|SECURITIES AND EXCHANGE COMMISSION     
|---------------------------------------
|Washington, DC 20549                   
|                                       
|FORM 10-KSB                            
|                                       
|ANNUAL REPORT UNDER SECTION 13 OR 15(d)
|OF THE SECURITIES EXCHANGE ACT OF 1934 
|                                       

|For the Fiscal Year Ended December 31, 2004 | Commission File No. 000-24778
|------------------------------------------- | -----------------------------
|                                            |                              

|ADS MEDIA GROUP, INC.                               
|----------------------------------------------------
|(Exact name of Small Business Issuer in its charter)
|                                                    

|UTAH                                                           |  | 87-0505222                       
|-------------------------------------------------------------- |  | ---------------------------------
|(State or other jurisdiction of
incorporation or organization) |  | (IRS Employer Identification No.)
|                                                               |  |                                  

|12758 Cimarron Path, Suite B-128, San Antonio, Texas 78249-3426
|---------------------------------------------------------------
|(Address of principal executive offices)                       
|                                                               
|Issuer's telephone number: (210) 655-6613                      
|                                                               
|Securities registered under Section 12(b) of the Exchange Act: 
|None                                                           
|                                                               
|Securities registered under Section 12(g) of the Exchange Act: 
|Common Stock, par value $.001                                  
|                                                               

|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
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                     

|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 the 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     [X]  No                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                                                                         
|The issuer's revenues for the fiscal year ended December 31, 2004, were $3,668,871.                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                         
|The aggregate market value of the voting common equity held by non-affiliates of the registrant on February 28, 2006, was $225,052, based on that day's closing price quotation on the National Quotation Bureau, Inc. "pink sheets".                                                                                                                    
|                                                                                                                                                                                                                                                                                                                                                         
|Check whether the issuer has filed all documents and reports required to be filed by Section 12, 13, or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court.   [X]  Yes     [   ]  No                                                                                                                       

|The number of shares of the registrant's common stock outstanding as of February 28, 2006, was 19,095,062.
|----------------------------------------------------------------------------------------------------------
|                                                                                                          
|DOCUMENTS INCORPORATED BY REFERENCE: None                                                                 
|                                                                                                          
|                                                                                                          



|TABLE OF CONTENTS
|-----------------
|                 

|         |                                                                                                                             | Page         
|-------- | --------------------------------------------------------------------------------------------------------------------------- | -------------
|PART I   |                                                                                                                             |              
|         |                                                                                                                             |              
|Item 1   | Description of Business                                                                                                     | 1            
|         | Overview
Plan of Operations
Marketing and Distribution
Technology Systems Development
Market Overview
Competition
Employees | 1
1
2
3
3
3
4
|Item 2   | Description of Property                                                                                                     | 4            
|Item 3   | Legal Proceedings                                                                                                           | 4            
|Item 4   | Submission of Matters to a Vote of Security Holders                                                                         | 4            
|         |                                                                                                                             |              
|PART II  |                                                                                                                             |              
|         |                                                                                                                             |              
|Item 5   | Market for Common Equity and Related Stockholder Matters                                                                    | 5            
|         | Dividend Policy                                                                                                             | 5            
|         | Recent Sales of Unregistered Securities                                                                                     | 5            
|Item 6   | Management's Discussion and Analysis or Plan of Operation                                                                   | 6            
|         | Risk Factors and Cautionary Statements                                                                                      | 6            
|         | Critical Accounting Policies                                                                                                | 6            
|         | Results of Operations for the Year Ended December 31, 2004, as Compared to the Year 
Ended December 31, 2003                | 7            
|         | Liquidity and Capital Resources                                                                                             | 8            
|         | Changes in Financial Condition                                                                                              | 9            
|         | Commitments                                                                                                                 | 9            
|         | Seasonality                                                                                                                 | 10           
|Item 7   | Financial Statements                                                                                                        | 10           
|Item 8   | Changes In and Disagreements With Accountants on Accounting and Financial Disclosure                                        | 10           
|Item 8A  | Controls and Procedures                                                                                                     | 10           
|         |                                                                                                                             |              
|PART III |                                                                                                                             |              
|         |                                                                                                                             |              
|Item 9   | Directors, Executive Officers, Promoters and Control Persons; Compliance With Section 16(a) 
of the Exchange Act            | 11           
|         | Director and Officer Profiles                                                                                               | 11           
|         | Section 16(a) Beneficial Ownership Reporting Compliance                                                                     | 12           
|Item 10  | Executive Compensation                                                                                                      | 12           
|Item 11  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder 
Matters                             | 14           
|Item 12  | Certain Relationships and Related Transactions                                                                              | 15           
|Item 13  | Exhibits                                                                                                                    | 17           
|Item 14  | Principal Accountant Fees and Services                                                                                      | 17           
|         |                                                                                                                             |              

|SIGNATURES                        | 18 
|--------------------------------- | ---
|                                  |    
|CONSOLIDATED FINANCIAL STATEMENTS | F-1
|                                  |    
|                                  |    





|PART I                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Item 1. Description of Business                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Overview                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|ADS Media Group, Inc. ("ADS Media"), through its wholly owned subsidiary, Alternative Delivery Solutions, Inc. ("ADS"), is a leading provider of turnkey direct marketing support services, with an emphasis on alternate (i.e., door to door) delivery.  Alternate delivery involves the creation, packaging and delivery (usually on the doors of homes) of solo marketing pieces and co-op marketing programs containing between 2 and 7 pieces of direct marketing material (e.g., brochures, coupons, advertisements and other offerings) to targeted audiences. In addition to alternate delivery, through outsourcing arrangements, ADS provides its clients access to full service direct marketing, printing, list procurement, database management, and fulfillment.  ADS' management is combining their expertise and relationships in direct marketing with sophisticated demographic mapping, tracking, and verification technology to deliver high quality direct marketing services.  ADS Media is based in San Antonio, Texas, and serves customers throughout the United States.                                                                                                                                                                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|ADS was incorporated in Texas on October 22, 2001, under the name Distributel Media Distribution, Inc. On January 31, 2003, ADS was acquired by National Health and Safety Corporation ("NHLT") in an exchange offer in which all of the ADS shareholders transferred all of their shares of ADS to NHLT in exchange for shares of NHLT's common stock. For accounting purposes this combination was treated as a "reverse acquisition" in accordance with APB 16, with ADS treated as the acquiring company. After the exchange, the former ADS shareholders owned 15,000,000 shares (75%) of the outstanding common stock of NHLT, including shares issuable upon exercise of an outstanding warrant. The acquisition closed January 31, 2003, subsequent to NHLT's January 30, 2003, shareholder meeting in which the shareholders of NHLT approved a comprehensive plan for refinancing and restructuring of NHLT, including a reverse stock split, discontinuance of NHLT's other business lines, and name change to ADS Media Group, Inc. as described in our Form 10-KSB for the year ended December 31, 2002, and Form 8-K dated January 30, 2003.                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Plan of Operations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|During 2004, ADS increased its revenue growth, which was attributable to the realization of several new marketing agreements, including the trial launch of our La Canasta de Valores, a door delivered advertising cooperative targeting the Hispanic consumer. La Canasta is a product of ADS, featuring a festive colored, branded poly-bag containing advertising inserts and samples, delivered to high-density Hispanic neighborhoods. La Canasta provides advertisers with a unique and effective print media option to reach the Hispanic consumers, not currently available nationally in a direct-to-door format. The program's translated name, "The Basket of Values", was initially developed in 2002, and relied on securing a "sponsor" advertising client in order to fund production costs for each program. The sponsor pays for the cost of the program and is given advertising placement both in and on the delivery bag. The sponsor also receives limited exclusivity rights, plus input on the areas delivered, quantity and frequency of deliveries.                                                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Early in the second quarter of 2004, we were approached by one of our advertising agency groups to propose the La Canasta for one of their wireless telecommunications clients, resulting in the trial launch of the program during the third quarter. The trial launch included three separate deliveries in August and September, of one million La Canasta bags each, spanning four heavily Hispanic-populated states: Texas, California, Arizona, and Illinois. Initial client feedback was positive; however, a decision on whether or not they will continue the trial, or commit to an annual agreement for delivery, has still not been made. Despite our success in at least securing sponsorship for a trial launch of La Canasta, ADS realized the program has enough merit to explore a marketing and financial scenario which does not rely on a sponsor, but may actually be funded internally by us. We received valuable trade press based on the trial launch, and received numerous inquiries about offering advertisers a regularly scheduled program in which they can participate, instead of one that may only last for a few delivery drops. The response and continued interest in La Canasta require us to explore all options for continuing the program at some point, either sponsored by an advertiser or self-funded by us.                                                                                                                                          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|1                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|The exposure we received from La Canasta helped us develop new agency relationships, including one that resulted in the largest single order in our history, which occurred during the fourth quarter of 2004. The sale involved a separate delivery campaign outside of La Canasta, resulting in a single delivery of ten million pieces nationally. This order demonstrated that our national delivery platform was capable of handling a large volume of door delivery during a short time span, while maintaining a high degree of accuracy and quality distribution. It also confirmed the effectiveness of our decision to market to advertising agencies.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Since the inception of ADS in 2001, we have focused on advertising agencies as a source of providing clients that need alternative delivery. The direct-to-door medium provides agencies with an effective print media option to propose and sell to their client base. This is especially true for clients that have a history using direct mail or newspaper inserts. The advantages for direct-to-door include the ability to target specific customer groups, reach every door that meets the desired profile, at a reduced rate from other print media options, and typically result in better response.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Agencies are constantly being asked by their clients to find new and different ways to present their message. Alternative delivery provides them with a new and different choice. Through an extensive agency push that began in 2003 and continued throughout 2004, our labor began to pay-off. Given the success that has begun to materialize, we believe that ADS will continue to strengthen its efforts within the advertising agency arena.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|ADS supplemented its sales efforts not only by addressing advertising agencies, but also by working directly with target customers. Dealing directly with the marketing organizations of companies in the telecommunications, retail and service industries, ADS realized multiple delivery orders during 2004 and prospects presented for even more campaigns early into 2005. Competition in the telecommunications business provided fertile ground for alternative delivery solutions. This is especially critical when dealing with companies that have very specific geographic footprints that are predicated by their network capabilities. ADS can deliver within those service areas with a high degree of accuracy. Our approach reduces the valuable marketing dollars wasted on communicating with people that cannot take advantage of their service. It allows for higher conversion rates on calls that do come into the provider's call centers, since clients can be served, and they are already educated on the rate plans being offered.                                                                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Event driven marketing promotions such as grand openings were a significant part of the orders that we did receive in 2004. Our advertisers, especially those in retail and wireless communications, used direct-to-door advertising to announce their new locations and opening dates. During 2004, ADS continued to demonstrate the effectiveness of the door medium to generate traffic into new store locations. We believe that, as large national retail chains and national communication companies continue to expand into new areas, the need for grand opening support will be strong for years to come. ADS will continue to focus on these, and other, event driven, promotional opportunities.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Marketing and Distribution                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|ADS continued to develop new channel partners throughout 2004, focusing primarily on large commercial printers. We previously included supply chain management companies in the list of channel partners, and had received orders from this group in 2003. This business was important to ADS's generating much needed sales at that time; however, the margins associated with these orders were greatly reduced from our original business plan. Therefore, we redirected our focus and efforts towards channel partners that could help grow revenues, while producing greater margins at the same time. Our relationships with commercial printers allowed us that opportunity, as did expanding our relationships with advertising agencies, direct client relationships, and launching programs like La Canasta that have increased margin potential.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|The value of advertising was best demonstrated this year by the trade press we received from the trial launch of La Canasta, and the resulting orders that followed. ADS plans to develop a comprehensive plan for the placement of advertising in key trade publications, and to participate in certain trade shows as funds from operations permit.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|In anticipation of increased demand, ADS continued to develop its national delivery capacity by seeking new distributors in both large and medium sized markets throughout the U.S., Mexico, Canada, and Puerto Rico. Our efforts to expand capacity were coupled with efforts to control delivery cost and improve overall distribution quality.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|2                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Technology Systems Development                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|During 2004, ADS continued to invest in developing its geo-demographic mapping capabilities. Work also began in earnest to develop proprietary software to automate much of the actions and labor required during the mapping process. This development activity was designed not only to reduce the man-hours associated with these activities, but just as importantly, to provide our customers with a tool that would allow them to be involved in determining their own delivery footprint. We recognized that our clients were requesting more involvement in determining the actual delivery areas for their campaigns. This has been especially important for large franchised operations, such as the retail fast food industry. In these instances, the corporate marketing groups and their advertising agencies want to allow franchisees control in determining both the delivery area and their costs, relative to budget, for these types of campaigns. Our vision is to provide them with a tool where they can manage their own campaigns to determine delivery area, type of message/offer used, and scheduling of distribution. This will benefit us as well, by offsetting the labor costs associated with the development of delivery maps for these types of campaigns, and allow for faster turnaround in the client planning process. It will also provide a user friendly environment for our clients, hopefully resulting in increased order frequency and overall sales.
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Additionally, work has begun to explore new global positioning technology to augment the delivery verification process. Currently, the expense associated with implementing this technology makes these solutions cost prohibitive. However, we anticipate that cost will go down as the technology evolves, possibly providing an effective means for supplementing our delivery verification protocols, translating into greater delivery assurance for our clients.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|In 2003, ADS Media Group launched its website on the Internet, www.adsmediagroup.com. The site includes corporate information about ADS Media and its management and directors, as well as the ability to download filings with the SEC and press releases issued by the company. Additionally, descriptions and schedules of the services and products of ADS are provided for shareholders, media industry analysts and new customers, as well as a password protected extranet for existing customers to track their jobs. Work continues to update and refine the website.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Market Overview                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Ever increasing postage rates, combined with lower response from direct mail programs, have created an ideal market opportunity for door distribution programs. Similarly, newspaper circulation has continued to decline nationwide, according to a recent report by the Audit Bureau of Circulations. On average, newspaper circulation reaches only 30% of the available market, leaving a large segment of the population uncovered, especially minority groups. For example, only 4% of newspaper subscribers are Hispanic. Meanwhile, rates for newspaper advertising continue to rise.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Advertisers are looking for better reach and return, and alternate delivery provides both. ADS has access to a national network of delivery resources, providing door-to-door delivery, and can extend this reach utilizing other delivery vendors capable of supplementing the existing delivery network on a city specific basis. Depending on customer requirements, delivery can be performed anywhere in the United States, Mexico, Canada, and Puerto Rico.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|The ability to offer both direct mail and alternate delivery programs is a distinct competitive advantage for ADS. The vast majority of alternate delivery companies only provide door distribution services, and the same is true with companies in the direct mail business. ADS has assembled a network of strategic partnerships and vendor relationships that allow it the flexibility to provide customized solutions to meet any direct marketing need a client may have. These capabilities make it possible to provide event marketing services and directory distribution as well.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Competition                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|The advertising market in general, and the alternative delivery market specifically, are highly competitive, with a proliferation of existing groups at local and regional levels, offering similar services as ADS. In addition to being                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|3                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|highly competitive, both of these markets are subject to rapid innovation and technological change, shifting consumer preferences and frequent new product and service introductions. Additionally, competition exists from traditional products and services offered through other marketing mediums and channels, such as newspaper, other print media, television, radio, billboard and internet sites, which may have all or some of the same customers targeted by ADS.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|While ADS believes that it can develop a market niche and differentiate itself from its competition by providing customers with the ability to deliver their marketing and advertising in multiple geographic markets and benefit from dealing with one firm (ADS) instead of many individual firms in every geographic market where deliveries are desired, ADS may be susceptible to attempts by others to duplicate its efforts. It is possible that other parties with greater resources will be able to replicate, or improve upon, ADS' business concepts and become market leaders, potentially reducing ADS' future earnings and business opportunities.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Employees                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|On September 30, 2005, ADS Media and its subsidiary had 9 full-time employees, including 3 in sales and marketing, 4 in distribution and fulfillment services and 2 in general and administrative functions. In addition, it routinely engages outside contractors to perform fulfillment and distribution operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Item 2. Description of Property                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|At the beginning of 2003, ADS leased office space at 15454 Tradesman, San Antonio, Texas 78249 in Northwest San Antonio.  The space contained a total of 28,000 square feet, of which approximately 8,000 square feet was finished office area and the balance was warehouse/assembly space.  The property was adequately covered by insurance.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|After the closing of the reverse acquisition on January 31, 2003, ADS Media began sharing the space located at 15454 Tradesman, San Antonio, Texas 78249 with ADS.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Effective January 1, 2004, an amendment to the original lease agreement was signed calling for a reduction of leased office space with a corresponding reduction in monthly rent paid by ADS. The amendment also provided for the early termination of the lease by either the landlord or ADS with a written notice to the other party of not less than 60 days. Effective March 31, 2005, this lease was terminated early.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|On January 10, 2005, ADS signed an original lease agreement for approximately 6,600 square feet of office/warehouse space at 12758 Cimarron Path, Suite B-128, San Antonio, Texas 78249.  The lease was to commence February 1, 2005 for a period of three (3) years and three (3) months. Effective January 24, 2005, an amendment to the original lease was signed delaying the commencement date of the lease to April 1, 2005, with a term of three (3) years and five (5) months.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Item 3. Legal Proceedings                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|On July 2, 2004, RR Donnelley Receivables, Inc. sued ADS to collect a sworn account in the amount of $28,503.76, plus attorney fees and expenses. ADS responded with a general denial and a counterclaim for breach of contract regarding a partnership with the plaintiff in Mexico. In November 2005, the counterclaim was dismissed on jurisdictional grounds. The suit on the sworn account remains pending, but no activity has taken place since November 2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Item 4. Submission of Matters to a Vote of Security Holders                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|No matters were submitted to a vote of security holders during the fourth quarter of 2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|4                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|PART II                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Item 5. Market for Common Equity and Related Stockholder Matters                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|ADS Media's Common Stock was traded in the over-the-counter market and quotations were published on the OTC Bulletin Board under the symbol "ADSM" until December 31, 2003. Effective January 1, 2004, ADS Media began trading in the National Quotation Bureau, Inc. "pink sheets" under "ADS Media Group, Inc."                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|The following table sets forth the range of high and low bid prices of the Common Stock for the periods indicated as reported by the OTC Bulletin Board and as adjusted for the 1 for 100 reverse stock split on January 31, 2003. Quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission, and may not represent actual transactions.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

|     | 1st Quarter | 2nd Quarter | 3rd Quarter | 4th Quarter
|---- | ----------- | ----------- | ----------- | -----------
|     | High        | Low         | High        | Low        
|     |             |             |             |            
|2003 | 0.51        | 0.001       | 0.38        | 0.11       
|2004 | 0.23        | 0.12        | 0.13        | 0.05       
|     |             |             |             |            

|As of December 15, 2005, there were approximately 277 shareholders of record for our common stock, which figure does not take into account those shareholders whose certificates are held in the name of broker-dealers.                                                                                                                                                                                                                  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                          
|Dividend Policy                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                          
|ADS Media has not declared or paid cash dividends or made distributions in the past, and does not anticipate that it will pay cash dividends or make distributions in the foreseeable future. ADS Media currently intends to retain and reinvest future earnings to finance its operations. Holders of the preferred shares are entitled to receive redemption payments before ADS Media may pay any dividends on its other capital stock.
|                                                                                                                                                                                                                                                                                                                                                                                                                                          
|Recent Sales of Unregistered Securities                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                          
|From January 1, 2004 through December 31, 2004, ADS Media issued the following securities that were not registered under the Securities Act of 1933 (the "Securities Act"). All of these securities were issued in privately negotiated transactions effected in reliance on the exemption contained in Section 4(2) of the Securities Act.                                                                                               
|                                                                                                                                                                                                                                                                                                                                                                                                                                          

|- | On three separate occasions in 2004, ADS Media issued a total of 33,173 shares of common stock to a consultant in exchange for professional services. The dates, amounts, and stock prices for these shares are as follows.
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                            

| | Date          | Number of Shares | Price per Share
| | ------------- | ---------------- | ---------------
| | March 2004    | 18,269           | $0.13          
| | April 2004    | 8,846            | $0.13          
| | December 2004 | 6,058            | $0.13          
| |               |                  |                

|- | In August 2004, ADS Media issued warrants to purchase up to 311,112 shares of common stock, at an exercise price of $0.12 per share, to two investors in connection with short-term loans to the company.                                     
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                               
|- | In August 2004, ADS Media issued warrants to purchase up to 155,556 and 333,333 shares of common stock, at an exercise price of $0.12 per share, to an officer and employee, respectively, in connection with short-term loans to the company.
|  |                                                                                                                                                                                                                                               
|- | In August 2004, ADS Media issued warrants to purchase up to 500,000 shares of common stock, at an exercise price of $0.12 per share, to a 5% shareholder in connection with a short-term loan to the company.                                 
|  |                                                                                                                                                                                                                                               
|  |                                                                                                                                                                                                                                               



| 
|-
| 
|5
| 
| 



|- | In August 2004, ADS Media issued warrants to purchase up to 312,500 shares of common stock, at an exercise price of $0.12 per share, to a consultant in exchange for professional services.                        
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                    
|- | In October 2004, ADS Media issued warrants to purchase up to 270,832 shares of common stock, at an exercise price of $0.12 per share, to an investor in connection with short-term loans to the company.           
|  |                                                                                                                                                                                                                    
|- | In November and December 2004, ADS Media issued warrants to purchase up to 98,120 shares of common stock, at an exercise price of $0.18 per share, to three vendors in exchange for reductions of accounts payable.
|  |                                                                                                                                                                                                                    



|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Item 6. Management's Discussion and Analysis of Financial Condition and Results of Operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|The following discussion and analysis should be read in conjunction with the consolidated financial statements and notes thereto included as Item 7 of this Report on Form 10-KSB. The consolidated financial statements and related footnotes included herein include the financial statements of ADS.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|Risk Factors and Cautionary Statements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|This report contains forward-looking statements made pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. When used in this document and in documents incorporated herein by reference, the words "anticipates," "believes," "estimates," "expects," "intends," "plans," "potential," or "continue," "may," "will," "should," and similar expressions are intended to identify forward-looking statements. ADS Media wishes to advise readers that actual results may differ substantially from such forward-looking statements. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those expressed in or implied by the statements, including, but not limited to, the following: the ability of ADS Media to continue as a viable concern, the ability of ADS Media to obtain financing in order to implement its business plan and other risks detailed in ADS Media's periodic report filings with the Securities and Exchange Commission.
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|Critical Accounting Policies                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|The financial statements of ADS Media were prepared in accordance with generally accepted accounting principles in the United States, which require ADS Media to make estimates and judgments that affect the reported financial position and results of operations during the reporting period. Our estimates and judgments are continually evaluated based on available information and experience. Because the use of estimates is inherent in the financial reporting process, actual results could differ from estimates. If there is a significant unfavorable change to current conditions, it likely will result in a material adverse impact to our business, operating results and financial condition.                                                                                                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|Our significant accounting policies and methods used in the preparation of the consolidated financial statements are discussed in Note A to the Notes to Financial Statements in Item 7 of this annual report on Form 10-KSB. We believe that, of its significant accounting policies, the following may involve a higher degree of judgment and complexity:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

|- | Concentration of credit risk and accounts receivable;
|- | -----------------------------------------------------
|- | Asset impairment; and                                
|- | Goodwill.                                            
|  |                                                      

|Concentration of Credit Risk and Accounts Receivable: Generally our customers pay 50% - 70% of the total fee in advance and the remaining portion within 45 days of completion of services. Our business model generally requires a deposit by the customer; however, in some cases, we will give minimal credit terms to customers if they have an established and good payment history with us. We extend unsecured credit in the normal course of business to virtually all of our customers. In the event of non-performance of accounts receivable, its maximum exposure is the recorded amount shown on the balance sheets. Concentration of credit risk and failure to collect accounts receivable have not presented significant problems to ADS Media.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|6                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|ADS Media establishes an allowance for doubtful accounts based upon factors surrounding the credit risk of specific customers.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|Asset Impairment: We review long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If impairment indicators are present and the estimated future undiscounted cash flows are less than the carrying value of the long-lived assets, the carrying value is reduced to the estimated fair value as measured by the discounted cash flows. We have not experienced any events or changes that would indicate that the carrying amounts of any of its long-lived assets might not be recoverable.                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|Goodwill: We assess the carrying value of goodwill annually and when factors are present that indicate an impairment may have occurred. Goodwill is considered impaired and a loss is recognized when its carrying value exceeds its implied fair value. Factors that are considered important which could trigger an impairment review include the following:                                                                                                                                                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

|- | significant underperformance relative to expected historical or projected future operating results;      
|- | ---------------------------------------------------------------------------------------------------------
|- | significant changes in the manner or use of the acquired assets or the strategy for our overall business;
|- | significant negative industry or economic trends;                                                        
|- | significant decline in stock price for a sustained period; and                                           
|- | our market capitalization relative to net book value.                                                    
|  |                                                                                                          

|In 2002, Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets" became effective, and as a result, we do not amortize goodwill. In lieu of amortization, this pronouncement requires that goodwill be evaluated for impairment on an annual basis, beginning January 1, 2002. Goodwill is considered impaired and a loss is recognized when its carrying value exceeds its implied fair value. We may use a number of valuation methods including quoted market prices, discounted cash flows and revenue multiples.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|Each year ADS Media assesses the realizability of the recorded goodwill and other intangibles in accordance with SFAS No. 142. At December 31, 2003, the analysis indicated that goodwill, attributed to the value of a publicly traded "shell" company which we acquired, was impaired, in that its carrying value was greater than fair value. We then used other market methods to estimate the fair value of the assets and liabilities other than goodwill and intangibles. This assessment indicated that goodwill of $450,000 was impaired. As a result, for the year ended December 31, 2003, ADS Media impaired its stated goodwill value by $450,000 from $700,000 to $250,000 by recording a non-cash goodwill impairment charge in continuing operations. At December 31, 2004, the analysis indicated there was no further impairment of goodwill. ADS Media will continue to test on a consistent measurement date unless events occur or circumstances change between annual impairment tests that would more likely than not reduce fair value below its carrying value.                                                                                                                                                                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|Results of Operations for the Year Ended December 31, 2004, as Compared to the Year Ended December 31, 2003                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|Through the year ended December 31, 2004, ADS Media incurred significant net losses from operations. After the reverse acquisition on January 31, 2003, we anticipated raising additional capital from the equity markets, but this did not come to fruition. This constricted our ability to sufficiently invest, advertise and ramp-up our sales operations as originally planned in order to cover increased operating expenses. Although we were forced to conserve cash and more cautiously grow our business, we expected that increases in revenue from new and existing customer sources, marketing programs like our own door delivered advertising cooperative La Canasta, and a related improvement in gross profit margin, would help offset the increased operating costs of building our infrastructure.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|Revenues. Revenues increased $1,713,467, or 88%, to $3,668,871 from $1,955,404. The increase was due to our success in the latter part of the year in implementing our marketing plan. We signed several national advertisers, trial launched La Canasta, and built the infrastructure necessary to implement these types of programs. Additionally, during the fourth quarter of 2004, we delivered a national campaign that resulted in the largest single order in company history, although there is no assurance that such a significant one-time event will reoccur.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|7                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|Cost of Goods Sold. Cost of goods sold increased $1,147,119, or 79%, to $2,594,344 from $1,447,225. The increase was primarily attributed to a corresponding increase in sales as discussed above.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|Gross Profit. Gross profit increased $566,348, or 111%, to $1,074,527 from $508,179. The increase was primarily attributed to an increase in revenues combined with margins improving as a result of new pricing guidelines, development of new channel partners such as large commercial printers, and the focus on selling products that offer higher gross profit. The gross profit margin percentage increased to 29% in 2004 from 26% in 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|Selling, administrative and other operating expenses. Selling, administrative and other operating expenses decreased $743,775, or 43%, to $999,338 from $1,743,113. The decrease was primarily due to a concerted effort on the Company's part to minimize operating expenses in 2004, including the reduction of headcount and slowing the expansion of operations begun in 2003, combined with the absence in 2004 of professional fees related to the reverse acquisition of National Health and Safety Corporation in 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|Goodwill impairment. Goodwill impairment of $450,000 in 2003 resulted from recording a non-cash charge in continuing operations after the assessment of the realizability of recorded goodwill in accordance with SFAS No. 142 indicated that goodwill was impaired as its carrying value was greater than fair value. There was no goodwill impairment charge in 2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|Income (loss) from operations. Income (loss) from operations increased $1,760,123, or 104%, to income of $75,189 from a loss of $1,684,934. The increase was primarily due to the increase in revenues and gross profit, the Company's concerted efforts to minimize operating expenses in 2004, and the absence in 2004 of acquisition-related expenses and the goodwill impairment charge incurred in 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|Other income (expense). Net other expense increased $23,532, or 47%, to $74,094 from $50,562. The primary component, interest expense, increased $25,812, or 50%, to $77,128 from $51,316. This increase was due to interest related to additional debt financing incurred in 2004 to provide cash for operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|Net income (loss). Net income (loss) increased $1,736,591, or 100%, to net income of $1,095 from a net loss of $1,735,496. The increase in net income in 2004 over net loss in 2003 was primarily due to the increase in revenues and gross profit, along with the decrease in selling, administrative and other operating expenses and the goodwill impairment charge.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|Liquidity and Capital Resources                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|ADS Media's working capital needs have historically been satisfied primarily through financing activities including private loans and raising capital through equity investments from individual investors. Long-term liquidity requirements will depend on the rate of expansion of our business.  We believe future operations can be financed at least in part from cash flow, but additional investment from outside investors may be required to fund expansion into new geographic areas and to launch new product initiatives.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|ADS Media had cash and cash equivalents of $208,860 as of December 31, 2004, compared to $19,664 as of December 31, 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|Working capital (measured by current assets less current liabilities) at December 31, 2004, was a deficit of $852,053 compared to a deficit of $933,513 at December 31, 2003. This increase in working capital was primarily due to increases in cash and net accounts receivable and decreases in customer advance payments and accrued liabilities, partially offset by a decrease in prepaid expenses and increases in accounts payable, accrued salaries and wages, and notes payable.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|8                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|Changes in Financial Condition                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|For the year ended December 31, 2004, cash provided by operating activities totaled $152,733, compared to cash used in operating activities of $541,360 in fiscal 2003. The most important change in operating cash flow was our break-even year in operating income in 2004, compared to a loss of $1.7 million in 2003, as discussed in Results of Operations. In 2004, our accounts receivable increased substantially, by $306,721, compared to a $102,642 increase in 2003, primarily due to increased sales and operating activity incurred in the normal course of business. In addition, in 2004 we did not record adjustments to goodwill (compared to $450,000 recorded in 2003) and we experienced much smaller amounts of funds provided from issuance of equity securities for services and in connection with financing, as financing activity decreased in 2004 and we were able to pay for services from cash generated from operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|For both years ended December 31, 2004 and 2003, cash used in investing activities was negligible, at $905 and $2,313 respectively, in each case for small capital expenditures.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|For the year ended December 31, 2004, cash provided by financing activities totaled $37,368 due mainly to proceeds from the issuance of notes payable, partially offset by payments on notes payable. For the year ended December 31, 2003, cash provided by financing activities totaled $537,153. In 2004, we netted proceeds from sale of notes payable, after deducting payments on outstanding notes, of approximately $40,000, compared to a net of $60,000 in 2003. The most important change was that, in 2003, we realized $480,000 from the sale of common stock, but we raised no cash from common stock sales in 2004. Payments on capital lease obligations were approximately the same in both years.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|Commitments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|ADS leased office space at 15454 Tradesman, San Antonio, Texas 78249. The space contained a total of 28,000 square feet, of which approximately 8,000 square feet was finished office area and the balance was warehouse/assembly space.  The lease, dated October 14, 2002, was for three (3) years, with the total rent being approximately $10,000 per month in year one, increasing to $11,000 per month in years two and three. The property was adequately covered by insurance.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|After the closing of the reverse acquisition on January 31, 2003, ADS Media began sharing the space located at 15454 Tradesman, San Antonio, Texas 78249 with ADS.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|Effective January 1, 2004, an amendment was signed to the original lease agreement (dated October 14, 2002) between Cadena Enterprises, Inc. ("Cadena") and ADS calling for a reduction of leased office space with a corresponding reduction in monthly rent paid by ADS from $10,000 per month to $4,000 per month. The amendment also provided for the early termination of the lease by either Cadena or ADS with a written notice to the other party of not less than 60 days. Additionally, all past due amounts owed by ADS to Cadena for unpaid rents, property taxes and insurance charges were combined and set forth in a Promissory Note dated January 1, 2004 in the amount of $65,403. The Promissory Note carries an annual interest rate of 5.5%, is due and payable in quarterly installments of $1,500 or more beginning on April 1, 2004, and continuing quarterly thereafter until paid in full, provided that all remaining amounts due are payable in full on February 1, 2005. Effective February 1, 2005, the Promissory Note was renewed, payable in monthly installments of $1,500 beginning September 1, 2005. Effective March 31, 2005, this lease was terminated early.                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|On January 10, 2005, ADS signed an original lease agreement for approximately 6,600 square feet of office/warehouse space at 12758 Cimarron Path, Suite B-128, San Antonio, Texas 78249.  The lease was to commence February 1, 2005 for a period of three (3) years and three (3) months. Effective January 24, 2005, an amendment to the original lease was signed delaying the commencement date of the lease to April 1, 2005, with a term of three (3) years and five (5) months. Base monthly rent shall be $0 per month for the first three months, $3,967 per month for the next nine months, $4,588 per month in year two, $4,993 per month in year three, and $5,128 per month for the final five months. Monthly operating expenses (including amounts for taxes, insurance, and common area maintenance) are in addition to the base monthly rent. The property is adequately covered by insurance.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|9                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|Seasonality                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|ADS's business historically has not been seasonal.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|Item7. Financial Statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|The information required by this item is set forth in ADS Media's Consolidated Financial Statements and Notes thereto beginning at page F-1 of this report.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|Item 8. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|None                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|Item 8A. Controls and Procedures.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as of December 31, 2004. During the third and fourth quarters of 2003 and all of 2004, we were unable to pay for the costs of independent auditing or to employ a chief financial officer who was familiar with accounting procedures and auditing standards for publicly held companies. We did not file our Form 10-KSB for fiscal 2003 or 2004 on time, and we could not, because of the costs involved, complete our 2004 audit until 2005. Accordingly, our management concluded that our disclosure controls and procedures were not effective as of the end of fiscal 2004. We believe, based on management's review of this Form 10-KSB, that it contains all information required to be included in the annual report on Form 10-KSB for 2004, but the information was not compiled and the report was not completed within the time periods specified for filing this report. Inability to file a timely report indicates a material weakness in our internal control over financial reporting. During the time period covered by this report, there were no changes in our internal control over financial reporting.
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|10                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|PART III                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|Item9. Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|The following table sets forth the names, ages and positions held with ADS Media by its directors and executive officers.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

|Name                  |  | Age* |  | Positions Held                                                                                                   
|--------------------- |  | ---- |  | -----------------------------------------------------------------------------------------------------------------
|Clark R. "Dub" Doyal  |  | 57   |  | Chairman, Chief Executive Officer, President and Director, Chairman and Chief Executive Officer of subsidiary ADS
|                      |  |      |  |                                                                                                                  
|James D. (Jim) Schell |  | 46   |  | Vice President, Secretary, Treasurer and Director, President of subsidiary ADS                                   
|                      |  |      |  |                                                                                                                  
|Gary J. Davis         |  | 51   |  | Director                                                                                                         
|                      |  |      |  |                                                                                                                  
|Bryan Forman          |  | 43   |  | Director                                                                                                         
|                      |  |      |  |                                                                                                                  

|* Age of directors and executive officers is determined as of August 1, 2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|All directors hold office until the next annual meeting of shareholders and serve until their successors have been duly elected and qualified. There are no agreements with respect to the election of directors. The Board of Directors appoints officers annually and each executive officer serves at the discretion of the Board of Directors.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|Pursuant to the provisions of the stock exchange agreement between NHLT and ADS, one of those directors, Jimmy E. Nix, II, resigned as a director of ADS Media on February 3, 2003.  One seat on the five member board of ADS Media has been vacant since the resignation of Mr. Nix.  The bylaws provide that vacant seats on the board may be filled by the remaining directors.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|Director and Officer Profiles                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|Clark R. "Dub" Doyal is the Chairman, Chief Executive Officer, President and a director of ADS Media Group.  Mr. Doyal is also the Chairman and Chief Executive Officer of Alternative Delivery Solutions, Inc.  Mr. Doyal has over 30 years experience in printing and direct marketing, having owned and built a number of successful companies during his career that provided marketing services. In 1981, Mr. Doyal started a business called Clear Visions Printing and Mailing, to compete with almost 140 other printers in San Antonio.  In 1995, Mr. Doyal sold Clear Visions to Consolidated Graphics, after taking the company to the number one spot in San Antonio. Since then, Mr. Doyal has built and sold his interest in a couple of companies in the alternate delivery industry, including one in Mexico City called Quicklink, SA, which provided door distribution to over 600,000 households on a weekly basis.  In late 1998, Mr. Doyal formed Delivery and Communications, Inc., a local and regional supplier of door delivery services, and sold his interest in that company prior to forming ADS in 2001 to specifically serve the growing demand for national door direct delivery.  Mr. Doyal is a graduate of Louisiana State University.
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|James D. (Jim) Schellis Vice President, Secretary, Treasurer and a director of ADS Media.  He is also President of its operating subsidiary, ADS, and was recruited to lead the effort to build national client relationships, along with providing marketing support specific to ADS's product development and marketing strategy. He joined ADS in November 2001. For the 20 years before his move to ADS, Mr. Schell worked for SBC Communications, Inc., focusing on development and implementation of numerous regional and national product initiatives. He also spent 8                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|11                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|years managing regional sales operations for Southwestern Bell Yellow Pages. Mr. Schell received his B.B.A. in Marketing from Texas Tech University.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|Gary J. Davisis a director of ADS Media.  Mr. Davis is the founder, president, CEO and sole shareholder of First Advisors, Inc., which is involved in business consulting and investing private investment capital in start-up and early stage companies.  Mr. Davis has been with First Advisors, Inc. since 1996.  Since 1973, Mr. Davis has spent a major portion of his career in a wide range of capital raising endeavors, including debt and equity for real estate ventures and private equity capital for business ventures. Additionally, Mr. Davis is a director of Ashley Laurent, Inc., a software company offering integrated network security solutions. Mr. Davis was the chairman, president and CEO of NHLT from February 9, 2001, to January 30, 2003, and has served on the board of directors of NHLT and ADS Media from 2001 to the present.                                                                                                                                                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|Bryan Formanis a director of ADS Media and has provided legal services to NHLT as outside counsel since April 2002.  Mr. Forman serves as founder and co-manager of The Privet Fund, LP, a hedge fund specializing in the private finance of publicly traded companies. Since 1991, Mr. Forman has focused his career in the ownership and executive management of three NASD registered broker-dealers, most recently serving as chairman and chief executive officer of First Avantus Securities, Inc. from January 1996 until April of 2002.  Mr. Forman continues to hold an NASD Series 7 license with First Avantus.  Mr. Forman is an attorney licensed to practice in Texas and periodically serves as an arbitrator in the securities industry.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|**Section 16(a) Beneficial Ownership Reporting Compliance**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|Section 16(a) of the Securities Exchange Act of 1934 requires our executive officers, directors and persons who beneficially own more than 10% of our common stock to file reports of ownership and changes in ownership with the Securities and Exchange Commission. These persons are required by the Securities and Exchange Commission regulations to provide us with copies of all Section 16(a) forms that they file.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|One officer, James D. (Jim) Schell, filed a late report on Form 5 of his acquisition of warrants to purchase up to 155,556 shares of common stock in connection with a short-term loan to the company in August 2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|Based solely upon a review of the copies of the forms furnished to the Company, or representations from certain reporting persons that no reports were required, the Company believes that no other persons failed to file required reports on a timely basis during or in respect of 2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|Item10. Executive Compensation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|The following table summarizes the compensation of the Chief Executive Officer and the other most highly compensated executive officers of ADS Media and its subsidiaries during the past year (the "Named Executive Officers").                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

|Summary Compensation Table
|--------------------------
|Name                      
|Clark R. "Dub" Doyal,     
|Chief Executive Officer   
|                          
|                          
|James D. (Jim) Schell,    
|Vice President, Secretary,
|Treasurer                 
|                          

|  
|--
|12
|  
|  
|  

|(1) | Includes $67,995, $110,831, and $14,769 in salary voluntarily deferred in 2004, 2003, and 2002, respectively, by Mr. Doyal. Also includes $77,847 and $80,710 in salary voluntarily deferred in 2004 and 2003, respectively, by Mr. Schell. These salaries will remain deferred until such time as cash flow permits payment.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                              

|Option/SAR Grants in Last Fiscal Year. There were no stock appreciation rights ("SAR") grants made to any Named Executive Officers during the year ended December 31, 2004. Mr. Schell received warrants to purchase common stock in connection with a loan he made to the company in 2004, as follows:
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                       

|Option/SAR Grants in Last Fiscal Year (Individual Grants)
|---------------------------------------------------------
|Name                                                     
|James D. (Jim) Schell                                    
|                                                         

|Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End Option/SAR Values. The following table shows the number of options exercised during 2004 and options held at December 31, 2004 by the Named Executive Officers. No SARs have been granted.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                  

|Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End Option/SAR Values
|--------------------------------------------------------------------------------
|Name                                                                            
|James D. (Jim) Schell                                                           
|                                                                                

|Compensation of Directors. No compensation was paid to any Director in 2004 in connection with their board service. ADS Media does reimburse its directors for reasonable expenses associated with attending board or committee meetings.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|Employment Agreements. ADS Media's subsidiary, ADS, has employment agreements with Mr. Doyal, who serves as Chairman, Chief Executive Officer and President of ADS Media and Chairman and Chief Executive Officer of ADS, and with Mr. Schell, who is Vice President, Secretary, and Treasurer of ADS Media, and President of ADS. Mr. Doyal's agreement provides for a base salary of $299,520 in 2005. Mr. Schell's agreement provides for a base salary of $249,600 in 2005. Because of a lack of revenues, both Mr. Doyal and Mr. Schell have foregone a substantial amount of their agreed compensation in 2002, 2003 and 2004. Both Mr. Doyal's and Mr. Schell's employment agreements are for three year terms ending in December 2005. Each executive may terminate the agreement at any time on 30 days' notice. ADS may terminate each agreement at any time without cause on 30 days' notice, in which case payment of 6 months' compensation as severance is required, or at any time for cause. The agreements also provide for incentive bonus based on whether the company achieves a target income before taxes, determined by the board of directors. We make available to the executives the same employee benefits generally made available to other managers and employees. The agreements contain non-competition clauses for 24 months after termination of the agreement and provisions regarding confidentiality of company information.
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|Item11. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|The following table shows, as of December 31, 2004, the beneficial ownership of our common stock held by (i) each person who is known by us to beneficially own more than 5% of the outstanding shares of any class of our voting securities; (ii) each of our directors; (iii) each of our Named Executive Officers; and (iv) all of our directors and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|13                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|Named Executive Officers as a group. Unless indicated otherwise, the address of each person listed below is c/o ADS Media Group, Inc., 12758 Cimarron Path, Suite B-128, San Antonio, Texas, 78249.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

| | Name of Beneficial Owners                                                           | Number of
Shares
Beneficially 
Owned (1) | Percentage of
Ownership (2)
| | ----------------------------------------------------------------------------------- | ---------------------------------------- | ---------------------------
| | Gavin M. Gray (6)
701 Brazos Street, Suite 960
Austin, Texas 78701                  | 1,856,814                                | 9.8%                       
| | Clyde J. Berg
600 Congress Ave.
Austin, Texas 78701                                 | 1,565,846                                | 8.3%                       
| | George T. Pjura
3703 Stonebridge Drive
Cape Girardeau, Missouri 63703               | 1,272,058                                | 6.6%                       
| |                                                                                     |                                          |                            
| | Executive Officers and Directors:                                                   |                                          |                            
| | Clark R. "Dub" Doyal                                                                | 4,915,025                                | 26.0%                      
| | James D. (Jim) Schell (7)                                                           | 1,854,083                                | 9.7%                       
| | Gary J. Davis (3) (4)
      3811 Bee Cave Rd, Suite 210
      Austin, Texas 78746   | 2,931,387                                | 15.4%                      
| | Bryan T. Forman (3) (5)
      6836 Bee Cave Rd, Suite 242
      Austin, Texas 78746 | 3,182,907                                | 16.3%                      
| |                                                                                     |                                          |                            
| | All Executive Officers and Directors as a 
   Group (4 persons) (3)                 | 10,980,684                               | 55.6%                      
| |                                                                                     |                                          |                            



|
|



|(1) | Pursuant to the rules of the Securities and Exchange Commission, a person or group is deemed to have "beneficial ownership" of any shares with regard to which such person or group has or shares voting or investment power or has or shares the right to acquire such power within 60 days of December 31, 2004, such as pursuant to the conversion or exchange of securities or the exercise of stock options or warrants.  For purposes of computing the percentage of outstanding shares held by any person or group of persons, shares that such person or group has the right to acquire within 60 days of December 31, 2004 are deemed to be outstanding for the purpose of computing the percentage ownership of such person or group but are not deemed to be outstanding for the purpose of computing the percentage ownership of any other person or group.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(2) | Based on 18,892,073 shares of common stock outstanding as of December 31, 2004. Percentage ownership is calculated separately for each person on the basis of the actual number of outstanding shares as of December 31, 2004 plus the number of shares issuable to that owner on exercise of options and warrants and the number of common shares into which the owner's preferred shares are convertible, and dividing by the total number of outstanding shares plus that owner's option, warrant and preferred conversion shares. Each Series A and Series B Preferred Share is convertible into five (5) shares of Common Stock. Each Warrant is convertible into one (1) share of Common Stock.                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(3) | Mr. Davis and Mr. Forman are the President and Managing Member, respectively, of two co-general partners of ADS Equity Partners, L.P. ("ADS Equity"), which owns 1,902,538 shares of ADS Media common stock. Because they have joint power to vote the shares owned by ADS Equity, each of them may be deemed to be beneficial owner of all the common stock owned by ADS Equity pursuant to Rule 13d-3 promulgated under the Securities and Exchange Act of 1934, as amended. Accordingly, the 1,902,538 shares of ADS Media that ADS Equity owns are included in the number of shares both Mr. Davis and Mr. Forman own and in the number of shares owned by all officers and directors as a group.                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

|14
|--
|  
|  



|(4) | Includes 90,000 shares issuable on the exercise of options, 590,571 shares held by partnerships in which Mr. Davis is a partner, and 264,278 shares held by a corporation of which Mr. Davis is the sole shareholder.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                      
|(5) | Includes 25,000 shares to be issued to Mr. Forman for services rendered and 617,332 shares issuable on the exercise of warrants.                                                                                     
|    |                                                                                                                                                                                                                      
|(6) | Includes 1,674,405 shares and warrants to purchase up to 35,076 shares held by partnerships in which Mr. Gray is a partner.                                                                                          
|    |                                                                                                                                                                                                                      
|(7) | Includes 155,556 shares which Mr. Schell has the right to acquire on the exercise of warrants.                                                                                                                       
|    |                                                                                                                                                                                                                      

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Item 12. Certain Relationships and Related Transactions.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|From time to time in 2004, ADS Media issued securities to officers and 5% shareholders as detailed in Item 5 - Market for Common Equity and Related Stockholder Matters - Recent Sales of Unregistered Securities.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|During the years ended December 31, 2004 and 2003, ADS Media purchased $2,740 and $63,175, respectively, in goods and services from Laser Dimensions, Inc., a company in which two of the officers of ADS Media own a non-controlling interest. As of December 31, 2004 and 2003, ADS Media owed Laser Dimensions $0 and $12,678, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|In 2004, ADS Media issued a short-term note payable for $60,000 to a 5% shareholder of the company. In connection with obtaining this short-term debt financing, ADS Media also issued the shareholder warrants to purchase up to 500,000 shares of common stock at an exercise price of $0.12 per share. ADS Media repaid the principal and interest in full on this note in 2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|In January 2003, ADS Media issued 827,183 shares of common stock to a related-party investor in exchange for $150,000 in cash (approximately $0.18 per share. ADS Media also issued warrants to purchase 246,663 post-acquisition shares to a director as compensation for services rendered in connection with the acquisition.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|Also in January 2003, ADS Media issued 3,005,543 shares of common stock to the related-party investor in exchange for $545,000 in a stock subscription note receivable (approximately $0.18 per share). In addition, ADS Media issued warrants to purchase up to 150,328 shares of common stock, at an exercise price of $0.16 per share, to a director in connection with the stock subscription note receivable. ADS Media received a total of $15,000 in payment of the subscription note. In August 2003, the stock subscription note receivable matured with a balance owed to ADS Media in the amount of $530,000. Consequently, 2,922,822 shares of common stock issued in connection with the note receivable have been returned to the Company for cancellation, and the director agreed to return warrants to purchase 142,056 shares in connection with the subscription note for cancellation.
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|In January 2003, ADS Media issued 137,889 shares of common stock to an investment partnership in which a 5% shareholder is a partner. This transaction resulted in net proceeds to ADS Media of approximately $25,000 ($0.18 per share.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|In March 2003, ADS Media issued 694,444 shares of the common stock to a 5% shareholder. In addition, ADS Media issued warrants to purchase up to 31,569 shares of common stock at an exercise price of $0.16 per share. This transaction resulted in net proceeds to ADS Media of approximately $125,000 (or $0.18 per share).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|On seven separate occasions in 2003, ADS Media issued a total of 508,037 shares of common stock to a director in exchange for professional services. The dates, amounts, and stock prices for these shares are as follows.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

|Date       | Number of Shares | Price per Share
|---------- | ---------------- | ---------------
|March 2003 | 55,556           | $0.18          
|April 2003 | 90,909           | $0.11          
|May 2003   | 26,316           | $0.38          
|           |                  |                

|15
|--
|  

|Date           | Number of Shares | Price Per Share
|-------------- | ---------------- | ---------------
|June 2003      | 83,333           | $0.12          
|July 2003      | 76,923           | $0.13          
|August 2003    | 125,000          | $0.08          
|September 2003 | 50,000           | $0.20          
|               |                  |                

|In 2003, ADS Media also agreed to issue 25,000 shares of common stock and a warrant to purchase an additional 25,000 shares to a director for services in arranging a short term loan.                                                                     
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                           
|In 2003, ADS Media issued warrants to purchase up to a total of 72,658 shares of common stock to a director in exchange for consulting services. The dates, post-acquisition amounts, and post-acquisition exercise prices for these shares are as follows.
|                                                                                                                                                                                                                                                           

|Date        | Number of Warrants | Exercise Price per Share
|----------- | ------------------ | ------------------------
|March 2003  | 37,582             | $0.16                   
|August 2003 | 35,076             | $0.15                   
|            |                    |                         

|Item 13. Exhibits
|-----------------
|                 

|31.1+ | Certification of the Chief Executive Officer and Chief Financial Officer of ADS Media required by Section 302 of the Sarbanes-Oxley Act of 2002                              
|----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      |                                                                                                                                                                              
|32.1+ | Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|      |                                                                                                                                                                              

|                                                                                                                                                                     
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------
|+          Filed with this Form 10-KSB                                                                                                                               
|                                                                                                                                                                     
|Item 14. Principal Accountant Fees and Services.                                                                                                                     
|                                                                                                                                                                     
|Audit Fees                                                                                                                                                           
|                                                                                                                                                                     
|Our independent auditors for fiscal 2003 and 2004 were Sprouse & Anderson, LLP. The fees billed to ADS Media by Sprouse & Anderson, LLP are shown in the table below.
|                                                                                                                                                                     



| |                    | Year EndedDecember 31, |             
| | ------------------ | ---------------------- | ------------
| |                    | 2004                   | 2003        
| |                    |                        |             
| | Audit fees         | $     20,550           | $     32,800
| | Audit-related fees | -                      | -           
| | Tax fees           | 2,000                  | -           
| | All other fees     | -                      | -           
| |                    | $     22,550           | $     32,800
| |                    |                        |             



|Audit fees consist of fees billed for professional services for the audit of ADS Media's annual financial statements, reviews of the financial statements included in ADS Media's quarterly reports and services that are normally provided in connection with statutory and regulatory filings.                                                                                      
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                      
|Audit-related fees consist of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of ADS Media's consolidated financial statements and are not reported under "Audit Fees."                                                                                                                                          
|                                                                                                                                                                                                                                                                                                                                                                                      
|Tax fees consist of fees billed for professional services for tax compliance, tax advice and tax planning.                                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                                                                                                                      
|16                                                                                                                                                                                                                                                                                                                                                                                    
|                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                      
|All other fees consist of fees for products and services other than for services reported above.                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                      
|Pre-Approval Policy and Procedures                                                                                                                                                                                                                                                                                                                                                    
|                                                                                                                                                                                                                                                                                                                                                                                      
|It is the Board of Director's policy to pre-approve all services provided by Sprouse & Anderson, LLP. All services provided by Sprouse & Anderson, LLP during the years ended December 31, 2004 and 2003 were pre-approved by the Board of Directors.                                                                                                                                 
|                                                                                                                                                                                                                                                                                                                                                                                      
|As of the date of this filing, ADS Media's current policy is to not engage Sprouse & Anderson, LLP to provide, among other things, bookkeeping services, appraisal or valuation services, or internal audit services. The policy provides that ADS Media engage Sprouse & Anderson, LLP to provide audit, tax, and other assurance services, such as review of SEC reports or filings.
|                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                      
|17                                                                                                                                                                                                                                                                                                                                                                                    
|                                                                                                                                                                                                                                                                                                                                                                                      
|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.                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                      



|Date: | March 17, 2006 | ADS Media Group, Inc.  
|----- | -------------- | -----------------------
|      |                |                        
|      |                | By: /s/ Clark R. Doyal 
|      |                | Clark R. Doyal         
|      |                | Chief Executive 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.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                       



|Name                | Title                                        | Date          
|------------------- | -------------------------------------------- | --------------
|                    |                                              |               
|/s/ Clark R. Doyal  | Chairman, Chief Executive Officer,           | March 17, 2006
|Clark R. Doyal      | President and Director (Principal Executive, |               
|                    | Financial and Accounting Officer)            |               
|                    |                                              |               
|/s/ James D. Schell | Vice President, Secretary, Treasurer and     | March 17, 2006
|James D. Schell     | Director                                     |               
|                    |                                              |               
|/s/ Gary J. Davis   | Director                                     | March 17, 2006
|Gary J. Davis       |                                              |               
|                    |                                              |               
|/s/ Bryan T. Forman | Director                                     | March 17, 2006
|Bryan T. Forman     |                                              |               
|                    |                                              |               

|  
|--
|  
|  
|  
|  
|  
|  
|  
|  
|  
|  
|  
|18
|  
|  



|INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
|------------------------------------------
|                                          

|INDEPENDENT AUDITORS' REPORT OF SPROUSE & ANDERSON LLP    | F-2
|--------------------------------------------------------- | ---
|                                                          |    
|CONSOLIDATED BALANCE SHEETS                               | F-3
|                                                          |    
|CONSOLIDATED STATEMENTS OF OPERATIONS                     | F-5
|                                                          |    
|CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT) | F-6
|                                                          |    
|CONSOLIDATED STATEMENTS OF CASH FLOWS                     | F-7
|                                                          |    
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                | F-9
|                                                          |    
|                                                          |    



















































|   
|---
|   
|   
|   
|   
|   
|   
|   
|F-1
|   
|   



|INDEPENDENT AUDITORS' REPORT                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|To the Board of Directors and Shareholders                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|ADS Media Group, Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|San Antonio, Texas                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|We have audited the accompanying consolidated balance sheets of ADS Media Group, Inc. (the "Company") as of December 31, 2004 and 2003, and the related consolidated statements of operations, shareholders' equity and cash flows for the years then ended.  These consolidated financial statements are the responsibility of the Company's management.  Our responsibility is to express an opinion on these financial statements based on our audits.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement.  An audit includes 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. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of ADS Media Group, Inc. as of December 31, 2004 and 2003, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|Sprouse & Anderson, LLP                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|Austin, Texas                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|July 8, 2005                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|F-2                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           



|ADS MEDIA GROUP, INC.      
|---------------------------
|CONSOLIDATED BALANCE SHEETS
|                           

|                                                                                                       | For the Year EndedDecember 31,
|------------------------------------------------------------------------------------------------------ | ------------------------------
|                                                                                                       | 2004                          
|                                                                                                       |                               
|CURRENT Assets                                                                                         |                               
|Cash and cash equivalents                                                                              | $       208,860               
|Accounts receivable (net of allowance for doubtful accounts of $42,449 in 
  2004 and $37,447 in 2003) | 441,362                       
|Prepaid expenses                                                                                       | 48,499                        
|Other current assets                                                                                   | 2,400                         
|                                                                                                       |                               
|Total current assets                                                                                   | 701,121                       
|                                                                                                       |                               
|PROPERTY AND EQUIPMENT                                                                                 |                               
|Furniture and fixtures                                                                                 | 16,572                        
|Computer equipment                                                                                     | 48,031                        
|Less: accumulated depreciation                                                                         | (50,179)                      
|                                                                                                       |                               
|Total property and equipment, net                                                                      | 14,424                        
|                                                                                                       |                               
|GOODWILL                                                                                               | 250,000                       
|                                                                                                       |                               
|OTHER ASSETS                                                                                           | 11,500                        
|                                                                                                       |                               
|TOTAL ASSETS                                                                                           | $977,045                      
|                                                                                                       |                               
|                                                                                                       |                               



































|                                                                                       
|---------------------------------------------------------------------------------------
|                                                                                       
|                                                                                       
|                                                                                       
|The accompanying notes are an integral part of these consolidated financial statements.
|                                                                                       
|F-3                                                                                    
|                                                                                       
|                                                                                       



|ADS MEDIA GROUP, INC.                  
|---------------------------------------
|CONSOLIDATED BALANCE SHEETS (continued)
|                                       



|                                                                                                                                           | December 31,   
|------------------------------------------------------------------------------------------------------------------------------------------ | ---------------
|                                                                                                                                           | 2004           
|                                                                                                                                           |                
|CURRENT Liabilities                                                                                                                        |                
|Accounts payable                                                                                                                           | $       489,961
|Customer advance payments                                                                                                                  | 80,784         
|Accrued salaries and wages                                                                                                                 | 618,688        
|Accrued liabilities                                                                                                                        | 46,640         
|Due to officer - related party                                                                                                             | 37,754         
|Notes payable, net of discount                                                                                                             | 176,972        
|Notes payable - related parties                                                                                                            | 100,000        
|Other current liabilities                                                                                                                  | 33             
|Obligations under capital leases                                                                                                           | 2,342          
|                                                                                                                                           |                
|Total current liabilities                                                                                                                  | 1,553,174      
|                                                                                                                                           |                
|Obligations under capital leases, long-term                                                                                                | 2,211          
|                                                                                                                                           |                
|Total liabilities                                                                                                                          | 1,555,385      
|                                                                                                                                           |                
|Commitments and contingencies                                                                                                              |                
|                                                                                                                                           |                
|SHAREholders' equity (DEFICIT)                                                                                                             |                
|Preferred stock series A, $0.001 par value, 40,000 shares authorized; 
     13,616 and 13,616 shares issued and outstanding, respectively  | 14             
|Preferred stock series B, $0.001 par value, 6,000 shares authorized; 
     166 and 166 shares issued and outstanding, respectively         | -              
|Common stock, $0.001 par value, 100,000,000 shares authorized; 
     18,892,073 and 18,858,900 shares issued and outstanding, respectively | 18,892         
|Additional paid-in capital                                                                                                                 | 2,099,928      
|Accumulated deficit                                                                                                                        | (2,697,174)    
|                                                                                                                                           |                
|Total shareholders' equity (deficit)                                                                                                       | (578,340)      
|                                                                                                                                           |                
|TOTAL Liabilities and Shareholders' Equity (Deficit)                                                                                       | $977,045       
|                                                                                                                                           |                











|                                                                                       
|---------------------------------------------------------------------------------------
|                                                                                       
|                                                                                       
|                                                                                       
|                                                                                       
|The accompanying notes are an integral part of these consolidated financial statements.
|                                                                                       
|F-4                                                                                    
|                                                                                       
|                                                                                       



|ADS MEDIA GROUP, INC.                
|-------------------------------------
|CONSOLIDATED STATEMENTS OF OPERATIONS
|                                     



|                                                           | For the year endedDecember 31,
|---------------------------------------------------------- | ------------------------------
|                                                           | 2004                          
|                                                           |                               
|REVENUES                                                   | $    3,668,871                
|                                                           |                               
|COST OF GOODS SOLD                                         | 2,594,344                     
|                                                           |                               
|Gross profit                                               | 1,074,527                     
|                                                           |                               
|OPERATING EXPENSES                                         |                               
|Selling, administrative and other operating expenses       | 999,338                       
|Goodwill impairment                                        | -                             
|                                                           |                               
|Total operating expenses                                   | 999,338                       
|                                                           |                               
|Income (loss) from operations                              | 75,189                        
|                                                           |                               
|OTHER INCOME (EXPENSE)                                     |                               
|Interest expense                                           | (77,128)                      
|Interest and other income                                  | 3,034                         
|                                                           |                               
|Total other income (expense)                               | (74,094)                      
|                                                           |                               
|Income (loss) before income taxes                          | 1,095                         
|                                                           |                               
|INCOME TAXES                                               | -                             
|                                                           |                               
|NET INCOME (LOSS)                                          | $1,095                        
|                                                           |                               
|                                                           |                               
|NET INCOME (LOSS) PER SHARE, basic                         | $0.00                         
|                                                           |                               
|WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING,
   basic    | 18,878,549                    
|                                                           |                               
|                                                           |                               
|NET INCOME (LOSS) PER SHARE, diluted                       | $0.00                         
|                                                           |                               
|WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING, 
   diluted | 18,947,459                    
|                                                           |                               







|                                                                                       
|---------------------------------------------------------------------------------------
|The accompanying notes are an integral part of these consolidated financial statements.
|                                                                                       
|F-5                                                                                    
|                                                                                       
|                                                                                       



|ADS MEDIA GROUP, INC.                                    
|---------------------------------------------------------
|CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
|                                                         

|                                                                                | Preferred Stock | Common Stock | Additional |            |             
|------------------------------------------------------------------------------- | --------------- | ------------ | ---------- | ---------- | ------------
|                                                                                |                 |              |            |            | Paid-In     
|                                                                                | Shares          | Par Value    | Shares     | Par Value  | Capital     
|Balance at December 31, 2002                                                    | -               | $       -    | 134,286    | $  679,999 | $        -  
|                                                                                |                 |              |            |            |             
|Acquisition of ADS by NHLT as 
      reverse acquisition                        | 16,644          | 17           | 4,566,782  | 4,567      | 695,416     
|Receipt of ADS common stock in 
     exchange for ADS Media common 
     stock  | -               | -            | (134,286)  | (679,999)  | 679,999     
|Issuance of ADS Media common 
     stock in exchange for ADS common 
     stock | -               | -            | 10,367,655 | 10,368     | (10,368)    
|Common stock issued for cash                                                    | -               | -            | 2,814,459  | 2,814      | 477,186     
|Common stock issued for services                                                | -               | -            | 1,095,694  | 1,096      | 150,344     
|Warrants issued for services                                                    | -               | -            | -          | -          | 20,919      
|Warrants issued in connection with 
     obtaining debt financing               | -               | -            | -          | -          | 20,049      
|Conversion of preferred shares into 
     common stock                          | (2,862)         | (3)          | 14,310     | 14         | (11)        
|Net loss for the year                                                           | -               | -            | -          | -          | -           
|                                                                                |                 |              |            |            |             
|Balance at December 31, 2003                                                    | 13,782          | $         14 | 18,858,900 | $   18,859 | $  2,033,534
|                                                                                |                 |              |            |            |             
|Common stock issued for services                                                | -               | -            | 33,173     | 33         | 4,279       
|Warrants issued for services                                                    | -               | -            | -          | -          | 9,031       
|Conversion of accounts payable 
     into warrants                              | -               | -            | -          | -          | 17,662      
|Warrants issued in connection 
     with obtaining debt financing               | -               | -            | -          | -          | 35,422      
|Net income for the year                                                         | -               | -            | -          | -          | -           
|                                                                                |                 |              |            |            |             
|Balance at December 31, 2004                                                    | 13,782          | $         14 | 18,892,073 | $  18,892  | $  2,099,928
|                                                                                |                 |              |            |            |             

















|                                                                                       
|---------------------------------------------------------------------------------------
|                                                                                       
|                                                                                       
|The accompanying notes are an integral part of these consolidated financial statements.
|                                                                                       
|F-6                                                                                    
|                                                                                       
|                                                                                       



|ADS MEDIA GROUP, INC.                
|-------------------------------------
|CONSOLIDATED STATEMENTS OF CASH FLOWS
|                                     



|                                                                                                   | For the year endedDecember 31,
|-------------------------------------------------------------------------------------------------- | ------------------------------
|                                                                                                   | 2004                          
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                              |                               
|Net income (loss)                                                                                  | $            1,095            
|Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |                               
|Impairment of goodwill                                                                             | -                             
|Bad debt expense                                                                                   | 5,003                         
|Depreciation expense                                                                               | 17,185                        
|Issuance of common stock and warrants for services                                                 | 13,343                        
|Issuance of warrants in connection with obtaining debt financing                                   | 32,422                        
|(Increase) decrease in assets:                                                                     |                               
|Accounts receivable                                                                                | (306,721)                     
|Prepaid expenses and other assets                                                                  | 54,110                        
|Increase (decrease) in liabilities:                                                                |                               
|Accounts payable and accrued expenses                                                              | 370,219                       
|Customer advance payments                                                                          | (33,923)                      
|                                                                                                   |                               
|Total adjustments                                                                                  | 151,638                       
|                                                                                                   |                               
|Net cash provided by (used in) operating activities                                                | 152,733                       
|                                                                                                   |                               
|CASH FLOW FROM INVESTING ACTIVITIES:                                                               |                               
|Capital expenditures                                                                               | (905)                         
|                                                                                                   |                               
|Net cash used in investing activities                                                              | (905)                         
|                                                                                                   |                               
|CASH FLOW FROM FINANCING ACTIVITIES:                                                               |                               
|Proceeds from the sale of common stock                                                             | -                             
|Proceeds from notes payable                                                                        | 109,833                       
|Payments on notes payable                                                                          | (90,264)                      
|Proceeds from notes payable - related parties                                                      | 98,667                        
|Payments on notes payable - related parties                                                        | (78,667)                      
|Payments on capital lease obligations                                                              | (2,201)                       
|                                                                                                   |                               
|Net cash provided by financing activities                                                          | 37,368                        
|                                                                                                   |                               
|NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                               | 189,196                       
|                                                                                                   |                               
|CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                                     | 19,664                        
|                                                                                                   |                               
|CASH AND CASH EQUIVALENTS, END OF PERIOD                                                           | $208,860                      













|The accompanying notes are an integral part of these consolidated financial statements.
|---------------------------------------------------------------------------------------
|F-7                                                                                    
|ADS MEDIA GROUP, INC.                                                                  
|CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)                                      



|                                                                 | For the year ended
December 31,
|---------------------------------------------------------------- | -------------------------------
|                                                                 | 2004                           
|SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:               |                                
|                                                                 |                                
|Cash paid for interest                                           | $                              
|                                                                 |                                
|Cash paid for income taxes                                       | $                              
|                                                                 |                                
|NON-CASH INVESTING AND FINANCING ACTIVITY:                       |                                
|                                                                 |                                
|Goodwill acquired in acquisition of ADS                          | $                              
|                                                                 |                                
|Conversion of ADS shares to ADS Media shares                     | $                              
|                                                                 |                                
|Issuance of common stock and warrants in exchange for services   | $                              
|                                                                 |                                
|Issuance of warrants in connection with obtaining debt financing | $                              
|                                                                 |                                
|Conversion of accrued liabilities to notes payable               | $                              
|                                                                 |                                
|Conversion of accounts payable into warrants                     | $                              

















































|                                                                                       
|---------------------------------------------------------------------------------------
|                                                                                       
|                                                                                       
|The accompanying notes are an integral part of these consolidated financial statements.
|                                                                                       
|                                                                                       
|F-8                                                                                    
|                                                                                       



|ADS MEDIA GROUP, INC.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|December 31, 2004 and 2003                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|NOTE A - GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|Description of Business and Basis of Presentation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|ADS Media Group, Inc. (the "Company" or "ADS Media"), through its wholly owned subsidiary Alternative Delivery Solutions, Inc. ("ADS"), is a leading provider of turnkey direct marketing support services, with an emphasis on alternate (i.e., door to door) delivery.  Services provided include the creation, packaging and delivery of direct marketing materials (e.g., brochures, coupons, advertisements, etc.) to targeted audiences. In addition to alternate delivery, ADS provides its clients direct marketing, printing, list procurement, database management and fulfillment services, primarily through outsourcing arrangements with third party vendors.  The Company is based in San Antonio, Texas and serves customers and markets throughout the United States.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|ADS Media, formerly known as National Health and Safety Corporation ("NHLT"), is a Utah corporation incorporated on March 23, 1989. ADS was incorporated in Texas on October 22, 2001 under the name Distributel Media Distribution, Inc. The name was changed to Alternative Delivery Solutions, Inc. in 2002. On January 31, 2003, ADS was acquired by NHLT in an exchange offer in which all of the ADS shareholders transferred all of their shares of ADS to NHLT in exchange for shares of NHLT's common stock. For accounting purposes this combination was treated as a "reverse acquisition" in accordance with APB 16, with ADS treated as the acquiring company. After the exchange, the former ADS shareholders owned 15,000,000 shares (75%) of the outstanding common stock of NHLT, including shares issuable upon exercise of outstanding warrants.  The remaining 4,900,002 shares (25%) were owned by the pre-stock exchange NHLT shareholders, including shares issuable upon the conversion of outstanding preferred stock and the exercise of outstanding options. The Company acquired the 4,900,002 shares of NHLT for a total value of $700,000, which represented the excess purchase price over fair value of assets acquired in the acquisition of ADS by NHLT and was recorded as goodwill.
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|Principles of Consolidation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|The accompanying consolidated financial statements include the financial statements of the Company and its wholly owned subsidiary, ADS. All intercompany balances and transactions have been eliminated in consolidation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|Cash and Cash Equivalents                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|Cash and cash equivalents include cash on hand and on deposit and highly liquid debt instruments with original maturities of three months or less.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|Concentration of Credit Risk and Accounts Receivable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|The Company extends unsecured credit in the normal course of business to virtually all of its customers. Management has provided an allowance for doubtful accounts which reflects its opinion of amounts which may ultimately become uncollectible. In the event of non-performance of accounts receivable, the maximum exposure to the Company is the recorded amount shown on the balance sheets. Concentration of credit risk and failure to collect accounts receivable have not presented significant problems to ADS Media.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|Property and Equipment                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|Property and equipment are recorded at cost. Depreciation is computed on property and equipment using the straight-line method over the expected useful lives of the assets, which are generally three years for computer equipment and five years for furniture and fixtures. Repairs and maintenance costs are expensed as incurred and improvements are capitalized. Depreciation expense for the years ended December 31, 2004 and 2003 was $17,185 and $17,941, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|Goodwill                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|Goodwill represents the excess purchase price over fair value of assets acquired in the acquisition of ADS by NHLT                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|F-9                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|ADS MEDIA GROUP, INC.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|December 31, 2004 and 2003                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|on January 31, 2003 in the amount of $700,000. Goodwill is being accounted for in accordance with Statement of Financial Accounting Standards ("SFAS") No. 142 "Goodwill and Other Intangible Assets." This pronouncement decrees that goodwill be reviewed for impairment rather than amortized, on an annual basis, beginning on January 1, 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|The Company assesses the carrying value of goodwill annually and when factors are present that indicate an impairment may have occurred. Goodwill is considered impaired and a loss is recognized when its carrying value exceeds its implied fair value. Factors that are considered important which could trigger an impairment review include the following:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

|- | significant underperformance relative to expected historical or projected future operating results;      
|- | ---------------------------------------------------------------------------------------------------------
|- | significant changes in the manner or use of the acquired assets or the strategy for our overall business;
|- | significant negative industry or economic trends;                                                        
|- | significant decline in stock price for a sustained period; and                                           
|- | our market capitalization relative to net book value.                                                    
|  |                                                                                                          

|Each year the Company assesses the realizability of the recorded goodwill and other intangibles in accordance with SFAS No. 142. At December 31, 2003, the analysis indicated that goodwill, attributed to the value of a publicly traded "shell" company which we acquired, was impaired, in that its carrying value was greater than fair value. The Company then used other market methods to estimate the fair value of the assets and liabilities other than goodwill and intangibles. This assessment indicated that goodwill of $450,000 was impaired. As a result, for the year ended December 31, 2003, the Company impaired its stated goodwill value by $450,000 from $700,000 to $250,000 by recording a non-cash goodwill impairment charge in continuing operations. At December 31, 2004, the analysis indicated that there was no further impairment of goodwill. The Company will continue to test on a consistent measurement date unless events occur or circumstances change between annual impairment tests that would more likely than not reduce fair value below its carrying value.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|Revenue Recognition                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|The Company recognizes revenue upon completion of project for fulfillment revenues, upon mailing of product for direct mail revenues and upon delivery of product to consumer for alternative delivery revenue. Services are generally not subject to "rights of return" unless the Company did not perform services in accordance with the contract.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|Income Taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|The Company records income taxes in accordance with SFAS No. 109 "Accounting for Income Taxes." Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the consolidated financial statement carrying amount of existing assets and liabilities and their respective tax bases, including operating loss carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.                                                                                                                                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|Stock-Based Compensation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|The Company accounts for stock-based employee compensation arrangements in accordance with the provisions of Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees," and complies with the disclosure provisions of SFAS No. 123, "Accounting for Stock Based Compensation." Under APB Opinion No. 25, compensation expense would be recorded on the date of grant only if the current market price of the underlying stock exceeded the exercise price. SFAS No. 123, as amended by SFAS No. 148, "Accounting for Stock-Based Compensation-Transition and Disclosure-an amendment of FASB Statement No. 123," established accounting and disclosure requirements using a fair value-based method of accounting for stock-based employee compensation plans. As allowed by SFAS No. 123 (as amended), the Company has elected to continue to apply the intrinsic value-based method of accounting described above, and has adopted the disclosure requirements of SFAS                                                                                              
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|F-10                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|ADS MEDIA GROUP, INC.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|December 31, 2004 and 2003                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|No. 123 (as amended).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|The Company uses the intrinsic value method to account for stock-based employee compensation. During 2004 and 2003, the Company did not incur any compensation cost under APB No. 25 for options granted under the Plan. For purposes of pro forma disclosure, the estimated fair value of the option is amortized to expense over the option's vesting period.  Had the Company determined compensation cost consistent with SFAS No. 123 and SFAS No. 148 using the fair value method, the Company's net income (loss) and net income (loss) per common share for the years ended December 31, 2004 and 2003 would approximate the pro forma amounts as shown below:                                                                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

|                                                                                                  | For the Year Ended December 31, |      
|------------------------------------------------------------------------------------------------- | ------------------------------- | -----
|                                                                                                  | 2004                            |      
|                                                                                                  |                                 |      
|Net income (loss), as reported                                                                    | $                               | 1,095
|Deduct:  Total stock-based employee compensation expense determined under fair value based method | -                               |      
|Pro forma net income (loss)                                                                       | $                               | 1,095
|                                                                                                  |                                 |      
|Net income (loss) per share:                                                                      |                                 |      
|Basic and diluted -                                                                               |                                 |      
|As reported                                                                                       | $                               | 0.00 
|                                                                                                  |                                 |      
|Pro forma                                                                                         | $                               | 0.00 
|                                                                                                  |                                 |      

|The effects of applying SFAS No. 123 in this pro forma disclosure are not indicative of future amounts.                                                                             
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                    
|The fair value of each stock option granted in 2003 was estimated on the date of grant using the Black-Scholes option pricing-model with the following weighted-average assumptions:
|                                                                                                                                                                                    

|                     | 2003     
|-------------------- | ---------
|Dividend Yield       | 0%       
|Interest Rate        | 10%      
|Implied Volatility   | 50%      
|Expected Option Life | 56 Months
|                     |          

|The Black-Scholes option valuation model and other existing models were developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of and are highly sensitive to subjective assumptions including the expected stock price volatility. The Company's stock options have characteristics significantly different from those of traded options, and changes in the subjective input assumptions can materially affect the fair value estimate.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|The Company accounts for equity instruments issued to non-employees in accordance with the provisions of SFAS No. 123 and Emerging Issues Task Force ("EITF") Issue No. 96-18, "Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services." All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. The measurement date of the fair value of the equity instrument issued is the earlier of                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|F-11                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|ADS MEDIA GROUP, INC.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|December 31, 2004 and 2003                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|the date on which the counterparty's performance is complete or the date on which it is probable that performance will occur.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|Net Loss Per Common Share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|Basic earnings per share amounts are computed by dividing net income or loss by the weighted average number of common shares outstanding during the period. Diluted earnings per share amounts assume the conversion, exercise, or issuance of all potential common stock instruments unless the effect is anti-dilutive, thereby reducing the loss or increasing the income per common share. However, as the Company incurred losses for the year ended December 31, 2003, the inclusion of those potential common shares in the calculation of diluted loss per share for 2003 would have an anti-dilutive effect.  Therefore, basic and diluted per share amounts are the same for the year ended December 31, 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|Fair Value of Financial Instruments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|The carrying value of cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate fair value because of their short-term nature. The recorded balance of notes payable is estimated to be the fair value since the rates specified in the notes approximate rates the Company could currently obtain on debt with similar terms.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|Use of Estimates                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|The preparation of the Company's consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|Recently Issued Accounting Pronouncements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|In December 2004, the FASB issued SFAS No. 123R, "Share-Based Payment". SFAS No. 123R is a revision of SFAS No. 123, "Accounting for Stock Based Compensation," and supersedes APB Opinion No. 25. Among other items, SFAS No. 123R eliminates the use of APB 25 and the intrinsic value method of accounting, and requires that the compensation cost relating to share-based payment transactions be recognized in financial statements based on the provisions of SFAS 123 issued in 1995. The Company currently accounts for stock-based compensation using APB 25 and discloses pro forma compensation expense by calculating the stock option grants' fair value using the Black-Scholes model and disclosing the impact on net income (loss) and net income (loss) per share in a Note to the Consolidated Financial Statements. Upon adoption, pro forma disclosure will no longer be an alternative. The effective date of SFAS No. 123R for the Company is the first quarter of 2006. The adoption of this statement will have the effect of decreasing net income and net income per share and increasing net loss and net loss per share as compared to what would be reported under the current requirements. These future amounts cannot be precisely estimated because they depend on, among other things, the number of options issued in the future, and accordingly, the Company has not determined the impact of adoption of this statement on its results of operations.
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|NOTE B - NOTES PAYABLE                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|Notes payable, net of debt discount, consist of the following at December 31, 2004 and 2003:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|F-12                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|ADS MEDIA GROUP, INC.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|December 31, 2004 and 2003                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

|                                                                                                                                                                                                                                                                                                                                                                           |  | December 31,
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------
|                                                                                                                                                                                                                                                                                                                                                                           |  | 2004        
|Uncollateralized note payable bearing interest at 6%, principal and interest payable monthly until paid in full. Renewed April 1, 2003, bearing interest at 10%, principal and interest payable in full upon maturity, matured April 1, 2004. Renewed May 1, 2004, bearing interest at 10%, principal and interest payable in full upon maturity, matures on May 1, 2005.  |  | 15,000      
|                                                                                                                                                                                                                                                                                                                                                                           |  |             
|Uncollateralized note payable bearing interest at 10%, principal and interest payable monthly until paid in full. Renewed April 1, 2003, bearing interest at 10%, principal and interest payable in full upon maturity, matured April 1, 2004. Renewed May 1, 2004, bearing interest at 10%, principal and interest payable in full upon maturity, matures on May 1, 2005. |  | 50,000      
|                                                                                                                                                                                                                                                                                                                                                                           |  |             
|Uncollateralized note payable bearing interest at 10%, payable in full upon maturity, matured April 1, 2004. Renewed May 1, 2004, bearing interest at 10%, principal and interest payable in full upon maturity, matures on May 1, 2005.                                                                                                                                   |  | 30,000      
|                                                                                                                                                                                                                                                                                                                                                                           |  |             
|Uncollateralized note payable bearing interest at 5.5%, principal and interest payable quarterly beginning April 1, 2004 and in full upon maturity, matures on February 1, 2005.                                                                                                                                                                                           |  | 54,955      
|                                                                                                                                                                                                                                                                                                                                                                           |  |             
|Uncollateralized note payable bearing interest at 10%, principal and interest payable monthly beginning December 15, 2004, until paid in full approximately November 15, 2005, net of debt discount of $3,000 at December 31, 2004.                                                                                                                                        |  | 27,017      
|Notes payable, net of debt discount                                                                                                                                                                                                                                                                                                                                        |  | $176,972    
|                                                                                                                                                                                                                                                                                                                                                                           |  |             

|Notes payable - related parties consist of the following at December 31, 2004 and 2003:
|---------------------------------------------------------------------------------------



|                                                                                                                                                                                                                                                                                        |  | December 31,
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------
|                                                                                                                                                                                                                                                                                        |  | 2004        
|Uncollateralized note payable to a 5% shareholder bearing interest at 6%, principal and interest payable in full upon maturity, matured September 23, 2002. Renewed May 1, 2004, bearing interest at 10%, principal and interest payable in full upon maturity, matures on May 1, 2005. |  | $   40,000  
|                                                                                                                                                                                                                                                                                        |  |             
|Uncollateralized note payable to a 5% shareholder bearing interest at 10%, principal and interest payable in full upon maturity, matured April 1, 2004. Renewed May 1, 2004, bearing interest at 10%, principal and interest payable in full upon maturity, matures on May 1, 2005.     |  | 40,000      
|                                                                                                                                                                                                                                                                                        |  |             
|Uncollateralized note payable to officer bearing interest at 10%, principal and interest payable monthly beginning June 15, 2005, until paid in full approximately February 15, 2006.                                                                                                   |  | 20,000      
|Notes payable - related parties                                                                                                                                                                                                                                                         |  | $100,000    
|                                                                                                                                                                                                                                                                                        |  |             

|Since its inception the Company has issued notes payable primarily for working capital purposes.
|------------------------------------------------------------------------------------------------
|                                                                                                
|                                                                                                
|F-13                                                                                            
|                                                                                                
|                                                                                                



|ADS MEDIA GROUP, INC.                                                                                                                          
|-----------------------------------------------------------------------------------------------------------------------------------------------
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                                                                                     
|December 31, 2004 and 2003                                                                                                                     
|                                                                                                                                               
|NOTE C - CAPITAL LEASE OBLIGATIONS                                                                                                             
|                                                                                                                                               
|The Company is leasing certain equipment under capital leases. Capital leases payable at December 31, 2004 and 2003 consisted of the following:
|                                                                                                                                               

|                                                                               | **2004**        | **2003**        
|------------------------------------------------------------------------------ | --------------- | ----------------
|Capital leases for computer equipment due in monthly installments through 2006 | $         5,009 | $          7,783
|                                                                               |                 |                 
|Less interest                                                                  | 456             | 1,029           
|Less current portion                                                           | 2,342           | 2,201           
|                                                                               |                 |                 
|Obligations under capital leases, long-term                                    | $2,211          | $4,553          
|                                                                               |                 |                 

Scheduled maturities for capital lease obligations for the years ended December 31, are as follows:

| | 2005  | $          2,342
| | ----- | ----------------
| | 2006  | 2,211           
| |       |                 
| | Total | $4,553          
| |       |                 

|The cost and accumulated depreciation of assets acquired under capital leases at December 31, 2004 and 2003, are as follows:
|----------------------------------------------------------------------------------------------------------------------------
|                                                                                                                            

|                                         | **2004**        | **2003**        
|---------------------------------------- | --------------- | ----------------
|                                         |                 |                 
|Cost                                     | $        10,627 | $         10,627
|Accumulated depreciation                 | 6,513           | 4,302           
|                                         |                 |                 
|Net leased property under capital leases | $4,114          | $6,325          
|                                         |                 |                 

|NOTE D - PREFERRED STOCK                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Series A                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|The Company is authorized to issue up to 40,000 shares of Series A Preferred Stock, par value $.001 per share, of which 13,616 shares were issued and outstanding as of December 31, 2004. Each Series A share has a $1.00 liquidation preference and preference over Series B Preferred Stock, Common Stock and all other series of stock ranking junior to Series A. Each share of Series A is convertible, at the option of the holder, into five (5) shares of Common Stock at such times and in such amounts as stated in the Certificate of Designation. The holders of Series A stock are entitled to vote together with the holders of Series B and Common Stock and are entitled to one (1) vote for each share of Common Stock which would be held by them if all of their shares of Series A were converted into shares of Common Stock.
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Series B                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|The Company is authorized to issue up to 6,000 shares of Series B Preferred Stock, par value $.001 per share, of which 166 shares were issued and outstanding as of December 31, 2004. Each Series B share has a $1.00 liquidation preference that is inferior to Series A but in preference to Common Stock and all other series of stock ranking junior to Series B. Each Series B share is convertible at the option of the holder into five (5) shares of                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|F-14                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|ADS MEDIA GROUP, INC.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|December 31, 2004 and 2003                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Common Stock at such times and in such amounts as stated in the Certificate of Designation. The holders of Series B stock are entitled to vote together with the holders of Series A and Common Stock and are entitled to one (1) vote for each share of Common Stock which would be held by them if all of their shares of Series B were converted into shares of Common Stock.                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|NOTE E - Common stock                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Common stock                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|All of these securities were issued in privately negotiated transactions effected in reliance on the exemption contained in Section 4(2) of the Securities Act.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|In 2003, the Company issued 2,731,738 shares of common stock, at prices ranging from $0.15 to $0.18 per share, in exchange for $465,000 in cash.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|In January 2003, prior to the stock exchange, the Company issued 38,929 shares (3,005,543 post-acquisition shares) of common stock in exchange for $545,000 in a stock subscription note receivable. In March 2003, a payment of $15,000 was made on the note receivable (representing 82,721 post-acquisition shares of common stock). In August 2003, the remaining stock subscription note receivable matured with a balance owed to the Company of $530,000. Consequently, 2,922,822 post-acquisition shares of common stock that were issued pursuant to the stock subscription note receivable have been returned to the company and canceled.                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|In 2003, the Company issued 1,095,694 shares of common stock, at prices ranging from $0.08 to $0.38 per share, in exchange for professional services totaling $151,440. In 2004, the Company issued 33,173 shares of common stock, at a price of $0.13 per share, in exchange for professional services totaling $4,312.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|NOTE F - STOCK WARRANTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|In 2003, the Company issued warrants to purchase up to 72,658 shares of common stock in conjunction with the purchase of common stock. These warrants enable the holder to purchase shares of the Company's common stock at exercise prices ranging from $0.15 to $0.16 per share through 2008.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|In 2003, the Company issued warrants to purchase up to 319,321 shares of common stock in exchange for consulting services. These warrants enable the holder to purchase shares of the Company's common stock at exercise prices ranging from $0.15 to $0.18 per share through 2008.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|In 2003, the Company issued warrants to purchase up to 160,915 shares of common stock in exchange for professional services. These warrants enable the holder to purchase shares of the Company's common stock at an exercise price of $0.13 per share through 2008. The Company recorded $20,919 in expenses related to the issuance of these warrants. In 2004, the Company issued warrants to purchase up to 312,500 shares of common stock in exchange for professional services. These warrants enable the holder to purchase shares of the Company's common stock at an exercise price of $0.12 per share through 2009. The company recorded $9,031 in expenses related to the issuance of these warrants.                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|In 2003, the Company issued warrants to purchase up to 249,999 shares of common stock in connection with a short-term loan to the company. These warrants enable the holder to purchase shares of the Company's common stock at an exercise price of $0.12 per share through 2008. The Company recorded $20,049 in expenses related to the issuance of these warrants. In 2004, the Company issued warrants to purchase up to 1,570,833 shares of common stock in connection with short-term loans to the company. These warrants enable the holder to purchase shares of the Company's common stock at an exercise price of $0.12 per share through 2009. The company recorded $35,422 in additional paid in capital related to the issuance of these warrants.                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|In January 2003, the Company issued warrants to purchase up to 150,328 post-acquisition shares of common stock in connection with the stock subscription note receivable. In March 2003, a payment of $15,000 was made on the                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|F-15                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|ADS MEDIA GROUP, INC.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|December 31, 2004 and 2003                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|note receivable (representing warrants to purchase up to 8,272 post-acquisition shares of common stock). In August 2003, the remaining stock subscription note receivable matured with a balance owed to the Company of $530,000. Consequently, warrants to purchase 142,056 shares of common stock that were issued in connection with the stock subscription note receivable have also been returned to the company for cancellation. The remaining 8,272 warrants enable the holder to purchase shares of the Company's common stock at an exercise price of $0.16 per share through 2008.                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|In 2004, the Company issued warrants to purchase up to 98,120 shares of common stock in exchange for reductions of accounts payable totaling $17,662. These warrants enable the holder to purchase shares of the Company's common stock at an exercise price of $0.18 per share through 2009.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|The following is a summary of outstanding warrants:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

|                                          | **Number ofShares** | **Exercise Price**     
|----------------------------------------- | ------------------- | -----------------------
|                                          |                     |                        
|Warrants outstanding at January 1, 2003   | 264,739             | **$              0.16**
|                                          |                     |                        
|Granted                                   | 953,221             | **$   0.12 - 0.16**    
|Exercised                                 | -                   |                        
|Canceled                                  | (142,056)           | **0.16**               
|                                          |                     |                        
|Warrants outstanding at December 31, 2003 | 1,075,904           | **$   0.12 - 0.16**    
|                                          |                     |                        
|Granted                                   | 1,981,453           | **$   0.12 - 0.18**    
|Exercised                                 | -                   |                        
|Canceled                                  | -                   |                        
|                                          |                     |                        
|Warrants outstanding at December 31, 2004 | 3,057,357           | **$   0.12 - 0.18**    
|                                          |                     |                        



|NOTE G - STOCK OPTIONS                                                                                                                                                                                                                                                                                                                                                                                                    
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Prior to completion of the exchange offer, on January 30, 2003, NHLT's shareholders approved the 2002 Employees and Consultants Stock Option Plan, granting 250,000 options (25,000,000 pre-reverse stock split options) to acquire shares of the Company's common stock at an exercise price of $0.10 per share ($0.001 per share pre-reverse stock split). The options vested immediately and expire on October 6, 2007.
|                                                                                                                                                                                                                                                                                                                                                                                                                          
|The following is a summary of outstanding stock options:                                                                                                                                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                                                                                                                                          

|                                         | **Number ofShares** | **Exercise Price**   
|---------------------------------------- | ------------------- | ---------------------
|Options outstanding at January 1, 2003   | **-**               |                      
|                                         |                     |                      
|Granted                                  | **250,000**         | **$            0.10**
|Exercised                                | **-**               |                      
|Canceled                                 | **-**               |                      
|Options outstanding at December 31, 2003 | **250,000**         | **0.10**             
|                                         |                     |                      
|Granted                                  | **-**               |                      
|Exercised                                | **-**               |                      
|Canceled                                 | **-**               |                      
|Options outstanding at December 31, 2004 | **250,000**         | **0.10**             
|                                         |                     |                      

|                                                                                                                                                                                                                                                                  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|F-16                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                  
|ADS MEDIA GROUP, INC.                                                                                                                                                                                                                                             
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                                                                                                                                                                                                        
|December 31, 2004 and 2003                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                  
|At December 31, 2004, the weighted average remaining contractual life of stock options outstanding was 2.8 years, with 250,000 options exercisable at a weighted average exercise price of $0.10 per share.                                                       
|                                                                                                                                                                                                                                                                  
|NOTE H - OPERATING LEASE OBLIGATIONS                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                                  
|The Company leases office and warehouse space and certain equipment under operating lease agreements having terms expiring at various dates through August 2008. The future minimum annual payments required under the leases at December 31, 2004 are as follows:
|                                                                                                                                                                                                                                                                  

| | 2005  | $          59,262
| | ----- | -----------------
| | 2006  | 77,799           
| | 2007  | 76,574           
| | 2008  | 52,534           
| |       |                  
| | Total | $266,169         
| |       |                  

|Rental and other related expenses for the above leases for the years ended December 31, 2004 and 2003 were approximately $63,000 and $119,000, respectively.                                                                                                                                                                                                                                                                                           
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|NOTE I - INCOME TAXES                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|As of December 31, 2004, the Company had a net deferred tax asset of approximately $5.1 million principally arising from net operating loss carryforwards for income tax purposes.  The Company has established a valuation allowance equal to the net deferred tax asset as of December 31, 2004.  At December 31, 2004 the Company had net operating loss carryforwards of approximately $4.8 million that will begin to expire in 2014 through 2022.
|                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|The Company's reverse acquisition in 2003 and subsequent issuances of stock have effected ownership changes under Internal Revenue Code Section 382.  The ownership changes resulting from this reorganization will likely limit the Company's ability to utilize a significant portion of the net operating loss carryforwards generated before the changes in ownership.                                                                             

|                                           | 2004                  |  | 2003                  
|------------------------------------------ | --------------------- |  | ----------------------
|Deferred tax asset (liabilities):          |                       |  |                       
|Net operating loss carryforward            | $           4,848,580 |  | $           4,218,810 
|Depreciation                               | (2,094)               |  | (3,778)               
|Allowance for doubtful accounts            | 15,706                |  | 13,855                
|Accrued expenses not deductible until paid | 239,279               |  | 138,073               
|                                           |                       |  |                       
|Net total deferred tax asset               | $           5,101,471 |  | $            4,366,960
|                                           |                       |  |                       
|Valuation allowance                        | $(5,101,471)          |  | $(4,366,960)          
|                                           |                       |  |                       
|Net deferred tax asset                     | $-                    |  | $-                    
|                                           |                       |  |                       

|NOTE J - COMMITMENTS AND CONTINGENCIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|The Company may become involved from time to time in litigation on various matters, which are routine to the conduct of its business. The Company believes that none of these actions, individually or in the aggregate, will have a material adverse effect on its financial position or results of operations, though any adverse decision in these cases or the costs of defending or settling such claims could have a material effect on its business.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|On July 2, 2004, RR Donnelley Receivables, Inc. sued ADS to collect a sworn account in the amount of $28,503.76,                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|F-17                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|ADS MEDIA GROUP, INC.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|December 31, 2004 and 2003                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|plus attorney fees and expenses. ADS responded with a general denial and a counterclaim for breach of contract regarding a partnership with the plaintiff in Mexico. In November 2005, the counterclaim was dismissed on jurisdictional grounds. The suit on the sworn account remains pending, but no activity has taken place since November 2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|The Company has employment agreements with three (3) members of management ending in December 2005. The Company is in default of these agreements because it has been unable to pay the employees according to the terms of their respective employment agreements. Each employee may terminate the agreement at any time on 30 days' notice. ADS may terminate each agreement at any time without cause on 30 days' notice, in which case payment of 6 months' compensation as severance is required, or at any time for cause.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|NOTE K - RELATED PARTY TRANSACTIONS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|During the years ended December 31, 2004 and 2003, the Company purchased $2,740 and $63,175, respectively, in goods and services from Laser Dimensions, Inc., a company in which two of the officers of the Company own a non-controlling interest. As of December 31, 2004 and 2003, the Company owed Laser Dimensions $0 and $12,678, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|In 2003, the Company received cash of $294 from the officer in exchange for a payable to officer.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|In 2003, the Company issued 1,071,222 shares of common stock and warrants to purchase up to 35,076 shares of common stock to an investment partnership in which a 5% shareholder is a partner in exchange for $165,000 in cash.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|In 2003, the Company issued 694,444 shares of common stock and warrants to purchase up to 31,569 shares of common stock to a 5% shareholder in exchange for $125,000 in cash.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|In 2003, the Company issued warrants to purchase up to 319,321 shares of common stock to a director in exchange for consulting services.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|In 2003, the Company issued 827,183 shares of common stock to a related-party investor in exchange for $150,000 in cash.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|In January 2003, prior to the stock exchange, the Company issued 3,005,543 post-acquisition shares of common stock to the related-party investor in exchange for $545,000 in a stock subscription note receivable. In addition, the Company issued warrants to purchase up to 150,328 post-acquisition shares of common stock to a director in connection with the stock subscription note receivable. In March 2003, a payment of $15,000 was made on the subscription note (representing 82,721 post-acquisition shares of common stock and warrants to purchase up to 8,272 post-acquisition shares of common stock). In August 2003, the remaining stock subscription note receivable matured with a balance owed to the Company of $530,000. Consequently, 2,922,822 post-acquisition shares of common stock that were issued pursuant to the stock subscription note receivable have been returned to the company for cancellation. Additionally, the director agree to return warrants to purchase 142,056 shares of common stock in connection with the stock subscription note for cancellation.                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|In 2003, the Company issued 508,037 shares of common stock, at prices ranging from $0.08 to $0.38 per share, to a director in exchange for professional services totaling $70,000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|In 2003, the Company issued a short-term note payable for $10,000 to a 5% shareholder of the company. In connection with obtaining this short-term debt financing, the Company also issued the shareholder warrants to purchase up to 83,333 shares of common stock at an exercise price of $0.12 per share. The Company repaid the principal in full on this note in 2003. In 2004, the Company issued a short-term note payable for $60,000 to a 5% shareholder of the company. In connection with obtaining this short-term debt financing, the Company also issued                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|F-18                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|ADS MEDIA GROUP, INC.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|December 31, 2004 and 2003                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|the shareholder warrants to purchase up to 500,000 shares of common stock at an exercise price of $0.12 per share. The Company repaid the principal and interest in full on this note in 2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|In 2004, the Company issued a short-term note payable for $18,667 to an officer of the company. In connection with obtaining this short-term debt financing, the Company also issued the officer warrants to purchase up to 155,556 shares of common stock at an exercise price of $0.12 per share. The Company repaid the principal and interest in full on this note in 2004. Also in 2004, the Company issued a note payable for $20,000 to an officer. Principal and interest are payable monthly beginning June 15, 2005, until paid in full.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|NOTE L - CONCENTRATION OF RISKS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|Four customers each totaled approximately 36%, 18%, 16% and 11% of the Company's revenues for the year ended December 31, 2004. Three customers each totaled approximately 33%, 12% and 10% of the Company's revenues for the year ended December 31, 2003. Concentration of credit risk and failure to collect accounts receivable have not presented significant problems to ADS Media. With a significant amount of the Company's revenues generated by a few major customers, the loss of one of these customers could have a material adverse effect on our business, operating results and financial condition.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|NOTE M - SUBSEQUENT EVENTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|Effective January 1, 2004, an amendment was signed to the original lease agreement (dated October 14, 2002) between Cadena Enterprises, Inc. ("Cadena") and ADS calling for a reduction of leased office space with a corresponding reduction in monthly rent paid by ADS from $10,000 per month to $4,000 per month. The amendment also provided for the early termination of the lease by either Cadena or ADS with a written notice to the other party of not less than 60 days. Additionally, all past due amounts owed by ADS to Cadena for unpaid rents, property taxes and insurance charges were combined and set forth in a Promissory Note dated January 1, 2004 in the amount of $65,403. The Promissory Note carries an annual interest rate of 5.5%, is due and payable in quarterly installments of $1,500 or more beginning on April 1, 2004, and continuing quarterly thereafter until paid in full, provided that all remaining amounts due are payable in full on February 1, 2005. Effective February 1, 2005, the Promissory Note was renewed, payable in monthly installments of $1,500 beginning September 1, 2005. Effective March 31, 2005, this lease was terminated early.
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|On January 10, 2005, ADS signed an original lease agreement for approximately 6,600 square feet of office/warehouse space at 12758 Cimarron Path, Suite B-128, San Antonio, Texas 78249.  The lease was to commence February 1, 2005 for a period of three (3) years and three (3) months. Effective January 24, 2005, an amendment to the original lease was signed delaying the commencement date of the lease to April 1, 2005, with a term of three (3) years and five (5) months. Base monthly rent shall be $0 per month for the first three months, $3,967 per month for the next nine months, $4,588 per month in year two, $4,993 per month in year three, and $5,128 per month for the final five months. Monthly operating expenses (including amounts for taxes, insurance, and common area maintenance) are in addition to the base monthly rent. The property is adequately covered by insurance.                                                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|In 2005, certain notes payable, with a maturity date of May 1, 2005, and in the principal amount of $95,000 at December 31, 2004, matured and are currently due on demand. Likewise, certain notes payable - related parties, with a maturity date of May 1, 2005, and in the principal amount of $80,000 at December 31, 2004, matured and are currently due on demand. At September 30, 2005, $95,000 and $80,000 of these notes payable and notes payable - related parties, respectively, remain outstanding.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|In 2005, the Company issued 145,846 shares of common stock, at a price of $0.13 per share, to consultants in exchange for professional services.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|In 2005, the Company issued 57,143 shares of common stock, at a price of $0.14 per share, to a vendor in exchange for reduction of accounts payable.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|F-19