**UNITED
      STATES SECURITIES AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**


**FORM
      10-KSB**




þ
            
            ANNUAL
                REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
                1934.


**For
      the fis** **cal
      year ended December 31, 2007**




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





**Commission
      file number: 000-52357**


**JAVA
      DETOUR, INC.**


(Exact
      name of small business issuer as specified in its charter)





**Delaware**
            
            **20-5968895**(State
                or other jurisdiction of
              incorporation
                or organization)
            
            (I.R.S.
                Identification No.)




**1550
                Bryant Street**
              **Suite
                500**
              **San
                Francisco, CA**
            
            **94103**(Address
                of principal executive offices)
            
            (Zip
                Code)





**(415)
      241-8020**


(Issuer’s
      telephone number, including area code)





Securities
      registered pursuant to Section 12(g) of the Exchange Act:


**Common
      Stock, par value $0.001 per share**





(Title
      of
      Class)





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





Check
      whether the issuer (1) filed all reports required to be filed by
      Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past
      12 months (or for such shorter period that the registrant was required to
      file such reports), and (2) has been subject to such filing requirements
      for the past 90 days. Yes x  No o





Check
      if
      there is no disclosure of delinquent filers in response to Item 405 of
      Regulation S-B contained in this form, and no disclosure will be contained,
      to the best of registrant’s knowledge, in definitive proxy or information
      statements incorporated by reference in Part III of this Form 10-KSB or any
      amendment to this Form 10-KSB x





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





State
      issuer’s revenue for its most recent fiscal year: $6,470,127





The
      aggregate market value of the registrant’s shares of voting and non-voting stock
      held by non-affiliates of the registrant at March 31, 2008 was $1,190,203;
      for
      purposes of this calculation only, “affiliates” of the registrant include its
      directors, officers, and any beneficial holder of 10% or more of the
      registrant’s outstanding common stock. Such
      value was computed by reference to the bid price of the registrant’s shares of
      common stock at March 31, 2008. The registrant’s shares of common stock are
      quoted in the Pink Sheets under the symbol “JVDT.” No established trading market
      for the registrant’s common stock has developed and management believes that the
      bid and ask price of the shares may not accurately reflect the value of the
      registrant.





The
      number of shares outstanding of the registrant’s common equity as of March 31,
      2008 was 28,743,823.





Documents
      incorporated by reference:


**None**





Transitional
      Small Business Disclosure Format: o Yes x No





**TABLE
      OF CONTENTS**





PagePART
                IITEM
                1.
            
            
            DESCRIPTION
                OF BUSINESS
            
            
            1ITEM
                2.
            
            
            DESCRIPTION
                OF PROPERTIES
            
            
            15ITEM
                3.
            
            
            LEGAL
                PROCEEDINGS
            
            
            15ITEM
                4.
            
            
            SUBMISSION
                OF MATTERS TO A VOTE OF SECURITY HOLDERS
            
            
            16PART
                IIITEM
                5.
            
            
            MARKET
                FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
            
            
            16ITEM
                6.
            
            
            MANAGEMENT’S
                DISCUSSION AND ANALYSIS AND RESULTS OF OPERATIONS
            
            
            18ITEM
                7.
            
            
            FINANCIAL
                STATEMENTS
            
            
            25ITEM
                8.
            
            
            CHANGES
                IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
                DISCLOSURE
            
            
            26ITEM 8A.
            
            
            CONTROLS
                AND PROCEDURES
            
            
            26ITEM 8B.
            
            
            OTHER
                INFORMATION
            
            
            27PART
                IIIITEM
                9.
            
            
            DIRECTORS,
                EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSON AND CORPORATE GOVERNANCE;
                COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
            
            
            27ITEM
                10.
            
            
            EXECUTIVE
                COMPENSATION
            
            
            29ITEM
                11.
            
            
            SECURITY
                OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
                STOCKHOLDER MATTERS
            
            
            32ITEM
                12.
            
            
            CERTAIN
                RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
            
            
            34ITEM
                13.
            
            
            EXHIBITS
            
            
            35ITEM
                14.
            
            
            PRINCIPAL
                ACCOUNTANT FEES AND SERVICES
            
            
            37SIGNATURES
            
            38Certification
                Pursuant to Rule 13a-14(a) or 15d-14(a)Certification
                Pursuant to Rule 13a-14(a) or 15d-14(a)Certification
                Pursuant to Section 906







**SPECIAL
      NOTE REGARDING FORWARD-LOOKING STATEMENTS**




**ADDITIONAL
      INFORMATION**




We
      are
      subject to the information and periodic reporting requirements of the Securities
      Exchange Act of 1934, as amended (the “Exchange Act”) and in accordance with the
      Exchange Act, we file annual, quarterly and special reports, and other
      information with the Securities and Exchange Commission (the “SEC”). These
      periodic reports and other information are available for inspection and copying
      at the regional offices, public reference facilities and website of the SEC
      referred to above.





Statements
      contained in this Annual Report about the contents of any contract or any other
      document that is filed as an exhibit are not necessarily complete, and we refer
      you to the full text of the contract or other document filed as an exhibit.
      A
      copy of annual, quarterly and special reports and related exhibits and schedules
      may be inspected without charge at the Public Reference Room maintained by
      the
      Board of Directors at 100 F Street, N.E., Washington, D.C. 20549, and copies
      of
      such reports may be obtained from the Board of Directors upon payment of the
      prescribed fee. Information regarding the operation of the Public Reference
      Room
      may be obtained by calling the Board of Directors at 1-800-SEC-0330. The Board
      of Directors maintains a web site that contains reports, proxy and information
      statements, and other information regarding registrants that file electronically
      with the SEC. The address of the site is www.sec.gov .





**PART
      I**





**ITEM
      1. DESCRIPTION OF BUSINESS**





Unless
      the context otherwise requires, the terms, “Company,” “we,” “us,” and “our” as
      used throughout this Annual Report refer to Java Detour, Inc. (formerly known
      as
      Media USA.com, Inc.), or “Java Detour,” a Delaware corporation as renamed in
      November 2006, our wholly-owned subsidiary, JDCO, Inc., a California corporation
      (“JDCO”), and JDCO’s wholly-owned subsidiary, Java Detour Franchise Corp., a
      California corporation formerly known as Java Detour (“JDCO
      Subsidiary”).





**History**





On
      November 30, 2006, we entered into an Agreement and Plan of Merger (the “Merger
      Agreement”) with our wholly-owned subsidiary Java Acquisition Co., Inc. (“Merger
      Sub”) and JDCO, pursuant to which we acquired JDCO in a reverse merger
      transaction wherein Merger Sub merged with and into JDCO, with JDCO being the
      surviving corporation, and the shareholders of JDCO exchanging their shares
      of
      JDCO common stock for shares of Java Detour common stock (the “Merger”). On
      November 30, 2006, the Merger closed and JDCO became our wholly−owned
      subsidiary. We changed our corporate name from Media USA.com, Inc. to Java
      Detour, Inc.





**Overview**





We
      operate through JDCO and sell
      high
      quality gourmet coffees, whole leaf teas, cold blended beverages, fresh fruit
      smoothies and select baked goods primarily from company-owned and franchised
      retail stores. **** We
      operate and conduct our franchising business through JDCO Subsidiary. Our
      immediate goal is to capitalize on the success of our company-owned stores
      and
      with a national franchise program that will help us expand the Java Detour®
brand into new domestic and international markets. All of our store locations,
      whether company-owned or franchised, will continue to focus on our core business
      concepts: consistently providing superior quality, convenience and customer
      service to all of our customers.





In
      a very
      competitive industry, we believe our Java Detour® stores successfully compete
      with other coffee retailers by offering premium quality beverages, fast service,
      superior convenience, quality franchise opportunities, and distinct and
      proprietary menu offerings. As a smaller boutique brand preparing for a national
      rollout plan, we believe we have to address our competition with efficient
      execution of our high speed drink preparation systems, utilizing our commercial
      grade pumps and specialized training procedures that are currently in place.


1





**Retail
      Stores**





As
      of
      December 31, 2007, our portfolio of stores includes 11 company-owned and 9
      franchised retail outlets. The following table sets forth the locations of
      each
      store in our portfolio.





**Company
                Store Locations**
            
            
            **Franchise
                Store Locations**1.
            Auburn,
                CA
            
            1.
            Rochester
                (#1), MN2.
            Bakersfield,
                CA
            
            2.
            Rochester
                (#2), MN3.
            Chico
                (#1), CA
            
            3.
            La
                Crosse (#1), WI4.
            Chico
                (#2), CA
            
            4.
            La
                Crosse (#2), WI5.
            Citrus
                Heights, CA
            
            5.
            Madison,
                WI6.
            Marysville,
                CA
            
            6.
            Las
                Vegas (Charleston), NV7.
            Red
                Bluff, CA
            
            7.
            Las
                Vegas (Pecos), NV8.
            Redding,
                CA
            
            8.
            Las
                Vegas (Tropicana), NV9.
            San
                Francisco, CA
            
            9.
            Las
                Vegas (Warm Springs), NV10.
            San
                Rafael, CA11.
            Yuba
                City, CA





The
      following table sets forth our revenues for the years ended December 31, 2007
      and 2006 in U.S. dollars:





Year
                ended
              December 31, 2007
            
            Year ended
              December 31, 2006Company-owned
                Store Revenues
            
            $
            6,127,951
            
            $
            6,317,946Franchise
                Revenues
            
            
            342,176
            
            
            71,771Total
            
            $
            6,470,127
            
            $
            6,389,717





Within
      our portfolio of stores we offer four distinctly different store footprints
      designed for flexibility and compatibility within different development and
      retail venues:





·
            stand-alone
                600 square foot double drive-through store.


·
            stand
                alone 1,300 square foot single-lane drive-through store with inside
                seating.


·
            1,250
                square foot single-lane drive-through store with inside seating located
                in
                the end space of a multi-tenant commercial retail building.


·
            1,250
                square foot store without drive-though service located in an interior
                space of a multi-tenant commercial retail
                building.





**Store** ****** **Design
      and Atmosphere**





We
      work
      with a group of designers and architects specializing in retail kitchen design
      to ensure that our stores are ergonomically designed for speed and efficiency
      and outfitted with state-of-the art equipment. Our team works to ensure that
      every piece of equipment and product used to make our drinks is positioned
      such
      that unnecessary or excessive movement by our employees is minimized, thereby
      increasing our production and efficiency.





Each
      store features eye-catching contemporary branding designed to maximize customer
      throughput and drive sales volumes. Our busiest location regularly serves over
      135 cars per hour from its drive through lanes during peak morning hours. All
      of
      our stores afford customers quick and convenient access
      into the locations to facilitate fast and convenient customer service. Our
      stores that feature inside seating offer, in addition to fast, convenient
      service, a contemporary interior venue where people can meet, work or simply
      relax while enjoying our delicious beverages.


2




**Company-Owned
      Stores**





Our
      first
      drive-through gourmet beverage store opened in California in 1995. As of
      December 31, 2007, we owned and operated 11 locations in California. We believe
      that with each new store opening, brand awareness and customer loyalty continues
      to grow. We believe that as we continue to open new company-owned stores our
      credit worthiness and attractiveness as a tenant for real estate developers
      and
      as a viable franchise for potential new franchisees will also continue to
      increase.





We
      have
      signed a number of strategic agreements designed to expedite our national
      expansion. In August 2006, we signed an exclusive development agreement with
      Pavilion Development to develop up to 30 stores in Texas and Florida. Pursuant
      to the development agreement, we also designated Pavilion Development as a
      preferred developer for any new markets we consider going forward, meaning
      that
      Pavilion Development has a right of first refusal to develop stores for us
      in
      such new markets on terms substantially similar to those in our current
      agreement with Pavilion Development. Pursuant to the terms of our agreement,
      Pavilion Development is responsible for the entire development process, from
      identifying and selecting sites for the new store locations to negotiating
      with
      and contracting to purchase the designated sites to managing and supervising
      the
      construction process until the store is built and delivered to us according
      to
      our agreed upon specifications. The first store under the Pavilion Development
      agreement was built and delivered to us for a store opening in January 2008
      while the second store under the Pavilion Development agreement is currently
      in
      the planning stages. Both of these stores will be located in Charlotte, NC.
      We
      are not obligated to approve and accept delivery of any stores from Pavilion
      Development unless such stores meet our specifications nor are we financially
      obligated to pay any fees to Pavilion Development under our agreement except
      to
      the extent that we approve and accept delivery of a store developed by Pavilion
      Development. Beginning in June 2007, we began paying Pavilion Development $4,250
      per month in rental fees for our first store in Charlotte, North Carolina that
      was developed by Pavilion Development.





**Franchised
      Stores**





The
      Java
      Detour® franchise opportunity attracts individuals seeking single store
      ownership, larger area developments and multi-unit operators interested in
      co-branding opportunities. We sold our first franchise area development in
      Minnesota and Wisconsin in 2000. In September 2006, we sold our first
      international territory for the rights to franchise Java Detour® stores
      throughout Ireland with additional options to franchise in the United Kingdom
      pursuant to a master licensing agreement. Since then, we have also sold the
      rights to franchise in China. As of December 31, 2007, we had 9 franchised
      stores in operation.





We
      evaluate and develop franchising opportunities based upon specific criteria,
      including demographics, traffic counts, competition, branding and marketing
      opportunities, and financial considerations. Franchisees must have sufficient
      financial and operating experience or abilities and their stores must maintain
      consistent high standard business practices. Franchising also offers challenges,
      including additional regulatory burdens, sharing of financial rewards with
      the
      franchisee and maintaining brand and operating standards in stores that are
      not
      operated by our employees. Certain real estate may not fit the profile of a
      company-owned store location but may be appropriate for a franchised location.
      Further, certain geographic markets may not be targeted for new company-owned
      stores in the near future, but may be good markets for immediate
      franchising.





Franchising
      is another method of raising capital and creating annuity income streams. For
      our franchised stores, we earn a one-time initial franchise fee for each
      individual location of $28,500. Additionally, we receive an on-going annual
      royalty of 4% of monthly gross sales, advertising fund fees of 2% and coop
      advertising fees of 1% of the franchised store’s annual gross sales.
      Furthermore, we may also supply our coffee and other store equipment supplies
      to
      the franchises at up to a 20% mark-up above cost. Typically, the term for our
      franchise agreements is 10 years, renewable in 5-year increments.





Pursuant
      to our franchise agreements, we provide comprehensive support services to our
      franchisees, including marketing programs, product sourcing, volume purchasing,
      customer service surveys, complete operations training and business
      consultation. We are required to provide our franchisees with operation manuals,
      site selection support, proprietary products and supplies, and assistance with
      building architecture drawings and national advertising campaigns. We have
      established an intensive in-house training program for our franchisees which
      includes two weeks of hands-on in store training on operations, coffee
      knowledge, merchandising, buying, inventory controls and accounting procedures.
      We work closely with franchisees on all issues pertaining to store operations;
      we also regularly survey franchise customers for feedback on product quality
      and
      customer service.


3




**Growth
      strategy**





Our
      business objective is to establish the Java Detour® brand as a successful
      nationally and internationally recognized gourmet beverage retail concept.
      We
      plan continued strategic expansion of our retail operations while simultaneously
      working to create other outlets and distribution points for sales of our freshly
      roasted whole bean coffees and other related proprietary products.





Key
      elements of our strategic planning include:





·
            *Increasing
                brand recognition and customer loyalty.*We
                believe we have particularly strong brand awareness in markets where
                we
                have a significant retail store presence. We believe our brand awareness
                has resulted from our marketing efforts, distinctive Java Detour
                branding
                and signage, and word of mouth; all of which help promote our brand
                as we
                expand into new markets. We continuously work to increase brand
                recognition and loyalty by improving the level and speed of customer
                service through training, improved technology and better daily execution.
                In addition, through cultivation of new relationships with other
                distribution channels, we hope to expand our brand awareness outside
                our
                existing markets through the sale of our coffee products by other
                distribution partners such as national food
                vendors.





·
            *Increasing
                comparable same store sales and operating margins.*We
                expect future growth in our retail segment to continue through continued
                increases in comparable same store sales as well as through continued
                increases in product and brand awareness with the introduction of
                new
                proprietary products and new advertising campaigns. Also, with our
                new
                database reporting solution “Dashboard” we can now track current retail
                sales against historical data allowing us to react quicker to sales
                trends
                at the store level. This information enables field management to
                respond
                more quickly to opportunities and challenges in an effort to increase
                market share and bottom-line profits. As our comparable**retail
                store sales increase, we expect our operating margins at those retail
                stores to also continue to improve. In addition, we continue to improve
                operating margins by leveraging our purchasing power to negotiate
                better
                pricing.





·
            *Opening
                successful new company-owned stores throughout the
                country.*We
                continue to seek additional penetration in existing markets as well
                as in
                new domestic markets nationwide. In order to maximize expansion
                opportunities, we have created four different store footprints. These
                different store designs allow us to easily configure into multiple
                venues
                such as shopping centers, stand-alone commercial retail spaces, parking
                lots, airports, shopping malls and urban office spaces. We plan to
                expand
                our company-owned stores primarily throughout California, Arizona,
                Texas,
                Florida, North Carolina, and Nevada with approximately 26 new retail
                locations planned by year-end 2010.





·
            *Expanding
                our franchise operations.*We
                intend to continue to afford strategic franchising domestically and
                abroad
                where we believe there are significant opportunities to develop and
                operate our brand. We believe strategic franchise development helps
                build
                brand awareness and add annuity revenue. We plan to expand our franchise
                retail operations throughout the country with approximately 44 new
                franchise locations planned by year-end 2010. Expanding into the
                international market for the first time in 2006, we currently have
                sold
                the territories of Ireland and
                China.


4




·
            *Expanding
                complementary distribution channels.*We
                intend to continue expanding into complementary distribution channels
                to
                enhance our growth and brand awareness. For example, in the home
                delivery
                segment, we have a dedicated website and customer service representatives
                that provide points of contact to our customers for coffee ordering.
                Our
                website, www.javadetour.com, features express buy functions for return
                customers and special coffee-of-the-month programs. In late 2005,
                we
                launched our online coffee program which now allows customers to
                establish
                regular deliveries of their favorite fresh roasted coffee. In addition,
                over the course of the next 24 months, we will seek to exploit
                distribution channels such as grocery stores, mass merchandisers,
                office
                coffee providers, airlines, hotels and college campuses to boost
                sales and
                brand recognition. Our management team will work together to continue
                sourcing all of our products sold as well as establishing new accounts
                in
                other distribution channels.





·
            *Expanded
                menu offerings.*We
                intend to continue to expand and diversify our product offerings
                in an
                attempt to attract new customers and increase the frequency of visits
                by
                current customers. In 2006, we launched a new menu and unveiled several
                new products including specialty teas, and milkshakes. In 2007 we
                introduced a new line of holiday flavored coffees. Our goal is to
                launch
                one new proprietary drink or product per year. Currently, we are
                working
                on the launch of panini and breakfast sandwiches in our company-owned
                stores which we expect to complete in April 2008. We anticipate spending
                approximately $5,000 to market this offering which is estimated to
                make up
                less than 2% of overall store sales. Depending on how the product
                fares
                with our customers, we will determine whether to make the panini
                sandwiches a permanent part of our menu offerings.We
                have also begun offering a variety of baked goods such as muffins,
                danishes, bars and cookies to our customers. Along
                with marketing materials, the new in-store menushelp
                guide customers through the process of choosing beverages and the
                right
                blend of coffee, all of which we believe helps build consumer loyalty
                and
                brand awareness.





**Site
      Selection**





We
      believe site selection for our retail locations is paramount to the success
      of
      our retail store growth strategy. We are constantly refining our site selection
      process to ensure superior site selection. When evaluating potential locations,
      we consider various site attributes, such as the type of venue, the potential
      for signage, and whether the location will feature a store design with inside
      seating, as well as the demographics and attributes of our existing retail
      store
      customer base. This process allows us to develop revenue forecasts and a
      financial plan for all potential locations. We search for geographic areas
      of
      expansion in which we believe there is significant demand for our products.
      Specifically, we target market areas that are close to freeways, schools,
      hospitals and other large traffic generators. After identifying a potential
      site, we develop a site plan, space plan and project budget that are approved
      by
      the appropriate management and personnel.





**Marketing**





We
      believe that consumer interest is increased, and incremental sales occur, when
      customers are informed about new Java Detour products, special offers, and
      the
      premium quality of our products. Accordingly, our strategies include advertising
      and marketing at the point-of-sale at our stores and outside of our stores.
      We
      have developed a successful strategy of using product photos and well designed
      point of sales pieces to help direct customers into the most profitable drinks
      and into drinks that can only be purchased at Java Detour®
stores.


5




We
      employ
      targeted marketing strategies to increase brand awareness and encourage trial
      and repeat purchases by educating potential customers about the distinctive
      qualities of Java Detour® products. Our marketing efforts also promote repeat
      business by reinforcing positive experiences with our fast and friendly service.
      We rely on a mixture of marketing efforts that are tailored to the specific
      needs of particular markets or retail stores, including:





·
            point-of-purchase
                marketing, which encourages existing customers to try new products
                or
                services;


·
            direct
                marketing, which includes mailings and email distributions which
                are
                cost-effective methods to reach new customers and encourage repeat
                visits
                from existing customers;


·
            promotions
                and local retail store marketing, which allow us to alert customers
                to new
                products, seasonal merchandise and coupon programs; and


·
            print
                advertising, which includes advertising in newspapers and other
                publications to attract new customers within a particular
                market.





In
      addition, we receive free marketing through word-of-mouth communication from
      our
      current customers who tell their friends and colleagues about their enjoyable
      Java Detour® experiences, our quality products and our fast service.





**Coffee
      Beans**





We
      purchase our whole coffee beans from various coffee-producing regions around
      the
      world. We purchase our coffee beans from a roaster who is directly responsible
      for selecting the supplier, purchasing, roasting, packaging and distributing
      coffee beans directly to our Java Detour® stores. While we typically do not
      enter into exclusive supply contracts to purchase coffee beans, we do enter
      oral
      agreements for pricing for each 50,000 pounds purchased and we purchase whole
      coffee beans at the agreed upon price per pound on a net 30 basis. Currently,
      we
      purchase all of our coffee beans from Landgrove Coffee Co., a company co-owned
      by Jon Binninger, a brother of Michael and Steven Binninger, our Chief Executive
      Officer and Chief Operating Officer, respectively.





As
      of
      January 2008, we had commitments to purchase whole coffee beans at a total
      cost
      of $3.73 per pound for our espresso & French roast blends, $4.29 per pound
      for our decaffeinated blend, $4.38 per pound for our house blend, and $4.92
      per
      pound for specialty blends. Together with our existing coffee bean inventory,
      we
      expect to have an adequate supply of coffee beans through June, 2008. Going
      forward, we intend to continue to purchase green beans in the spot market at
      negotiated prices. Because we are not locked into an exclusive agreement with
      any particular supplier, we are able to negotiate with and purchase from various
      green bean suppliers throughout the country. While we currently purchase our
      coffee exclusively from Landgrove Coffee, we have relationships with other
      roasters who are capable of supplying us with our coffee beans. We believe
      that
      this flexibility will ensure that we are able to secure a sufficient supply
      of
      green beans going forward.





Additionally,
      Landgrove Coffee currently pays JDCO Subsidiary a rebate of $0.40 per pound
      for
      all coffee purchases from our franchisees in the Midwest.





**Dairy
      Products**





We
      obtain
      our dairy products from regional dairy suppliers. In our established markets,
      we
      generally have arrangements with a dairy supplier under which we purchase
      products for fixed prices based upon the commodity price plus a percentage.





**Other
      Non-Coffee Products**





We
      obtain
      the majority of our other non-coffee products, including specialty teas, paper
      and plastic goods and food items, from regional or national vendors such as
      Sysco Foods Inc.


6




**Competition**





The
      retail segment of the gourmet coffee industry remains highly fragmented and,
      with the exception of Starbucks Corporation, contains few companies with strong
      brand loyalty or a substantial national presence. In addition to Starbucks,
      our
      primary competitors in whole bean gourmet coffee sales are primarily regional
      or
      local market coffeehouses, such as Coffee Bean & Tea Leaf in the California
      market. As we continue to expand geographically, we expect to encounter
      additional regional and local competitors.





Premium
      coffee brands may serve as substitutes for our whole bean coffee and we also
      compete indirectly against all other coffee brands on the market.  In
      addition to competing with other distributors of whole bean coffee, we compete
      with retailers of prepared beverages, including other coffeehouse chains,
      numerous convenience stores, restaurants, coffee shops and street vendors.





Despite
      competing in a fragmented market, consumer demand has continued to rise and,
      as
      a result, gourmet coffee brands continue to develop across multiple distribution
      channels. Several competitors are aggressive in obtaining distribution in
      specialty grocery and gourmet food stores, and in office, restaurant and food
      service locations.





We
      believe that our customers choose among gourmet coffee brands based upon the
      quality and variety of the coffee and other products, atmosphere, convenience,
      customer service and, to a lesser extent, price. We believe that our market
      share in the gourmet coffee market is based on a differentiated position built
      on superior quality, convenience and consistently fast customer service.





**Government
      Regulation**





Each
      of
      our retail locations and our roaster’s facility is and will be subject to
      licensing and reporting requirements by a number of governmental authorities.
      These governmental authorities include federal, state and local health,
      environmental, labor relations, sanitation, building, zoning, fire, safety
      and
      other departments that have jurisdiction over the development and operation
      of
      these locations. Our activities are also subject to the Americans with
      Disabilities Act and related regulations, which prohibit discrimination on
      the
      basis of disability in public accommodations and employment. Changes in any
      of
      these laws or regulations could have a material adverse affect on our
      operations, sales, and profitability. Delays or failures in obtaining or
      maintaining required construction and operating licenses, permits or approvals
      could delay or prevent the opening of new retail locations, or could materially
      and adversely affect the operation of existing retail locations. In addition,
      we
      may not be able to obtain necessary variances or amendments to required
      licenses, permits or other approvals on a cost-effective or timely basis in
      order to construct and develop store locations in the future.





We
      believe that we are in compliance in all material respects with all such laws
      and regulations and that we have obtained all material licenses that are
      required for the operation of the business. We are not aware of any
      environmental regulations that have or that we believe will have a material
      adverse effect on our operations.





**Intellectual
      Property**




Intellectual
      property and other proprietary rights are considered an important part of our
      success. We place high value on our Java Detour® trade name, and we own several
      trademarks and service marks that have been registered with the United States
      Patent and Trademark Office, including Java Detour®, “Cold Rush,” “Feel the Cold
      Rush,” and “Changing the way America buys Coffee.”




In
      addition to registered and pending trademarks, we consider the packaging for
      our
      gourmet coffee beans and the ergonomic design of our stores to be strong
      identifiers of our brand. Although we consider our packaging and store design
      to
      be essential to our brand identity, we have not applied to register these
      trademarks and trade dress, and thus cannot rely on the legal protections
      afforded by trademark registration, although we have substantial protection
      under the existing family of marks that we have registered.


7




Our
      ability to differentiate our brand from those of our competitors depends, in
      part, on the strength and enforcement of our trademarks. We must constantly
      protect against any infringement by competitors. If a competitor infringes
      on
      our trademark rights, we may have to litigate to protect our rights, in which
      case, we may incur significant expenses and divert significant attention from
      our business operations.





**Employees**





As
      of
      December 31, 2007, we employed 126 employees, 52 of whom are employed full-time.
      113 of our employees were employed in our retail stores with the remainder
      in
      our corporate offices, and store and franchise development and operations.
      None
      of our employees are represented by a labor union and our relations with our
      employees are good.





**Risk
      Factors**





Any
      investment in our common stock involves a high degree of risk. Investors should
      carefully consider the risks described below and all of the information
      contained in this report before deciding whether to purchase our common stock.
      Our business, financial condition or results of operations could be materially
      adversely affected by these risks if any of them actually occur. Some of these
      factors have affected our financial condition and operating results in the
      past
      or are currently affecting us. This report also contains forward-looking
      statements that involve risks and uncertainties. Our actual results could differ
      materially from those anticipated in these forward-looking statements as a
      result of certain factors, including the risks faced by us described below
      and
      elsewhere in this report.




**RISKS
      RELATED TO OUR OPERATIONS**





**If
      we fail to continue to develop and maintain our brand, we may be unable to
      increase our future revenue or implement our business strategy and our business
      will suffer.**





We
      believe that maintaining and developing our brand
      is
      critical to our success
      and that the importance of brand recognition will likely increase as a result
      of
      competitors offering products similar to our products. Because
      the substantial majority of our retail locations are on the West Coast,
      primarily in California, our brand recognition remains largely regional. We
      intend
      to increase our marketing
      expenditures to create and maintain brand loyalty as well as increase awareness
      of our brand
      on
      a national level. However, if our brand-building strategy is unsuccessful,
      these
      expenses may never be recovered, and we may be unable to increase our future
      revenue or implement our business
      strategy.





**Because
      our business is highly dependent on a single product, gourmet coffee, we are
      vulnerable to changes in consumer preferences and economic conditions that
      could
      harm our financial results.**





Our
      business is not diversified and primarily consists of buying, blending and
      roasting coffee beans and operating gourmet coffee stores. Consumer preferences
      often change rapidly and without warning, moving from one trend to another
      among
      many product or retail concepts. Shifts in consumer preferences away from the
      gourmet coffee industry would have a material adverse effect on our results
      of operations. Our continued success will depend in part on our ability
      to anticipate, identify and respond quickly to changing consumer preferences
      and
      economic conditions.





**Because
      our California retail stores account for a substantial portion of our net
      revenue, we are susceptible to adverse trends and economic conditions in
      California.**





Our
      California retail stores generated 84.5% of our net revenue for the year ended
      December 31, 2007. We expect that our California operations will continue to
      generate the substantial portion of our revenue for the foreseeable future.
      In
      addition, our California retail stores provide us with means for increasing
      brand awareness, building customer loyalty and creating a premium gourmet coffee
      brand.  As
      a
      result, a worsening of economic conditions or a decrease in consumer spending
      in
      California may not only lead to a substantial decrease in revenue, but may
      also
      adversely impact our ability to market our brand, build customer loyalty, or
      otherwise implement our business strategy.


8




**We
      compete with a number of companies for customers. Our business would be
      adversely affected by the success of these competitors.**





The
      retail segment of the gourmet coffee industry remains highly fragmented and,
      with the exception of Starbucks, contains few companies with strong brands. Our primary
      competitors for gourmet coffee sales are other gourmet coffeehouses and
      restaurants. In all markets in which we do business, there are numerous
      competitors in the gourmet coffee industry, and we expect
      this situation to continue. Starbucks is the gourmet coffeehouse segment leader.
      We also
      compete with numerous convenience stores, restaurants and coffee shops and
      we must
      spend significant resources to differentiate our customer
      experience (which is defined by convenient store locations, customer service
      and
      ergonomic store design and convenience) from the offerings of our competitors.
      Despite these efforts, our competitors
      still may be successful in attracting our customers.





Aside
      from Starbucks, our primary
      competitors in whole bean gourmet coffee sales are primarily regional or local
      market coffeehouses. As we continue to expand geographically, we expect to
      encounter additional regional and local competitors.





Competition
      in the gourmet coffee industry is becoming increasingly intense as relatively
      low barriers to entry encourage new competitors to enter the market. The
      financial, marketing and operating resources of these new market entrants may
      be
      greater than our resources.
      In addition, some of our existing
      competitors have substantially greater financial, marketing and operating
      resources. Our failure
      to compete successfully against current or future competitors could have an
      adverse effect on our business,
      including loss of customers, declining net sales and loss of market
      share.





**Our
      new retail locations may not achieve market acceptance or the same levels of
      profitability in the geographic regions we enter or be profitable in existing
      markets, therefore placing a significant strain on our financial resources
      and
      potentially limiting our ability to further expand our
      business.**





Our
      expansion plans depend in large part on opening retail locations in new markets
      where we may have little or no operating experience. The success of these new
      locations will be affected by the different competitive conditions, consumer
      tastes and discretionary spending patterns of the new markets we enter, as
      well
      as our ability
      to generate market awareness of the Java Detour® brand. Although we have opened
      nine locations in markets outside California and expect to continue to do so,
      we
      may not achieve the same levels of profitability at these other locations as
      we
      have with those located in California.





In
      addition, our expansion plans also depend on opening new locations in existing
      markets. New locations may take longer to reach profitability, thereby affecting our overall
      profitability and results of operations. Moreover, we  may
      not
      be successful in operating our new locations on a profitable basis. In addition, our failure
      to achieve market acceptance or profitability at one or more of our new retail
      locations could put a significant strain on our financial
      resources and could limit our ability to further expand our business.





**If
      we are unable to continue leasing our retail locations or obtain leases for
      new
      stores, our existing operations and our ability to expand may be adversely
      affected.**





All
      but
      two of our retail locations are presently located on leased premises. If we
      are
      unable to renew these leases, which average between 5 to 15 years remaining
      on
      the leases, our revenues and profits could suffer. Additionally, we intend
      to
      lease other premises in connection with the planned expansion of our retail
      locations. Because we compete with other retailers and restaurants for store
      sites and some landlords may grant exclusive locations to our competitors,
      we
      may not be able to obtain new leases in some markets on acceptable terms. This
      could adversely impact our revenue growth and brand building initiatives in
      some
      localized markets.





**Our
      growth through franchising may not occur as rapidly as we currently anticipate
      and may be subject to additional risks related to our lack of control over
      the
      quality and timing of our franchised operations.**





As
      part
      of our growth
      strategy, we intend to continue to seek franchisees to operate retail locations
      under the Java Detour® brand in selected geographic markets. We believe that our ability
      to recruit,
      retain and contract with qualified franchises will be increasingly important
      to
      our operations as we expand. Our franchisees are dependent upon the availability
      of adequate sources of financing in order to meet their development obligations.
      Such financing may not be available to our franchisees, or only available upon
      disadvantageous terms. Our franchise strategy may not enhance our results of
      operations. In addition, retail store openings contemplated under our existing
      franchise agreements or any future franchise agreement may not open on the
      anticipated development schedule or at all.


9




Expanding
      through franchising exposes our business and brand to risks because the quality
      of franchised operations will be beyond our immediate control. Even if we have
      contractual remedies to cause franchisees to maintain operational standards,
      enforcing those remedies may require litigation and therefore our image and
      reputation may suffer, unless and until such litigation is successfully
      concluded.





**Because
      we rely heavily on third party carriers to deliver our coffee, any disruption
      in
      their services or increase in shipping costs could adversely affect our sales
      and profitability.**





We
      rely
      on a number of third party carriers to deliver coffee to our distribution facility, our roaster and our store
      locations, as well as to Internet-order customers. We have no control over
      these
      carriers and the services provided by them may be interrupted or disrupted
      as a
      result of labor shortages, contract disputes or other factors. If we experience
      an interruption or disruption in these services, it may be unable to ship our
      coffee in a timely manner. A delay in shipping could:





·
            have
                an adverse impact on the quality of the coffee shipped, and thereby
                adversely affectourbrand
                and reputation;


·
            result
                in the disposal of an amount of coffee that could not be shipped
                in a
                timely manner; and


·
            require
                us to contract with alternative, and possibly more expensive, third
                party
                carriers.





Any
      significant increase in shipping costs could lower our profit margins or force
      us to raise prices, which could cause our profits
      to suffer.





**A
      significant interruption in the operation of our distribution facility or in
      our
      coffee roaster’s operations could potentially disrupt our
      operations.**





We
      have
      only one distribution facility and currently rely on only one coffee roaster
      to
      provide roasting services to us. A significant interruption in the operation
      of
      these facilities, whether as a result of broken equipment, a natural disaster
      or
      other causes, could significantly impair our ability to operate the business
      on
      a day-to-day basis.





**Our
      roasting methods are not proprietary, so competitors may be able to duplicate
      them, which could harm our competitive position.**





We
      consider our roasting
      methods essential to the flavor and richness of our roasted
      whole bean coffee and, therefore, essential to our brand.
      Because we do not hold any patents for our roasting
      methods, it may be difficult for us to prevent competitors from copying our roasting
      methods. If our competitors
      copy our roasting
      methods, the value of the Java Detour® brand may be diminished, and we may lose
      customers to our competitors.
      Additionally, competitors may be able to develop roasting methods that are
      more
      advanced than our roasting
      methods, which may also harm our competitive
      position.





**Compliance
      with health, environmental, safety and other governmental regulations applicable
      to us could increase cost and affect profitability.**





Each
      of
      our retail locations and our roaster’s facility is and will be subject to
      licensing and reporting requirements by a number of governmental authorities.
      These governmental authorities include federal, state and local health,
      environmental, labor relations, sanitation, building, zoning, fire, safety
      and
      other departments that have jurisdiction over the development and operation
      of
      these locations. Our activities are also subject to the Americans with
      Disabilities Act and related regulations, which prohibit discrimination on
      the
      basis of disability in public accommodations and employment. Changes in any
      of
      these laws or regulations could have a material adverse affect on our
      operations, sales, and profitability. Delays or failures in obtaining or
      maintaining required construction and operating licenses, permits or approvals
      could delay or prevent the opening of new retail locations, or could materially
      and adversely affect the operation of existing retail locations. In addition,
      we
      may not be able to obtain necessary variances or amendments to required
      licenses, permits or other approvals on a cost-effective or timely basis in
      order to construct and develop store locations in the future.


10




**We
      may not be able to adequately protect our intellectual property, which could
      harm the value of our brand and adversely affect our sales and
      profitability.**





The
      success of our retail locations depends in part on the Java Detour® brand,
      logos, branded merchandise and other intellectual property. We rely on a
      combination of trademarks, copyrights, service marks, trade secrets and similar
      rights to protect our intellectual property. The success of our growth strategy
      depends on our continued ability to use our existing trademarks and service
      marks in order to increase brand awareness and further develop our brand in
      both
      domestic and international markets. We also use our trademarks and other
      intellectual property on the Internet. If our efforts to protect our
      intellectual property are not adequate, or if any third party misappropriates
      or
      infringes on our intellectual property, either in print or on the Internet,
      the
      value of the Java Detour® brand may be harmed, which could have a material
      adverse effect on our business. We may become engaged in litigation to protect
      our intellectual property, which could result in substantial costs to us as
      well
      as diversion of management attention.





**We
      will likely need to raise significant additional capital in order to continue
      to
      grow our business, which subjects us to the risks that we may be unable to
      maintain or grow our business as planned or that our shareholders may be subject
      to substantial additional dilution.**




We
      will
      likely need to raise additional capital in the future to fund the continued
      growth and expansion of our business. We
      may
      also require additional capital to respond to competitive pressures, to make
      capital improvements at our retail locations or to acquire necessary
      technologies. We do not know if we will be able to raise additional financing
      or
      financing on terms favorable to us. If adequate funds are not available or
      are
      not available on acceptable terms, our ability to fund our operations, develop
      and expand our business or otherwise respond to competitive pressures would
      be
      significantly impaired. In such a case, our stock price would likely be
      materially and adversely impacted.





In
      addition, if we raise additional funds through the issuance of equity or
      convertible or exchangeable securities, the percentage ownership of our existing
      shareholders will be reduced. These newly issued securities may have rights,
      preferences and privileges senior to those of existing
      shareholders.





**Future
      growth may make it difficult to effectively allocate our resources and manage
      our business.**





As
      we
      continue to develop additional retail locations and investigate licensing
      opportunities, we will need to allocate our resources effectively. Our growth
      has and will continue to increase our operating complexity and the level of
      responsibility for new and existing management. Our anticipated growth could
      place a strain on our management, production, financial and other resources.
      We
      cannot assure you that we will be able to manage any future growth effectively.
      Any failure to manage our growth effectively could have an adverse effect on
      our
      business, financial condition and results of operations. Our
      ability to compete effectively and to manage our recent
      and future growth effectively will depend on our ability
      to implement and improve financial and management information systems on a
      timely basis and to effect changes in our business,
      such as implementing internal controls to handle the increased size of our operations
      and hiring, training, developing and managing an increasing number of
      experienced management-level and other employees. Unexpected difficulties during
      expansion, the failure to attract and retain qualified employees or our
      inability to respond effectively to recent growth or plan for future growth
      could adversely affect our ability
      to implement our business
      strategy or our results
      of operations.





**We
      depend on key members of our management and will need to add and retain
      additional management and other personnel in order to effectively compete in
      our
      industry.**





The
      success of our business to date has been, and our continuing
      success will depend, to a large degree on the continued services of our
      executive officers, especially our Chief Executive Officer, Michael Binninger,
      and other key personnel who have extensive experience in the gourmet coffee
      industry. If we lose the services of any of these integral personnel and fail
      to
      manage a smooth transition to new personnel, our business
      would suffer. We do carry key person life insurance on our executive
      officers.


11




The
      success of our business
      also depends on our ability
      to attract and retain highly motivated, well-qualified management and other
      personnel, including technical personnel and retail employees. We face
      significant competition in the recruitment of qualified employees and there
      can
      be no assurance that we will be able to retain our existing
      personnel or attract additional qualified employees. The loss of key personnel
      or the inability to hire and retain additional qualified management and other
      personnel in the future could have a material adverse effect on our business,
      financial condition and results of operation.





**RISKS
      RELATED TO OUR INDUSTRY**





**A
      shortage in the supply, or an increase in the price, of coffee beans could
      adversely affect our net sales.**





The
      supply and price of whole coffee beans are subject to significant volatility.
      Although most coffee beans are traded in the commodity market, the green coffee
      beans we buy tend to trade on a negotiated basis at a substantial premium above
      commodity coffee prices, depending upon the supply and demand at the time of
      purchase. **** Supply
      and price can be affected by multiple factors in the producing countries,
      including weather, natural disasters, political and economic conditions or
      civil
      unrest or strikes due to the poor conditions imposed on many coffee farmers.
      In
      addition, coffee bean prices have been affected in the past, and may be affected
      in the future, by the actions of certain organizations and associations that
      have historically attempted to influence commodity prices of coffee beans
      through agreements establishing export quotas or restricting coffee supplies
      worldwide. Our ability to raise sales prices in response to rising coffee bean
      prices may be limited, and our profitability could be adversely affected if
      coffee bean prices were to rise substantially. Moreover, passing price increases
      on to our customers could result in losses in sales volume or margins in the
      future. Similarly, rapid sharp decreases in the cost of coffee beans could
      also
      force us to lower sales prices before we have realized cost reductions in our
      coffee bean inventory.





**Adverse
      publicity regarding customer complaints may negatively impact our brand image
      and therefore harm our business.**





We
      may be
      the subject of complaints or litigation from customers alleging beverage and
      food-related illnesses, injuries suffered on the premises or other quality,
      health or operational concerns. Adverse publicity resulting from such
      allegations may materially adversely affect us, regardless of whether such
      allegations are true or whether we are ultimately held liable.





**We
      face the risk of fluctuations in the cost, availability and quality of our
      non-coffee raw ingredients, all of which could have an adverse effect on our
      profitability.**





The
      cost,
      availability and quality of non-coffee raw ingredients for our products are
      subject to a range of factors. Fluctuations in economic and political
      conditions, weather and demand could adversely affect the cost of our
      ingredients. We have limited supplier choices dependent on frequent deliveries
      of fresh ingredients, thereby subjecting us to the risk of shortages or
      interruptions in supply. In particular, the supply and price of dairy products
      are subject to significant volatility. Our ability to raise sales prices in
      response to increases in prices of these non-coffee raw ingredients may be
      limited, and our profitability could be adversely affected if the prices of
      these ingredients were to rise substantially.





**Adverse
      public or medical opinion about caffeine may reduce our sales and profits.**





Our gourmet
      coffee contains significant amounts of caffeine and other active compounds,
      the
      health effects of some of which are not fully understood. A number of research
      studies conclude or suggest that excessive consumption of caffeine may lead
      to
      increased heart rate, nausea and vomiting, restlessness and anxiety, depression,
      headaches, tremors, sleeplessness and other adverse health effects. An
      unfavorable report on the health effects of caffeine or other compounds present
      in coffee could significantly reduce the demand for coffee, which could harm our business
      and reduce our sales
      and
      profits.


12




**RISKS
      RELATED TO OUR CAPITAL STRUCTURE**





**There
      is no assurance of an established public trading market, which would adversely
      affect the ability of investors to sell their securities in the public
      market.**





Although
      our common stock is quoted in the Pink Sheets, a regular trading market for
      the
      securities may not be sustained in the future. Quotes for stocks listed on
      the
      Pink Sheets are not listed in the financial sections of newspapers and
      newspapers generally have very little coverage of stocks listed solely on the
      Pink Sheets. Accordingly, prices for and coverage of securities traded solely
      on
      the Pink Sheets may be difficult to obtain. In addition, stock traded solely
      on
      the Pink Sheets tend to have a limited number of market makers and a larger
      spread between the bid and ask prices than those listed on the NYSE, AMEX or
      NASDAQ exchanges, or the OTC.BB. All of these factors may cause holders of
      our
      common stock to be unable to resell their securities at or near their original
      offering price or at any price.





Market
      prices for our common stock will be influenced by a number of factors,
      including:





·
            changes
                in interest rates;


·
            competitive
                developments, including announcements by competitors of new products
                of
                services or significant contracts, acquisitions, strategic partnerships,
                joint ventures or capital commitments;


·
            variations
                in quarterly operating results;


·
            changes
                in financial estimates by securities
                analysts;


·
            the
                depth and liquidity of the market for our common stock;


·
            investor
                perceptions of our company; and


·
            general
                economic and other national
                conditions.





**Our
      principal shareholders have significant influence over our company and their
      interests may differ from the interests of our other
      stockholders.**




Michael
      Binninger, Ronald Sands, and Steven Binninger, and their respective affiliates,
      beneficially own, in the aggregate, 31.5% of our outstanding shares. As a
      result, these principal shareholders possess significant influence over the
      election of the Board of Directors and to the approval of significant corporate
      transactions. Such share ownership and control may also have the effect of
      delaying or preventing a future change in control, impeding a merger,
      consolidation, takeover or other business combination or discouraging a
      potential acquirer from making a tender offer or otherwise attempting to obtain
      control of our company. The interests of these principal shareholders may differ
      from the interests of our other
      shareholders.





**If
      we fail to maintain effective internal controls over financial reporting, the
      price of our common stock may be adversely affected.**





Our
      internal control over financial reporting or disclosure controls and procedures
      may have weaknesses and conditions that need to be addressed, the disclosure
      of
      which may have an adverse impact on the price of our common stock. We are
      required to establish and maintain appropriate internal controls over financial
      reporting and disclosure controls and procedures. Failure to establish those
      controls, or any failure of those controls once established, could adversely
      impact our public
      disclosures regarding our business, financial condition or results of
      operations. In addition, management’s assessment of internal controls over
      financial reporting or disclosure controls and procedures may identify
      weaknesses and conditions that need to be addressed in our internal
      controls over financial reporting, disclosure controls and procedures or other
      matters that may raise concerns for investors. Any actual or perceived
      weaknesses and conditions that need to be addressed in our internal
      control over financial reporting, disclosure controls and procedures may have
      an
      adverse impact on the price of our common
      stock.


13




**Compliance
      with changing regulation of corporate governance and public disclosure will
      result in additional expenses.**




Changing
      laws, regulations and standards relating to corporate governance and public
      disclosure, including the Sarbanes-Oxley Act of 2002 and related SEC
      regulations, have created uncertainty for public companies and significantly
      increased the costs and risks associated with accessing the United States public
      markets and related public reporting obligations. Our management team will
      need
      to invest significant management time and financial resources to comply with
      both existing and evolving standards for public companies, which will lead
      to
      increased general and administrative expenses and a diversion of management
      time
      and attention from revenue generating activities to compliance
      activities.





**Standards
      for compliance with Section 404 of the Sarbanes-Oxley Act of 2002 are uncertain,
      and if we fail to comply in a timely manner, our business could be harmed and
      our stock price could decline.**




Rules
      adopted by the SEC pursuant to Section 404 of the Sarbanes-Oxley Act of 2002
      require annual assessment of our internal control over financial reporting,
      and
      attestation of this assessment by our company’s independent registered public
      accountants. The SEC extended the compliance dates for non-accelerated filers,
      as defined by the SEC. Accordingly, beginning with this Annual Report, we are
      required to furnish a report by our management on our internal control over
      financial reporting. We believe that the attestation requirement of management’s
      assessment by our independent registered public accountants will first apply
      to
      our annual report for the 2008 fiscal year. The standards that must be met
      for
      management to assess the internal control over financial reporting as effective
      are new and complex, and require significant documentation, testing and possible
      remediation to meet the detailed standards. If we are unable to provide a
      reliable and accurate assessment of our internal control over financial
      reporting, our business and operating results could be harmed and investor
      confidence and share value may be negatively affected. In addition, the
      attestation process by our independent registered public accountants is new
      and
      we may encounter problems or delays in completing the implementation of any
      requested improvements and receiving an attestation of our assessment by our
      independent registered public accountants. If we cannot assess our internal
      control over financial reporting as effective, or our independent registered
      public accountants are unable to provide an unqualified attestation report
      on
      such assessment when required to do so, investor confidence and share value
      may
      be negatively impacted.





**Our** **common
      stock is considered a “penny stock,” and is thereby subject to additional sale
      and trading regulations that may make it more difficult to
      sell.**




Our common
      stock is considered to be a “penny stock” because it does not qualify for one of
      the exemptions from the definition of “penny stock” under Section 3a51-1 of the
      Exchange Act. Our common
      stock may be a “penny stock” if it meets one or more of the following conditions
      (i) the stock trades at a price less than $5.00 per share; (ii) it is NOT traded
      on a “recognized” national exchange; (iii) it is not quoted on the Nasdaq
      Capital Market, or even if so, has a price less than $5.00 per share; or (iv)
      is
      issued by a company that has been in business less than three years with net
      tangible assets less than $5.0 million.




The
      principal result or effect of being designated a “penny stock” is that
      securities broker-dealers participating in sales of our common
      stock will be subject to the “penny stock” regulations set forth in Rules 15-2
      through 15g-9 promulgated under the Exchange Act. For example, Rule 15g-2
      requires broker-dealers dealing in penny stocks to provide potential investors
      with a document disclosing the risks of penny stocks and to obtain a manually
      signed and dated written receipt of the document at least two business days
      before effecting any transaction in a penny stock for the investor’s account.
      Moreover, Rule 15g-9 requires broker-dealers in penny stocks to approve the
      account of any investor for transactions in such stocks before selling any
      penny
      stock to that investor. This procedure requires the broker-dealer to (i) obtain
      from the investor information concerning his or her financial situation,
      investment experience and investment objectives; (ii) reasonably determine,
      based on that information, that transactions in penny stocks are suitable for
      the investor and that the investor has sufficient knowledge and experience
      as to
      be reasonably capable of evaluating the risks of penny stock transactions;
      (iii)
      provide the investor with a written statement setting forth the basis on which
      the broker-dealer made the determination in (ii) above; and (iv) receive a
      signed and dated copy of such statement from the investor, confirming that
      it
      accurately reflects the investor’s financial situation, investment experience
      and investment objectives. Compliance with these requirements may make it more
      difficult and time consuming for holders of our common
      stock to resell their shares to third parties or to otherwise dispose of them
      in
      the market or otherwise.


14




**We
      do not foresee paying cash dividends in the foreseeable future.**




We currently
      intend to retain any future earnings for funding growth. We do
      not
      anticipate paying any dividends in the foreseeable future. As a result, you
      should not rely on an investment in our securities
      if you require dividend income. Capital appreciation, if any, of our shares
      may
      be your sole source of gain for the foreseeable future. Moreover, you may not
      be
      able to resell your shares in our
      company at or
      above the price you paid for them.





**Shares
      eligible for future sale may adversely affect the market price of our common
      stock, as the future sale of a substantial amount of outstanding stock in the
      public marketplace could reduce the price of our common
      stock.**





Substantial
      sales of our common stock in the public market, or the perception that such
      sales could occur, could result in the drop in the market price of our
      securities and make it more difficult for us to complete future equity
      financings on acceptable terms, if at all, by introducing a large number of
      sellers to the market. As of March 31, 2008, we had 28,743,823 shares of our
      common stock outstanding and approximately 13,860,996 shares of common stock
      are
      registered pursuant to effective registration statements filed with the SEC
      and
      such shares may be freely sold and transferred without further restriction
      under
      the Securities Act except if subject to a lock-up agreement. Of those freely
      tradable shares, 4,520,000 shares represent shares underlying outstanding
      warrants..





From
      time
      to time, certain of our stockholders may be eligible to sell all or some of
      our
      shares of common stock by means of ordinary brokerage transactions in the open
      market pursuant to Rule 144, promulgated under the Securities Act (“Rule 144”),
      subject to certain limitations. In general, pursuant to Rule 144, a stockholder
      (or stockholders whose shares are aggregated) who has satisfied a six-month
      holding period may, under certain circumstances, sell within any three-month
      period a number of securities which does not exceed the greater of 1% of the
      then outstanding shares of common stock or the average weekly trading volume
      of
      the class during the four calendar weeks prior to such sale. Rule 144 also
      permits, under certain circumstances, the sale of securities, without any
      limitations, by a non-affiliate that has satisfied a one-year holding period.
      Any substantial sale of common stock pursuant to any resale prospectus or Rule
      144 may have an adverse effect on the market price of our common stock by
      creating an excessive supply.





**ITEM
      2. DESCRIPTION OF PROPERTIES**





Our
      executive offices and product development are located in San Francisco,
      California, in a leased facility consisting of approximately 2,829 square feet.
      Pursuant to our lease agreement expiring on April 30, 2012, we pay a base rent
      of $9,253.19 per month, subject to adjustment pursuant to the terms of the
      lease
      agreement, to lease our offices.





We
      also
      lease all but two of our company-owned store facilities. All of our existing
      leases for such facilities are for **** 2
      to 15
      years with none of such leases scheduled to expire before 2009 and the majority
      of those leases not scheduled to expire for at least 10 years. Additionally,
      we
      have the option to renew all but two of the leases for a significant renewal
      term. We regularly evaluate the economic performance of our company-owned stores
      and, when feasible, close or sell ones that do not meet our expectations. In
      reviewing economic performance, we typically review profitability and sales
      growth of each of our company-owned stores on a continuous basis. In conjunction
      with this review, we also analyze cash flows from operations to determine the
      impact of a particular store’s cash contribution on our overall financial
      health. We also consider certain intangible variables such as the consumer
      brand
      recognition generated by a particular store before making the decision to sell
      an otherwise underperforming store. In the event that we determine that a
      particular store location is not, and cannot be, managed to provide an economic
      benefit to us, then we close or sell such store. To date, we have only sold
      one
      underperforming store.





**ITEM
      3. LEGAL PROCEEDINGS**





We
      are
      not aware of any pending or threatened legal proceedings involving our company
      or our assets.


15




**ITEM
      4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**





None.





**PART
      II**




**ITEM
      5.** **MARKET
      FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS**




Our
      shares of common stock are currently quoted for trading on Pink Sheets under
      the
      symbol “JVDT.” The following table shows the high and low bid prices for our
      common stock on Pink Sheets for each quarter over the last two fiscal years.
      The
      following quotations reflect inter-dealer prices, without ret ail
      mark-up, mark-down or commission and may not necessarily represent actual
      transactions:




**2006****High**
            
            **Low**Quarter
                ended:March 31,
                2006
            
            
            None
            
            
            NoneJune 30,
                2006
            
            
            None
            
            
            NoneSeptember 30,
                2006
            
            $
            0.52
            
            $
            0.24December 31,
                2006
            
            $
            2.24
            
            $
            0.24


**2007****High**
            
            **Low**Quarter
                ended:March
                31, 2007
            
            $
            2.50
            
            $
            2.00June 30,
                2007
            
            $
            2.90
            
            $
            2.50September 30,
                2007
            
            $
            3.90
            
            $
            2.00December
                31, 2007
            
            $
            2.80
            
            $
            1.01





On
      March
      31, 2008, the closing bid price for our common stock in the Pink Sheets was
      $0.10 per share; the price will likely fluctuate in the future. The stock market
      in general has experienced extreme stock price fluctuations in the past few
      years. In some cases, these fluctuations have been unrelated to the operating
      performance of the affected companies. Many companies have experienced dramatic
      volatility in the market prices of their common stock. We believe that a number
      of factors, both within and outside our control, could cause the price of our
      common stock to fluctuate, perhaps substantially. Factors such as the following
      could have a significant adverse impact on the market price of our common
      stock:





·
            Our
                ability to obtain additional financing and, if available, the terms
                and
                conditions of the financing;


·
            Our
                financial position and results of
                operations;


·
            Our
                ability to execute our business
                plan;


·
            The
                development of litigation against our
                company;


·
            Period-to-period
                fluctuations in our operating
                results;


·
            Changes
                in estimates of our performance by any securities
                analysts;


·
            The
                issuance of new equity securities pursuant to a future offering or
                acquisition;


·
            Changes
                in interest rates;


·
            Competitive
                developments, including announcements by competitors of new products
                or
                services or significant contracts, acquisitions, strategic partnerships,
                joint ventures or capital
                commitments;


·
            Investor
                perceptions of our company; and


·
            General
                economic and other national and international
                conditions.





Our common
      stock is considered to be a “penny stock” because it does not qualify for one of
      the exemptions from the definition of “penny stock” under Section 3a51-1 of the
      Exchange Act. Our common
      stock may be a “penny stock” if it meets one or more of the following conditions
      (i) the stock trades at a price less than $5.00 per share; (ii) it is NOT traded
      on a “recognized” national exchange; (iii) it is not quoted on the Nasdaq
      Capital Market, or even if so, has a price less than $5.00 per share; or (iv)
      is
      issued by a company that has been in business less than three years with net
      tangible assets less than $5.0 million.


16




The
      principal result or effect of being designated a “penny stock” is that
      securities broker-dealers participating in sales of our common
      stock will be subject to the “penny stock” regulations set forth in Rules 15-2
      through 15g-9 promulgated under the Exchange Act. For example, Rule 15g-2
      requires broker-dealers dealing in penny stocks to provide potential investors
      with a document disclosing the risks of penny stocks and to obtain a manually
      signed and dated written receipt of the document at least two business days
      before effecting any transaction in a penny stock for the investor’s account.
      Moreover, Rule 15g-9 requires broker-dealers in penny stocks to approve the
      account of any investor for transactions in such stocks before selling any
      penny
      stock to that investor. This procedure requires the broker-dealer to (i) obtain
      from the investor information concerning his or her financial situation,
      investment experience and investment objectives; (ii) reasonably determine,
      based on that information, that transactions in penny stocks are suitable for
      the investor and that the investor has sufficient knowledge and experience
      as to
      be reasonably capable of evaluating the risks of penny stock transactions;
      (iii)
      provide the investor with a written statement setting forth the basis on which
      the broker-dealer made the determination in (ii) above; and (iv) receive a
      signed and dated copy of such statement from the investor, confirming that
      it
      accurately reflects the investor’s financial situation, investment experience
      and investment objectives. Compliance with these requirements may make it more
      difficult and time consuming for holders of our common
      stock to resell their shares to third parties or to otherwise dispose of them
      in
      the market or otherwise.





**Holders
      of our Common Stock**





As
      of
      March 31, 2008, we had 28,743,823
      shares of our common stock issued and outstanding, which are held by
      approximately 88 shareholders.





**Dividend
      Policy**





We
      have
      not declared or paid any cash dividends on our common stock, and we currently
      intend to retain future earnings, if any, to finance the growth of our business,
      and we do not expect to pay any cash dividends in the foreseeable future. The
      decision whether to pay cash dividends on our common stock will be made by
      our
      Board of Directors, in their discretion, and will depend on our financial
      condition, operating results, capital requirements and other factors that the
      Board of Directors considers significant. We currently intend to retain our
      earnings for funding growth and, therefore, do not expect to pay any dividends
      in the foreseeable future.





**Equity
      Compensation Plan**





# of securities to be issued
              upon
                exercise of
              outstanding
                options,
              warrants
                and rights
            
            Weighted-average
              exercise
                price of
              outstanding
                options,
              warrants
                and rights
            
            # of securities remaining
              available
                for future
              issuance
                under equity
              compensation
                plans
              (excluding
                securities
              reflected
                in column (a))Equity
                compensation plans approved by security holders
            
            
            3,211,165
            
            $
            1.02
            
            
            1,038,002Equity
                compensation plans not approved by securities holders
            
            
            -
            
            
            -
            
            
            -Total
            
            
            3,211,165
            
            $
            1.02
            
            
            1,038,002





On
      November 30, 2006, the Board of Directors and our shareholders approved the
      2006
      Java Detour, Inc. Equity Incentive Plan (the “Equity Incentive Plan”). The
      Equity Incentive Plan authorizes the issuance of options to purchase shares
      of
      common stock and the grant of stock awards. Administration of the Equity
      Incentive Plan is carried out by our Board of Directors or any committee of
      the
      Board of Directors to which the Board of Directors has delegated all or a
      portion of responsibility for the implementation, interpretation or
      administration of the Equity Incentive Plan. Our employees, officers and
      directors (including employees, officers and directors of our affiliates) are
      eligible to participate in the Equity Incentive Plan. The administrator of
      the
      Equity Incentive Plan will select the participants who are granted stock options
      or stock awards and, consistent with the terms of the Equity Incentive Plan,
      will establish the terms of each stock option or stock award. The maximum period
      in which a stock option may be exercised will be fixed by the administrator.
      Under the Equity Incentive Plan, the maximum number of shares of common stock
      that may be subject to stock options or stock awards is 4,249,167. As of
      December 31, 2007, we have granted an aggregate of 3,211,165 options to our
      directors, officers and employees with 1,038,002 shares of common stock
      available for future issuance. For more information, please see the discussion
      under “Item 10. Executive Compensation.”


17





**ITEM
      6. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS**





The
      following discussion should be read in conjunction with our Financial
      Statements, including the related notes thereto, and other financial information
      included herein. The information in this Annual Report includes forward-looking
      statements. Our actual results could differ materially from those set forth
      as a
      result of general economic conditions and changes in the assumptions used in
      making such forward-looking statements. The analysis set forth below is provided
      pursuant to applicable SEC regulations and is not intended to serve as a basis
      for projections of future events.





**Overview**





We
      sell
      high quality gourmet coffees, whole leaf teas, cold blended beverages, fresh
      fruit smoothies and select baked goods primarily from company-owned and
      franchised retail stores. Our immediate goal is to capitalize on the success
      of
      our company-owned stores with a new national franchisee program that will help
      us expand the Java Detour® brand into new domestic and international markets.
      All of our store locations, whether company-owned or franchised, will continue
      to focus on our core business concepts: consistently providing superior quality,
      convenience and customer service to all of our customers. Our main source of
      revenue, our coffee and related retail beverages and food sales, accounted
      for
      more than 94.7% of our sales for the year ended December 31, 2007.





We
      earn
      revenues mainly from our retail coffee beverage sales and our franchise fees
      and
      royalties. Moving forward, we intend to increase our distribution and
      franchising efforts. We hope to increase profits as a result of increased
      distribution and new store openings and acquisitions, since our retail coffee
      beverage sales and franchising fees are our main source for generating cash.
      We
      intend to devote additional resources to increasing our distribution channels
      and continue to develop additional store locations in order to expand our
      presence and brand recognition.





We
      believe that among the primary challenges and risks we face going forward is
      successful implementation of our growth strategy. If we fail to accurately
      predict and meet the needs of our customers in our current and new markets,
      we
      will encounter difficulties maintaining the working capital required to fund
      our
      expansion efforts as well as our efforts to respond to competitive pressures
      within the industry. While we intend to expand our presence internationally,
      there is a certain level of uncertainty surrounding our ability to implement
      such an expansion.





**Recent
      Events**





On
      January 2, 2008, Java Nevada, one of our franchisees, turned over operations
      of
      its four Nevada franchise stores back to us. We are currently operating these
      stores as we negotiate the terms for an amendment to the Purchase Agreement
      with
      Java Nevada whereby we intend to terminate the current master franchise
      agreement in place with Java Nevada in connection with the Nevada territory.
      As
      a part of this process, we have solicited offers for the purchase of the four
      Nevada franchise stores from interested third parties.





On
      April
      7, 2008, through our wholly-owned subsidiary JDCO, Inc. (“JDCO”), we purchased
      from Java Universe, LLC (“Java Universe”) its right, title and interest in the
      assets related to a coffee retail location in West Hollywood, California (the
      “Assets”), pursuant to an Asset Purchase Agreement we entered into with JDCO,
      Java Universe, Elie Samaha and Joseph Merhi (the “Purchase Agreement”). The
      purchase price for the Assets was $1,450,000 which was paid with 1,450,000
      shares of our common stock valued at $1.00 per share. As a condition to closing
      of the Purchase Agreement, we also entered into an Agency, Co-Occupancy and
      Operating Agreement (the “Operating Agreement”) with Demitri Samaha, Samaha
      Foods and Java Universe for the lease, occupancy and use of the West
      Hollywood store premises. Pursuant to the terms of the Operating Agreement,
      certain events may trigger the relinquishment of a portion of the common stock
      issued to Java Universe under the Purchase Agreement.


18




On
      April
      7, 2008, we also agreed to terminate our Middle East and Southern California
      master franchise agreements with Java Universe pursuant to a Termination,
      Waiver and Mutual Release we entered into with Java Detour Franchise Corp.
      and
      Java Universe. Pursuant to such release, we terminated the franchise agreements
      in exchange for 550,000 shares of our common stock valued at $1.00 per share.





On
      March
      18, 2008, we amended our area development agreement with Colorado Java, one
      of
      our franchisees, modifying such agreement to become a master franchise agreement
      for the State of Colorado. Pursuant to the amended agreement, the aggregate
      purchase price due and payable by Java Colorado was amended from $142,500 to
      $275,000 (less the $57,000 already paid under the original area development
      agreement). We have since received the remaining $218,000 due and payable under
      the master franchise agreement. Upon payment in full by Java Colorado, we agreed
      to issue 100,000 warrants to purchase shares of our common stock. Although
      we
      have received payment in full, the warrants have not yet been
      issued.





**Critical
      Accounting Policies Used in Financial Statements**





The
      discussion and analysis of our financial condition and results of operations
      are
      based upon our consolidated financial statements, which have been prepared
      in
      accordance with generally accepted accounting principles in the United States.
      We believe the following are the critical accounting policies that impact the
      financial statements, some of which are based on management’s best estimates
      available at the time of preparation. Actual results may differ from these
      estimates.





***Intangible
      Assets*** - When
      facts and circumstances indicate that the carrying values of long-lived assets
      may be impaired, an evaluation of recoverability is performed by comparing
      the
      carrying values of the assets to projected future cash flows, in addition to
      other quantitative and qualitative analyses. For intangible assets, impairment
      tests are performed annually and more frequently if facts and circumstances
      indicate that carrying values exceed estimated reporting unit fair values and
      if
      indefinite useful lives are no longer appropriate. Upon indication that the
      carrying values of such assets may not be recoverable, we recognize an
      impairment loss as a charge against current operations. Property, plant and
      equipment assets are grouped at the lowest level for which there are
      identifiable cash flows when assessing impairment. Cash flows for retail assets
      are identified at the individual store level. Long-lived assets to be disposed
      of are reported at the lower of their carrying amount or fair value. Judgments
      made by us related to the expected useful lives of long-lived assets and our
      ability to realize undiscounted cash flows in excess of the carrying amounts
      of
      such assets are affected by factors such as the ongoing maintenance and
      improvements of the assets, changes in economic conditions and changes in
      operating performance. As we assess the ongoing expected cash flows and carrying
      amounts of our long-lived assets, these factors could cause us to realize
      material impairment charges. In
      accordance with SFAS No. 142, *Goodwill
      and Other Intangible Assets* ,
      the
      Company evaluates intangible assets and other long-lived assets for impairment,
      at least on an annual basis and whenever events or changes in circumstances
      indicate that the carrying value may not be recoverable from its estimated
      future cash flows.  Recoverability of intangible assets and other
      long-lived assets is measured by comparing their net book value to the related
      projected undiscounted cash flows from these assets, considering a number of
      factors including past operating results, budgets, economic projections, market
      trends and product development cycles. If the net book value of the asset
      exceeds the related undiscounted cash flows, the asset is considered impaired,
      and a second test is performed to measure the amount of impairment loss. No
      impairment was recorded for the year ended December 31, 2007. Impairment of
      $80,165 was recorded during the year ended December 31, 2006 related to new
      product formulation and brand re-imaging.





***Stock
      Based Compensation*** - We
      adopted SFAS No. 123 (Revised 2004), *Share
      Based Payment* (“SFAS
      No. 123R”), under the modified-prospective transition method on
      January 1, 2006.  SFAS No. 123R requires companies to
      measure and recognize the cost of employee services received in exchange for
      an
      award of equity instruments based on the grant-date fair value. Share-based
      compensation recognized under the modified-prospective transition method of
      SFAS
      No. 123R includes share-based compensation based on the grant-date fair
      value determined in accordance with the original provisions of SFAS
      No. 123, *Accounting
      for Stock-Based Compensation,* for all
      share-based payments granted prior to and not yet vested as of
      January 1, 2006 and share-based compensation based on the grant-date
      fair-value determined in accordance with SFAS No. 123R for all share-based
      payments granted after January 1, 2006. SFAS No. 123R eliminates
      the ability to account for the award of these instruments under the intrinsic
      value method prescribed by Accounting Principles Board (“APB”) Opinion
      No. 25, *Accounting
      for Stock Issued to Employees* ,
      and
      allowed under the original provisions of SFAS No. 123.  Prior to the
      adoption of SFAS No. 123R, we would have accounted for our stock option
      plans using the intrinsic value method in accordance with the provisions of
      APB
      Opinion No. 25 and related interpretations. We account
      for stock-based compensation in accordance with the fair value recognition
      provisions of SFAS 123R. We use the Black-Scholes option pricing model
      which requires the input of highly subjective assumptions. These assumptions
      include estimating the length of time employees will retain their stock options
      before exercising them (“expected term”), the estimated volatility of our common
      stock price over the expected term and the number of options that will
      ultimately not complete their vesting requirements (“forfeitures”). Changes in
      the subjective assumptions can materially affect the estimate of fair value
      of
      stock-based compensation and consequently, the related amount recognized on
      the
      consolidated statements of earnings.


19




**Results
      of Operations**





The
      following table sets forth our statements of operations for the years ended
      December 31, 2007 and 2006 in U.S. dollars:





**Year
                Ended December 31,*****2007***
            
            ***2006******(in
                thousands)***Sales
                and other operating revenues
            
            $
            6,470
            
            $
            6,390Cost
                of sales
            
            
            (2,022
            )
            
            (1,846
            )Gross
                profit
            
            $
            4,448
            
            $
            4,544Store
                expenses
            
            
            4,434
            
            
            3,326Selling,
                general and administrative expenses
            
            
            4,242
            
            
            2,956Acquisition
                due diligence
            
            
            209Depreciation
            
            
            462
            
            
            430Total
                operating expenses
            
            
            9,347
            
            $
            6,712Income
                (loss) from operations
            
            
            (4,899
            )
            
            (2,168
            )Other
                income and expensesOther
                income
            
            
            142
            
            
            41Interest
                expense
            
            
            (267
            )
            
            (1,480
            )Registration
                rights expense
            
            
            150
            
            
            (150
            )Other
                expenses
            
            
            (990
            )
            
            (92
            )Net
                loss before income taxes
            
            $
            (5,864
            )
            $
            (3,849
            )Income
                tax (expense) benefit
            
            
            (3
            )
            
            4Net
                loss
            
            $
            (5,867
            )
            $
            (3,845
            )




20





*Comparison
      of the Fiscal Year ended December 31, 2007 to the Year ended December 31,
      2006*





Sales
      and
      other operating revenues for year ended December 31, 2007 were approximately
      $6.5 million, an increase of $0.1 million, or 1.3%, from sales and other
      operating revenues earned of approximately $6.4 million for the year ended
      December 31, 2006. The primary reasons for the increase was an increase in
      area
      development fees of $0.2 million and in new store revenues of $0.3 million,
      offset by a decrease in same store revenues of $0.4 million.





Cost
      of
      sales for the year ended December 31, 2007 was approximately $2.0 million,
      an
      increase of $0.2 million, or 9.5%, from approximately $1.8 million for the
      year
      ended December 31, 2006. The increase was primarily due to product costs
      associated with new stores of $0.2 million. Cost of sales as a percentage of
      net
      sales for the year ended December 31, 2007 was approximately 31.3%, which was
      an
      increase from 28.9% for the year ended December 31, 2006. This increase was
      primarily due to the rise in fuel prices which caused our milk and other product
      distributors to raise prices significantly.





Gross
      profit for the year ended December 31, 2007 was approximately $4.4 million,
      a
      decrease of $95,000, or 2.1%, from $4.5 million for the year ended December
      31,
      2006. Our gross margin for the year ended December 31, 2007 was 68.7% as
      compared with 71.1% for the year ended December 31, 2006.





Store
      expenses were approximately $4.4 million for the year ended December 31, 2007,
      an increase of $1.1 million, or 33.3%, from approximately $3.3 million for
      the
      year ended December 31, 2006. The increase was due to an increase of new store
      operating expenses of $0.4 million combined with increased same store operating
      expenses of approximately $0.7 million.





Selling
      and general administrative expenses were approximately $4.2 million for the
      year
      ended December 31, 2007, an increase of approximately $1.2 million, or 43.5%,
      from approximately $3.0 million for the year ended December 31, 2006. The
      increase was primarily due to increased salaries and benefits of approximately
      $0.6 million, stock based compensation expense of $0.4 million, and other
      general administrative expenses of approximately $0.3 million.





Acquisition
      due diligence costs for the year ended December 31, 2007 was approximately
      $209,000 as compared to $0 for the year ended December 31, 2006. The increase
      of
      $209,000 was due to expenditures in performing due diligence on an unrealized
      acquisition opportunity.





Depreciation
      expenses for the year ended December 31, 2007 was approximately $462,000 as
      compared to approximately $430,000 for the year ended December 31, 2006. The
      increase of approximately $32,000, or 7.4%, was primarily due to the
      depreciation on new store equipment.





Other
      income was approximately $142,000 for the year ended December 31, 2007 as
      compared with approximately $41,000 of other income for the year ended December
      31, 2006. The increase of approximately $101,000 was primarily due to interest
      revenue on deposited funds.




Other
      expenses for the year ended December 31, 2007
      was approximately $990,000, an increase of $898,000, or 976.1%, from
      approximately $92,000 for the year ended December 31, 2006. The increase was
      primarily due to $506,000 in debt determined to be uncollectable and
      $402,000 lost on sale and disposal of equipment.





Interest
      expenses for the year ended December 31, 2007 was approximately $267,000, a
      decrease of $1.2 million or 82.0%, from approximately $1.5 million for the
      year
      ended December 31, 2006. The decrease was primarily due to repayment of
      outstanding notes with proceeds from a $10.0 million private placement in
      November 2006.





Net
      loss
      for the year ended December 31, 2007 was approximately $5.9 million , an
      increase of approximately $2.1 million , or 52.6%, from $3.8 million for the
      year ended December 31, 2006 for the reasons stated above.





**Liquidity
      and Capital Resources**





At
      December 31, 2007, we had total **** equity
      of
      approximately $2.4 million and had cash and cash equivalents of approximately
      $671,000. Prior to November 2006, we have historically financed our business
      through long-term bank loans and lines of credit and cash provided by
      operations.


21




From
      September 2002 through 2004, we borrowed funds through convertible secured
      promissory notes in the aggregate principal amount of $1,525,000, bearing
      interest at a rate of 12% per annum and due and payable on December 31, 2007
      (the “Convertible Notes”).





In
      January 2006, we borrowed the aggregate principal amount of $350,000 from First
      Street Ventures, with interest accruing at a rate of 8% per annum. In October
      2006, First Street Ventures entered into a Note Conversion Agreement with JDCO,
      whereby First Street Ventures agreed to accept 51,775 shares of JDCO’s common
      stock as partial satisfaction of JDCO’s obligations under the loan from First
      Street Ventures, thereby reducing the principal amount outstanding under the
      First Street loan to $175,000. Immediately after the closing of the Merger,
      we
      paid the principal amount of $175,000 still outstanding under the loan to First
      Street Ventures.





From
      time
      to time, we borrowed funds through several promissory notes in the aggregate
      principal amount of approximately $630,000 **** (the
      “Promissory Notes”), $400,000 of which was converted into 118,342 shares of JDCO
      common stock immediately prior to the closing of the Merger. We paid the
      remaining aggregate principal amount of $230,000 still outstanding under the
      Promissory Notes immediately after the closing of the Merger.





Pursuant
      to a business loan agreement dated September 19, 2006 and maturing on July
      1,
      2007, Summit Bank extended a line of credit in the principal amount of
      $1,500,000, guaranteed by Michael Binninger, Steven Binninger, Paul F. Klapper
      and the Klapper Family Trust, each shareholders of our company. Concurrent
      with
      the closing of the Merger using proceeds of the Private Placement referenced
      below, we paid off the Summit line of credit as well as a line of credit with
      Wells Fargo Bank, N.A. in the amount of $99,300 and a line of credit with
      American Express in the amount of $26,500.





On
      August
      30, 2006, JDCO executed a Term Credit Agreement with The Hunter Fund Limited,
      an
      affiliated entity of Hunter, the placement agent in connection with the Private
      Placement described below, for a $500,000 term loan (the “Bridge Financing”).
      Immediately after the closing of the Merger and using proceeds from the Private
      Placement, we paid off the Bridge Financing in addition to paying the Hunter
      Fund a bridge loan fee of $60,000 and a flat interest payment of $50,000.





In
      November 2006, we received gross proceeds of $10.0 million in a private
      placement transaction (the “Private Placement”). Each investor in the Private
      Placement purchased shares of our common stock and five-year warrants to
      purchase 25% of the common stock purchased by such investor in the Private
      Placement. For its services as placement agent, Hunter received a fee equal
      to
      10% of the funds placed in the Private Placement. Hunter also received, for
      nominal consideration, five-year warrants to purchase 2,000,000 shares of our
      common stock, exercisable at the same share price of the shares sold in the
      Private Placement. We also incurred legal and accounting expenses of
      approximately $270,000. After commission and expenses, we received net proceeds
      of approximately $8.75 million.





Net
      cash
      used in operating activities for the year ended December 31, 2007 was
      approximately $3.1 million, as compared to approximately $1.0 million used
      during the year ended 2006. The change is primarily the result of operating
      losses during the year ended December 31, 2007 of approximately $5.9 million
      as
      compared to operating losses of approximately $3.8 million during the year
      ended
      December 31, 2006.





Net
      cash
      used by investing activities was approximately $0.9 million for the year ended
      December 31, 2007, as compared to net cash used of approximately $0.8 million
      for the year ended December 31, 2006. The increase in cash used was primarily
      a
      result of increased capital asset acquisitions of approximately $0.3 million
      partially offset by payments received on outstanding notes receivable of $0.2
      million during the year ended December 31, 2007 and an increase in capital
      expenditures for intangible assets.





Net
      cash
      used in financing activities was approximately $0.3 million for the year ended
      December 31, 2007, as compared to cash provided in the amount of approximately
      $6.6 million for the year ended December 31, 2006. The change was primarily
      due
      to the Private Placement partialy offset by a pay down in outstanding notes
      of
      $3.1 million during the year ended December 31, 2006.


22




Our
      capital requirements, including development costs related to the opening of
      additional retail locations and expansion of our franchise retail operations,
      have been, and will continue to be significant. Our future capital requirements
      and the adequacy of available funds will depend on many factors, including
      the
      pace of our expansion, real estate markets, the availability of suitable site
      locations and the nature of the arrangements negotiated with landlords. During
      2008, we intend to expend approximately $0.9 million to continue to
      strategically expand our retail operations while also creating other outlets
      and
      distribution points for sales of our products. We believe that by selling
      additional franchises both domestically and internationally and larger area
      development agreements several of which we have been working on extensively
      for
      several months, through the strategic expansion of both our company owned and
      franchised stores domestically and internationally, possible closing of one
      or
      two underperforming stores domestically, coupled with our efforts to increase
      same store sales we believe we will generate sufficient liquidity and resources
      to fund our operations for at least 12 months. In addition to the above, we
      have
      and continue to find areas to aggressively cut costs at both the corporate
      and
      store levels. We continue discussions for the possibility of future capital
      raises and other strategic opportunities.





**Off-Balance
      Sheet Arrangements**





None.





**New
      Accounting Pronouncements**





We
      have
      adopted all accounting pronouncements effective before December 31, 2007, which
      are applicable to us.





In
      September 2006, the FASB issued Statement of Financial Accounting Standards
      No. 157, *Fair Value Measurements* (“SFAS No. 157”), which
      establishes a formal framework for measuring fair value under Generally Accepted
      Accounting Principles (“GAAP”). SFAS No. 157 defines and codifies the many
      definitions of fair value included among various other authoritative literature,
      clarifies and, in some instances, expands on the guidance for implementing
      fair
      value measurements, and increases the level of disclosure required for fair
      value measurements. Although SFAS No. 157 applies to and amends the provisions
      of existing FASB and American Institute of Certified Public Accountants
      (“AICPA”) pronouncements, it does not, of itself, require any new fair value
      measurements, nor does it establish valuation standards. SFAS No. 157 applies
      to
      all other accounting pronouncements requiring or permitting fair value
      measurements, except for: SFAS No. 123R, share-based payment and related
      pronouncements, the practicability exceptions to fair value determinations
      allowed by various other authoritative pronouncements, and AICPA Statements
      of
      Position 97-2 and 98-9 that deal with software revenue recognition. SFAS No.
      157
      is effective for financial statements issued for fiscal years beginning after
      November 15, 2007, and interim periods within those fiscal years. We
      are currently assessing the potential effect of SFAS No. 157 on its
      consolidated financial statements.





In
      December 2006, the FASB issued FSP EITF 00-19-2, *Accounting for
      Registration Payment Arrangements* (“EITF 00-19-2”), which addresses an
      issuer’s accounting for registration payment arrangements. EITF 00-19-2
      specifies that the contingent obligation to make future payments or otherwise
      transfer consideration under a registration payment arrangement, whether issued
      as a separate agreement or included as a provision of a financial instrument
      or
      other agreement, should be separately recognized and measured in accordance
      with
      FASB No. 5, “Accounting for Contingencies”. EITF 00-19-2 further clarifies that
      a financial instrument subject to a registration payment arrangement should
      be
      accounted for in accordance with other applicable generally accepted accounting
      principles without regard to the contingent obligation to transfer consideration
      pursuant to the registration payment arrangement. EITF 00-19-2 is effective
      immediately for registration payment arrangements and the financial instruments
      subject to those arrangements that are entered into or modified subsequent
      to
      the date of issuance of EITF 00-19-2. For registration payment arrangements
      and
      financial instruments subject to those arrangements that were entered into
      prior
      to the issuance of EITF 00-19-2, EITF 00-19-2 is effective for financial
      statements issued for fiscal years beginning after December 15, 2006, and
      interim periods within those fiscal years. Early adoption of EITF 00-19-2 for
      interim or annual periods for which financial statements or interim reports
      have
      not been issued is permitted. We chose to early adopt EITF 00-19-2
      effective December 31, 2006.


23




In
      February 2007, the FASB issued Statement of Financial Accounting Standards
      No. 159, *The Fair Value Option for Financial Assets and Financial
      Liabilities* (“SFAS No. 159”), which provides companies with an option to
      report selected financial assets and liabilities at fair value. SFAS No. 159’s
      objective is to reduce both complexity in accounting for financial instruments
      and the volatility in earnings caused by measuring related assets and
      liabilities differently. Generally accepted accounting principles have required
      different measurement attributes for different assets and liabilities that
      can
      create artificial volatility in earnings. SFAS No. 159 helps to mitigate this
      type of accounting-induced volatility by enabling companies to report related
      assets and liabilities at fair value, which would likely reduce the need for
      companies to comply with detailed rules for hedge accounting. SFAS No. 159
      also establishes presentation and disclosure requirements designed to facilitate
      comparisons between companies that choose different measurement attributes
      for
      similar types of assets and liabilities. SFAS No. 159 requires companies to
      provide additional information that will help investors and other users of
      financial statements to more easily understand the effect of the company’s
      choice to use fair value on its earnings. SFAS No. 159 also requires companies
      to display the fair value of those assets and liabilities for which the company
      has chosen to use fair value on the face of the balance sheet. SFAS No. 159
      does
      not eliminate disclosure requirements included in other accounting standards,
      including requirements for disclosures about fair value measurements included
      in
      SFAS No. 157 and SFAS No. 107. SFAS No. 159 is effective as of the
      beginning of a company’s first fiscal year beginning after November 15,
      2007. Early adoption is permitted as of the beginning of the previous fiscal
      year provided we make that choice in the first 120 days of that
      fiscal year and also elects to apply the provisions of SFAS No. 157. We are
      currently assessing the potential effect of SFAS No. 159 on our
      consolidated financial statements.





In
      December 2007, the FASB issued SFAS No. 141(R), *Business
      Combinations* (“SFAS No. 141(R)”), which requires an acquirer to
      recognize in its financial statements as of the acquisition date (i) the
      identifiable assets acquired, the liabilities assumed, and any noncontrolling
      interest in the acquiree, measured at their fair values on the acquisition
      date,
      and (ii) goodwill as the excess of the consideration transferred plus the fair
      value of any noncontrolling interest in the acquiree at the acquisition date
      over the fair values of the identifiable net assets acquired.
      Acquisition-related costs, which are the costs an acquirer incurs to effect
      a
      business combination, will be accounted for as expenses in the periods in which
      the costs are incurred and the services are received, except that costs to
      issue
      debt or equity securities will be recognized in accordance with other applicable
      GAAP. SFAS No. 141(R) makes significant amendments to other Statements and
      other
      authoritative guidance to provide additional guidance or to conform the guidance
      in that literature to that provided in SFAS No. 141(R). SFAS No. 141(R) also
      provides guidance as to what information is to be disclosed to enable users
      of
      financial statements to evaluate the nature and financial effects of a business
      combination. SFAS No. 141(R) is effective for financial statements issued
      for fiscal years beginning on or after December 15, 2008. Early adoption is
      prohibited. We have not yet determined the effect on our consolidated
      financial statements, if any, upon adoption of SFAS No. 141(R).





In
      December 2007, the FASB issued SFAS No. 160, *Noncontrolling Interests
      in Consolidated Financial Statements - an amendment of ARB No. 51* (“SFAS
      No. 160”), which revises the relevance, comparability, and transparency of the
      financial information that a reporting entity provides in its consolidated
      financial statements by establishing accounting and reporting standards that
      require (i) the ownership interests in subsidiaries held by parties other than
      the parent be clearly identified, labeled, and presented in the consolidated
      statement of financial position within equity, but separate from the parent’s
      equity, (ii) the amount of consolidated net income attributable to the parent
      and to the noncontrolling interest be clearly identified and presented on the
      face of the consolidated statement of income, (iii) changes in a parent’s
      ownership interest while the parent retains its controlling financial interest
      in its subsidiary be accounted for consistently as equity transactions, (iv)
      when a subsidiary is deconsolidated, any retained noncontrolling equity
      investment in the former subsidiary be initially measured at fair value, with
      the gain or loss on the deconsolidation of the subsidiary being measured using
      the fair value of any noncontrolling equity investment rather than the carrying
      amount of that retained investment, and (v) entities provide sufficient
      disclosures that clearly identify and distinguish between the interests of
      the
      parent and the interests of the noncontrolling owners. SFAS No. 160 amends
      FASB
      No. 128 to provide that the calculation of earnings per share amounts in the
      consolidated financial statements will continue to be based on the amounts
      attributable to the parent. SFAS No. 160 is effective for financial statements
      issued for fiscal years, and interim periods within those fiscal years,
      beginning on or after December 15, 2008. Early adoption is prohibited. SFAS
      No. 160 shall be applied prospectively as of the beginning of the fiscal year
      in
      which it is initially applied, except for the presentation and disclosure
      requirements, which shall be applied retrospectively for all periods presented.
      We have not yet determined the effect on its consolidated financial statements,
      if any, upon adoption of SFAS No. 160.


24




In
      December 2007, the SEC issued Staff Accounting Bulletin
      (SAB) No. 110, *Share-Based
      Payment* (“SAB
      110”). SAB 110 establishes the continued use of the simplified method for
      estimating the expected term of equity based compensation. The simplified method
      was intended to be eliminated for any equity based compensation arrangements
      granted after December 31, 2007. SAB 110 is being published to help
      companies that may not have adequate exercise history to estimate expected
      terms
      for future grants. We utilized the guidance in SAB 110 in estimating the
      expected terms of options granted to employees.





**Seasonality**





Historically,
      sales in the gourmet coffee industry has experienced variations in sales from
      quarter-to-quarter due to the temperature changes in specific geographic areas
      ,
      as well as from a variety of other factors, including, but not limited to,
      general economic trends, the cost of green coffee, competition, marketing
      programs, weather and special or unusual events. ****





**ITEM
      7. FINANCIAL STATEMENTS**





The
      information required by this Item 7 is incorporated by reference to the Index
      to
      Consolidated Financial Statements beginning at page F-1 of this Annual
      Report.


25





**JAVA
      DETOUR, INC. AND SUBSIDIARIES**


**INDEX
      TO FINANCIAL STATEMENTS**




Page**REPORT
                OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**
            
            
            F-2**CONSOLIDATED
                FINANCIAL STATEMENTS**Consolidated
                Balance Sheet as of December 31, 2007
            
            
            F-3Consolidated
                Statements of Operations for the years ended December 31, 2007 and
                2006
            
            
            F-4Consolidated
                Statements of Changes in Stockholders' Equity (Deficit) for the years
                ended December 31, 2007 and 2006
            
            
            F-5Consolidated
                Statements of Cash Flows for the years ended December 31, 2007 and
                2006
            
            
            F-6Notes
                to Consolidated Financial Statements
            
            
            F-7




F-1




**AJ.
      ROBBINS, P.C.**




**Certified
      Public Accountants**




**216
      Sixteenth Street**




**Suite
      600**




**Denver,
      Colorado 80202**




**Report
      of Independent Registered Public Accounting Firm**





To
      The
      Board of Directors and Stockholders of


Java
      Detour, Inc.


San
      Francisco, California





We
      have
      audited the accompanying consolidated balance sheet of Java Detour, Inc. and
      Subsidiaries as of December 31, 2007, and the related consolidated
      statements of operations, changes in stockholders’ equity (deficit) and cash
      flows for each of the years in the two year period then ended. These
      consolidated financial statements are the responsibility of the Company’s
      management.  Our responsibility is to express an opinion on these
      consolidated 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
      consolidated 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 consolidated financial statements, assessing the accounting
      principles used and significant estimates made by management, as well as
      evaluating the overall financial statement presentation. We believe that our
      audits provide a reasonable basis for our opinion.




In
      our
      opinion, the consolidated financial statements referred to above present fairly,
      in all material respects, the consolidated financial position of Java Detour,
      Inc. and Subsidiaries as of December 31, 2007, and the consolidated
      results of their operations and consolidated cash flows for each of the years
      in
      the two year period then ended, in conformity with accounting principles
      generally accepted in the United States of America.




*/s/
      AJ. Robbins PC.*





**AJ.
      Robbins PC**


**Certified
      Public Accountants**





Denver,
      Colorado


March
      21,
      2008, except for note 16 and 17, as to which the date is April 11,
      2008.


F-2


**JAVA
      DETOUR, INC. AND SUBSIDIARIES**


**CONSOLIDATED
      BALANCE SHEET**


**DECEMBER
      31, 2007**





**ASSETS****CURRENT
                ASSETS:**Cash
                and cash equivalents
            
            $
            671,018Accounts
                receivable, net
            
            
            97,167Inventories
            
            
            85,421Prepaid
                expenses
            
            
            127,443Total
                current assets
            
            
            981,049**NONCURRENT
                ASSETS:**Notes
                receivable, net
            
            
            900,000Property
                and equipment, net
            
            
            4,192,213Intangibles
            
            
            498,907Prepaid
                expenses
            
            
            26,049Deferred
                tax assets
            
            
            485,647Other
                assets
            
            
            70,756**TOTAL
                ASSETS**
            
            $
            7,154,621**LIABILITIES
                AND STOCKHOLDERS’ EQUITY****CURRENT
                LIABILITIES:**Accounts
                payable
            
            $
            703,491Accounts
                payable, related party
            
            
            46,086Deferred
                revenue, current portion
            
            
            792,500Notes
                payable, current portion
            
            
            146,508Capital
                lease obligations, current portion
            
            
            261,504Accrued
                expenses and other current liabilities
            
            
            414,724Total
                current liabilities
            
            
            2,364,813Deferred
                revenue, net of current portion
            
            
            385,500Notes
                payable, net of current portion
            
            
            1,287,037Capital
                lease obligations, net of current portion
            
            
            510,017Deferred
                rent
            
            
            203,502Total
                liabilities
            
            
            4,750,869**COMMITMENTS
                AND CONTINGENCIES****STOCKHOLDERS’
                EQUITY:**Preferred
                stock, $0.001 par value; 5,000,000 shares authorized; 0   Shares
                issued and outstanding
            
            
            -Common
                stock, $0.001 par value; 75,000,000 shares authorized;   28,743,823
                shares issued and outstanding
            
            
            28,745Additional
                paid in capital
            
            
            14,790,037Accumulated
                deficit
            
            
            (12,415,030
            )Total
                stockholders’ equity
            
            
            2,403,752**TOTAL
                LIABILITIES AND STOCKHOLDERS’ EQUITY**
            
            $
            7,154,621




The
      accompanying notes are an integral part of these consolidated financial
      statements.


F-3


**JAVA
      DETOUR, INC. AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF OPERATIONS**


**FOR
      THE YEARS ENDED DECEMBER 31, 2007 AND 2006**




**2007**
            
            **2006****OPERATING
                REVENUES:**Sales
                and other operating revenues, net
            
            $
            6,470,127
            
            $
            6,389,717Cost
                of sales
            
            
            (2,021,678
            )
            
            (1,846,176
            )Gross
                profit
            
            
            4,448,449
            
            
            4,543,541**OPERATING
                EXPENSES:**Store
                operating expenses
            
            
            4,433,547
            
            
            3,325,827Selling,
                general and administrative expenses
            
            
            4,241,603
            
            
            2,955,967Acquisition
                due diligence
            
            
            209,426
            
            
            -Depreciation
            
            
            462,063
            
            
            430,193Total
                operating expenses
            
            
            9,346,639
            
            
            6,711,987**INCOME
                (LOSS) FROM OPERATIONS**
            
            
            (4,898,190
            )
            
            (2,168,446
            )**OTHER
                INCOME/(EXPENSE):**Other
                income
            
            
            141,514
            
            
            41,657Interest
                expense
            
            
            (266,728
            )
            
            (1,480,247
            )Gain
                (Loss) on registration rights agreement
            
            
            150,000
            
            
            (150,000
            )Other
                expenses
            
            
            (990,101
            )
            
            (92,127
            )Total
                other income/(expense)
            
            
            (965,315
            )
            
            (1,680,717
            )**NET
                (LOSS) BEFORE INCOME TAXES**
            
            
            (5,863,505
            )
            
            (3,849,163
            )**INCOME
                TAX (EXPENSE)BENEFIT**
            
            
            (3,322
            )
            
            3,996**NET
                (LOSS)**
            
            
            (5,866,827
            )
            
            (3,845,167
            )**PREFERRED
                STOCK DIVIDENDS**
            
            
            0
            
            
            (54,923
            )**NET
                LOSS ATTIBUTED TO COMMON****STOCKHOLDERS**
            
            $
            (5,866,827
            )
            $
            (3,900,090
            )**NET
                (LOSS) PER SHARE:****BASIC
                AND DILUTED**
            
            $
            (0.21
            )
            $
            (0.31
            )**WEIGHTED
                AVERAGE SHARES****OUTSTANDING:****BASIC
                AND DILUTED**
            
            
            28,488,531
            
            
            12,405,530




The
      accompanying notes are an integral part of these consolidated financial
      statements.


F-4




**JAVA
      DETOUR, INC. AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)**


**FOR
      THE YEARS ENDED DECEMBER 31, 2007 AND 2006**





**Preferred Stock Series A**
            
            **Common**
            
            **Stock**
            
            **Additional**
            
            **Accumulated****Paid
                in****Shares**
            
            **Amount**
            
            **Shares**
            
            **Amount**
            
            **Capital**
            
            **(Deficit)**
            
            **Total****Balance,
                December 31, 2005**
            
            
            **295,454**
            
            **$**
            **296**
            
            
            **10,875,460**
            
            **$**
            **10,875**
            
            **$**
            **1,379,856**
            
            **$**
            **(2,648,113**
            **)**
            **$**
            **(1,257,086**
            **)**Declaration
                of preferred dividends
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (54,923
            )
            
            (54,923
            )Amortization
                of warrants granted with preferred stock
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            40,807
            
            
            
            
            
            40,807Conversion
                of Series A Preferred shares
            
            
            (295,454
            )
            
            (296
            )
            
            1,062,125
            
            
            1,062
            
            
            (766
            )
            
            
            
            
            -Conversion
                of Series A Preferred – warrants and dividends
            
            
            
            
            
            
            
            
            279,078
            
            
            279
            
            
            173,067
            
            
            
            
            
            173,346Conversion
                of convertible notes and accrued interest
            
            
            
            
            
            
            
            
            3,281,781
            
            
            3,282
            
            
            1,926,505
            
            
            
            
            
            1,929,787Conversion
                of notes payable
            
            
            
            
            
            
            
            
            501,586
            
            
            502
            
            
            571,813
            
            
            
            
            
            572,315Sale
                of common stock, net of offering costs of $1,050,000
            
            
            
            
            
            
            
            
            10,000,000
            
            
            10,000
            
            
            8,940,000
            
            
            
            
            
            8,950,000Effect
                of reverse merger
            
            
            
            
            
            
            
            
            1,534,345
            
            
            1,534
            
            
            (1,534
            )
            
            
            
            
            -Common
                stock issued for services
            
            
            
            
            
            
            
            
            793,412
            
            
            794
            
            
            792,608
            
            
            
            
            
            793,402Warrants
                granted for bridge loan
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            450,499
            
            
            
            
            
            450,499Fair
                value of employee stock options
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            33,619
            
            
            
            
            
            33,619Net
                loss for the year
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (3,845,167
            )
            
            (3,845,167
            )**Balance,
                December 31, 2006**
            
            
            **-**
            
            
            **-**
            
            
            **28,327,787**
            
            
            **28,328**
            
            
            **14,306,474**
            
            
            **(6,548,203**
            **)**
            
            **7,786,599**Fair
                value of employee stock options
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            458,980
            
            
            
            
            
            458,980Shares
                issued in connection with acquisition
            
            
            
            
            
            
            
            
            12,500
            
            
            13
            
            
            24,987
            
            
            
            
            
            25,000Shares
                issued for cashless exercise of warrants
            
            
            
            
            
            
            
            
            403,536
            
            
            404
            
            
            (404
            )
            
            
            
            
            -Net
                loss for the year
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (5,866,827
            )
            
            (5,866,827
            )**Balance,
                December 31, 2007**
            
            
            **-**
            
            **$**
            **-**
            
            
            **28,743,823**
            
            **$**
            **28,745**
            
            **$**
            **14,790,037**
            
            **$**
            **(12,415,030**
            **)**
            **$**
            **2,403,752**





The
      accompanying notes are an integral part of these consolidated financial
      statements.


F-5




**JAVA
      DETOUR, INC. AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


**YEARS
      ENDED DECEMBER 31, 2007 AND 2006**




**2007**
            
            **2006****CASH
                FLOWS (TO) FROM OPERATING ACTIVITIES:**Net
                income/(loss)
            
            $
            (5,866,827
            )
            $
            (3,845,167
            )Adjustments
                to reconcile net (loss) to net cash (used in) operating activities:Depreciation
            
            
            462,063
            
            
            430,193Loss
                (gain) on disposal of fixed assets
            
            
            398,279
            
            
            76,565Loss
                on sale of available for sale investments
            
            
            16,167
            
            
            -Impairment
                of intangible assets
            
            
            
            
            
            80,165Write-down
                of uncollectable note receivable
            
            
            501,443Amortization
                of beneficial conversion feature
            
            
            
            
            
            39,607Value
                of stock issued for services
            
            
            
            
            
            793,402Value
                of stock issued as repayment of accrued interest
            
            
            
            
            
            19,181Value
                of warrants granted for loan fees
            
            
            
            
            
            450,499Value
                of options granted to employees
            
            
            458,980
            
            
            33,619Amortization
                of fair value of warrants granted in connection with issuance of
                preferred
                stock
            
            
            
            
            
            40,807Changes
                in operating assets & liabilitiesAccounts
                receivable
            
            
            (100,571
            )
            
            8,024Inventories
            
            
            (39,502
            )
            
            (15,408
            )Deferred
                financing costs
            
            
            -
            
            
            150,655Prepaid
                expenses
            
            
            (71,453
            )
            
            (33,683
            )Prepaid
                expenses long term
            
            
            (13,731
            )
            
            -Deferred
                tax assets
            
            
            -
            
            
            (3,996
            )Other
                assets
            
            
            (12,901
            )
            
            12,497Accounts
                payable
            
            
            334,343
            
            
            (50,353
            )Accounts
                payable related party
            
            
            10,642
            
            
            35,444Deferred
                revenue
            
            
            803,000
            
            
            357,000Accrued
                expenses and other current liabilities
            
            
            94,853
            
            
            250,025Contingent
                liability
            
            
            (150,000
            )
            
            150,000Deferred
                rent
            
            
            79,326
            
            
            62,494**NET
                CASH (USED IN) OPERATING ACTIVITIES**
            
            
            (3,095,889
            )
            
            (958,430
            )**CASH
                FLOW FROM (TO) INVESTING ACTIVITIES**Purchase
                of property and equipment
            
            
            (1,010,825
            )
            
            (839,326
            )Payments
                received on notes receivable
            
            
            200,000
            
            
            7,101Purchase
                of investments
            
            
            (991,481
            )
            
            -Proceeds
                from sale of investments
            
            
            975,314
            
            
            -Intangible
                assets
            
            
            (63,031
            )
            
            (5,600
            )**NET
                CASH (USED IN) INVESTING ACTIVITIES**
            
            
            (890,023
            )
            
            (837,825
            )**CASH
                FLOWS FROM (TO) FINANCING ACTIVITIES**Advances
                to shareholders
            
            
            -
            
            
            (62,751
            )Proceeds
                from notes payable
            
            
            -
            
            
            525,990Principal
                repayments of notes payable
            
            
            (48,710
            )
            
            (541,167
            )Principal
                repayments of capital lease obligations
            
            
            (232,509
            )
            
            (187,585
            )Principal
                repayments of lines of credit
            
            
            -
            
            
            (1,630,026
            )Proceeds
                from related party notes payable
            
            
            -
            
            
            530,000Principal
                repayments of related party notes payable
            
            
            -
            
            
            (964,537
            )Preferred
                dividends paid
            
            
            -
            
            
            (9,986
            )Proceeds
                from issuance of common stock
            
            
            -
            
            
            10,000,000Payment
                of offering costs
            
            
            -
            
            
            (1,050,000
            )**NET
                CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES**
            
            
            (281,219
            )
            
            6,609,938**NET
                INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS**
            
            
            (4,267,131
            )
            
            4,813,683Cash
                and cash equivalents, at beginning of period
            
            
            4,938,149
            
            
            124,466**CASH
                AND CASH EQUIVALENTS, AT END OF PERIOD**
            
            $
            671,018
            
            $
            4,938,149**NONCASH
                INVESTING AND FINANCING ACTIVITY:**Acquisition
                of property and equipment under capital leases
            
            $
            -
            
            $
            473,005Acquisition
                of property and equipment through contribution by
                stockholders
            
            $
            -
            
            $
            201,900Acquisition
                of property and equipment under note payable
            
            $
            501,111
            
            $
            -Repayment
                of convertible notes in exchange for common stock
            
            $
            -
            
            $
            1,355,000Repayment
                of related party notes in exchange for common stock
            
            $
            -
            
            $
            550,050Repayment
                of related party convertible notes in exchange for common
                stock
            
            $
            -
            
            $
            470,000Repayment
                of accrued interest and finance charges in exchange for common
                stock
            
            $
            -
            
            $
            127,121Preferred
                stock dividends in exchange for common stock
            
            $
            -
            
            $
            173,347**SUPPLEMENTAL
                DISCLOSURE OF CASH FLOW INFORMATION:**Cash
                paid for interest
            
            $
            258,065
            
            $
            687,004Cash
                paid for income taxes
            
            $
            3,200
            
            $
            1,600




The
      accompanying notes are an integral part of these consolidated financial
      statements .


F-6




**JAVA
      DETOUR, INC. AND SUBSIDIARIES**


**NOTES
      TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS**


**DECEMBER
      31, 2007 AND 2006**


**NOTE
      1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
      POLICIES**





Java
      Detour, Inc. (formerly known as Media USA.com, Inc. and referred to herein as the “Company”
or “ Java
      Detour ”)
      operates through its wholly-owned subsidiary JDCO, Inc., a California
      corporation (“JDCO”). The Company sells high-quality gourmet coffees, whole leaf
      teas, cold-blended beverages, fresh fruit smoothies and select baked goods
      to
      its customers from uniquely designed retail stores specialized in providing
      fast
      and convenience customer service. Java Detour Franchise Corp., a
      California corporation formerly known as Java Detour (“JDCO
      Subsidiary”) and a
      wholly owned subsidiary of JDCO, is a franchisor of Java Detour cafés, with nine
      franchised outlets in the United States. As of December 31, 2007, there were
      11
      company-owned stores and 9 franchised stores.





On
      November 30, 2006, Java Detour, its wholly-owned subsidiary Java Acquisition
      Co., Inc. (“Merger Sub”) and JDCO entered into an Agreement and Plan of Merger
      (the “Merger Agreement”) pursuant to which JDCO would be acquired by Java Detour
      in a reverse merger transaction wherein Merger Sub would merge with and into
      JDCO, with JDCO being the surviving corporation, and the shareholders of JDCO
      would exchange their shares of JDCO common stock for shares of Java Detour
      common stock (the “Merger”) on a 2.962 for 1 basis. On November 30, 2006, the
      Merger closed and JDCO became a wholly−owned subsidiary of the Company. The
      Company changed its name from Media USA.com, Inc. to Java Detour, Inc. and
      reincorporated in the state of Delaware further
      to an 8-for-1 exchange ratio. All references to common stock shares and per
      share amounts have been retroactively restated to reflect the share exchange
      as
      if the exchange had taken place as of the beginning of the earliest period
      presented.





The
      Merger was accounted for as a recapitalization of JDCO and the consolidated
      financial statements presented herein are those of JDCO.





**Principles
      of Consolidation**


The
      financial statements reflect the consolidation of JDCO and JDCO Subsidiary,
      wholly-owned subsidiaries of Java Detour, and all material intercompany
      transactions have been eliminated.





**Stock
      Based Compensation to Employees**




The
      Company accounts for its stock-based compensation in accordance with Statement
      of Financial Accounting Standards (“SFAS”) No. 123R, "Share-Based Payment, an
      Amendment of Financial Accounting Standards Board (“FASB”) Statement No. 123."
      The Company recognizes in the statement of operations the grant-date fair value
      of stock options and other equity-based compensation issued to employees and
      non-employees.




**Stock
      Based Compensation to Other than Employees**





The
      Company accounts for equity instruments issued in exchange for the receipt
      of
      goods or services from other than employees in accordance with Statement of
      Financial Accounting Standards No. 123, “Accounting for
      Stock-Based Compensation ,”
and
      the conclusions reached by the Emerging Issues Task Force in Issue No. 96-
      18,
“Accounting for Equity Instruments That Are Issued to Other Than Employees for
      Acquiring or in Conjunction with Selling Goods or Services” (“EITF 96-18”).
      Costs are measured at the estimated fair market value of the consideration
      received or the estimated fair value of the equity instruments issued, whichever
      is more reliably determinable. The value of equity instruments issued for
      consideration other than employee services is determined on the earlier of
      a
      performance commitment or completion of performance by the provider of goods
      or
      services as defined by EITF 96-18. In the case of equity instruments issued
      to
      consultants, the fair value of the equity instrument is recognized over the
      term
      of the consulting agreement.




F-7




**JAVA
        DETOUR, INC. AND SUBSIDIARIES**
 **NOTES
        TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS**
 **DECEMBER
        31, 2007 AND 2006**




**Management
      Plans**





Management
      plans to generate sufficient liquidity and resources to fund the Company’s
      operations in 2008 through strategic initiatives. Management has engaged a
      number of domestic and international master license opportunities for the Middle
      East, Vietnam, Colorado and the Los Angeles areas. Management believes these
      agreements will close before June 2008. Completion of these master license
      agreements will provide for up to an anticipated $1.4 million in operating
      cash
      flow in 2008. Management is also working to acquire five additional stores
      which
      will generate an anticipated cash flow from operations of up to $300,000. In
      addition, management has and will continue to aggressively find areas to cut
      corporate expenses and increase same store sales. Management is continuously
      evaluating the performance of its store operations and will close
      underperforming stores if it becomes necessary. Management is also active in
      procuring investment capital and other strategic partnerships. Management
      believes that the completion of these initiatives will permit the opening of
      two
      additional Company stores in 2008 and will adequately generate liquidity and
      resources to fund its operations through 2008.





**Reclassifications**


Certain
      prior year amounts have been reclassified to conform with the current year’s
      presentation, none of which had an impact on total assets, stockholders’ equity
      (deficit), net loss, or net loss per share.





**Fair
      Value of Financial Instruments**


The
      carrying value of cash, accounts receivable, deferred revenue, accounts payable,
      and accrued expenses approximate fair value because of the short maturity of
      these items.




**Cash
      and Cash Equivalents**


For
      purposes of the statement of cash flows, the Company considers all highly-liquid
      instruments purchased with a remaining maturity of three months or less to
      be
      cash equivalents.





**Concentrations**


The
      Company maintains its cash in bank deposit accounts that, at times, may exceed
      federally insured limits. The Company has not experienced any losses in such
      accounts. Management believes the Company is not exposed to any significant
      credit risk related to cash.





The
      Company primarily operates its stores in California and Nevada and generated
      approximately 84.5% of its revenues in California in the year ended December
      31,
      2007.





**Accounts
      Receivable**


Accounts
      receivable are stated at amounts due from customers or individuals net of an
      allowance for doubtful accounts. Accounts longer than the contractual payment
      terms are considered past due.





**Allowance
      for Doubtful Accounts**


The
      Company maintains an allowance for doubtful accounts resulting from the
      inability, failure or refusal of franchisees to make required payments.
 The Company determines the adequacy of this allowance by regularly
      reviewing the accounts receivable aging and applying various expected loss
      percentages to certain accounts receivable categories based upon historical
      bad
      debt experience. At December 31, 2007 the allowance for doubtful accounts
      balance was $61,335.





**Due
      from Stockholders**


Prior
      to
      becoming a reporting company with the United States Securities and Exchange
      Commission (“SEC”), the Company made advances to certain of the Company's
      original stockholders. These advances were non-interest bearing and payable
      upon
      the demand of the Company. The stockholders repaid these advances during 2006
      by
      applying payroll owed to them in the amount of $56,972 and by paying for and
      contributing leasehold improvements into newly constructed Java Detour store
      locations in the amount of $201,900.





**Notes
      Receivable**


Notes
      receivable consist of amounts due from purchasers of former Company owned stores
      and are stated net of amounts due from an individual that acquired the assets
      of
      a store. The Company routinely evaluates the collectability of the notes to
      determine if there is any risk of default. During the year ended December 31,
      2007 the Company reserved $442,471 as an allowance for uncollectable
      debt.




F-8




**JAVA
      DETOUR, INC. AND SUBSIDIARIES**


**NOTES
      TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS**


**DECEMBER
      31, 2007 AND 2006**




**Deferred
      Offering Costs**


Deferred
      offering costs, consisting of legal and filing fees relating to future offerings
      will be capitalized. The deferred offering costs will be offset against offering
      proceeds in the event the offering is successful. In the event the offering
      is
      unsuccessful or is abandoned, the deferred offering costs will be expensed.
      Costs associated with debt offerings will be capitalized and amortized over
      the
      terms of the debt. If the debt is repaid before it is due, or the debt is
      converted, the Company will expense the remaining unamortized balance of these
      costs at that time.





**Investments**


Investments
      consist of corporate and government bonds. The Company purchased these during
      2007 and classified them as available for sale. Any unrealized gain or loss
      was
      recognized as other comprehensive income (loss) prior to the sale of these
      investments. All investments were sold prior to December 31, 2007 and the
      Company recorded $16,167 as realized loss on sale of investments during the
      year
      ended December 31, 2007.





**Deferred
      Acquisition Costs**


Deferred
      acquisition costs, consisting of legal and accounting fees relating to a future
      acquisition will be capitalized. The deferred acquisition costs will be included
      in the purchase price allocation in the event the acquisition is successful.
      In
      the event the acquisition is unsuccessful or is abandoned, the deferred
      acquisition costs will be expensed.





**Acquisition
      Due Diligence Costs**


Acquisition
      due diligence costs, consisting of legal, accounting and travel expenses
      relating to an acquisition target in which the Company was unable complete
      negotiations. These expenses would have been included in the purchase price
      allocation in the event the acquisition was successfully completed. They are
      now
      being recorded as an expense, in as much as the acquisition was abandoned.
      Acquisition due diligence costs on an unrealized acquisition opportunity
      for twelve months ended December 31, 2007 and 2006 were
      approximately $209,000 and $0, respectively.





**Inventories**


Inventories
      consist of coffee and other beverage ingredients, cups, napkins, and other
      serving goods, and are valued at the lower of cost or market, computed on the
      first-in, first-out basis.





**Property
      and equipment**


Property
      and equipment are stated at cost less accumulated depreciation. Depreciation
      is
      provided for in amounts sufficient to relate the cost of depreciable assets
      to
      operations over their estimated service lives. The estimated lives in
      determining depreciation are recognized on the straight-line method over
      estimated useful lives of five to seven years for equipment, signs, vehicles,
      and site preparation and engineering. For leasehold improvements and buildings,
      the Company depreciates the assets over the shorter of their estimated useful
      lives or original lease terms plus any renewal periods for which renewal has
      been determined to be reasonably assured.





**Intangible
      Assets**


In
      accordance with SFAS No. 142, “Goodwill ** and
      Other
      Intangible Assets,” the Company evaluates intangible assets and other long-lived
      assets for impairment, at least on an annual basis and whenever events or
      changes in circumstances indicate that the carrying value may not be recoverable
      from its estimated future cash flows.  Recoverability of intangible assets
      and other long-lived assets is measured by comparing their net book value to
      the
      related projected undiscounted cash flows from these assets, considering a
      number of factors including past operating results, budgets, economic
      projections, market trends and product development cycles. If the net book
      value
      of the asset exceeds the related undiscounted cash flows, the asset is
      considered impaired, and a second test is performed to measure the amount of
      impairment loss. Impairment of $80,165 was recorded for the year ended December
      31, 2006 related to new product formulation and brand re-imaging. No impairment
      was recorded during the year ended December 31, 2007.




F-9




**JAVA
        DETOUR, INC. AND SUBSIDIARIES**
 **NOTES
        TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS**
 **DECEMBER
        31, 2007 AND 2006**
  **Deferred
        Rent**


For
      those
      leases that require fixed rental escalations during their lease terms, rent
      expense is recognized on a straight-line basis resulting in deferred rent of
      $203,502 at December 31, 2007. The liability will be satisfied through future
      rental payments.





**Income
      Taxes**


The
      Company accounts for income taxes in accordance with SFAS 109, Accounting for
      Income Taxes *.* The
      Company records deferred income tax assets and liabilities based up the
      difference between the financial statement and income tax bases of assets and
      liabilities using enacted income tax rates. Valuation allowances are established
      when necessary to reduce deferred income tax assets to the amount expected
      to be
      realized. Income tax expense is the taxes paid and payable for the period and
      the change during the period in the net deferred income tax assets and
      liabilities.





Effective
      January 1, 2007, the Company adopted the provisions of Financial Accounting
      Standards Board Interpretation No. 48, “Accounting for Uncertainty in Income
      Taxes,” (“FIN 48”). FIN 48 prescribes recognition thresholds that must be met
      before a tax position is recognized in the financial statements and provides
      guidance on de-recognition, classification, interest and penalties, accounting
      in interim periods, disclosure, and transition. Under FIN 48, an entity may
      only
      recognize or continue to recognize tax positions that meet a "more likely than
      not" threshold. The Company did not make any adjustment to opening retained
      earnings as a result of the implementation.





Based
      on
      its evaluation, the Company has concluded that there are no significant
      uncertain tax positions requiring recognition in its financial statements.
      The
      Company’s evaluation was performed for the tax years ended December 31, 2004
      through 2007 for U.S. Federal Income Tax and for the tax years ending December
      31, 2004 through 2007 for the State of California Income Tax, the tax years
      which remain subject to examination by major tax jurisdictions as of December
      31, 2007.





The
      Company does not have any unrecognized tax benefits as of January 1, 2007 and
      December 31, 2007 which if recognized would affect the Company’s effective
      income tax rate.





The
      Company’s policy is to recognize interest and penalties related to income tax
      issues as components of income tax expense. The Company did not recognize or
      incur any accrual for interest and penalties relating to income taxes as of
      January 1, 2007 or December 31, 2007.





**Franchise
      Stores**


The
      following shows a detail of the franchise stores in operation as of December
      31,
      2007 for Company-owned and franchise stores:





Units
                in Operation
            
            Franchisee
                Operated
            
            Company
                OperatedTotal
                at December 31, 2006
            
            4
            
            13Units
                opened
            
            1
            
            1Units
                sold
            
            0
            
            4Units
                purchased
            
            4
            
            1Total
                at December 31, 2007
            
            9
            
            11





**Revenue
      Recognition**





***Initial
      Franchise Fees***


Initial
      franchise fee income is recognized as revenue in accordance with Statement
      of
      Financial Accounting Standards (SFAS) No. 45, Accounting for Franchise Fee
      Revenue. SFAS 45 requires franchisors to recognize revenue from individual
      and
      area franchise sales only when all material services or conditions relating
      to
      the sale have been substantially performed or satisfied by the franchisor.
      In
      accordance with SFAS 45, the Company recognizes these fees as revenue upon
      the
      Company’s material and substantial performance of its obligations under the
      Franchise Agreement, which usually occurs at the commencement of operations
      of
      the individual location, unless it can be demonstrated that substantial
      performance has occurred before this time. Initial franchise fee income amounted
      to $0 for each of the years ended December 31, 2007 and 2006.




F-10


**JAVA
        DETOUR, INC. AND SUBSIDIARIES**
 **NOTES
        TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS**
 **DECEMBER
        31, 2007 AND 2006**


***Area
      Development Fees***


Area
      development fee income is recognized in accordance with SFAS 45 on a pro rata
      basis of the required quota of stores to be opened upon the Company’s material
      and substantial obligations under its area development agreement which usually
      occurs upon the Company’s approval of applicants to become franchisees provided
      by the area developer. Area development fee income from the Company’s franchisee
      in the Midwest amounted to $0 and $18,000 for the years ended December 31,
      2007
      and 2006, respectively.





***Master
      License Agreement Fees***


Master
      license agreement fee income is recognized as revenue in accordance with
      Statement of Financial Accounting Standards (SFAS) No. 45 “Accounting for
      Franchise Fee Revenue.” SFAS 45 requires franchisors to recognize revenue from
      individual and area franchise sales only when all material services or
      conditions relating to the agreement have been substantially performed or
      satisfied by the franchisor. In accordance with SFAS 45, the Company recognizes
      these fees as revenue upon the Company’s material and substantial performance of
      its obligations under the Master License Agreement, which usually occurs at
      the
      completion of operations training for the Master Licensee. Master license
      agreement fee income amounted to $275,000 and $0 for the years ended December
      31, 2007 and 2006, respectively.





***Royalties***


Royalty
      income of 4% of defined net sales is earned based on sales by franchisees and
      is
      recognized monthly as revenue when the related sales are reported to the
      Company. Additionally, the Company may receive a rebate or charge a mark-up
      for
      delivered supplies and coffee. Royalty income amounted to $43,633 and $40,329
      for the years ended December 31, 2007 and 2006, respectively.





***Promotional
      Fund Fees***


Promotional
      fund fee income of 2% and coop advertising of 1% of defined net sales is earned
      based on sales by franchisees, and is deferred until the promotional fund fee
      expenses are incurred by the Company. Promotional fund fee income amounted
      to
      $14,544 and $13,443 for the years ended December 31, 2007 and 2006,
      respectively.





***Retail
      Revenues***


Company-operated
      retail store revenues are recognized when payment is tendered at the point
      of
      sale. Retail revenues amount to $6,127,951 and $6,317,946 for the years ended
      December 31, 2007 and 2006, respectively.





**Deferred
      Revenue**


Deferred
      revenue consists of the portion of the initial franchise fees received from
      franchisees who have not commenced operations, the pro rata portion of the
      initial fees received from area development fees of which the Company has not
      approved franchisee applications for the required quota, master license
      agreement fees of which the Company has not completed its obligations and the
      excess, if any, of the 1% weekly promotional fund fees received from franchisees
      less the related promotional fund expenses incurred by the Company.




**Rewards/Gift
      Cards**


Revenues
      from the Company’s stored value cards, such as the Java Detour rewards/gift
      card, are recognized when tendered for payment or upon redemption. Outstanding
      customer balances are included in “Accrued expenses and other current
      liabilities” on the accompanying consolidated balance sheet. In accordance with
      the Company’s policies, none of its rewards/gift cards carry expiration dates
      and Java Detour does not charge any service fees that cause a decrement to
      customer balances. As of December 31, 2007 the Company has recorded $217,080
      in
      accrued expenses and other current liabilities for the stored value
      cards.




F-11




**JAVA
        DETOUR, INC. AND SUBSIDIARIES**
 **NOTES
        TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS**
 **DECEMBER
        31, 2007 AND 2006**


While
      the
      Company will continue to honor all stored rewards/gift cards presented for
      payment, management may determine the likelihood of redemption to be remote
      for
      certain card balances due to, among other things, long periods of inactivity.
      In
      these circumstances, to the extent management determines there is no requirement
      for remitting card balances to government agencies under unclaimed property
      laws, card balances may be recognized in the consolidated statements of
      operations in “Other income.” The Company recognized $0 and $0 for the years
      ended December 31, 2007 and 2006, respectively.





Through
      September 15, 2007 the Company offered two types of discounts to its customers,
      reward cards and 2-for-1 coupons. The Company’s reward cards rewarded customers
      for dollars spent at Java Detour stores. Every time a customer made a purchase
      with their card, the value of the purchase was tracked on the card.  Each
      time a customer spent at least $35.00, $3.50 was loaded on their card and could
      be used toward future purchases.  These discounts constituted approximately
      63% and approximately 99% of all discounts for the years ended December 31,
      2007
      and 2006 respectively. The Company discontinued the reward card program on
      September 16, 2007 and converted outstanding reward points to future purchase
      dollars at that time. Occasionally the Company will promote Java Detour in
      local
      markets and publish “Buy one drink and get the second drink free” in newspapers
      and local coupon books, which are redeemable at any Java Detour store. The
      Company accounts for these discounts in accordance with the conclusions reached
      by the Emerging Issues Task Force in Issue No. 01-09, “Accounting for
      Consideration Given by a Vendor to a Customer (Including a Reseller of the
      Vendor's Products)” as a reduction in revenue and the above rewards and/or
      discounts are included in the line item “Sales and other operating revenues,
      net” in the Company’s Consolidated Statements of Operations.





**Use
      of Estimates**


The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States of America (“GAAP”) requires management
      to make estimates and assumptions that affect certain reported amounts and
      disclosures. Accordingly, actual results could differ from those
      estimates.





**Earnings
      Per Share**


In
      accordance with SFAS No. 128, “Earnings ** Per
      Share,” the basic loss per common share is computed by dividing net loss
      available to common stockholders by the weighted average number of common shares
      outstanding.  Diluted loss per common share is computed similar to basic
      loss per common share except that the denominator is increased to include the
      number of additional common shares that would have been outstanding if the
      potential common shares had been issued and if the additional common shares
      were
      dilutive.  At December 31, 2007, the Company had 7,731,165 of
      potential dilutive securities. The Company’s potential dilutive securities
      included 4,520,000 warrants that are exercisable at $2.00 per share for the
      purchase of common stock and 3,211,165 of stock options that are exercisable
      between $1.00 and $1.10 a share for the purchase of common stock. At
      December 31, 2006, the Company had 7,344,165 of potential dilutive
      securities. The Company’s potential dilutive securities included 5,020,000
      warrants that were exercisable between $0.60 and $2.00 a share for the purchase
      of common stock and 2,324,165 of stock options that are exercisable between
      $1.00 and $1.10 a share for the purchase of common stock. Due to the net loss,
      none of the potentially dilutive securities were included in the calculation
      of
      diluted earnings per share since their effect would be
      anti-dilutive.




**Costs
      of Sales**


Included
      in costs of sales are coffee beans, dairy products, other beverage ingredients,
      paper products and food.  These costs include freight charges, purchasing
      and receiving costs, warehousing cost and other distribution network
      costs.





**Store
      Operating Expenses**


Store
      operating expenses consist of direct and indirect labor, operating supplies,
      store utilities, travel and entertainment, store maintenance, store leases,
      store advertising, insurance, and taxes and licenses.





**Selling,
      General and Administrative Expenses**


Selling,
      general and administrative expenses consist of salaries and related benefits,
      travel and entertainment, corporate headquarters rent and utilities,
      corporate advertising and marketing, and professional fees.




F-12




**JAVA
      DETOUR, INC. AND SUBSIDIARIES**


**NOTES
      TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS**


**DECEMBER
      31, 2007 AND 2006**




**Advertising
      and Marketing Costs**


The
      Company expenses costs of advertising and marketing as incurred.
 Advertising and marketing expense for the years ended
      December 31, 2007 and 2006 were $301,498 and $198,673,
      respectively.





**Promotional
      Fund Expenses**


Promotional
      costs are charged to expense during the period incurred. These costs arise
      from
      advertising for area franchisee stores. These costs are indirect to the Company
      in that they receive a promotional fee from the franchisees to pay for these
      costs.




**Recently
      Issued Accounting Pronouncements**


The
      Company has adopted all accounting pronouncements effective before
      December 31, 2007, which are applicable to the Company.





In
      September 2006, the FASB issued Statement of Financial Accounting Standards
      No. 157, “Fair Value Measurements” (“SFAS No. 157”), which establishes a
      formal framework for measuring fair value under Generally Accepted Accounting
      Principles (“GAAP”). SFAS No. 157 defines and codifies the many definitions of
      fair value included among various other authoritative literature, clarifies
      and,
      in some instances, expands on the guidance for implementing fair value
      measurements, and increases the level of disclosure required for fair value
      measurements. Although SFAS No. 157 applies to and amends the provisions of
      existing FASB and American Institute of Certified Public Accountants (“AICPA”)
      pronouncements, it does not, of itself, require any new fair value measurements,
      nor does it establish valuation standards. SFAS No. 157 applies to all other
      accounting pronouncements requiring or permitting fair value measurements,
      except for: SFAS No. 123R, share-based payment and related pronouncements,
      the
      practicability exceptions to fair value determinations allowed by various other
      authoritative pronouncements, and AICPA Statements of Position 97-2 and 98-9
      that deal with software revenue recognition. SFAS No. 157 is effective for
      financial statements issued for fiscal years beginning after November 15,
      2007, and interim periods within those fiscal years. The Company is currently
      assessing the potential effect of SFAS No. 157 on its financial statements.





In
      December 2006, the FASB issued FSP EITF 00-19-2, “Accounting for
      Registration Payment Arrangements” (“EITF 00-19-2”), which addresses an issuer’s
      accounting for registration payment arrangements. EITF 00-19-2 specifies that
      the contingent obligation to make future payments or otherwise transfer
      consideration under a registration payment arrangement, whether issued as a
      separate agreement or included as a provision of a financial instrument or
      other
      agreement, should be separately recognized and measured in accordance with
      FASB
      No. 5, “Accounting for Contingencies”. EITF 00-19-2 further clarifies that a
      financial instrument subject to a registration payment arrangement should be
      accounted for in accordance with other applicable generally accepted accounting
      principles without regard to the contingent obligation to transfer consideration
      pursuant to the registration payment arrangement. EITF 00-19-2 is effective
      immediately for registration payment arrangements and the financial instruments
      subject to those arrangements that are entered into or modified subsequent
      to
      the date of issuance of EITF 00-19-2. For registration payment arrangements
      and
      financial instruments subject to those arrangements that were entered into
      prior
      to the issuance of EITF 00-19-2, EITF 00-19-2 is effective for financial
      statements issued for fiscal years beginning after December 15, 2006, and
      interim periods within those fiscal years. Early adoption of EITF 00-19-2 for
      interim or annual periods for which financial statements or interim reports
      have
      not been issued is permitted. The Company chose to early adopt EITF 00-19-2
      effective December 31, 2006. See Note 12 for the effect of the adoption of
      this
      FSP.





In
      February 2007, the FASB issued Statement of Financial Accounting Standards
      No. 159, “The Fair Value Option for Financial Assets and Financial
      Liabilities” (“SFAS No. 159”), which provides companies with an option to report
      selected financial assets and liabilities at fair value. SFAS No. 159’s
      objective is to reduce both complexity in accounting for financial instruments
      and the volatility in earnings caused by measuring related assets and
      liabilities differently. Generally accepted accounting principles have required
      different measurement attributes for different assets and liabilities that
      can
      create artificial volatility in earnings. SFAS No. 159 helps to mitigate this
      type of accounting-induced volatility by enabling companies to report related
      assets and liabilities at fair value, which would likely reduce the need for
      companies to comply with detailed rules for hedge accounting. SFAS No. 159
      also establishes presentation and disclosure requirements designed to facilitate
      comparisons between companies that choose different measurement attributes
      for
      similar types of assets and liabilities. SFAS No. 159 requires companies to
      provide additional information that will help investors and other users of
      financial statements to more easily understand the effect of the company’s
      choice to use fair value on its earnings. SFAS No. 159 also requires companies
      to display the fair value of those assets and liabilities for which the company
      has chosen to use fair value on the face of the balance sheet. SFAS No. 159
      does
      not eliminate disclosure requirements included in other accounting standards,
      including requirements for disclosures about fair value measurements included
      in
      SFAS No. 157 and SFAS No. 107. SFAS No. 159 is effective as of the
      beginning of a company’s first fiscal year beginning after November 15,
      2007. Early adoption is permitted as of the beginning of the previous fiscal
      year provided the company makes that choice in the first 120 days of that
      fiscal year and also elects to apply the provisions of SFAS No. 157. The Company
      is currently assessing the potential effect of SFAS No. 159 on its financial
      statements.




F-13




**JAVA
      DETOUR, INC. AND SUBSIDIARIES**


**NOTES
      TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS**


**DECEMBER
      31, 2007 AND 2006**




In
      December 2007, the FASB issued SFAS No. 141(R), “Business Combinations”
(“SFAS No. 141(R)”), which requires an acquirer to recognize in its
      financial statements as of the acquisition date (i) the identifiable assets
      acquired, the liabilities assumed, and any noncontrolling interest in the
      acquiree, measured at their fair values on the acquisition date, and (ii)
      goodwill as the excess of the consideration transferred plus the fair value
      of
      any noncontrolling interest in the acquiree at the acquisition date over the
      fair values of the identifiable net assets acquired. Acquisition-related costs,
      which are the costs an acquirer incurs to effect a business combination, will
      be
      accounted for as expenses in the periods in which the costs are incurred and
      the
      services are received, except that costs to issue debt or equity securities
      will
      be recognized in accordance with other applicable GAAP. SFAS No. 141(R) makes
      significant amendments to other Statements and other authoritative guidance
      to
      provide additional guidance or to conform the guidance in that literature to
      that provided in SFAS No. 141(R). SFAS No. 141(R) also provides guidance as
      to
      what information is to be disclosed to enable users of financial statements
      to
      evaluate the nature and financial effects of a business combination.
      SFAS No. 141(R) is effective for financial statements issued for fiscal
      years beginning on or after December 15, 2008. Early adoption is
      prohibited. The Company has not yet determined the effect on its consolidated
      financial statements, if any, upon adoption of SFAS No. 141(R).





In
      December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
      Consolidated Financial Statements - an amendment of ARB No. 51” (“SFAS No.
      160”), which revises the relevance, comparability, and transparency of the
      financial information that a reporting entity provides in its consolidated
      financial statements by establishing accounting and reporting standards that
      require (i) the ownership interests in subsidiaries held by parties other than
      the parent be clearly identified, labeled, and presented in the consolidated
      statement of financial position within equity, but separate from the parent’s
      equity, (ii) the amount of consolidated net income attributable to the parent
      and to the noncontrolling interest be clearly identified and presented on the
      face of the consolidated statement of income, (iii) changes in a parent’s
      ownership interest while the parent retains its controlling financial interest
      in its subsidiary be accounted for consistently as equity transactions, (iv)
      when a subsidiary is deconsolidated, any retained noncontrolling equity
      investment in the former subsidiary be initially measured at fair value, with
      the gain or loss on the deconsolidation of the subsidiary being measured using
      the fair value of any noncontrolling equity investment rather than the carrying
      amount of that retained investment, and (v) entities provide sufficient
      disclosures that clearly identify and distinguish between the interests of
      the
      parent and the interests of the noncontrolling owners. SFAS No. 160 amends
      FASB
      No. 128 to provide that the calculation of earnings per share amounts in the
      consolidated financial statements will continue to be based on the amounts
      attributable to the parent. SFAS No. 160 is effective for financial statements
      issued for fiscal years, and interim periods within those fiscal years,
      beginning on or after December 15, 2008. Early adoption is prohibited. SFAS
      No. 160 shall be applied prospectively as of the beginning of the fiscal year
      in
      which it is initially applied, except for the presentation and disclosure
      requirements, which shall be applied retrospectively for all periods presented.
      The Company has not yet determined the effect on its consolidated financial
      statements, if any, upon adoption of SFAS No. 160.





In
      December 2007, the SEC issued Staff Accounting Bulletin
      (SAB) No. 110, “ Share-Based
      Payment” (“SAB
      110”). SAB 110 establishes the continued use of the simplified method for
      estimating the expected term of equity based compensation. The simplified method
      was intended to be eliminated for any equity based compensation arrangements
      granted after December 31, 2007. SAB 110 is being published to help
      companies that may not have adequate exercise history to estimate expected
      terms
      for future grants. The Company utilized the guidance in SAB 110 in estimating
      the expected terms of options granted to employees.




F-14


**JAVA
        DETOUR, INC. AND SUBSIDIARIES**
 **NOTES
        TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS**
 **DECEMBER
        31, 2007 AND 2006**


**NOTE
      2 – ACCOUNTS RECEIVABLE**





Accounts
      receivable as of December 31, 2007 include rebate balances and balances due
      from lessees and franchisees totaling $97,167, net of $61,335 of allowance
      for
      doubtful accounts.





**NOTE
      3 - PROPERTY AND EQUIPMENT**





Property
      and equipment consist of the following at December 31, 2007:





Land
            
            $
            425,000Site
                preparation and engineering
            
            
            590,196Buildings
            
            
            1,783,861Leasehold
                improvements
            
            
            1,565,391Signs
            
            
            355,823Store
                equipment
            
            
            772,608Other
                equipment, furniture, and vehicles
            
            
            475,128Total
            
            
            5,968,007Less
                accumulated depreciation
            
            
            (1,775,794
            )Property
                and equipment, net
            
            $
            4,192,213Depreciation
                expense for the years ending December 31, 2007 and 2006 was $462,063
                and
                $430,193, respectively. Accumulated depreciation for assets under
                capital
                leases was $306,091 at December 31, 2007. Depreciation expense for
                the
                assets under capital leases was $149,279 and $142,679 for years ended
                December 31, 2007 and 2006, respectively.





**NOTE
      4 - INTANGIBLE ASSETS**




Other
      intangible assets consist of the following at December 31, 2007:





Franchise
                operating manuals
            
            $
            32,450Architectural
                design for new stores
            
            
            37,457Goodwill
                (see note 14)
            
            
            429,000Total
            
            $
            498,907





The
      Company has evaluated the intangible assets for impairment and has estimated
      that $69,907 of the carrying value will be recoverable from its estimated future
      cash flows. No impairment was recorded during the year ended December 31, 2007.
      Impairment of $80,165 was recorded for the year ended December 31, 2006 relating
      to new product formulation and brand re-imaging.





**NOTE
      5 - NOTES RECEIVABLE**





During
      2005, the Company sold one of its Bakersfield, California locations to an
      unrelated third party for a note receivable in the amount of $450,368. The
      term
      of the note is for ten years and bears interest at the rate of 6% annually.
      The
      Company recorded a gain on the sale of this store of $300,052 during the year
      ended December 31, 2005 As of December 31, 2006, $436,221 was still owed to
      the
      Company under this note, of which $43,641 is due over the next twelve months.
      In
      addition, the Company paid other fees, such as property taxes on behalf of
      the
      new store owner in exchange for a note receivable in the amount of $6,250.
      As of
      December 31, 2007 the entire balance is still due the Company however this
      amount has been reserved as uncollectible.





During
      2007, the Company sold four of its Las Vegas, Nevada locations to an unrelated
      third party for cash, certain franchise rights, and a note receivable in the
      amount of $900,000. See Note 17.




F-15




**JAVA
      DETOUR, INC. AND SUBSIDIARIES**


**NOTES
      TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS**


**DECEMBER
      31, 2007 AND 2006**




**NOTE
      6 - LONG-TERM OBLIGATIONS**





Long-term
      obligations, excluding capital leases, consist of the following:




**2007**Notes
                payable to a bank, payable in monthly installments with interest
                at Prime
                Rate plus 1.75% (9.50% at December 31, 2007), maturing in 2021
                through 2029, secured by the property and equipment at four
                stores
            
            $
            860,120Notes
                payable to a multi-bank organization, payable in monthly installments
                with
                interest at Prime Rate plus 2.75% (10.50% at December 31, 2007),
                maturing in 2009, secured by substantially all the Company’s
                assets
            
            
            60,144Term
                loan from vehicle dealer, payable in monthly installments with fixed
                interest of 7.69% maturing in 2011, secured by one vehicle
            
            
            19,209Term
                loan from vehicle dealer, payable in monthly installments with fixed
                interest of 2.74% maturing in 2010, secured by one vehicle
            
            
            19,072Note
                payable to an individual, payable in monthly installments with fixed
                interest at 6.00%, maturing in 2012, secured by all assets purchased
                through this agreement at a single store (see note 14).
            
            
            475,000Total
                notes payable
            
            $
            1,433,545Less
                current portion
            
            
            146,508Long-term
                obligations
            
            $
            1,287,037





Scheduled
      annual maturities of long-term obligations, excluding capital leases, are as
      follows:





2008
            
            $
            146,5082009
            
            
            151,5192010
            
            
            147,4852011
            
            
            146,4652012
            
            
            145,681Thereafter
            
            
            695,887Total
            
            $
            1,433,545





**NOTE
      7 - LEASE COMMITMENTS**





The
      Company currently has 28 capital leases. Approximately 60% of the leases have
      a
      60-month term with a $1.00 buyout option after the final payment under the
      lease. The remaining leases have terms of either 36 or 48 months. Additionally,
      7% of the leases required a 10% balloon payment at the beginning of the lease,
      and 3% call for a fair market buy out. All leases have either the final month
      prepaid or a single payment on account as a refundable security deposit. None
      of
      the leases have an escalation clause; however annual payments may vary slightly
      if there are changes to regional sales or property tax rates.





Capital
      lease obligations consist of the following:





**2007**Lease
                for the land of the Red Bluff store site, on which payments, less
                interest
                at 10% per annum, are credited toward purchase of the land; expires
                in
                2012 with options to extend by two six-year periods; full ownership
                would
                be attained in 2022 under present terms
            
            $
            212,168Leases
                for property and equipment at several store sites, expiring through
                2011,
                a majority of the total balance guaranteed by two
                stockholders
            
            
            559,353Total
            
            $
            771,521




F-16


**JAVA
        DETOUR, INC. AND SUBSIDIARIES**
 **NOTES
        TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS**
 **DECEMBER
        31, 2007 AND 2006**


The
      Company leases its headquarters and most of its store sites under long-term
      operating lease agreements expiring in 2008 through 2021. Included in these
      are
      16 operating leases governing 12 of its stores (two for its San Francisco and
      San Rafael stores each), a 13th lease for a property it sublets in Bakersfield
      and a 14th on undeveloped land in Lincoln, CA. Additional leases exist for
      the
      Company’s headquarters in California and its sales office in North Carolina. The
      leases initially run for either 5, 10 or 15 years and each store has between
      one
      and five-year extensions available. Seven leases have pre-established rent
      increase that take effect when each five-year option is exercised, all others
      have small annual rent increases and allow for renegotiation of the rental
      amount before options are exercised. Rent expense under operating leases totaled
      $715,595 for 2007 and $628,488 for 2006.





Future
      minimum lease payments are as follows:


**Capital**
              
              **Operating**
              
              **Total**2008
              
              $
              369,921
              
              $
              676,408
              
              $
              1,046,3292009
              
              
              259,725
              
              
              705,166
              
              
              964,8912010
              
              
              126,648
              
              
              653,010
              
              
              779,6582011
              
              
              60,759
              
              
              624,591
              
              
              685,3502012
              
              
              28,372
              
              
              502,991
              
              
              531,363Thereafter
              
              
              250,616
              
              
              943,020
              
              
              1,193,636Total
              
              $
              1,096,041
              
              $
              4,105,186
              
              $
              5,201,227Less
                  amounts representing interest
              
              
              (324,520
              )Present
                  value of minimum lease payments
              
              
              771,521Less
                  current portion
              
              
              (261,504
              )Total,
                  net of current portion
              
              $
              510,017The
                  gross amount of assets under capital leases recorded as property
                  and
                  equipment was $840,876 as of December 31, 2007. Depreciation expense
                  for
                  the assets under capital leases was $149,279 and $142,679 for the
                  years
                  ended December 31, 2007 and 2006, respectively.


**NOTE
      8 - LINES OF CREDIT**




As
      of
      December 31, 2007 the Company has unused lines of credit with interest rates
      ranging from 13.5% and 15.0%. Total available credit under the lines of credit
      with Wells Fargo Bank is $100,000. Outstanding balances as of December 31,
      2007
      totaled $0.





**NOTE
      9 - CONVERTIBLE NOTES PAYABLE**





During
      the years ended December 31, 2002 through 2004 the Company issued $1,525,000
      in
      convertible notes payable of which $170,000 was to a stockholder. The notes
      bear
      interest at ten percent, are due December 31, 2007 and fifty percent of the
      value of the notes are convertible at the holder’s option into common shares of
      the company at $1.00 per share. The values of the debentures were allocated
      between the debenture and the beneficial conversion feature, which amounted
      to $1,266,000 and $89,000, respectively.  The discount related to
      the beneficial conversion features of $89,000 was being amortized over the
      term
      of the debenture. The Company amortized $39,607 and $19,804 to interest expense
      during the years ended December 31, 2006 and 2005, respectively. In addition,
      as
      part of the transaction the Company paid $155,000 and issued 250,000 shares
      of
      common stock of the Company to a related party valued at $250,000 as offering
      costs. These costs were being amortized over the term of the debentures. The
      Company recorded amortization of $81,777 to interest expense during the year
      ended December 31, 2005. During the year ended December 31, 2006 these notes
      were converted into 2,927,013 post split shares of common stock. Of the notes,
      fifty percent or $762,500 were converted at $1.00 per share (pre-split) for
      762,500 shares (2,258,746 post split) and the remaining $762,500 were converted
      at $3.38 per share (pre-split) for 225,592 shares (668,267 post split). As
      a
      result of the conversion, the Company recognized all unamortized deferred
      offering costs and recorded $150,655 of interest expense for the year ended
      December 31, 2006. In addition, the above shareholders converted $104,576 of
      accrued interest at $3.38 (pre-split) per share into 31,002 shares (91,837
      post
      split).




F-17


**JAVA
        DETOUR, INC. AND SUBSIDIARIES**
 **NOTES
        TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS**
 **DECEMBER
        31, 2007 AND 2006**




**NOTE
      10 - RELATED PARTY CONVERTIBLE NOTE PAYABLE**





In
      addition to the $170,000 convertible note payable issued to a stockholder as
      discussed in Note 9, during 2005 the Company issued a $300,000 convertible
      note
      payable to an unrelated party. As additional consideration for issuing the
      debenture, the Company granted six-year warrants to purchase 1,000 shares of
      common stock at $3.38 per share (see Note 12). During 2005, the note was
      assigned to a related party. The note was convertible into the Company’s Series
      B preferred stock at a rate of $3.38 per share. As of December 31, 2006 the
      balance has been converted into 88,757 shares of JDCO common stock (exchanged
      for 262,925 shares of our common stock upon closing of the Merger) at $3.38
      per
      share, and the warrants 1,000 were exercised on cashless basis for 224 shares
      of
      JDCO common stock (exchanged for 664 shares of our common stock upon closing
      of
      the Merger).





**NOTE
      11 - INCOME TAXES**





The
      provision (benefit) for income taxes consists of the following:




**December 31,****2007**
            
            **2006**Deferred
                income tax benefit for net operating losses
            
            $
            -
            
            $
            (3,996
            )Current
                income tax expense
            
            
            3,322
            
            
            -Income
                tax expense (benefit), net
            
            $
            3,322
            
            $
            (3,996
            )





Deferred
      income taxes reflect the net tax effects of temporary differences between the
      carrying amounts of assets and liabilities for financial statement purposes
      and
      the amounts used for income tax purposes. Significant components of the
      Company’s deferred tax liabilities and assets as of December 31, 2007
      are as follows:





**2007**Net
                operating loss carry-overs for federal income taxes totaling $10,937,087,
                expiring in 2022 through 2027
            
            $
            3,937,351Net
                operating loss carry-overs for state of California income taxes totaling
                $10,651,284, expiring in 2012 through 2017
            
            
            735,096Total
            
            
            4,672,447Valuation
                allowance
            
            
            (4,186,800
            )Deferred
                tax assets, net
            
            $
            485,647




The
      Components of deferred income tax expense (benefit) are as follows:





**December 31,**
              **2007**
            
            **December 31,**
              **2006**Depreciation
            
            $
            4,241
            
            $
            (23,103
            )Contingent
                liability for registration rights
            
            
            128,520
            
            
            (64,260
            )Accrued
                vacation
            
            
            (26,025
            )
            
            (11,222
            )Accrued
                officer salaries
            
            
            4,467
            
            
            (5,623
            )Net
                operating loss carryforward
            
            
            (1,395,654
            )
            
            (1,121,123
            )Increase
                in valuation allowance
            
            
            1,287,773
            
            
            1,221,335Income
                tax  expense (benefit)
            
            $
            3,322
            
            $
            (3,996
            )




F-18


**JAVA
          DETOUR, INC. AND SUBSIDIARIES**
 **NOTES
          TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS**
 **DECEMBER
          31, 2007 AND 2006**


Following
      is a reconciliation of the amount of income tax expense (benefit) that would
      result from applying the statutory federal income tax rates to pre-tax income
      and the reported amount of income tax expense (benefit):





**2007**
            
            **2006**Tax
                benefit (expense) at federal statutory rates
            
            $
            (1,994,721
            )
            $
            (1,308,715
            )Depreciation
            
            
            14,970
            
            
            18,336Timing
                differences
            
            
            (57,813
            )
            
            427,785Increase
                in valuation allowance
            
            
            2,037,564
            
            
            862,594Income
                tax benefit, net
            
            $
            0
            
            $
            0





At
      December 31, 2007, the Company has provided a partial valuation
      allowance for the deferred tax assets since management has determined that
      the
      realization of a portion of that asset is more likely than not.





**NOTE
      12 - STOCKHOLDER’S EQUITY**





PREFERRED
      STOCK





The
      Company is authorized to issue up to 5,000,000 shares of $0.001 par value
      preferred stock. As of December 31, 2007, the Company does not have any shares
      of preferred stock outstanding. All transactions relating to preferred stock
      prior to the reverse merger were that of JDCO.





In
      March
      2006 JDCO amended its articles of incorporation to change its preferred stock
      from no par to par value of $0.001. The accompanying financial statements have
      been retroactively restated to present the effect of this change in par value.
      All preferred shares issued prior to the reverse merger were of Series A of
      JDCO. Series A preferred shares were convertible, at the holders’ option at
      any time, into an equal number of common shares, subject to adjustments to
      account for stock splits, stock dividends, and certain other events including
      the conversion of the convertible notes. Prior to the reverse merger, the Series
      A preferred shareholders converted all of their shares into 295,454 pre split
      (875,222 post split) shares of common stock. These shareholders also converted
      $173,346 of accrued dividends payable at $3.38 per share (pre split) into 51,286
      pre split shares (151,294 post split) of common stock. The Series A shareholders
      exercised warrants to purchase 118,182 shares of common stock granted to them
      in
      connection with their purchase of the series A preferred stock on a cashless
      basis for 42,924 pre split shares (127,153 post split). The holders of the
      Company’s secured convertible notes due December 31, 2007 exercised their
      conversion rights under those notes in their entirety and as a result the Series
      A shareholders were issued an additional 63,094 pre split shares (186,903 post
      split) under their rights per their subscription agreements.





COMMON
      STOCK





On
      November 30, 2006, as part of a single private placement, the Company sold
      10,000,000 shares together with five-year warrants to purchase 2,500,000 shares
      of common stock at $2.00 per share for total consideration of $10.0 million.
      As
      part of the transaction, the Company paid the placement agent $1,050,000 for
      commissions and fees and granted warrants to purchase 2,000,000 shares of common
      stock with the same terms as those granted to the investors in the placement
      except that the placement agent warrants are exercisable nine months from the
      date of issuance and have a cashless exercise feature. The shares included
      in
      the private placement have weighted average anti-dilution coverage for the
      issuance of securities within 12 months of the closing of the Merger at a price
      below $1.00, subject to customary exceptions.





As
      part
      of the private placement, the Company entered into a share registration rights
      agreement, whereby the Company agreed to register the shares of common stock
      sold in the private placement. The agreement requires the Company to file a
      registration statement within 30 days of the closing and to have the
      registration statement declared effective within 120 days of the closing. If
      the
      Company fails to have the registration statement declared effective within
      120
      days, the Company must pay a prorated monthly penalty of 1.5% of the amount
      raised. The Company filed the registration statement on Form SB-2 to register
      9,442,593 shares of the common stock sold in the private placement on December
      29, 2006. The registration statement was not declared effective within 120
      days
      of the closing.




F-19




**JAVA
        DETOUR, INC. AND SUBSIDIARIES**
 **NOTES
        TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS**
 **DECEMBER
        31, 2007 AND 2006**


The
      Company also entered into a warrant registration rights agreement, whereby
      the
      Company agreed to register the remaining shares of the common stock sold in
      the
      private placement, the shares underlying the warrants issued in the private
      placement and 4,418,403 **** shares
      of
      common stock which are owned by the placement agent and its affiliates. The
      agreement requires the Company to file a registration statement within 10 days
      of June 29, 2007 and to have the registration statement declared effective
      within 120 days of such filing. If the Company fails to have the registration
      statement declared effective within 120 days, the Company must pay a prorated
      monthly penalty of 1.5% of the amount raised. The registration statement
      covering the warrant registration rights was filed on July 10, 2007 and declared
      effective on July 26, 2007.





In
      accordance with FSP EITF 00-19-2, on the date of the private placement, the
      Company reviewed the terms of the registration rights agreements and as of
      that
      date, the Company believed they would meet all of the required deadlines under
      both of the agreements. As a result, the Company did not record any liability
      associated with the registration rights agreement. The registration statement
      covering the shares issued in the private placement was not declared effective
      within the 120 day requirement. The Company received a 30 day waiver from the
      investors, which extended the deadline for the effectiveness of the registration
      statement to April 24, 2007. As a result the Company determined that it was
      probable that the registration statement would be declared effective within
      30
      days of the extended deadline and recorded a contingent liability of $150,000
      representing one month of registration rights penalties. The Company’s
      registration was declared effective July 5, 2007. Upon effectiveness, the
      investors waived the penalty and the Company has recorded a gain on registration
      rights agreement as other income for the year ended December 31, 2007. The
      Company believed it would meet its deadlines for the registration and
      effectiveness of the stock underlying the warrant registration rights agreement
      and therefore did not record any contingent liability associated with those
      shares. The Company met the deadlines associated with the shares underlying
      the
      warrant registration rights agreement.





The
      warrants granted to the investors in the above private placement were treated
      as
      permanent equity pursuant to exemption from FAS 133 under paragraph
      11a.





During
      the fourth quarter of 2006, the Company issued 793,412 shares of common stock
      with a value of $793,402 to a consultant for services performed.





In
      August
      2007, the Company issued 403,536 shares of common stock for the cashless
      exercise of 500,000 warrants with an exercise price of $0.60 per
      share.




F-20




**JAVA
        DETOUR, INC. AND SUBSIDIARIES**
 **NOTES
        TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS**
 **DECEMBER
        31, 2007 AND 2006**


**Common
      Stock Issued for Debt and Warrant Conversion**


The
      Company issued common shares to convert outstanding indebtedness and warrants
      for the year ended December 31, 2006. The indebtedness and warrants converted
      were as follows:




**Summarized**




**Description**
            
            **Amount**
            
            **Shares**
              **Acquired****Convertible
                notes and accrued interest**
            
            $
            1,444,204
            
            
            2,678,910**Related
                party notes payable**
            
            $
            572,315
            
            
            501,586**Related
                party convertible notes payable**
            
            $
            485,583
            
            
            602,871**Convertible
                Series A preferred stock**
            
            $
            -
            
            
            1,062,125**Accrued
                dividends**
            
            $
            173,346
            
            
            151,924**Warrants
                converted on cashless basis**
            
            $
            -
            
            
            127,154**Total**
            
            $
            2,675,448
            
            
            5,124,570





DESCRIPTION
      OF STOCK PLANS




**Java
      Detour, Inc. 2006 Equity Incentive Plan**


On
      November 30, 2006, the Company’s board of directors adopted the Java
      Detour, Inc. 2006 Equity Incentive Plan (the “2006 Plan”).   Under
      the 2006 Plan, a total of 4,249,167 common shares will be available
      for issuance through the grant of a variety of common share-based awards under
      the plan.  Types of awards that may be granted under the 2006 Plan
      include stock awards, restricted stock awards and non-qualified and incentive
      stock options.  As of December 31, 2007, there were 3,211,165
      outstanding options under the 2006 Plan, all vesting over a period of 4
      years, and 1,038,002 shares available for issuance.




F-21




**JAVA
        DETOUR, INC. AND SUBSIDIARIES**
 **NOTES
        TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS**
 **DECEMBER
        31, 2007 AND 2006**


**Summary
      of Options Granted to Directors, Officers and Employees**


The
      following table summarizes compensatory options granted to directors, officers
      and other employees for the periods or as of the dates indicated, both under
      the
      aforesaid stock plans and in the form of free-standing grants:




**Options**
              **Granted**
            
            **Weighted Average**
              **Exercise Price**Balance,
                December 31, 2005Exercised
            
            
            0.00
            
            $
            0.00Cancelled
            
            
            0.00
            
            $
            0.00Granted
            
            
            2,324,165
            
            $
            1.03Balance,
                December 31, 2006
            
            
            2,324,165
            
            $
            1.03Exercised
            
            
            0.00
            
            $
            0.00Cancelled
            
            
            0.00
            
            $
            0.00Granted
            
            
            887,000
            
            $
            1.00Balance,
                December 31, 2007
            
            
            3,211,165
            
            $
            1.02Exercisable,
                December 31, 2007
            
            
            581,041
            
            $
            1.03





The
      weighted average remaining contractual life of compensatory options outstanding
      for directors, officers and employees is  9.09 years at
      December 31, 2007.  The exercise prices for compensatory options
      outstanding for directors, officers and employees at December 31, 2007
      were as follows:





**Number of**
              **Options**
            
            **Exercise**
              **Price**2,572,000
            
            $
            1.00639,165
            
            $
            1.103,211,165





In
      accordance with FAS 123R, compensation expense of $403,432 and $33,619 was
      recognized during the year ended December 31, 2007 and 2006, respectively,
      as a
      result of the grant of compensatory stock options to purchase 2,324,165 shares
      of common stock, granted to directors, officers and employees of the Company. At
      November 30, 2006, the date of grant, the Company calculated the value of these
      options using the Black-Scholes model based on the following assumptions: a
      risk-free rate of 4.75%, volatility of 130%, estimated life of 5 years, fair
      market value of $1.00 per share and exercise price ranging between $1.00 and
      $1.10 per share. The total value of options granted was $2,017,159 and the
      unvested portion was $1,580,108, which is expected to be recognized over a
      weighted average period of
      3.92
      years .





In
      accordance with FAS 123R, compensation expense of $49,059 was recognized during
      the year ended December 31, 2007 as a result of the grant of compensatory stock
      options to purchase 687,000 shares of common stock, granted to directors,
      officers and employees of the Company. At
      June
      20, 2007, the date of grant, the Company calculated the value of these options
      using the Black-Scholes model based on the following assumptions: a risk-free
      rate of 5.05%, volatility of 131%, estimated life of 5 years, fair market value
      of $0.79 per share and exercise price of $1.00 per share. The total value of
      options granted was $465,017 and the unvested portion was $415,958, which is
      expected to be recognized over a weighted average period of
      4.47
      years .




F-22


**JAVA
          DETOUR, INC. AND SUBSIDIARIES**
 **NOTES
          TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS**
 **DECEMBER
          31, 2007 AND 2006**


In
      accordance with FAS 123R, compensation expense of $6,489 was recognized during
      the year ended December 31, 2007 as a result of the grant of compensatory stock
      options to purchase 200,000 shares of common stock, granted to an employee
      of
      the Company. At
      October 3, 2007, the date of grant, the Company calculated the value of these
      options using the Black-Scholes model based on the following assumptions: a
      risk-free rate of 4.24%, volatility of 129%, estimated life of 5 years, fair
      market value of $0.79 per share and exercise price of $1.00 per share. The
      total
      value of options granted was $134,123 and the unvested portion was $127,634,
      which is expected to be recognized over a weighted average period of
      4.76
      years .





Total
      compensation expense recorded in accordance with FAS 123R during the years
      ended
      December 31, 2007 and 2006 was $458,980 and $33,619, respectively.





For
      compensatory options granted to directors, officers and employees during the
      year ended December 31, 2006 where the exercise price equalled the
      stock price at the date of the grant, the weighted-average fair value of such
      options was $1.00 and the weighted-average exercise price of such options
      was $1.00  No options were granted during the year ended
      December 31, 2007 or 2006, where the exercise price was less than the
      stock price at the date of the grant or the exercise price was greater than
      the
      stock price at the date of grant.





WARRANTS





We
      have
      outstanding warrants to purchase 4,520,000 shares of our common stock
      outstanding, exercisable at $2.00 per share for a five-year period from the
      date
      of issuance. 4,500,000 of the shares underlying such warrants have weighted
      average anti-dilution coverage for the issuance of securities within 12 months
      of the closing of the Merger at a price below $1.00, subject to customary
      exceptions.





The
      Company had the following warrants outstanding to purchase common shares as
      of
      December 31, 2007 and 2006:





**2007**
            
            **2006**Warrants
                issued in conjunction with issuance of promissory note
            
            
            0
            
            
            500,000Warrants
                issued in conjunction with the issuance of securities
            
            
            4,520,000
            
            
            4,520,0004,520,000
            
            
            5,020,000




F-23




**JAVA
        DETOUR, INC. AND SUBSIDIARIES**
 **NOTES
        TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS**
 **DECEMBER
        31, 2007 AND 2006**




**Summary
      of Warrants Granted**


The
      following table summarizes warrants granted for the years ended December 31,
      2006 and 2007.




**Warrants**
            
            **Weighted Average**
              **Exercise Price**Balance,
                December 31, 2005
            
            
            191,254
            
            $
            3.38Exercised
            
            
            (191,254
            )
            $
            3.38Cancelled
            
            
            
            
            $
            0.00Granted
            
            
            5,020,000
            
            $
            1.86Balance,
                December 31, 2006
            
            
            5,020,000
            
            $
            1.86Exercised
            
            
            (500,000
            )
            $
            .60Cancelled
            
            
            
            
            $
            0.00Granted
            
            
            
            
            $
            0.00Balance,
                December 31, 2007
            
            
            4,520,000
            
            $
            2.00Exercisable,
                December 31, 2007
            
            
            4,520,000
            
            $
            2.00





The
      weighted average remaining contractual life of the common share purchase
      outstanding is 3.92 years at December 31, 2007.  The
      exercise prices for common share purchases outstanding at December 31, 2007
      were as follows:





**Number
                of**
              **Warrants**
            
            **Exercise**
              **Price**4,520,000
            
            $
            2.004,520,000





During
      the year ended December 31, 2006, the Company issued a total
      of 500,000 common share purchase warrants valued at $450,499 as
      additional consideration for the bridge loan from The Hunter Fund Limited of
      $500,000. The Company calculated the value of these warrants
      using the Black-Scholes model based on the following assumptions: a risk-free
      rate of 4.75%, volatility of 130%, estimated life of 5 years and a fair market
      value of $1.00 per share. The value of these warrants of $450,499 was recorded
      as deferred financing cost and was being amortized over the 2 year term of
      the
      note. Upon repayment of the note in December 2006, the remaining unamortized
      balance was expensed to interest. These warrants were exercised during the
      year
      ended December 31, 2007 under the cashless provision in exchange for 403,536
      shares of common stock.




F-24


**JAVA
          DETOUR, INC. AND SUBSIDIARIES**
 **NOTES
          TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS**
 **DECEMBER
          31, 2007 AND 2006**


**NOTE
      13 - COMMITMENTS AND CONTINGENCIES**





**Litigation**


From
      time
      to time, in the normal course of business, the Company is subject to routine
      litigation incidental to its business. Although there can be no assurances
      as to
      the ultimate disposition of any such matters, it is the opinion of management,
      based upon the information available at this time, that there are no matters,
      individually or in the aggregate, that will have a material adverse effect
      on
      the results of operations and financial condition of the Company.





**Related
      Party Transactions**


The
      Company purchases coffee from Landgrove Coffee Co., a related-party under
      ownership by a brother of the CEO and President of the Company. There is no
      on
      going commitment to purchase coffee from Landgrove and the Company can end
      its
      association with them at any time. As of December 31, 2007 the Company owes
      $46,086 for coffee purchases in 2007. The Company paid Landgrove $420,764 and
      $376,868 for the years ended December 31, 2007 and 2006 respectively. As
      of
      January 2008, the Company had commitments to purchase whole coffee
      beans at a total cost of $3.73 per pound for its espresso & French
      roast blends, $4.29 per pound for its decaffeinated blend, $4.38 per pound
      for
      its house blend, and $4.92 per pound for specialty blends. Landgrove Coffees
      currently pays JDCO Subsidiary a rebate of forty cents per pound for all
      franchisee coffee purchases from its franchisee in the Midwest. The rebates
      are
      recorded as royalty revenue in the Company’s consolidated statements of
      operations. JDCO Subsidiary, however, reserves the right to earn a profit on
      the
      sale of proprietary products of up to 20%. For its fiscal year ended December
      31, 2007 and 2006, JDCO
      Subsidiary’s revenue from franchisee purchases and leases totaled $8,999 and
      $8,373, respectively.





**Employment
      Agreements**


The
      Company has a five year employment agreement with its chief executive officer.
      Under the agreement, he is entitled to an annual base salary of $205,900 per
      year and cash bonus to be determined by the Company, and is entitled to a
      severance of up to one year base salary if he is terminated by the Company
      without cause. The agreement automatically renews for a period of one year,
      and
      each successive year thereafter, unless the Company or employee declines to
      renew by providing written notice of such decision on the other party not less
      than 60 days before the expiration date. The agreement allows for annual cost
      of
      living increases based on the consumer price index, San Francisco, California.
      During the fourth quarter of 2007, the executive verbally agreed to reduce
      base
      salary to $180,000 per year until further notice.





The
      Company has a five year employment agreement with its chief financial officer.
      Under the agreement, he is entitled to an annual base salary of $199,800 per
      year and cash bonus to be determined by the Company, and is entitled to a
      severance of up to one year base salary if he is terminated by the Company
      without cause. The agreement automatically renews for a period of one year,
      and
      each successive year thereafter, unless the Company or employee declines to
      renew by providing written notice of such decision on the other party not less
      than 60 days before the expiration date. The agreement allows for annual cost
      of
      living increases based on the consumer price index, San Francisco, California.
      During the fourth quarter of 2007, the executive verbally agreed to reduce
      base
      salary to $180,000 per year until further notice.





The
      Company has a one year employment agreement with an advisor. Under the
      agreement, he is entitled to an annual base salary of $120,000 per year and
      cash
      bonus to be determined by the Company, and is entitled to a severance of
      eighteen months base salary if he is terminated by the Company without cause.
      The agreement automatically renews for a period of one year, and each successive
      year thereafter, unless the Company or employee declines to renew by providing
      written notice of such decision on the other party not less than 60 days before
      the expiration date. The agreement allows for annual cost of living increases
      based on the consumer price index, San Francisco, California.





The
      Company has a two year employment agreement with its director of business
      development. Under the agreement, he is entitled to an annual base salary of
      $120,000 per year and cash bonus to be determined by the Company and is entitled
      to a severance of up to six months base salary if he is terminated by the
      Company without cause. The agreement automatically renews for a period of one
      year, and each successive year thereafter, unless the Company or employee
      declines to renew by providing written notice of such decision on the other
      party not less than 60 days before the expiration date. The agreement allows
      for
      annual cost of living increases based on the consumer price index, Charlotte,
      North Carolina.




F-25




**JAVA
          DETOUR, INC. AND SUBSIDIARIES**
 **NOTES
          TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS**
 **DECEMBER
          31, 2007 AND 2006**


Future
      commitments under employment agreements are as follows:





**Base**2008
            
            $
            550,0002009
            
            
            360,0002010
            
            
            360,0002011
            
            
            330,000Thereafter
            
            
            0




**NOTE
      14 – STORE ACQUISITION**





On
      November 9, 2007, the Company purchased the right, title and interest in the
      assets related to a coffee retail location in Northern California. The purchase
      price for the Assets was $650,000, which comprised of (i) $150,000 in cash,
      (ii)
      $475,000 payable pursuant to a promissory note accruing interest at a fixed
      rate
      of 6% per annum and maturing on January 1, 2013, and (iii) 12,500 shares of
      the
      Company’s common stock valued at $2.00 per share. The fair value of the assets
      acquired and allocation of the purchase price is summarized as
      follows:





Inventory
            
            $
            6,000Building
            
            $
            175,000Property
                and Equipment
            
            $
            40,000Goodwill
            
            $
            429,000Purchase
                price
            
            $
            650,000





**NOTE
      15 – FRANCHISE AGREEMENTS**





During
      2007 and through March 31, 2008 the Company entered into franchise, area
      development and master license agreements which granted rights to sell or open
      stores in the cities of Livermore, California, and Tracy, California, the
      counties of Broward and Gainesville in Florida, the States of Colorado, New
      York
      and New Jersey, and the country of China. The aggregate acquisition price of
      these territories was $946,000, of which $528,000 was received as of December
      31, 2007. No revenue was recorded on the received funds for the twelve months
      ended December 31, 2007. Of the $528,000 received, $142,500 was recorded as
      deferred revenue, current portion and $385,500 was recorded as deferred revenue,
      long term. The Company has also agreed to issue an aggregate of 300,000 warrants
      of the Company’s common stock valued at $1.00 per share pending the successful
      completion of specific terms in certain of these agreements. As of December
      31,
      2007, no stores have been opened under these agreements.





**NOTE
      16 – JAVA UNIVERSE AGREEMENT**





On
      March
      30, 2007 the Company entered into a Master License Agreement with Java Universe,
      LLC, a Nevada limited liability company, for the sale of rights to sell Java
      Detour® franchises throughout the Middle East and parts of North Africa. The
      aggregate purchase price is $1.0 million, of which $100,000 was received as
      a
      deposit on February 5, 2007 and $400,000 was received during the three months
      ended June 30, 2007. The remaining balance of $500,000 will be receivable either
      when the Company registers as a franchisor in the Middle East and North Africa
      marketplaces or six months from the execution of the Master License Agreement,
      whichever occurs first. The Company has yet to receive the remaining $500,000
      payment. On October 16, 2007, the Company entered into an amendment to the
      Master License Agreement, pursuant to which the Company granted Java Universe
      an
      extension until October 31, 2007 to tender the remaining $500,000 payment.
      The initial $500,000 was recorded as deferred revenue. As an incentive to enter
      into the Master License Agreement, the Company originally agreed to grant
      600,000 options to purchase common shares at $1.00 per share to persons as
      designated by Java Universe, LLC. The options were initially to be granted
      under
      the 2006 Plan, of which all the shares approved for issuance under the 2006
      Plan
      have been registered pursuant to an S-8 registration statement. It has been
      determined that the options do not qualify for issuance pursuant to the 2006
      Plan and the S-8 registration. Instead, the Company intends to issue to Java
      Universe, LLC another form of derivative security. The Company has not
      determined what derivative security will be issued to Java Universe; therefore
      for accounting purposes the Company determined the measurement date has not
      occurred and no value has been recorded for the derivative security that will
      be
      issued. The Company has a commitment to issue Java Universe these derivative
      securities and believes the terms and number of such derivative securities
      will
      be similar to what was originally agreed upon in the Master License Agreement.
      Once the Company has determined what derivative security will be issued and
      all
      other terms are agreed upon by both parties, the value of the derivative
      security will be recorded as a reduction to unearned revenue and they will
      be
      subsequently recorded as a reduction to license fee revenues when they are
      earned. Neither the previously discussed options nor any other derivative
      security has been issued by the Company pursuant to the Master License
      Agreement. The Company will recognize the revenue and the value of the
      derivative security that will be issued as a sales incentive upon the Company’s
      completion of all obligations to Java Universe, which includes the granting
      of
      the derivative security. Pursuant to the amendment referenced above, the Company
      has determined the derivative security to be issued to Java Universe will be
      a
      warrant to purchase 600,000 common shares at $1.00 per share, such warrant
      to be
      issued upon the Company’s receipt of the remaining $500,000 payment from Java
      Universe.




F-26




**JAVA
        DETOUR, INC. AND SUBSIDIARIES**
 **NOTES
        TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS**
 **DECEMBER
        31, 2007 AND 2006**




On
      December 31, 2007, the Company entered into an Option
      to
      Extend (the “Option to Extend”) with Java Universe, its master franchisee in the
      Middle East and Southern California, amending the terms of its Master Franchise
      Agreement dated March 31, 2007, as amended. Pursuant
      to the Option to Extend, the Company granted Java Universe an option to extend
      (the “Option”) until June 30, 2008 to tender a remaining payment of $500,000
      (the “Payment”) previously due and payable on or before October 31, 2007;
      provided, that Java Universe was required to pay the Company $50,000 before
      December 31, 2007 (payment received and recorded as deferred revenue as of
      December 31, 2007) and is required to pay an additional $50,000 to the Company
      on or before June 30, 2008 in order to exercise the Option. Pursuant to the
      terms of the Option to Extend, the Company agreed to credit any payments
      received from Java Universe in connection with the Option towards amounts owed
      under the Payment. Additionally, the Company agreed to grant a warrant to Java
      Universe to purchase an additional 250,000 shares of the Company’s common stock
      at $1.00 per share upon the Company’s receipt of the Payment as a result of the
      cost overruns of the Santa Monica/Robertson franchise location of Java Universe.
      If Java Universe is successful in selling the Dubai and Qatar territories,
      the
      Company will grant them an additional 150,000 warrants. None of the above
      warrants have been granted as of December 31, 2007.





Subsequent
      to December 31, 2007, the Company, through its wholly-owned subsidiary JDCO,
      purchased from Java Universe its right, title and interest in the assets related
      to a coffee retail location in West Hollywood, California (the “Assets”),
      pursuant to an Asset Purchase Agreement dated April 7, 2008 by and among JDCO,
      Java Universe, the Company, Elie Samaha and Joseph Merhi (the “Purchase
      Agreement”). The purchase price for the Assets was $1,450,000 which was paid
      with 1,450,000 shares of the Company’s common stock valued at $1.00 per share.
      As a condition to closing of the Purchase Agreement, the Company also entered
      into an Agency, Co-Occupancy and Operating Agreement with Demitri Samaha, Samaha
      Foods and Java Universe for the lease, occupancy and use of the West Hollywood
      store premises. Pursuant to the terms of the Operating Agreement, certain events
      may trigger the relinquishment of a portion of the common stock issued to Java
      Universe under the Purchase Agreement.





Subsequent
      to December 31, 2007, the Company agreed to terminate its Middle East Franchise
      and Southern California Franchise agreements with Java Universe. Pursuant to
      a Termination,
      Waiver and Mutual Release (“Termination Agreement”) dated April 7, 2008, by and
      among the Company, JDCO Subsidiary and Java Universe, the Company
      terminated such agreements in exchange for 550,000 shares of the Company’s
      common stock valued at $1.00 per share. The
      Agreement also included lock-up restrictions on the sale of the common shares
      for 18 months from the signing of the Termination Agreement.





F-27


**JAVA
          DETOUR, INC. AND SUBSIDIARIES**
 **NOTES
          TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS**
 **DECEMBER
          31, 2007 AND 2006**


**NOTE
      17 – JAVA NEVADA AGREEMENT**





On
      August
      2, 2007, the Company, through JDCO, sold to Java Nevada, LLC (“Java Nevada”) its
      right, title and interest in the assets related to its four company-owned
      gourmet coffee retail locations in the State of Nevada (the “Assets”), pursuant
      to an Asset Purchase Agreement dated July 11, 2007 by and between JDCO and
      Java
      Nevada (the “Purchase Agreement”). The purchase price for the Assets was (i)
      $200,000 in cash, (ii) $900,000 payable pursuant to a promissory note accruing
      interest at a fixed rate of 8% per annum and maturing on August 2, 2012, and
      (iii) the assumption by Java Nevada of certain liabilities related to the
      Assets, subject to limited exceptions set forth in the Purchase Agreement.
      Pursuant to the Purchase Agreement, the Company and JDCO also agreed to cause
      JDCO Subsidiary to relinquish its rights to open additional company-owned
      gourmet coffee retail locations in the State of Nevada as granted under a Master
      Franchise Agreement dated as of December 6, 2006 between JDCO Subsidiary and
      Java Nevada.




The
      Purchase Agreement included customary, covenants, representations and warranties
      by the parties, including, among others, representations by JDCO regarding
      ownership of the Assets. Further, the principals of Java Nevada agreed to
      guaranty the payment obligations of Java Nevada under the Purchase
      Agreement.





The
      Purchase Agreement was amended to state the Assets sold would be free and clear
      of all liens, security interest, and encumbrances of any kind or nature. Such
      Assets are subject to capital leases and the Company agreed to remain obligated
      to make any and all payments under such leases from and after the closing and
      that all amounts due under the leases shall be paid off on or prior to the
      maturity date of the promissory note. The promissory note was amended to state
      that Java Nevada is entitled to offset on a dollar for dollar basis any amounts
      it pays on the Company’s behalf with respect to equipment leases against any
      amounts due to the Company under the terms of such note.





The
      Purchase Agreement was further amended to state the Company shall not present
      gift card promotions sold by the Company to buyer for reimbursement for those
      promotions sold on or prior to July 31, 2007. On or prior to August 15, 2007
      the
      Company agrees to pay buyer $26,650. Gift cards sold by the Company on or after
      August 1, 2007 and redeemed within Java Nevada’s territory shall result in
      dollar for dollar reimbursement without discount, unless mutually agreed upon,
      in writing, by and between Java Nevada and the Company.





As
      a
      result of the sale, the Company recognized a loss on the sale of the assets
      for
      the Nevada stores in the amount of $378,377 during the year ended December
      31,
      2007.





On
      January 3, 2008, Java Nevada turned over operations of its Nevada stores back
      to
      the Company. The Company is currently operating these stores as it negotiates
      conditions for an amendment of its Purchase Agreement with Java Nevada and
      a
      return of the Nevada Franchise area back to the Company. As a part of this
      process, the Company has solicited offers for the purchase of the Nevada stores
      from interested third parties. On April 10, 2008 the Company entered into a
      term
      sheet with Java Nevada for the purchase of the Nevada stores by the Company,
      subject to the parties executing and closing on a definitive resale
      agreement.





F-28




**ITEM
      8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURE**





None.





**ITEM
      8A. CONTROLS AND PROCEDURES**





**Disclosure
      Controls and Procedures**





We
      maintain disclosure controls and procedures (as defined in Rule 13a-15(e) of
      the
      Exchange Act) designed to provide reasonable assurance that the information
      required to be disclosed in our reports under the Exchange Act is processed,
      recorded, summarized and reported within the time periods specified in the
      SEC’s
      rules and forms and that such information is accumulated and communicated to
      our
      management, including our Chief Executive Officer and Chief Financial Officer,
      as appropriate, to allow for timely decisions regarding required disclosure.
      In
      designing and evaluating the disclosure controls and procedures, our management
      recognizes that any controls and procedures, no matter how well designed and
      operated, can provide only reasonable assurance of achieving the desired control
      objectives, and management is required to apply its judgment in evaluating
      the
      cost-benefit relationship of possible controls and procedures.





As
      required by SEC Rule 13a-15(b), we carried out an evaluation, under the
      supervision and with the participation of our management, including our Chief
      Executive Officer and Chief Financial Officer, of the effectiveness of the
      design and operation of our disclosure controls and procedures as of the end
      of
      the period covered by this Annual Report . Based on this evaluation, Michael
      Binninger, our Chief Executive Officer, and Ronald Sands, our Chief Financial
      Officer, concluded that these disclosure controls and procedures were effective
      at the reasonable assurance level as of December 31, 2007.





**Management’s
      Annual Report on Internal Control over Financial Reporting**





Our
      management is responsible for establishing and maintaining adequate internal
      control over financial reporting. Internal control over financial reporting,
      as
      defined in Exchange Act Rule 13a-15(f), is a process designed by, or under
      the supervision of, our principal executive and principal financial officers
      and
      effected by our Board of Directors, management and other personnel, to provide
      reasonable assurance regarding the reliability of financial reporting and the
      preparation of financial statements for external purposes in accordance with
      generally accepted accounting principles and includes those policies and
      procedures that:





·
            Pertain
                to the maintenance of records that in reasonable detail accurately
                and
                fairly reflect the transactions and dispositions of our
                assets;


·
            Provide
                reasonable assurance that transactions are recorded as necessary
                to permit
                preparation of financial statements in accordance with generally
                accepted
                accounting principles, and that our receipts and expenditures are
                being
                made only in accordance with authorizations of our management and
                directors; and


·
            Provide
                reasonable assurance regarding prevention or timely detection of
                unauthorized acquisition, use of disposition of our assets that could
                have
                a material effect on the financial
                statements.





Because
      of its inherent limitations, internal control over financial reporting may
      not
      prevent or detect misstatements. Projections of any evaluation of effectiveness
      to future periods are subject to the risk that controls may become inadequate
      because of changes in conditions, or that the degree of compliance with the
      policies or procedures may deteriorate. All internal control systems, no matter
      how well designed, have inherent limitations. Therefore, even those systems
      determined to be effective can provide only reasonable assurance with respect
      to
      financial statement preparation and presentation.




Our
      management assessed the effectiveness of our internal control over financial
      reporting as of December 31, 2007. In making this assessment, our
      management used the criteria set forth by the Committee of Sponsoring
      Organizations of the Treadway Commission (COSO) in Internal Control-Integrated
      Framework. Based on this assessment, management believes that as of
      December 31, 2007, our internal control over financial reporting is
      effective based on those criteria.




26




This
      Annual Report does not include an attestation report of our registered public
      accounting firm regarding internal control over financial reporting.
      Management’s report was not subject to attestation by the company’s registered
      public accounting firm pursuant to temporary rules of the SEC to provide only
      management’s report in this annual report.





**Changes
      in internal control over financial reporting**





There
      have been no changes in our internal control over financial reporting identified
      in connection with the evaluation required by Rule 13a-15(d) or Rule 15d-15(d)
      under the Exchange Act that occurred during the quarter ended December 31,
      2007
      that have materially affected, or are reasonably likely to materially affect,
      our internal control over financial reporting.





**ITEM
      8B. OTHER INFORMATION**





On
      December 31, 2007, we entered into an Option to Extend (the “Option to Extend”)
      with Java Universe, our master franchisee in the Middle East and Southern
      California, amending the terms of its Master Franchise Agreement dated March
      31,
      2007, as amended. Pursuant to the Option to Extend, we granted Java Universe
      an
      option to extend (the “Option”) until June 30, 2008 to tender a remaining
      payment of $500,000 (the “Payment”) previously due and payable on or before
      October 31, 2007; provided, that Java Universe was required to pay us $50,000
      before December 31, 2007 and is required to pay an additional $50,000 to us
      on
      or before June 30, 2008 in order to exercise the Option. Pursuant to the terms
      of the Option to Extend, we agreed to credit any payments received from Java
      Universe in connection with the Option towards amounts owed under the Payment.
      Additionally, we agreed to issue a warrant to Java Universe to purchase an
      additional 250,000 shares of the our common stock at $1.00 per share upon the
      receipt of the Payment from Java Universe.





The
      foregoing description of the Option to Extend is qualified in its entirety
      by
      the full text of the Option to Extend, which is filed as Exhibit 10.19 to this
      Annual Report and incorporated by reference herein.





**PART
      III**





**ITEM
      9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS AND CORPORATE
      GOVERNANCE; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE
      ACT**





As
      of
      March 31, 2008, the following individuals constitute our Board of Directors
      and
      executive management:





**Name**
            
            **Age**
            
            **Positions**Michael
                Binninger
            
            41
            
            Chief
                Executive Officer and Chairman of the Board of
                DirectorsRonald
                Sands
            
            42
            
            Chief
                Financial Officer, Secretary and DirectorSteven
                Binninger
            
            40
            
            Chief
                Operating Officer, President and
                Director





**Michael
      Binninger** has been
      Chief Executive Officer and Chairman of the Board of Directors since inception.
      Mr. Binninger graduated from the University of California Berkeley. His direct
      responsibilities include overall company strategic planning, company expansion,
      real estate acquisition and brand development. He oversees all site selection,
      lease and purchase negotiations, and construction of new Java Detour® locations.
      In 2003, Mr. Binninger led the creation of our joint venture agreement with
      First Street Ventures under which First Street Ventures built out six new
      stores. More recently he led the negotiations that resulted in Pavilion
      Development signing on to build 30 stores over the next 36 months in Texas,
      North Carolina and Florida.




27




**Steven
      Binninger** has been
      Chief Operating Officer, President and Director since 2002. Mr. Binninger
      graduated with honors from the University of Idaho Business School. In addition
      to overseeing all store operations and quality control, he is also responsible
      for new store set-up and operational design, equipment selection and layout.
      Mr.
      Binninger develops all proprietary products and drink recipes. He directed
      the
      development of our company’s proprietary chocolate syrups to improve product
      quality and streamline beverage operations, and laid the groundwork for our
      company’s wholesale business. He also oversees all aspects of our coffee
      roasting operations.





**Ronald
      Sands** ,
      has
      been our Chief Financial Officer and Secretary since 2002. Mr. Sands graduated
      with honors from Menlo College in Atherton, California in 1991 with a B.S.
      in
      Business Management. He is responsible for identifying and utilizing all capital
      resources, in addition to directing financing and investing activities. Mr.
      Sands oversees all product pricing, vendor negotiations and daily accounting
      procedures for our company. Prior to joining us, Mr. Sands was employed by
      Charles Schwab and was named national Manager of the Year for employee
      development in 2000.





**Advisory
      Board**





In
      addition to the directors and executive officers listed above, the following
      individuals make significant contributions to our company as members of our
      advisory board.





**Andrew
      Cherng** as
      founder and director of Panda Express, continues to head the privately held
      company, Panda Restaurant Group. The Panda Restaurant Group operates a
      successful portfolio of restaurants including Panda Express, Panda Inn, and
      Hibachi-San. The Panda Restaurant Group is one of the largest family-owned
      restaurant chains in the world and has over 800 restaurants covering 34 states,
      Puerto Rico and Japan





**Paul
      F.  Klapper** is
      currently serving as Manager for three private equity funds and has assisted
      in
      the start-up of many new businesses including one major retail coffee
      chain.  Mr. Klapper was responsible for the start-up funding and initial
      expansion capital of Pasqua Coffees of San Francisco. After receiving Mr.
      Klapper’s expansion funding, Pasqua later became and acquisition candidate and
      was eventually bought by Starbucks Coffee. Mr. Klapper served as a director
      and
      shareholder of Yorkshire Global Restaurants, which owned the brand names of
      A&W Restaurants, Inc. and Long John Silver's Restaurants, Inc. Mr. Klapper
      has been involved with a significant number of properties in San Francisco,
      Boston, Houston and other cities.  The most recent development was a Class
      A high rise office building (approximately 500,000 square feet) in downtown
      Honolulu. Most recently, Mr. Klapper and his affiliated companies, PFK
      Acquisition Company I, LLC and PFK Acquisition Group II, LLC have been involved
      as principals and advisors for the purchase of approximately $500 million in
      institutionally owned properties and companies.





**Family
      Relationships**





Michael
      Binninger and Steven Binninger are brothers. Other than the foregoing, there
      are
      no family relationships among the individuals comprising our Board of Directors,
      management or other key personnel.





**Committees
      of the Board of Directors**





Our
      Board
      of Directors does not maintain a separate audit, nominating or compensation
      committee. Functions customarily performed by such committees are performed
      by
      our Board of Directors as a whole. We are not required to maintain such
      committees under the rules applicable to companies that do not have securities
      listed or quoted on a national securities exchange or national quotation system.
      We intend to charter audit, nominating and compensation committees in the near
      future.





**Director
      Compensation**





We
      did
      not and we do not currently have an established policy to provide compensation
      to members of our Board of Directors for their services in that capacity. We
      intend to develop such a policy in the near future.




28




**Section
      16(a) Beneficial Ownership Reporting Compliance.**





Our
      securities are currently registered under Section 12 of the Securities Exchange
      Act of 1934, as amended. As a result, and pursuant to Rule 16a-2, our directors
      and officers and holders of 10% or more of our common stock are currently
      required to file statements of beneficial ownership with regards to their
      ownership of equity securities under Sections 13 or 16 of the Exchange Act.
      O ur
      current officers, directors and beneficial holders of 10% or more of our equity
      securities became subject to such requirement and to date, b ased
      solely upon a review of Forms 3, 4 and 5 and any amendments thereto furnished
      to
      us during our most recent fiscal year, none of our officers or directors has
      failed to file on a timely basis, as disclosed in the above forms, reports
      required by Section 16(a) of the Exchange Act during the most recent fiscal
      year. However, Hunter World Markets, Inc. a holder of 10% or more of our common
      stock, did not file its Form 3 reflecting its acquisition of such an equity
      position in our company.





**Code
      of Ethics.**





As
      of
      March 27, 2007, our Board of Directors unanimously approved a Code of Business
      Conduct and Ethics (the “Code of Ethics”) applicable to all directors, officers
      and executive employees, including our Chief Executive Officer and Chief
      Financial Officer. The purpose of the Code of Ethics is to promote honest and
      ethical conduct. The Code of Ethics is filed as Exhibit 14.1 to this Annual
      Report, and is also available in print, without charge, upon written or
      telephonic request to our headquarters. Any amendments to or waivers of the
      Code
      of Ethics will be promptly posted on our website at www.javadetour.com or in a
      report on Form 8-K, as required by applicable laws.





**ITEM
      10. EXECUTIVE COMPENSATION**





**Summary
      Compensation Table**





The
      following table summarizes all compensation that we have recorded in each of
      the
      last two completed fiscal years for our principal executive officer, our two
      most highly compensated executive officers other than our principal executive
      officer whose annual compensation exceeded $100,000, and up to two additional
      individuals for whom disclosure would have been made in this table but for
      the
      fact that the individual was not serving as an executive officer of our company
      at December 31, 2007 (collectively, the “Named Executive Officers”).


Name and Principal Position
              
              Year
              
              Salary
              
              Bonus
              
              Option Awards
                (1)
              
              All Other
                Compensation(2)
              
              TotalMichael
                  BinningerChief
                  Executive Officer and
              
              
              2007
              
              $
              184,948
              
              $
              8,333
              
              $
              36,780
              
              $
              14,720
              
              $
              244,781Chairman
                  of the Board
              
              
              2006
              
              
              95,625
              
              
              5,000
              
              
              3,065
              
              
              13,808
              
              
              117,498Steven
                  BinningerChief
                  Operating Officer and
              
              
              2007
              
              $
              166,508
              
              $
              8,333
              
              $
              36,780
              
              $
              15,383
              
              $
              227,004President
              
              
              2006
              
              
              64,472
              
              
              5,000
              
              
              3,065
              
              
              12,093
              
              
              84,630Ronald
                  Sands
              
              
              2007
              
              $
              194,167
              
              $
              8,333
              
              $
              36,780
              
              $
              22,493
              
              $
              261,773Chief
                  Financial
                  Officer
              
              
              2006
              
              
              56,359
              
              
              5,000
              
              
              3,065
              
              
              19,855
              
              
              84,279


(1) Represents
      the dollar amount recognized for financial reporting purposes for the fiscal
      year ended December 31, 2007, in accordance with SFAS 123(R)
      (disregarding estimates of forfeitures). The total grant date fair value of
      these options was $183,901 each and the unvested portion is $144,056. See
      Note 12 to the Financial Statements beginning on page F-1 for a discussion
      of the relevant assumptions used in calculating these amounts.


(2) Relates
      to annual car allowance, life and health insurance premiums





29




**Employment
      Agreements**





Each
      of
      Michael Binninger, Ronald Sands and Steven Binninger are parties to five-year
      employment agreements with JDCO expiring in November 2011 unless renewed upon
      mutual written consent, further to which each employee is paid an annual salary
      of $205,900, $199,800 and 199,800, respectively, although Steven Binninger
      has
      been on a personal leave of absence since December 2007. Each employment
      agreement also contains a non-competition provision and provides for severance
      compensation in the event of termination without cause or upon a change of
      control. In the event that an executive officer of our company is terminated
      without cause or upon a change of control, such executive shall be entitled
      to
      receive as severance compensation his base salary at the rate payable at the
      time of such termination for a period of 12 months from the date of termination.
      Such executive shall also be entitled to accelerated vesting of any awards
      granted to the executive under our Equity Incentive Plan to the extent provided
      in the stock option agreement entered into at the time of such grant. Further,
      such executive shall be entitled to accelerated vesting of awards granted to
      the
      executive under our Equity Incentive Plan upon a change of control. In addition,
      we shall transfer to such executive all insurance policies maintained on the
      life or disability of the executive at no cost to the executive, to the extent
      that such policies permit transfer





**Option
      Grants in 2007**





There
      were no option grants to Named Executive Officers in 2007.





**Outstanding
      Equity Awards at Fiscal Year-end**





As
      of the
      year ended December 31, 2007, the following Named Executive Officers had the
      following unexercised options, stock that has not vested, and equity incentive
      plan awards:





Name and Principal Position
            
            Number of Securities
              Underlying Unexercised
              Options (#) Exercisable (1)
            
            Number of Securities
              Underlying Unexercised
              Options (#) Unexercisable
              (1)
            
            Option Exercise
              Price
            
            Option
              Expiration DateMichael
                BinningerChief
                Executive Officer
                and
              Chairman
                of the Board
            
            
            53,264
            
            
            159,791
            
            $
            1.10
            
            
            11/30/2016Steven
                Binninger(2)Chief
                Operating Officer, President
              and
                Director
            
            
            53,264
            
            
            159,791
            
            $
            1.10
            
            
            11/30/2016Ronald
                SandsChief
                Financial Officer,
                Secretary
              and
                Director
            
            
            53,264
            
            
            159,791
            
            $
            1.10
            
            
            11/30/2016







(1)  Option
      awards were granted on November 30, 2006; 25% vested on November 30, 2007 with
      the balance vesting in 25% increments on each anniversary
      thereafter.





**Director
      Compensation**





Name
            
            Fees
              Earned or
              Paid in
              Cash
              ($)
            
            Stock
              Awards
              ($)
            
            Option
              Awards
              ($)
            
            Non-Equity
              Incentive Plan
              Compensation
              ($)
            
            Change in
              Pension
              Value and
              Nonqualified
              Deferred
              Compensation
              Earnings
            
            All Other
              Compensation
              ($)
            
            Total
              ($)All
                Directors (total of 3 persons)
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -




30




For
      the
      year ended December 31, 2007, none of the members of our Board of Directors
      received compensation for his service as a director. We do not currently have
      an
      established policy to provide compensation to members of our Board of Directors
      for their services in that capacity. We intend to develop such a policy in
      the
      near future.





**Supplemental
      Executive Retirement Plan**





On
      December 3, 2007, the Board of Directors elected to terminate the supplemental
      executive retirement plan through New York Life Executive Benefits, LLC (the
      “Retirement Plan”) that was previously adopted on October 9, 2006. Under the
      Retirement Plan, our participating employees (as designated by our Board of
      Directors) had the option to elect to defer up to 100% or their salary and
      up to
      100% of their bonus each year; such election to be made by December 31 of the
      preceding year in which the salary and bonus were earned. The first year for
      which deferrals were made was the 2007 plan year. Any deferral made by a
      participating employee was only permitted to the extent the election is
      implemented in a manner consistent with 409A of the Internal Revenue Code,
      as
      amended. The balance in a participating employee’s account shall be distributed
      in a lump-sum in the event of such employee’s death or Disability (as defined in
      the Retirement Plan). Pursuant to the terms of the Retirement Plan, in 2007
      the
      initially contributed $25,000 was refunded to us in connection with the
      termination of the Retirement Plan.





**Indemnification
      of Directors And Executive Officers And Limitations of
      Liability**





Under
      Section 145 of the General Corporation Law of the State of Delaware, we can
      indemnify our directors and officers against liabilities they may incur in
      such
      capacities, including liabilities under the Securities Act of 1933, as amended
      (the “Securities Act”). Our certificate of incorporation provides that, pursuant
      to Delaware law, our directors shall not be liable for monetary damages for
      breach of the directors’ fiduciary duty of care to our company and our
      stockholders. This provision in the certificate of incorporation does not
      eliminate the duty of care, and in appropriate circumstances equitable remedies
      such as injunctive or other forms of nonmonetary relief will remain available
      under Delaware law. In addition, each director will continue to be subject
      to
      liability for breach of the director’s duty of loyalty to us or our
      stockholders, for acts or omissions not in good faith or involving intentional
      misconduct or knowing violations of the law, for actions leading to improper
      personal benefit to the director, and for payment of dividends or approval
      of
      stock repurchases or redemptions that are unlawful under Delaware law. The
      provision also does not affect a director’s responsibilities under any other
      law, such as the federal securities laws or state or federal environmental
      laws.





Our
      bylaws provide for the indemnification of our directors to the fullest extent
      permitted by the Delaware General Corporation Law. Our bylaws further provide
      that our Board of Directors has discretion to indemnify our officers and other
      employees. We are required to advance, prior to the final disposition of any
      proceeding, promptly on request, all expenses incurred by any director or
      executive officer in connection with that proceeding on receipt of an
      undertaking by or on behalf of that director or executive officer to repay
      those
      amounts if it should be determined ultimately that he or she is not entitled
      to
      be indemnified under the bylaws or otherwise. We are not, however, required
      to
      advance any expenses in connection with any proceeding if a determination is
      reasonably and promptly made by our Board of Directors by a majority vote of
      a
      quorum of disinterested Board members that (i) the party seeking an advance
      acted in bad faith or deliberately breached his or her duty to us or our
      stockholders and (ii) as a result of such actions by the party seeking an
      advance, it is more likely than not that it will ultimately be determined that
      such party is not entitled to indemnification pursuant to the applicable
      sections of our bylaws.





We
      have
      been advised that in the opinion of the Board of Directors, insofar as
      indemnification for liabilities arising under the Securities Act may be
      permitted to our directors, officers and controlling persons pursuant to the
      foregoing provisions, or otherwise, such indemnification is against public
      policy as expressed in the Securities Act and is therefore unenforceable. In
      the
      event a claim for indemnification against such liabilities (other than the
      our
      payment of expenses incurred or paid by our director, officer or controlling
      person in the successful defense of any action, suit or proceeding) is asserted
      by such director, officer or controlling person in connection with the
      securities being registered, we will, unless in the opinion of our counsel
      the
      matter has been settled by controlling precedent, submit to a court of
      appropriate jurisdiction the question of whether such indemnification by us
      is
      against public policy as expressed in the Securities Act and will be governed
      by
      the final adjudication of such issue.




31


We
      may
      enter into indemnification agreements with each of our directors and officers
      that are, in some cases, broader than the specific indemnification provisions
      permitted by Delaware law, and that may provide additional procedural
      protection. We have not entered into any indemnification agreements with our
      directors or officers, but may choose to do so in the future. Such
      indemnification agreements may require us, among other things, to:





·
            indemnify
                officers and directors against certain liabilities that may arise
                because
                of their status as officers or directors;


·
            advance
                expenses, as incurred, to officers and directors in connection with
                a
                legal proceeding, subject to limited exceptions; or


·
            obtain
                directors’ and officers’ insurance.





At
      present, there is no pending litigation or proceeding involving any of our
      directors, officers or employees in which indemnification is sought, nor are
      we
      aware of any threatened litigation that may result in claims for
      indemnification.





**ITEM
      11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
      STOCKHOLDER MATTERS**





Beneficial
      ownership is determined in accordance with the rules of the SEC. In computing
      the number of shares beneficially owned by a person and the percentage of
      ownership of that person, shares of common stock subject to options and warrants
      held by that person that are currently exercisable or become exercisable within
      60 days of the date hereof are deemed outstanding even if they have not actually
      been exercised. Those shares, however, are not deemed outstanding for the
      purpose of computing the percentage ownership of any other person.





The
      following table sets forth as of March 31, 2008, certain information with
      respect to beneficial ownership of our common stock immediately after the
      closing of the Merger and Private Placement, based on 28,743,823 issued and
      outstanding shares of common stock, by:





·
            Each
                person known to be the beneficial owner of 5% or more of our outstanding
                common stock;


·
            Each
                executive officer;


·
            Each
                director; and


·
            All
                of the executive officers and directors as a
                group.




32




Unless
      otherwise indicated, the persons and entities named in the table have sole
      voting and sole investment power with respect to the shares set forth opposite
      the stockholder’s name, subject to community property laws, where applicable.
      Unless otherwise indicated, the address of each stockholder listed in the table
      is c/o Java Detour, Inc., 1550 Bryant Street, Suite 500, San Francisco,
      California, 94103.





**Name and Address of**
              **Beneficial Owner**
            
            **Title**
            
            **Beneficially**
              **Owned**
              **Post-Merger**
            
            **Percent of Class*****Directors
                and Officers:***Michael
                Binninger
            
            Chief
              Executive Officer and Chairman of the Board of Directors
            
            
            3,527,729
            (1)
            
            12.3
            %Steven
                Binninger
            
            Chief
              Operating Officer, President and Director
            
            
            3,527,729
            (2)
            
            12.3
            %Ronald
                Sands
            
            Chief
              Financial Officer, Secretary and Director
            
            
            2,027,727
            (3)
            
            7.0
            %All
                executive officers and directors asa
                group (3 persons)
            
            
            
            
            
            9,083,185
            
            
            31.5
            %***Five
                Percent Shareholders:***Absolute
                Return Europe Fund
              c/o
                Hunter World Markets, Inc.
              9300
                Wilshire Blvd. Penthouse Suite
              Beverly
                Hills, CA 90212
            
            
            
            
            
            4,375,000
            (4)
            
            14.8
            %Hunter
                World Markets, Inc.
              9300
                Wilshire Blvd. Penthouse Suite
              Beverly
                Hills, CA 90212
            
            
            
            
            
            4,418,403
            (5)
            
            14.1
            %European
                Catalyst Fund
              c/o
                Hunter World Markets, Inc.
              9300
                Wilshire Blvd. Penthouse Suite
              Beverly
                Hills, CA 90212
            
            
            
            
            
            3,125,000
            (6)
            
            10.6
            %Absolute
                Octane Fund
              c/o
                Hunter World Markets, Inc.
              9300
                Wilshire Blvd. Penthouse Suite
              Beverly
                Hills, CA 90212
            
            
            
            
            
            2,500,000
            (7)
            
            8.5
            %Absolute
                German Fund
              c/o
                Hunter World Markets, Inc.
              9300
                Wilshire Blvd. Penthouse Suite
              Beverly
                Hills, CA 90212
            
            
            
            
            
            1,875,000
            (8)
            
            6.4
            %Paul
                F. Klapper
              160
                Spear Street, Suite #230
              San
                Francisco, CA 94105
            
            
            
            
            
            1,647,613
            (9)
            
            5.7
            %







(1)
      This
      amount includes (i) 3,474,465 shares of common stock owned by Michael Binninger
      and (ii) 53,264 shares of common stock issuable to Mr. Binninger upon exercise
      of options vested as of March 31, 2008, or within 60 days
      thereafter.




33




(2)
      This
      amount includes (i) 3,474,465 shares of common stock owned by Steven Binninger
      and (ii) 53,264 shares of common stock issuable to Mr. Binninger upon exercise
      of options vested as of March 31, 2008, or within 60 days
      thereafter.





(3)
      This
      amount includes (i) 1,974,463 shares of common stock owned by Ronald Sands
      and
      (ii) 53,264 shares of common stock issuable to Mr. Sands upon exercise of
      options vested as of March 31, 2008, or within 60 days thereafter.





(4) As
      Chief
      Investment Officer and control person of Absolute Return Europe Fund, Florian
      Homm may be deemed to have voting and investment powers for the shares held
      by
      the foregoing funds. Mr. Homm disclaims beneficial ownership of the shares
      held
      by foregoing funds except to the extent of his proportionate pecuniary interest
      therein.





(5) This
      amount includes (i) 1,918,403 shares of our common stock owned by Hunter World
      Markets, Inc. (“Hunter”) and its affiliates and (ii) warrants issued to Hunter
      currently exercisable into 2,500,000 shares of our common stock. Todd Ficeto
      is
      President, Chief Executive Officer, and control person of Hunter and may be
      deemed to have voting and investment power over the shares held by Hunter.
      Mr.
      Ficeto disclaims beneficial ownership of the shares held by Hunter except to
      the
      extent of his pecuniary interest therein.




(6)
      As
      control person of European Catalyst Fund, Peter Irblad may be deemed to have
      voting and investment powers for the shares held by the foregoing funds. Mr.
      Irblad disclaims beneficial ownership of the shares held by foregoing funds
      except to the extent of his proportionate pecuniary interest
      therein.





(7)
      As
      control person of Absolute Octane Fund, Jens Peters may be deemed to have voting
      and investment powers for the shares held by the foregoing funds. Mr. Peters
      disclaims beneficial ownership of the shares held by foregoing funds except
      to
      the extent of his proportionate pecuniary interest therein.





(8)
      As
      control person of Absolute German Fund, Frank Siebrecht may be deemed to have
      voting and investment powers for the shares held by the foregoing funds. Mr.
      Siebrecht disclaims beneficial ownership of the shares held by the foregoing
      funds except to the extent of his proportionate pecuniary interest
      therein.





(9)
      This
      amount includes (i) 498,677 shares of our common stock owned by Clydesdale
      Partners LLC, a partnership for which Mr. Klapper is one of two managers, and
      (ii) 1,148,936 shares of our common stock owned by The Klapper Family Trust,
      a
      trust for which Mr. Klapper is the trustee. As control person of Clydesdale
      Partners LLC, and The Klapper Family Trust, Mr. Klapper may be deemed to have
      voting and investment powers for the shares held by the foregoing entities.
      Mr.
      Klapper disclaims beneficial ownership of the shares held by the foregoing
      entities except to the extent of his proportionate pecuniary interest therein.




**ITEM
      12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
      INDEPENDENCE**





**Interlocking
      Directors**





JDCO,
      Inc. (“JDCO”) is our wholly-owned subsidiary and has interlocking executive and
      director positions with Java Detour, Inc.





**Director
      Independence**





As
      we are
      quoted on Pink Sheets and not one of the national securities exchanges, we
      are
      not subject to any director independence requirements. None of our present
      directors qualifies as an independent director pursuant to Rule 10A-3
      promulgated under the Exchange Act due to their affiliation with us as
      employees.





**Java
      Detour Licensing Agreement**





Pursuant
      to a Master Licensing Agreement (the “Java Detour Licensing Agreement”) dated as
      of August 1, 2002, JDCO granted Java Detour Franchise Corp., a California
      corporation formerly known as Java Detour (“JDCO Sub”), an exclusive license to
      open and operate Java Detour® stores and to franchise others to do so as well.
      In June 2002, JDCO acquired all of the issued and outstanding stock in JDCO
      Sub
      and JDCO Sub became a wholly-owned subsidiary of JDCO. The term of the Java
      Detour Licensing Agreement is 10 years and JDCO Sub has the option to renew
      for
      two successive terms of 10 years each by written notice not less than 90 days
      prior to expiration. JDCO Sub currently pays JDCO a royalty equal to 75% of
      gross revenues received each month in connection with the Java Detour Licensing
      Agreement. We believe that our Java Detour Licensing Agreement is at fair market
      value and is on terms comparable to those that would have been reached in arms’
length negotiations had the parties been unaffiliated at the time of the
      negotiations.




34




**Landgrove
      Coffee Co.**





We
      currently purchase all of our coffee beans from Landgrove Coffee Co., a company
      co-owned by Jon Binninger, brother of Michael Binninger and Steven Binninger,
      our Chief Executive Officer and Chief Operating Officer, respectively. We have
      an oral agreement for pricing for each 50,000 pounds purchased whereby we
      purchase whole coffee beans at the agreed upon price per pound on a net 30
      basis. We do not have a binding commitment to purchase coffee from Landgrove
      Coffee and we can end our association with Landgrove Coffee at any time. We
      paid
      Landgrove Coffee $420,764
      and $376,868 for the years ended December 31, 2007 and 2006, respectively. As
      of
      January 2008, we had commitments to purchase whole coffee beans at a total
      cost
      of $3.73 per pound for our espresso & French roast blends, $4.29 per pound
      for our decaffeinated blend, $4.38 per pound for our house blend, and $4.92
      per
      pound for specialty blends. Additionally, Landgrove Coffee currently pays JDCO
      Subsidiary a rebate of $0.40 per pound for all coffee purchases from our
      franchisees in the Midwest.





Although
      we currently purchase our coffee exclusively from Landgrove Coffee, we have
      relationships with other roasters who are capable of supplying us with our
      coffee beans. We
      believe that our agreement with Landgrove Coffee is at fair market value and
      is
      on terms comparable to those that would have been reached in arms’ length
      negotiations had the parties been unaffiliated at the time of the
      negotiations.





**ITEM
      13. EXHIBITS**





**Exhibit**
              **Number**
            
            **Description
                of Exhibit**3.1
            
            Certificate
                of Incorporation of the Registrant (incorporated by reference to
                Exhibit
                3.1 to the Registrant’s Form 10-SB filed with the SEC on December 8,
                2006)3.2
            
            By-Laws
                of the Registrant of the Registrant (incorporated by reference to
                Exhibit
                3.2 to the Registrant’s Form 10-SB filed with the SEC on December 8,
                2006)3.3
            
            Certificate
                of Merger Effecting Reincorporation and Name Change (incorporated
                by
                reference to Exhibit 3.3 to the Registrant’s Form 10-SB filed with the SEC
                on December 8, 2006)4.1
            
            Form
                of Investor Warrant (incorporated by reference to Exhibit 4.1 to
                the
                Registrant’s Form 10-SB filed with the SEC on December 8,
                2006)4.2
            
            Share
                Registration Rights Agreement dated November 30, 2006 (incorporated
                by
                reference to Exhibit 4.2 to the Registrant’s Form 10-SB filed with the SEC
                on December 8, 2006)4.3
            
            Warrant
                Share Registration Rights Agreement dated November 30, 2006 (incorporated
                by reference to Exhibit 4.3 to the Registrant’s Form 10-SB filed with the
                SEC on December 8, 2006)4.4
            
            Form
                of Placement Agent Warrant (incorporated by reference to Exhibit
                4.4 to
                the Registrant’s Form 10-SB filed with the SEC on December 8,
                2006)4.5
            
            Specimen
                Common Stock Certificate of Registrant (incorporated by reference
                to
                Exhibit 4.5 to Registrant’s Form SB-2 filed with the SEC on December 29,
                2006)10.1
            
            Securities
                Purchase Agreement dated November 30, 2006 (incorporated by reference
                to
                Exhibit 10.1 to the Registrant’s Form 10-SB filed with the SEC on December
                8, 2006)10.2
            
            Lease
                Agreement dated September 21, 2007 by and between Registrant and
                AE-Hamm’s
                Property Owner LLC10.3
            
            Term
                Credit Agreement dated August 30, 2006 by and between JDCO, Inc.
                and The
                Hunter Fund Limited (incorporated by reference to Exhibit 10.3 to
                the
                Registrant’s Form 10-SB filed with the SEC on December 8,
                2006)




35




**Exhibit**
              **Number**
            
            **Description
                of Exhibit**10.4
            
            Employment
                Agreement dated November 27, 2006 by and between Michael Binninger
                and
                JDCO, Inc. (incorporated by reference to Exhibit 10.4 to the Registrant’s
                Form 10-SB filed with the SEC on December 8, 2006)10.5
            
            Employment
                Agreement dated November 27, 2006 by and between Steven Binninger
                and
                JDCO, Inc. (incorporated by reference to Exhibit 10.5 to the Registrant’s
                Form 10-SB filed with the SEC on December 8, 2006)10.6
            
            Employment
                Agreement dated November 27, 2006 by and between Ronald Sands and
                JDCO,
                Inc. (incorporated by reference to Exhibit 10.6 to the Registrant’s Form
                10-SB filed with the SEC on December 8, 2006)10.7
            
            Placement
                Agent Agreement dated August 30, 2006 by and between JDCO, Inc. and
                Hunter
                World Markets, Inc. (incorporated by reference to Exhibit 10.7 to
                the
                Registrant’s Form 10-SB filed with the SEC on December 8,
                2006)10.8
            
            2006
                Equity Incentive Plan of the Registrant (incorporated by reference
                to
                Exhibit 10.8 to the Registrant’s Amendment No. 1 to Form 10-SB filed with
                the SEC on February 14, 2007)10.9
            
            Form
                of Notice of Grant of Stock Option of the Registrant (incorporated
                by
                reference to Exhibit 10.9 to the Registrant’s Form 10-SB filed with the
                SEC on December 8, 2006)10.10
            
            Form
                of Stock Option Agreement (including Addendum) of the Registrant
                (incorporated by reference to Exhibit 10.10 to the Registrant’s Form 10-SB
                filed with the SEC on December 8, 2006)10.11
            
            Form
                of Stock Issuance Agreement (including Addendum) of the Registrant
                (incorporated by reference to Exhibit 10.11 to the Registrant’s Form 10-SB
                filed with the SEC on December 8, 2006)10.12
            
            Form
                of Stock Purchase Agreement (including Addendum) of the Registrant
                (incorporated by reference to Exhibit 10.12 to the Registrant’s Form 10-SB
                filed with the SEC on December 8, 2006)10.13
            
            Development
                Agreement dated August 11, 2006 by and between JDCO, Inc. and Pavilion
                Development Company (incorporated by reference to Exhibit 10.14 to
                the
                Registrant’s Form 10-KSB filed with the SEC on April 2, 2007)10.14
            
            Master
                Franchise Agreement dated as of March 30, 2007 by and between Java
                Detour
                Franchise Corp. and Java Universe, LLC (incorporated by reference
                to
                Exhibit 10.16 to the Registrant’s Amendment No. 3 to Form 10-SB filed with
                the SEC on May 2, 2007)10.15
            
            Letter
                Agreement, amending the terms of the Master Franchise Agreement,
                executed
                as of October 16, 2007, by and between the Registrant and Java Universe,
                LLC (incorporated by reference to Exhibit 10.2 of the Registrant’s
                Form 8-K filed with the SEC on October 19, 2007)10.16
            
            Asset
                Purchase Agreement dated as of July 11, 2007 between JDCO, Inc. and
                Java
                Nevada, LLC (incorporated by reference to Exhibit 10.1 to the Registrant’s
                Form 8-K filed with the SEC on August 7, 2007)10.17
            
            First
                Amendment to Asset Purchase Agreement and Promissory Note dated as
                of
                August 1, 2007 between JDCO, Inc. and Java Nevada, LLC (incorporated
                by reference to Exhibit 10.2 to the Registrant’s Form 8-K filed with the
                SEC on September 14, 2007)10.18
            
            Second
                Amendment to Asset Purchase Agreement dated as of August 1,
                2007between JDCO, Inc. and Java Nevada, LLC (incorporated by reference
                to
                Exhibit 10.3 to the Registrant’s Form 8-K filed with the SEC on September
                14, 2007)10.19
            
            Option
                to Extend dated as of December 31, 2007 between Java Detour Franchise
                Corp. and Java Universe, LLC




36




**Exhibit**
              **Number**
            
            **Description
                of Exhibit**14.1
            
            Java
                Detour, Inc. Code of Business Conduct and Ethics, adopted March 27,
                2007
                (incorporated by reference to Exhibit 14.1 to the Registrant’s Form 10-KSB
                filed with the SEC on April 2, 2007)21.1
            
            List
                of Subsidiaries of Registrant (incorporated by reference to Exhibit
                21.1
                to the Registrant’s Form 10-SB filed with the SEC on December 8,
                2006)31.1
            
            Certification
                of the Chief Executive Officer pursuant to Exchange Act Rule 13a-14(a)31.2
            
            Certification
                of the Chief Financial Officer pursuant to Exchange Act Rule 13a-14(a)32.1
            
            Certification
                pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of
                the
                Sarbanes Oxley Act of 2002**]**




**ITEM
      14. PRINCIPAL ACCOUNTANT FEES AND SERVICES**





AJ.
      Robbins, PC ,
      has
      provided audit services for us for the 2007 and 2006 fiscal years:





**2007 Fees**
            
            **2006 Fees**Audit
                Fees(1)
            
            $
            251,831
            
            $
            50,000Audit-Related
                Fees(2)
            
            $
            76,041
            
            
            -Tax
                Fees(3)
            
            $
            15,000
            
            $
            10,000All
                Other Fees(4)
            
            $
            -
            
            $
            14,259Total
            
            $
            342,872
            
            $
            74,259





(1)  “Audit
      Fees” consist of fees billed for professional services rendered for the audit of
      Java Detour, Inc.’s annual financial statements for the years ended December 31,
      2007 and 2006, and for the review of our interim financial statements and
      services performed during 2007.





(2)  “Audit-Related
      Fees” consist of fees billed for professional services rendered by AJ. Robbins,
      PC, for the years ended December 31, 2007 and 2006 reasonably related to the
      performance of the audit and review that are not otherwise reported under Audit
      Fees.





(3)  “Tax
      Fees” consist of fees billed for professional services rendered by AJ Robbins,
      PC, for services rendered in connection with tax compliance, tax advice and
      tax
      planning.





(4)  “All
      Other Fees” consist of fees billed for professional services rendered by AJ.
      Robbins, PC, for services rendered that are not otherwise reported above





**Pre-Approval
      Policy**





From
      inception to date, we have not had an audit committee. Our Board of Directors
      as
      a whole pre-approves all services provided by AJ. Robbins, PC. Prior to the
      engagement of AJ. Robbins, PC, for any non-audit or non-audit related services,
      the Board of Directors must conclude that such services are compatible with
      the
      independence of AJ. Robbins, PC, as our auditors.




37


**SIGNATURES**





Pursuant
      to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
      1934, the Registrant has duly caused this report to be signed on its behalf
      by
      the undersigned, thereunto duly authorized, in the City of San Francisco, State
      of California, on April 15, 2008.


JAVA
                  DETOUR, INC./s/
                  Michael BinningerMichael
                  BinningerChief
                  Executive Officer and Chairman of the Board(Principal
                  Executive Officer)/s/
                  Ronald SandsRonald
                  SandsChief
                  Financial Officer(Principal
                  Financial Officer)


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





SIGNATURE
            
            TITLE
            
            DATE/s/
                Michael Binninger
            
            Chief
                Executive Officer and Chairman of the Board
            
            April
                15, 2008/s/
                Ronald Sands
            
            Chief
                Financial Officer
            
            April
                15, 2008




38