UNITED
      STATES SECURITIES AND EXCHANGE COMMISSION


Washington,
      D.C. 20549





FORM
      10-KSB




x ANNUAL
      REPORT
      UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934




For
      the
      fiscal year ended December 31, 2005




o TRANSITION
      REPORT
      UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934




For
      the
      transition period from __________ to ____________




Commission
      File No. 0-51377




Strategic
      Defense Alliance Corp.


(Name
      of
      small business issuer in its charter)





Delaware
            
            51-0539826(State
                or other jurisdiction of incorporation)
            
            (I.R.S.
                Employer Identification No.)





12020
                Sunrise Valley Drive, Suite 100, Reston,  Virginia
            20191(Address
                of principal executive offices)
            (Zip
                Code)Issuer’s
                telephone number: (703) 476 2250





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


Securities
      registered under Section 12(g) of the Exchange Act: Title of class: Common
      stock, par value $.0001 per share





Check
      whether the issuer is not required to file reports pursuant to Section 13 or
      15(d) of the Exchange Act: o





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




Check
      here 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. o




Indicate
      by check mark whether the registrant is a shell company (as defined in rule
      12b-2 of the Exchange Act. Yes o No x.




State
      issuer’s revenue for its most recent fiscal year: $6,070,841




The
      aggregate market value of the registrant’s common stock held by non-affiliates
      of the registrant was $28,000 as of May 22, 2006.




There
      were 1,707,500 shares of the Company’s common stock, $.0001 par value,
      outstanding as of May 22, 2006.




Transitional
      Small Business Disclosure Format (Check one): Yes o No x




**DOCUMENTS
      INCORPORATED BY REFERENCE:**None









**Item
      1. Business.**




Presently,
      our sole business is the business conducted by our wholly-owned subsidiary,
      Computer Networks & Software, Inc. (“CNS”). We provide network and software
      solutions and professional consulting services including engineering and
      technical services, software development, systems engineering and analysis,
      systems integration, international circuit provisioning, internet management
      applications and program/project management primarily to agencies of the federal
      government. Since its founding in 1987, CNS has focused on solving complex
      communications technology issues by providing a high level expertise in
      engineering, systems and technology areas. Approximately 40% of its employees
      have high level security clearances.




Our
      current business operation consists of two core business areas -- - the
      technical professional services group and the solutions group. The professional
      consulting services group provides technical consultants to government agencies
      on a subcontract basis primarily through large system integrators. Staffing
      includes personnel that carry government security clearance from the secret
      to
      top secret level. The group’s major area of support is to provide network and
      security and information technology engineering.




The
      solutions group provides advanced communications and information engineering
      services in support of government agencies. This group provides services to
      the
      military, government and the aviation industry in the disciplines of
      communications, navigation and surveillance. These services also include system
      performance measurement, performance analysis and capacity planning. We
      undertake highly technical projects that leverage expert information technology
      knowledge and experience.




Our
      clients are principally government agencies, with the largest being NASA and
      the
      Defense Information Systems Agency, and Federal Network Systems Verizon (FNS
      Verizon) and Qwest Government Services (Qwest) , which are prime contractors
      who
      subcontract our services. These four customers accounted for 88% of our revenue
      for 2005, 92.0% of revenue for 2004 and 84.0% of revenue for 2003.




Our
      strategy is to pursue acquisitions in the defense and homeland security markets.
      However, our ability to make any acquisitions is dependent upon our ability
      to
      obtain necessary financing, and to be able to offer equity securities that
      have
      a readily ascertainable market value. As of the date of this annual report,
      we
      do not have any financing commitments and our agreement with our preferred
      stockholder may make it difficult for us to obtain financing from other sources.
      Further, there is no market for our common stock. We cannot assure you as to
      our
      ability to obtain the financing necessary for us to make acquisitions or as
      to
      the development of any public market for our common stock.




**Organization;
      Merger**




On
      January 11, 2006, we acquired CNS.
      As a result of the acquisition of CNS, our business became the business of
      CNS.
      The acquisition of CNS is accounted for as a reverse acquisition. The accounting
      rules for reverse acquisitions require that beginning with the date of the
      merger, January 11, 2006, our balance sheet includes the assets and liabilities
      of CNS and our equity accounts were recapitalized to reflect the net equity
      of
      CNS. In addition, our historical operating results will be the operating results
      of CNS.




Prior
      to the acquisition of CNS,
      Lounsberry Holdings I, Inc. was not engaged in any active business.




-1-




In
      anticipation of the acquisition of CNS, Paul B. Silverman, our chief executive
      officer and director, and Tom Bednarek, our secretary and director, and one
      non-affiliated person formed CNS Acquisition Corp. to acquire CNS.




In
      connection with the acquisition of CNS:




•
            We
                issued 382,500 shares of common stock and warrants to purchase 892,500
                shares of common stock at $.12 per share to Mr. Silverman, Mr. Bednarek
                and one non-affiliated person in exchange for the stock of CNS Acquisition
                Corp.




•
            We
                sold to Barron Partners LP, for $1,300,000, 5,416,667 shares of series
                A
                preferred stock and warrants to purchase an aggregate of 30,000,000
                shares
                of common stock. The series A preferred stock is convertible into
                10,833,334 shares of common stock, subject to
                adjustment.




•
            We
                purchased 928,000 shares of common stock from Capital Markets Advisory
                Group, LLC, which was then our controlling stockholder, for $200,000,
                using the proceeds from the sale of the preferred stock and
                warrants.




•
            CNS
                Acquisition Corp. was merged with and into CNS with the result that
                CNS
                became our wholly-owned subsidiary. Pursuant to the merger, we issued
                or
                agreed to issue to the former stockholders of
                CNS:




•
            up
                to $1,000,000 in cash of which approximately $250,000 was paid at
                closing
                and the balance of up to $750,000, subject to adjustment, was due
                subsequent to closing;




•
            1,075,000
                shares of common stock;




•
            warrants
                to purchase 10,000,000 shares of common stock at $.20 per share;
                and




•
            contingent
                payments of up to $1,000,000 based on post-closing
                performance.




•
            We
                entered into employment agreements with Mr. Silverman and the former
                stockholders of CNS.




The
      agreements with Barron Partners required us to file a registration statement
      covering the shares of common stock issuable upon conversion of the series
      A
      preferred stock and upon exercise of the warrants within 60 days after the
      closing, on January 10, 2006. Pursuant to this agreement, we were required
      to
      file the registration statement by March 13, 2006. As a result, we may be
      required to issue an additional 1,644 shares of series A preferred stock for
      each day after March 13, 2006 until we file the registration statement, up
      to a
      maximum of 900,000 shares. The agreement requires the registration statement
      to
      be declared effective by the Commission not later than 120 days after March
      13,
      2006. To the extent that the registration statement is declared effective by
      that date, we will not be required to issue additional shares as liquidated
      damages for our failure to file on time.




CNS
      is a Virginia corporation founded
      in 1987. Its executive offices are located at 7405 Alban Station Court, Suite
      B-215, Springfield, VA 22150-2318. CNS’ website is www.cnsw.com.
      Information on CNS’s website or any other website is not part of this annual
      report.




-2-




We
      are a Delaware corporation,
      organized in 2005 under the name Lounsberry Holdings I, Inc. We changed our
      corporate name to Strategic Defense Alliance Corp. on February 8, 2006. Our
      executive offices are located at 12020 Sunrise Valley Drive, Suite 100,
      Reston, Virginia 20191, telephone (703) 476 2250.




References
      in this annual report to
“we,” “us,” “our” and similar words refer to Strategic Defense Alliance Corp.,
      commencing with the acquisition of CNS and the consummation of the private
      placement which occurred contemporaneously with the acquisition, and, with
      respect to historical information, these terms refer to CNS.




**RISK
      FACTORS**




An
      investment in our securities
      involves a high degree of risk. In determining whether to purchase our
      securities, you should carefully consider all of the material risks described
      below, together with the other information contained in this prospectus before
      making a decision to purchase our securities. You should only purchase our
      securities if you can afford to suffer the loss of your entire
      investment.




**Risks
      Relating to our Business**




**We
      require additional financing for our operations.**




At
      December 31, 2005, we had a working
      capital deficiency of approximately $1.5 million, and a bank overdraft of
      approximately $88,000. We require funding for our operations in addition to
      our
      $1.25 million bank line of credit. Because of our continuing losses, our working
      capital deficiency has increased since December 31, 2005. Our obligations under
      our bank line of credit mature on May 31, 2006, and we cannot assure you that
      the bank line will be extended or replaced. As of the date of this annual
      report, we have no commitment from our bank to extend the credit line beyond
      May
      31, 2006 and we have no replacement lender. If the bank does not extend the
      line
      of credit at its present level or if we do not find a replacement lender or
      other financing we will not be able to continue in business and it may be
      necessary for us to seek protection under the Bankruptcy Code.




**If
      we remain in violation of loan agreement covenants, our lender may not continue
      to extend credit to us which could impair our ability to continue in
      business.**




At
      December 31, 2005 and March 31,
      2006, we were in violation of covenants under CNS’ loan agreement and our
      borrowings exceeded the amount that we can borrow under the borrowing formula.
      Although the lender waived the violations and agreed to permit the excess
      borrowings after two of the former stockholders of CNS provided the bank with
      additional collateral, we cannot assure you that the lender will grant a waiver
      with respect to future violations of the covenants, which could result in a
      demand for repayment of our loan in addition to the right of the lender to
      demand payment on the maturity date of May 31, 2006. Since we could not pay
      the
      loan without an alternative lender and we do not anticipate that, if the loan
      is
      extended, we will be able to comply with the covenants at least through the
      end
      of 2006 unless we raise sufficient capital from the sale of equity securities,
      we may be unable to continue in business if the lender demands payment of our
      loan and we are not able to obtain alternative financing. We cannot assure
      you
      that alternative financing would be available on reasonable terms if at all.




-3-




**Our
      financial condition and breach of our bank covenants may affect the willingness
      of government agencies and government contractors to grant us
      contracts.**




If
      we continue to be in breach of the
      financial covenants under our loan agreement, regardless of whether the lender
      grants a waiver or seeks to enforce any remedies under the credit agreement,
      government agencies and government contractors may be reluctant to engage us
      because of our financial condition.




**Our
      working capital requirements are affected by expenses incurred in 2005 relating
      to a contract which was never awarded to us as well as additional costs
      resulting from our status as a public corporation.**




In
      2006, we incurred expenses,
      principally compensation expenses, of approximately $400,000 resulting from
      the
      performance of services in anticipation of a contract from a government agency
      which was never awarded to us. The cost of performing these services resulted
      in
      borrowings in excess of our credit facility. Further, as a result of the reverse
      acquisition, our ongoing expenses have increased significantly, including
      expenses in compensation to our present officers, compensation to our chief
      executive officer, who was not employed by us prior to the reverse acquisition,
      additional expenses relating to the anticipated hiring of a chief financial
      officer, ongoing public company expenses, and obligations incurred in connection
      with the reverse acquisition. Based on current agreements, we may also be
      required to make additional payments to the former CNS stockholders in an amount
      not exceeding $750,000, which amount is subject to adjustment, and contingent
      payments of up to $1,000,000 based on achieving specified target EBITDA
      milestones in 2006, 2007, 2008 and 2009. Our failure to generate sufficient
      additional revenue or reduce expenses or obtain alternative financing
      arrangements to enable us to cover our increased level of expenses could impair
      our ability to continue in business.




**The
      factors which resulted in a loss for 2005 may continue to affect our
      business.**




We
      sustained a loss of for 2005,
      primarily because of both a decrease in our gross margin from 50% in 2004 to
      35%
      in 2005 and an increase in indirect costs, principally selling, general and
      administrative costs. The decrease in gross margin results from both labor
      costs
      for services rendered to a government agency in anticipation of a contract
      which
      was never awarded, together with an increase in the percentage of revenue from
      private sector clients which generate a lower gross margin than government
      clients. If we are not able to increase our gross margin and reduce our selling,
      general and administrative expenses, we will not be able to operate profitably,
      and if our losses continue, we may not be able to continue in
      business.




**Because
      we are dependent upon four major clients, the loss of any of these clients
      could
      impair our ability to operate.**




Our
      four largest clients, two of which
      are government agencies and two of which are companies in the private sector,
      accounted for approximately 85.7% of our revenue in 2005, 92.0% of our revenue
      for 2004, and 84.0% of our revenue for 2003. One of these clients, FNS Verizon,
      accounted for 42.6% of our revenue for 2005, 32.7% of our revenue for 2004
      and
      19.7% of our revenue for 2003. Further, another of these major clients, NASA,
      accounted for 15.9% of our revenue for 2005, 27.8% of revenue for 2004 and
      25.6%
      of revenue for 2003. Both the revenue from NASA, and the gross margin on work
      performed for NASA was affected by our performance of services for NASA in
      anticipation of a contract which was never awarded. With respect to these
      services, we incurred cost of revenue for which no revenue was generated. The
      loss of any of these clients could materially impair our ability to continue
      in
      operations unless we develop alternative revenue sources. We cannot assure
      you
      that we will be able to develop additional revenue sources.




-4-




**Because
      we are engaged pursuant to short-term contracts, we do not have a continuing
      source of revenue.**




Since
      our engagements are on a short
      term basis, and any contracts with agencies of the federal government are
      subject to renegotiation and termination for the convenience of the government,
      we do not have any assurance of a continued source of revenue. Our inability
      or
      failure to obtain new contracts from our major clients and to develop a larger
      client base could impair are ability to operate and could result in continuing
      and increased losses.




**Because
      our revenue is derived from services rendered from the defense and related
      industries, our operating results may suffer from conditions affecting this
      market.**




Substantially
      all of our revenue is derived from clients in the defense and related
      industries. Our business may suffer from any budgeting, economic or other trends
      that have the effect of reducing the requirements for our services, including
      changes in federal budgeting which may reduce the budget of those agencies
      that
      either engage us directly or affect the contracts of private sector clients
      for
      whom we perform services as subcontractors under prime contracts with government
      agencies.




**We
      need to hire a chief financial officer.**




Our
      chief executive officer, Paul B.
      Silverman, is presently acting as our chief financial officer as well. Our
      failure to hire an independent chief financial officer could affect our ability
      to implement necessary internal controls which could affect our credibility
      in
      the market place.




**Our
      operating results in future periods may vary from quarter to quarter, and,
      as a
      result, we may fail to meet the expectations of our investors and analysts,
      which may cause our stock price to fluctuate or decline.**




Although
      our business is not seasonal, the timing of our revenue is based largely on
      the
      contracting policies and requirements of a small number of clients. As a result,
      our revenue and operating results have fluctuated from quarter to quarter
      significantly in the past. We expect that fluctuations in both revenue and
      net
      income will continue due to a variety of factors, many of which are outside
      of
      our control. Furthermore, to the extent that we perform services under a
      government contract in a period prior to the receipt of a contract, both our
      gross margin and our net income will be affect in both the quarter in which
      the
      services are performed and in the quarter in which the contract is received,
      and, if the contract is not received, we will write off the cost incurred.
      A
      substantial portion of our operating expenses is related to personnel costs,
      depreciation and rent which cannot be adjusted quickly and, therefore, cannot
      be
      easily reduced in response to lower revenue levels or changes in client
      requirements. Due to these factors and the other risks discussed in this annual
      report, you should not rely on period-to-period comparisons of our results
      of
      operations as an indication of future performance.




-5-




**Our
      failure to identify and engage qualified information technology professionals
      will adversely affect our ability to attract clients and generate
      revenue.**




Our
      business is dependent upon our
      identifying, hiring and retaining qualified information technology professionals
      and, in many cases, professionals with security clearances required by our
      clients. Because these information technology professionals are in high demand
      and the demand for these professionals is increasing, we may have difficulty
      in
      attracting a sufficient number of qualified professionals to meet our staffing
      requirements and attract clients. Furthermore, to the extent that we have highly
      skilled personnel with security clearance who are not engaged on assignments
      for
      our clients would increase our cost of revenue without generating revenue,
      which
      would result in decreased gross margins and could result in continued
      losses.




**Our
      failure to meet our clients’ expectations could result in decreased revenue,
      increased costs and negative publicity.**




Our
      client engagements involve the
      creation, implementation and maintenance of solutions to meet the specific
      needs
      of our clients, which may be critical to our clients’ businesses or to specific
      objectives of our government clients. Defects or errors in these systems or
      failure to meet clients’ needs and expectations could result in:




•
            delayed
                or lost revenues;




•
            increased
                costs in correcting any problems or errors;




•
            negative
                publicity regarding us and the quality of our
                services;




•
            claims
                for substantial damages against us, regardless of our responsibility
                for
                such failure, which claims may exceed our insurance coverage;
                and




•
            our
                inability to attract or retain clients or personnel.




**The
      terms on which we may raise additional capital may result in significant
      dilution and may impair our stock price.**




Because
      of both the absence of a public market for our common stock, the terms of our
      recent private placement and the number of outstanding warrants and the exercise
      price and other terms on which we may issue common stock upon exercise of the
      warrants, it may be difficult for us to raise additional capital if required
      for
      our present businesses and for any planned expansion. We cannot assure you
      that
      we will be able to get additional financing on any terms, and, if we are able
      to
      raise funds, it may be necessary for us to sell our securities at a price which
      is at a significant discount from the market price and on other terms which
      may
      be disadvantageous to us. In connection with any such financing, we may be
      required to provide registration rights to the investors and pay damages to
      the
      investor in the event that the registration statement is not filed or declared
      effective by specified dates. The price and terms of any financing which would
      be available to us could result in both the issuance of a significant number
      of
      shares and significant downward pressure on our stock price and could result
      in
      a reduction of the conversion price of the series A preferred stock and exercise
      price of the warrants held by the Barron Partners.




**We
      may not be able to continue to grow through acquisitions.**




An
      important part of our growth strategy is to expand our business and to acquire
      other businesses in the defense and homeland security fields. If we fail to
      make
      any acquisitions, our future growth may be limited. As of the date of this
      annual report, we do not have any agreement or understanding, either formal
      or
      informal, as to any acquisition, and we cannot assure you that we will be able
      to consummate any acquisitions.




-6-




**If
      we identify a proposed acquisition, we may require substantial cash to fund
      the
      cost of the acquisition.**




Any
      acquisitions we make may be made with cash or our securities or a combination
      of
      cash and securities. To the extent that we require cash, we may have to borrow
      the funds or sell equity securities. We have no commitments from any financing
      source and we may not be able to raise any cash necessary to complete an
      acquisition. If we seek to expand our business internally, we will incur
      significant start-up expenses without any assurance of our ability to penetrate
      the market.




**The
      issuance of securities, whether in connection with an acquisition or otherwise,
      may result in significant dilution to our stockholders.**




If
      we are
      required to issue securities, either as payment of all or a portion of the
      purchase price of an acquisition or in order to obtain financing for the
      acquisition or for other corporate purposes, the issuance of the securities
      could result in dilution to our stockholders. The amount of such dilution will
      be dependent upon the terms on which we issue securities. The issuance of
      securities at a price which is less than the exercise price of warrants or
      the
      conversion price of securities could result in additional dilution if we are
      required to reduce the exercise price or conversion price of our outstanding
      options or warrants or other convertible securities.




**If
      we make any acquisitions, they may disrupt or have a negative impact on our
      business.**




If
      we
      make acquisitions, we could have difficulty integrating the acquired companies’
personnel and operations with our own. In addition, the key personnel of the
      acquired business may not be willing to work for us. We cannot predict the
      affect expansion may have on our core business. Regardless of whether we are
      successful in making an acquisition, the negotiations could disrupt our ongoing
      business, distract our management and employees and increase our expenses.
      In
      addition to the risks described above, acquisitions are accompanied by a number
      of inherent risks, including, without limitation, the following:




•
            the
                difficulty of integrating acquired products, services or
                operations;




•
            the
                potential disruption of the ongoing businesses and distraction of
                our
                management and the management of acquired companies;




•
            the
                difficulty of incorporating acquired rights or products into our
                existing
                business;




•
            difficulties
                in disposing of the excess or idle facilities of an acquired company
                or
                business and expenses in maintaining such facilities;




•
            difficulties
                in maintaining uniform standards, controls, procedures and policies;




•
            the
                potential impairment of relationships with employees and customers
                as a
                result of any integration of new management
                personnel;




•
            the
                potential inability or failure to achieve additional sales and enhance
                our
                customer base through cross-marketing of the products to new and
                existing
                customers;




•
            the
                effect of any government regulations which relate to the business
                acquired;




•
            potential
                unknown liabilities associated with acquired businesses or product
                lines,
                or the need to spend significant amounts to retool, reposition or
                modify
                the marketing and sales of acquired products or the defense of any
                litigation, whether of not successful, resulting from actions of
                the
                acquired company prior to our acquisition.




-7-


Our
      business could be severely impaired if and to the extent that we are unable
      to
      succeed in addressing any of these risks or other problems encountered in
      connection with these acquisitions, many of which cannot be presently
      identified, these risks and problems could disrupt our ongoing business,
      distract our management and employees, increase our expenses and adversely
      affect our results of operations.




**Because
      we are dependent on our management, the loss of key executive officers or a
      key
      consultant and the failure to hire additional qualified key personnel could
      harm
      our business.**




Our
      present business is largely dependent upon the continued efforts of the former
      CNS stockholders, Chris Dhas, Chris A. Wargo, and James G. Dramby, and our
      chief
      executive officer, Paul B. Silverman. We have three-year employment contracts
      with each of these individuals, although Mr. Dhas has the right to take a leave
      of absence or terminate his employment. Our business may be adversely affected
      if any one or more of these individuals or any of our key management personnel
      or other key employees left our employ. The employment agreements do not
      guarantee that they will continue with us. Furthermore, we need to hire a chief
      financial officer and we may need to hire additional marketing personnel. We
      cannot assure you that we will be successful in engaging and retaining such
      personnel and the failure to engage qualified personnel will have a material
      adverse effect upon our business.




**Because
      we do not have any independent directors, we may be unable to generate any
      interest in our common stock.**




In
      general, investors, particularly institutional investors, do not invest in
      companies that do not have an independent board of directors. Further, under
      our
      agreement with Barron Partners, our failure to have a board of directors with
      at
      least a majority of independent directors within 60 days from the closing has
      resulted in our obligation to pay liquidated damages under our agreement with
      Barron Partners. We are in default of these obligations.




**Intense
      competition for both clients and information technology professionals could
      limit our ability to compete.**




A
      number
      of major companies provide services which are similar to our services. Some
      of
      these companies have the managerial resources, qualified professionals and
      financial ability to dominate the market. In addition, because there is no
      significant barrier to entry, other companies may enter the field with little
      difficulty. Accordingly, we cannot assure you that we will be able to compete
      successfully with existing or new competitors. We compete with national,
      regional and local firms for access to both hiring employers and candidates.
      In
      addition to a large number of national and regional firms, which have greater
      financial, technical and marketing resources than we have, the competition
      includes numerous smaller businesses which compete aggressively in their
      markets. Many major defense contractors have divisions which perform services
      similar to ours. We cannot give any assurance that we will be able to compete
      successfully with these firms either for the employment of highly skilled
      workers with necessary security clearances or for engagements from
      clients.




-8-




**Because
      we lack patent or copyright protection, we cannot assure you that others will
      not be able to use our proprietary information in competition with
      us.**




We
      have
      no patent or copyright protection for our proprietary software or products,
      including our bomb-jamming equipment, and we rely on non-disclosure agreements
      with our employees. Any unauthorized use or disclosure of this information
      could
      harm our business.




**We
      may face liability claims from our clients.**




Our
      business may expose us to liability with respect to services rendered by our
      employees. Any failure of a client’s computer system which is the result of an
      act or omission by our employees, including the failure of an employee to comply
      with the client’s confidentiality restrictions or with the restrictions imposed
      on persons with a high level of security clearance. Our professional liability
      insurance may not provide adequate coverage for any claim or continue to be
      available on acceptable costs and terms.




**Risks
      Related to our Common Stock and the Market for our Common
      Stock.**




**The
      rights of the holders of common stock may be impaired by the potential issuance
      of preferred stock.**




Our
      certificate of incorporation gives our board of directors the right to create
      new series of preferred stock. As a result, the board of directors has and
      in
      the future may, without stockholder approval, issue preferred stock with voting,
      dividend, conversion, liquidation or other rights which could adversely affect
      the voting power and equity interest of the holders of common stock. Preferred
      stock, which could be issued with the right to more than one vote per share,
      could be utilized as a method of discouraging, delaying or preventing a change
      of control. The possible impact on takeover attempts could adversely affect
      the
      price of our common stock. Although we have no present intention to issue any
      additional shares of preferred stock or to create any new series of preferred
      stock and the certificate of designation relating to the series A restricts
      our
      ability to issue additional series of preferred stock, we may issue such shares
      in the future.




**Because
      we are in default of our obligation to register common stock issuable upon
      conversion of our series A preferred stock and exercise of warrants held by
      our
      preferred stockholder, we may be subject to payment of liquidated
      damages.**




Our
      agreement with the holder of our series A preferred stock requires us to file
      a
      registration statement covering the shares of common stock issuable upon
      conversion of the series A preferred stock and upon exercise of warrants to
      purchase 30,000,000 shares by March 11, 2006. We have not yet filed the
      registration statement. Unless we file a registration statement that is declared
      effective by July 9, 2006, we will be required to pay liquidated damages equal
      to 1,644 shares of series A preferred stock per day of the delay.




-9-




**The
      issuance of shares through our stock compensation and incentive plans may dilute
      the value of existing stockholders.**




We
      anticipate using stock options, stock grants and other equity-based incentives,
      to provide motivation and compensation to our officers, employees and key
      independent consultants. The award of any such incentives will result in an
      immediate and potentially substantial dilution to our existing stockholders
      and
      could result in a decline in the value of our stock price.




**Shares
      may be issued pursuant to our stock plans which may affect the market price
      of
      our common stock.**




We
      may
      issue stock upon the exercise of options or pursuant to stock grants covering
      a
      total of 2,015,000 shares of common stock pursuant to our 2006 long-term
      incentive plan, under which options to purchase 1,039,500 shares of common
      stock
      at $.12 per share, held by our two directors, Paul B. Silverman (926,100 shares)
      and Tom Bednarek (113,400 shares), are outstanding. The exercise of options
      under the plan and the sale of the underlying shares of common stock and the
      sale of any stock issued pursuant to stock grants may have an adverse effect
      upon the price of our stock.




**Because
      we are not subject to compliance with rules requiring the adoption of certain
      corporate governance measures, our stockholders have limited protections against
      interested director transactions, conflicts of interest and similar
      matters.**




The
      Sarbanes-Oxley Act of 2002, as well as rule changes proposed and enacted by
      the
      SEC, the New York and American Stock Exchanges and the Nasdaq Stock Market
      as a
      result of Sarbanes-Oxley require the implementation of various measures relating
      to corporate governance. These measures are designed to enhance the integrity
      of
      corporate management and the securities markets and apply to securities which
      are listed on those exchanges or the Nasdaq Stock Market. Because we are not
      presently required to comply with many of the corporate governance provisions
      and because we chose to avoid incurring the substantial additional costs
      associated with such compliance any sooner than necessary, we have not yet
      adopted all of these measures. Because none of our directors are independent
      directors, we do not have independent audit or compensation committees. We
      also
      are not in compliance with requirements relating to the distribution of annual
      and interim reports, the holding of stockholders meetings and solicitation
      of
      proxies for such meeting and requirements for stockholder approval for certain
      corporate actions. Until we comply with such corporate governance measures,
      regardless of whether such compliance is required, the absence of such standards
      of corporate governance may leave our stockholders without protections against
      interested director transactions, conflicts of interest and similar matters
      and
      investors may be reluctant to provide us with funds necessary to expand our
      operations.




**Failure
      to achieve and maintain effective internal controls in accordance with Section
      404 of the Sarbanes-Oxley Act could have a material adverse effect on our
      business and operating results and stockholders could lose confidence in our
      financial reporting.**




Effective
      internal controls are necessary for us to provide reliable financial reports
      and
      effectively prevent fraud. If we cannot provide reliable financial reports
      or
      prevent fraud, our operating results could be harmed. We may be required to
      document and test our internal control procedures in order to satisfy the
      requirements of Section 404 of the Sarbanes-Oxley Act, which requires increased
      control over financial reporting requirements, including annual management
      assessments of the effectiveness of such internal controls and a report by
      our
      independent certified public accounting firm addressing these assessments.
      Failure to achieve and maintain an effective internal control environment,
      regardless of whether we are required to maintain such controls, could also
      cause investors to lose confidence in our reported financial information, which
      could have a material adverse effect on our stock price.




-10-




**Because
      of restrictions in the terms of our series A preferred stock and our cash
      requirements, w** **e
      do not anticipate paying dividends on our common stock.**




We
      are
      prohibited from paying dividends on our common stock while the series A
      preferred stock is outstanding. Further, because of our cash position and our
      working capital requirements we do not have cash available to pay
      dividends.




**Because
      there is no public market for our common stock, you may have difficulty selling
      common stock that you own.**




Although
      we are registered pursuant to the Securities Exchange Act of 1934, we currently
      have approximately 45 stockholders and there is no public market for our common
      stock. None of the presently outstanding shares of common stock may be sold
      except pursuant to an effective registration statement. We have agreed to file
      a
      registration statement to enable our stockholders to sell their shares, however,
      neither the filing of a registration statement nor the effectiveness of the
      registration statement will assure a public market for out common stock.
      Accordingly we cannot assure you that there will be any public market for our
      common stock.




**Because
      we may be subject to the “penny stock” rules, you may have difficulty in selling
      our common stock.**




If
      a
      public market develops for our common stock and if our stock price is less
      than
      $5.00 per shares, our stock would be subject to the SEC’s penny stock rules,
      which impose additional sales practice requirements and restrictions on
      broker-dealers that sell our stock to persons other than established customers
      and institutional accredited investors. These rules may affect the ability
      of
      broker-dealers to sell our common stock and may affect your ability to sell
      any
      common stock you may own.




According
      to the SEC, the market for penny stocks has suffered in recent years from
      patterns of fraud and abuse. Such patterns include:




•
            Control
                of the market for the security by one or a few broker-dealers that
                are
                often related to the promoter or
                issuer;




•
            Manipulation
                of prices through prearranged matching of purchases and sales and
                false
                and misleading press releases;




•
            “Boiler
                room” practices involving high pressure sales tactics and unrealistic
                price projections by inexperienced sales
                persons;




•
            Excessive
                and undisclosed bid-ask differentials and markups by selling
                broker-dealers; and




•
            The
                wholesale dumping of the same securities by promoters and broker-dealers
                after prices have been manipulated to a desired level, along with
                the
                inevitable collapse of those prices with consequent investor
                losses.




-11-




**As
      an issuer of “penny stock” the protection provided by the federal securities
      laws relating to forward looking statements does not apply to
      us.**




Although
      the federal securities law provide a safe harbor for forward-looking statements
      made by a public company that files reports under the federal securities laws,
      this safe harbor is not available to issuers of penny stocks. As a result,
      we
      will not have the benefit of this safe harbor protection in the event of any
      claim that the material provided by us, including this annual report, contained
      a material misstatement of fact or was misleading in any material respect
      because of our failure to include any statements necessary to make the
      statements not misleading.




**Fluctuations
      in our operating results and announcements and developments concerning our
      business affect our stock price.**




Historically,
      there has been volatility in the market price for common stock of companies
      such
      as us. Our quarterly operating results, the number of stockholders desiring
      to
      sell their shares, changes in general economic conditions and the financial
      markets, the execution of new contracts and the termination or expiration of
      existing license agreements and other developments affecting us, could cause
      the
      market price of our common stock to fluctuate substantially. Further, since
      a
      majority of our operating expenses, particularly personnel and related costs,
      depreciation and rent, are relatively fixed in advance of any particular
      quarter, the underutilization of our technical personnel may cause significant
      variations in our operating results in any particular quarter and could result
      in losses for the quarter.




**We
      cannot predict when or whether an active market for our common stock will
      develop.**




In
      the
      absence of an active trading market, you may have difficulty buying and selling
      or obtaining market quotations; the market visibility for our stock may be
      limited, and the lack of visibility for our common stock may have a depressive
      effect on the market price for our common stock.




**Our
      stock price may be affected by our failure to meet projections and estimates
      of
      earnings developed either by us or by independent securities
      analysts.**




Although
      we do not make projections relating to our future operating results, our
      operating results may fall below the expectations of securities analysts and
      investors. In this event, the market price of our common stock would likely
      be
      materially adversely affected.




**The
      registration and potential sale by our stockholders of a significant number
      of
      shares could encourage short sales by third parties.**




The
      number of shares of common stock that is subject to registration rights includes
      all of the 10,833,334 shares of common stock issuable on conversion of the
      series A preferred stock held by Barron Partners as well as the 30,000,000
      shares of common stock issuable to Barron Partners upon exercise of its
      warrants, together with all of the common stock which was issued or is issuable
      upon exercise of warrants is substantially in excess of our presently
      outstanding common stock. In addition, we expect to register the 1,075,000
      shares of common stock issuable to the former CNS stockholders which may be
      subject to a put agreement with one of our security holders. The significant
      downward pressure on our stock price caused by the sale or potential sale of
      a
      significant number of shares could cause our stock price to decline, thus
      allowing short sellers of our stock an opportunity to take advantage of any
      decrease in the value of our stock. The presence of short sellers in our common
      stock may further depress the price of our common stock.




-12-




If
      stockholders whose shares are being registered sell a significant number of
      shares of common stock, the market price of our common stock may decline.
      Furthermore, the sale or potential sale the offered shares and the depressive
      effect of such sales or potential sales could make it difficult for us to raise
      funds from other sources.




**FORWARD-LOOKING
      STATEMENTS**




Statements
      in this annual report may be “forward-looking statements.” Forward-looking
      statements include, but are not limited to, statements that express our
      intentions, beliefs, expectations, strategies, predictions or any other
      statements relating to our future activities or other future events or
      conditions. These statements are based on current expectations, estimates and
      projections about our business based, in part, on assumptions made by
      management. These statements are not guarantees of future performance and
      involve risks, uncertainties and assumptions that are difficult to predict.
      Therefore, actual outcomes and results may, and are likely to, differ materially
      from what is expressed or forecasted in the forward-looking statements due
      to
      numerous factors, including those described above and those risks discussed
      from
      time to time in this prospectus, including the risks described under “Risk
      Factors,” and “Management’s Discussion and Analysis of Financial Condition and
      Results of Operations” in this annual report and in other documents which we
      file with the Securities and Exchange Commission. In addition, such statements
      could be affected by risks and uncertainties related to the terms and
      continuation of our bank credit agreement, our ability to obtain additional
      financing, demand for our services, our ability to diversify our client base
      and
      enter new markets for our services, market and customer acceptance, competition,
      government regulations and requirements, pricing and development difficulties,
      our ability to make acquisitions and successfully integrate those acquisitions
      with our business, as well as general industry and market conditions and growth
      rates, and general economic conditions. Any forward-looking statements speak
      only as of the date on which they are made, and we do not undertake any
      obligation to update any forward-looking statement to reflect events or
      circumstances after the date of this current report.




**BUSINESS**




We
      provide network and software solutions and professional consulting services
      including engineering and technical services, software development, systems
      engineering and analysis, advanced systems simulation and modeling, systems
      integration, international circuit provisioning, internet management
      applications and program/project management primarily to agencies of the federal
      government. Approximately 40% of our employees have high level security
      clearances.




In
      1999,
      we secured our initial contracts to support key NASA staff on communications,
      navigation and surveillance projects for the National Airspace System and later
      in 2001 for the Small Aircraft Transportation System project. Since 1999, we
      have conducted more than 40 task orders in the areas of communications,
      surveillance and navigation systems studies and analyses, the development of
      large scale modeling and simulation systems for next generation air transport
      facilities and for selected new technology studies related to the air transport
      industry. In June 2003, we received the Turning Goals into Reality Award from
      NASA Headquarters for our original design and development work within the Small
      Aircraft Transportation System for the airborne internet project.




-13-




Our
      largest clients include NASA and the Defense Information Systems Agency, and
      FNS
      Verizon and Qwest, which are prime contractors who subcontract our services.
      These four customers accounted for 85.7% of our revenue for 2005, 92.0% of
      revenue for 2004 and 84.0% of revenue for 2003.




Representative
        customers we have
        supported for the above clients include the Internal Revenue Service, United
        States Courts, United States Mint, Department of Transportation, Office of
        Naval
        Intelligence, Virginia Small Aircraft Transportation System Consortium, as
        well
        as several U.S government classified projects.
  Our
        current business operation consists of technical professional services and
        solutions.




*Technical
      Professional Services*




Our
      technical professional services group provides technical recruiting and staffing
      services to government agencies on a subcontract basis primarily through large
      system integrators. We believe that we can offer our clients innovative,
      measurable and timely services to support the clients’ staffing needs. In
      providing network and security and information technology engineering, we assist
      clients in meeting their complex technical needs arising from the rapid advance
      of communications and computing technologies. We believe that our success in
      marketing our services reflects our ability to offer an effective established
      human resources and security clearance operation to enable us to rapidly process
      candidates to meet clients’ needs. Some of our services offerings are as
      follows:




•
            Communications,
                navigation and surveillance for
                aerospace




•
            System
                performance measurement, performance analysis and capacity
                planning




•
            Technical
                consulting in information technology and program
                management




•
            Other
                services to support professional services and technical staff
                consulting




In
      offering our services, we employ a structured process designed to rapidly meet
      clients’ staffing needs, including identifying and pre-screening candidates,
      scheduling interviews, providing and responding to feedback from the
      client.




*Solutions*




The
      mission of our solutions group is to develop innovative wireless and information
      exchange solutions for mission critical command and control applications in
      areas of communications, surveillance, simulation and modeling, and developing
      network-based architectures and solutions. Our solutions group provides a wide
      range of support services to meet clients’ needs including participation in
      industry standards committees worldwide, advanced simulation and modeling,
      technical analysis and design, technical product development, software system
      design, and software development, integration and test.




-14-




We
      seek
      to differentiate ourselves from our competitors by undertaking highly technical
      projects that require both our information technology knowledge with our
      extensive federal project experience and high level security clearances. Some
      representative examples of our highly technical projects include the
      following:




•
            Under
                contract to a government research center, we developed a new
                communications approach to support the small aircraft transportation
                system (SATS) concept, known as the “Airborne Internet.” The concept was
                the result of a study and demonstration testbed activities performed
                by
                our engineers. A copy of the system components was then procured
                for use
                by a government research center during the SATS Program.




•
            Under
                contract to a government research center, we constructed a communication
                testbed to interact with a European group’s study and analysis of the use
                of the next generation internet protocol (IP), know as IP Version
                6.
                During the study, we performed tests in the use of the new protocol
                for
                air traffic control applications. The topics study included the use
                of
                wireless services, quality of service parameters, the use of security
                protocols, and the transmission of voice via these data facilities
                using
                voice over IP technologies.




•
            We
                developed the software and performed the system integration for a
                large-scale communications test facility, and for a web-based system.
                Both
                systems were used to conduct performance simulations of aeronautical
                communications. Under contract to a government research center, we
                developed the software and hardware integration necessary to construct
                a
                simulator known as the Virtual Aircraft and Controller Communications
                Evaluation Systems. This simulator was able to establish flight plans
                for
                more than 160 aircraft and the message emulation between the aircraft
                avionics, the pilot, and the air traffic controller. The messaging
                was
                based on the International Civil Air Organization standards for the
                use of
                controller-to-pilot data link. These standards are part of the emerging
                use of digital communications to accomplish controller to pilot messaging
                instead of using voice. The simulator was able to connect to radio
                components using the full suite ICAO standard layers.. The simulator
                is
                used to conduct experiments showing the performance of the new radio
                protocols and techniques using the message traffic loads resulting
                under
                differing aircraft flight scenarios.




•
            We
                developed for several government agencies a web-based tool called
                the
                Future Aeronautical Subnetworks Traffic Evaluator for Communications,
                Navigation & Surveillance (FASTE - CNSSM) to support
                interagency planning for the next generation of communications, navigation
                and surveillance technologies to meet air transport industry needs.
                The
                system includes a database of all scheduled flights and routes in
                the
                United States, and simulates flights and communications between aircraft
                and with controllers. The system enables the technical aspects of
                today’s
                voice communications to be analyzed, such as communications traffic
                patterns, projected interference issues, traffic loading and similar
                issues. The system also simulates how new alternative data
                communications-based services will meet the traffic engineering,
                security
                criteria and capacity needs as these new data services are implemented.
                The work involved the development of about 1,000,000 lines of software
                code and the integration of modeling, database and web servers.




•
            We
                worked with domestic and international organizations in a project
                aimed at
                shaping the communications mechanisms that will support the air traffic
                control system in the United
                States.






-15-




**Growth
      Strategy**




Our
      growth strategy contemplates expanding our existing business and making
      acquisitions in the global defense and homeland security markets. We have
      reviewed the global defense markets, market and technology trends and critical
      homeland security and national infrastructure needs. Based on management’s
      analysis and related discussions, the Company’s mission is to target three key
      market segments -- air transport, including air safety and security, biometrics,
      including new technology solutions and support services for biometrics
      applications in screening and security, and surveillance and intelligence
      services. However, we will also consider acquisition is other fields if we
      believe that the acquisitions are consistent with our long-term growth
      goals.




Our
      ability to consummate any acquisition is likely to be dependent upon our ability
      to finance the acquisition and issue equity for some or all of the purchase
      price. Because of the provisions of our agreement with the holder of our series
      A preferred stock, it may be difficult for us to raise capital for the
      acquisition. Since our present business is overleveraged, we anticipate that
      any
      financing we obtain would be based on the strength of the acquired company
      independent of our current business. Because there is no public market for
      our
      common stock, sellers may be reluctant to accept our stock unless they are
      satisfied that a reasonable market for our stock, in terms of both price and
      volume, is likely to develop. We cannot give any assurance that such a public
      market for our common stock can or will ever develop.




**The
      Market**




In
      recent
      years, the information technology consulting and services industry sector has
      shown stronger and steadier growth than many other technological industry
      sectors, as the growing trend towards outsourcing helped shield companies in
      this market from the down turn which affected many technology markets. The
      information technology consulting and services industry sector includes all
      providers of information technology services other than data processing --
      in
      particular information technology consulting and information management
      services.




The
      historical global information technology consulting growth, as reported by
      the
      Federal IT Security MarketView (June 2004) shows annual growth; however, the
      rate of growth has varied significantly over the past few years, and slowed
      down
      significantly after 2002, from a growth rate of 14.3% from 1999 to 2000 to
      a
      growth rate of 2.5% from 2001 to 2002. Although we believe that the market
      is
      growing, the rate of growth has only marginally improved since
      2003.




**Marketing**




Over
      the
      past five years, our marketing efforts has been built on developing
      relationships with key management personnel of a specific government agency
      or
      commercial vendor that provides technical services to the government. As we
      go
      forward we will continue to seek to develop relationships with government and
      commercial vendor personnel, however to maximize our growth potential we must
      increase our bidding opportunities by adding senior sales personnel to seek
      out
      proposal opportunities with new clients within the government. Sales personnel
      will be salaried employees and will be on a defined commission plan.




-16-




**Principal
      Customers**




Four
      customers accounted for 10% or
      more of our revenue during the years ended December 31, 2004 and 2003. The
      following table sets forth information as to revenue and percentage of revenue
      for these periods (dollars in thousands):




Year
                Ended December 31,Customer2005
            
            
            2004
            
            
            2003FNS
                Verizon
            
            $
            2,333
                (42.6
            %)
            $
            2,181
                (32.7
            %)
            $
            1,194
                (19.7
            %)Qwest
            
            
            930
                (17.0
            %)
            
            1,344
                (20.2
            %)
            
            1,423
                (23.5
            %)NASA
            
            
            873
                (15.9
            %)
            
            1,849
                (27.8
            %)
            
            1,550
                (25.6
            %)Defense
                Information Systems Agency
            
            
            561
                (10.2
            %)
            
            782
                (11.3
            %)
            
            923
                (15.2
            %)




See
      “Management’s Discussion and Analysis of Financial Condition and Results of
      Operations” for information relating to services performed for government
      agencies, principally NASA, in anticipation of a contract which was never
      awarded to us.




**Recruitment**






We
      offer
      a wide variety of alternative solutions to our customers’ staffing and
      recruiting needs. We seek to provide a one-stop shop of creative, cost-effective
      answers to what can be seen by the customer as daunting questions.  The
      focus and fundamental force behind our staffing and recruiting solutions
      philosophy is simply this:  we are customer-driven.   We provide,
      as much, or as little, support as the customer needs in as many or as few
      combinations as it requires.




Our
      consulting and outsourcing solutions provides services and solutions that help
      our customers plan, design, implement, and operate networks in today’s
      constantly changing, complex environment. Some of our staffing and recruiting
      solutions services include the following:




·
            **Outsourcing**-
                In these rapidly changing economic times, outsourcing has become
                an
                integral management tool for redefining and re-energizing
                corporations.




·
            **Consulting**-
                We provide expert consultants to support functions such as the application
                development process, technology migration, and projectmanagement.
                Our services relate to legacy systems, distributed systems and emerging
                technology.




·
            **Onsite**-
                If requested by our customers, we can manage all of our customer’s IT
                staffing needs.  We offer to provide processes for managing multiple
                IT staffing vendors, independent contractors or specialty suppliers. 
                We can serve as an extension of our customers’ human/recruiting resources
                and IT organizations.




·
            **Staffing
                and Direct Hires**-
                We offer to meet our customers’ staffing needs, including temporary or
                permanent staff or to assist the customer in directly hiring IT
                personnel.




**Competition**




A
      number
      of major companies provide services which are similar to our services. Some
      of
      these companies have the managerial resources, qualified professionals and
      financial ability to dominate the market. In addition, because there is no
      significant barrier to entry, other companies may enter the field with little
      difficulty. Accordingly, we cannot assure you that we will be able to compete
      successfully with existing or new competitors. We compete with national,
      regional and local firms for access to both hiring employers and candidates.
      In
      addition to a large number of national and regional firms, which have greater
      financial, technical and marketing resources than we have, the competition
      includes numerous smaller businesses which compete aggressively in their
      markets. Many major defense contractors have divisions which perform services
      similar to ours. We cannot give any assurance that we will be able to compete
      successfully with these firms either for the employment of highly skilled
      workers with necessary security clearances or for engagements from clients.
      We
      compete with these companies both for engagements from customers and for highly
      skilled information technology personnel, especially those with a high level
      of
      security clearance.




-17-




**Government
      Regulations**




The
      staffing industry, in which we are engaged, does not require licensing as a
      personnel or similar agency. However, as a provider of personnel for other
      corporations, we are subject to federal and state regulations concerning the
      employment relationship, including those relating to wages and hours and
      unemployment compensation.




Because
      we have contracts with government agencies, we are subject to the procurement
      regulations of the Department of Defense as well as any other agencies, such
      as
      NASA, which is one of our major clients. Government contracts are typically
      subject to renegotiation and to cancellation for the convenience of the
      government. Further, regardless of whether we perform services at the request
      of
      an agency, until and unless we receive a contract, the agency has no obligation
      to pay us. In the past, we have performed services with government agencies
      prior to the formal issuance of a contract. To date the contracts have been
      issued, although the delay between the performance of services and the date
      of
      the contract could be significant.




Some
      of
      our contracts with both government agencies and the private sector require
      us to
      provide employees or independent consultants who have a high level of security
      clearance. Since a number of our employees have security clearance, we are
      able
      to bid on and we have been successful in obtaining these contracts.




**Intellectual
      Property Rights**




We
      have
      no patent or copyright protection for our proprietary software or products,
      and
      we rely on non-disclosure agreements with our employees. Any unauthorized use
      or
      disclosure of this information could harm our business.




**Personnel**




We
      currently employ 57 administrative and technical staff employees and five
      technical consultants who provide consulting services to several of our
      clients.




**Item
      2. Description of Property.**




We
      lease
      office space for our corporate headquarters at 12020 Sunrise Valley Drive,
      Suite
      100, Reston, VA 20191. Terms of the lease are three months at $300 per month
      with renewal under the same terms.




-18-




We
      lease
      approximately 7,500 square feet of office space at 7405 Alban Station Court,
      Springfield, Virginia pursuant to a lease which expires in October 2007, which
      is used for our operations. The lease provides for an annual rental of
      approximately $115,000, which is subject to annual escalations. We believe
      that
      our facilities are adequate for our needs and that the additional space is
      readily available if we need additional space.






**Item
      3. Legal Proceedings.**




We
      are
      not a defendant in any material legal proceedings.






**Item
      4. Submission of Matters to a Vote of Security Holders.**




No
      matters were submitted to our stockholders during the fourth quarter of
      2005.




**PART
      II**






**Item
      5. Market for Common Equity and Related Stockholder
      Matters.**




There
      is
      no market for our common stock




As
      of
      March 31, 2006, we had approximately 45 record holders of our common
      stock.




We
      have
      not paid dividends on our common stock, and the terms of certificate of
      designation relating to the creation of the series A preferred stock prohibit
      us
      from paying dividends. We plan to retain future earnings, if any, for use in
      our
      business. We do not anticipate paying dividends on our common stock in the
      foreseeable future.




As
      of
      March 31, 2006, we had the following shares of common stock reserved for
      issuance:




•
            10,833,334
                shares issuable upon conversion of the series A preferred
                stock.




•
            30,000,000
                shares issuable upon exercise of the warrants issued to Barron
                Partners.




•
            12,235,833
                shares issuable upon exercise of other
                warrants.




•
            2,015,000
                shares issuable upon exercise of stock options or other equity-based
                incentives pursuant to our 2006 long-term incentive plan, which is
                subject
                to stockholder approval.




-19-




**Equity
      Compensation Plan Information**




The
      following table summarizes the equity compensation plans under which our
      securities may be issued as of April 30, 2006.




******Plan
                Category
            
            Number
                of securities to be issued upon exercise of outstanding optionsand
                warrants
            
            Weighted-average
                exercise price of outstanding optionsand warrants
            
            Number
                of securities remaining available for future issuance under
                equitycompensation plansEquity
                compensation plans approved by security holders
            
            
            -0-
            
            
            --
            
            
            --Equity
                compensation plan not approved by security holders
            
            
            2,480,633
            
            $
            .12
            
            
            877,700




The
      number of securities to be issued upon exercise of outstanding options and
      warrants includes 1,137,300 shares issuable pursuant to our 2006 long-term
      incentive plan, which was approved by the board of directors, subject to
      stockholder approval, and 1,343,333 shares issuable upon exercise of warrants
      issued in connection with sale of preferred stock and warrants in January 2006. The
      2006
      long-term incentive plan, and the options granted thereunder, are subject to
      stockholder approval of the plan. The plan has not yet been submitted to the
      stockholders for their approval.






Information
      relating to the sale of unregistered securities during the year ended December
      31, 2005 is included in our Form 8-K, which was filed with the SEC on January
      17, 2006.






On
      January 10, 2006, we entered into a stock redemption agreement with Capital
      Markets Advisory Group, LLC, which was then our principal stockholder, pursuant
      to which we purchased 928,000 shares of common stock from Capital Markets for
      $200,000, using the proceeds from the sale of series A preferred stock. The
      purchase was made contemporaneously with the acquisition of CNS.




**Item
      6.**  **Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations.**




**You
      should read the following discussion together with Financial Statements that
      are
      included elsewhere in this annual report on Form 10-KSB** ***.***




**Overview**




We
      provide network and software solutions and professional consulting services
      including engineering and technical services, software development, systems
      engineering and analysis, advanced systems simulation and development, systems
      integration, international circuit provisioning, internet management
      applications and program/project management primarily to agencies of the federal
      government.




Our
      clients are principally government agencies, with the largest two being NASA
      and
      the Defense Information Systems Agency, and FNS Verizon and Qwest, which are
      prime contractors who subcontract our services. These four customers accounted
      for 85.7% of our revenue for 2005 and 92.0% of revenue for 2004. For the reasons
      discussed in the following paragraph, the cost of revenue for these four clients
      accounted for approximately 93.0% of our cost of revenue for 2005.




-20-




We
      perform services for our government agency clients pursuant to contracts which
      typically either run until the end of the government’s fiscal year or which are
      only funded through the end of the fiscal year. During 2005, we performed
      services for a government agency in anticipation of a contract which was never
      awarded. Although the contract was not awarded, the cost of the services is
      included in cost of revenue, thus reducing our gross margin during
      2005.




**Critical
      Accounting Policies**




The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States requires our management to make
      assumptions, estimates and judgments that affect the amounts reported in the
      financial statements, including the notes thereto, and related disclosures
      of
      commitments and contingencies, if any. We consider our critical accounting
      policies to be those that are complex and those that require significant
      judgments and estimates in the preparation of our financial statements,
      including the following: recognition of revenues and cost of revenue, and
      accounting for income taxes. We rely on historical experience and on other
      assumptions we believe to be reasonable under the circumstances in making our
      judgment and estimates. Actual results could differ materially from those
      estimates. There have been no significant changes in the assumptions, estimates
      and judgments in the preparation of these financial statements from the
      assumptions, estimates and judgments used in the preparation of our 2005 audited
      financial statements.




*Revenue
      Recognition*




We
      generate revenue from professional services rendered to customers. Historically,
      approximately 77% of our revenue has been generated under time-and-material
      contracts whereby costs are generally incurred in proportion with contracted
      billing schedules and revenue is recognized as services are performed, with
      the
      corresponding cost of providing those services reflected as direct costs. The
      majority of the customers are billed on an hourly or daily basis whereby actual
      time is charged directly to the customer. Such method is expected to result
      in
      reasonably consistent profit margins over the contract term.




We
      also
      generate revenue from fixed-price and fixed-time contracts. Revenue generated
      from most fixed-price contracts, including most application management and
      support contracts, is recognized ratably over the contract term. Revenue
      generated from certain other fixed-price contracts is recognized using the
      percentage of completion method as the ratio of labor hours incurred to
      estimated total labor hours. This method is used because reasonably dependable
      estimates of the revenue and costs applicable to various stages of a contract
      can be made, based on historical experience and milestones set in the contract.
      We continually review labor hours incurred and estimated total labor hours,
      which may result in revisions to the estimated amount of recognized revenue
      for
      the contract. Changes in estimates are accounted for in the period of
      change.




If
      we do
      not accurately estimate the resources required or the scope of work to be
      performed for a contract or if we do not manage the project properly within
      the
      planned time period, then a loss may be recognized on the contract. Losses
      are
      recorded in the period when they become known.




We
      report
      gross reimbursable “out-of-pocket” expenses incurred as both revenue and direct
      costs in the statements of operations.




Unbilled
      services represent services provided pursuant to a contract which are billed
      subsequent to the period end. All such amounts are anticipated to be realized
      in
      the following period.




-21-




*Computer
      Software Development Costs*




We
      capitalize direct costs incurred with developing or obtaining software for
      internal use, including external direct costs of materials and services and
      payroll and payroll related costs for employees who are directly associated
      with
      and devote time to internal-use software development projects. The cost of
      internal-use software and the capitalized implementation-related costs are
      included in computer software development costs. Such capitalized costs will
      be
      amortized on a straight-line basis over the software’s estimated useful life of
      three years, upon completion of the particular project.




*Allowance
      for Doubtful Accounts*




We
      provide an allowance for doubtful accounts, which is based upon a review of
      outstanding receivables as well as historical collection information. Credit
      is
      granted to substantially all customers on an unsecured basis. In determining
      the
      amount of the allowance, management is required to make certain estimates and
      assumptions. Management has determined that as of December 31, 2005, no
      allowance is required.




**Results
      of Operations**




**Introduction**




*Gross
      Margin.* We
      generate revenue from professional services rendered to our clients, primarily
      for customer who are billed on an hourly or daily basis whereby actual time
      is
      charged directly to the customer. This method generally results in reasonably
      consistent profit margins over the contract term, except where we are performing
      services for a government agency in anticipation of a contract. Until we receive
      a contract, we are incurring cost of revenue but are not recognizing revenue,
      with a resultant decline in gross margin. If and when the contract is issued,
      all the services rendered prior to the contract become billable. We believe
      that
      the reduced margin is a temporary state, and over a longer period the revenues
      and cost of revenue will match more closely.




If
      we do
      not accurately estimate the resources required or the scope of work to be
      performed for a fixed price contract or if we do not manage the project properly
      within the planned time period, then we may recognize a loss on the contract.
      Losses are recorded in the period when they become known.




Since
      our
      revenue is derived principally from the services of our professionals, the
      utilization of our technical professional staff has a direct effect upon our
      operating results. Although we generally employ our professional staff, we
      use
      independent consultants where there is a requirement for specific skills or
      at
      the request of the client. In addition, a majority of our operating expenses,
      particularly personnel and related costs, depreciation and rent, are relatively
      fixed in advance of any particular quarter. As a result, the underutilization
      of
      our technical personnel may cause significant variations in our operating
      results in any particular quarter and could result in losses for the quarter.
      Factors which could cause such underutilization include any reduction in size
      or
      scope of a contract, delay in commencement, interruption or termination of
      one
      or more major projects; the completion of one or more significant projects
      during a quarter; the miscalculation of resources required to complete a
      project; the timing and extent of training, vacations and holidays; and changes
      in the economic climate for one or more industries, including the defense
      industry, that represents a significant portion of our revenue.




-22-




*Gross
      Profit.* Our
      principal direct costs are our personnel-related expenses, including salaries
      and taxes as well as our subcontractor-related expenses and training. Our cost
      of revenue is affected by the compensation we pay to our professional staff
      and
      the benefits we pay our employees. Our gross profit is affected by the extent
      that we can use employees, rather than subcontractors, on an engagement.
      Although we do not provide benefits for our subcontractors, our cost of labor
      as
      a percentage of revenue, is significantly greater for subcontractors than for
      employees. However, the subcontractors are only engaged, and therefore only
      paid, when their services are allocated to a contract, whereas we continue
      to
      pay our employees even if they are not serving on an engagement. Because of
      the
      increasing demand for information technology specialists, the compensation
      which
      we pay our personnel has been increasing, and we expect this trend to continue.
      Further, as noted under “revenue,” the personnel and related costs of services
      rendered to a government agency prior to receipt of a contract are included
      in
      cost of revenue although no revenue is recognized until the contract is issued.
      Our other direct costs which include all fringes and overhead expenses including
      a portion of the rent, travel and all salaries other than those included as
      direct costs and our administrative employees which are included in selling,
      general and administrative expenses. These costs have increased in the past
      twelve months due to the nature of the contracts and increases in personnel.
      In
      an attempt to reduce our benefit costs, we have a partial self-insurance program
      for our health case.




*Selling,
      General and Administrative Expenses.* Our
      principal selling, general and administrative expenses include rent,
      recruitment, professional fees, training, business development and
      administrative compensation.




*Other
      Expenses* .
      These
      expenses are out-of-pocket expenses which we incur in connection with a
      government project but which, under the applicable procurement regulations,
      cannot be charged to the client.




*Interest
      Expenses* .
      Interest expense relates to the expenses incurred on our outstanding debt.
      We
      have netted any interest earned on our marketable securities in this figure.
      Our
      interest income was not material.




We
      regularly review our fee structure, compensation and overhead costs in an effort
      to remain competitive within our industry as to both the fees we charge our
      clients and the compensation we provide our employees. As part of our project
      management, we review the progress of projects with our clients’ technical
      personnel and senior management on a regular basis. Most of our projects can
      be
      terminated by the clients on short notice without penalty, and our contracts
      with government agencies may be terminated at any time for the convenience
      of
      the government.




*Stock-Based
      Compensation*




To
      the
      extent that we can do so, we will treat the grant of stock options under our
      plan and account for such option gin accordance with Accounting Principles
      Board
      Opinion No. 25 (“APB 25”), “Accounting for Stock Issued to Employees,” and
      related interpretations and we will provide the disclosure requirements of
      Statement of Financial Accounting Standards (“SFAS”) No. 123, “Accounting for
      Stock-Based Compensation” (“SFAS 123”), and related interpretations. Stock-based
      awards to non-employees are accounted for under the provisions of SFAS 123
      and
      we have adopted the enhanced disclosure provisions of SFAS 148 “Accounting for
      Stock-Based Compensation-Transition and Disclosure, an amendment of SFAS No.
      123.”




-23-




In
      December 2004, the FASB issued SFAS No.123 (revised 2004), “Share-Based
      Payment.” Statement 123R will provide investors and other users of financial
      statements with more complete financial information by requiring that the
      compensation cost relating to share-based payment transactions be recognized
      in
      financial statements. That cost will be measured based on the fair value of
      the
      equity or liability instruments issued. Statement 123R covers a wide range
      of
      share-based compensation arrangements including stock options, restricted stock
      plans, performance-based awards, stock appreciation rights, and employee stock
      purchase plans. Statement 123R replaces FASB Statement No. 123, Accounting
      for
      Stock-Based Compensation, and supersedes APB Opinion No. 25, Accounting for
      Stock Issued to Employees. Statement 123, as originally issued in 1995,
      established as preferable a fair-value-based method of accounting for
      share-based payment transactions with employees. However, that statement
      permitted entities the option of continuing to apply the guidance in Opinion
      25,
      as long as the footnotes to financial statements disclosed what net income
      would
      have been had the preferable fair-value-based method been used. Pursuant to
      Statement 123R, we adopted Statement 123R effective January 1,
      2006.




*Income
      Taxes*




Effective
      January 1, 2004, CNS was an S Corporation. As an S Corporation, CSN generally
      not subject to corporate income taxes and the income, deductions, credits and
      other tax attributes generated by us flowed to its stockholders. However, we
      are
      subject to corporate income taxes for built-in gains for a period of 10 years
      from the effective date of the S Corporation election. The CNS Agreement
      provides that any taxes which are payable as a result of the merger of
      Acquisition Company and CNS and CNS’ resulting loss of its S Corporation status
      shall be paid by the former CNS stockholders at the closing, to the extent
      that
      such amount can be estimated at closing. To the extent that the actual taxes
      are
      different from the amount estimated at Closing, an appropriate adjustment shall
      be made within ten days after a final determination has been made by CNS and
      us.




*New
      Accounting Pronouncements*




In
      November 2004, the FASB issued SFAS No. 151 “Inventory Costs, an amendment of
      Accounting Research Bulletin (“ARB”) No. 43, Chapter 4.” The amendments made by
      Statement 151 clarify that abnormal amounts of idle facility expense, freight,
      handling costs, and wasted materials (spoilage) should be recognized as
      current-period charges and require the allocation of fixed production overheads
      to inventory based on the normal capacity of the production facilities. The
      guidance is effective for inventory costs incurred during fiscal years beginning
      after June 15, 2005.




In
      December 2004, the FASB issued SFAS No.153, “Exchanges of Nonmonetary Assets, an
      amendment of APB Opinion No. 29, Accounting for Nonmonetary Transactions” (“SFAS
      153”). The amendments made by SFAS 153 are based on the principle that exchanges
      of nonmonetary assets should be measured based on the fair value of the assets
      exchanged. Further, the amendments eliminate the narrow exception for
      nonmonetary exchanges of similar productive assets and replace it with a broader
      exception for exchanges of nonmonetary assets that do not have commercial
      substance. Previously, Opinion 29 required that the accounting for an exchange
      of a productive asset for a similar productive asset or an equivalent interest
      in the same or similar productive asset should be based on the recorded amount
      of the asset relinquished. Opinion 29 provided an exception to its basic
      measurement principle (fair value) for exchanges of similar productive assets.
      The board believes that exception required that some nonmonetary exchanges,
      although commercially substantive, be recorded on a carryover basis. By focusing
      the exception on exchanges that lack commercial substance, the Board believes
      this Statement produces financial reporting that more faithfully represents
      the
      economics of the transactions. The Statement is effective for nonmonetary asset
      exchanges occurring in fiscal periods beginning after June 15, 2005. Earlier
      application is permitted for nonmonetary asset exchanges occurring in fiscal
      periods beginning after the date of issuance. The provisions of this statement
      shall be applied prospectively.




-24-




We
      expect
      that the adoption of the foregoing new statements will not have a significant
      impact on our financial statements.




The
      following table sets forth our statements
      of operations for the years ended December 31, 2005 and 2004, in dollars
      (dollars in thousands) and as a percentage of revenue:




Year
                Ended December 31,2005
            
            
            2004Revenue
            
            $
            6,071
            
            
            100
            %
            $
            6,660
            
            
            100
            %Direct
                CostsDirect
                labor
            
            
            3,072
            
            
            51
            %
            
            2,419
            
            
            36
            %Other
                direct costs
            
            
            1,710
            
            
            28
            %
            
            1,320
            
            
            20
            %Gross
                profit
            
            
            1,289
            
            
            21
            %
            
            2,921
            
            
            44
            %Selling,
                general and administrative costs
            
            
            3,086
            
            
            51
            %
            
            2,366
            
            
            36
            %Other
                expenses
            
            
            12
            
            
            1
            %
            
            19
            
            
            1
            %Total
                operating expenses
            
            
            3,098
            
            
            51
            %
            
            2,385
            
            
            36
            %Income
                (loss) before other income (expense)and
                provision for (benefit of) income taxes
            
            
            (1,809
            )
            
            -30
            %
            
            537
            
            
            8
            %Interest
                expense (net)
            
            
            (91
            )
            
            -7
            %
            
            (55
            )
            
            -1
            %Income
                (loss) before (benefit of) income taxes
            
            
            (1,900
            )
            
            -31
            %
            
            482
            
            
            7
            %(Benefit
                of) income taxes
            
            
            (100
            )
            
            1
            %
            
            (27
            )
            
            -1
            %Net
                (loss) income
            
            
            (1,800
            )
            
            -30
            %
            
            509
            
            
            7
            %




**Years
      Ended December 31, 2005 and 2004**




Revenue
      for the year ended December 31, 2005 was approximately $6.1 million, a decrease
      of approximately $600,000, or 9% from revenue of $6.7 million for 2004. This
      decrease is primarily the result of added time and material contracts in the
      private sector as well as increases in both time and material and fixed price
      contracts in the government sector. We expanded our services to both public
      and
      private sector customers to include higher level technical services and
      application development.




Direct
      costs for 2005 were approximately $4.8 million, compared to approximately $3.7
      million for 2004, an increase of 29.7%. The increase in direct costs reflects
      expenses of approximately $400,000, principally compensation expenses, incurred
      in anticipation of a contract with NASA which was never awarded to us. This
      increase in cost and decrease in gross margin was offset by (i) an the increase
      in services under private sector contracts which generally produce higher
      margins, and (ii) the hiring of additional salaried employees as opposed to
      the
      use of subcontractors. As a result, our gross margin declined to 21% for 2005
      from 45% for 2004.




-25-




Selling,
      general and administrative costs include administrative personnel as well as
      rent, training, office and professional fees. These costs were approximately
      $3.0 million in 2005, compared to approximately $2.3 million for 2004,
      representing an increase of approximately 30.0%. This increase is attributable
      to an increase in the administrative personnel due to the increase in contracts,
      particularly an increase in our cost of benefits.




Interest
      costs were approximately $91,000 in for 2005, compared to $27,000 in 2004
      representing an increase of approximately 64%. This increase is attributable
      to
      increases in interest expense due to increases in borrowings.




We
      recognized an income tax benefit of $100,000 for the 2005 and $27,000 for 2004,
      reflecting the adjustments in its accrual for built-in gains. These amounts
      are
      pro forma since the Company was an S Corporation during these
      periods.




**Liquidity
      and Capital Resources**




At
      December 31, 2005, we had no cash, a bank overdraft of approximately $88,000
      and
      a $1.5 million working capital deficiency, and our borrowings from our bank
      exceeded our borrowing formula by $340,000. During 2005, we used approximately
      $1.8 million for our operations and $466,000 from investing activities,
      principally for software acquisition costs and the purchase of equipment.




We
      have a
      $1.25 million line of credit and a $250,000 term loan with a bank. The line
      of
      credit expires on May 31, 2006 and the term loan matures in July 2007. Our
      line
      of credit agreement requires CNS to maintain a current ratio of at least 1.25
      to
      1, a debt to equity ratio of not more than 3.0 to 1, and tangible net worth
      of
      at least $550,000. In addition, our borrowing base formula limits our borrowing
      to 90% of eligible accounts receivable. At both December 31, 2005 and March
      31,
      2006, CNS was in violation of all of these financial covenants and our
      borrowings exceeded our borrowing base formula. In order to provide additional
      collateral because of the excess borrowings, in April 2006, two of the former
      stockholders of CNS provided personal assets as additional collateral to the
      bank. Although the bank has granted us a waiver of these defaults at December
      31, 2005 and March 31, 2006, we cannot give any assurance that the bank will
      grant us further waivers in the future or that it will extend the credit
      agreement beyond May 31, 2006. We anticipate that until and unless we raise
      additional funds and use the funds in CNS’ business, we will not be able to be
      in compliance with the bank covenants at least through the end of 2006. If
      the
      bank does not extend the credit agreement beyond May 31, 2006 and continue
      to
      provide us with financing in excess of the borrowing base formula and we are
      not
      able to enter into an agreement with an alternative lender or obtain capital
      from other sources, it may be necessary for us to seek protection under the
      Bankruptcy Code.




Between
      the time that we performed the services for the government agencies and the
      time
      a contract is issued and payment is made, we may have difficulty in financing
      our operations. We require additional working capital and we intend to seek
      an
      increase in our credit facilities, either from our present lender or other
      lending sources. However, we do not believe that we will be able to increase
      our
      credit line until we can show positive operating results.




During
      2005, we performed design and technical services for NASA in anticipation of
      a
      contract which was never awarded to us. As a result, we incurred expenses of
      approximately $400,000, which are mostly compensation to our employees who
      worked on the project. Our working capital, along with our gross profit and
      gross margin, were affected by our failure to receive the award.




-26-




As
      a
      result of the reverse acquisition, our ongoing expenses have increased. In
      connection with the reverse acquisition, we entered into employment agreements
      with our three executive officers which provide for an annual salary for each
      of
      them of $265,000 plus a one-time bonus of $20,000 payable by January 15, 2007.
      The salary for each of these officers for 2005 was $195,000. In addition, we
      have an employment agreement with our chief executive officer pursuant to which
      he will receive compensation at the annual rate of $240,000 for 2006, $260,000
      for 2007 and $280,000 for 2008. However, Mr. Silverman has agreed to defer
      $60,000 of his 2006 salary until January 31, 2007. We also anticipate that
      we
      will hire a chief financial officer and we will incur significant additional
      expenses in being a public corporation. In addition, in connection with the
      acquisition of CNS, we agreed to guaranty the obligations of an affiliate of
      Mr.
      Silverman to pay $175,000, plus interest at 5% per annum, to a lender of the
      affiliate on December 31, 2006. The affiliate’s obligations will be reflected as
      a liability on our balance sheet. Furthermore, pursuant to the current agreement
      relating to the acquisition of CNS, we will be required to make payments of
      not
      to exceed $750,000, subject to adjustment as provided in the agreement, to
      the
      former CNS stockholders during 2006 and the first four months of
      2007.




We
      will
      need to generate significant additional business in order to support this
      increased level of expenses, and we cannot give any assurance that we will
      be
      able to do so. If we are unable to generate increased revenue, it will be
      necessary for us to significantly reduce our expenses in order to continue
      in
      business. We cannot assure you that we will be able to generate sufficient
      additional revenue to cover our increased level of expenses, or that we will
      be
      able to obtain the financing necessary to support our business. Our failure
      to
      generate such revenue, reduce our expenses or obtain necessary financing could
      impair our ability to continue in business.






**Item
      7. Financial Statements.**




The
      financial statements begin on Page F-1.




**Item
      8. Changes in and Disagreements With Accountants on Accounting and Financial
      Disclosure.**




There
      were no reportable events or disagreements with our independent accounting
      during or subsequent to the year ended December 31, 2005.




**Item
      8A. Controls and Procedures.**




As
      of the
      end of the period covered by this report, our chief executive officer and chief
      financial officer, who are the same person, evaluated the effectiveness of
      our
      disclosure controls and procedures. Based on their evaluation, the chief
      executive officer and chief financial officer concluded that our disclosure
      controls and procedures
      are effective in alerting him to material information that is required to be
      included in the reports that we file or submit under the Securities Exchange
      Act
      of 1934.




Our
      principal executive officer and principal financial officer has concluded that
      there were no significant changes in our internal controls or in other factors
      that could significantly affect these controls during the fourth quarter ended
      December 31, 2005.




-27-




**Item
      8B. Other Information.**




Not
      Applicable




**PART
      III**






**Item
      9. Directors, Executive Officers, Promoters and Control Persons; Compliance
      with
      Section 16(a) of the Exchange Act.**




The
      following table sets forth certain information with respect to our directors
      and
      executive officers.




Name
            Age
            PositionPaul
                B. Silverman.
            61
            President,
                chief executive officer, acting chief financial officer and
                directorTom
                Bednarek
            54
            Secretary
                and director




Paul
      B.
      Silverman has been our president, chief executive officer, acting chief
      financial officer and a director since January 10, 2006. Since January 2004,
      Mr.
      Silverman has been chairman and chief executive officer of Global Defense
      Corporation, a development stage corporation which he co-founded to make
      acquisitions in defense-related businesses. From January to December 2003,
      Mr.
      Silverman was a consultant to MobilePro Corporation, a wireless broadband
      company, and he currently serves as chairman of MobilePro's management advisory
      board. From 2002 until November 2005, he was managing partner of Gemini Group
      LLC (formerly known as EC Partners LLC), a business advisory services firm.
      From
      2001 to 2002, he was president and chief operating officer of Attotek Medical
      Imaging Corp., a developer of diagnostic imaging software systems. Since 2001,
      Mr. Silverman has served as an Adjunct Professor in the Kogod School of Business
      at American University and in the School of Management at George Mason
      University where he has taught Entrepreneurship and Advanced Business Strategy
      and Modeling courses.




Tom
      Bednarek has been secretary and a director since January 10, 2006. For more
      than
      the past five years, Mr. Bednarek has been actively involved in the development
      and production of global media and information industry projects. Since February
      2003, he was an independent consultant in this field, and from January 2000
      to
      February 2003, he was principal of Bigwig MusiFilm, an independent media
      production and development company. From February 2003 until January 2006,
      he
      was also a consultant to Global Defense.




**Key
      Employees**




Our
      business is conducted through our wholly-owned subsidiary, CNS. Mr. Paul B.
      Silverman also serves as chief executive officer of CNS. The following
      individuals, who were CNS’ executive officers, directors and sole stockholders
      prior to the reverse acquisition, are critical to its operations.




Name
            Age
            PositionChris
                Wargo
            57
            President
                of CNSJames
                Dramby
            60
            Chief
                operating officer of CNSChris
                Dhas
            65
            Chief
                technology officer of CNS




-28-


Messrs.
      Wargo, Dramby and Dhas have been senior executive officers and sole stockholders
      of CNS for more than the past five years. Prior to the reverse merger, Mr.
      Dhas
      was chief executive officer, Mr. Wargo was president and Mr. Dramby was chief
      operating officer.




**Committees**




Our
      board
      of directors has no separate committees and it acts as the audit committee
      at
      this time. We have no qualified financial expert at this time. We intend to
      search for a qualified individuals to serve as independent directors and members
      of an audit and compensation committee.




**Advisory
      Board**




We
      have
      an advisory board, which is presently comprised of four persons, to provide
      advice and assistance to management with respect to medium to long term business
      opportunities and strategy. Each member received, as compensation for one-year’s
      service, a non-qualified stock option to purchase 15,000 shares of common stock
      at $0.12, the current fair market value.




The
      current members of the Advisory Board are:




Dr.
      Claudio Filippone


Capt.
      Chuck Nash, USNAir (Ret.)


Major
      Gen. Paul Vallely, US Army (Ret.)


Ms.
      Barbara Winston.




Dr.
      Filippone is the director of the Advanced Energy Concepts Center, Aerospace
      Engineering Department, University of Maryland. Dr. Filippone is leading a
      team
      of US and international scientists on a “spent nuclear fuel energy extraction”
project, known as the Clean And Environmentally Safe Advanced Reactor. From
      1999
      to 2000 he redesigned the EMI noise suppression system on a telerobotics project
      for NASA’s Space Systems Lab.




Capt.
      Nash is the senior military-technology analyst for FOX News Channel. Based
      in
      Washington, DC, he retired from the US Navy after 25 years of service as a
      Naval
      Aviator in 1998 and entered Santa Barbara Applied Research Inc., as vice
      president of its emerging technologies division. In 2001, he founded Emerging
      Technologies International, a company specializing in assessing advanced
      technologies and in concert with the military was able to affect a significant
      implementation of those technologies within advanced weapons, products, and
      systems utilized by our nation’s war fighters. He holds degrees from Parks
      College of Aeronautical Technology, a B.S. in Aeronautics from Saint Louis
      University as well as The National War College.




Gen.
      Vallely is the senior military analyst for FOX News Channel. Gen. Vallely is
      a
      member of the board of directors for American Military Housing Services, and
      represents several information technology firms in the Washington D.C. area.
      Gen. Vallely retired in 1991 from the US Army as Deputy Commanding General,
      US
      Army, and Pacific in Honolulu, Hawaii. Gen. Vallely graduated from the US
      Military Academy at West Point in 1961 and served a distinguishing career in
      the
      Army. He is a graduate of the Infantry School, Ranger and Airborne Schools,
      Command and General Staff School, The Industrial College of the Armed Forces
      and
      the Army War College.




-29-




Ms.
      Winston is a member of the Cato Heritage Foundation and the Hudson Institute
      for
      Policy. Ms. Winston is also a member of the Board of Regents of the Center
      for
      Secure Policy based in Washington, DC.  Ms. Winston co-chairs numerous
      national central committees and serves as an adviser to the Woman’s Republican
      Club in New York.




**Item
      10. Executive Compensation.**




**Summary
      Compensation Table**




Prior
      to
      the reverse merger, we (then known as Lounsberry Holdings I, Inc.) did not
      pay
      any compensation to any executive officers. Set forth below is information
      for
      CNS’ chief executive officer and each of its other officers whose compensation
      exceeded $100,000 for 2004.




Name
                and Position
            
            Year
            
            Salary
            
            Other
                CompensationChris
                Dhas, chief executive officer
            
            
            2005
            
            $
            195,000
            
            $
            9,600Chris
                Wargo, president
            
            
            2005
            
            
            195,000
            
            
            9,600James
                Dramby, chief operating officer
            
            
            2005
            
            
            195,000
            
            
            9,192




No
      bonuses were paid to any of the officers and no stock or other equity
      compensation was provided to any of the officers. Other compensation represents
      an automobile allowance.




**Employment
      Agreements**




In
      January 2006, we entered into an employment agreement with Paul B. Silverman
      pursuant to which we agreed to employ Mr. Silverman as our chief executive
      officer through 2006, and continuing on a year-to-year basis unless terminated
      by either party on 90 days’ written notice prior to the expiration of the
      initial term or any one year extension. During the term of this agreement,
      we
      agreed to include Mr. Silverman as one of our nominees for election as a
      director. Mr. Silverman’s salary is $240,000 for 2006, $260,000 for 2007 and
      $280,000 for 2008 and a $500 per month automobile allowance. However, for 2006,
      Mr. Silverman will receive salary at the annual rate of $180,000, deferring
      the
      $60,000 balance until January 31, 2007. The agreement also provides that Mr.
      Silverman will receive a bonus for each year, not to exceed Executive’s Salary
      for the year, the amount of the bonus to be determined by a compensation
      committee of the Board comprised solely of independent directors, based on
      such
      revenue, EBITDA, earnings or other performance criteria as such committee may
      determine, the amount and payment of which shall also be subject to cash flow
      availability. If we terminate the employment agreement other than as a result
      of
      his death, disability or cause or if Mr. Silverman terminates the agreement
      with
      good cause, as defined, we are required to pay the Mr. Silverman for the balance
      of the term and during this period, to keep Mr. Silverman on our insurance
      plans. Pursuant to the employment agreement, we granted Mr. Silverman stock
      options to purchase 926,100 shares of common stock at $.12 per share, being
      the
      fair market value of the common stock on the date of grant.




In
      connection with the acquisition of CNS, CNS entered into employment agreements
      with Chris Dhas, Chris Wargo and James Dramby. Each of these agreements provides
      for an annual compensation at the annual rate of $265,000 plus a $20,000 bonus
      payable by January 15, 2007. Pursuant to these agreements, Chris Wargo will
      be
      president of CNS, Jim Dramby will be chief operating officer of CNS and Chris
      Dhas will be chief technical officer of CNS. The agreements also provide for
      a
      $400 per month automobile allowance. The employment agreements also provide
      that, after a public market develops for the Company’s common stock, the Company
      shall grant each of the CNS Stockholders a stock option to purchase 50,000
      shares of common stock at an exercise price equal to the fair market value
      on
      the date of grant. If CNS terminates the employment agreement other than as
      a
      result of death, disability or cause or if the executive terminates the
      agreement with good cause, as defined, CNS is required to pay the executive
      for
      the balance of the term. The employment agreement with Mr. Dhas gives him the
      right to take a leave or absence or to terminate the agreement prior to the
      expiration of the stated term.




-30-




**2006
      Long-Term Incentive Plan**




In
      January 2006, we adopted, subject to stockholder approval, the 2006 long-term
      incentive plan covering 2,015,000 shares of common stock. The plan provides
      for
      the grant of incentive and non-qualified options, stock grants, stock
      appreciation rights and other equity-based incentives to employees, including
      officers, and consultants. The 2006 Plan is to be administered by a committee
      of
      not less than two directors each of which is to be an independent director.
      In
      the absence of a committee, the plan is administered by the board of directors.
      Independent directors are not eligible for discretionary options. However,
      each
      newly elected independent director receives at the time of his election, a
      five-year option to purchase 30,000 shares of common stock at the market price
      on the date of his or her election. In addition, the plan provides for the
      annual grant of an option to purchase 5,000 shares of common stock on April
      1 st of each
      year, commencing April 1, 2007. Pursuant to this plan, we granted incentive
      stock options to Paul B. Silverman to purchase 926,100 shares of common stock
      and Tom Bednarek to purchase 151,200 shares of Common Stock, such options to
      have a term of five years and an exercise price of $.12 per share. We also
      granted options to purchase 15,000 shares of common stock to each of the four
      members of our advisory board. All of the options are subject to stockholder
      approval of the 2006 Plan. At December 31, 2005, there were no outstanding
      options.




Options
      intended to be incentive stock options must be granted at an exercise price
      per
      share which is not less than the fair market value of the common stock on the
      date of grant and may have a term which is not longer than ten years. If the
      option holder holds 10% of our common stock, the exercise price must be at
      least
      110% of the fair market value on the date of grant and the term of the option
      cannot exceed five years.




Option
      holders do not recognize taxable income upon the grant of such either incentive
      or non-qualified stock options. When employees exercise incentive stock options,
      they will not recognize taxable income upon exercise of the option, although
      the
      difference between the exercise price and the fair market value of the common
      stock on the date of exercise is included in income for purposes of computing
      their alternative minimum tax liability, if any. If certain holding period
      requirements are met, their gain or loss on a subsequent sale of the stock
      will
      be taxed at capital gain rates. Generally, long-term capital gains rates will
      apply to their full gain at the time of the sale of the stock, provided that
      they do not dispose of the stock made within two years from the date of grant
      of
      the option or within one year after your acquisition of such stock, and the
      option is exercised while they are employed by us or within three months of
      the
      termination of their employment or one year in the event of death or disability,
      as defined in the Internal Revenue Code.




In
      general, upon the exercise a non-qualified option, the option holders will
      recognize ordinary income in an amount equal to the difference between the
      exercise price of the option and the fair market value of the shares on the
      date
      they exercise the option. Subject to certain limitations, we may deduct that
      amount an expense for federal income tax purposes. In general, when the holders
      of shares issued on exercise of a nonqualified stock option sell their shares,
      any profit or loss is short-term or long-term capital gain or loss, depending
      upon the holding period for the shares and their basis in the shares will be
      the
      fair market value on the date of exercise.




-31-




**Item
      11. Security Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters.**




The
      following table provides information at to shares of common stock beneficially
      owned as of April 30, 2006 by:




•
            each
                director;




•
            each
                officer named in the summary compensation
                table;




•
            each
                person owning of record or known by us, based on information provided
                to
                us by the persons named below, to own beneficially at least 5% of
                our
                common stock; and




•
            all
                directors and executive officers as a group.




Name
            
            Shares
                of Common Stock
              Beneficially
                Owned
            
            PercentageChris
                Dhas
              7405
                Alban Station Court
              Springfield,
                VA 22150-2318
            
            
            537,500
            
            
            31.5
            %Chris
                Wargo
              7405
                Alban Station Court
              Springfield,
                VA 22150
            
            
            268,750
            
            
            15.7
            %James
                Dramby
              7405
                Alban Station Court
              Springfield,
                VA 22150
            
            
            268,750
            
            
            15.7
            %Paul
                B. Silverman
              12020
                Sunrise Valley Drive, Suite 100
              Reston, 
                Virginia 20191
            
            
            267,750
            
            
            15.7
            %Tom
                Bednarek
              12020
                Sunrise Valley Drive, Suite 100
              Reston, 
                Virginia 20191
            
            
            91,800
            
            
            5.4
            %All
                officers and directors as a group (two individuals)
            
            
            359,550
            
            
            21.1
            %




Except
      as
      otherwise indicated each person has the sole power to vote and dispose of all
      shares of common stock listed opposite his name. Each person is deemed to own
      beneficially shares of common stock which are issuable upon exercise or warrants
      or options or upon conversion of convertible securities if they are exercisable
      or convertible within 60 days of April 30, 2006.




The
      stockholders named in the table each hold the warrants to purchase the number
      of
      shares of common stock set forth below. These warrants become exercisable July
      1, 2006.




-32-




Name
            Shares
                Issuable upon Warrant ExerciseChris
                Dhas
            5,000,000Chris
                Wargo
            2,500,000James
                Dramby
            2,500,000Paul
                B. Silverman
            634,750Tom
                Bednarek
            214,200All
                officers and directors as a group (two individuals)
            848,950




Mr.
      Silverman has pledged 260,100 shares of common stock and warrants to purchase
      606,900 as security for the obligations of an affiliate of Mr. Silverman in
      the
      amount of $175,000. We have also guaranteed that obligation.




Although
      Barron Partners owns shares of series A preferred stock and warrants which,
      if
      fully converted exercised, would result in ownership of more than 5% of our
      outstanding common stock, the series A preferred stock may not be converted
      and
      the warrants may not be exercised if such conversion or exercise would result
      in
      Barron owning more than 4.9% of our outstanding common stock. This limitation
      may not be waived.






**Item
      12. Certain Relationships and Related Transactions.**




In
      anticipation of the acquisition of CNS, Paul Silverman, our chief executive
      officer and director, and Tom Bednarek, our secretary and director, and one
      non-affiliated person formed CNS Acquisition Corp. to acquire CNS. Mr. Silverman
      owned 82% of the CNS Acquisition Corp. for which he paid $2,050, and Mr.
      Bednarek owned 20% of the stock, for which he paid $500. Pursuant to an
      agreement between us and the stockholders of CNS Acquisition Corp., we issued
      the following securities in exchange for all of the capital stock of CNS
      Acquisition Corp.:




Name
            Shares
            Shares
                Issuable upon
              Warrant
                ExercisePaul
                B. Silverman
            267,750
            624,750Tom
                Bednarek
            91,800
            214,200One
                other stockholder
            22,950
            53,550




The
      warrants have an exercise of $.12 per share and are exercisable during the
      period commencing July 1, 2006 through December 31, 2010. The shares and
      warrants issued pursuant to the agreement are subject to an 18 month lock-up,
      and we granted the stockholders demand and piggyback registration rights
      subsequent to December 31, 2006.




On
      January 10, 2006, we purchased 928,000 shares of common stock from Capital
      Markets for $200,000. The purchase price was funded from the sale of the series
      A preferred stock and warrants to Barron Partners. At the time of the purchase,
      Capital Markets owned approximately 97.3% of our outstanding common
      stock..




-33-




Pursuant
      to an agreement among us, CNS, CNS Acquisition Corp. and the former stockholders
      of CNS, CNS Acquisition Corp. was merged with and into CNS with the result
      that
      CNS became our wholly-owned subsidiary and the former CNS stockholders
      received:




•
            Cash
                payments totaling up to $1,000,000, of which approximately $250,000
                was
                paid at the closing to or in accordance with instructions from the
                CNS
                stockholders, and the balance of up to approximately $750,000, is
                payable,
                subject to adjustment, as follows. To the extent that CNS received
                payments from certain government agencies for services which were
                rendered
                but are not yet billable, up to a maximum of approximately $440,000,
                the
                Company will pay the CNS Stockholders from the proceeds of such
                collections. The government agency never awarded us the contract
                and we
                never received the payment or recognized the revenue. The balance
                is to be
                payable in twelve equal monthly installments commencing May 15, 2006
                through and including April 15,
                2007.




•
            1,075,000
                shares of Common Stock.




•
            Warrants
                to purchase 10,000,000 shares of Common Stock at an exercise price
                of $.20
                per share. These warrants are exercisable commencing July 1, 2006
                through
                December 31, 2010.




The
      agreement also provides for contingent payments of up to a maximum of $1,000,000
      equal to 35% of the amount by which the Company’s EBITDA for any year,
      commencing in 2006 through 2010, exceeds $900,000. Once CNS has paid total
      contingency payments of $1,000,000 pursuant to this provision, there is no
      further contingent payment due.




Prior
      to
      the transaction, the former CNS stockholders had guaranteed CNS’ obligations to
      its secured lender. This guarantee is continuing. We have guaranteed CNS’s
      obligations to pay the deferred and contingent payments under the CNS agreement
      and payment of any amount paid by the CNS Stockholders under their
      guarantee.




The
      Company agreed to register the shares of common stock issued pursuant to the
      CNS
      agreement and the warrants issued pursuant to that agreement, and the CNS
      stockholders agreed to an 18 month lock-up on the shares of common stock issued
      pursuant to the CNS Agreement and upon exercise of the warrants. The lock-up
      does not apply to shares transferred to Liberty Company Fund upon exercise
      of
      the put granted by Liberty Company Fund.




We
      sold
      to Barron Partners, for $1,300,000, (i) 5,416,667 shares of series A preferred
      stock and warrants (the “Barron Warrants”) to purchase 10,000,000 shares of
      common stock at an exercise price of $.20 per share, 10,000,000 shares of common
      stock at an exercise price of $.25 per share and 10,000,000 shares of common
      stock at an exercise price of $.30 per share. The series A preferred stock
      is
      convertible into an aggregate of 10,833,334 shares of common stock. The Barron
      Warrants have a term of five years.




We
      agreed
      that, within 60 days from January 12, 2006, we will have appointed such number
      of independent directors that would result in a majority of its directors being
      independent directors, that the audit committee would be composed solely of
      independent directors and the compensation committee would have a majority
      of
      independent directors. Our failure of the Company to meet these requirements
      would results in the imposition of liquidated damages which are payable in
      cash
      or additional shares of series A preferred stock. Until such time as the Company
      has met this requirement, the shares of common stock owned by Paul B. Silverman
      will be held in escrow. As of the date of this annual report, we have not met
      this requirement. The agreement provides for liquidated damages equal at the
      rate of $427.397 per day until the breach is cured. These liquidated damages
      may
      be paid in cash or stock, at Barron Partners shall elect.




We
      agreed
      that we would file a registration statement covering the shares of common stock
      issuable upon conversion of the series A preferred stock and exercise of the
      Barron Warrants within 60 days after the closing and the registration statement
      would be declared effective not later than 120 days after the date filing is
      required. We have not yet filed the registration statement, and liquidated
      damages are accruing at the rate of 1,644 shares of series A preferred stock
      per
      day until the registration statement is filed or declared effective, as the
      case
      may be. No liquidated damages would be payable if, notwithstanding a late filing
      of the registration statement, the registration statement is declared effective
      on the required date.




-34-




The
      Certificate of Designation and the Barron Warrants provide that the series
      A
      preferred stock cannot be converted and Barron Warrants cannot be exercised
      if
      such conversion or exercise would result in the holder and
      its
      affiliates of more than 4.9% of the then outstanding number of shares of common
      stock on such date. Beneficial ownership is determined in accordance with
      Section 13(d) of the Securities Exchange Act of 1934, as amended, and Regulation
      13d-3. This limitation
      may not be modified or waived.




We
      agreed
      to submit to our stockholders for their approval, an amendment to our
      certificate of incorporation to provide that t he
      terms
      and conditions of any rights, options and warrants approved by the board of
      directors may provide that any or all of such terms and conditions may be waived
      or amended only with the consent of the holders of a designated percentage
      of a
      designated class or classes of capital stock of the Company (or a designated
      group or groups of holders within such class or classes, including but not
      limited to disinterested holders), and the applicable terms and conditions
      of
      any such rights, options or warrants so conditioned may not be waived or amended
      absent such consent




In
      the
      event that our fully-diluted EBITDA,
      as defined, per
      share
      of common stock for 2006, is less than $0.039 per share, the conversion price
      of
      the series A preferred stock and the exercise price of the Barron Warrants
      shall
      be reduced proportionately by up to 20%, in the case of the series A preferred
      stock, and up to 30% in the case of the Barron Warrants. The following table
      sets forth the adjusted conversion price and the conversion ratio of the Series
      A Preferred Stock if EBITDA per share for 2006 is less than $.039 per share
      and
      the number of shares of common stock issuable if all of the shares of series
      A
      preferred stock are outstanding on the date of the adjustment in the conversion
      rate. The conversion ratio is the number of shares of common stock issuable
      upon
      conversion of each share of series A preferred stock. The initial conversion
      price is $.12 and the initial conversion rate is 2.




Fully-Diluted
              EBITDA
                per Share
            Conversion
                Price
            Conversion
                Ratio
            No.
                of Share of common stock$.0351
            $.108
            2.22
            12,037,038$.0312
                or less
            $.096
            2.50
            13,541,668






-35-


The
      following table shows the reduction in the exercise price of the warrants in
      the
      event that our EBITDA per share is less than $.039.




Fully
                Diluted
              EBITDA
                per Share
            $.20
                Warrants
            $.25
                Warrants
            $.30
                Warrants$.0351
            $.18
            $.225
            $.27$.0312
            $.16
            $.200
            $.24$.0273
                or less
            $.14
            $.175
            $.21




With
      certain exceptions, if we issue common stock at a price, or warrants or other
      convertible securities with an exercise or conversion price which is less than
      the exercise price of the warrants, the conversion price of the series A
      preferred stock and the exercise price of the Barron Warrants will be reduced
      to
      the sales price, exercise price or conversion price, as the case may be, of
      such
      other securities.




We
      also
      reimbursed Barron Partners for its due diligence and other expenses in the
      amount of $50,000.




Pursuant
      to an agreement dated January 10, 2006 between the Company and Capital Markets,
      the Company’s principal stockholder, the Company purchased 928,000 shares of
      common stock , constituting 90.2% of the then outstanding shares of the
      Company’s common stock, from Capital Markets for $200,000. The purchase price
      was paid from the proceeds of the sale of series A preferred stock to Barron
      Partners. In connection with that agreement, the Company agreed to include
      all
      of the then-outstanding shares of common stock in the first registration
      statement that the Company files after the closing.




In
      December 2004, an affiliated company, Global Defense Corporation, borrowed
      $300,000 from Cornell Capital Partners, for which it issued its debenture in
      the
      principal amount of $300,000. Global Defense was co-founded by Paul B. Silverman
      for the purpose of making acquisitions in the defense industry. Mr. Silverman
      is
      the chief executive officer, a director and a principal stockholder of Global
      Defense. Global Defense did not make any acquisitions and is not presently
      engaged in any significant business activities. At the closing of the
      acquisition of CNS, we paid Cornell Capital Partners $125,000 and issued 150,000
      shares of common stock to Cornell Capital Partners. Global Defense has an
      obligation to pay Cornell Capital Partners $175,000 by December 31, 2006, and
      we
      guaranteed this obligation. Our guarantee obligations will be reflected as
      a
      liability on our balance sheet.




In
      2004,
      we advanced $19,563 to a company owned by Chris Dhas, Chris A. Wargo and James
      G. Dramby, the three former stockholders of CNS. In 2005, we advanced an
      additional $380,300, bringing the total advances to $399,863. These advances
      were made with no particular terms of repayment and no stated interest rate.
      The
      advance was repaid in
      full,
      but without interest,  in
      January 2006.




At
      both
      December 31, 2005 and March 31, 2006, CNS was in violation of the financial
      covenants under its credit line and its borrowings exceeded the borrowing base
      formula. CNS’ bank requested additional
      collateral in the amount of $250,000. This additional collateral was added
      to
      support the outstanding line of credit to CNS, and is in the form of an
      indemnity deed of trust for James Dramby’s residence along with pledges not to
      further encumber primary residences for Chris Dhas and Chris Wargo. The
      indemnity deed of trust is an instrument that precludes Mr. Dramby from
      refinancing or further encumbering his residence.




-36-




**Item
      13. Exhibits.**




2.1
            
            Agreement
                and plan of reorganization dated as of January 10, 2006, among the
                Registrant, CNS Acquisition Corp., Computer Networks & Software, Inc.
                (“CNS”), and Chris Dhas, Chris A. Wargo, and James G. Dramby13.1
            
            Certificate
                of incorporation23.2
            
            By-laws23.3
            
            Certificate
                of Designation for the Series A Convertible Preferred Stock14.1
            
            Loan
                agreement dated June 27, 2003 between United Bank and CNS34.2
            
            Form
                of warrant issued to Barron Partners LP14.3
            
            Form
                of Series A common stock purchase warrant14.4
            
            Form
                of Series B common stock purchase warrant110.1
            
            Preferred
                stock purchase agreement dated January 10, 2006, between the Registrant
                and Barron Partners, LP110.2
            
            Registration
                rights agreement dated January 10, 2006, between the Registrant and
                Barron
                Partners LP110.3
            
            Exchange
                Agreement dated January 10, 2006, among the Registrant and the former
                stockholders of CNS Acquisition Corp.110.4
            
            Registration
                rights provisions pursuant to the stock exchange agreement110.5
            
            Registration
                rights provisions pursuant to the agreement and plan of
                reorganization110.6
            
            Employment
                agreement dated January 11, 2006, between the Registrant and Paul
                B.
                Silverman110.7
            
            Employment
                agreement dated January 11, 2006, between CNS and Chris Dhas110.8
            
            Employment
                agreement dated January 11, 2006, between CNS and Chris Wargo110.9
            
            Employment
                agreement dated January 11, 2006, between CNS and James Dramby110.10
            
            2006
                Long-term incentive plan310.11
            
            Guaranty
                by the Registrant of obligations of Global Defense Corporation114.1
            
            Code
                of business conduct and ethics321.1
            
            List
                of Subsidiaries331.1
            
            Certification
                of chief executive officer and chief financial officer pursuant to
                Section
                302 of the Sarbanes-Oxley Act of 2002332.1
            
            Certification
                of chief executive officer and chief financial officer pursuant to
                Section
                906 of the Sarbanes-Oxley Act of 20023




1
            Filed
                as an exhibit to the Company’s current report on Form 8-K which was filed
                with the Commission on January 17, 2006, and incorporated herein
                by
                reference.




2
            Filed
                as an exhibit to the Company’s registration statement on Form 10-SB, which
                was filed with the Commission on June 23, 2005 and incorporated herein
                by
                reference.




3
            Filed
                herewith.




-37-




**Item
      14. Principal Accountant Fees and Services.**




The
      following lists fees paid to Marcum & Kliegman, LLP (“MK”), our former
      independent registered accounting firm, during the year ended December 31,
      2005:




From
      February 10,
      2005 (inception)


through
      December
      31, 2005





Audit
      Fees  $12,500(1)


Audit
      Related Fees  None


Tax
      Fees  None


All
      Other
      Fees  None






(1)
      Fees
      billed in connection with MK’s audit of the financial statement from February
      10, 2005 to April 30, 2005 for the purpose of the registration statement on
      Form
      10-SB filed on June 23, 2005 and MK’s review of our interim financial statements
      for the quarters ended June 30, 2005 and September 30, 2005.




We
      engaged Michael Pollack CPA (“Pollack”) as our independent registered accounting
      firm on February 15, 2006. Pollack was the independent certified public
      accounting firm for CNS and audited its financial statements at December 31,
      2005 and for the two years in the period then ending and our financial statement
      for the year ended December 31, 2005. The following lists fees paid to Pollack
      during 2005:




2005Audit
                fees
            
            $
            42,500Audit
                related fees
            
            
            7,500Tax
                Fees
            
            
            NoneAll
                Other Fees
            
            
            None




*Audit
      Fees* :
      Audit
      fees represent fees for professional services performed by the independent
      registered accounting firm for the audit of our annual financial statements
      and
      the review of our quarterly financial statements, as well as services that
      are
      normally provided in connection with statutory and regulatory filings or
      engagements.




*Audit
      Related Fees:* Audit-related fees represent fees for assurance and related services performed
      by the independent registered accounting firm that are reasonably related to
      the
      performance of the audit or review of our financial statements.




*Tax
      Fees:* Tax
      fees
      represent fees for services rendered by the independent registered accounting
      firm for tax compliance, tax advice and tax planning services. We did not pay
      any tax fees in 2005.




*All
      other fees* :
      Neither
      of the independent registered accounting firms did performed any services other
      than the services described above for 2005.




We
      do not
      have an audit committee. It is the policy of the board of directors to review
      the nature of the non-audit work and approve such services in advance. In making
      its review the board determines whether, in its opinion, the performance of
      such
      services does not impair the independence of our independent public accounting
      firm.




-38-




**SIGNATURES**




Pursuant
      to the requirements of the Securities Exchange Act of 1934, the registrant
      has
      duly caused this report to be signed on its behalf by the undersigned hereunto
      duly authorized.




STRATEGIC
                DEFENSE ALLIANCE CORP.(Registrant)Date: 
              May 22, 2006
            By:
            /s/ 
              Paul B.
              SilvermanPaul
                B. Silverman, President and
              Chief
                Executive Officer







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






Signature
            Title
            Date/s/Paul
              B. Silverman
            President,
              chief executive officer,
            May
              22, 2006Paul
              B. Silverman
            chief
              financial officer and director(Principal
              Executive Officer)/s/Tom
              Bednarek
            Director
            May
              22, 2006Tom
              Bednarek








-39-




**INDEX
      TO FINANCIAL STATEMENTS**






Page**Strategic
                Defense Alliance Corp. (formerly Lounsberry Holdings I,
                Inc.**Report
                of Independent Registered Accounting Firm
            F-2Balance
                Sheet at December 31, 2005
            F-3Statements
                of Operation for the period February 10, 2005 (inception) through
                December
                31, 2005 with Cumulative Totals since Inception
            F-4Statements
                of Changes of Stockholders’ (Deficit) for the period February 10, 2005
                (inception) through December 31, 2005
            F-5Statements
                of Cash Flows for the period February 10, 2005 (inception) through
                December 31, 2005
            F-6Notes
                to Financial Statements
            F-7
                - F-16**Computer
                Networks & Software, Inc.**Report
                of Independent Registered Accounting Firm
            F-17Balance
                Sheet at December 31, 2005
            F-18Statements
                of Operations and Comprehensive Income (Loss) for the years ended
                December
                31, 2005 and 2004
            F-19Statements
                of Changes of Shareholders’ Equity (Deficit) for the years ended December
                31, 2005 and 2004
            F-20Statements
                of Cash Flows for the years ended December 31, 2005 and
                2004
            F-21Notes
                to Financial Statements
            F-22
                - F-33




F-1




**REPORT
        OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**
 
 
 To
        the
        Board of Directors
 Strategic
        Defense Alliance Corp.
 (Formerly
        Lounsberry Holdings I, Inc.)
 Reston,
        VA
 
 I
        have
        audited the accompanying balance sheet of Strategic Defense Alliance Corp.
        (formerly Lounsberry Holdings I, Inc.) as of December 31, 2005, and the related
        statements of operations, stockholders’ (deficit), and cash flows for the period
        February 10, 2005 (Inception) through December 31, 2005. These financial
        statements are the responsibility of the Company’s management. My responsibility
        is to express an opinion on these financial statements based on my audit.
 
 I
        conducted the audit in accordance with the standards of the Public Company
        Accounting Oversight Board (United States). Those standards require that
        I plan
        and perform the audit to obtain reasonable assurance about whether the financial
        statements are free of material misstatement. An audit includes examining
        on a
        test basis, evidence supporting the amounts and disclosures in the financial
        statements. An audit also includes assessing the accounting principles used
        and
        significant estimates made by management, as well as evaluating the overall
        financial statement presentation. I believe that the audit provides a reasonable
        basis for my opinion.
 
 The
        accompanying financial statements have been prepared assuming the Company
        will
        continue as a going concern. As discussed in Note 4 to the financial statements,
        the Company has just begun operations, and is currently developing their
        business. They have incurred losses in their initial months of operations,
        and
        just completed an acquisition to assist in funding their operations. These
        factors raise substantial doubt about its ability to continue as a going
        concern. Management’s operating and financing plans in regards to these matters
        are also discussed in Note 4. The financial statements do not include any
        adjustments that might result from the outcome of these
        uncertainties.
 
 In
        my
        opinion, the financial statements referred to above present fairly, in all
        material respects, the financial position of Strategic Defense Alliance Corp.
        (formerly Lounsberry Holdings I, Inc.) as of December 31, 2005, and the changes
        in its operations, changes in stockholders’ (deficit) and cash flows for the
        period then ended, in conformity with U.S. generally accepted accounting
        principles.
 
 **Michael
        Pollack CPA**
 
 Michael
        Pollack CPA
 Cherry
        Hill, New Jersey
 March
        31,
        2006
 
 F-2
 **STRATEGIC
              DEFENSE ALLIANCE CORP.**
 **(FORMERLY
                LOUNSBERRY HOLDINGS I, INC.)**
 **(A
                  DEVELOPMENT STAGE COMPANY)**
 **BALANCE
        SHEET**
 **DECEMBER
        31, 2005**
 **ASSETS****CURRENT
                    ASSETS**Cash
                
                $
                2,000**Total
                    current assets**
                
                
                2,000**TOTAL
                    ASSETS**
                
                $
                2,000**LIABILITIES
                    AND STOCKHOLDERS' (DEFICIT)****CURRENT
                    LIABILITIES**Loan
                    payable - related party
                
                $
                39,721**Total
                    current liabilities**
                
                
                39,721**TOTAL
                    LIABILITIES**
                
                
                39,721**STOCKHOLDERS'
                    (DEFICIT)**Preferred
                    stock, par value $.0001 per share, 10,000,000 authorized and
                    0 issued and
                    outstanding
                
                
                -Common
                    stock, par value $.0001 per share; 90,000,000 shares
                    authorized1,028,000
                    shares issued and outstanding
                
                
                103Additional
                    paid-in capital
                
                
                1,999Deficit
                    accumulated during the development stage
                
                
                (39,823
                )**Total
                    stockholders' (deficit)**
                
                
                (37,721
                )**TOTAL
                    LIABILITIES AND STOCKHOLDERS' (DEFICIT)**
                
                $
                2,000
 The
          accompanying notes are an integral part of these financial
          statements.
 F-3
 
 **STRATEGIC
                DEFENSE ALLIANCE CORP.**
 **(FORMERLY
                  LOUNSBERRY HOLDINGS I, INC.)**
 **(A
                    DEVELOPMENT STAGE COMPANY)**
 STATEMENTS
              OF OPERATIONS
 **FOR
                THE PERIOD FEBRUARY 10, 2005 (INCEPTION) THROUGH DECEMBER 31, 2005**
 **(WITH
                CUMULATIVE TOTALS SINCE INCEPTION)**
  **FEBRUARY 10,
                                2005**(INCEPTION)THROUGHDECEMBER 31,
                          2005**REVENUE**
                      
                      $
                      -
                      
                      $
                      -**COST
                          OF GOODS SOLD**
                      
                      
                      -
                      
                      
                      -**GROSS
                          PROFIT**
                      
                      
                      -
                      
                      
                      -**OPERATING
                          EXPENSES**Selling,
                          general and administrative
                      
                      
                      39,823
                      
                      
                      39,823**Total
                          operating expenses**
                      
                      
                      39,823
                      
                      
                      39,823**NET
                          LOSS FROM OPERATIONS BEFORE PROVISION FOR INCOME
                          TAXES**
                      
                      
                      (39,823
                      )
                      
                      (39,823
                      )Provision
                          for income taxes
                      
                      
                      -
                      
                      
                      -**NET
                          (LOSS) APPLICABLE TO COMMON SHARES**
                      
                      $
                      (39,823
                      )
                      $
                      (39,823
                      )**NET
                          (LOSS) PER BASIC AND DILUTED SHARES**
                      
                      $
                      (0.04
                      )**WEIGHTED
                          AVERAGE NUMBER OF COMMON****SHARES
                          OUTSTANDING**
                      
                      
                      1,020,100
 The
                accompanying notes are an integral part of these financial
                statements.
 F-4
 
 **STRATEGIC
                    DEFENSE ALLIANCE CORP.**
 **(FORMERLY
                      LOUNSBERRY HOLDINGS I, INC.)**
 **(A
                        DEVELOPMENT STAGE COMPANY)**
 STATEMENT
                  OF CHANGES IN STOCKHOLDERS' (DEFICIT)
 **FOR
                    THE PERIOD FEBRUARY 10, 2005 (INCEPTION) THROUGH DECEMBER 31,
                    2005**
  **Common
                              Stock**
                          
                          
                          **Additional**
                          
                          
                          **Defict
                              Accumulated During the****Shares**
                          
                          
                          **Amount**
                          
                          
                          **Paid-In Capital**
                          
                          
                          **Development Stage**
                          
                          
                          **Total**Balance
                              , February 10, 2005
                          
                          
                          -
                          
                          $
                          -
                          
                          $
                          -
                          
                          $
                          -
                          
                          $
                          -Issuance
                              of common stock to foundersfor
                              services rendered
                          
                          
                          1,020,000
                          
                          
                          102
                          
                          
                          -
                          
                          
                          -
                          
                          
                          102Issuance
                              of shares for cash
                          
                          
                          8,000
                          
                          
                          1
                          
                          
                          1,999
                          
                          
                          -
                          
                          
                          2,000Net
                              loss for the period
                          
                          
                          -
                          
                          
                          -
                          
                          
                          -
                          
                          
                          (39,823
                          )
                          
                          (39,823
                          )Balance,
                              December 31, 2005
                          
                          
                          1,028,000
                          
                          $
                          103
                          
                          $
                          1,999
                          
                          $
                          (39,823
                          )
                          $
                          (37,721
                          )
 The
                    accompanying notes are an integral part of these financial
                    statements.
 F-5
 
 STRATEGIC
                        DEFENSE ALLIANCE CORP.
 (FORMERLY
                          LOUNSBERRY HOLDINGS I, INC.)
 (A
                            DEVELOPMENT STAGE
                            COMPANY)
 STATEMENTS OF CASH
                      FLOW
 **FOR
                        THE PERIOD FEBRUARY 10, 2005 (INCEPTION) THROUGH DECEMBER
                        31,
                        2005**
 **(WITH
                        CUMULATIVE TOTALS SINCE INCEPTION)**
 
 **CUMULATIVE
                                  TOTALS**
                                **FEBRUARY
                                  10, 2005**
                                **(INCEPTION)**
                                **THROUGH**
                                **DECEMBER
                                  31, 2005****CASH
                                  FLOWS FROM OPERATING ACTIVITIES:**Net
                                  (loss)
                              
                              $
                              (39,823
                              )
                              $
                              (39,823
                              )**Adjustments
                                  to reconcile net (loss)****to
                                  net cash used in operating activities:**Common
                                  stock issued for services
                              
                              
                              102
                              
                              
                              102**Total
                                  adjustments**
                              
                              
                              102
                              
                              
                              102**Net
                                  cash (used in) operating activities**
                              
                              
                              (39,721
                              )
                              
                              (39,721
                              )**CASH
                                  FLOWS FROM FINANCING ACTIVITIES:**Related
                                  party loans
                              
                              
                              39,721
                              
                              
                              39,721Proceeds
                                  from common stock issuances
                              
                              
                              2,000
                              
                              
                              2,000**Net
                                  cash provided by financing activities**
                              
                              
                              41,721
                              
                              
                              41,721**NET
                                  INCREASE IN CASH AND CASH EQUIVALENTS**
                              
                              
                              2,000
                              
                              
                              2,000**CASH
                                  AND CASH EQUIVALENTS - BEGINNING OF PERIOD**
                              
                              
                              -
                              
                              
                              -**CASH
                                  AND CASH EQUIVALENTS - END OF PERIOD**
                              
                              $
                              2,000
                              
                              $
                              2,000**SUPPLEMENTAL
                                  INFORMATION ON NONCASH ACTIVITY**Common
                                  stock issued for services
                              
                              $
                              102
                              
                              $
                              102
 The
                        accompanying notes are an integral part of these financial
                        statements.
 F-6
 **STRATEGIC
                            DEFENSE ALLIANCE CORP.**
 **(FORMERLY
                              LOUNSBERRY HOLDINGS I, INC.)**
 **(A
                                DEVELOPMENT STAGE COMPANY)**
 **NOTES
                                  TO THE FINANCIAL STATEMENTS**
 **DECEMBER
                                  31, 2005**
 **NOTE
        1 -** **NATURE
        OF BUSINESS**
 
 Lounsberry
        Holdings I, Inc. (the “Company”) was incorporated in Delaware on February 10,
        2005, with the objective of acquiring, or merging with, an operating
        business.
  At
        December 31, 2005, the Company had not yet commenced any operations. All
        activity through December 31, 2005 relates to the Company’s formation.
  On
        January 9, 2006, the Company successfully completed the acquisition of Computer
        Networks and Software, Inc., (“CNS”) a Virginia corporation. CNS provides
        network and software solutions and professional consulting services including
        engineering and technical services, software development, systems engineering
        and analysis, advanced systems simulation and modeling, systems integration,
        international circuit provisioning, internet management applications and
        program/project management primarily to agencies of the federal government.
        Approximately 40% of its employees have high level security clearances.
 
 CNS
        was
        established in 1987. In 1989, CNS secured initial contracts to support key
        NASA
        staff on communications, navigation and surveillance projects for the National
        Airspace System (NAS) and later in 2001 for the Small Aircraft Transportation
        System (SATS) project. Since 1999, CNS has conducted more than 40 task orders
        in
        the areas of communications, surveillance and navigation systems studies
        and
        analyses, the development of large scale modeling and simulation systems
        for
        next generation air transport facilities and for selected new technology
        studies
        related to the air transport industry. In June 2003, CNS received the Turning
        Goals into Reality Award from NASA Headquarters for its original design and
        development work within the SATS team for the Airborne Internet
        Project.
 
 CNS’
        largest clients include NASA and the Defense Information Systems Agency,
        and FNS
        Verizon and Qwest, which are prime contractors who subcontract CNS’ services.
        These four customers accounted for 88% of CNS’ revenues for 2005 and 92% for
        2004.
 
 CNS’
        current business operations consists of two core Lines of Business; Technical
        Professional Services and Solutions.
  F-7
 **STRATEGIC
              DEFENSE ALLIANCE CORP.**
 **(FORMERLY
              LOUNSBERRY HOLDINGS I, INC.)**
 **(A
              DEVELOPMENT STAGE COMPANY)**
 **NOTES
              TO THE FINANCIAL STATEMENTS (CONTINUED)**
 **DECEMBER
              31, 2005**
  **NOTE
        1 -** **NATURE
        OF BUSINESS** **(CONTINUED)**
 
 With
        CNS,
        the Company is pursuing new acquisitions in the global defense and homeland
        security markets. The Company’s two-fold objectives are to acquire entities that
        both provide growth opportunities and make a strong potential contribution
        to
        improve the nation’s homeland security and global defense. The Company has
        identified three key market segments; Air Transport, Biometrics and Surveillance
        and Intelligence Services.
 
  Upon
        the
        completion of this transaction, CNS was merged into the Company and became
        a
        wholly owned subsidiary. The transaction was accounted for as a reverse merger,
        and for accounting purposes, CNS became the accounting acquirer of the Company.
        At this time, the Company ceased being a shell company.
  In
        February 2006, the Company changed its name to Strategic Defense Alliance
        Corp.
  
 **NOTE
        2-**   **SUMMARY
        OF SIGNIFICANT ACCOUNTING POLICIES**
 
 **Development
        Stage Company**
 
 The
        Company is considered to be in the development stage as defined in Statement
        of
        Financial Accounting Standards (SFAS) No. 7, “ *Accounting
        and Reporting by Development Stage Enterprises* ”.
        The
        Company has devoted substantially all of its efforts in targeting proposed
        business combinations.
 
 **Company
        Year - End**
 
 The
        Company has a December 31 year-end.
 
 **Cash
        and Cash Equivalents**
 
 For
        financial statement presentation purposes, the Company considers short-term,
        highly liquid investments with original maturities of three months or less
        to be
        cash and cash equivalents.
  F-8
 **STRATEGIC
              DEFENSE ALLIANCE CORP.**
 **(FORMERLY
              LOUNSBERRY HOLDINGS I, INC.)**
 **(A
              DEVELOPMENT STAGE COMPANY)**
 **NOTES
              TO THE FINANCIAL STATEMENTS (CONTINUED)**
 **DECEMBER
              31, 2005**
  **NOTE
        2-**  **SUMMARY
        OF SIGNIFICANT ACCOUNTING POLICIES** **(CONTINUED)**
 
 **Use
        of Estimates**
 
 The
        preparation of financial statements in conformity with accounting principles
        generally accepted in the United States of America requires management to
        make
        estimates and assumptions that affect the reported amounts of assets and
        liabilities and disclosures of contingent assets and liabilities at the date
        of
        the financial statements and the reported amounts of revenues and expenses
        during the reporting period. Actual results could differ from those
        estimates.
 
 **Income
        Taxes**
 
 The
        provision for income taxes includes the tax effects of transactions reported
        in
        the financial statements. Deferred taxes would be recognized for differences
        between the basis for assets and liabilities for financial statement and
        income
        tax purposes. The major difference relates to the net operating loss carry
        forwards generated by sustaining deficits during the development
        stage.
 
 **(Loss)
        Per Share of Common Stock**
 
 Basic
        net
        (loss) per common share (“EPS”) is computed using the weighted average number of
        common shares outstanding for the period. Diluted earnings per share includes
        additional dilution from common stock equivalents, such as stock issuable
        pursuant to the exercise of stock options and warrants. Common stock equivalents
        are not included in the computation of diluted earnings per share when the
        Company reports a loss because to do so would be anti-dilutive for the periods
        presented.
 F-9
 **STRATEGIC
                DEFENSE ALLIANCE CORP.**
 **(FORMERLY
                LOUNSBERRY HOLDINGS I, INC.)**
 **(A
                DEVELOPMENT STAGE COMPANY)**
 **NOTES
                TO THE FINANCIAL STATEMENTS (CONTINUED)**
 **DECEMBER
                31, 2005**
 **NOTE
        2-**  **SUMMARY
        OF SIGNIFICANT ACCOUNTING POLICIES** **(CONTINUED)**
 
 **(Loss)
        Per Share of Common Stock** **(Continued)**
 
 The
        following is a reconciliation of the computation for basic and diluted
        EPS:
  **December
                    31,****2005**Net
                    (loss)
                
                $
                (39,763
                )Weighted-average
                    common shares outstanding :Basic
                
                
                1,020,100Effect
                    of dilutive securities-stock
                    options
                
                
                -Diluted
                
                
                1,020,100Basic
                    net earnings (loss) per share
                
                $
                (0.04
                )Diluted
                    net earnings (loss) per share
                
                $
                (0.04
                )
  There
        were no options or warrants to purchase shares of common stock at December
        31,
        2005.
 
 **Stock-Based
        Compensation**
 
 The
        Company measures compensation expense for its employee stock-based compensation
        using the intrinsic-value method. Under the intrinsic-value method of accounting
        for stock-based compensation, when the exercise price of options granted
        to
        employees and common stock issuances are less than the estimated fair value
        of
        the underlying stock on the date of grant, deferred compensation is recognized
        and is amortized to compensation expense over the applicable vesting period.
        In
        each of the periods presented, the vesting period was the period in which
        the
        options were granted. All options were expensed to compensation in the period
        granted rather than the exercise date.
 F-10
 **STRATEGIC
                  DEFENSE ALLIANCE CORP.**
 **(FORMERLY
                  LOUNSBERRY HOLDINGS I, INC.)**
 **(A
                  DEVELOPMENT STAGE COMPANY)**
 **NOTES
                  TO THE FINANCIAL STATEMENTS (CONTINUED)**
 **DECEMBER
                  31, 2005**
 
 **NOTE
        2-**  **SUMMARY
        OF SIGNIFICANT ACCOUNTING POLICIES** **(CONTINUED)**
 
 **Stock-Based
        Compensation** **(Continued)**
 
 The
        Company measures compensation expense for its non-employee stock-based
        compensation under the Financial Accounting Standards Board (FASB) Emerging
        Issues Task Force (EITF) Issue No. 96-18, “ *Accounting
        for Equity Instruments that are Issued to Other Than Employees for Acquiring,
        or
        in Conjunction with Selling, Goods or Services* ”.
        The
        fair value of the option issued is used to measure the transaction, as this
        is
        more reliable than the fair value of the services received. The fair value
        is
        measured at the value of the Company’s common stock on the date that the
        commitment for performance by the counterparty has been reached or the
        counterparty’s performance is complete. The fair value of the equity instrument
        is charged directly to compensation expense and additional paid-in
        capital.
  **December
                        31,****2005**Net
                        income (loss), as reported
                    
                    $
                    (39,763
                    )Add:
                        Stock-based employee compensation expenseincluded
                        in reported net income (loss), net of relatedtax
                        effects
                    
                    
                    -Less:
                        Total stock-based employeecompensation expense determinedunder fair value-based method for allawards, net of related tax effects
                    
                    
                    -Pro
                        forma net income (loss)
                    
                    $
                    (39,763
                    )Basic
                        and diluted income (loss) per share:As
                        reported
                    
                    $
                    (0.04
                    )Pro
                        forma
                    
                    $
                    (0.04
                    )
 F-11
 **STRATEGIC
                  DEFENSE ALLIANCE CORP.**
 **(FORMERLY
                  LOUNSBERRY HOLDINGS I, INC.)**
 **(A
                  DEVELOPMENT STAGE COMPANY)**
 **NOTES
                  TO THE FINANCIAL STATEMENTS (CONTINUED)**
 **DECEMBER
                  31, 2005**
 **NOTE
        2-**  **SUMMARY
        OF SIGNIFICANT ACCOUNTING POLICIES** **(CONTINUED)**
 
 **Recent
        Issued Accounting Standards**
 
 On
        December 16, 2004, the Financial Accounting Standards Board (“FASB”) published
        Statement of Financial Accounting Standards No. 123 (Revised 2004),
“ *Share-Based
        Payment* ”
(“SFAS
        123R”). SFAS 123R requires that compensation cost related to share-based payment
        transactions be recognized in the financial statements. Share-based payment
        transactions within the scope of SFAS 123R include stock options, restricted
        stock plans, performance-based awards, stock appreciation rights, and employee
        share purchase plans. The provisions of SFAS 123R, as amended, are effective
        for
        small business issuers beginning as of the next interim period after December
        15, 2005.
 
 **NOTE
        3-** **STOCKHOLDERS’
        (DEFICT)**
 
 On
        February 10, 2005 the Company was formed with one class of common stock,
        par
        value $.0001, with 90,000,000 shares authorized and one class of preferred
        stock, par value $.0001, with 10,000,000 shares authorized in the State of
        Delaware.
 
 On
        February 10, 2005, the Company issued 1,020,000 shares of stock to its founder
        for services rendered valued at $102.
 
 In
        December 3005, the Company issued 8,000 shares for $2,000.
 
 There
        are
        no shares of preferred stock issued and outstanding as of December 31, 2005
        and
        1,028,000 shares of common stock issued and outstanding at December 31,
        2005.
 
 **NOTE
        4-** **GOING
        CONCERN**
 
 As
        shown
        in the accompanying financial statements, as is typical of companies going
        through the development stage, the Company incurred a net loss for the period
        February 10, 2005 (Inception) through December 31, 2005. The Company as of
        December 31, 2005 was in the development stage and had no operating revenues
        nor
        an operating entity. They were actively searching for and investigating
        potential merger candidates. This raises substantial doubt about the Company’s
        ability to continue as a going concern.
 F-12
 **STRATEGIC
                DEFENSE ALLIANCE CORP.**
 **(FORMERLY
                LOUNSBERRY HOLDINGS I, INC.)**
 **(A
                DEVELOPMENT STAGE COMPANY)**
 **NOTES
                TO THE FINANCIAL STATEMENTS (CONTINUED)**
 **DECEMBER
                31, 2005**
 **NOTE
        4-** **GOING
        CONCERN** **(CONTINUED)**
 
 As
        noted,
        the board of directors approved the acquisition of CNS and the transaction
        closed on January 9, 2006. Upon this merger, the Company was no longer in
        the
        development stage had recurring revenues of approximately $6,000,000 and
        was
        able to raise approximately $1,300,000 in capital and issued 40,000,000 warrants
        which when exercised will generate additional capital, however, there can
        be no
        assurance that management will be able to raise sufficient capital, under
        terms
        satisfactory to the Company, if at all. Management believes that the Company’s
        capital requirements will depend on many factors including the success of
        the
        Company’s stock post-merger with CNS, as well as CNS’ expanded solution
        development efforts. Additionally, CNS did expend resources during 2005 on
        new
        projects that they plan on generating new sources of business for which may
        contribute to the Company increasing their profitability. The Company plans
        on
        filing a registration statement to register the shares that were issued in
        the
        acquisition of CNS (see Note 7).
 
 The
        financial statements do not include any adjustments that might result from
        the
        outcome of these uncertainties.
 
 
 **NOTE
        5-**  **** **PROVISION
        FOR INCOME TAXES**
 
 Deferred
        income taxes will be determined using the liability method for the temporary
        differences between the financial reporting basis and income tax basis of
        the
        Company’s assets and liabilities. Deferred income taxes will be measured based
        on the tax rates expected to be in effect when the temporary differences
        are
        included in the Company’s tax return. Deferred tax assets and liabilities are
        recognized based on anticipated future tax consequences attributable to
        differences between financial statement carrying amounts of assets and
        liabilities and their respective tax bases.
 
 At
        December 31, 2005, deferred tax assets consist of the following:
  Deferred
                  tax assets
                
                $
                13,519Less:
                  valuation allowance
                
                
                (13,519
                )$
                -0-
 
  F-13
 **STRATEGIC
                DEFENSE ALLIANCE CORP.**
 **(FORMERLY
                LOUNSBERRY HOLDINGS I, INC.)**
 **(A
                DEVELOPMENT STAGE COMPANY)**
 **NOTES
                TO THE FINANCIAL STATEMENTS (CONTINUED)**
 **DECEMBER
                31, 2005**
   **NOTE
        5-**  **** **PROVISION
        FOR INCOME TAXES**
 
 At
        December 31, 2005, the Company had accumulated deficits during the development
        stage of $39,763 available to offset future taxable income through 2025.
        The
        Company established valuation allowances equal to the full amount of the
        deferred tax assets due to the uncertainty of the utilization of the operating
        losses in future periods.
 
 A
        reconciliation of the Company’s effective tax rate as a percentage of income
        before taxes and federal statutory rate for the period ended December 31,
        2005
        is summarized as follows:
  December
                  31, 2005Federal
                  statutory rate
              (34.0)%State
                  income taxes, net of federal benefits
              0.0Valuation
                  allowance
              34.00%
 
 **NOTE
        6-** **LOAN
        PAYABLE - RELATED PARTY**
 
 The
        Company had received various amounts from a related party to cover the formation
        costs. These loans are non-interest bearing and were payable the earlier
        of May
        31, 2006 or the consummation of a business combination. The business combination
        occurred January 11, 2006, and the amounts were paid back by the
        Company.
  F-14
 **STRATEGIC
                DEFENSE ALLIANCE CORP.**
 **(FORMERLY
                LOUNSBERRY HOLDINGS I, INC.)**
 **(A
                DEVELOPMENT STAGE COMPANY)**
 **NOTES
                TO THE FINANCIAL STATEMENTS (CONTINUED)**
 **DECEMBER
                31, 2005**
 **NOTE
        7-**  ****  **SUBSEQUENT
        EVENT**
 
 On
        January 9, 2006 the Company acquired Computer Networks and Software, Inc.
        in a
        reverse merger.
 
 The
        acquisition of CNS and the related financing included:
 
 ·  Payment
        of $250,000 cash, $750,000 in installments through April 2007, 1,075,000
        shares
        of common stock, and 10,000,000 warrants for 100% of the stock of
        CNS;
 ·  The
        cancellation of 928,000 shares of the 1,028,000 shares of common stock issued
        and outstanding;
 ·  The
        issuance of 5,416,667 shares of preferred stock for an investment of $1,300,000,
        net of $410,000 in closing costs;
 ·  The
        issuance of 382,500 shares to former shareholders of CNS Acquisition in exchange
        for there stock and warrants to purchase 982,500 shares of common stock of
        the
        Company; and
 ·  The
        issuance of 150,000 shares of stock to another investor and the payment of
        $125,000 in cash and the incurrence of a note payable of $175,000 to this
        investor due December 31, 2006;
 
 The
        summarized unaudited pro forma financial information for the years ended
        December 31, 2005 and 2004 that follows assumes the acquisition of CNS was
        consummated on January 1, 2004:
  F-15
 **STRATEGIC
                DEFENSE ALLIANCE CORP.**
 **(FORMERLY
                LOUNSBERRY HOLDINGS I, INC.)**
 **(A
                DEVELOPMENT STAGE COMPANY)**
 **NOTES
                TO THE FINANCIAL STATEMENTS (CONTINUED)**
 **DECEMBER
                31, 2005**
 **NOTE
        7-**  ****  **SUBSEQUENT
        EVENT** **(CONTINUED)**
  **Years
                    Ended****December
                    31,**
                
                
                **December
                    31,****2005**
                
                
                **2004**Revenues
                
                $
                6,070,841
                
                $
                6,660,191Cost
                    of revenues
                
                
                4,781,723
                
                
                3,738,728Gross
                    profit
                
                
                1,289,118
                
                
                2,921,463Operating
                    expenses
                
                
                3,098,158
                
                
                2,384,826Income
                    (loss) before other (expense)
                
                
                (1,809,040
                )
                
                536,637Other
                    (income) expense
                
                
                90,770
                
                
                55,128Net
                    income (loss) before provision for income taxes
                
                
                (1,899,810
                )
                
                481,509Provision
                    (beneift) for income taxes
                
                
                (100,000
                )
                
                (27,000
                )Net
                    income (loss)
                
                $
                (1,799,810
                )
                $
                508,509Net
                    loss per basic and diluted shares
                
                $
                (17,998.10
                )
                $
                5,085.09Weighted
                    average number of common sharesoutstanding
                
                
                100
                
                
                100
  The
        unaudited pro forma results of operations for the years ended December 31,
        2005
        and 2004, are not necessarily indicative of what the actual results of
        operations of the Company would have been had the acquisition been consummated
        on January 1, 2004.
 F-16


**Report
      of Independent Registered Public Accounting Firm**







To
      the
      Board of Directors and Shareholders


Computer
      Networks & Software, Inc.





I
      have
      audited the accompanying balance sheets of Computer Networks & Software,
      Inc. (the "Company") as of December 31, 2005 and 2004, and the related
      statements of operations and comprehensive income (loss), changes in
      shareholders' equity (deficit) and cash flows for the years then ended. These
      financial statements are the responsibility of the Company's management. My
      responsibility is to express an opinion on these financial statements based
      on
      my audit.





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





In
      my
      opinion, the financial statements referred to above present fairly, in all
      material respects, the financial position of the Company as of December 31,
      2005
      and 2004, and their results of operations and comprehensive income (loss) and
      cash flows for the years then ended, in conformity with accounting principles
      generally accepted in the United States of America.





The
      accompanying financial statements have been prepared assuming that the Company
      will continue as a going concern. As discussed in Note 1 to the financial
      statements, the Company has sustained operating losses and capital deficits
      that
      raise substantial doubt about its ability to continue as a going concern.
      Management’s plans in regard to these matters are also described in Note 1. The
      financial statements do not include any adjustments that might result from
      the
      outcome of this uncertainty.








/s/Michael
      Pollack CPA





Cherry
      Hill, New Jersey


May
      10,
      2006




F-17
 **COMPUTER
            NETWORKS & SOFTWARE, INC.** **BALANCE
                SHEETS**
 **FOR
                THE YEARS ENDED DECEMBER 31, 2005 AND 2004**




**December
                      31,**2005
                
                
                **December
                      31,**2004**ASSETS****CURRENT
                    ASSETS**Cash
                    and cash equivalents
                
                $
                -
                
                $
                -Marketable
                    securities
                
                
                -
                
                
                12,695Accounts
                    receivable, net
                
                
                805,712
                
                
                1,613,282Unbilled
                    services
                
                
                -
                
                
                298,861Due
                    from related parties
                
                
                399,863
                
                
                19,563Prepaid
                    expenses and other current assets
                
                
                19,754
                
                
                73,904Total
                    current assets
                
                
                1,225,329
                
                
                2,018,305Property
                    and equipment, net
                
                
                85,635
                
                
                112,984Computer
                    software development costs
                
                
                103,454
                
                
                38,582Deposits
                
                
                8,014
                
                
                7,684Total
                    assets
                
                $
                1,422,432
                
                $
                2,177,555**LIABILITIES
                    AND SHAREHOLDERS' EQUITY (DEFICIT)****CURRENT
                    LIABILITIES**Line
                    of credit
                
                $
                1,498,253
                
                $
                946,717Bank
                    overdraft
                
                
                87,695
                
                
                43,808Unearned
                    revenue
                
                
                187,375
                
                
                77,397Accounts
                    payable and accrued expenses
                
                
                881,019
                
                
                356,042Deferred
                    income taxes payable
                
                
                -
                
                
                100,000Current
                    portion of note payable
                
                
                83,328
                
                
                83,328Total
                    current liabilities
                
                
                2,737,670
                
                
                1,607,292Note
                    payable, net of current portion
                
                
                48,617
                
                
                131,950Total
                    liabilities
                
                
                2,786,287
                
                
                1,739,242Commitments
                    and contingencies**Shareholders'
                    Equity (Deficit)**Common
                    stock, no par value, 100 shares authorized, issuedand
                    outstanding at December 31, 2005 and 2004, respectively
                
                
                5,000
                
                
                5,000Retained
                    earnings (deficit)
                
                
                (1,279,985
                )
                
                519,825Accumulated
                    other comprehensive loss
                
                
                (88,870
                )
                
                (86,512
                )Total
                    shareholders' equity (deficit)
                
                
                (1,363,855
                )
                
                438,313Total
                    liabilities and shareholders' equity (deficit)
                
                $
                1,422,432
                
                $
                2,177,555
 The
        accompanying notes to the financial statements are
        an integral part of these statements.
  F-18
 **COMPUTER
              NETWORKS & SOFTWARE, INC.** **STATEMENTS
                OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)** **FOR
                  THE YEARS ENDED DECEMBER 31, 2005 AND 2004**


**2005**
              
              
              **2004**Revenue
              
              $
              6,070,841
              
              $
              6,660,191Direct
                  costsDirect
                  labor
              
              
              3,072,118
              
              
              2,419,028Other
                  direct costs
              
              
              1,709,605
              
              
              1,319,700Total
                  direct costs
              
              
              4,781,723
              
              
              3,738,728Gross
                  profit
              
              
              1,289,118
              
              
              2,921,463Selling,
                  general and administrative expenses
              
              
              3,086,254
              
              
              2,365,989Other
                  expenses
              
              
              11,904
              
              
              18,837Total
                  operating expenses
              
              
              3,098,158
              
              
              2,384,826Income
                  (loss) before other income (expense) andprovision
                  for (benefit of) income taxes
              
              
              (1,809,040
              )
              
              536,637Other
                  income (expense)Interest
                  income
              
              
              194
              
              
              305Interest
                  expense
              
              
              (90,964
              )
              
              (55,433
              )Income
                  (loss) before provision for (benefit of) income taxes
              
              
              (1,899,810
              )
              
              481,509Provision
                  for (benefit of) income taxes
              
              
              (100,000
              )
              
              (27,000
              )Net
                  income (loss)
              
              $
              (1,799,810
              )
              $
              508,509Earnings
                  (loss) per share:Basic
                  and diluted earnings (loss) per shareNet
                  earnings (loss) per share
              
              $
              (17,998.10
              )
              $
              5,085.09Weighted
                  average number of common sharesoutstanding
                  - basic and diluted
              
              
              100
              
              
              100Comprehensive
                  income (loss)Net
                  income (loss)
              
              $
              (1,799,810
              )
              $
              508,509Other
                  comprehensive income (loss)Gain
                  (loss) on marketable equity securities available for sale
              
              
              (2,358
              )
              
              112Comprehensive
                  income (loss)
              
              $
              (1,802,168
              )
              $
              508,621


The
        accompanying notes to the financial statements are an integral part of these
        statements.
 F-19
 **COMPUTER
                NETWORKS & SOFTWARE, INC.** **STATEMENTS
                    OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)**
 **FOR
                    THE YEARS ENDED DECEMBER 31, 2005 AND 2004**
  Common
                      Stock
                  
                  
                  
                  
                  
                  Accumulated
                      OtherShares
                  
                  
                  Amount
                  
                  
                  RetainedEarnings (Deficit)
                  
                  
                  Comprehensive
                            Income (Loss)
                  
                  
                  TotalShareholders' Equity (Deficit)Balance,
                      January 1, 2004
                  
                  
                  100
                  
                  $
                  5,000
                  
                  $
                  11,316
                  
                  $
                  (86,624
                  )
                  $
                  (70,308
                  )Other
                      unrealized holding gains
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  112
                  
                  
                  112Net
                      income
                  
                  
                  -
                  
                  
                  -
                  
                  
                  508,509
                  
                  
                  -
                  
                  
                  508,509Balance,
                      December 31, 2004
                  
                  
                  100
                  
                  
                  5,000
                  
                  
                  519,825
                  
                  
                  (86,512
                  )
                  
                  438,313Other
                      unrealized holding losses
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  (2,358
                  )
                  
                  (2,358
                  )Net
                      loss
                  
                  
                  -
                  
                  
                  -
                  
                  
                  (1,799,810
                  )
                  
                  -
                  
                  
                  (1,799,810
                  )Balance,
                      December 31, 2005
                  
                  
                  100
                  
                  $
                  5,000
                  
                  $
                  (1,279,985
                  )
                  $
                  (88,870
                  )
                  $
                  (1,363,855
                  )
 The
            accompanying notes to the financial statements are an integral part of
            these
            statements.
  F-20
 **COMPUTER
                  NETWORKS & SOFTWARE, INC.** **STATEMENTS
                        OF CASH FLOWS**
 **FOR
                      THE YEARS ENDED DECEMBER 31, 2005 AND 2004**
  **December
                          31,**2005
                    
                    
                    **December
                          31,**2004Cash
                        flows from operating activities:Net
                        income (loss)
                    
                    $
                    (1,799,810
                    )
                    $
                    508,509Adjustments
                        to reconcile net loss to netcash
                        used in operating activitiesDepreciation
                        and amortization
                    
                    
                    58,386
                    
                    
                    60,165Deferred
                        income taxes
                    
                    
                    (100,000
                    )
                    
                    (27,000
                    )Changes
                        in operating assets and liabilitiesAccounts
                        receivable
                    
                    
                    807,570
                    
                    
                    (605,986
                    )Unbilled
                        services
                    
                    
                    298,861
                    
                    
                    (1,928
                    )Prepaid
                        expenses and other current assets
                    
                    
                    54,150
                    
                    
                    (39,921
                    )Deposits
                    
                    
                    (330
                    )
                    
                    (1,484
                    )Unearned
                        revenue
                    
                    
                    109,978
                    
                    
                    77,397Accounts
                        payable and accrued expenses
                    
                    
                    524,977
                    
                    
                    20,170Net
                        cash used in operating activities
                    
                    
                    (46,218
                    )
                    
                    (10,078
                    )Cash
                        flows from investing activities:Purchase
                        of property and equipment
                    
                    
                    (23,723
                    )
                    
                    (50,766
                    )Computer
                        software development costs
                    
                    
                    (72,186
                    )
                    
                    (24,481
                    )Proceeds
                        from sale of marketable securities
                    
                    
                    10,337
                    
                    
                    -Advances
                        to related parties
                    
                    
                    (380,300
                    )
                    
                    (19,563
                    )Net
                        cash used in investing activities
                    
                    
                    (465,872
                    )
                    
                    (94,810
                    )Cash
                        flows from financing activities:Increase
                        (decrease) in bank overdraft
                    
                    
                    43,887
                    
                    
                    (190,566
                    )Proceeds
                        from note payable
                    
                    
                    -
                    
                    
                    250,000Repayment
                        of note payable
                    
                    
                    (83,333
                    )
                    
                    (34,722
                    )Net
                        change in line of credit borrowings
                    
                    
                    551,536
                    
                    
                    80,176Net
                        cash provided by financing activities
                    
                    
                    512,090
                    
                    
                    104,888Net
                        increase (decrease) in cash and cash equivalents
                    
                    
                    -
                    
                    
                    -Cash
                        and cash equivalents - beginning of year
                    
                    
                    -
                    
                    
                    -Cash
                        and cash equivalents - end of year
                    
                    $
                    -
                    
                    $
                    -Supplemental
                        disclosures of cash flow informationCash
                        paid for income taxes
                    
                    $
                    -
                    
                    $
                    -Cash
                        paid for interest
                    
                    $
                    90,964
                    
                    $
                    55,433
 The
              accompanying notes to the financial statements are an integral part
              of these
              statements.
 F-21
 **COMPUTER
                      NETWORKS & SOFTWARE, INC.** **NOTES
                            TO FINANCIAL STATEMENTS**
 **DECEMBER
                          31, 2005 AND 2004**
 **NOTE
        1-**  **ORGANIZATION
        AND BASIS OF PRESENTATION**




Computer
      Networks & Software, Inc. (“CNS” or the “Company”) was incorporated in the
      State of Virginia in 1987. CNS provides advanced communications, information
      engineering and professional consulting services primarily to agencies of the
      federal government, i.e. NASA and Defense Information System’s Agency’s.
      Services include engineering and technical services, software development,
      network engineering, security engineering and systems integration.




The
      Company holds a Department of Defense Top Secret (TS) facility clearance.
      Approximately 40% of the company’s staff maintains a government security
      clearance.




The
      Company and its stockholders entered into an agreement and plan of
      reorganization with Strategic Defense Alliance Corp. (formerly Lounsberry
      Holdings I, Inc. (“SDAC”) and CNS Acquisition Corp. The transaction was
      completed on January 11, 2006 and upon the completion of this transaction,
      the
      Company become a wholly-owned subsidiary of SDAC. In the transaction, the
      Company’s shareholders received stock and warrants in SDAC and cash.





**Going
      Concern**





As
      shown
      in the accompanying financial statements the Company has incurred a loss of
      $1,799,810 for the year ended December 31, 2005, and has a working capital
      deficiency of $1,512,341 as of December 31, 2005. The Company is currently
      in
      technical default of its line of credit by not achieving the financial covenants
      contained in the line, and has had a reduction of revenue in 2005. There is
      no
      guarantee that the Company will be able to bring their line into compliance
      in
      the upcoming year or increase their revenues. These conditions raise substantial
      doubt about the Company’s ability to continue as a going concern for a
      reasonable period.




Management
      believes that the Company’s capital requirements will depend on many factors
      including the success of the Company’s stock post-merger with SDAC which
      occurred in January 2006, as well as its sales efforts. Additionally, the
      Company did expend resources during 2005 on new projects and plans to seek
      new
      sources of business for which may contribute to the Company increasing their
      profitability.




The
      financial statements do not include any adjustments relating to the carrying
      amounts of recorded assets or the carrying amounts and classification of
      recorded liabilities that may be required should the Company be unable to
      continue as a going concern.


F-22
 **COMPUTER
                  NETWORKS & SOFTWARE, INC.** **NOTES
                        TO FINANCIAL STATEMENTS (CONTINUED)**
 **DECEMBER
                      31, 2005 AND 2004**


**NOTE
      2-**  **SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES**




**Use
      of Estimates**




The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States of America requires management to make
      estimates and assumptions that affect the reported amounts of assets and
      liabilities and disclosures of contingent assets and liabilities at the date
      of
      the financial statements and the reported amounts of revenue and expenses during
      the reporting period. Actual results could differ from those estimates.




**Cash
      and Cash Equivalents**




The
      Company considers all highly liquid debt instruments and other short-term
      investments with a maturity of three months or less, when purchased, to be
      cash
      equivalents.




The
      Company maintains cash and cash equivalent balances at one financial institution
      that is insured by the Federal Deposit Insurance Corporation up to $100,000.
      The
      Company has at times maintained cash balances in excess of insured amounts.




**Allowance
      for Doubtful Accounts**




The
      Company provides an allowance for doubtful accounts, which is based upon a
      review of outstanding receivables as well as historical collection information.
      Credit is granted to substantially all customers on an unsecured basis. In
      determining the amount of the allowance, management is required to make certain
      estimates and assumptions. Management has determined that as of December 31,
      2005 and 2004, an allowance of $66,014 and $0 is required.




**Property
      and Equipment**




Property
      and equipment is stated at cost, less accumulated depreciation. Depreciation
      is
      provided using the straight-line method over the estimated useful lives of
      the
      related assets (primarily three to five years). Leasehold improvements are
      amortized over the shorter of the lease term or the estimated useful life.
      Costs
      of maintenance and repairs are charged to expense as incurred.




**Computer
      Software Development Costs**




The
      Company capitalizes direct costs incurred with developing or obtaining software
      for internal use, including external direct costs of materials and services
      and
      payroll and payroll related costs for employees who are directly associated
      with
      and devote time to internal-use software development projects. The cost of
      internal-use software and the capitalized implementation-related costs are
      included in computer software development costs. Such capitalized costs will
      be
      amortized on a straight-line basis over the software’s estimated useful life of
      three years, upon completion of the particular project.


F-23
 **COMPUTER
                      NETWORKS & SOFTWARE, INC.** **NOTES
                            TO FINANCIAL STATEMENTS (CONTINUED)**
 **DECEMBER
                          31, 2005 AND 2004**


**NOTE
      2-**  **SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES** **(CONTINUED)**




**Recoverability
      of Long-Lived Assets**




The
      Company reviews the recoverability of its long-lived assets on a periodic basis
      whenever events and changes in circumstances have occurred which may indicate
      a
      possible impairment. The assessment for potential impairment is based primarily
      on the Company’s ability to recover the carrying value of its long-lived assets
      from expected future cash flows from its operations on an undiscounted basis.
      If
      such assets are determined to be impaired, the impairment recognized is the
      amount by which the carrying value of the assets exceeds the fair value of
      the
      assets. Property and equipment to be disposed of by sale is carried at the
      lower
      of the then current carrying value or fair value less estimated costs to
      sell.




**Revenue
      Recognition**




The
      Company generates revenue from professional services rendered to customers.
      The
      majority of the Company’s revenue is generated under time-and-material contracts
      whereby costs are generally incurred in proportion with contracted billing
      schedules and revenue is recognized as services are performed, with the
      corresponding cost of providing those services reflected as direct costs. The
      majority of the customers are billed on an hourly or daily basis whereby actual
      time is charged directly to the customer. Such method is expected to result
      in
      reasonably consistent profit margins over the contract term.




The
      Company also generates revenue from fixed-price and fixed-time contracts.
      Revenue generated from most fixed-price contracts, including most application
      management and support contracts, is recognized ratably over the contract term.
      Revenue generated from certain other fixed-price contracts is recognized using
      the percentage of completion method as the ratio of labor hours incurred to
      estimated total labor hours.




This
      method is used because reasonably dependable estimates of the revenue and costs
      applicable to various stages of a contract can be made, based on historical
      experience and milestones set in the contract. The Company’s project delivery
      and business unit finance personnel continually review labor hours incurred
      and
      estimated total labor hours, which may result in revisions to the estimated
      amount of recognized revenue for the contract. Changes in estimates are
      accounted for in the period of change.




If
      the
      Company does not accurately estimate the resources required or the scope of
      work
      to be performed for a contract or if the Company does not manage the project
      properly within the planned time period, then a loss may be recognized on the
      contract. Losses are recorded in the period when they become known.




The
      Company does not derive revenue from projects involving multiple
      revenue-generating activities. If a contract would involve the provision of
      multiple service elements, total estimated contract revenue would be allocated
      to each element based on the fair value of each element.




F-24
 **COMPUTER
              NETWORKS & SOFTWARE, INC.** **NOTES
                    TO FINANCIAL STATEMENTS (CONTINUED)**
 **DECEMBER
                  31, 2005 AND 2004**


**NOTE
      2-**  **SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES** **(CONTINUED)**




**Revenue
      Recognition** **(Continued)**




The
      amount of revenue allocated to each element would then be limited to the amount
      that is not contingent upon the delivery of another element in the future.
      Revenue for each element would then be recognized depending upon whether the
      contract is a time-and-materials contract or a fixed-price, fixed-time
      contract.




The
      Company reports gross reimbursable “out-of-pocket” expenses incurred as both
      revenue and direct costs in the statements of operations.




Unbilled
      services represent services provided which are billed subsequent to the period
      end in accordance with the contract terms and services rendered for which
      contracts with government agencies were executed subsequent to the period end.
      All such amounts are anticipated to be realized in the following
      period.




Any
      unearned revenue reflects items that are pre-billed by the Company with the
      revenue associated with that billing incurred in the following
      period.




**Stock-Based
      Compensation**




Employee
      stock awards under the Company's compensation plans are accounted for in
      accordance with Accounting Principles Board Opinion No. 25 (“APB 25”),
“Accounting for Stock Issued to Employees”, and related interpretations. The
      Company provides the disclosure requirements of Statement of Financial
      Accounting Standards (“SFAS”) No. 123, “Accounting for Stock-Based Compensation”
(“SFAS 123”), and related interpretations. Stock-based awards to non-employees
      are accounted for under the provisions of SFAS 123 and have adopted the enhanced
      disclosure provisions of SFAS 148 “Accounting for Stock-Based
      Compensation-Transition and Disclosure, an amendment of SFAS No. 123”.




The
      Company measures compensation expense for its employee stock-based compensation
      using the intrinsic-value method. Under the intrinsic-value method of accounting
      for stock-based compensation, when the exercise price of options granted to
      employees is less than the estimated fair value of the underlying stock on
      the
      date of grant, deferred compensation is recognized and is amortized to
      compensation expense over the applicable vesting period. For
      disclosure purposes, pro forma net loss and loss per share impacts are provided
      as if the fair value method under SFAS 123 had been applied:




The
      Company did not issue any options or warrants in the years ended December 31,
      2005 and 2004.




F-25
 **COMPUTER
              NETWORKS & SOFTWARE, INC.** **NOTES
                    TO FINANCIAL STATEMENTS (CONTINUED)**
 **DECEMBER
                  31, 2005 AND 2004**


**NOTE
      2-**  **SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES** **(CONTINUED)**




**Stock-Based
      Compensation** **(Continued)**




**Years
                  Ended****December
                  31,**
              
              
              **December
                  31,****2005**
              
              
              **2004**Net
                  income (loss), as reported
              
              $
              (1,799,810
              )
              $
              508,509Add:
                  Stock-based employee compensation expenseincluded
                  in reported net income (loss), net of relatedtax
                  effects
              
              
              -
              
              
              -Less:
                  Total stock-based employeecompensation expense determinedunder fair value-based method for allawards, net of related tax effects
              
              
              -
              
              
              -Pro
                  forma net income (loss)
              
              $
              (1,799,810
              )
              $
              508,509Basic
                  and diluted income (loss) per share:As
                  reported
              
              $
              (17,998.10
              )
              $
              5,085.09Pro
                  forma
              
              $
              (17,998.10
              )
              $
              5,085.09


**Concentrations**




The
      Company has derived and believes that it will continue to derive a significant
      portion of its revenue from a limited number of customers and projects. For
      the
      years ended December 31, 2005 and 2004, the Company's three and four
      largest customers accounted for in the aggregate approximately 79% and 76%
      of
      its revenue, respectively. During 2005 and 2004, each of these four customers
      accounted for 10% or more of revenue.




Financial
      instruments that potentially subject the Company to significant concentrations
      of credit risk consist principally of marketable securities, accounts
      receivable, and unbilled receivables. Marketable securities are subject to
      market fluctuations that could materially affect the recorded balances. To
      date,
      accounts receivable and unbilled receivables have been derived primarily from
      contracts with agencies of the federal government. Accounts receivable are
      generally due within 30 days and no collateral is required.




**Segment
      Reporting**




The
      Company follows the provisions of SFAS 131, “Disclosures about Segments of an
      Enterprise and Related Information.” This standard requires that companies
      disclose operating segments based on the manner in which management
      disaggregates the Company in making internal operating decisions. The Company
      believes that there is only one operating segment.


F-26
 **COMPUTER
              NETWORKS & SOFTWARE, INC.** **NOTES
                    TO FINANCIAL STATEMENTS (CONTINUED)**
 **DECEMBER
                  31, 2005 AND 2004**


**NOTE
      2-**  **SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES** **(CONTINUED)**




**Fair
      Value of Financial Instruments**




The
      carrying amount reported in the balance sheets for cash and cash equivalents,
      accounts receivable, accounts payable, accrued expenses, and notes payable
      approximate fair value because of the immediate or short-term maturity of these
      financial instruments. The Company does not utilize derivative
      instruments.




**Income
      Taxes**




Effective
      January 1, 2004, the Company is an S Corporation. As an S Corporation, the
      Company is generally not subject to corporate income taxes and the income,
      deductions, credits and other tax attributes generated by the Company flow
      to
      its stockholders. However, the Company is subject to corporate income taxes
      for
      built-in gains for a period of 10 years from the effective date of the S
      Corporation election.




**Comprehensive
      Income (Loss)**




The
      Company adopted SFAS 130, “Reporting Comprehensive Income,” (“SFAS 130”). SFAS
      130 requires the reporting of comprehensive income in addition to net income
      (loss) from operations. Comprehensive income (loss) differs from net income
      (loss) solely due to unrealized holding gains and losses on the
      available-for-sale marketable securities.




Comprehensive
      income is a more inclusive financial reporting methodology that includes
      disclosure of information that historically has not been recognized in the
      calculation of net income.




**Reclassifications**




Certain
      amounts reported in for the year ended December 31, 2004 have been reclassified
      to conform to the presentation of the December 31, 2005 amounts. The
      reclassifications have no effect for the year ended December 31,
      2004.




**Earnings
      (Loss) Per Share of Common Stock**




Basic
      net
      income (loss) per common share is computed using the weighted average number
      of
      common shares outstanding for the period. Diluted earnings per share includes
      additional dilution from common stock equivalents, such as stock issuable
      pursuant to the exercise of stock options and warrants. Common stock equivalents
      are not included in the computation of diluted earnings per share when the
      Company reports a loss because to do so would be anti-dilutive for the periods
      presented.




There
      were no options or warrants to purchase shares of common stock at December
      31,
      2005 and 2004, respectively.


F-27
 **COMPUTER
              NETWORKS & SOFTWARE, INC.** **NOTES
                    TO FINANCIAL STATEMENTS (CONTINUED)**
 **DECEMBER
                  31, 2005 AND 2004**


**NOTE
      2-**  **SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES** **(CONTINUED)**




**Earnings
      (Loss) Per Share of Common Stock** **(Continued)**




The
      following is a reconciliation of the computation for basic and diluted
      EPS:




**Years
                  Ended****December
                  31,**
              
              **December
                  31,****2004**
              
              **2003**Net
                  income (loss)
              
              $
              (1,799,810
              )
              $
              508,509Weighted-average
                  common shares outstanding :Basic
              
              
              100
              
              
              100Effect of dilutive securities-stock
                    options
              
              
              -
              
              
              -Diluted
              
              
              100
              
              
              100Basic
                  net earnings (loss) per share
              
              $
              (17,998.10
              )
              $
              5,085.09Diluted
                  net earnings (loss) per share
              
              $
              (17,998.10
              )
              $
              5,085.09




**Recent
      Issued Accounting Standards**




In
      January 2003, the FASB issued Interpretation No. 46 (“FIN 46”), “Consolidation
      of Variable Interest Entities,” an interpretation of Accounting Research
      Bulletin No. 51, “Consolidated Financial Statements.” FIN 46 establishes
      accounting guidance for consolidation of variable interest entities that
      function to support the activities of the primary beneficiary. In December
      2003,
      the FASB revised FIN 46 and issued FIN 46 (revised December 2003) ("FIN 46R").
      In addition to conforming to previously issued FASB Staff Positions, FIN No.
      46R
      deferred the implementation date for certain variable interest entities. This
      revised interpretation is effective for all entities no later than the end
      of
      the first reporting period that ends after March 15, 2004. The Company does
      not
      have any investments in or contractual relationship or other business
      relationship with a variable interest entity and therefore the adoption of
      this
      interpretation will not have any impact on the Company’s results of operations,
      financial position or cash flows.




F-28
 **COMPUTER
              NETWORKS & SOFTWARE, INC.** **NOTES
                    TO FINANCIAL STATEMENTS (CONTINUED)**
 **DECEMBER
                  31, 2005 AND 2004**


**NOTE
      2-**  **SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES** **(CONTINUED)**




**Recent
      Issued Accounting Standards** **(Continued)**




On
      December 16, 2004, the Financial Accounting Standards Board (“FASB”) published
      Statement of Financial Accounting Standards No. 123 (Revised 2004),
“ *Share-Based
      Payment* ”
(“SFAS
      123R”). SFAS 123R requires that compensation cost related to share-based payment
      transactions be recognized in the financial statements. Share-based payment
      transactions within the scope of SFAS 123R include stock options, restricted
      stock plans, performance-based awards, stock appreciation rights, and employee
      share purchase plans. The provisions of SFAS 123R, as amended, are effective
      for
      small business issuers commencing with the first annual or interim period of
      the
      first fiscal year beginning after December 15, 2005.




On
      December 16, 2004, FASB issued SFAS No. 153, “Exchanges of Non-monetary Assets,
      an amendment of APB Opinion 29, Accounting for Non-monetary Transaction” ("SFAS
      153"). This statement amends APB Opinion 29 to eliminate the exception for
      non-monetary exchanges of similar productive assets and replaces it with a
      general exception for exchanges of non-monetary assets that do not have
      commercial substance. Under SFAS 153, if a non-monetary exchange of similar
      productive assets meets a commercial-substance criterion and fair value is
      determinable, the transaction must be accounted for at fair value resulting
      in
      recognition of any gain or loss. SFAS 153 is effective for non-monetary
      transactions in fiscal periods that begin after June 15, 2005. The Company
      does
      not anticipate that the implementation of this standard will have a material
      impact on its financial position, results of operations or cash
      flows.




In
      May
      2005, the FASB issued FASB Statement No. 154, “Accounting Changes and Error
      Corrections (“SFAS 154”). SFAS 154 replaces Accounting Principles Board Opinion
      No. 20, “Accounting Changes” and FASB Statement No. 3, “Reporting Accounting
      Changes in Interim Financial Statements,” and requires the direct effects of
      accounting principle changes to be retrospectively applied. The existing
      guidance with respect to accounting estimate changes and corrections of errors
      is carried forward in SFAS 154. SFAS 154 is effective for accounting changes
      and
      corrections of errors made in fiscal years beginning after December 15, 2005.
      The Company does not expect the adoption of SFAS 154 to have a material effect
      on its financial statements.




F-29
 **COMPUTER
              NETWORKS & SOFTWARE, INC.** **NOTES
                    TO FINANCIAL STATEMENTS (CONTINUED)**
 **DECEMBER
                  31, 2005 AND 2004**




**NOTE
      3-**  **PROPERTY
      AND EQUIPMENT**




Property
      and equipment consist of the following as of December 31, 2005 and
      2004:




**Estimated
                  Useful****Lives
                  (Years****)**
              
              **2005**
              
              **2004**Computer
                  equipment
              
              
              3
              
              $
              193,874
              
              $
              181,330Furniture
                  and fixtures
              
              
              5
              
              
              74,522
              
              
              63,343Leasehold
                  improvements
              
              
              5
              
              
              15,750
              
              
              15,750284,146
              
              
              260,423Less:
                  Accumulated depreciation and amoritization
              
              (198,511
              )
              
              (147,439
              )Total,
                  net
              
              
              
              
              $
              85,635
              
              $
              112,984




Depreciation
      expense was $51,072 and $60,165 for the years ended December 31, 2005 and 2004,
      respectively.




**NOTE
      4-**  **LINE
      OF CREDIT**




On
      June
      27, 2003, the Company and United Bank (the “Bank”) entered into a Revolving
      Demand Commercial Note (the “Line of Credit”) in the original amount of
      $1,250,000. Borrowings under the Line of Credit accrue interest, due monthly,
      at
      the higher of the Bank’s prime rate plus 1% per annum (8.25% and 6% as of
      December 31, 2005 and 2004, respectively). The Line of Credit is secured by
      substantially all assets of the Company, and is guaranteed by the Company’s
      stockholders. The Line of Credit was modified by the First Modification and
      Extension Agreement dated June 30, 2004, the Second Increase, Modification
      and
      Extension Agreement dated as of October 31, 2004, the Third Modification and
      Extension Agreement dated as of December 15, 2004 and the Fourth Increase,
      Modification and Extension Agreement dated May 31, 2005. The fourth extension
      extended the maturity date of the Line of Credit to May 31, 2006 and increased
      the Line of Credit to $1,500,000.




The
      balance of the Line of Credit as of December 31, 2005 and 2004 was $1,498,253
      and $946,717, respectively. Interest expense on the Line of Credit for the
      years
      ended December 31, 2005 and 2004 was $79,145 and $50,193, respectively.




The
      Line
      of Credit requires the Company to maintain certain financial covenants such
      as
      the Current Ratio being 1.25 to 1.00 or greater; the Debt to Equity Ratio being
      2.00 to 1.00 or less; and a Tangible Net Worth Ratio being greater than or
      equal
      to $500,000. The Company was not in compliance with any of these covenants
      and
      received a waiver from the Bank upon providing additional collateral for the
      Line of Credit.




F-30
 **COMPUTER
              NETWORKS & SOFTWARE, INC.** **NOTES
                    TO FINANCIAL STATEMENTS (CONTINUED)**
 **DECEMBER
                  31, 2005 AND 2004**


**NOTE
      5-**  **NOTE
      PAYABLE**




The
      Company has a note payable with the Bank for an original amount of $250,000
      (the
“Note”). The Note requires monthly principal payments of $6,944, plus interest
      at the Bank’s prime rate plus .5% per annum (7.75% and 5.75% at December 31,
      2005 and 2004, respectively). The Note is secured by substantially all of the
      assets of the Company and is guaranteed by the Company’s stockholders. Any
      outstanding principal balances and accrued interest are due in July
      2007.




As
      of
      December 31, 2005, the repayment schedule of the Note for the next two years
      and
      in the aggregate are:




2006
              
              $
              83,3282007
              
              
              48,617131,945Less:
                  current portion
              
              
              (83,328
              )Long-term
                  portion
              
              $
              48,617




Interest
      expense for the years ended December 31, 2005 and 2004 were $11,820 and $5,240,
      respectively.




**NOTE
      6-**  **SHAREHOLDERS’
      EQUITY**




***Common
      Stock***




At
      December 31, 2005 and 2004, there are 100 shares of no par value stock
      authorized, issued and outstanding




No
      shares
      were issued for the years ended December 31, 2005 and 2004.




**NOTE
      7-**  **RELATED
      PARTY TRANSACTIONS** ****




In
      2004,
      the Company advanced $19,563 to a company under common ownership of CNS. In
      2005, the Company advanced an additional $380,300 for a total amount outstanding
      of $399,863. These advances were made with no particular terms of repayment
      and
      no stated interest rate. The Company has classified this as a current asset,
      and
      the advance was repaid this amount in January 2006.




F-31
 **COMPUTER
              NETWORKS & SOFTWARE, INC.** **NOTES
                    TO FINANCIAL STATEMENTS (CONTINUED)**
 **DECEMBER
                  31, 2005 AND 2004**


**NOTE
      8-**  **COMMITMENTS**




**Rental**




The
      Company leases office space under an operating lease that has initial or
      remaining non-cancelable lease terms and expires in October 2007. The lease
      agreement provides for an annual 3% escalation of the base rent. As of December
      31, 2005, the following presents the approximate future minimum lease payments
      required under this lease:




**For
                  the Years Ended****December
                  31,**2006
              
              $
              98,0002007
              
              
              84,000$
              182,000




Rent
      expense for the years ended December 31, 2005 and 2004 was $114,132 and $92,810,
      respectively.




In
      April
      2005, the Company entered into a Settlement Agreement and General Mutual Release
      with a vendor, whereby the Company agreed to a one-time payment in the amount
      of
      $17,500 in exchange for a full release of any and all present and future claims
      arising out of a recruitment agreement entered into between the companies.




**Other**




The
      Company as of December 31, 2005, had outstanding $46,452 in legal fees in
      connection with the merger between the Company and SDAC. Upon the closing of
      the
      merger between the parties on January 11, 2006, the liability was assigned
      by
      the attorneys from the Company to the three former shareholders of the Company,
      individually. The Company as of December 31, 2005 does not reflect this
      liability in its balance sheet.




**NOTE
      9-**  **INCOME
      TAXES**




During
      the years ended December 31, 2005 and 2004, the Company adjusted its built-in
      gains tax accrual by $100,000 and $27,000 based on the amounts shown on the
      2003
      income tax return. This change in estimate was reported as an income tax benefit
      on the statement of operations during the years ended December 31, 2005 and
      2004, respectively.




F-32
 **COMPUTER
              NETWORKS & SOFTWARE, INC.** **NOTES
                    TO FINANCIAL STATEMENTS (CONTINUED)**
 **DECEMBER
                  31, 2005 AND 2004**




**NOTE
      10-**  **DEFINED
      CONTRIBUTION PLAN**




Effective
      January 1, 2003, the Company adopted a defined contribution 401(k) profit
      sharing plan (the “Plan”) covering substantially all employees who have
      completed three months of service an attained the age of 21. Participants may
      make voluntary contributions to the Plan up to the maximum amount allowable
      by
      law, but not to exceed 25% of their annual compensation. Company contributions
      to the Plan are at the discretion of management and vest to participants ratably
      over a two-year period. The Company recorded contributions to the Plan of
      $49,136 and $45,204 during the years ended December 31, 2005 and 2004,
      respectively.




**NOTE
      11-**  **SUBSEQUENT
      EVENTS** ****




The
      Company and its stockholders entered into an agreement and plan of
      reorganization with SDAC and CNS Acquisition Corp. The transaction was completed
      on January 11, 2006 and upon the completion of this transaction, the CNS
      Acquisition Corp. was merged with and into the Company, with the result that
      the
      Company became a wholly-owned subsidiary of SDAC. The Company’s shareholders in
      this transaction received stock and warrants in SDAC and cash.





F-33