed to assume certain liabilities of PAG in consideration of the stock purchase. Pacific Auto Group, Inc. will be operated and controlled totally independent of HSNI; however, it is the intention of HSNI to distribute the remaining 20% of the outstanding common stock of PAG that HSNI owns to its stockholders as a dividend. For other related party transactions see Financial Footnotes 11, 12, 13, 17 and 21.  ITEM 13. EXHIBITS  Exhibit Index  The following exhibits are filed herewith or are incorporated by reference to exhibits previously filed with the Commission.  Exhibit NumberDescription3.1Amendments to Articles of Incorporation (incorporated by reference to Exhibit C of HSNIs February 7, 2005 DEF 14C)10.1Acquisition Agreement (incorporated by reference to Exhibit 2.1 of HSNIs August 31, 2004 8-K)21.1List of Subsidiaries (incorporated by reference to Exhibit 10.1 of HSNIs  May 18, 2004 10-KSB)10.1Purchase and Sale Agreement bet. Pacific Auto Group, Inc and Monet Acquisition LLC ( incorporated by reference to Exhibit 10.1 of HSNIs 8-K , October 3 2006)31.1Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2Certification of President and pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 200232.2Certification of President Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002   ITEM 14. PRINCIPAL ACCOUNTANTS FEES AND SERVICES  AUDIT FEES  Fees for audit services totaled approximately $65,000 and $55,000 in 2006 and 2005, respectively. There were no audit related tax, or other fees paid to the Companys independent registered public accounting firm.  AUDIT RELATED FEES  None.  TAX FEES  None.  ALL OTHER FEES  None.  THE BOARD OF DIRECTORS PRE-APPROVAL POLICY AND PROCEDURES  We do not have a separate Audit Committee. Our full Board of Directors performs the functions of an Audit Committee.  During fiscal year 2006, the Board of Directors  adopted  policies  and  procedures  for the pre-approval of audit and non-audit  services  for  the  purpose  of  maintaining  the independence of our independent  auditors.  We may not engage our independent auditors to render any audit or non-audit service unless either the service is approved in advance by the Board of Directors or the engagement to render the service is entered into pursuant to the Board of Director's pre-approval policies and procedures. On an annual basis, the Board of Directors may pre-approve services that are expected to be provided to us by the independent auditors during the following 12 months. At  the  time  such  pre-approval  is  granted,  the Board of Directors must (1) identify the particular pre-approved services in a sufficient level of detail so that  management  will  not  be  called  upon  to  make judgment as to whether a proposed  service  fits  within  the  pre-approved  services and (2) establish a monetary limit with respect to each particular pre-approved service, which limit may  not  be  exceeded  without obtaining further pre-approval under the policy.  The Board has considered whether the provision of the services described above under the caption "All Other Fees" is compatible with maintaining the auditor's independence.  2     HOMELAND SECURITY NETWORK, INC. AND SUBSIDIARIES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS  December 31, 2006 and 2005  REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM27CONSOLIDATED FINANCIAL STATEMENTSConsolidated Balance Sheets28Consolidated Statements of Operations29Consolidated Statements of Cash Flows30Consolidated Statement of Changes in
Shareholders' Equity (Deficit)31Notes to Consolidated Financial Statements32           3   REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM  To the Board of Directors and Shareholders Homeland Security Network, Inc.  We have audited the accompanying consolidated balance sheets of Homeland Security Network, Inc. and its subsidiaries as of December 31, 2006 and 2005, and the related consolidated statements of operations, shareholders deficit, and cash flows for the years then ended.  These consolidated financial statements are the responsibility of the Companys management.  Our responsibility is to express an opinion on these financial statements based on our audits.  We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  We were not engaged to perform an audit of the Companys internal control over financial reporting.  Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Companys internal control over financial reporting.  Accordingly we express no such opinion.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.  In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Homeland Security Network, Inc. and its subsidiaries as of December 31, 2006 and 2005, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.  The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.  As discussed in Note 5 to the financial statements, the Company has suffered losses from operations, incurred negative cash flows from operations, and has a shareholders deficit at December 31, 2006 and 2005. These conditions raise substantial doubt about the Companys ability to continue as a going concern. Managements plans in regards to these matters are also described in Note 6.  These consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.     /s/ BKR Cornwell Jackson Plano, Texas April 16, 2007    4     HOMELAND SECURITY NETWORK, INC.  AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS  December 31,
2006December 31,
2005ASSETSCurrent Assets:Cash$1,842$2,776Accounts Receivable  related parties, net of allowances of $133,250 and $0, respectively-133,250Finance receivables, net of allowances of $0 and $132,077, respectively-10,482Prepayments and other current assets-1,055Total current assets1,842147,563Property, plant and equipment, net of accumulated depreciation of $44,365 and $38,674, respectively13,37419,065Capitalized software, net-788,033Deferred charges and other assets:Security deposits-7,036Miscellaneous receivable-599Total other assets-7,635Total assets$15,216$962,296LIABILITIES AND STOCKHOLDERS DEFICITAccounts payable and accrued liabilities$1,492,609$872,557Accounts payable and accrued liabilities to related parties1,348,724318,713Notes payable to related parties1,371,0091,094,206Amounts payable to credit unions80,032202,555Line of credit166,085166,085Total current liabilities4,458,4592,654,116Commitments and contingenciesShareholders deficit:Series A cumulative convertible preferred stock, $.001 par value, 10,000,000 shares authorized, 4,086,856 issued and outstanding4,0874,087Series B cumulative convertible preferred stock, no par value, 5% non-cumulative; liquidation preference of $14.64 per share; 2,000,000 shares authorized, 1,621,642 issued and outstanding352,643352,643Common Stock, par value $.001; 400,000,000 shares authorized, 175,536,430 and 171,123,930 shares issued and outstanding175,537171,124Additional paid-in-capital19,887,84519,677,632Accumulated deficit(24,463,615)(21,497,566)(4,043,503)(1,292,080)Less treasury at cost, 1,817,000 shares(399,740)(399,740)Total Stockholders deficit(4,443,243)(1,691,820)Total liabilities and stockholders deficit$15,216$962,296  The accompanying notes are an integral part of these Consolidated Financial Statements.   HOMELAND SECURITY NETWORK, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS  For the Years Ended December 31,20062005Revenues:Net Product Sales  related parties and other$54,260$255,060Cost of goods sold50,346191,500Gross Margin  Product Sales3,91463,560Interest income  finance receivables8,45039,258Gain (Loss) on sale of loans and other-12,304Other Income90011,287Other Income9,35062,849Gross Margin13,264126,409Expenses:Interest expense183,135104,593Deferred financing costs-175,000Compensation and benefits1,027,8161,764,376Office occupancy and equipment96,016118,568Professional and consulting fees563,436235,614Loan servicing8,61310,059Depreciation and amortization169,29135,482Product development expense160,791313,000Provision for loan loss(15,218)(59,198)Marketing expense-63,203Other operating expense126,44762,679Bad debt expense133,25022,937Total expenses2,453,5772,846,313Loss from Operations$(2,440,313)$(2,719,904)Other income (deductions):Other Income8,0461,069Forgiveness of Debt90,65146,112Impairment of Intangible Asset(624,433)Interest Expense from beneficial conversion
(See Note 15)-(2,521,803)Total other deductions(525,736)(2,474,622)Net loss$(2,966,049)$(5,194,526)Net loss per share, basic and diluted$(0.02)$(0.04)Weighted average shares outstanding, basic and diluted174,142,526133,820,103  The accompanying notes are an integral part of these Consolidated Financial Statements.       HOMELAND SECURITY NETWORK, INC.  AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS For the Years Ended December 31,20062005Cash flows from operating activities:Net loss$(2,966,049)$(5,194,526)Adjustments to reconcile net loss from continuing operations to net cash used in operating activities:Gain on sale of assets-(6,250)Depreciation and amortization169,29135,482Bad debt expense133,250-Provision for loan loss-190,137Impairment of intangible asset624,433Common stock issued for interest-beneficial conversion    feature-2,535,679Common stock issued for services and compensation189,626832,844Common stock issued for interest expense-176,550Forgiveness of debt(91,548)Changes in:Accounts receivable10,482(133,250)Other current assets1,05510,791Other assets7,63537,301Accounts payable and other accrued expenses1,843,798602,720Principal payments collected on consumer loans-103,933Payments to credit unions-(344,589)Finance receivable/non-cash-107,060Proceeds from loans sold-1,319Net cash used in operating activities(78,027)(1,044,799)Cash flows from investing activities:Purchases of property and equipment-(3,142)Sale of fixed assets-6,250Net cash provided by investing activities-3,108Cash flows from financing activities:Borrowings (repayment) under line of credit-(27,666)Advances from affiliates-672,832Principal payments of long-term debt(49,907)(61,538)Proceeds from notes payable127,000134,500Proceeds from issuance of common stock-305,000Net cash provided by financing activities77,0931,023,128Net decrease in cash(934)(18,563)Cash beginning of the year2,77621,339Cash end of the year$1,842$2,776Supplemental disclosure of cash flow information:Cash paid for interest$-$17,140Forgiveness of related entities liabilities and receivables$-$118,962Stock issued to purchase software$-$818,000Stock issued for debt conversion$-$309,026Stock issued for accrued expenses$25,000$154,371  The accompanying notes are an integral part of these Consolidated Financial Statements.     HOMELAND SECURITY NETWORK, INC.  AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (Deficit)  For the Years Ended December 31, 2006 and 2005  Common StockAdditional
Paid-In CapitalPreferred Stock  Series ASharesAmountSharesAmountBalance at December 31, 2004106,463,671$106,464$14,491,8504,086,856$4,087Forgiveness of related entities
liabilities and receivables--118,973--Common Stock issuances64,660,25964,6605,066,809--Net loss-----Balance at December 31, 2005171,123,930$171,124$19,677,6324,086,856$4,087Common stock issuances4,412,5004,413210,213--Net loss-----Balance at December 31, 2006175,536,430$175,537$19,887,8454,086,856$4,087Preferred Stock  Series BTreasury StockAccumulatedTotal StockholdersSharesAmountSharesAmountDeficitEquity (Deficit)Balance at December 31, 20041,621,642$352,6431,817,000(399,740)$(16,303,040)$(1,747,736)Forgiveness of related entities
liabilities and receivables-----118,973Common stock issuances-----5,131,469Net loss----(5,194,526)(5,194,526)Balance at December 31, 20051,621,642$352,6431,817,000(399,740)$(21,497,566)$(1,691,820)Common Stock issuances-----214,626Net Loss----(2,966,049)(2,966,049)Balance at December 31, 20061,621,642$352,6431,817,000(399,740)$(24,463,615)$(4,443,243)  The accompanying notes are an integral part of these consolidated financial statements.                HOMELAND SECURITY NETWORK, INC. AND SUBSIDIARIES NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS  Note 1. Basis of Presentation  The financial information presented in this report comprises the consolidated financial information (i) for the year ended December 31, 2006; and (ii) for the year ended December 31, 2005.  The consolidated financial statements include the Companys accounts and those of its subsidiaries. All material inter-company balances have been eliminated.  In the opinion of HSNIs management, the consolidated financial statements include all adjustments, which consist of normal recurring adjustments, necessary to present fairly the consolidated financial position, results of operations and cash flows of the Company for the period presented.  Note 2. Segment Reporting  The Company has two reportable business segments. The Company considers reportable segments as business units that offer different products and are managed separately. The operating results of each segment are regularly reviewed and evaluated by senior management.  The measure of segment profit or loss includes all revenues and expenses, and allocates certain corporate office expense to certain segments based on resources allocated.  The accounting policies of the reportable segments are the same as those described in the summary of Significant Accounting Policies (Note 3).  Automobile Finance Segment  Until the third quarter of 2004, the Company provided financial products and related services to the new and pre-owned automotive finance industry. The Company primarily purchased and subsequently sold automobile finance receivables collateralized by new and pre-owned automobiles. The receivables were predominately purchased from automobile retailers nationwide and sold to banks and credit unions. The Company also provided collection and servicing activities on a fee basis for finance receivables. In August 2004, the Company began to develop plans to run-off its operations in this industry by not accepting new business and terminating its business relationships. Transactions during 2005 primarily included servicing its remaining receivables and negotiations with vendors to settle amounts owed to them.  Transactions during 2006 primarily included negotiations with vendors to settle amounts owed to them.  Its new focus is to transition into a new market with new products. See Item 1. Description of Business.  GPS Tracking Devices Segment  The Company changed its name to Homeland Security Network, Inc. (OTC: HSYN) on March 1, 2005 to reflect the change in its formal business model discussed herein. The Company intends Homeland Security Network, Inc. to be recognized as a provider of technology products and services for tracking and recovering valuable mobile assets. The Company anticipates its new course of business will capitalize on rapidly emerging, largely under-served, GPS tracking markets. HSNI plans to serve the concerns and requirements of the individual consumer, corporations and the security operations of government.  Business Segment Assets  December 31,
2006December 31,
2005GPS Tracking Devices$15,216$951,814Automobile Finance-10,482Total$15,216$962,296   The following tables present information about the Companys operating segments for the years ended December 31, 2006 and 2005.    Business Segment Revenues  December 31,
2006December 31,
2005GPS Tracking Devices$54,260$255,060Automobile Finance9,35062,849Total$63,610$317,909  Business Segment Interest Expense  December 31,
2006December 31,
2005GPS Tracking Devices$146,985$50,242Automobile Finance36,15054,351Total$183,135$104,593  Business Segment Depreciation and Amortization  December 31,
2006December 31,
2005GPS Tracking Devices$169,291$35,482Automobile Finance-Total$169,291$35,482  Business Segment Profit/ (Loss)  December 31,
2006December 31,
2005GPS Tracking Devices$(2,891,063)$(2,485,510)Automobile Finance(74,986)(2,709,016)Total$(2,966,049)$(5,194,526)  Note 3. Significant Accounting Policies  Use of Estimates  The Companys consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). These accounting principles require management to make estimates, judgments and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. When sources of information regarding the carrying values of assets, liabilities and reported amounts of revenue and expenses are not readily apparent, HSNI bases its estimates on historical experience and on various other assumptions that HSNIs management believes to be reasonable for making judgments. HSNI evaluates all of its estimates on an on-going basis and may consult outside experts to assist in HSNIs evaluations. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of the date of the consolidated financial statements, as well as the reported amounts of revenue and expenses during the periods presented. Actual results could differ from those estimates.  Revenue Recognition  Interest income from finance receivables is recognized using the interest method. Accrual of income on finance receivables is suspended when a contract is contractually delinquent for ninety days or more. The accrual is resumed when the contract becomes contractually current, and past due interest and discount income is recognized at that time. Origination Fees are recognized for services provided during the loan origination process at the point in time the loan is funded by the third-party lender. Service Fees are based on a percentage of collections and are recognized as collected on a monthly basis from the Obligor of the receivable. Participation income is based on a percentage of collections and is recognized as collected on a monthly basis from the obligor of the receivable.  The Company recognizes revenue principally on two types of transactions  sales of products and wireless communication service fees.  In accordance with guidance provided by the Securities and Exchange Commissions Staff Accounting bulletin No. 104, or SAB No. 104, Revenue Recognition, revenue is recognized when all of the following are met: (i) persuasive evidence of an arrangement exists, (ii) title and risk of loss have passed, (iii) delivery has occurred or the services have been rendered, (iv) the sales price is fixed or determinable and (v) collection is reasonably assured.  The Company generally recognizes revenue on products sales upon shipment, which is prior to the installation of the related products on the consumers vehicle or other valuable assets.  For revenues relating to the sale of wireless communication service, subscriptions are recognized over the life of the contract.  The term of service contracts offered ranges from 1 to 36 months and are generally payable in full, however, some submit monthly fees through electronic fund transfers upon activation of the related unit or renewal of a previous service contract.  Accounts Receivable  Accounts receivable relating to the Companys tracking device segment consist of payments due from wholesalers of the products. In the normal course of business, the Company monitors the financial condition of the Companys customer base; accordingly, the Company has recorded a provision for uncollectible accounts as of December 31, 2006 and 2005, of $133,250 and $0, respectively.  The account deemed uncollectible relates to an individual customer for which the Company has a note payable outstanding to an affiliated entity of the customer with a principal balance of $141,875 and $134,500 as of December 31, 2006 and 2005, respectively.  As the note payable terms do not have a right of offset, the Company has reserved the balance in full in accordance with its own accounting policies; however, the Company believes it has a legal right of offset if the affiliated entity of the customer pursues further collection efforts on the notes payable balance.  Finance Receivables  Finance receivables consist of purchased automobile installment contracts, which were assigned to the Company upon acquisition. The titles to the automobiles, which serve as security for the payment of the purchased contracts, are held either by the Company or the financial institution for which the finance receivables serve as collateral.  Finance receivables that management has the intent and ability to hold for the foreseeable future or until maturity of payoff are reported at their outstanding gross contractual balances, net of allowance for losses and unearned finance revenue. Unearned finance revenue consists of unearned interest and discounts realized on contract purchases.  Discounts are amortized as adjustments of the yields on the related contracts.  Allowance for credit losses is increased by allocating a portion of the discount recorded on the acquisition of contracts. The Company performs periodic evaluations of the adequacy of the allowance for losses taking into consideration the past loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrower's ability to repay, the estimated value of any underlying collateral, as well as recovery potential of any underlying collateral and current economic conditions. Any increases in the allowance for losses subsequent to the acquisition of the contract are charged to earnings. In conjunction with the Company's contract purchases, dealers make certain representations and warranties regarding the validity of the contract and the enforceability of the security interest in the related vehicle. Consequently, the Company has recourse to the dealer in the event the dealer's representations and warranties are false. Furthermore, the Company's standard form agreement with all of its dealers requires that the dealer repurchase any contract where the borrower has failed to make the first two payments. In such cases, it is the Company's responsibility to return the related vehicle to the dealer. Consumer loans are ordinarily charged off when they are 120 - 180 days contractually past due.  Depreciation and Amortization  Furniture and equipment are carried at cost net of accumulated depreciation. Depreciation and amortization is calculated using the straight-line method over the estimated useful life of the assets.  The Company capitalizes certain computer software costs, after technological feasibility has been established, which are amortized utilizing the straight-line method over the economic life of the related software which has been estimated at five years.  Goodwill and Intangible Assets  Goodwill and intangible assets are accounted for in accordance with SFAS No. 142 "Goodwill and Other Intangible Assets" ("SFAS 142").  Under SFAS 142, goodwill and indefinite lived intangible assets are not amortized but instead are reviewed annually for impairment, or more frequently, if impairment indicators arise. Separable intangible assets that are not deemed to have an indefinite life will continue to be amortized over their estimated useful lives. The Company tests for impairment whenever events or changes in circumstances indicate that the carrying amount of goodwill or other intangible assets may not be recoverable, or at least annually at December 31 of each year.  These tests are performed at the reporting unit level using a two-step, fair-value based approach. The first step compares the fair value of the reporting unit with its carrying amount, including goodwill. If the fair value of the reporting unit is less than its carrying amount, a second step is performed to measure the amount of impairment loss.  The second step allocates the fair value of the reporting unit to the Company's tangible and intangible assets and liabilities.  This derives an implied fair value for the reporting unit's goodwill. If the carrying amount of the reporting unit's goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized equal to that excess.  In the event that the Company determines that the value of goodwill or other intangible assets have become impaired, the Company will incur a charge for the amount of the impairment during the fiscal quarter in which the determination is made.  Deferred financing costs  The Company capitalizes costs associated with the issuance of debt instruments. These costs are amortized on a straight-line basis over the term of the related debt instruments.  Income Taxes  Income taxes are accounted for under the asset and liability method. Under this method, deferred tax assets and liabilities are generally recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis, and net operating loss carry forwards.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. In addition, a valuation allowance has been established to reduce any deferred tax asset in which the Company is not able to determine on a more likely than not basis that the deferred tax asset will be realized.  Long-Lived Assets  HSNI accounts for its long-lived assets in accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, (SFAS No. 144) which requires that long-lived assets be evaluated whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If the total of the undiscounted future cash flows is less than the carrying amount of the asset or asset group, an impairment loss is recognized for the difference between the estimated fair value and the carrying value of the asset or asset group.  Fair Value of Financial Instruments  The fair value of a financial instrument represents the amount at which the instrument could be exchanged in a current transaction between willing parties, other than a forced sale or liquidation. Significant differences can arise between the fair value and carrying amount of financial instruments that are recognized at historical cost amounts. The carrying value of cash, accounts payable and accrued liabilities approximate the fair value because of the short maturity of those instruments. The finance receivables have been reduced to their estimated fair value.  Concentrations of Credit Risk  The Company maintains its cash with high credit quality financial institutions. The Federal Deposit Insurance Corporation secures each depositor up to $100,000.  Loans to persons with non-prime credit involve an increased probability of delinquency and/or default and involve greater servicing costs than loans made to borrowers with prime credit profiles. The ability to operate profitably depends, in part, on an accurate evaluation of the creditworthiness of customers and the minimization of losses following defaults. As a result, it is likely that delinquency and loss rates in the Company's portfolio will fluctuate in the near term and may increase as a greater portion of the portfolio of automobile receivables matures. A significant variation in the timing of or increases in credit losses experienced on the portfolio of automobile receivables could have a materially adverse effect on the Company. There can be no assurance that any loans made to customers will be repaid in whole or in part or that reserves for such credit risks will be adequate. Any loans that are in default may need to be charged off against the reserves. Further, any default that is with recourse to a Credit Union may require the Company to repurchase the receivable from the Credit Union.  Stock-Based Compensation  Prior to January 1, 2006, we elected to follow Accounting Principles Board Opinion (APB) No. 25, Accounting for Stock Issued to Employees, and related interpretations to account for our employee and director stock options, as permitted by Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based Compensation. We accounted for stock-based compensation for non-employees under the fair value method prescribed by SFAS No. 123. Effective January 1, 2006, we adopted the fair value recognition provisions of SFAS No. 123 (revised 2004), Share-Based Payments, (SFAS No. 123(R)) for all share-based payment awards to employees and directors including stock options, restricted stock units and employee stock purchases related to our employee stock purchase plan. In addition, we have applied the provisions of Staff Accounting Bulletin No. 107 (SAB No. 107), issued by the Securities and Exchange Commission, in our adoption of SFAS No. 123(R). We adopted SFAS No. 123(R) using the modified-prospective-transition method. Under this transition method, stock-based compensation expense recognized after the effective date includes: (1) compensation cost for all share-based payments granted prior to, but not yet vested as of January 1, 2006, based on the measurement date fair value estimate in accordance with the original provisions of SFAS No. 123, and (2) compensation cost for all share-based payments granted subsequent to January 1, 2006, based on the measurement date fair value estimate in accordance with the provisions of SFAS No. 123(R). Results from prior periods have not been restated and do not include the impact of SFAS No. 123(R). Stock-based compensation expense under SFAS No. 123(R) for 2006 was $62,600 relating to employee and director stock options, restricted stock units and our employee stock purchase plan. Stock-based compensation expense recognized each period is based on the greater of the value of the portion of share-base payment awards under the straight-line method or the value of the portion of share-based payment awards that is ultimately expected to vest during the period. SFAS No. 123(R) requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. In our pro forma disclosures required under SFAS No. 123 for periods prior to 2006, we accounted for forfeitures as they occurred. Upon adoption of SFAS No. 123(R), we elected to use the Black-Scholes-Merton option-pricing formula to value share-based payments granted to employees subsequent to January 1, 2006 and elected to attribute the value of stock-based compensation to expense using the straight-line single option method. These methods were previously used for our pro forma information required under SFAS No. 123. On November 10, 2005, the Financial Accounting Standards Board (FASB) issued FASB Staff Position No. FAS 123(R)-3, Transition Election Related to Accounting for Tax Effects of Share-Based Payment Awards, which detailed an alternative transition method for calculating the tax effects of stock-based compensation pursuant to SFAS No. 123(R). This alternative transition method included simplified methods to establish the beginning balance of the additional paid-in capital pool (APIC pool) related to the tax effects of employee stock-based compensation and to determine the subsequent impact on the APIC pool and Consolidated Statement of Cash Flows of the tax effects of employee stock-based compensation awards that are outstanding upon adoption of SFAS No. 123(R). Due to our historical net operating losses, we have not recorded the tax effects of employee stock-based compensation and have no APIC pool. Prior to the adoption of SFAS No. 123(R), all tax benefits of deductions resulting from the exercise of stock options were required to be presented as operating cash flows in the Consolidated Statement of Cash Flows. SFAS No. 123(R) requires the cash flows resulting from the tax benefits resulting from tax deductions in excess of the compensation cost recognized for those options (excess tax benefits) to be classified as financing cash flows. Due to our historical net operating loss position, we have not recorded these excess tax benefits as of December 31, 2006.   Note 4.  Divestiture of Subsidiary On September 26, 2006, the Company entered into an agreement to sell 80% of the total issued and outstanding common stock of its wholly-owned subsidiary Pacific Auto Group, Inc. ("PAG") pursuant to a Stock Purchase Agreement by and between Homeland Security Network, Inc. and Monet Acquisition, LLC, a Delaware limited liability company. Monet agreed to indemnify the Company against any contingent liabilities of PAG and return 20% of the entity that could potentially have value in the future depending on the buyers future action with the entity in consideration of the stock purchase. Pacific Auto Group, Inc. will be operated and controlled totally independent of HSNI; however, it is the intention of HSNI to distribute the remaining 20% of the outstanding common stock of PAG that HSNI owns to its stockholders as a dividend. Note 5. Recently issued Accounting Pronouncements In July 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes  An Interpretation of FASB Statement No. 109, or FIN 48. FIN 48 provides detailed guidance for the financial statement recognition, measurement and disclosure of uncertain tax positions recognized in the financial statements in accordance with SFAS No. 109. Tax positions must meet a more-likely-than-not recognition threshold at the effective date to be recognized upon the adoption of FIN 48 and in subsequent periods. FIN 48 is effective for fiscal years beginning after December 15, 2006, and the provisions of FIN 48 will be applied to all tax positions upon its initial adoption. The cumulative effect of applying the provisions of FIN 48 is reported as an adjustment to the opening balance of retained earnings for that fiscal year. We are currently evaluating the application of FIN 48 to our financial statements and have not yet determined its impact.  Note 6. Going Concern Uncertainty  The Company has incurred net losses in the years ended December 31, 2006 and 2005 and has had working capital deficiencies both periods.  The Company's consolidated financial statements have been prepared on the assumption that the Company will continue as a going concern. Management is seeking a revolving credit facility for the purchase of inventory and various types of additional funding such as issuance of additional common or preferred stock, additional lines of credit, or issuance of subordinated debentures or other forms of debt. The inventory financing and additional  funding would alleviate the Company's working capital deficiency and increase profitability. However, it is not possible to predict the success of management's efforts to achieve profitability or to secure additional funding. Also, there can be no assurance that additional funding will be available when needed or, if available, that its terms will be favorable or acceptable. Management is also seeking to renegotiate certain liabilities in order to alleviate the working capital deficiency.  If the additional financing or arrangements cannot be obtained, the Company would be materially and adversely affected and there would be substantial doubt about the Company's ability to continue as a going concern. The consolidated financial statements do not include any adjustments relating to the recoverability and realization of assets and classifications of liabilities necessary if the Company becomes unable to continue as a going concern.  Years Ended
December 31,20062005Loss from operations$(2,440,313)$(2,719,904)Other income (deductions)(525,736)(2,474,622)Net loss$(2,966,049)$(5,194,526)   Note 7. Income (Loss) Per Share  Basic loss per share is computed based on net loss divided by the weighted average number of shares of common stock outstanding during the period.  Diluted loss per share is computed based on net loss divided by the weighted average number of shares of common stock outstanding during the period after giving effect to convertible securities considered to be dilutive common stock equivalents. The conversion of preferred stock and stock options during the periods in which the Company incurs a loss from continuing operations before giving effect to gains from the sale of the discontinued operations is not assumed since the effect is anti-dilutive. The number of shares of preferred stock, which would have been assumed to be converted and have a dilutive effect if the Company had income from continuing operations, is 42,490,202 for the years ended December 31, 2006 and 2005. See Note 21 for common stock transactions subsequent to December 31, 2006.  Note 8. Finance Receivables  Finance receivables are comprised of the following at December 31, 2006 and December 31, 2005:  December 31,
2006December 31,
2005Finance receivables$-$142,559Allowance for credit losses-(132,077)Finance receivables net$-$10,482  The Company no longer services loans as of December 31, 2006 and has reflected no activity related to finance receivables as of December 31, 2006.  Note 9. Property, Plant and Equipment  Property, plant and equipment are comprised of the following at December 31, 2006 and December 31, 2005:  Description:December 31,
2006December 31,
2005Furniture and office equipment$55,554$55,554Software2,1852,18557,73957,739Less accumulated depreciation(44,365)(38,674)Property and equipment, net$13,374$19,065  Note 10. Capitalized Software Costs  The Company accounts for the development cost of software intended for sale in accordance with Statement of Financial Accounting Standards No. 86, Accounting for Costs of Computer Software to be Sold, Leased, or Otherwise Marketed, (SFAS 86). SFAS 86 requires product development costs to be charged to expense as incurred until technological feasibility is attained. Technological feasibility is attained when the Companys software has completed system testing and been determined viable for its intended use. Accordingly the Company did not capitalize any development costs other than product development costs acquired through a third party purchase. The Company capitalizes software through technology purchases if the related software under development has reached technological feasibility or if there are alternative future uses for the software. During 2005, the Company purchased software from a third party totaling $1,131,000, for which the Company allocated $313,000 to product development expense for efforts to reach technological feasibility.  Capitalized software costs and accumulated amortization were as follows for the years ended December 31, 2006 and December 31, 2005. As of December 31, 2006, the Company determined that there was an impairment of these assets due to insufficient cash flows from operations related to this software purchased in 2005.  As of result, an impairment charge of $624,433 was recorded and is reflected in other expense as of December 31, 2006.  December 31,
2006December 31,
2005Software development costs$-$818,000Less accumulated amortization-(29,967)Capitalized Software, net$-$788,033   Note 11. Stock Plans  The Company has a non-qualified stock option plan (the Plan) that was adopted by the Board of Directors in March 1997. The Plan, as authorized, provides for the issuance of up to 2,000,000 shares of the Companys stock. Persons eligible to participate in the Plan as recipients of stock options include full and part-time employees of the Company, as well as officers, directors, attorneys, consultants and other advisors to the Company or affiliated corporations.  Options issued under the Plan are exercisable at a price that is not less than twenty percent (20%) of the fair market value of such shares (as defined) on the date the options are granted. The non-qualified stock options are generally non-transferable and are exercisable over a period not to exceed ten (10) years from the date of the grant. Earlier expiration is operative due to termination of employment or death of the issuee. The entire Plan expires on March 20, 2007, except as to non-qualified stock options then outstanding, which will remain in effect until they have expired or have been exercised. As of December 31, 2006, 1,990,289 shares had been exercised and issued under the Plan, and 9,711 shares were available for future issuance.  In January 2005, HSNI issued 100,000 shares of common stock with a par value of $.001. They were issued to an executive as a hiring bonus and are reflected in operating expenses of the consolidated financial statements at $0.15 per share ($15,000) for period ending September 30, 2005. No options were granted and no warrants were authorized during 2004.  On November 8, 2006, the Company filed a Non-Statutory Stock Option Plan with the Securities and Exchange Commission.  This 2006 Non-Statutory Stock Option Plan is intended as an employment incentive, to aid in attracting and retaining in the employ or service of Homeland Security Network, Inc., a Nevada Corporation, and any Affiliated Corporation, persons of experience and ability and whose services are considered valuable to encourage the sense of proprietorship in such persons, and to stimulate the active interest of such persons in the development and success of the Company.  This Plan provides for the issuance of non-statutory stock options which are not intended to qualify as incentive stock options within the meaning of section 422 of the Internal Revenue Code of 1986, as amended.  There are a total of 15,000,000 common shares in the Plan.  As of December 31, 2006, no shares had been issued under the Plan.   Note 12. Notes Payable  December 31,
2006December 31,
2005Two notes payable to a Director of the Company. Both bear interest at 8% per annum. The notes matured in February 2007286,874286,874In 2006, the Company obtained funds under a financing arrangement bearing interest at 7% per annum.  This note matured in May 2006. The Company intends and expects to renegotiate the terms.27,000-In 2006, the Company obtained funds under a financing arrangement bearing interest at 10% per year.  The note matured in February 2007 and is convertible into shares of the Companys common stock at a fixed rate.100,000-In 2006, a note was established upon conversion of a trade payable balance to an interest-bearing loan.  The note bears interest at 8% per year and matures in June 2007. This note is convertible into shares of the Companys common stock at a fixed price.165,000-In 2005, the Company obtained funds under a financing arrangement bearing interest at 8% per annum from a related third party. The note provides a line of credit totaling $500,000. The note is uncollateralized and the proceeds were utilized for working capital. This note has been renegotiated with an extended term. This note matured in January 2007.246,325229,365In March 2005, the Company obtained $134,500 under a financing arrangement bearing interest at 7% per annum from a related third party. The note is uncollateralized and the proceeds were utilized for working capital. This note has been renegotiated with an extended term. This note matured in April 2006.141,875134,500Note payable, unsecured, to an Executive bearing interest at 6% per annum and matured in July 2006.  The Company intends and expects to renegotiate the terms.216,150224,750Note payable, unsecured, to a former Executive and current Director bearing interest at 6% per annum and matured in July 2006.  The Company intends and expects to renegotiate terms.174,618197,417Note payable, unsecured, to a former  Executive and current Director bearing interest at 6% per annum and matured in July 2006.  The Company intends and expects to renegotiate terms.13,16721,300$1,371,009$1,094,206   Note 13. Beneficial Conversion Transaction  In March 2001, the Company issued a note payable with a limited conversion feature in the principal sum of $125,000, bearing interest at 12% per annum, to a related party. In December 2004, the related party endorsed and assigned all rights, title and interest in the remaining obligation of this note payable to another entity. At such time, the outstanding principal balance was $61,538.  In December 2004, subsequent to the assumption of this note payable by Securities Acquisition New York, LLC (SANY), a related party, the Board of Directors of the Company resolved to both convert this note payable and consent to an amended conversion calculation at a rate permitting 10,000 shares of common stock to be issued in exchange for each $1.00 of reduction in the outstanding principal of this note payable.  Based on the aforementioned amendment to the conversion calculation rate, the Company performed two conversions, which were elected by the entity holding the note payable:  January 2005, the Company issued 3,429,355 shares valued at $0.11 per share at $377,229; and in March 2005, the Company issued 12,000,000 shares valued at $0.18 per share at $2,160,000, totaling $2,537,229 resulting in a charge in the statement of operations. See Item 11, Security Ownership of Certain Beneficial Owners and Management. The applied conversion rate was adjusted and recalculated by the Board of Directors.  In August 2005, as a result of a termination and settlement agreement of the assignment and assumption of the note payable by and between the related party and SANY, the Company was relieved of additional debt requiring no further issuances of shares of common stock. And as such, the conversion calculation was corrected and amended to 1,000 shares of common stock having been issued in exchange for each $1.00 deducted from the outstanding principal of this note payable.  Further, under the terms of the termination and settlement agreement no party has any future right nor does the Company have any future obligation to convert or issue shares of common stock in exchange for debt relief related to this note payable.  In the year ended December 31, 2005, $13,876 was recorded as a repayment of the obligation. On December 30, 2005, the Company was entirely relieved of this related party note payable of $46,113 with a recorded balance of $46,311. The Company received an unconditional release by the holder of the note from any and all obligations.  Note 14. Credit Union Participations  On August 31, 2004, the Company entered into a Mutual Termination and Separation Agreement with a credit union and received a full release of all guarantees and servicing obligations in connection with four of the six guaranteed participations totaling $1,359,810.  At December 31, 2004, loan participations payable to credit unions in the amount of $547,144 represented the remaining 90% interest purchased by credit unions in two pools of automobile finance receivables guaranteed by the Company.  On February 28, 2005, the Company entered into a Mutual Termination and Separation Agreement with an additional credit union and again received a full release of all guarantees and servicing obligations in connection with a fifth participation totaling $297,809.  As of March 31, 2006, one final credit union participation transaction with guarantee provisions and servicing obligations remains.  The Company also provided, on a fee basis, collection and servicing of automobile finance receivables sold to credit unions by the Company as a non-guaranteed participation transaction. At December 31, 2005, the total outstanding balance of finance receivables for which collection, asset management, and servicing activities were performed was approximately $87,414.  As of December 31, 2006, the Company no longer services automobile finance receivables.  Note 15. Related Party Transactions  Rodwell Software Systems, Inc.  The Company entered into a letter of intent dated as of January 2005 with Rodwell Software Systems, Inc. (RSSI) regarding the Company's acquisition of all of the issued and outstanding capital stock of RSSI subject to certain adjustments at the closing of the acquisition plus assumption of certain transaction and related costs and expenses.  The letter of intent was subject to various conditions and approvals and contemplated that the acquisition would be effected through the merger of RSSI with and into the Company, with the Company as the surviving corporation. The Company's intention to acquire RSSI was to significantly increase its software/firmware development capabilities, which combines GPS tracking with a web interface in one simple device working in tandem with a cell phone, PDA or computer. The acquisition was not consummated by mutual agreement.  On December 26, 2005, the Company, as a prerequisite to a more definitive agreement, entered into an agreement to solely purchase certain software, firmware and product enhancements developed by RSSI. The transaction is subject to the execution and delivery of the more definitive written agreement and other documents between the Company and RSSI. In September 2005, the Company issued 7,000,000 shares of common stock to RSSI as compensation for the purchase of the software, firmware and product enhancements. In December 2005, pursuant to its agreement with RSSI, the Company issued 4,100,000 shares of common stock as additional compensation to RSSI. Further, the Company will provide an intermittent royalty based on the sale of components and usage of the web interface by consumers as compensation to RSSI, subject to certain milestones. The Company incurred product development costs of $313,000 during the year ended December 31, 2005 for software related to the GPS tracking devices. The more definitive agreement will include additional language, without limitation, regarding an exclusive permanent License, attached schedules, representations, warranties and exceptions, and other matters with respect to the transaction.  On September 18, 2006, the Company entered into an agreement to purchase certain firmware and product enhancements developed by RSSI.  The Company received the software code in the fourth quarter of 2006 and began testing the functionality of the software for acceptable integration into its product offerings.  Prior to December 31, 2006, the Company determined it would accept one of three modules it purchased in the software agreement. Subsequent to December 31, 2006, the Company has continued to evaluate the effectiveness of the software with its product offerings and believes the other two modules will be accepted by the Company in the second quarter of 2007 upon complete integration into its software platform.  The terms of the agreement require the Company to pay RSSI $136,000 upon final acceptance.  The payment includes $11,000 to be paid initially in cash consideration with the remaining $125,000 to be repaid through the issuance of a note payable that is convertible into a fixed amount of shares of the Company at the option of RSSI.  The Company is currently negotiating the terms of the existing agreement and expects certain terms to be amended.  As of December 31, 2006, the Company has recorded the amount owed in accordance with the agreement referenced above, which is reflected as product development expense of $136,000 and is included in accrued expenses for the same amount.  The Company did not capitalize the cost of the purchased software since its recent historical cash flows does not support that their will be adequate cash flows in the future to record as an intangible asset at December 31, 2006.  The general terms and conditions related to the exclusivity of the permanent license are as follows. The exclusivity relates primarily to the retail automotive industry, which encompasses end users of the products. Other unrelated markets are also provided for. The exclusivity, however, is conditional.  The purchase from RSSI provides the Company with technology products and support services for tracking and recovering valuable mobile assets.  Beneficial Conversion Transaction  In March 2001, the Company issued a note payable with a limited conversion feature in the principal sum of $125,000, bearing interest at 12% per annum, to a related party. In December 2004, the related party endorsed and assigned all rights, title and interest in the remaining obligation of this note payable to another entity. At such time, the outstanding principal balance was $61,538.  In December 2004, subsequent to the assumption of this note payable by Securities Acquisition New York, LLC (SANY), a related party, the Board of Directors of the Company resolved to both convert this note payable and consent to an amended conversion calculation at a rate permitting 10,000 shares of common stock to be issued in exchange for each $1.00 of reduction in the outstanding principal of this note payable.  Based on the aforementioned amendment to the conversion calculation rate, the Company performed two conversions, which were elected by the entity holding the note payable:  January 2005, the Company issued 3,429,355 shares valued at $0.11 per share at $377,229; and in March 2005, the Company issued 12,000,000 shares valued at $0.18 per share at $2,160,000, totaling $2,537,229 resulting in a charge in the statement of operations. See Item 11, Security Ownership of Certain Beneficial Owners and Management. The applied conversion rate was adjusted and recalculated by the Board of Directors.  In August 2005, as a result of a termination and settlement agreement of the assignment and assumption of the note payable by and between the related party and SANY, the Company was relieved of additional debt requiring no further issuances of shares of common stock. And as such, the conversion calculation was corrected and amended to 1,000 shares of common stock having been issued in exchange for each $1.00 deducted from the outstanding principal of this note payable.  Further, under the terms of the termination and settlement agreement no party has any future right nor does the Company have any future obligation to convert or issue shares of common stock in exchange for debt relief related to this note payable.  In the year ended December 31, 2005, $13,876 was recorded as a repayment of the obligation. On December 30, 2005, the Company was entirely relieved of this related party note payable of $46,113 with a recorded balance of $46,311. The Company received an unconditional release by the holder of the note from any and all obligations.  Securities Acquisition New York, LLC  In November 2004, the Company signed a proposal for certain services to be performed by Securities Acquisition New York, LLC to plan and re-capitalize the business. The proposal agreement provided for various services, which included certain merger services and capital sourcing activities and related services. The Company only partially implemented the services provided by the proposal agreement from January 2005 through March 2005, and since then effectively abandoned the core strategy encompassed in the agreement. Formerly, the Company had not agreed to nor had it made any provisions for any additional compensation. The Company and Securities Acquisition New York, LLC concluded their discussions regarding a resolution of the matter.  In December 2005, the Company issued 2,500,000 shares of common stock as compensation paid for services rendered by Securities Acquisition New York, LLC in 2005. Given the additional consideration, Securities Acquisition New York, LLC is fully and entirely compensated.  For other related party transactions see Notes 11, 12, 13 and 17.  Note 16. Line of Credit  In November 2003, the Company executed a revolving credit facility in the amount of $10,000,000 with a financial institution that bore interest at a rate of prime plus 2% and matured in November 2004.  The purpose of the credit facility was to provide funding for the purchase of automobile finance installment contracts for sale to banks and credit unions. The outstanding balance totaling $166,085 at December 31, 2006 is in default. However, the Company is presently negotiating revised payment terms with the lender.  Note 17. Commitments and Contingencies  Employment Contracts  In April 2003, (amended and restated January 2004, amended and restated January 2005) HSNI entered into an Employment Agreement (Agreement) with Charles W. Norman. The Agreement provides that Mr. Norman shall serve as the Chief Executive Officer of HSNI to January 1, 2007. The duration of the Agreement is for a period of two years marked by the amended and restated date of January 1, 2005. At any time prior to the expiration of the Agreement, HSNI and Mr. Norman may mutually agree to extend the duration of employment under the terms of the Agreement for an additional period or periods. As payment for services, HSNI agrees to pay Mr. Norman, as the Chief Executive Officer, a minimum base salary of $250,000 per annum. As provided in the Agreement, Mr. Norman is eligible to be paid bonuses, from time to time, at the discretion of HSNIs Board of Directors, of cash, stock or other valid form of compensation. Upon termination of and under the terms of the Agreement, Mr. Norman shall be entitled to severance compensation in an amount equal to twenty-four months of base salary as shall exist at the time of such termination.  At December 31, 2006, upon resignation by Mr. Norman the employment agreement was not renewed.  In May 2004, (amended and restated January 2005) HSNI entered into an Employment Agreement (Agreement) with Peter Ubaldi. The Agreement provides that Mr. Ubaldi shall serve as the President of HSNI to January 1, 2007. The duration of the Agreement is for a period of two years marked by the amended and restated date of January 1, 2005. At any time prior to the expiration of the Agreement, HSNI and Mr. Ubaldi may mutually agree to extend the duration of employment under the terms of the Agreement for an additional period or periods. As payment for services, HSNI agrees to pay Mr. Ubaldi, as the President, a minimum base salary of $250,000 per annum. As provided in the Agreement, Mr. Ubaldi is eligible to be paid bonuses, from time to time, at the discretion of HSNIs Board of Directors, of cash, stock or other valid form of compensation. Upon termination of and under the terms of the Agreement, Mr. Ubaldi shall be entitled to severance compensation in an amount equal to twenty-four months of base salary as shall exist at the time of such termination.  Operating Leases  The Company leases its principal executive office in Dallas, Texas.  The following table sets forth the Companys commitment thereof.  Future minimum annual payments expected under the operating lease are as follows:  Year Ending December 31,Amount2007$43,082200845,454200939,525Total$128,061  Note 18. Income Taxes  The Company continues to incur tax net operating losses (NOL's), which are available to carry forward and offset future taxable income. These NOL's were generated, principally as a result of the tax losses resulting from the operations of the Company. A deferred tax asset results from the benefit of utilizing the NOL carry-forwards in future years.  Due to the current uncertainty of realizing the benefits of the tax NOL carry-forward, a valuation allowance equal to the tax benefits for the deferred taxes has been established. The full realization of the tax benefit associated with the carry-forward depends predominately upon the Company's ability to generate taxable income during future periods, which is not assured.   The components of income taxes are comprised as follows:  December 31,
2006December 31,
2005DeferredFederal$(980,524)$(1,559,100)State(144,195)(229,326)(1,124,718)(1,788,426)Effect of Valuation Allowance1,124,7181,788,426$-$  The difference between the U.S. Federal statutory rate and the Company's effective rate is:  December 31,
2006December 31,
2005Federal statutory tax rate(34%)(34%)Valuation allowance34%34%Effective tax rate-   Deferred tax assets are comprised of the following:  December 31,
2006December 31,
2005Deferred Tax SummaryNet operating loss carry-forward$11,591,311$10,434,522Provision for finance receivable losses-32,04111,591,31110,466,593Valuation allowance(11,591,311)(10,466,593)$$  The net operating loss carry-forwards as of December 31, 2006 and 2005 are subject to certain loss limitations under IRS Section 382 regulations. The deferred tax summary set forth above does not reflect the effect of the IRS Section 382 limitation for the years ended December 31, 2006 and 2005.  Note 19.  Pension Plans  The Company does not currently provide, administer or manage a 401(K) plan or any other pension plan.  Note 20. Legal Proceedings  Plus 4 Credit Union FK/A Houston Postal Credit Union (HPCU).  The Company, through its wholly owned subsidiary, Autocorp Financial Services, Inc. (ACFS) had entered into an auto loan servicing agreement dated January 7, 2003. ACFS and HPCU have disputes over collection of certain auto finance receivables and general performance under the servicing agreement.  HPCU has started a legal action but the attorneys for both sides are in the process of negotiating a settlement. HPCU is asserting claims and damages of $40,000.  Management believes that a settlement will be reached and this matter will be resolved.  The Company has not recorded any amounts above the amount recorded as a note payable to HPCU at December 31, 2006 related to the lawsuit as it believes the settlement will likely be an amount that is not material to the financial statements and due to the current negotiations between the parties no amount can be reasonably estimated.  The Company is presently not a party to any legal proceeding, except as discussed above, that it considers other than to be routine litigation incidental to the business.  Note 21. Subsequent Events  Subsequent to year end, the Company issued 23,916,765 shares of common stock for services preformed prior to December 31, 2006.  These transactions were recognized as accrued expenses as of December 31, 2006.    5   SIGNATURES  In accordance with Section 13 or 15(d) of the Exchange Act, the registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.    Homeland Security Network, Inc.RegistrantPeter D. Ubaldi
President & Chief Executive OfficerDate: April 15, 2007/s/ PETER UBALDIPeter UbaldiPresident and Chief Executive OfficerDate: April 15, 2007
     Pursuant to the requirements of the Securities Exchange Act of 1934, this report has  been  signed below by the following persons on behalf of the registrant and in  the  capacities  and  on  the  date  indicated.   Homeland Security Network, Inc.RegistrantPeter D. Ubaldi
President & Chief Executive OfficerDate: April 15, 2007/s/ PETER UBALDIPeter UbaldiPresident and Chief Executive OfficerDate: April 15, 2007
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