**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 Number: 000-32355





**CYOP
      SYSTEMS INTERNATIONAL INCORPORATED**


(Name
      of
      small business issuer in its charter)


Nevada


(State
      or
      other jurisdiction of incorporation or organization)





98-0222927


(I.R.S.
      Employer Identification Number)





Unit
      A


1022
      6th
      Street - Unit A


Hermosa
      Beach, California


90254


(Address
      of principal executive offices)


(310)
      691-2585


(Issuer's
      telephone number)





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





Securities
      registered under Section 12(g) of the Exchange Act:  Common
      Shares





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.


o
      Yes x No





Check
      if
      there is no disclosure of delinquent filers in response to Item 405 of
      Regulation S-B contained in this form, and no disclosure will be contained,
      to
      the best of Issuer'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. x





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





The
      issuer’s revenues for its most recent fiscal year were $8,138.





The
      aggregate market value of the voting and non-voting stock held by non-affiliates
      of the registrant was approximately $2,342,303 computed by reference to the
      price at which the common equity was sold as of May 15, 2006. Shares of common
      stock held by each officer and director and by each person who owns five percent
      or more of the outstanding common stock have been excluded from this calculation
      as such person may be considered to be affiliated with the Company. As of May
      15, 2006, the number of shares outstanding of the registrant's Common Stock
      was
      333,498,160.





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









**TABLE
      OF CONTENTS**




**PART
                I**
            3Item
                1. Description of Business
            3Item
                2. Description of Properties
            11**PART
                II**
            12Item
                5. Market for Common Equity and Related Stockholder
                Matters
            12Item
                6. Management’s Discussion and Analysis or Plan of
                Operations
            14Item
                7. Financial Statements
            18Item
                8. Changes in and Disagreements With Accountants on Accounting and
                Financial Disclosure
            39Item
                8A. Controls and Procedures
            39**PART
                III**
            39Item
                9. Directors and Executive Officers of the Registrant.
            39Item
                10. Executive Compensation
            43Item
                11. Security Ownership of Certain Beneficial Owners and
                Management
            44Item
                12. Certain Relationships and Related Transactions
            46Item
                13. Exhibits
            48Item
                14. Principal Accounting Fees and Services
            51




2


**PART
      I**





Item
      1.
      Description of Business





The
      Company was incorporated on October 29, 1999 in as Triple 8 Development
      Corporation under the laws of the State of Nevada to engage in any lawful
      business or activity for which corporations may be organized under the laws
      of
      the State of Nevada. The Company changed its name to CYOP Systems International
      Incorporated on October 30, 2000. On November 3, 2000, the Company acquired
      100%
      of the issued and outstanding shares of CYOP Systems Inc., Barbados (“CYOP
      Barbados”). This transaction was accounted for as a reverse acquisition and a
      recapitalization.





CYOP
      Barbados was incorporated under the laws of Barbados on June 20, 2000. On August
      31, 2000, CYOP Barbados acquired 100% of the issued and outstanding shares
      of
      Moshpit Entertainment Inc., Canada (“Moshpit”), a company incorporated under the
      laws British Columbia, Canada. CYOP Barbados sold 100% of the issued and
      outstanding shares of Moshpit by an agreement dated April 1, 2002 to a former
      stockholder and the sole director. On April 29, 2005 the Company incorporated
      Red Felt Software under the laws of the United Kingdom.





Business





The
      Company, and its subsidiaries, is a provider of multimedia transactional
      technology solutions and services for the entertainment industry. The Company’s
      range of products and services include financial transaction platforms for
      on-line video games, licensed online gaming software and integrated e-commerce
      transaction technology for on-line merchants.





In
      2005,
      the Company embarked on an aggressive strategy to build up its services and
      productions capabilities by embarking on a number of new ventures. These
“business centres” are all subsidiaries of the Company and join the existing
      divisions of the Company. They are as follows:





CrediPlay
      Transaction Software





The
      Company has licensed a proprietary technology called CrediPlay, which
      essentially combines online games of skill to a database platform that allows
      players to compete against each other for money. It also houses a transaction
      platform, not unlike a virtual bank, which allows players to deposit money
      using
      their credit cards, pay for the games and ask to withdraw any winnings instantly
      in real time. This software is utilized as the ecommerce backend for the
      Company’s games and websites.





SkillArcade.com





www.skillarcade.com
      is CYOP’s central games portal; an online games destination where people play
      popular skill games against other players and compete in tournaments to win
      real
      money prizes. Games on the site include over the Internet, including Puzzle,
      Board, Trivia, Learning games, Action Games, Strategy, & Role Play games.
      Online skill games are games that have been formatted so that the rules of
      the
      game eliminate elements of luck, without changing the fundamental nature of
      what
      makes the game enjoyable and appealing. Players win cash and/or prizes based
      on
      one or more skills including; hand-eye coordination, reaction time, dexterity,
      spatial memory, long-term memory, pattern recognition, organizational skills,
      strategic planning, game play knowledge, general knowledge and intelligence.





Each
      contestant pays an entry fee to enter a tournament and the winner collects
      all
      the entry fees paid minus a tournament maintenance fee to CYOP Systems for
      providing the games, online tournament software and ecommerce banking.





The
      fees
      collected by CYOP range between $0.25 cents to $2.00 per game per player. This
      system of micro-payments is based on users playing multiple games over a
      user-session online. Tournaments generally run no longer than five minutes
      and
      involve five people on average. CYOP’s current hardware configuration can
      currently operate 10,000 tournaments consecutively at any given time, and the
      Company has the ability to increase that to 100,000 tournaments consecutively
      in
      the near future.





3


The
      Company also allows players to play on SkillArcade.com for free, and is planning
      to monetize these customers by placement of advertising on the website and
      by
      converting the free-player database into cash-players through aggressive
      interactive marketing strategies. SkillArcade.com currently has about 250,000
      members.





CrediPlay.com
      Network





The
      games
      found on SkillArcade.com are available to third party operators whereby the
      third party operator pays a set up fee, and an ongoing percentage of the net
      revenues to CYOP. The third party operator is responsible for marketing the
      licensed website and for driving traffic that may be converted into cash play.
      Licensing in this manner builds brand awareness quickly and is commonplace
      throughout the online gaming industry.





CrediPlay.cn





The
      Company reached an agreement to feature CYOP's licensed pool and poker games
      on
      an exclusive basis with SINA.com Online, the North American subsidiary of SINA
      Corporation; a leading online media company and value-added information service
      provider for China and for global Chinese communities.





The
      executed joint marketing agreement provides exclusivity to CYOP to be the
      provider of online poker and online billiards type games on Game Channel pages
      throughout the SINA’s network sites, including mainland China, United States,
      Hong Kong and Taiwan. The expected launch date is targeted for the first quarter
      of 2006 on SINA’s network.





SINA
      Corporation is the leading online media company and value-added information
      service provider for China and for Chinese communities worldwide and has more
      than 100 million registered users. With the most recognized Internet brand
      in
      China, SINA has established a network of localized Web sites that target Greater
      China and overseas Chinese communities. SINA is a publicly traded company on
      the
      NASDAQ has close to 2,000 employees in its offices in six cities throughout
      Asia
      and the U.S. and maintains a network of four localized Web sites. At December
      31, 2005, SINA generated annual net revenue of $193.5 million.





The
      games
      on the site are “Play-for-Free” meaning that customers may play the games and
      enter tournament for free after joining the site and providing personal data
      about themselves.





The
      Company intends to monetize the site by selling advertising on the site and
      within the games, by selling sponsorship opportunities and by renting out the
      player database to third party advertisers.





Red
      Felt
      Software





The
      Company launched www.redfeltsoftware.com through a newly formed United Kingdom
      Company, Red Felt Software Ltd., which has been organized as a wholly owned
      subsidiary of CYOP Systems International Incorporated.





With
      Red
      Felt Software Ltd., we will pursue in the iGaming market place turnkey licensing
      opportunities for enterprises wishing to enter and capitalize in this market
      space. The United Kingdom is being recognized as a jurisdiction embracing and
      regulating this sector.





We
      recently announced an executed agreement with FutureBet Systems Inc., to
      purchase 40 online casino games and SportsBook software and platform for
      $1,200,000.00.





We
      purchased the software code of FutureBet system “V.2.4 which includes software
      for various casino table games and slot machines as well as Internet sports
      wagering software. We agreed to pay FutureBet $650,000 as follows: (i) $325,000
      upon closing, (ii) installments of $30,000 thirty (30) days after the closing
      and $40,000 sixty (60) days after the closing, and (iii) the balance of $255,000
      to be paid upon the effectiveness of a registration statement and concurrent
      funding with Cornell Capital Partners, LP (“Cornell Capital”) due payable no
      later than June 1, 2006. Should we default in any of the payments or issuance
      of
      shares under the Agreement then the rights to the source code shall revert
      back
      to FutureBet. Additionally, we will issue to FutureBet upon effectiveness of
      the
      registration statement, $550,000 in the Registrant’s common stock or $550,000
      cash at our discretion. The shares that may be issued to FutureBet will be
      registered on registration statement to be filed. Prior to any stock issuance,
      FutureBet will enter into a twelve-month lock-up agreement which will limit
      the
      amount sold on a monthly basis dependent on market volume.





4


Some
      of
      the casino features are an icon driven menu system, an intuitive Quick Menu
      that
      allows the user to switch to different games in a single click, higher graphics
      resolution and many other industry revolutionizing features. The software is
      offered in an Instant Play/No download Flash version and a stand-alone Windows
      application that is the smallest download online.





The
      games
      have been translated in the following 9 languages: Japanese, Spanish, French,
      Dutch, German, Italian, Korean, Russian, and English.





Casino
      games that will be in the Company’s tournament software include:




·  Blackjack


·  American
      Roulette


·  European
      Roulette


·  Mini-Baccarat


·  Deuces
      Wild Video Poker


·  Jacks
      or
      Better Video Poker


·  Joker
      Wild Video Poker


·  Classic
      Slots


·  Cash
      Bash
      Slots


·  Caribbean
      Poker


·  Ride
      On
      Poker


·  Pai
      Gow
      Poker


·  Craps


·  Casino
      War


·  Red
      Dog


·  Three
      Card Poker




The
      Internet Sports Wagering Software covers North American and International sports
      and events. The software purchase also includes a full suite of reporting tools
      designed especially for licensing to third parties.





Online
      gaming is forecasted to be an industry segment with significantly above-average
      growth. Gaming consultants Christian Capital forecast that gaming revenue will
      rise to $22.7 billion by 2009, from $8.2 billion in 2004, an annualized growth
      rate of 22 percent. Online gaming is also expected to seize an 8.1% share of
      the
      worldwide global gaming market according to www.GamingPublic.com.





Red
      Felt
      Software is a simple non-download gaming system that can be easily executed
      and
      distributed to end-users by any webmaster or administrator. The Company also
      provides the necessary management experience and support to its licensees and
      their customers.





The
      Company intends to begin marketing activities with respect to the licensing
      of
      the software to existing portals online gaming operators as well as to
      traditional casinos. Furthermore, the Company intends to increase the sales
      force solicit licensing agreements with companies that have global
      clientele.





These
      games are being made available to third party operators whereby they pay
      one-time customization fees, followed by an ongoing percentage of the net
      revenues to CYOP. The third party operator is responsible for marketing the
      licensed website and for driving traffic that may be converted into cash play.
      Licensing in this manner builds brand awareness quickly and is commonplace
      throughout the online gaming industry.





5


Red
      Felt
      Software Ltd. provides the following services to licensees in exchange for
      the
      upfront set up fee, a percentage of the net revenue and a monthly hosting
      fee:


·  Fully
        built gaming site
 ·  Non-Download
        gaming software
 ·  Real
        Time
        live reporting
 ·  Hosting
        & Server monitoring
 ·  Credit
        Card Processing


TenseatPoker.com





The
      TenSeatPoker.com site will be the flagship play-for-cash poker site featuring
      the Company’s licensed poker games, and will be marketed with the goal of
      establishing brand recognition and driving revenues from targeted audience
      areas. Operated through its subsidiary, Red Felt Software Ltd., the Company
      announced an executed agreement with Action Poker Gaming Inc., to license their
      online poker system.





Action
      Poker Gaming Inc., (APG) is a wholly owned subsidiary of Las Vegas From Home.com
      Entertainment Inc. (TSX VENTURE: LVH; OTCBB: LVFHF; BERLIN:LVH)





The
      software includes classic poker games of Texas Hold’em, Omaha and 7 Card Stud,
      as well favorites such as Omaha Hi. Players will be able to pick from ring
      game
      action, daily tournaments with entries to the World Poker Tour, the World Series
      of Poker and all the major events.





Under
      the
      terms of the agreement, APG will be integrating the software at TenSeatPoker.com
      and will also be supplying CYOP with Chinese cash play versions of the software
      later in 2006.





The
      Company has negotiated with a number of payment processors to ensure global
      payments including the ability to leverage Check 21, laws regulating paper
      drafts, and new technologies to provide the optimal online payment processing.
      This also includes direct debit from banking institutions, major credit cards
      and multiple currencies.





More
      than
      200 online poker sites collectively are generating about $3 billion a year
      in
      revenues, equal to 60% of last year's $5 billion in gambling revenues from
      all
      of the Las Vegas “Strip”. An estimated 1.7 million players are active online;
      meaning they've played Internet poker in the past six months and about 150,000
      people play on an average day, according to PokerPulse.com.





The
      Company plans to derive revenues from a percentage of the rake and through
      processing fees. Rake is the percentage of the pot that the house collects
      as
      compensation for hosting the game. The maximum rake in ring games is $3, with
      a
      minimum pot size needed for any rake. Tournament style games do not have a
      rake,
      but have an entry fee.





TenSeatPoker.com
      Chinese





The
      Company will be localizing its TenSeatPoker.com cash play site into traditional
      and simplified Chinese.





The
      TensSeatPoker.com site will be translated, leveraging our tournament sponsorship
      and advertising model with the design to convert players from third-party
      portals in Asia to a cash play gaming site. The Company is continuing to seek
      out new partners in Asia who have large vertical portals and who are looking
      to
      add content and functionality to their web properties.





6


Even
      with
      its minimal penetration rate, China already ranks second in the world in total
      Internet users. According to eMarketer, during the 2004-2008 period, the U.S.
      Internet population will grow at a 2.6% annual rate. In contrast, China's
      Internet population will grow during the 2004-2008 period by over 14.3% on
      an
      annual basis.





The
      Company plans to derive revenues from a percentage of the rake and through
      processing fees. Rake is the percentage of the pot that the house collects
      as
      compensation for hosting the game. The maximum rake in ring games is $3, with
      a
      minimum pot size needed for any rake. Tournament style games do not have a
      rake,
      but have an entry fee.





CrediPlay
      M Games





The
      Company has begun preliminary talks with mobile developers into launching mobile
      games. The Company has long realized the potential for wireless gaming and
      in
      now doing due diligence on and meeting with mobile platform developers. While
      games have been provided as a value added service so far, there is a move
      towards gearing up both subscription and pay-for-play skill based wireless
      applications. CYOP intends to be the leader in pay for play skill wireless
      gaming, and is actively working with strategic partners to exploit this niche
      over the next 12 months.





Carriers
      are rolling out packages that place emphasis on games, and value added services
      such as SMS, stock quotes and email. The growth of wireless gaming is the next
      step in the evolution of the video game industry. While Japan was the leader
      in
      wireless gaming technology, Europe has been getting a good reputation in
      developing SMS, MMS and Java games for a variety of Wireless ASP’s looking to
      develop their content. Now the US market is heating up, and both carriers and
      developers are determining how they may profit by the explosion of SMS (“Short
      Message Service”) and MMS (“Multimedia Messaging”) technology in the North
      American marketplace. While games have been provided, as a value added service
      so far, there is a move towards gearing up both subscription and casino based
      wireless applications.




Gaming
      on
      mobile phones and wireless devices is set to generate revenues of US$19.3
      billion by 2009, according to a new report from Juniper Research, and in the
      short term the report said 2005 would see total mobile gambling revenues pass
      the US$2 billion mark. The Asia-Pacific region is expected to contribute the
      largest share of total gross revenues with 39% of the market and Europe follows
      closely behind with a 37% market share, with the US making up the majority
      of
      the remainder.





The
      Yankee Group says there are already 27 million U.S. users playing games on
      their
      handsets, and CYOP intends to introduce its skill gaming model to this growing
      segment.





The
      Company intends to monetize its M-games through licensing to third parties
      and
      from marketing to mobile players through its proprietary gaming
      portals.





Credit
      Card Processing Fees





Our
      transaction network receives credit card processing fees for every deposit
      of
      cash into a member’s financial account. This e-commerce transactional network is
      also the backbone for additional ventures, which stem from the CrediPlay
      network.





Non-Competitive
      Strategy





We
      are
      committed to the Linux open source movement, which allows our members to share
      and contribute to the development of games. Our members will have access to
      all
      information surrounding game development and game hosting. All resources are
      available to members except the technology behind our processing
      network.





We
      allow
      members to use our technology to become pay-for-play game developers and game
      server operators. This open source strategy creates new business and integrates
      and binds members to our transaction network.




7


We
      developed the CrediPlay network as a new playing field for the growing number
      of
      people playing games on line.





Distribution
      Methods Of Our Products And Services





Game
      And
      Information Portals





The
      dominant gaming portals are located in North America and are in the English
      language. They include GameSpy, MSN Game Zone, Yahoo! Games, Lycos Games, and
      Pogo (Electronic Arts). Stung by the overall advertising crunch that has shut
      down many content sites, operators of free game sites are scrambling for ways
      to
      make a consistent profit. The portals that survive will be those that form
      both
      short and long-term alliances with other content and service providers, so
      they
      can offer new revenue-generating services such as e-commerce, subscription
      fees,
      placement fees, and premium content. Those are our primary targets. We are
      targeting potential licensees because:





CYOP’s
      intent is to partner with portals and to license to third parties in this market
      place because:





1.
            Existing
                traffic - these types of sites are well established and they aggressively
                market themselves to keep their unique and returning visitor numbers
                high.


2.
            Existing
                databases - these sites have developed large databases of members
                with
                sophisticated information.


3.
            Software
                built in English - CrediPlay has been designed in English, so integration
                is immediate.


4.
            Proximity
                for business development.


5.
            Instant
                revenues - CYOP does not have to spend great amount of resources
                marketing.


6.
            The
                portals need new revenue sources.





Asia/Europe





We
      believe that the opportunity to develop a gaming portal exists in the emerging
      markets of Asia and Europe. Marketing to these relatively under-developed areas
      of the e-commerce world costs a fragment of the same in North America. China,
      Taiwan and Korea are being made a priority as they have a high proportion of
      gamers, strong Internet growth and readily disposable income. Europe continues
      to increase in online numbers and the Company has recently localized the
      software into German, French and Italian. Furthermore, we have partnered with
      Vertical Portals in Europe to increase our exposure.





CYOP
      plans to partner with companies in each market, and to localize its proprietary
      portal and systems into respective languages. The partner companies will be
      expected to handle local issues and drive marketing efforts.





A
      summation of why CYOP intends to build global portals is as
      follows:





1.
            Higher
                share of Network Maintenance Fees through Joint Venture
                agreements.


2.
            First
                in Market - North America is approximately two to five years ahead
                of the
                rest of the Internet world, and there exists an opportunity for start-up
                ventures.


3.
            Relative
                ease and low cost of marketing - as compared to the
                Americas.


4.
            Long-term
                revenues - Future growth in the industry will be driven by extra-American
                countries.





Our
      product of providing on-line access to pay-for-play video gaming is not
      distributed in the conventional sense. Rather, video gamers log on to our
      Internet site and register at one of the membership levels to enter play. We
      believe that news of our unique site and pay-for-play concept will spread
      quickly through the on-line gaming community. If we have available capital,
      we
      also propose to advertise at venues such as the computer game developers
      conference, electronic entertainment exposition and various on-line traditional
      video game sites.





CYOP
      Systems And The Video Game Industry





We
      intend
      to position ourselves as an asset to all industry players through an integrated
      transaction technology.





8


Game
      console developers are creating web browser capabilities within their next
      generation systems that will enable players to connect to the CrediPlay
      network.





Transaction
      technology within the CrediPlay network creates a means by which game developers
      can create pay-for-play versions of their games. Developers can utilize the
      CrediPlay network to market and promote their games.


CYOP
      has
      created a new business model for game server operators. By simply utilizing
      the
      CrediPlay network games third party servers, operators can host pay-for-play
      video games, generating a significant additional source of revenue.





We
      believe professional game leagues are limited to physical tournament settings
      or
      reliance on sponsorships for financing. The CrediPlay network creates a 24-hour
      market of interactive video gaming where players enter tournaments through
      their
      own financial accounts.





How
      We
      Plan To Expand Our Business Model





We
      intend
      to capitalize on our experience in the on-line gaming Industry by leveraging
      our
      experience and contacts in this, the most profitable sector of the global
      digital economy. With the ability to integrate with popular online games like
      bingo, we believe that we have the opportunity to gain acceptance by licensing
      its software to the mainstream Internet portals and games sites as a viable
      on
      going alternative to advertising and subscription-based revenues





Portals
      such as Bingo.com have been depending on the Internet advertising model as
      their
      sole source of revenues with moderate success. The addition of the
<Pay-for-Play> model allows these portals to further capitalize on their
      existing database; a demographic of repeat game players. The ease of integration
      allows companies to add to their core business without any software development
      costs or expensive downtime. One hundred percent automated, the system registers
      players in tournaments, runs the tournaments and pays the winners
      instantly.





Operations





While
      we
      do have a history of revenues we also have a history of losses since our
      inception. If we are unable to generate enough revenue and become profitable,
      our company will fail.





Risk
      factors





You
      should carefully consider the risks described below and the other information
      in
      this disclosure and any other filings we make with the SEC in the future before
      investing in our common stock. If any of the following risks occur, our
      business, operating results and financial condition could be seriously harmed.





Operations





While
      we
      do have a history of revenues we also have a history of losses since our
      inception. If we are unable to generate enough revenue and become profitable,
      our company will fail.





Management





While
      our
      management has signed agreements they are under no contractual obligation to
      remain with us and their departure could cause our business to fail. Our
      directors and our officers have varied business interests and are working for
      other companies from time to time. Members of management have signed written
      employment agreements with us only as at January 1, 2003 and have deferred
      fees
      as we have not been able to afford to pay management members. As at January
      2005, these fees will be accrued or paid out to ensure management devotes
      necessary time and energy to the Company.





9


Competition





Our
      competitive position in the on-line pay for play video gaming industry is
      dependent on our ability to market our system and acquire traffic and
      affiliates. Even though we believe our system is world class for delivering
      pay
      for play games online, it is possible we could receive intense competition
      from
      better financed companies with in-house software development capabilities who
      are able to offer online pay for play video games.





Financing





We
      are
      highly dependent upon our management for financing our software development
      and
      ongoing operations. We were cleared by the Securities exchange Commission
      (“SEC”) and National Association of Securities Dealers (“NASD”) in September
      2002 to have our securities quoted in the OTC BB. We have just begun earning
      revenues (“NMF”) through the use of our pay for play software. While we have
      been and continue to be dependent upon management for loans to our company
      to
      fund our operations. The Company in December 2003 negotiated a financing with
      Cornell Capital LP of up to five million dollars ($5,000,000). The financing
      is
      based on a draw-down and the purchase price is set at 98% of the Market Price.
      This was completed in the fall of 2004.





On
      December 15, 2005, the Company entered into a Securities Purchase Agreement
      with
      Cornell Capital LP. Pursuant to the Securities Purchase Agreement, Cornell
      Capital Partners purchased secured convertible debentures in the original
      principal amount of $1,350,000. The debentures have a three-year term and
      accrues annual interest of 10%. The $700,000 under the secured convertible
      debenture was disbursed to us upon the execution of the Securities Purchase
      Agreement on December 15, 2005. The balance will be disbursed upon the discharge
      of certain conditions placed upon the Company in the SPA. The debentures mature
      on December 15, 2008. The secured convertible debentures may be redeemed by
      us
      at any time, in whole or in part. We will pay a redemption premium of 20% of
      the
      amount redeemed in addition to such redemption. The debentures are convertible
      from time to time into our common stock of by Cornell for at the price per
      share
      of an amount equal to ninety percent (90%) of the lowest average volume weighted
      average price of our Common Stock, as quoted by Bloomberg, LP, for the thirty
      (30) trading days immediately preceding the conversion date. We granted Cornell
      a security interest in certain of its assets pursuant to amended and restated
      security agreement dated December 15, 2005. Cornell also received five year
      warrants to purchase 2,970,000 shares of common stock, 1,350,000 shares at
      an
      exercise price of $0.05 per share and 1,620,000 shares at an exercise price
      of
      $0.06 per share.




On
      September 2, 2005, we entered into an Equity Distribution Agreement with Cornell
      Capital Partners. Under the Equity Distribution Agreement, CYOP may issue and
      sell to Cornell Capital Partners common stock for a total purchase price of
      up
      to $15,000,000. For each share of common stock purchased under the Equity
      Distribution Agreement, Cornell Capital Partners will pay us 98% of the lowest
      volume weighted average price of our common stock as quoted by the
      Over-the-Counter Bulletin Board during the five trading days immediately
      following the notice date. Cornell Capital Partners will also retain 4% of
      each
      advance under the Equity Distribution Agreement. The amount of each cash advance
      is subject to a maximum amount of $800,000, with no cash advance occurring
      within seven trading days of a prior advance. Cornell Capital Partners received
      two warrants to purchase 27,500,000 shares of our common stock as a one-time
      commitment fee under the Equity Distribution Agreement. The first warrant for
      15,000,000 shares of our common stock has an exercise price equal to $0.05.
      The
      second warrant for 12,500,000 shares of our common stock has an exercise price
      equal to $0.06. The warrants expire three years from September 2, 2005. The
      Equity Distribution Agreement with Cornell Capital Partners was terminated
      pursuant to a Termination Agreement dated December 15, 2005.




In
      addition, on September 2, 2005, we entered into a Securities Purchase Agreement
      with Cornell Capital Partners. Pursuant to the Securities Purchase Agreement,
      Cornell Capital Partners purchased a secured convertible debenture in the
      original principal amount of $650,000. Cornell surrendered this $650,000
      convertible debenture plus unpaid and accrued interest totaling $19,660 in
      consideration in part for the Debentures that were issued.





Online
      pay for play video gaming is attracting the interest of large well financed
      potential competitors. Our common shares are quoted on the OTC BB. Persons
      who
      acquire our common shares have limited liquidity or opportunity to sell their
      shares and may not be able to recover any funds, which have been invested in
      our
      common shares. Our common shares fall within the definition of a penny stock.
      All transactions involving our shares will be subject to special rules
      established by the Securities and Exchange Commission which require brokers
      and
      dealers to complete due diligence on penny stocks being acquired on behalf
      of
      clients. These requirements are onerous and may make an investment in penny
      stocks less appealing to certain investors, which could affect your ability
      to
      sell our common shares.





10


Stock
      Price Volatility





The
      market price of CYOP’s common stock has fluctuated significantly in the past,
      and is likely to continue to be highly volatile. The Company cannot provide
      assurance that the sales price of its common stock will not fluctuate or decline
      significantly in the future. In addition the U.S. equity markets have from
      time
      to time experienced significant price and volume fluctuations that have
      particularly affected the market prices for the stocks of technology companies.
      These broad market fluctuations may materially adversely affect the market
      price
      of CYOP’s common stock in the future. Such fluctuations and variations may be
      the result of changes in CYOP’s business, operations or prospects, announcements
      of technological innovations and new products by competitors, CYOP or its
      competitors entering into new contractual relationships with strategic partners,
      proposed acquisitions by CYOP or its competitors, financial results that fail
      to
      meet public market analyst expectations of performance, regulatory
      considerations and general market and economic conditions in the U.S. and
      throughout the world.





Dilutive
      Effect of Future Sales of Securities





Future
      sales of substantial amounts of CYOP’s Common stock in the public market could
      adversely affect the market price of the Common stock and shareholders could
      experience dilution in their stock ownership of the Company and in the value
      of
      their shares. Dilution is a reduction in the value of the holder’s investment
      measured by the difference between the purchase price of the shares of the
      Common stock and the net tangible book value of the shares after the purchase
      takes place. As at December 31, 2005 there were 333,498,160 shares of Common
      stock issued and outstanding.





Experience





We
      have
      significant experience operating online pay for play video games and processing
      online financial transactions. We have tested our operating system and believe
      it will accommodate the expected commercial traffic at our website however,
      without operating high volumes of traffic our system could result in a breakdown
      slowing our operations with the resultant lack of business and
      revenue.





Future
      Capital Needs





CYOP
      has
      capital requirements for such applications as geographical expansion, marketing
      and advertising, development of new applications, expansion and upgrading of
      infrastructure and completing joint venture agreements with potential European
      and Asian partners. CYOP may not be successful in generating sufficient cash
      from operations for those purposes and will need to utilize additional equity
      capital. Failure to generate sufficient cash flows may require CYOP to revise,
      delay or abandon some or all of its development and expansion plans or otherwise
      forego market opportunities and may make it difficult to respond to competitive
      pressures, any of which could have a material adverse effect on CYOP’s business,
      results of operations and financial condition.




Item
      2.
      Description of Properties





At
      December 31, 2005, we maintained an office at 1022 6th Street - Unit A, Hermosa
      Beach, California. This office space is provided free of charge by one of our
      Directors. Monthly lease payments on this office space are zero. These
      facilities are temporary until our revenue exceeds our expenses. All our
      infrastructure and equipment is located in the Westin Building in Seattle,
      Washington on a co-location agreement for $1,500.00 per month.





11





**PART
      II**





Item
      5. Market
      for Common Equity and Related Stockholder Matters




**(a)
      Market Information**




Our
      stock
      began trading on the Over-the-Counter Bulletin Board in September 2002 under
      the
      symbol “CYOS.OB.”




The
      following table sets forth the high and low bid prices for our common stock
      for
      the periods indicated as reported by the NASDAQ Over-the-Counter Bulletin Board.
      The quotations reflect inter-dealer prices, without retail mark-up, mark-down
      or
      commission and may not represent actual transactions.




**YEAR
                2003**
            
            **High
                Bid**
            
            **Low
                Bid**Quarter
                Ended March, 31, 2003
            
            $
            0.0400
            
            $
            0.0060Quarter
                Ended June 30, 2003
            
            $
            0.0750
            
            $
            0.0070Quarter
                Ended September 30, 2003
            
            $
            0.3700
            
            $
            0.0090Quarter
                Ended December 31, 2003
            
            $
            0.1400
            
            $
            0.0330**YEAR
                2004**
            
            
            **High
                Bid**
            
            
            **Low
                Bid**Quarter
                Ended March 31, 2004
            
            $
            0.0450
            
            $
            0.0200Quarter
                Ended June 30, 2004
            
            $
            0.0330
            
            $
            0.0090Quarter
                Ended Sept. 30, 2004
            
            $
            0.0110
            
            $
            0.0018Quarter
                Ended Dec. 31, 2004
            
            $
            0.0043
            
            $
            0.0013**YEAR
                2005**
            
            
            **High
                Bid**
            
            
            **Low
                Bid**Quarter
                Ended March 31, 2005
            
            $
            3.36
            
            $
            0.0018Quarter
                Ended June 30, 2005
            
            $
            0.6000
            
            $
            0.0070Quarter
                Ended September 30, 2005
            
            $
            0.0566
            
            $
            0.022Quarter
                Ended December 31, 2005
            
            $
            0.0350
            
            $
            0.0018




**(b)
      Holders Of Common Stock**




As
      of May
      15, 2006, we had approximately 2,025 shareholders of our common stock and
      333,498,160 shares of our common stock were issued and outstanding. The transfer
      agent and registrar for our common stock is Nevada Agency and Trust Company.
      Their address is Suite 880, Bank of America Plaza, 50 West Liberty Street,
      Reno,
      Nevada 89501, and their telephone number is (775) 322-0626.




12


**(c)
      Dividends**




We
      have
      never declared or paid a cash dividend. There are no restrictions on the common
      stock or otherwise that limit the ability of us to pay cash dividends if
      declared by the Board of Directors. The holders of common stock are entitled
      to
      receive dividends if and when declared by the Board of Directors, out of funds
      legally available therefore and to share pro-rata in any distribution to the
      shareholders. Generally, we are not able to pay dividends if after payment
      of
      the dividends, we would be unable to pay our liabilities as they become due
      or
      if the value of our assets, after payment of the liabilities, is less than
      the
      aggregate of our liabilities and stated capital of all classes. We do not
      anticipate declaring or paying any cash dividends in the foreseeable
      future.




**(d)
      Equity Compensation Plan**




**Plan
                  Category**
              
              **Number
                  of**
                **Securities**
                **to
                  be Issued Upon**
                **Exercise
                  of**
                **Outstanding**
                **Options,**
                **Warrants
                  and**
                **Rights**
                **(a)**
              
              **Weighted**
                **Average**
                **Exercise
                  Price of**
                **Outstanding**
                **Options,**
                **Warrants
                  and**
                **Rights**
                **(b)**
              
              **Number
                  of**
                **Securities**
                **Remaining**
                **Available**
                **for
                  Future**
                **Issuance**
                **Under
                  Equity**
                **Compensation**
                **Plans**
                **(Excluding**
                **Securities**
                **Reflected
                  in**
                **Column
                  (a))**
                **(c)**Equity
                  compensation plans approved by security holders
              
              
              0
              
              $
              0
              
              
              0Equity
                  compensation plans not approved by equity holders
              
              
              45,000,000
              
              
              0.0187
              
              
              0Total
              
              
              45,000,000
              
              $
              841,500
              
              
              0




**(e)
      Description of Equity Compensation Plans**




*2003
      Consultant Stock Plan*




Our
      2003
      Stock Plan (the "2003 Plan"), adopted by the Company on October 21, 2003.
      Pursuant to the 2003 Plan, it is a ten (10) year plan to grant common shares
      or
      right to receive common shares by consultants (per individual agreement) to
      a
      maximum 2,500,000 shares (restated for the Company’s stock split). The allocated
      number of shares includes an indeterminate number of additional shares that
      may
      be issued to adjust the number of shares issued pursuant to the stock plan
      described herein as the result of any future stock split, stock dividend or
      similar adjustment of the registrant’s outstanding common stock.




13


The
      purpose of the 2003 plan is to advance the interests of the Company by helping
      the Company obtain and retain the services of persons providing consulting
      services upon whose judgment, initiative, efforts and/or services the Company
      is
      substantially dependent, by offering to or providing those person with
      incentives or inducements affording such persons an opportunity to become owners
      of capital stock of the Company.




On
      October 29, 2003, we filed with the SEC a registration statement on Form S-8
      for
      the purpose of registering the common shares issuable under the 2003 Plan under
      the Securities Act of 1933.




*2005
      Consultant Stock Plan*




Our
      2005
      Non-Qualified Stock Option Plan (the "2005 Plan"), adopted by the Company on
      February 18, 2005, is intended to promote the financial success and interests
      of
      the Company and materially increase shareholder value by giving incentives
      to
      the eligible officers and other employees and directors of and consultants
      and
      advisors to the Company and any present or future subsidiaries of the Company
      through providing opportunities to acquire stock in the Company.




We
      reserved a total of 40,000,000 common shares for issuance under the 2005 Plan.
      The Stock Plan provides for the grants of common stock. No awards may be issued
      after the ten year anniversary of the date we adopted the Stock Plan, the
      termination date for the plan.




On
      February 24, 2005, we filed with the SEC a registration statement on Form S-8
      for the purpose of registering the common shares issuable under the 2005 Plan
      under the Securities Act of 1933.




*Stand-Alone
      Grants*




From
      time
      to time our board of directors grants common share purchase options or warrants
      to selected directors, officers, employees, consultants and advisors in payment
      of goods or services provided by such persons on a stand-alone basis outside
      of
      any of our formal stock plans. The terms of these grants are individually
      negotiated.




Item
      6.
      Management’s Discussion and Analysis or Plan of Operations





The
      information contained in this Management's Discussion and Analysis of Financial
      Condition and Results of Operation contains "forward looking statements." Actual
      results may materially differ from those projected in the forward-looking
      statements as a result of certain risks and uncertainties set forth in this
      report. Although management believes that the assumptions made and expectations
      reflected in the forward looking statements are reasonable, there is no
      assurance that the underlying assumptions will, in fact, prove to be correct
      or
      that actual future results will not be materially different from the
      expectations expressed in this Annual Report. The following discussion should
      be
      read in conjunction with the audited Consolidated Financial Statements and
      related Notes thereto included in Item 8, with "Item 6. Selected Financial
      Data," with the Risk Factors section of Item 1, and with the Special Note
      regarding forward-looking statements included elsewhere in this report.





14


Overview





We
      have
      been primarily focused on developing channel partners and exploiting
      opportunities to drive traffic to our site. Management has financed most of
      our
      operations to date along with Cornell Capital Partners LP. However, management
      is not under any contractual obligation to provide continued funding. We will
      spend approximately $1 million in the next 12 months to maintain current
      operations at our current expenditure rate; not including any marketing
      initiatives or expansion plans. Additional funds in the amount of $1.5 million
      will be required for a complete launch of the Crediplay system including a
      full
      marketing budget. Executive and key personnel have executed management
      contracts; however fees and salaries have been accrued by the Company. To ensure
      retention of executive and key personnel the Company will again be paying fees
      and salaries or accruing them as necessary for 2006.





We
      anticipate contracting additional human resources as required during the next
      12
      months. We do not expect to acquire any material physical assets or significant
      equipment in the next 12 months. We will not be performing any significant
      research and development in the next 12 months as our pay for play software
      is
      complete and tested.





We
      launched our first pay-for-play online video game, Urban Mercenary in February
      2001. Recently we have begun distributing downloadable
      and streaming games from Atari thru an agreement with Atari Asia Pacific Pty.
      Ltd. (NASDAQ:ATAR). Merchant
      processing is done by Banner Bank.





In
      September 2002, we launched a suite of free and “pay for play” games including
      card, strategy, arcade, sports and multiplayer games, terminating our licensing
      contract with Bingo.com. Our proprietary site www.skillarcade.com as at
      December 31, 2005 has about 275,000 members, 250 affiliate sites and has
      processed since inception approximately 3.5 million transactions.





In
      order
      for our Company to expand its operations and realize profits from pay for play
      online video gaming a number of additional steps must be taken. We must continue
      to maintain and upgrade our software programs and our website. This is an
      ongoing month-to-month responsibility. Funds for this ongoing software
      maintenance have been budgeted, and are being loaned to our Company by
      management. In the future, the funds required for ongoing software maintenance
      will come from our equity financing or revenue from licensing fees or system
      maintenance fees from pay for play video gaming. Secondly, to increase our
      Company's exposure and attract players to our website we will be required to
      complete a full marketing launch of the Crediplay system. We anticipate that
      this marketing launch will cost approximately $1.5 million. Until we complete
      a
      marketing launch we cannot expect large volumes of players for our online pay
      for play video game. Revenues will be derived from licensing fees from third
      parties.





Results
      of Operations





Revenue





Revenue
      decreased to $8,138 in 2005. This decrease is a result of limited marketing
      and
      the management time expended in closing the SEDA (“Standby Equity Distribution
      Agreement”) with Cornell Capital Partners LLP.





Cost
      of
      Revenue





The
      Company recorded cost of revenue of $59,302 during the year ended December
      31,
      2005 and $95,697 during the year ended December 31, 2004. This decrease is
      reflective of a number of things including a decrease in games licensing costs,
      coupled with a material expenditure in excess of $50,000 in game development
      costs and site translation costs.





15


Sales
      and
      Marketing expenses





Sales
      and
      marketing expenses increased to $69,915 for the year ended December 31, 2005
      from $0 for the year ended December 31, 2004. This is a result of a management
      decision to try various methods of driving traffic to the proprietary site www.skillarcade.com without
      significant expenditures in third party advertising campaigns. Sales and
      marketing expenses include principally costs for marketing, co-brand advertising
      and keyword buys for our site and participation in trade shows.





We
      expect
      to again increase sales and marketing expenses to further our efforts to
      increase traffic to our Web portal and develop licensee opportunities with
      gaming portals. These costs will include commissions, salaries, advertising,
      and
      other promotional expenses intended to increase traffic to licensees and improve
      revenue. There can be no assurances that these expenditures will result in
      increased traffic or significant new revenue sources.





General
      and Administrative expenses




General
      and administrative expenses consist primarily of legal and audit professional
      fees, finance, travel and other general corporate and office expenses. General
      and administrative expenses increased to $281,726 in 2005 as compared to
      $201,695. This was not primarily due to any one single factor. General and
      administrative costs also included a significant increase in associated legal
      fees from an ongoing SB-2 registration process.





Consulting
      fees





Consulting
      fees increased to $1,194,552 in 2005 from $410,874 in 2004. This was primarily
      due to issuance of S-8 stock to consultants for services.





Corporate
      financing fees





Corporate
      financing fees decreased to $213,169 in 2005 from $317,392 in 2004 due to
      increased amounts of borrowing during the year as opposed to multiple borrowings
      for lower amounts in the previous year.





We
      expect
      to continue to incur general and administrative expenses to support the
      business, and there can be no assurances that the Company will be able to
      generate sufficient revenue to cover these expenses. The Company will be relying
      on the equity financing to support the business.





Interest
      expense





Imputed
      interest expense decreased to $120,568 in 2005 from $123,657 in 2004 from demand
      loans from related parties. This is a result of loans to the Company from
      shareholders and directors accruing interest at 5% per annum as at October
      1,
      2004.





Loss
      per
      share and net loss





The
      Company ended the year with a net loss of ($2,012,050) in 2005, compared to
      ($1,049,504) in 2004. The net loss position for 2005 reflects a ($0.006) per
      share loss compared to the 2004 per share loss of ($0.007).





Liquidity
      and capital resources





While
      the
      Company now has access to a source of financing, management has utilized the
      SEDA only when necessary to fund operations. There can be no assurances that
      the
      Company will in the future achieve a consistent and reliable revenue stream
      adequate to support continued operations.





The
      Company had cash and cash equivalents of $218,844 and a working capital
      deficiency of ($2,371,842) at December 31, 2005. This compares to cash and
      cash
      equivalents of $7,337 and working capital deficiency of ($1,945,453) at December
      31, 2004. This reflects the continued commitment by management with an increase
      of advancing shareholder loans and initial funding from Cornell Capital LLP
      in
      the form of promissory notes and convertible debentures to cover the cost of
      operations.





16


During
      the year ended December 31, 2005, the Company used cash of $1,424,299 in
      operating activities compared to using $601,301 in the prior year.





Net
      cash
      provided by financing activities was $1,694,374 in 2005, which compares to
      $638,564 in 2004. During the year ended December 31, 2005, $100,000 in
      promissory notes were granted by Cornell Capital Partners LLP and $1,350,000
      in
      convertible debentures, of which $1,350,000 plus accrued interest remained
      outstanding at December 31, 2005.





Our
      future capital requirements will depend on a number of factors, including costs
      associated with development of our Web portal, the success and acceptance of
      our
      new games and the possible acquisition of complementary businesses, products
      and
      technologies. We do not have sufficient cash and cash equivalents on hand to
      conduct our operations through the first quarter of 2006, and are substantially
      dependent on the equity financing and interim funding from our Chairman and
      CEO
      to continue operations.





The
      Company concluded an underwriting in the third and fourth quarters with Cornell
      Capital LP and the associated SB-2 was filed subsequent to the year-end on
      March
      16, 2006 on EDGAR. Management believes with this financing and some material
      contracts executed in the fourth quarter that the Company is in a position
      to
      positively impact its nominal revenues to date. As there have been only nominal
      revenues for 2005 and 2004 due to the lack of capitalization of the Company,
      the
      Promissory Note for $1.8 million (“the note”) (discounted to $1,605,739) that
      was additionally guaranteed by the shareholder loan of Mitch White was assigned
      to an affiliated company.





The
      original marketing and licensing and exploitation agreement (Filed on Form
      8-K
      on April 15, 2002) anticipated the promissory note to be paid down from
      generated revenues. To date this has not occurred due to lack of revenues.
      Consequently an agreement was reached exchanging the note for 25 million shares
      of Gaming Transactions Inc (“GGTS”) a pink sheet issuer at a deemed price of
      $0.075 per share. As at December 2005 this stock was thinly traded.





Pursuant
      to the above-mentioned Marketing and Distribution Agreement executed on December
      1, 2001, the anticipated revenue considered more than adequate to pay down
      the
      promissory at the time of the Agreement had not materialized as at December
      31,
      2005. In light of this lack of revenue, the Company has concluded that the
      realization of the deferred revenue was highly improbable for the foreseeable
      future. The Company wrote this deferred revenue down by $2,173,507 to a value
      of
      nil, and credited the Company’s additional paid-in capital for this
      amount.





The
      auditors' report on the Company's December 31, 2005 consolidated financial
      statements contains an explanatory paragraph that states that the Company has
      suffered losses and negative cash flows from operations that raise substantial
      doubt about the Company's ability to continue as a going concern. The financial
      statements do not include any adjustments that might result from the outcome
      of
      this uncertainty.





The
      Company has no financial instruments for trading purposes, or derivative or
      other financial instruments with off balance sheet risk. The fair value of
      all
      financial instruments at December 31, 2005 is not materially different from
      their carrying value.





On
      December 15, 2005, we entered into a Securities Purchase Agreement with Cornell
      Capital Partners. Pursuant to the Securities Purchase Agreement, Cornell Capital
      Partners purchased secured convertible debentures in the original principal
      amount of $1,350,000. The debentures have a three-year term and accrues annual
      interest of 10%. The $700,000 under the secured convertible debenture was
      disbursed to us upon the execution of the Securities Purchase Agreement on
      December 15, 2005.





17


The
      debentures mature on December 15, 2008. The secured convertible debentures
      may
      be redeemed by us at any time, in whole or in part. We will pay a redemption
      premium of 20% of the amount redeemed in addition to such redemption. The
      debentures are convertible from time to time into our common stock of by Cornell
      for at the price per share of an amount equal to ninety percent (90%) of the
      lowest average volume weighted average price of our Common Stock, as quoted
      by
      Bloomberg, LP, for the thirty (30) trading days immediately preceding the
      conversion date. We granted Cornell a security interest in certain of its assets
      pursuant to amended and restated security agreement dated December 15, 2005.
      Cornell also received five year warrants to purchase 2,970,000 shares of common
      stock, 1,350,000 shares at an exercise price of $0.05 per share and 1,620,000
      shares at an exercise price of $0.06 per share.





These
      instruments are not for trading purposes. They are classified as embedded
      derivatives pursuant to SFAS No. 133 Accounting for Derivative Instruments
      and
      Hedging Activities, and as such are carried at the difference of the exercise
      prices and the trading prices as prescribed by the SPA at the balance sheet
      dates.





To
      December 31, 2005, all revenues are incurred In United States dollars. Cash
      costs have been realized in both United States dollars and in Canadian dollars
      and as such, are subject to material foreign currency exchange rate risk. To
      date, the Company has not entered into foreign currency contracts to hedge
      against foreign currency risks between the Canadian dollar or other foreign
      currencies and our reporting currency, the United States dollar.





Item
      7.
      Financial Statements





The
      financial statements of the Company and related schedules are included following
      this page.








18


**CYOP
      SYSTEMS INTERNATIONAL**


**INCORPORATED**




Consolidated
      Financial Statements


**(Expressed
      in U.S. Dollars)**





December
      31, 2005 and 2004




Index




Report
                  of Independent Registered Public Accounting Firms
              20Consolidated
                  Balance Sheets
              21Consolidated
                  Statement of Stockholders’ Deficiency
              22Consolidated
                  Statements of Operations
              24Consolidated
                  Statements of Cash Flows
              25Notes
                  to Consolidated Financial Statements
              26


19




**Report
      of Independent Registered Public Accounting Firm**





We
      have
      audited the accompanying consolidated balance sheets of CYOP Systems
      International Incorporated and it’s Subsidiaries as of December 31, 2005 and
      2004, and the related consolidated statements of operations, stockholders'
      equity, and cash flows for the years then ended. These financial statements
      are
      the responsibility of the Company's management. Our responsibility is to express
      an opinion on these financial statements based on our audits.





We
      conducted our audits in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audits to obtain reasonable assurance about whether the
      financial statements are free of material misstatement. The Company is not
      required to have, nor were we engaged to perform, an audit of its internal
      control over financial reporting. Our audits included consideration of internal
      control over financial reporting as a basis for designing audit procedures
      that
      are appropriate in the circumstances, but not for the purpose of expressing
      an
      opinion on the effectiveness of the Company’s internal control over financial
      reporting. Accordingly, we express no such opinion. An audit also includes
      examining, on a test basis, evidence supporting the amounts and disclosures
      in
      the financial statements. An audit also includes assessing the accounting
      principles used and significant estimates made by management, as well as
      evaluating the overall financial statement presentation. We believe that our
      audits provide a reasonable basis for our opinion.





In
      our
      opinion, the financial statements referred to above present fairly, in all
      material respects, the financial position of the Company at December 31, 2005
      and 2004, and the results of its operations and its cash flows for the years
      then ended, in conformity with U.S. generally accepted accounting
      principles.





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 suffered recurring losses from operations and a
      net
      capital deficiency that raise substantial doubt about its ability to continue
      as
      a going concern. Management's plans in regard to these matters are also
      described in Note 1. The financial statements do not include any adjustments
      that might result from the outcome of this uncertainty.





De
      Leon
& Company, P.A.


Pembroke
      Pines, Florida


March
      17,
      2006


20


**CYOP
                SYSTEMS INTERNATIONAL INCORPORATED**Consolidated
                Balance SheetsDecember
                31, 2005 and 2004**(Expressed
                in U.S. Dollars)**


2005
            
            2004**ASSETS****Current**Cash
                and cash equivalents
            
            $
            218,844
            
            $
            7,337Accounts
                receivable
            
            
            711
            
            
            50.058Prepaid
                expenses and deposit
            
            
            473,518
            
            
            2,440**Total
                current assets**
            
            
            693,073
            
            
            59,835**Fixed
                assets**
            
            
            92,694
            
            
            54,568**Investment
                in equity - method investee**
            
            
            1,618,278
            
            
            1,668,285**Intangible
                assets**
            
            
            28,916
            
            
            57,833**Total
                assets**
            
            $
            2,432,962
            
            $
            1,840,521**LIABILITIES****Current**Demand
                loans related party
            
            $
            1,161,167
            
            $
            1,289,620Accounts
                payable and accrued liabilities
            
            
            244,326
            
            
            288,785Convertible
                debenture
            
            
            1,369,660
            
            
            70,000Player
                funds on deposit
            
            
            46,088
            
            
            44,158Short-term
                loan
            
            
            212,725
            
            
            212,725Promissory
                note
            
            
            —
            
            
            100,000Conversion
                option
            
            
            30,949
            
            
            —**Total
                current liabilities**
            
            
            3,064,915
            
            
            2,005,288**Deferred
                revenue**
            
            
            —
            
            
            2,173,822**Total
                Liabilities**
            
            
            3,064,916
            
            
            4,179,110**Nature
                and continuance of operations****STOCKHOLDERS'
                DEFICIENCY****Share
                capital**Authorized:500,000,000shares
                of common stock with a par valueof

                $0.00002 per shareIssued,
                allotted and outstanding:181,103,355shares
                of common stock (2004 - 181,103,355)
            
            
            6,669
            
            
            3,623**Additional
                paid-in capital**
            
            
            4,778,610
            
            
            1,062,970**Deficit
                accumulated**
            
            
            (5,417,232
            )
            
            (3,405,182
            )**Total
                stockholders' deficiency**
            
            
            (631,953
            )
            
            (2,338,589
            )**Total
                liabilities and stockholders' deficiency**
            
            $
            2,432,962
            
            $
            1,840,521**The
                accompanying notes are an integral part of these financial
                statements.**





21


**CYOP
                SYSTEMS INTERNATIONAL INCORPORATED**Consolidated
                Statement of Stockholders' DeficiencyYears
                ended December 31, 2005 and 2004
            Page
              1 of 2**(Expressed
                in U.S. Dollars)**




Additional
            
            
            
            TotalCommon
                stock
            
            paid-in
            
            Deficit
            
            Stockholders'Shares
            
            Amount
            
            capital
            
            accumulated
            
            (deficiency)**Balance**,
                December 31, 2003
            
            
            142,973,160
            
            
            2,860
            
            
            695,464
            
            
            (2,355,677
            )
            
            (1,657,353
            )Shares
                issued for legal services at $0.03995 per share
            
            
            212,500
            
            
            4
            
            
            7,434
            
            
            —
            
            
            7,438on
                January 27, 2004Shares
                issued for corporate finance fees at $0.032 per
            
            
            7,500,000
            
            
            150
            
            
            262,350
            
            
            —
            
            
            262,500share
                on January 27, 2004Shares
                issued for escrow agent services at $0.032 per
            
            
            312,500
            
            
            6
            
            
            10,931
            
            
            —
            
            
            10,937share
                on January 27, 2004Shares
                issued to Cornell Capital at $0.0032 per share
            
            
            3,125,000
            
            
            63
            
            
            12,437
            
            
            —
            
            
            12,500on
                September 9, 2004Shares
                issued to Cornell Capital at $0.0011 per share
            
            
            4,545,454
            
            
            91
            
            
            11,273
            
            
            —
            
            
            11,364on
                November 5, 2004Shares
                issued to Cornell Capital at $0.0015 per share
            
            
            3,333,333
            
            
            67
            
            
            7,266
            
            
            —
            
            
            7,333on
                November 10, 2004Shares
                issued to Cornell Capital at $0.0013 per share
            
            
            3,846,154
            
            
            77
            
            
            8,385
            
            
            —
            
            
            8,462on
                November 16, 2004Shares
                issued to Cornell Capital at $0.00185 per share
            
            
            5,405,405
            
            
            108
            
            
            16,108
            
            
            —
            
            
            16,216on
                November 23, 2004**Balance,
                December 31, 2003**
            
            
            171,253,506
            
            $
            3,426
            
            $
            1,031,648
            
            $
            (2,355,677
            )
            $
            (1,320,603
            )**The
                accompanying notes are an integral part of these financial
                statements.**





22


**CYOP
                SYSTEMS INTERNATIONAL INCORPORATED**Consolidated
                Statement of Stockholders' DeficiencyYears
                ended December 31, 2005 and 2004
            Page
              2 of 2**(Expressed
                in U.S. Dollars)**




Additional
              
              
              
              TotalCommon stock
              
              paid-in
              
              Deficit
              
              StockHoldersShares
              
              Amount
              
              capital
              
              accumulated
              
              (deficiency)(continued
                  from page 1)**Balance**,
                  Forward
              
              
              171,253,506
              
              
              3,426
              
              
              1,031,648
              
              
              (2,355,677
              )
              
              (1,320,603
              )Shares
                  issued to Cornell Capital at $0.00185 per share
              
              
              5,405,405
              
              
              108
              
              
              17,189
              
              
              —
              
              
              17,297on
                  November 30, 2004Shares
                  issued to Cornell Capital at $0.00185 per share
              
              
              4,444,444
              
              
              89
              
              
              14,133
              
              
              —
              
              
              14,222on
                  November 30, 2004Net
                  loss for the year
              
              
              —
              
              
              —
              
              
              —
              
              
              (1,049,505
              )
              
              (1,049,505
              )**Balance,**December 31, 2004
              
              
              181,103,355
              
              $
              3,623
              
              $
              1,062,970
              
              $
              (3,405,182
              )
              $
              (2,338,589
              )**Balance**,
                  Forward
              
              
              181,103,355
              
              $
              3,623
              
              $
              1,062,970
              
              $
              (3,405,182
              )
              $
              (2,338,589
              )Shares
                  issued to Cornell Capital at $0.0071 per share
              
              
              107,394,805
              
              
              2,146
              
              
              760,033
              
              
              —
              
              
              762,179Shares
                  issued for services at $0.0174 per share
              
              
              45,000,000
              
              
              900
              
              
              782,100
              
              
              —
              
              
              783,000Write
                  down of deferred revenue
              
              
              —
              
              
              
              
              
              2,173,507
              
              
              —
              
              
              2,173,507Net
                  loss for the year
              
              
              —
              
              
              —
              
              
              —
              
              
              (2,012,050
              )
              
              (2,012,050
              )**Balance**,
                  December 31, 2005
              
              
              333,498,160
              
              
              6,669
              
              
              4,778,610
              
              
              (5,417,232
              )
              
              (631,953
              )**The
                  accompanying notes are an integral part of these financial
                  statements.**







23


**CYOP
                SYSTEMS INTERNATIONAL INCORPORATED**Consolidated
                Statements of OperationsYears
                ended December 31, 2005 and 2004**(Expressed
                in U.S. Dollars)**


2005
              
              2004**Revenue**Sales
                  - Crediplay
              
              $
              315
              
              $
              8,690Service
                  fees
              
              
              7,390
              
              
              15,706Banking
                  fees
              
              
              433
              
              
              385Ad
                  sales
              
              
              —
              
              
              —8,138
              
              
              24,781Cost
                  of sales
              
              
              59,302
              
              
              95,697(51,164
              )
              
              (70,916
              )Sales
                  and marketing expenses
              
              
              (69,915
              )
              
              —Consultants
                  fees
              
              
              (1,194,552
              )
              
              (410,874
              )Corporate
                  Finance fees
              
              
              (213,169
              )
              
              (317,392
              )General
                  and Admin fees
              
              
              (281,726
              )
              
              (201,695
              )Conversion
                  option
              
              
              (30,949
              )
              
              —**Operating
                  loss**
              
              
              (1,841,475
              )
              
              (1,000,877
              )**Other
                  income (loss)**Interest
                  income related party
              
              
              —
              
              
              81,717Interest
                  Expense
              
              
              (120,568
              )
              
              (123,657
              )Equity
                  in losses of equity-method investee
              
              
              (50,007
              )
              
              (6,688
              )**Net
                  loss for the year**
              
              $
              (2,012,050
              )
              $
              (1,049,505
              )**Loss
                  per share -**basic
                  and dilutedLoss
                  from operations
              
              $
              (0.006
              )
              $
              (0.006
              )Net
                  loss
              
              $
              (0.006
              )
              $
              (0.007
              )**Weighted
                  average number of common shares outstanding -**basic
                  and diluted
              
              
              307,953,741
              
              
              154,426,228**The
                  accompanying notes are an integral part of these financial
                  statements.**




24




**CYOP
                SYSTEMS INTERNATIONAL INCORPORATED**Consolidated
                Statements of Cash FlowsYears
                Ended December 31, 2005 and 2004**(Expressed
                in U.S. Dollars)**


2005
            
            2004**Cash
                flows from (used in) operating activities**Net
                loss for the year
            
            $
            (2,012,050
            )
            $
            (1,049,505
            )Adjustments
                to reconcile net loss to net cashUsed
                in operating activities:-
                amortization of intangible assets
            
            
            28,916
            
            
            28,916-
                depreciation of fixed assets
            
            
            23,489
            
            
            18,934-
                imputed interest on related party loan
            
            
            —
            
            
            72,257-
                investment in equity interest
            
            
            50,007
            
            
            —-
                shares issuance for services
            
            
            899,309
            
            
            258,490-
                forgiveness of debt
            
            
            —
            
            
            —-
                accredited to convertible debenture
            
            
            —
            
            
            6,074Changes
                in assets and liabilities:-
                accounts receivable
            
            
            49,347
            
            
            —-
                note receivable related party
            
            
            —
            
            
            —-
                prepaid expenses and deposit
            
            
            (471,078
            )
            
            61-
                accounts payable and accrued liabilities
            
            
            (24,798
            )
            
            77,071-
                player funds on deposit
            
            
            1,930
            
            
            (4,909
            )-
                deferred revenue
            
            
            (315
            )
            
            (8,690
            )-
                conversion option
            
            
            30,949
            
            
            —(1,424,298
            )
            
            (601,301
            )**Cash
                flows from (used in) investing activities**Proceeds
                from disposal of fixed assets
            
            
            —
            
            
            —Increase
                in software development costs
            
            
            —
            
            
            —Purchase
                of investments
            
            
            —
            
            
            —Purchase
                of fixed assets
            
            
            (61,615
            )
            
            —(61,615
            )
            
            —**Cash
                flows from (used in) financing activities**Shares
                issued
            
            
            642,826
            
            
            —Increase
                in due from director
            
            
            (128,453
            )
            
            468,564Proceeds
                from promissory note
            
            
            (100,000
            )
            
            100,000Proceeds
                from convertible debenture
            
            
            1,280,000
            
            
            70,0001,694,373
            
            
            638,564**Increase
                in cash and cash equivalents**
            
            
            208,460
            
            
            37,263*Effect
                of exchange rate on cash*
            
            
            3,047
            
            
            (38,983
            )**Cash
                and cash equivalents,**beginning
                of year
            
            
            7,337
            
            
            9,057**Cash
                and cash equivalents**,
                end of year
            
            $
            218,844
            
            $
            7,337**Cash
                and cash equivalents represented by:**Cash
            
            $
            217,450
            
            $
            4,186Cash
                with processors
            
            
            1,394
            
            
            3,151$
            218,844
            
            $
            7,337**The
                accompanying notes are an integral part of these financial
                statements.**





25


**CYOP
        SYSTEMS INTERNATIONAL INCORPORATED**
 
 Notes
        to
        Consolidated Financial Statements
 Years
        Ended December 31, 2005 and 2004
 **(Expressed
        in U.S. dollars)**


**1.** **Nature
      and Continuance of Operations**




The
      Company was incorporated on October 29, 1999 in as Triple 8 Development
      Corporation under the laws of the State of Nevada to engage in any lawful
      business or activity for which corporations may be organized under the laws
      of
      the State of Nevada. The Company changed its name to CYOP Systems International
      Incorporated on October 30, 2000. On November 3, 2000, the Company acquired
      100%
      of the issued and outstanding shares of CYOP Systems Inc., Barbados (“CYOP
      Barbados”). This transaction was accounted for as a reverse acquisition and a
      recapitalization.




CYOP
      Barbados was incorporated under the laws of Barbados on June 20, 2000. On August
      31, 2000, CYOP Barbados acquired 100% of the issued and outstanding shares
      of
      Moshpit Entertainment Inc., Canada (“Moshpit”), a company incorporated under the
      laws British Columbia, Canada. CYOP Barbados sold 100% of the issued and
      outstanding shares of Moshpit by an agreement dated April 1, 2002 to a former
      stockholder and the sole director




The
      Company, and its subsidiaries, are providers of multimedia transactional
      technology solutions and services for the entertainment industry. The Company’s
      range of products and services include financial transaction platforms for
      on-line video games and integrated e-commerce transaction technology for on-line
      merchants. These services are considered as one segment only based on internal
      organizational structure.




These
      consolidated financial statements have been prepared using the generally
      accepted accounting principles applicable to a going concern which contemplates
      the realization of assets and the satisfaction of liabilities and commitments
      in
      the normal course of business. The Company has suffered recurring losses from
      operations and has a net capital deficiency. The ability of the Company to
      continue as a going concern is dependent upon many factors, including the
      ability of the Company to obtain financing to fund working capital requirements,
      the degree of competition encountered by the Company, technology risks,
      government regulation and general economic conditions. The Management’s plan in
      this regard is to raise equity financing as required and keep abreast with
      the
      multimedia technology. These consolidated financial statements do not include
      any adjustments that might result from this uncertainty.




**2.  Significant
      Accounting Policies**




**(a)** **Basis
      of Consolidation**




These
      consolidated financial statements, prepared in accordance with accounting
      principles generally accepted in the United States of America, include the
      accounts of the Company and its wholly owned subsidiaries CYOP Barbados and
      Red
      Felt Software limited (UK). Significant inter-company accounts and transactions
      have been eliminated.




26


**CYOP
      SYSTEMS INTERNATIONAL INCORPORATED**


Notes
        to
        Consolidated Financial Statements
 Years
        Ended December 31, 2005 and 2004
 **(Expressed
        in U.S. dollars)**


**(b)** **Accounting
      Estimates**




The
      preparation of financial statements in conformity with generally accepted
      accounting principles requires management to make estimates and assumptions
      that
      affect the reported amount of assets and liabilities and disclosure of
      contingent assets and liabilities at the date of the financial statements and
      the reported amount of revenues and expenses during the period. Actual results
      may differ from those estimates.




**(c)** **Cash
      Equivalents**




For
      purposes of the statement of cash flows cash equivalents usually consist of
      highly liquid investments which are readily convertible into cash with maturity
      of three months or less when purchased. The Company occasionally will have
      amounts on deposit at financial institutions that exceed the $100,000 FDIC
      insurance limit. The Company believes there is no significant risk with respect
      to these deposits. At December 31, 2005 the Company had deposits with financial
      institutions that exceeded the insured amounts by approximately
      $117,500.




**(d)** **Equity
      Investments**




The
      Company has certain investment in equity securities. These investments are
      accounted for using the equity method of accounting if the investment gives
      the
      Company the ability to exercise significant influence, but not control, over
      an
      investee. Significant influence is deemed to exist if the Company has an
      ownership interest in the voting stock of the investee of between 20% and 50%,
      although other factors, such as representation on the investee’s Board of
      Directors and the impact of commercial arrangements, are considered in
      determining whether the equity method of accounting is appropriate. The Company
      records its investment in equity-method investees on the consolidated balance
      sheet as “Investments in equity-method investees” and its share of the
      investees’ earnings or losses as “Equity in losses of equity-method
      investees”.




**(e)** **Fixed
      Assets**




Fixed
      assets are recorded at historical cost. Depreciation is charged to earnings
      in
      amounts sufficient to allocate the costs over their estimated useful lives,
      as
      follows:




Audio
                and visual equipment
            20%
                declining-balance basisComputer
                hardware
            30%
                declining-balance basisComputer
                software
            50%
                declining-balance basisOffice
                furniture and equipment
            20%
                declining-balance basisLeasehold
                improvements
            20%
                straight-line basis




27


**CYOP
        SYSTEMS INTERNATIONAL INCORPORATED**
 
 Notes
        to
        Consolidated Financial Statements
 Years
        Ended December 31, 2005 and 2004
 **(Expressed
        in U.S. dollars)**


**(f)** **Revenue
      recognition**




The
      Company derives revenue from providing services on software development and
      online internet transaction platform maintenance. Service revenues are
      recognized when services have been performed and delivered in accordance with
      service agreements, the Company has no significant remaining performance
      requirements, there are no material uncertainties regarding customer acceptance
      and collection of the resulting receivable is deemed probable.





**(g)** **Software
      Development Costs**




Software
      development costs incurred prior to the establishment of technological
      feasibility are charged to expenses as incurred. Cost incurred after
      technological feasibility are capitalized and amortized over the estimated
      benefit period in accordance with Emerging Issue Taskforce Number
      98-5.




**(h)** **Advertising
      and Promotion**




The
      Company expenses advertising and promotion costs as incurred. Total advertising
      and promotion costs charged to expenses for the year ended December 31, 2005
      amounted to $69,915 and (2004 - nil).




**(i)** **Foreign
      Currency Transactions**




The
      Company and CYOP Barbados maintain their accounting records in the reporting
      currency. Foreign currency transactions are translated into their reporting
      currency in the following manner. At the transaction date, each asset,
      liability, revenue and expense is translated into the reporting currency by
      the
      use of the exchange rate in effect at that date. The resulting foreign exchange
      gains and losses are included in operations. The Company does not have any
      assets or liabilities in foreign countries or foreign denominations or would
      created translation income or losses under other comprehensive
      income.




**(j)** **Income
      Taxes**




The
      Company has adopted Statement of Financial Accounting Standards ("SFAS") No.
      109, " *Accounting
      for Income Taxes"* ,
      which
      requires the Company to recognize deferred tax liabilities and assets for the
      expected future tax consequences of events that have been recognized in the
      Company's financial statements or tax returns using the liability method. Under
      this method, deferred tax liabilities and assets are determined based on the
      temporary differences between the financial statement and tax bases of assets
      and liabilities using enacted tax rates in effect in the years in which the
      differences are expected to reverse. The effect on deferred income tax assets
      and liabilities of a change in income tax rates is included in the period that
      includes the enactment date.







**(k)** **Long-Lived
      Assets Impairment**




Effective
      January 1, 2002, certain long-term assets of the Company are reviewed when
      changes in circumstances require consideration as to whether their carrying
      value has become impaired pursuant to guidance established in Statement of
      Financial Accounting Standards (“SFAS”) No. 144, *Accounting
      for the Impairment or Disposal of Long-Lived Assets* .
      Management considers assets to be impaired if the carrying value exceeds the
      future projected cash flows from related operations. If impairment is deemed
      to
      exist, the assets will be written down to fair value. Prior to January 1, 2002,
      the Company evaluated long-term assets of the Company in accordance with SFAS
      No. 121, *Accounting
      for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
      of* .
      The
      adoption of SFAS No. 144 did not have a material effect on the consolidated
      financial statements.


28
 **CYOP
        SYSTEMS INTERNATIONAL INCORPORATED**
 
 Notes
        to
        Consolidated Financial Statements
 Years
        Ended December 31, 2005 and 2004
 **(Expressed
        in U.S. dollars)**


**(l)** **Financial
      Instruments and Concentration of Risks**




Fair
      value of financial instruments are made at a specific point in time, based
      on
      relevant information about financial markets and specific financial instruments.
      As these estimates are subjective in nature, involving uncertainties and matters
      of significant judgement, they cannot be determined with precision. Changes
      in
      assumptions can significantly affect estimated fair values.




The
      carrying value of cash and cash equivalents, interest receivable, note
      receivable, demand loans, accounts payable and accrued liabilities, player
      funds
      on deposit and short-term loans approximate their fair values because of the
      short-term maturity of these instruments.




Financial
      instruments that potentially subject the Company to concentration of credit
      risk
      consist of interest receivable and note receivable, the balances of which are
      stated on the balance sheet. The Company performs ongoing credit evaluations
      of
      its debtors and maintains allowances for possible losses with, when realized,
      have been within the range of management’s expectations. The Company places its
      cash in high credit quality financial institutions. The Company does not require
      collateral or other security to support financial instruments subject to credit
      risk.




**(m)** **Accounting
      for Derivative Instruments and Hedging Activities**




The
      Financial Accounting Standards Board (“FASB”) issued SFAS No. 133 *Accounting
      for Derivative Instruments and Hedging Activities* .
      SFAS
      No. 133 requires companies to recognize all derivatives contracts as either
      assets or liabilities in the balance sheet and to measure them at fair value.
      If
      certain conditions are met, a derivative may be specifically designated as
      a
      hedge, the objective of which is to match the timing of gain or loss recognition
      on the hedging derivative with the recognition of (i) the changes in the fair
      value of the hedged asset or liability that are attributable to the hedged
      risk
      or (ii) the designated as a hedging instrument, the gain or loss is recognized
      in income in the period of change. As at December 31, 2005, the Company has
      not
      entered into any derivative contracts either to hedge existing risks or for
      speculative purposes. The Emerging Issue task Force Number 00-19 (“EITF 00-19”)
      requires that embedded instruments be accounted for as derivatives when certain
      exclusions are not met . The
      Company has recorded a derrivative expense in accordance with EITF
      00-19.





**(n)** **Net
      Income (Loss) Per Share**




Basic
      net
      income (loss) per share are computed using the weighted-average number of shares
      of common stock outstanding during the period. Diluted net income (loss) per
      share incorporates the incremental shares issuable upon the assumed exercise
      of
      stock options and other dilutive securities.


29
 **CYOP
          SYSTEMS INTERNATIONAL INCORPORATED**
 
 Notes
          to
          Consolidated Financial Statements
 Years
          Ended December 31, 2005 and 2004
 **(Expressed
          in U.S. dollars)**


**(o)** **Stock-based
          Compensation**




The
      Company has adopted SFAS Number R123, "Accounting for Stock-based Compensation".
      SFAS R123 requires companies to adopt a fair value based method for determining
      expense related to stock-based compensation.




**(p)** **Goodwill
          and Other Intangible assets**




Effective
      January 1, 2002, the Company adopted Statement of Financial Accounting Standards
      (“SFAS”) No. 142, “Goodwill and Other Intangible Assets”. This statement
      requires that intangible assets with an indefinite life are not amortized.
      Intangible assets with a definite life are amortized over its useful life or
      estimated of its useful life. Indefinite life intangible assets will be tested
      for impairment annually, and will be tested for impairment between annual tests
      if any events occur or circumstances change that would indicate that the
      carrying amount may be impaired. Intangible assets with a definite life are
      tested for impairment whenever events or circumstances indicate that a carrying
      amount of an asset (asset group) may not be recoverable. An impairment loss
      would be recognized when the carrying amount of an asset exceeds the estimated
      non-discounted cash flows used in determining the fair value of the assets.
      The
      amount of the impairment loss to be recorded is calculated by the excess of
      the
      assets carrying value over its fair value.




**(q)** **New
      Accounting Pronouncements**




In
      January 2003, the Financial Accounting Standard Board issued FASB Interpretation
      No. 46 (FIN 46), *Consolidation
      of Variable Interest Entities - An Interpretation of Accounting Research
      Bulletin (ARB) No. 51.* This
      interpretation addressed the requirements for business enterprises to
      consolidate related entities in which they are determined to be the primary
      economic beneficiary as a result of their variable economic interest. The
      interpretation is intended to provide guidance in judging multiple economic
      interests in an entity and in determining the primary beneficiary. The
      interpretation outlines disclosure requirements for VIEs in existence prior
      to
      January 31, 2003, outlines consolidation requirements for VIEs created after
      January 31, 2003. The company has reviewed its major commercial relationship
      and
      its overall economic interests with other companies consisting of related
      parties, vendors, loan creditors and other suppliers to determine the extent
      of
      its variable economic interest in these parties. The review has not resulted
      in
      a determination that the Company would be judged to be the primary economic
      beneficiary in any material relationships, or that any material entities would
      be judged to be Variable Interest Entities of the Company.




In
      April
      2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on Derivative
      Instruments and Hedging Activities". This Statement amends and clarifies
      financial accounting and reporting for derivative instruments, including certain
      derivative instruments embedded in other contracts (collectively referred to
      as
      derivatives) and for hedging activities under SFAS No. 133, "Accounting for
      Derivative Instruments and Hedging Activities". This Statement is effective
      for
      contracts entered into or modified after June 30, 2003. We do not expect the
      implementation of SFAS No. 149 to have a material impact on our consolidated
      financial statements.


30
 **CYOP
          SYSTEMS INTERNATIONAL INCORPORATED**
 
 Notes
          to
          Consolidated Financial Statements
 Years
          Ended December 31, 2005 and 2004
 **(Expressed
          in U.S. dollars)**


In
      May
      2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
      Instruments with Characteristics of Both Liabilities and Equity". This Statement
      establishes standards for how an issuer classifies and measures certain
      financial instruments with characteristics of both liabilities and equity.
      It
      requires that an issuer classify a financial instrument that is within its
      scope
      as a liability (or an asset in some circumstances). This Statement is effective
      for financial instruments entered into or modified after May 30, 2003, and
      otherwise is effective at the beginning of the first interim period beginning
      after June 15, 2003. We do not expect the implementation of SFAS No. 150 to
      have
      a material impact on our consolidated financial statements.





In
      December 2004, The Financial Accounting Standards Board issued Statement of
      Financial Accounting Standard number 123r, “ Share Based Payments” (“SFAS 123r”)
      which superseded SFAS 123 and APB No. 25. This statement eliminates the use
      of
      the intrinsic method as previously allowed under APB 25 and is effective for
      small issuers for years ending after December 15, 2005. The Company does not
      expect adoption of this statement to have an impact on their
      operations.







In
      December 2004, The Financial Accounting Standards Board issued Statement of
      Financial Accounting Standard number 153 “Exchanges of Non Monetary Assets - An
      Amendment of APB No 29”. This statement removed the exemption in APB 29 to the
      use of the fair value method in certain transactions and is effective for years
      beginning after June 15, 2005. The Company does not expect the adoption of
      this
      statement to have an impact on their operations.





**3.** **Investment
      in equity method investee**





At
      December 31, 2005, The Company’s equity-method investee approximate ownership
      interest consisted of a 19.99% interest based on the outstanding shares of
      Gaming Transactions, Inc. (OTC:GGTS). The Company has the ability to
      significantly influence GGTS. Summarized Balance Sheet and Operations
      information is as follows:








Balance
                Sheet
            
            2005Current
                assets
            
            $
            25Non
                current assets
            
            $
            688,783Current
                Liabilities
            
            $
            222,228Non
                current liabilities
            
            $
            806,315OperationsNet
                sales
            
            $
            —Gross
                profits
            
            $
            —Net
                loss
            
            $
            (308,086
            )




The
      Company acquired the investment in December 2004 and valued the investment
      at
      $1,674,973. The Company has recorded a cumulative losses of $56,695 based on the proportionate share of the investee’s
      loss which resulted in a reduction in the carrying amount to $1,618,278 at
      December 31, 2005.


31
 **CYOP
          SYSTEMS INTERNATIONAL INCORPORATED**
 
 Notes
          to
          Consolidated Financial Statements
 Years
          Ended December 31, 2005 and 2004
 **(Expressed
          in U.S. dollars)**


**4.** **Fixed
      assets**




December
                31, 2004Cost
            
            Accumulated
                depreciation
            
            Net
                book
              ValueAudio
                and visual equipment
            
            $
            21,558
            
            $
            13,450
            
            $
            8,108Computer
                hardware
            
            
            96,864
            
            
            52,920
            
            
            43,944Computer
                software
            
            
            3,088
            
            
            3,088
            
            
            —Office
                furniture and equipment
            
            
            9,227
            
            
            6,711
            
            
            2,516Total
            
            $
            130,737
            
            $
            76,169
            
            $
            54,568








December
                31, 2005Cost
            
            Accumulated
                depreciation
            
            Net
                book
              ValueAudio
                and visual equipment
            
            $
            21,558
            
            $
            15,072
            
            $
            6,486Computer
                hardware
            
            
            135,979
            
            
            73,988
            
            
            61,991Computer
                software
            
            
            22,500
            
            
            296
            
            
            22,204Office
                furniture and equipment
            
            
            9,227
            
            
            7,214
            
            
            2,013Total
            
            $
            189,264
            
            $
            96,570
            
            $
            92,694




**5.** **Intangible
      Assets**




On
      May
      21, 2002, the Company terminated the software development agreement and a
      software licensing, technical support and operation of customer service and
      data
      centre agreement with a related company (related by a common director) was
      terminated. As at that date $240,000 license fees were billed with $200,000
      remaining unpaid at May 21, 2002.




In
      satisfaction of this unpaid amount and in consideration of terminating the
      agreement the related company assigned all right, title and interest
      in:




The
      Skill-Bingo Patents and the Skill-Bingo Inventions purchased from FYRC Inc.




The
      above
      has been collectively recorded as intellectual property with an expected useful
      life of 5 years.




the
      Skill-Bingo game software


the
      website located at http://www.bigrbingo.com


the
      trademark “BiG’rBingo”


the
      BiG’rBingo customer deposits


32
 **CYOP
          SYSTEMS INTERNATIONAL INCORPORATED**
 
 Notes
          to
          Consolidated Financial Statements
 Years
          Ended December 31, 2005 and 2004
 **(Expressed
          in U.S. dollars)**


The
      changes in the carrying amount of intellectual property as follows:




2005
            
            2004Balance,
                beginning of year
            
            $
            57,833
            
            $
            86,749Intangible
                assets acquired during the period-
                intellectual property
            
            
            —
            
            
            —Impairment
                of intangible assets during the period
            
            
            —Fair
                valueAccumulated
                amortization
            
            
            (28,917
            )
            
            (28,916
            )Balance,
                end of year
            
            $
            28,916
            
            $
            57,833






**6.** **Loans**





(a) **Demand
        Loans Related Party**




December
                31 2005
            
            December
                31 2004i. 
              Interest bearing and unsecured at 5% per annum:-
                Andrea Carley - an officer
            
            $
            44,671
            
            $
            25,156-
                Mitch White - a director and stockholder
            
            
            869,044
            
            
            1,054,726-
                Gordon Samson - a director
            
            
            110,109
            
            
            104,457-
                Patrick Smyth - a director
            
            
            92,718
            
            
            60,656Total
            
            $
            1,116,542
            
            $
            1,244,995





(b)Short
      term Loan




Deceber
                31 2005
            
            December
                31 2004i. 
              Non-Interest bearing and unsecured-
                Jack Carley - related to a director and stockholder
            
            $
            44,625
            
            $
            44,625Total
            
            $
            44,625
            
            $
            44,625




(c)Short-term
      Loan Related Party




December
                31 2005
            
            December
                31 2004i.Interest
                at 10% per annum:-
                RedRuth Ventures
            
            
            212,725
            
            
            212,725Total
            
            $
            212,725
            
            $
            212,725





(d)Convertible
      debenture




On
                December 15, 2005, the Company entered into a Securities Purchase
                Agreement with Cornell Capital LP. Pursuant to the Securities Purchase
                Agreement, Cornell Capital Partners purchased secured convertible
                debentures in the original principal amount of $1,350,000. The debentures
                have a three-year term and accrues annual interest of 10%. The $700,000
                under the secured convertible debenture was disbursed to us upon
                the
                execution of the Securities Purchase Agreement on December 15, 2005.
                The
                balance will be disbursed upon the discharge of certain conditions
                placed
                upon the Company in the SPA. The debentures mature on December 15,
                2008.
                The secured convertible debentures may be redeemed by us at any time,
                in
                whole or in part. We will pay a redemption premium of 20% of the
                amount
                redeemed in addition to such redemption. The debentures are convertible
                from time to time into our common stock of by Cornell for at the
                price per
                share of an amount equal to ninety percent (90%) of the lowest average
                volume weighted average price of our Common Stock, as quoted by Bloomberg,
                LP, for the thirty (30) trading days immediately preceding the conversion
                date. We granted Cornell a security interest in certain of its assets
                pursuant to amended and restated security agreement dated December
                15,
                2005. Cornell also received five year warrants to purchase 2,970,000
                shares of common stock, 1,350,000 shares at an exercise price of
                $0.05 per
                share and 1,620,000 shares at an exercise price of $0.06 per
                share.




33
 **CYOP
          SYSTEMS INTERNATIONAL INCORPORATED**
 
 Notes
          to
          Consolidated Financial Statements
 Years
          Ended December 31, 2005 and 2004
 **(Expressed
          in U.S. dollars)**


On
                September 2, 2005, we entered into an Equity Distribution Agreement
                with
                Cornell Capital Partners. Under the Equity Distribution Agreement,
                CYOP
                may issue and sell to Cornell Capital Partners common stock for a
                total
                purchase price of up to $15,000,000. For each share of common stock
                purchased under the Equity Distribution Agreement, Cornell Capital
                Partners will pay us 98% of the lowest volume weighted average price
                of
                our common stock as quoted by the Over-the-Counter Bulletin Board
                during
                the five trading days immediately following the notice date. Cornell
                Capital Partners will also retain 4% of each advance under the Equity
                Distribution Agreement. The amount of each cash advance is subject
                to a
                maximum amount of $800,000, with no cash advance occurring within
                seven
                trading days of a prior advance. Cornell Capital Partners received
                two
                warrants to purchase 27,500,000 shares of our common stock as a one-time
                commitment fee under the Equity Distribution Agreement. The first
                warrant
                for 15,000,000 shares of our common stock has an exercise price equal
                to
                $0.05. The second warrant for 12,500,000 shares of our common stock
                has an
                exercise price equal to $0.06. The warrants expire three years from
                September 2, 2005. The Equity Distribution Agreement with Cornell
                Capital
                Partners was terminated pursuant to a Termination Agreement dated
                December
                15, 2005.




In
                addition, on September 2, 2005, we entered into a Securities Purchase
                Agreement with Cornell Capital Partners. Pursuant to the Securities
                Purchase Agreement, Cornell Capital Partners purchased a secured
                convertible debenture in the original principal amount of $650,000.
                Cornell surrendered this $650,000 convertible debenture plus unpaid
                and
                accrued interest totaling $19,660 in consideration in part for the
                Debentures that were issued.





**7.** **Sale
      and License-back of Computer Software**





On
      December 14, 2001, the Company sold computer software identified as Crediplay
      System to the sole director and a major stockholder and creditor of the Company
      for $3,000,000. The purchase price was settled by retiring $1,200,000 of debt
      owed to the purchaser and a promissory note for $1,800,000. The promissory
      note
      bears interest at 5% per annum with maturity on December 14, 2010. The
      promissory note is secured through a first priority lien and security interest
      in the Crediplay System and amount due to Mr. Mitch White (the “Purchaser”)
      totalling $517,613 (2001 - nil). As at December 31, 2002 the present value
      of
      the promissory note is $1,585,034 after calculating at the discount of 7% and
      accruing interest at 5%. Interest receivable was calculated at 1,800,000 X
      5% or
      $90,000. As at December 31, 2003, the present value of the promissory note
      is
      $1,605,986 after calculating at the discount of 7% and accruing interest at
      5%.
      Interest receivable was calculated at $1,800,000 X 5% or $90,000.




34
 **CYOP
            SYSTEMS INTERNATIONAL INCORPORATED**
 
 Notes
            to
            Consolidated Financial Statements
 Years
            Ended December 31, 2005 and 2004
 **(Expressed
            in U.S. dollars)**




2002
            Gross
                Earnings x 20%2003
            Gross
                Earnings x 17%2004
            Gross
                Earnings x 15%2005
                to 2017
            Gross
                Earnings x 10%





As
      there
      have been only minor revenues since inception due to the lack of capitalization
      of the Company, the Promissory Note for $1.8 million (“the note”) was assigned
      to an affiliated company, Gaming Transactions Inc., after releasing the
      guarantee provided by the shareholder loan of Mitch White in consideration
      of
      twenty five (25) million shares of restricted stock of Gaming Transactions
      Inc.,
      (“GGTS) a pink sheet issuer. As at December 2004 (Form 8-K filed December 13,
      2004) this company was thinly traded and a deemed price of $0.075 per share
      was
      used. As no reductions have been made as contemplated in the agreements executed
      December 31, 2001 and filed on Edgar by Form 8-K on April 15, 2002 a market
      asset was exchanged to ensure value to the Company.




The
      development costs of the Crediplay System expended by the Company amounted
      to
      approximately $1,273,406 of which $778,348 was expensed previously.




Management
      of the Company has estimated the $3,000,000 value based on the discounted future
      cash flow projection and the estimate provided by knowledgeable parties of
      the
      software.




The
      gain
      on the sale of the Crediplay System is calculated as follows:




Sales
                priceRetirement
                of loan due to the purchaser
            
            $
            1,200,000Present
                value of $1,800,000 promissory note discounted at 7% per
                annum
            
            
            1,565,4522,765,452Software
                development costs incurred in 2001
            
            
            (495,058
            )Deferred
                gain 2001
            
            $
            2,270,394Recognized
                gain
            
            
            (71,842
            )Deferred
                gain 2002
            
            $
            2,198,552Recognized
                gain in 2003
            
            
            (16,040
            )Deferred
                gain in 2003
            
            $
            2,182,512Recognized
                gain in 2004
            
            
            (8,690
            )Deferred
                gain 2004
            
            
            2,173,822


35
 **CYOP
            SYSTEMS INTERNATIONAL INCORPORATED**
 
 Notes
            to
            Consolidated Financial Statements
 Years
            Ended December 31, 2005 and 2004
 **(Expressed
            in U.S. dollars)**


Pursuant
      to the Marketing and Distribution Agreement executed on December 1, 2001, the
      anticipated revenue, considered more than adequate to pay down the promissory
      at
      the time of the Agreement, had not materialized as at December 31, 2005. In
      light of this lack of revenue, the Company has concluded that the realization
      of
      the deferred revenue was highly improbable for the foreseeable future, thereby
      changing management’s estimate of realiseability. The Company wrote this
      deferred revenue down by $2,173,507 to a value of nil, and credited the
      Company’s additional paid-in capital for this amount.




**8. Stockholders’
      Equity (Deficit)**




**(a)** **Issuance
      of Common Shares**




During
      2004, the Company issued 88,130,195 shares to Cornell Capital LLP including
      a
      corporate finance fee of 312,500 shares to Newbridge Securities Corp as an
      escrow agent fee and 50,000,000 in escrow in connection with the Standby equity
      underwriting agreement for financing as originally filed on the Company’s SB-2
      on March 1, 2004. During 2005 the Company has issued 107,394,805 common shares
      drawing down the escrow shares as well as new issuances to Cornell Capital,
      LP.




**(b)** **2003
      Consultant Stock Plan**




On
      October 21, 2003, the Board of Directors of the Company approved and adopted
      “2003 Consultant Stock Plan” (“2003 Plan”). Pursuant to the 2003 Plan, it is a
      ten (10) year plan to grant common shares or right to received common shares
      by
      consultants (per individual agreement) to a maximum 2,500,000 shares (restated
      for the company’s stock split). The allocated number of shares includes an
      indeterminate number of additional shares that may be issued to adjust the
      number of shares issued pursuant to the stock plan described herein as the
      result of any future stock split, stock dividend or similar adjustment of the
      registrant's outstanding common stock.




**(c)**  Stock
      Option




There
      were no stock options granted for the period ended December 31, 2005 or
      2004.




**(d)** **Earnings
      Per Share**




The
      Company follows Financial Accounting Standards Number 128 “Earnings Per Share”
(FASB 128”). This statement requires the computation of basic and diluted
      earnings per share. Potential dilutive securities were not included in the
      dilutive earnings per share computation since the inclusion of such instruments
      would be anti-dilutive.


36
 **CYOP
              SYSTEMS INTERNATIONAL INCORPORATED**
 
 Notes
              to
              Consolidated Financial Statements
 Years
              Ended December 31, 2005 and 2004
 **(Expressed
              in U.S. dollars)**


**9.** **Income
        Taxes**




As
        at
        December 31, 2005, the Company has non-capital losses and undepreciated capital
        cost of approximately $4,092,000 and $2,080,000, respectively, which can
        be
        carried forward for tax purposes and are available to reduce taxable income
        of
        future years. The non-capital losses expire commencing in 2006 through
        2010.
  (a)
                  The tax effect of temporary differences that
                    give rise to
                    the Company’s deferred tax assets are as
                    follows:


2004
            
            2005Undepreciated
                capital cost of capital assetsover
                their net book value
            
            $
            19,000
            
            $
            19,000Estimated
                tax loss carryforward
            
            
            715,000
            
            
            1,391,000Less:
                valuation allowance
            
            
            (734,000
            )
            
            (1,410,000
            )—
            
            
            —




The
      valuation allowance reflects the realization of the tax assets is
      unlikely.




**10.** **Related
        Party Transactions**




Related
        party transactions not disclosed elsewhere in the consolidated financial
        statements are as follows:
 
 (a)
                During
                    the fiscal year 2005, the Company accrued imputed interest of
                    approximately $62,454 at an interest rate of 5% per annum on
                    interest-free
                    loans totaling $1,116,542 from directors of the Company. At October
                    1,
                    2004 these loans started to accrue interest at 5% per annum.
                    Additionally,
                    the Company accrued interest of $21,272 from a note due to a
                    Company
                    controlled by a related party at 10% on a balance of
                    $212,725.
 (b)
              See
                  Note 6, and 7.
  On
        December 1, 2004 by agreement (Form 8-K December 13, 2004) the discounted
        promissory note, face value $1,800,000.00 dated December 1, 2001 and maturing
        December 14, 2010 (the “note”) was assigned to an affiliated company, Gaming
        Transactions Inc., (“assignee”) in consideration of 25 million restricted shares
        of the assignee’s common stock.
  (c)
              The
                  following schedule reflects payments on related party obligations
                  and
                  interest accrued on such obligations for the year ended December
                  31,
                  2005:


Related
                Party
            
            Payments
                Made on Loans
            
            Interest
                AccruedAndrea
                Carey (Officer)
            
            $
            24,000
            
            $
            2,349Mitch
                White (Officer)
            
            $
            333,096
            
            $
            51,859Gordon
                Samson (Officer)
            
            $
            69,695
            
            $
            4,184Patrick
                Smith (Director)
            
            $
            12,000
            
            $
            4,062


37
 **CYOP
              SYSTEMS INTERNATIONAL INCORPORATED**
 
 Notes
              to
              Consolidated Financial Statements
 Years
              Ended December 31, 2005 and 2004
 **(Expressed
              in U.S. dollars)**


**11.** **Derivative
      Instruments**




On
          December 15, 2005, the Company entered into a debt instrument that included
          the
          ability of the lender to convert such debt to common stock of the Company.
          In
          accordance with Statement of Financial Accounting Standards Number 133
          (“SFAS
          133”) and EITF 00-19 such options are considered a derrivative instrument
          (“DR”). The Company determined the value of such DR at December 31, 2005 by
          utilizing the Black-Scholes method of valuing options. Such amounts have
          been
          recorded as a liability in the current year balance sheet. Under SFAS 133
          the
          Company is required to revalue such liability at the balance sheet date
          and
          record the difference as income or expense at such time in the statement
          of
          operations. The Company does not utilize any other derrivative instruments
          as
          hedges.




**12.** **Geographic
      Information**




All
      the
      Company’s operations and fixed assets are located in the United
      States.




**13.** **Subsequent
        Events**




On
      May 9,
      2006, the Company signed and executed an Amendment to an Asset Purchase
      Agreement with FutureBet Systems Inc. which amends the time of the last cash
      payment under such agreement to June 7, 2006 and amends the seller of the
      software to FB Systems of Nevis, West Indies.




38




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





The
      Company filed a Current Report on Form 8-K, dated February 16, 2005, to report
      a
      change of its auditors. Such report was filed with the Securities & Exchange
      Commission on February 18, 2005.





Item
      8A.
      Controls and Procedures







We
      maintain disclosure controls and procedures that are designed to ensure that
      information required to be disclosed in our reports that are filed or submitted
      under the Securities Exchange Act of 1934 (the “Exchange Act”) reports is
      recorded, processed, summarized and reported within the time periods specified
      in the regulations promulgated by United States Securities and Exchange
      Commission (the “SEC”), and that such information is accumulated and
      communicated to our management, including our President and Chief Financial
      Officer, as appropriate, to allow timely decisions regarding required
      disclosure.




Within
      90
      days prior to the date of this report, we carried out an evaluation, under
      the
      supervision and with the participation of our management, including our
      President and Chief Financial Officer, of the effectiveness of the design and
      operation of our disclosure controls and procedures pursuant to Rule 13a-14
      promulgated by the SEC under the Exchange Act. Based upon the foregoing, our
      President and our Chief Financial Officer concluded that our disclosure controls
      and procedures are effective. There were no changes in our internal control
      over
      financial reporting during the fiscal year ended December 31, 2005, that would
      materially affect or is reasonably likely to materially affect, our internal
      control over financial reporting.




As
      of
      this date, given the small size of the Company and its limited operations and
      over the last year, the Company utilized a preliminary and basic standard of
      internal controls and procedures related to its financial reporting for the
      period covered by this report. Management is in the process of developing and
      adopting new and more stringent controls and procedures and anticipates such
      controls and procedures to be in place prior to the end of fiscal year 2006.
      Management expects to be in compliance with the internal control requirements
      of
      Section 404 of the Sarbanes-Oxley Act prior to the required compliance date
      in
      2006.




**PART
      III**





Item
      9.
      Directors and Executive Officers of the Registrant.




**MANAGEMENT**




**Officers
      And Directors**




The
      following table sets forth the names and positions of our executive officers
      and
      directors. Our directors are elected at our annual meeting of stockholders
      and
      serve for one year or until successors are elected and qualify. Our Board of
      Directors elect our officers, and their terms of office are at the discretion
      of
      the Board, except to the extent governed by an employment contract.




39


As
      of
      December 31, 2005, our directors and executive officers, their age, positions,
      the dates of their initial election or appointment as directors or executive
      officers, and the expiration of their terms are as follows:




**Name
                of Director/Executive Officer**
            
            **Age**
            
            **Position**
            
            **Period
                Served**Mitch
                White
            
            43
            
            Chairman
                of the Board, Chief Executive Officer and Director
            
            February
                2001 to presentCanon
                Bryan
            
            32
            
            Chief
                Financial Officer
            
            January
                2006 to presentRandy
                Peterson
            
            53
            
            Director
            
            February
                2005 to presentMichael
                Ozerkevich
            
            61
            
            Director
            
            March
                2005 to presentScott
                Carley
            
            30
            
            President
            
            September
                2005 to March 2006Andrea
                Carley
            
            35
            
            Secretary
                & Treasurer
            
            February
                2003 to present




Below
      are
      the biographies of each of our officers and directors as of December 31, 2005.
      Mr. Ozerkevich subsequently resigned as our director March 16,
      2006.




***Mr.
      Mitch White, Chairman, CEO, Vancouver, B.C., Canada***




MITCH
      WHITE was appointed to his positions on February 14, 2001. Mr. White devotes
      his
      time on an as needed basis, which he expects to be approximately 120 hours
      per
      month. Mr. White is a director and officer of CYOP Systems International, Inc.
      From March 1995 to June 1998, Mr. Mitch White held the position of Chairman
      of
      the Board of Directors of Starnet Systems International which is a
      publicly-traded reporting company quoted on the NASD OTC Bulletin Board under
      the symbol “WGMGY” and on the AIM market in London, England. Starnet Systems
      developed and implemented computer software designed to process online casino
      transactions in those jurisdictions in which online gaming is permitted. From
      June 1998 until the present, Mr. White has been principally engaged in the
      founding, funding and development of Moshpit Entertainment and its pay for
      play
      electronic transactional platform. Mr. White possesses 18 years of experience
      in
      sales, marketing and management in the high technology and entertainment
      industries.




***Mr.
      Canon Bryan,Chief Financial Officer, Vancouver, B.C.,
      Canada***




CANON
      BRYAN was appointed Principal Financial Officer on January 17, 2006. Mr. Bryan
      has over 10 years experience as a financial analyst with mining, biotechnology,
      information technology companies and financial institutions that are
      publicly-listed in Cana, the United States and Europe. Since mid-2004, Mr.
      Bryan
      has been employed by Uranium Energy Corp., a NASDAQ Bulletin-Board listed
      company, in the capacity of Vice-President of Finance. From the year 2000 to
      the
      present, he was the managing director of his private company, ACB Analytics,
      providing financial advisory services to private and public companies. From
      1999
      to 2002, Mr. Bryan was senior financial analyst of Lasik Vision Corporation,
      a
      Vancouver Stock Exchange-listed company.




***Mr.
      Randy Peterson, Director, Vancouver, B.C., Canada***




RANDY
      PETERSON was appointed to his position on February 22, 2005 as an independent
      Director. Mr. Peterson is a retired police detective, with a distinguished
      reputation and is also a judicially recognized gaming expert. As a highly
      respected member of the gaming community, he is also the inventor of a number
      of
      games including skill-bingo and skill- poker.
      Mr. Peterson is a disinterested member of the Audit Committee. Mr. Peterson
      served with the Vancouver Police Department from October 1978 until his
      retirement on November 30, 2003. As a detective, Mr. Peterson worked primarily
      in gambling, internal investigations and, for the last two years, was the
      Departmental Security Officer. Since his retirement, he has worked part-time
      for
      Gateway Casinos in their surveillance department and is licensed with the
      Provincial Government as a security consultant. Mr. Peterson will assist the
      Company on developing its entry into new product launches, providing solutions
      for technical issues relating to current research and development, and
      identifying commercial opportunities for the creation of strategic
      partnerships.




40


***Mr.
        Michael Ozerkevich, Director, Vancouver B.C.,
        Canada***




MICHAEL
      OZERKEVICH is one of the founding partners of EMC Partners, a management
      consulting company with clients in Canada, the United States, Europe and the
      Caribbean where he has worked for seventeen years. Mr. Ozerkevich has acquired
      a
      very large and impressive international client base. Mr. Ozerkevich also has
      many years experience including being a Deputy Minister for the Government
      of
      Alberta, a partner in Price Waterhouse (Now PricewaterhouseCoopers), and the
      author of many publications and reports.




***Mr.
      Scott Carley, President, Vancouver, B.C., Canada***




SCOTT
      CARLEY was appointed to his position on September 28 th ,
      2005.
      With more than 10 years of Internet technology and software experience, Mr.
      Carley has held executive positions in the online media and gaming industries,
      including President of SportsBookVIP.com and GamblingVIP.com. And at World
      Gaming PLC, he was responsible for International Business Development, which
      included direct sales to new software licensees. Mr. Carley was most recently
      the Chief Operations Officer for Kouei International Inc., where he oversaw
      the
      expansion of their products into the international arena.




***Ms.
      Andrea Carley, Secretary and Treasurer, Vancouver, B.C.,
      Canada***




ANDREA
      CARLEY serves as Secretary and Treasurer of Cyop Systems International, Inc.
      Ms.
      Carley has a diversified background with over 10 years of Internet and gaming
      related experience. Ms. Carley was educated at the University of British
      Columbia in Accounting and Corporate Finance. Ms. Carley joined Cyop Systems
      in
      February 2003. Prior to joining Cyop Systems, Ms. Carley worked for Solid
      Management, a high-tech investment company, where she held various executive
      positions. Ms. Carley began her career in the accounting department at Starnet
      Systems International, which is a publicly-traded reporting company quoted
      on
      the NASD OTC Bulletin Board under the symbol “WGMGY” and on the AIM market in
      London, England.




41


***Family
      Relationships***




Andrea
      Carley, our secretary and treasurer, is married to Mitch White, our Chief
      Executive Officer. Our President, Scott Carley, is Andrea Carley’s brother.
      There are no other family relationships among the directors or executive
      officers of CYOP.




***Involvement
      In Certain Legal Proceedings***




None
      of
      our officers, directors, promoters or control persons have been involved in
      the
      past five years in any of the following:




(1)
      any
      bankruptcy petition filed by or against any business of which such person was
      a
      general partner or executive officer either at the time of the bankruptcy or
      within two years prior to that time;






(2)
      any
      conviction in a criminal proceeding or being subject to a pending criminal
      proceeding (excluding traffic violations and other minor offenses);






(3)
      Being
      subject to any order, judgment or decree, not subsequently reversed, suspended
      or vacated, or any court of competent jurisdiction, permanently or temporarily
      enjoining, barring, suspending or otherwise limiting his involvement in any
      type
      of business, securities or banking activities; or




(4)
      Being
      found by a court of competent jurisdiction (in a civil action), the Commission
      or the Commodity Futures Trading Commission to have violated a federal or state
      securities or commodities law, and the judgment has not been reversed,
      suspended, or vacated.




***Audit
      Committee And Financial Expert***




Mr.
      Peterson serves on CYOP’s audit committee. The audit committee reports to the
      Board of Directors regarding the appointment of our independent public
      accountants, the scope and results of our annual audit, compliance with our
      accounting and financial policies and management’s procedures and policies
      relative to the adequacy of our internal accounting controls.




**Code
      Of Ethics**




We
      have a
      Code of Ethics, which we adopted on April 7, 2004 .




42





**Section
      16(a) Beneficial ownership Reporting Compliance**





Section
      16(a) of the Securities Exchange Act of 1934 requires the Company's directors
      and executive officers, and persons who own more than ten percent of a
      registered class of the Company's equity securities, to file with the Securities
      and Exchange Commission (the "SEC") initial reports of ownership and reports
      of
      changes in ownership of common stock and other equity securities of the
      Company.





Officers,
      directors and greater than ten percent stockholders are required by SEC
      regulation to furnish the Company with copies of all Section 16(a) forms they
      file.





To
      the
      Company's knowledge, based solely on review of the copies of such reports
      furnished to the Company and representations that no other reports were required
      during the year ended December 31, 2005, and except as disclosed elsewhere
      in
      this document, the Company's officers, directors and greater than ten percent
      beneficial owners have complied with all Section 16(a) filing requirements
      in


a
      timely
      manner.





Item
      10.
      Executive Compensation





*Summary
      Compensation Table* ***.*** The
      following summary compensation table shows certain compensation information
      for
      services rendered in all capacities for the years ended December 31, 2005,
      2004
      and 2003. Other than as set forth herein, no executive officer’s cash salary and
      bonus exceeded $100,000 in any of the applicable years. The following
      information includes the dollar value of base salaries, bonus awards, the value
      of restricted shares issued in lieu of cash compensation and certain other
      compensation, if any, whether paid or deferred:





**Annual
                Compensation**
            **Long-Term
                Compensation****Name
                &**
              **Principal
                Position**
            **Year**
            **Salary**
            **Bonus**
            **Other
                Accrued Compensation**
            **Restricted
                Stock Awards in US$**
            
            **Options/SARs**
            **LTIP
                Payouts**
            **All
                Other Compensation**Mitch
                White
            2005
            100,833
            —
            —
            —
            
            —
            —
            —2004
            —
            —
            —
            —
            
            —
            —
            —2003
            —
            —
            —
            —
            
            —
            —
            —Gordon
                Samson
            2005
            62,500
            —
            —
            —
            
            —
            —
            —2004
            18,000
            —
            —
            —
            
            —
            —
            —2003
            —
            —
            —
            —
            
            —
            —
            —




**Compensation
      Of Directors**




Directors
      currently do not receive cash compensation for their services as members of
      the
      Board of Directors, although members are reimbursed for expenses in connection
      with attendance at Board of Directors meetings and specific business meetings.
      Directors are eligible to participate in our stock option plans. Option grants
      to directors are at the discretion of the Board of Directors. Compensation
      received by officers, directors, and management personnel will be determined
      from time to time by our Board of Directors. Officers, directors, and management
      personnel will be reimbursed for any out-of-pocket expenses incurred on our
      behalf.




**Employment
      Agreements** .





In
      January 2003, CYOP entered into management contracts with Messrs. White, and
      Samson. Each contract can be terminated upon one year’s prior written notice
      unless there is a change of control. If a change of control occurs, then each
      contract can be terminated only after two years following such change of
      control. The following table describes the annual compensation provided under
      each contract. All compensation in 2003 was forgiven and 2004 has been deferred
      other than $18,000.00 paid to Mr. Samson. CYOP will continue to accrue and/or
      pay compensation as necessary.





43





Name:
            Base
                Compensation:
            Bonus
                Compensation:Mitch
                White
            $120,000
            Up
                to 120% of base compensation





If
      Mitch
      White is terminated other than for cause or disability or in violation of the
      change of control, then Mitch White as the case may be shall be entitled to
      be
      paid 200% of such base compensation, plus 200% of such annual incentive bonus.





**Options/SAR
      Grants or Exercises and Long Term Incentive Plan**





There
      are
      no stock option grants, Stock Appreciation Rights (SAR’s) grants, options/SAR
      exercises or Long Term Incentive Plans (LTIP’s) awarded to the named executive
      officers in the last three financial years.





**Defined
      benefit of actuarial plan**





The
      Company does not have a defined benefit or actuarial plan in place.





Item
      11.
      Security Ownership of Certain Beneficial owners and Management







**Security
      Ownership Of Certain Beneficial Owners And Management**






The
      table
      below sets forth information with respect to the beneficial ownership of our
      common stock as of May 15, 2006 for (i) any person who we know is the beneficial
      owner of more than 5% of our outstanding common stock; (ii) each of our
      directors or those nominated to be directors, and executive officers; and (iii)
      all of our directors and executive officers as a group. Except as otherwise
      noted in the footnotes below, the entity, individual Director or Executive
      Officer has sole voting power an investment power over such
      securities.




**SECURITY
                OWNERSHIP OF CERTAIN BENEFICIAL OWNERS****Amount
                and****Nature
                of****Name
                and Address**
            **Beneficial**
            **Percentage****Title
                of Class**
            **of
                Beneficial Owner**
            **Ownership**
            **of
                Class****(1)**Common
            Mitch
                White(2)(3)
            76,100,000
            22.8%5469
                Wildwood CrescentTsawwassen,
                B.C. V4M 359




(1)
      Applicable percentage of ownership is based on 333,498,160 shares of common
      stock outstanding as of May 15, 2006 for each stockholder. Beneficial ownership
      is determined in accordance with the rules of the SEC and generally includes
      voting of investment power with respect to securities and securities owned
      by or
      for, among others, the spouse and/or minor children of an individual and any
      other relative who has the same home as such individual. Shares of common stock
      subject to securities exercisable or convertible into shares of common stock
      that are currently exercisable or exercisable within 60 days of Maya 15, 2006
      are deemed to be beneficially owned by the person holding such options for
      the
      purpose of computing the percentage of ownership of such persons, but are not
      treated as outstanding for the purpose of computing the percentage ownership
      of
      any other person.




44




(2)
      Includes 49,100,000 shares held by Pacific Rim Consulting. The address of
      Pacific Rim Consulting is 3076 Sir Francis Drake Highway, Box 3463 Road Town,
      Tortola, B.V.I. Mitch White is the person with voting and investment power
      of
      shares held by Pacific Rim Consulting.




(3)
      Includes 20,000,000 shares held by Greenday, Inc. The address for Greenday,
      Inc.
      is 3076 Sir Francis Drake Highway, Box 3463 Road Town, Tortola, B.V.I. Mitch
      White is the person with voting and investment power of shares held by Greenday,
      Inc.


**SECURITY
                      OWNERSHIP OF MANAGEMENT****Title
                      of Class**
                  **Name
                      and Address**
                    **of
                      Beneficial Owner**
                  **Amount
                      and**
                    **Nature
                      of**
                    **Beneficial**
                    **Ownership**
                  **Percentage**
                    **of
                      Class****(1)**Common
                  Mitch
                      White(2)(3)(4)
                    5469
                      Wildwood Crescent
                    Tsawwassen,
                      B.C. V4M 3S9
                    CANADA
                  76,100,000
                  22.8%Common
                  Andrea
                      Carley(4)
                    5469
                      Wildwood Crescent
                    Tsawwassen,
                      B.C. V4M 3S9
                    CANADA
                  800,000
                  *Common
                  Scott
                      Carley
                    5469
                      Wildwood Crescent
                    Tsawwassen,
                      B.C. V4M 3S9
                  0
                  0%Common
                  Randy
                      Peterson
                    40420
                      Thunderbird Ridge
                    Garibaldi
                      Highlands, B.C.
                    V0N
                      1T0
                    CANADA
                  2,000,000
                  *All
                      directors and executive
                    officers,
                      as a group (4 persons)
                  78,900,000
                  23.6%
  45


*
      Less
      than 1%.




(1)
            Applicable
                percentage of ownership is based on 333,498,160 shares of common
                stock
                outstanding as of May 15, 2006 for each stockholder. Beneficial ownership
                is determined in accordance with the rules of the SEC and generally
                includes voting of investment power with respect to securities and
                securities owned by or for, among others, the spouse and/or minor
                children
                of an individual and any other relative who has the same home as
                such
                individual. Shares of common stock subject to securities exercisable
                or
                convertible into shares of common stock that are currently exercisable
                or
                exercisable within 60 days of May 15, 2006 are deemed to be beneficially
                owned by the person holding such options for the purpose of computing
                the
                percentage of ownership of such persons, but are not treated as
                outstanding for the purpose of computing the percentage ownership
                of any
                other person.(2)
            Includes
                49,100,000 shares held by Pacific Rim Consulting. The address of
                Pacific
                Rim Consulting is 3076 Sir Francis Drake Highway, Box 3463 Road Town,
                Tortola, B.V.I. Mitch White is the person with voting and investment
                power
                of shares held by Pacific Rim Consulting.(3)
            Includes
                20,000,000 shares held by Greenday, Inc. The address for Greenday,
                Inc. is
                3076 Sir Francis Drake Highway, Box 3463 Road Town, Tortola, B.V.I.
                Mitch
                White is the person with voting and investment power of shares held
                by
                Greenday, Inc.(4)
            Mitch
                White and Andrea Carley are married. Their benenficial ownership
                numbers
                are not aggregated in this table.




Item
      12.
      Certain Relationships and Related Transactions




During
        the past two years, we have entered into transactions with a value in excess
        of
        $60,000 with an officer, director or beneficial owner of 5% or more of our
        common stock, or with a member of the immediate family of any of the foregoing
        named persons or entities, as follows:
  (1)
        Our
        Chairman and Chief Executive Officer, Mr. Mitch White, has been the primary
        source of funding. Mr. White has directly advanced total proceeds of $869,044
        to
        CYOP. These loans are not secured by any of the assets of CYOP or its
        subsidiaries and have no specified terms of maturity or any other terms.
  (2)
        During the fiscal year 2004, we accrued imputed interest of $72,257 at an
        interest rate of 10% per annum on interest-free loans totaling $1,242,575
        from
        our directors to September 30, 2004 and 5% from October
        1, 2004 to December 31, 2004. These loans have no specified term of maturity
        or
        any other terms. During the fiscal year 2005, we accrued interest of $62,444
        on
        these loans which totaled $1,116,542 at December 31, 2005. We also accrued
        $21,273 of interest on a loan to RedRuth Ventures which is owned by our
        President.


46


(3)
        On
        December 1, 2004, by agreement of both parties, CYOP assigned a $1,800,000
        promissory note, dated December 1, 2001, and maturing December 14, 2010,
        to an
        affiliated company, Gaming Transactions, Inc., in consideration for 25 million
        restricted shares of Gaming Transactions, Inc.’s common stock. Our Chief
        Executive Officer, director and shareholder, Mitch White, is a major shareholder
        of Gaming Transactions, Inc. This transaction has been recorded as an equity
        investment of $1,674,643.
  (4)
        CYOP
        has received the following loans from the following related parties:


**(a)
        Demand Loans Related Party**
  **December**
                  **31,**
                
                **December**
                  **31,**Interest
                    bearing and unsecured at 5% per annum:
                
                **2005**
                
                **2004**Andrea
                    Carley –
                    an officer
                
                $
                44,671
                
                $
                25,156Mitch
                    White – a director, officer and stockholder
                
                
                869,044
                
                
                1,054,726Gordon
                    Samson – former director and officer
                
                
                110,109
                
                
                104,457Patrick
                    Smyth – former officer
                
                
                92,718
                
                
                60,656$
                1,116,542
                
                $
                1,244,995


**(b)
      Short term Loan**


**December**
                **31,**
              
              **December**
                **31,**Non-Interest
                  bearing and unsecured:
              
              **2005**
              
              **2004**Jack
                  Carley – related to a director and stockholder
              
              $
              44,625
              
              $
              44,625$
              44,625
              
              $
              44,625






**(c)
          Short-term Loan Related Party**




**December**
                    **31,**
                  
                  **December**
                    **31,**Interest
                      at 10% per annum:
                  
                  **2005**
                  
                  **2004**RedRuth
                      Ventures
                  
                  $
                  212,725
                  
                  $
                  212,725$
                  212,725
                  
                  $
                  212,725





We
      have
      no policy with respect to entering into transactions with members of management
      or affiliated companies. Any non-arm's length transaction we consider will
      be
      reviewed and voted on by disinterested members of our board of
      directors.





47


Item
      13.
      Exhibits




**EXHIBIT**
                    **NO.**
                
                **DESCRIPTION**
                
                **LOCATION**3.1
                
                Articles
                    of Incorporation
                
                Incorporated
                    by reference to Exhibit 3.1 to CYOP’sRegistration
                    Statement on Form SB-2 filed with theSecurities
                    and Exchange Commission on October 30,20013.2
                
                Certificate
                    of Amendment to Articles of Incorporation
                
                Incorporated
                    by reference to Exhibit 3.2 to CYOP’sRegistration
                    Statement on Form SB-2 filed with theSecurities
                    and Exchange Commission on October 30,20013.3
                
                Certificate
                    of Amendment to Articles of Incorporation
                
                Incorporated
                    by reference to Exhibit 99.3 to CYOP’sForm
                    8-K filed with the Securities and ExchangeCommission
                    on October 8, 20033.4
                
                Bylaws
                
                Incorporated
                    by reference to Exhibit 3.3 to CYOP’sRegistration
                    Statement on Form SB-2 filed with theSecurities
                    and Exchange Commission on October 30,200110.1
                
                Share
                    Purchase Agreement between CYOP Systems,Inc.
                    (Vendors), a wholly-owned subsidiary of CYOP,and
                    Steve White (Purchaser) dated as of April 1, 2002
                
                Incorporated
                    by reference to Exhibit 1.1 to CYOP’sForm
                    8-K filed with the Securities and ExchangeCommission
                    on August 20, 200210.2
                
                Software
                    Acquisition Agreement between CYOPSystems,
                    Inc. (Vendor), a wholly-owned subsidiary ofCYOP,
                    and Mitch White (Purchaser) dated as ofDecember
                    14, 2001
                
                Incorporated
                    by reference to Exhibit 1.1 to CYOP’sForm
                    8-K filed with the Securities and ExchangeCommission
                    on April 15, 200210.3
                
                Marketing
                    Development & Distribution Agreementbetween
                    CYOP (Marketer) and Mitch White (Vendor)dated
                    as of December 14, 2001
                
                Incorporated
                    by reference to Exhibit 1.2 to CYOP’sForm
                    8-K filed with the Securities and ExchangeCommission
                    on April 15, 200210.4
                
                Share
                    Purchase Agreement
                
                Incorporated
                    by reference to Exhibit 10.1 to CYOP’sRegistration
                    Statement on Form SB-2 filed with theSecurities
                    and Exchange Commission on October 30,2001
 
 48
 **EXHIBIT****NO.**
                    
                    **DESCRIPTION**
                    
                    **LOCATION**10.5
                    
                    Software
                        License Agreement
                    
                    Incorporated
                        by reference to Exhibit 10.2 to CYOP’s Registration Statement on Form
                        SB-2 filed with the Securities and Exchange Commission on October
                        30, 200110.6
                    
                    2003
                        Consultant Stock Plan
                    
                    Incorporated
                        by reference to Exhibit 4 to CYOP’s Registration Statement on Form
                        S-8 filed with the Securities and Exchange Commission on October
                        29, 200310.7
                    
                    Management
                        Agreement dated as of January 2003 between CYOP and Mitch
                        White
                    
                    Incorporated
                        by reference to Exhibit 10.7 to CYOP’s Registration Statement on Form
                        SB-2 filed with the Securities and Exchange Commission on March
                        1, 200410.8
                    
                    Management
                        Agreement dated as of January 2003 between CYOP and Patrick
                        Smyth
                    
                    Incorporated
                        by reference to Exhibit 10.9 to CYOP’s Registration Statement on Form
                        SB-2 filed with the Securities and Exchange Commission on March
                        1, 200410.9
                    
                    Securities
                        Purchase Agreement dated as of December 15, 2005 between CYOP and
                        Cornell Capital Partners, L.P.
                    
                    Filed
                        as an exhibit to the Company’s 8-K on December 22, 2005 and
                        incorporated by reference10.10
                    
                    Secured
                        Convertible Debenture 001 dated as of December 15, 2005 for the
                        benefit of Cornell Capital Partners, L.P.
                    
                    Filed
                        as an exhibit to the Company’s 8-K on December 22, 2005 and
                        incorporated by reference10.11
                    
                    Secured
                        Convertible Debenture 002 dated as of December 15, 2005 for the
                        benefit of Cornell Capital Partners, L.P.
                    
                    Filed
                        as an exhibit to the Company’s 8-K on December 22, 2005 and
                        incorporated by reference10.12
                    
                    Amended
                        and Restated Security Agreement dated as of December 15, 2005 by and
                        between CYOP and Cornell Capital Partners, L.P.
                    
                    Filed
                        as an exhibit to the Company’s 8-K on December 22, 2005 and incorporated
                        by reference
  49
 **EXHIBIT
                    **NO.****
                
                **DESCRIPTION**
                
                **LOCATION**10.13
                
                Warrant
                    dated as of December 15, 2005 by andbetween
                    CYOP and Cornell Capital Partners, L.P.
                
                Filed
                    as an exhibit to the Company’s 8-K on December22,
                    2005 and incorporated by reference10.14
                
                Warrant
                    dated as of December 15, 2005 by andbetween
                    CYOP and Cornell Capital Partners, L.P.
                
                Filed
                    as an exhibit to the Company’s 8-K on December22,
                    2005 and incorporated by reference10.15
                
                Escrow
                    Agreement dated as of December 15, 2005between
                    CYOP and Cornell Capital Partners, L.P.
                
                Filed
                    as an exhibit to the Company’s 8-K on December22,
                    2005 and incorporated by reference10.16
                
                Investor
                    Registration Rights Agreement dated as ofDecember
                    15, 2005 between CYOP and CornellCapital
                    Partners, L.P.
                
                Filed
                    as an exhibit to the Company’s 8-K on December22,
                    2005 and incorporated by reference10.17
                
                Termination
                    Agreement dated as of December 15,2005
                    between CYOP and Cornell Capital Partners, L.P.
                
                Filed
                    as an exhibit to the Company’s 8-K on December22, 2005 and incorporated by
                    reference10.18
                
                Asset
                    Purchase Agreement, dated as of November 16,2005,
                    between the Registrant and FutureBet Systems,Inc.
                
                Filed
                    as an exhibit to the Company’s 8-K on January 5,2006
                    and incorporated by reference10.19
                
                Amendment
                  to Asset Purchase Agreement, dated as of May 9, 2006, between the
                  Registrant, Future Bet Systems, Inc. and FutureBet Software,
                  Ltd.
                
                Filed
                  herewith14.1
                
                Code
                    of Ethics
                
                Filed
                    as an exhibit to the Company’s RegistrationStatement
                    on Form SB-2 on March 17, 2006 and incorporated by
                    reference21.1
                
                Subsidiaries
                  of
                  Company
                
                Filed
                  as an exhibit to
                  the Company’s RegistrationStatement
                  on Form SB-2 on March 17, 2006 andincorporated
                  by reference31.1
                
                Rule
                  13a-14(a)/15d-14(a) Certification of the Company's Chief Executive
                  Officer
                
                Filed
                  herewith31.2
                
                Rule
                  13a-14(a)/15d-14(a) Certification of the Company's Chief Financial
                  Officer
                
                Filed
                  herewith32.1
                
                Section
                  1350 Certification of the Company's Chief Executive Officer
                
                Filed
                  herewith32.2
                
                Section
                  1350 Certification of the Company's Chief Financial Officer
                
                Filed
                  herewith
 
 50
 Item
            14.
            Principal Accounting Fees and Services
 
 The
            following table sets forth the fees billed to the Company for professional
            services rendered by the Company's principal accountant, for the year
            ended
            December31, 2004 and December 31, 2005:
 
 **Services**
                  
                  **2004**
                  
                  **2005**Audit
                      fees
                  
                  
                  37,291
                  
                  
                  71,513Audit
                      related fees
                  
                  
                  
                  
                  
                  12,500Tax
                      fees
                  
                  
                  
                  
                  
                  —All
                      other fees
                  
                  
                  —
                  
                  
                  —Total
                      fees
                  
                  
                  37,291
                  
                  
                  84,013
 
 Audit
            fees consist of fees for the audit of the Company's annual financial
            statements
            or services that are normally provided in connection with the statutory
            and
            regulatory filings. Audit
            related fees consisted of reviews of the Company’s quarterly
            filings.
 
 Tax
            fees
            included tax planning and various taxation matters.
 
 Other
            services provided by the Company's principal accountant, other than audit,
            audit-related and tax services, included advisory services associated
            with
            accounting software applications.
 51


**SIGNATURES**





In
      accordance with Section 13 or 15(d) of the Exchange Act, the Registrant caused
      this report to be signed on its behalf by the undersigned, thereunto duly
      authorized.





**CYOP
              SYSTEMS INTERNATIONAL INCORPORATED**Dated:
              May
              16, 2006
            By:
            /s/ Mitch
              WhiteMitch
              White, Chairman, CEO and
              Director




In
      accordance with the Exchange Act, this report has been signed below by the
      following person on behalf of the Registrant and in the capacities and on the
      dates indicated.




**SIGNATURE**
            
            **TITLE**
            
            **DATE**/s/
                *Mitch White*
            
            Chief
                Executive Officer (Principal Executive
            
            May
                16, 2006Mitch
                White
            
            Officer),
                  and Chairman of the Board of Directors/s/
                *Canon Bryan*
            
            Chief
                Financial Officer
            
            May
                16, 2006Canon
                Bryan/s/*Randall
                Peterson*
            
            Director
            
            May
                16, 2006





52