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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-KSB



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(Mark One)

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

For the Fiscal Year Ended December 31, 2006



| ̈ | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
|- | ---------------------------------------------------------------

For the transition period from  to

Commission file number: 000-27131



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INVERTED PARADIGMS CORPORATION

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



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|                                                               |  |                        
|-------------------------------------------------------------- |  | -----------------------
|Delaware                                                       |  | 88-0381258             
|(State or other Jurisdiction of Incorporation or Organization) |  | (IRS Employer I.D. No.)

2203 North Lois Avenue, Suite 929

Tampa, FL 33607

(813) 600-4081

(Address and telephone number of principal executive offices)

11523 Palm Brush Tr. #341

Lakewood Ranch, FL 34202

(941) 926-6180

(Former address and
telephone number of principal executive offices)

Securities registered under Section 12 (b) of the Exchange Act:



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|                    |  |                                          
|------------------- |  | -----------------------------------------
|Title of each class |  | Name of each exchange on which registered
|None                |  | None                                     

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

$0.001 Par Value Common Stock

Title
of Class



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

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the 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 are no
disclosures of delinquent filers in response to Item 405 of Regulation S-B contained in this form, and no disclosures will be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB.  x

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

Issuers revenues for its most recent fiscal year were $480.

Aggregate market value of voting and non-voting common stock held by non-affiliates as of August 14, 2007 was $131,138 based on a price of $0.004.

The number of shares of the registrants common stock, par value $0.001 per share, outstanding as of August 16, 2007 was 37,645,143 and there were
approximately 1,000 stockholders of record.

Documents Incorporated by Reference

None

Transitional Small Business Issuer
Format: ̈Yes    x  No



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INVERTED PARADIGMS CORPORATION

FORM 10-KSB

TABLE OF CONTENTS



|         |  |          |  |                                                                                                                                       |  |     
|-------- |  | -------- |  | ------------------------------------------------------------------------------------------------------------------------------------- |  | ----
|         |  |          |  |                                                                                                                                       |  | Page
|PART I   |  |          |  |                                                                                                                                       |  | 2   
|         |  |          | 
|         |  | Item 1.  |  | Description of Business                                                                                                               |  | 2   
|         |  | Item 2.  |  | Description of Property                                                                                                               |  | 8   
|         |  | Item 3.  |  | Legal Proceedings                                                                                                                     |  | 8   
|         |  | Item 4.  |  | Submissions of Matters to a Vote of Security Holders                                                                                  |  | 8   
|         |  |          | 
|PART II  |  |          |  |                                                                                                                                       |  | 9   
|         |  |          | 
|         |  | Item 5.  |  | Market for Common Equity and Related Stockholder Matters                                                                              |  | 9   
|         |  | Item 6.  |  | Managements Discussion and Analysis or Plan of Operation                                                                             |  | 11  
|         |  | Item 7.  |  | Financial Statements                                                                                                                  |  | 15  
|         |  | Item 8.  |  | Changes In and Disagreements With Accountants on Accounting and Financial Disclosure                                                  |  | 15  
|         |  | Item 8A. |  | Controls and Procedures                                                                                                               |  | 15  
|         |  | Item 8B. |  | Other Information                                                                                                                     |  | 16  
|         |  |          | 
|PART III |  |          |  |                                                                                                                                       |  | 16  
|         |  |          | 
|         |  | Item 9.  |  | Directors, Executive Officers, Promoters, Control Persons and Corporate Governance: Compliance with Section 16(a) of the Exchange Act |  | 16  
|         |  | Item 10. |  | Executive Compensation                                                                                                                |  | 18  
|         |  | Item 11. |  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters                                        |  | 19  
|         |  | Item 12. |  | Certain Relationships, Related Transactions and Director Independence                                                                 |  | 20  
|         |  | Item 13. |  | Exhibits                                                                                                                              |  | 20  
|         |  | Item 14. |  | Principal Accountant Fees and Services                                                                                                |  | 21  



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Forward Looking Statements

We have made forward-looking statements, within the meaning of Section 21E of the Securities and Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended, in this Annual Report on Form 10-KSB,
including the sections entitled Managements Discussion and Analysis or Plan of Operation and Description of Business that are based on our managements beliefs and assumptions and on information currently available
to our management. Forward-looking statements include the information concerning our possible or assumed future results of operations, business strategies, financing plans, competitive position, industry environment, potential growth opportunities
and the effects of future regulation and the effects of competition. Forward-looking statements include all statements that are not historical facts and can be identified by the use of forward-looking terminology such as the words
believe, expect, anticipate, intend, plan, estimate or similar expressions.

Forward-looking statements involve risks, uncertainties and assumptions. Actual results may differ materially from those expressed in the forward-looking statements. You should understand that many important factors, in addition to those
discussed elsewhere in this Annual Report on Form 10-KSB, could cause our results to differ materially from those expressed in the forward-looking statements. These factors include, without limitation, the rapidly changing industry and regulatory
environment, our limited operating history, our ability to implement our growth strategy, our ability to integrate acquired companies and their assets and personnel into our business, our fixed obligations, our dependence on new capital to fund our
growth strategy, our ability to attract and retain quality personnel, our competitive environment, economic and other conditions in markets in which we operate, increases in maintenance costs and insurance premiums and cyclical and seasonal
fluctuations in our operating results. The Company, unless legally required, undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

For further information about these and other risks, uncertainties and factors, please review the disclosure included in this report under the caption Risk
Factors.



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##### Table of Contents

PART I



|ITEM 1. | DESCRIPTION OF BUSINESS
|------- | -----------------------

Overview

We were incorporated under the name DP Charters in Nevada on December 18, 1997. On April 18, 2002, we changed our name to Nomadic
Collaboration International, Inc. Effective May 30, 2003, LGC Acquisition Company, a Delaware corporation and wholly owned subsidiary of Nomadic Collaboration International, Inc., a Nevada corporation, merged with and into LiquidGolf
Corporation, a Delaware corporation, such that LiquidGolf Corporation was the surviving entity, and by virtue thereof, LiquidGolf corporation became a wholly owned subsidiary of Nomadic Collaboration.

On September 29, 2003, the Company completed a re-incorporation merger into a Delaware Corporation thus changing the state of incorporation from Nevada to Delaware.
As a result of the merger, the name of the Company changed to LiquidGolf Holding Corporation.

On December 22, 2003, the Company acquired certain
assets from Leather Craft Technology, Inc. (Leather Craft), including the name, for a single cash payment of $45,000. In addition to the single cash payment, the Company incurred a finders fee of $22,500 relating to the
acquisition. Leather Craft sold leather bound notebooks and related products. The Company acquired Leather Craft in order to diversify its revenue streams.

On June 30, 2004, we acquired the Game Fore Golf business including the name, for common stock. The Company issued 10,000 shares of its common stock for this acquisition. Game Fore Golf was accounted for by us as part of the leather
goods product segment. Game Fore Golf distributed specialty golf bags and head covers adorned with wildlife artist works that Game Fore Golf is licensed, by the artist, to distribute.

On August 12, 2004 a majority of our stockholders approved changing the name of the Company from LiquidGolf Holding Corporation to Horizon Holding Corporation to reflect our business direction of diversifying its
revenue streams.

In November 2004, the board of directors decided to discontinue the operations of Leather Craft including Game Fore Golf, due to
significantly fewer orders than expected for leather goods from Leather Crafts largest customer.

Since the date of the merger with LiquidGolf
Corporation in May 2003, our goal had been to create an online community for golfers that provided an e-commerce marketplace for the sale of golf-related equipment and apparel, golf-related news and information and e-commerce solutions for other
golf-related businesses. In February 2005, we closed our retail golf operation in Apopka, Florida to focus on our golf web site operations, by seeking to partner with an experienced golf e-tailer. During August 2006, we decided to discontinue the
operations of Liquidgolf, due to the inability to attract affiliates to the website and our inability to find an experienced partner in the golf industry.

In January 2006, in a continuing effort to build a revenue stream, we purchased the Silent SwordTMsoftware and all trademarks, service marks, and logos. As of December 31, 2006, we have issued a total of 10,000,000 shares of our common stock for
Silent SwordTM.Under the purchase agreement, we may issue a maximum of 20,000,000 common shares subject to certain provisions in the agreement. The stock issued is considered restricted securities as defined by the Securities Act of 1933, as amended. The
product became available for sale in the third quarter of 2006. In March 2007, we closed our website and discontinued sales due to a lack of funds. We also wrote off the remaining value of our software and trademarks. We intend to not only to
continue to seek additional funding, but re-evaluate our business plan to include an evaluation of other lines of business.

On April 28, 2006 a majority of our stockholders approved changing the name of the Company from Horizon
Holding Corporation to Inverted Paradigms Corporation (Inverted) to reflect our business direction of developing the Silent SwordTMsoftware.



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Unless otherwise indicated, references in this Annual Report to 2006 and 2005 are to Inverteds fiscal years ended
December 31, 2006 and 2005, respectively.

Our principal executive offices and mailing address is 2203 North Lois Avenue, Suite 929 Tampa, FL 33607
and our telephone number is (813) 600-4081.

Our Strategy

We had been selling and enhancing our software, Silent SwordTM. The software is a comprehensive set of security solutions. The solutions include anti-virus, anti-spyware, anti-spam, intrusion prevention, secure
messaging, web filtering and vulnerability management. We offer management tools to keep threat-protection systems up-to-date. We began selling this product in July 2006, but discontinued sales in March 2007 due to slow sales and a lack of funds.

We are currently re-evaluating our product to determine its feasibility in the market place. We are also evaluating other lines of business to
compliment our software business or change our business line to a new product or service.

Our Product

Silent Swordis a virus/mal-ware protection software. This concept was initially developed by Charles Wernicke, Chief Technology Officer (CTO), in February
2004. Silent Swordis not only used to rid the Windowscomputer system of virus and mal-ware but further enhances the performance and operation of the Operating System (OS) by managing its protection in the startup boot of
the OS.

Our retail version of Silent Swordwill enable us to expand into an Original Equipment Manufacture (OEM) and Enterprise version.

Silent Swordcombats all forms of mal-ware, spy-ware and other malicious viruses. Its patent pending process attacks the viruses at the
start-up level using a white list/black list process before it corrupts a computer. Silent Sworddifferentiates itself from other products in the way it addresses the viruses. The software is not concerned with the virus unless it
causes an issue. A virus needs to initiate itself in the startup boot section of the Windows OS. Silent Swordaddresses those active viruses. Other virus file infectors are dormant until they need to propagate. If they do propagate,
then they will become active in the start-up sector. Silent Swordcontrols the advancement of those viruses by controlling the startup file boot sector. Future Silent Swordversions will include an OEM version that will
allow Silent Swordto be customized to OEM specifications. The Enterprise version will enable Network Engineers to manually and automatically control the desktop programs that will be able to run and those that will not.

Marketing and Sales Summary

The primary marketing focus is to further raise awareness of the retail version. We will utilize websites and a concentrated focus on the personal computer repair shops allow us to create a presence throughout the
internet and in the marketplace. Secondly, we will create mailers to key demographic sectors for purchase via the website. Thirdly, we will educate the distribution and channel resellers to extend the awareness and market share of the product. At
this time, we plan to deliver repair retail shops of major retailers the Silent SwordTMproduct at a
reduced fee to help reduce their repair time dramatically.

The next direction will be to use media outlets. Media will be utilized to further
promote the awareness of the product. Lastly, the modification and fluency of the website will promote usage, focus groups, knowledgebase implementation and increased traffic due to modified search indexing on the current sites. We plan to present
the software to the OEM market, which consists of companies like Dell, Gateway and HP/Compaq. Our intent is to allow OEM to customize or value-add the current retail version to give OEM pertinent information to speed up support and service calls.
The enterprise version will be marketed via Trade Shows, word-of-mouth and computer conferences. Success will ultimately be determined by the number of gross software sales, acceptance by the technical community and the adoption of the product on
the OEM and Corporate levels.



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The Competition

Our
flagship software product Silent Swordaddresses the virus/spy-ware/mal-ware issue in a completely new way. The main premise is to maintain a blacklist of known mal-ware/spy-ware programs and scan the entire file structure to detect,
clean and dispose of the computer infectors properly. While Silent Swords process is similar, there are very consistent differences. Silent Sword handles not only the blacklist of definitions but also a whitelist of definitions of
programs that are allowed to run on the PC. Also, Silent Sword patent-pending process addresses the issue in the startup section of the boot. This enables Silent Sword to address only propagating viruses not just the
viruses that are not active. Again, using this method also allows Silent Sword to run faster than its competitors because scanning the startup sectors is very fast compared to scanning the entire file structure. The last point about Silent
Sword and its competition involves the use of automation in the product. Most competitors have the need for interfering manual transactions. Silent Sword can virtually run on its own without interaction of the end-user.

The markets for our products are intensely competitive and are subject to rapid changes in technology. We also expect competition to increase in the
near-term. We believe that the principal competitive factors affecting the markets for our products include, but are not limited to:



| |  |  | performance,
| | - |  | ------------



| |  |  | quality,
| | - |  | --------



| |  |  | breadth of product group,
| | - |  | -------------------------



| |  |  | integration of products,
| | - |  | ------------------------



| |  |  | introduction of new products,
| | - |  | -----------------------------



| |  |  | brand name recognition,
| | - |  | -----------------------



| |  |  | price,
| | - |  | ------



| |  |  | market presence,
| | - |  | ----------------



| |  |  | functionality,
| | - |  | --------------



| |  |  | innovation,
| | - |  | -----------



| |  |  | customer support,
| | - |  | -----------------



| |  |  | frequency of upgrades and updates,
| | - |  | ----------------------------------



| |  |  | reduction of production costs,
| | - |  | ------------------------------



| |  |  | manageability of products, and
| | - |  | ------------------------------



| |  |  | reputation.
| | - |  | -----------

We believe that we compete favorably
against our competitors in performance, innovation and price. However, some of our competitors have longer operating histories, greater brand recognition, stronger relationships with strategic channel partners, larger technical staffs, established
relationships with hardware vendors and/or greater financial, technical and marketing resources. These factors may provide our competitors with an advantage in penetrating markets with their network security and management products.

Our principal competitors in the anti-virus market are McAfee, Symantec Corp., Computer Associates International Inc. and Microsoft Corp. In addition to competition from
large technology companies such as McAfee, EMC Corp., Hewlett-Packard Co., IBM, Novell Inc. and Microsoft Corp., we also face competition from smaller companies and shareware authors that may develop competing products.

Proprietary Technology

Our success depends significantly upon
proprietary software technology. We rely on a combination of patents pending, trademarks, trade secrets and copyrights to establish and protect proprietary rights to our software. However, these protections may be inadequate or competitors may
independently develop technologies or products that are substantially equivalent or superior to our products. Laws in some foreign countries either do not protect these rights at all or offer only limited protection for these rights. The steps taken
by us to protect our proprietary software technology may be inadequate to deter misuse or theft of this technology.



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Employees

As of
August 1, 2007, we had 3 full time executive management personnel. Our personnel consists of our Chief Executive and Financial Officer, Chief Technology Officer, and Director of Corporate Finance. None of the employees are covered by a
collective bargaining agreement and our management considers relations with our employees to be good.

RISK FACTORS

Risks Specific to Our Company

We have limited operating
funds, and our ability to continue as a going concern is dependent upon our ability to obtain additional capital to operate our business.

We have
incurred net losses and negative cash flows from operations in all of the quarters since our inception. Our lack of sufficient financing to implement our business plan, and our expectation of continued operating losses for the foreseeable future
raises substantial doubt about our ability to continue as a going concern. Our independent registered certified public accounting firm has issued its report, which includes an explanatory paragraph for going concern uncertainty on our financial
statements as of December 31, 2006. Our ability to continue as a going concern is heavily dependant upon our ability to obtain additional capital to sustain operations. Currently, we have no commitments to obtain additional capital, and there
can be no assurance additional capital will be available on acceptable terms, if at all.

We will need additional financing, the availability of which
is uncertain, to fund our business and to implement our business plan.

We will require additional financing in order to carry out our business plan.
Such financing may take the form of the issuance of common or preferred stock or debt securities, or may involve bank financing. There can be no assurance that we will obtain such additional capital on a timely basis, on favorable terms, or at all.
If we are unable to generate the required amount of additional capital, our ability to meet our financial obligations and to implement our business plan may be adversely effected.

We will need additional capital, the availability of which is uncertain, to fund our business and complete the implementation of our business plan.

We will require additional financing in order to carry out our business plan. Such financing may take the form of the issuance of common or preferred stock or debt securities, or may involve bank financing. There can
be no assurance that we will obtain such additional capital on a timely basis, on favorable terms, or at all. If we are unable to generate the required amount of additional capital, our ability to meet our financial obligations and to implement our
business plan may be adversely effected.

We may dilute existing stockholders by issuing more of our common stock.

It is likely that in order to obtain additional funds as needed, we will have to sell additional securities including, but not limited to, its common stock, the effect
of which may result in a substantial dilution of the present equity interests of our shareholders.

We rely heavily on our intellectual property rights
which offer only limited protection against potential infringers.

We rely on a combination of pending patents, copyright and trademark laws, trade
secrets, confidentiality procedures and contractual provisions to protect our proprietary rights. Despite such efforts to protect our proprietary rights, unauthorized parties from time to time have copied aspects of our software products or have
obtained and used information that we regard as proprietary. Policing unauthorized use of our software products could be time-consuming and costly. Furthermore, our means of protecting our proprietary rights may not be adequate, and our competitors
may independently develop similar technology.



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Intellectual property litigation in the network and system security market is common and can be expensive.

As more and more software patents are granted worldwide, as the number of products and competitors in our industry segments grows and as the
functionality of products in different industry segments overlap, we expect that software product developers will be increasingly subject to infringement claims. Infringement or misappropriation claims may be asserted against us, and any such
assertions could harm our business. Additionally, certain patent holders have become more aggressive in threatening litigation in attempts to obtain fees for licensing the right to use patents. Any such claims or threats, whether with or without
merit, could be time-consuming to defend, result in costly litigation and diversion of resources, or could cause product shipment delays or require us to enter into royalty or licensing agreements. In addition, such royalty or license agreements, if
required, may not be available on acceptable terms, if at all, which would likely harm our business.

Our management may be unable to effectively
integrate our software purchase and to manage our growth and we may be unable to fully realize any anticipated benefits.

In the event our software is
successful, we could experience rapid growth in revenues, personnel, complexity of administration and in other areas. There can be no assurance that we will be able to manage the significant strains that future growth may place on our administrative
infrastructure, systems, and controls. If we are unable to manage future growth effectively, our business, operating results and financial condition may be materially adversely affected.

We may be unable to hire and retain key personnel.

We are dependent on our ability to hire and retain highly
skilled and qualified personnel. We face competition for qualified personnel from numerous industry sources, and there can be no assurance that we will be able to attract and retain qualified personnel on acceptable terms. We do not have key man
insurance on any of our employees. The loss of service of any of our key personnel could have a material adverse effect on our operations or financial condition.

We face product development risks associated with rapid technological changes in our market.

Any change to our customers operating
systems could require us to modify our products and could cause us to delay product releases. In addition, any decline in the market acceptance of these operating systems we support may require us to ensure that all of our products and services are
compatible with other operating systems to meet the demands of our customers. If potential customers do not want to use the Microsoft operating systems we support, we will need to develop more products that run on other operating systems adopted by
our customers. If we cannot successfully develop these products in response to customer demands, our business could be adversely impacted. The development of new products in response to these risks would require us to commit a substantial investment
of resources, and we might not be able to develop or introduce new products on a timely or cost-effective basis, or at all, which could lead potential customers to choose alternative products.

Risks Specific to Our Industry

General economic conditions
may affect consumer and business purchases.

We will become increasingly subject to the risks arising from adverse changes in domestic and global
economic and political conditions. If economic growth in the United States and other countries economies is slowed, many customers may delay or reduce technology purchases. This could result in reductions in sales of our products, longer sales
cycles, slower adoption of new technologies and increased price competition.



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We are subject to intense competition in the system and network protection markets, and we expect to face increased
competition in the future.

The software industry has limited barriers to entry, and the availability of desktop computers with continually expanding
performance at progressively lower prices contributes to the ease of market entry. The markets in which we compete are characterized by vigorous competition, both by entry of competitors with innovative technologies and by consolidation of companies
with complementary products and technologies.

In addition, some of our competitors have greater financial, technical, sales and marketing and other
resources. Furthermore, a reduction in the number and availability of compatible third-party applications may adversely affect the sale of our products. Because of these and other factors, competitive conditions in the industry are likely to
intensify in the future. Increased competition could result in continued price reductions, reduced net revenues and profit margins and loss of market share, any of which would likely harm our business.

Government Regulations and Legal Uncertainties Could Burden Our Business

The adoption or modification of laws or regulations applicable to software and the Internet could harm our business. New laws may be imposed relating to intellectual property, privacy, libel and taxation apply to the software industry. New
laws and regulations and interpretations of existing laws and regulations could subject us and/or our customers to potential liability, which could have an adverse effect on our business, operating results and financial condition. The adoption of
any future laws or regulations might decrease the growth of the Internet, decrease demand for our products and services, impose taxes or other costly technical requirements or otherwise increase the cost of doing business or in some other manner
have a significant adverse effect on us or our customers, which, in turn, could have a significant adverse effect on our business and operating results. In addition, applying existing laws governing issues such as property ownership, copyrights and
other intellectual property issues, taxation, libel, obscenity and personal privacy to the Internet is uncertain. The vast majorities of these laws were adopted prior to the advent of the Internet and related technologies and, as a result, do not
contemplate or address the unique issues of the Internet and related technologies. Changes to these laws intended to address these issues, including some recently proposed changes, could create uncertainty in the marketplace which could reduce
demand for our services or increase the cost of doing business as a result of costs of litigation or increased service delivery costs, or could in some other manner have a significant adverse effect on our business and operating results. As our
services are available over the Internet in multiple states and foreign countries, and as we facilitate sales by our customers to end users located in these states and foreign countries, these jurisdictions may claim that we are required to qualify
to do business as a foreign corporation in each of these states or foreign countries. Any new legislation or regulation, or the application of laws or regulations from jurisdictions whose laws may not currently apply to our business, could have a
significant adverse effect on our business and operating results.

Risks Related to Our Securities

Our common stock is subject to the penny stock rules of the sec and the trading market in our securities is limited, which makes transactions in our stock
cumbersome and may reduce the value of an investment in our stock.

The Securities and Exchange Commission has adopted Rule 15g-9 which establishes the
definition of a penny stock, for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any
transaction involving a penny stock, unless exempt, the rules require:



| |  |  | that a broker or dealer approve a persons account for transactions in penny stocks; and
| | - |  | ----------------------------------------------------------------------------------------



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| |  |  | the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------

In order to approve a persons account for transactions in penny stocks, the broker or dealer must:



| |  |  | obtain financial information and investment experience objectives of the person; and
| | - |  | ------------------------------------------------------------------------------------



| |  |  | make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in
financial matters to be capable of evaluating the risks of transactions in penny stocks.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The broker or dealer must also
deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the Commission relating to the penny stock market, which, in highlight form:



| |  |  | sets forth the basis on which the broker or dealer made the suitability determination; and
| | - |  | ------------------------------------------------------------------------------------------



| |  |  | that the broker or dealer received a signed, written agreement from the investor prior to the transaction.
| | - |  | ----------------------------------------------------------------------------------------------------------

Generally, brokers may be less willing to execute transactions in securities subject to the penny stock rules. This may make it more difficult for investors
to dispose of our common stock and cause a decline in the market value of our stock.

Disclosure also has to be made about the risks of investing in penny
stocks in both public offerings and in secondary trading and about the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in
cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.

Our share price may be highly volatile.

The market prices of equity
securities of small companies have experienced extreme price volatility in recent years not necessarily related to the individual performance of specific companies. Factors such as announcements by us, or our competitors concerning products,
technology, governmental regulatory actions, other events affecting healthcare companies generally and general market conditions may have a significant impact on the market price of our shares and could cause it to fluctuate substantially.



|ITEM 2. | DESCRIPTION OF PROPERTY
|------- | -----------------------

All of our operations are based in our
facility located at 2203 North Lois Avenue, Suite 929, Tampa, FL 33607. Our rent for this location is approximately $900 per month on a month to month basis. Our personal property consists of computer equipment and office furniture.



|ITEM 3. | LEGAL PROCEEDINGS
|------- | -----------------

We are not a party to any pending legal
proceeding or litigation. In addition, none of our property is the subject of a pending legal proceeding. We are not aware of any legal proceedings against the company or our property contemplated by any governmental authority.



|ITEM 4. | SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS
|------- | ----------------------------------------------------

No matters
were submitted to a vote of security holders during the last quarter of the fiscal year ended December 31, 2006.



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##### Table of Contents

PART II



|ITEM 5. | MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
|------- | --------------------------------------------------------

Our
common stock is traded on the OTC Bulletin Board (pink sheets) under the symbol IVPC.PK. The following table presents the range of high and low quotations reported on the OTC Bulletin Board or the OTC Bulletin Board (Pink Sheets) during
the past two years. The market quotations reflect inter-dealer prices, without retail mark-up, markdown or commissions and may not necessarily represent actual transactions. We have approximately 1,000 stockholders of record as of August 16,
2007.



|                 |  |          |       |         |   |      
|---------------- |  | -------- | ----- | ------- | - | -----
|Fiscal Year 2006 |  | High ($) |       | Low ($)
|Fourth Quarter   |  | $        | 0.085 |         | $ | 0.045
|Third Quarter    |  | $        | 0.50  |         | $ | 0.05 
|Second Quarter   |  | $        | 0.50  |         | $ | 0.20 
|First Quarter    |  | $        | 0.51  |         | $ | 0.16 
|                 |  |         
|Fiscal Year 2005 |  |          |       |        
|Fourth Quarter   |  | $        | 0.20  |         | $ | 0.10 
|Third Quarter    |  | $        | 0.18  |         | $ | 0.10 
|Second Quarter   |  | $        | 0.25  |         | $ | 0.06 
|First Quarter    |  | $        | 0.95  |         | $ | 0.25 

Dividends and Dividend Policy

We have never declared or paid cash dividends on our common stock and do not anticipate paying any cash dividends on our common stock in the foreseeable future. We currently intend to retain future earnings, if any,
to finance the expansion of our business and for general corporate purposes. We cannot assure you that we will pay dividends in the future. Our future dividend policy is within the discretion of our Board of Directors and will depend upon various
factors, including our results of operations, financial condition, capital requirements and investment opportunities.

Recent Sales of Unregistered
Securities

On November 20, 2006, we sold in a private placement, an unsecured promissory note in the amount of $26,618. Interest accrues on the
outstanding principal balance from and after November 20, 2006 at a rate of 12% per annum. At maturity, March 17, 2007, in addition to the payment of principal and accrued interest, we will deliver as additional incentive for making
the loan, 150,000 shares of our common stock. The stock is considered restricted securities as defined by the Securities Act of 1933, as amended. The fair value of these shares amounts to $10,500 and were amortized over the length of the loan.
During the year ended December 31, 2006, $5,017 was included in interest expense in our consolidated statements of operations.

On November 8,
2006, we sold in a private placement, two unsecured convertible promissory notes in the amount of $26,618 to two stockholders. Interest accrues on the outstanding principal balance from and after November 8, 2006 at a rate of 12% per
annum. At maturity, February 7, 2007, in addition to the payment of principal and accrued interest, we will deliver as additional incentive for making the loan, 300,000 shares of our common stock. The stock is considered restricted securities
as defined by the Securities Act of 1933, as amended. The fair value of these shares amounts to $21,000 and are being amortized over the length of the loan. During the year ended December 31, 2006, $12,133 was included in interest expense in
our consolidated statements of operations. The $26,618 note payable has a conversion feature for which the Company recognized $10,648 of interest expense during the year ended December 31, 2006 as a result of the beneficial conversion feature.

On August 7, 2006, we closed an agreement (the Agreement) with an individual for the purchase of 294,118 shares of our common stock for
$25,000. The stock is considered restricted securities as defined by Rule 144 promulgated under the Securities Act of 1933, as amended.



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On May 30, 2006, we closed an agreement with an investor (the Investor) for the purchase of 2,941,177
shares of our common stock for $250,000. The stock issued to the Investor is considered restricted securities as defined by Rule 144 promulgated under the Securities Act of 1933, as amended. We also issued two classes of warrants in accordance with
this agreement. Class A warrants allows the Investor to purchase 2,941,177 shares at $0.25 per share and Class B warrants allows the Investor to purchase 2,941,177 shares at $0.35 a share. Both classes expire on May 30, 2011.

On April 3, 2006, the Company entered into a stock purchase agreement with an investor (the Investor). This agreement allows the investor to purchase
a maximum of 35,000,000 shares of common stock of the Company at a purchase price of 20% of the bid price. These shares are deemed restricted securities as defined in Rule 144 of the Securities Act of 1933. The investor purchased 3,000,000 shares on
April 17, 2006 for $135,000. The Investor is under no obligation to purchase any further amounts of stock from the Company.

On March 9, 2006, we
sold in a private placement, a secured promissory note in the amount of $250,000 to a stockholder. Interest accrues on the outstanding principal balance from and after March 9, 2006 at a rate of 11 percent per annum. At maturity,
October 31, 2006, in addition to the payment of principal and accrued interest, we will deliver as additional incentive for making the loan, 75,000 shares of our common stock. The stock is considered restricted securities as defined by the
Securities Act of 1933, as amended. This note is in default and due upon demand as of December 31, 2006.

On December 6, 2005, we sold in a
private placement, a secured promissory note in the amount of $50,000 to a stockholder. Interest accrues on the outstanding principal balance from December 6, 2005 at a rate of 8 percent per annum. The note holder has the sole option of
converting the principal represented by this note into our common stock at a strike price equal to a 50 percent discount to the average closing bid price of the stock for the ten days immediately prior to the conversion. The note holder may convert
all or any part of the principal represented by this note. The maturity date for the promissory is December 5, 2006. This note is in default and due upon demand as of December 31, 2006.

On November 15, 2005, we sold in a private placement, a secured promissory note in the amount of $200,000 to a stockholder. Interest accrues on the outstanding
principal balance from and after November 15, 2005 at a rate of 11 percent per annum. At maturity, April 18, 2006, in addition to the payment of principal and accrued interest, we will deliver as additional incentive for making the loan,
50,000 shares of our common stock. Any stock issued pursuant to this promissory note will be restricted securities as defined by the Securities Act of 1933, as amended. This note is in default and due upon demand as of December 31, 2006.

On July 7, 2005, we sold in a private placement, a secured promissory note in the amount of $5,000 to a stockholder. Interest accrued on the
outstanding principal balance from July 7, 2005 at a rate of 8 percent per annum. The note holder had the sole option of converting the principal represented by this note into our common stock at a strike price equal to a 50 percent discount to
the average closing bid price of the stock for the ten days immediately prior to the conversion. The note holder could convert all or any part of the principal and accrued interest represented by this note. On December 6, 2005, we issued 57,076
shares of our common stock to satisfy the promissory note conversion agreement.

On July 7, 2005, we sold in a private placement, a secured promissory
note in the amount of $10,000 to a stockholder. Interest accrued on the outstanding principal balance from July 7, 2005 at a rate of 8 percent per annum. The note holder had the sole option of converting the principal represented by this note
into our common stock at a strike price equal to a 50 percent discount to the average closing bid price of the stock for the ten days immediately prior to the conversion. The note holder could convert all or any part of the principal and accrued
interest represented by this note. On November 28, 2005, we issued 129,595 shares of our common stock to satisfy the promissory note conversion agreement.



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Equity Compensation Plan Information

The following table summarizes certain information regarding our equity compensation plans as of December 31, 2006. The underlying compensation plan has been previously approved by a vote of the shareholders.



|                                                       |  |                                                                                             |  |                                                                             |      |                                                                                              |          
|------------------------------------------------------ |  | ------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------- | ---- | -------------------------------------------------------------------------------------------- | ---------
|Plan category                                          |  | Number of securities to be issued upon exercise of outstanding options, warrants and rights |  | Weighted-average exercise price of outstanding options, warrants and rights |      | Number of securities remaining available for future issuance under equity compensation plans
|Equity compensation plans approved by shareholders     |  | 6,000,000                                                                                   |  | $                                                                           | 0.00 |                                                                                              | 6,000,000
|Equity compensation plans not approved by shareholders |  | N/A                                                                                         |  |                                                                             | N/A  |                                                                                              | N/A      
|                                                       |  |                                                                                             |  |                                                                             |      |                                                                                              |          
|Total:                                                 |  | 6,000,000                                                                                   |  | $                                                                           | 0.00 |                                                                                              | 6,000,000
|                                                       |  |                                                                                             |  |                                                                             |      |                                                                                              |          



|ITEM 6. | MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
|------- | ---------------------------------------------------------

The following discussion of our plan of operation, financial condition and results of operations should be read in conjunction with the Companys consolidated financial statements, and notes thereto, included elsewhere herein. This
discussion contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors including, but not limited to,
those discussed in this Annual Report.

Overview

We were incorporated under the name DP Charters in Nevada on December 18, 1997. On April 18, 2002, we changed our name to Nomadic Collaboration International, Inc. Effective May 30, 2003, LGC
Acquisition Company, a Delaware corporation and wholly owned subsidiary of Nomadic Collaboration International, Inc., a Nevada corporation, merged with and into LiquidGolf Corporation, a Delaware corporation, such that LiquidGolf Corporation was the
surviving entity, and by virtue thereof, LiquidGolf corporation became a wholly owned subsidiary of Nomadic Collaboration. As a result of a merger, the name of the Company changed to LiquidGolf Holding Corporation. On September 29, 2003, the
Company completed a re-incorporation merger into a Delaware Corporation thus changing the state of incorporation from Nevada to Delaware.

On
August 12, 2004 a majority of our stockholders approved changing the name of the Company from LiquidGolf Holding Corporation to Horizon Holding Corporation to reflect our business direction of diversifying its revenue streams.

Since the date of the merger with LiquidGolf Corporation in May 2003, our goal had been to create an online community for golfers that provided an e-commerce marketplace
for the sale of golf-related equipment and apparel, golf-related news and information and e-commerce solutions for other golf-related businesses. In February 2005, we closed our retail golf operation in Apopka, Florida to focus on our golf web site
operations, by seeking to partner with an experienced golf e-tailer. During August 2006, we decided to discontinue the operations of LiquidGolf, due to the inability to attract affiliates to the website and our inability to find an experienced
partner in the golf industry.

In January 2006, in a continuing effort to build a revenue stream, we
purchased the Silent SwordTMsoftware and all trademarks, service marks, and logos. As of
March 30, 2006, we have issued a total of 10,000,000 shares of our common stock for Silent SwordTM. Under the purchase agreement, we could have issued a maximum of 20,000,000 common shares subject to certain provisions in the agreement, but these



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conditions were not met. The stock issued is considered restricted securities as defined by the Securities Act of 1933, as amended. This product was
available for sale in July 2006. We are constantly improving on the product and plan on developing an EOM version and an enterprise version. The costs associated with developing addition versions are approximately $100,000 for labor, inclusive of
officers salary of $66,000, and $10,000 for equipment. Additional capital for marketing, packaging and customer services will be needed for these new versions and if the capital is not available, the release of the new versions could be
delayed.

In March 2007, we closed our website and discontinued sale due to a lack of funds. We also wrote off the remain value of our software and
trademarks. In an effort to protect our stockholders, we intend to not only to continue to seek additional funding, but re-evaluate our business plan to include an evaluation of other lines of business.

On April 28, 2006, a majority of our stockholders approved changing the name of the Company from Horizon
Holding Corporation to Inverted Paradigms Corporation to reflect our business direction of developing to Silent SwordTMsoftware.

Plan of Operations

We plan to grow our business with the sales of our retail version of the Silent SwordTMsoftware. We have sold our latest version through our website from July 2006 through March 2007. We discontinued sales in March 2007 due to our inability to fund current operations. We are currently re-evaluating the market for the software and
seeking additional capital.

Based upon the Companys current level of revenues and cash position, we will need to raise additional capital in
order to fund current operations. These factors raise substantial doubt about our ability to continue as a going concern. We are pursuing several alternatives to address this situation, including raising additional funding through an equity or debt
financing. We have sold in private placements restricted stock and obtained debt financing to raise these additional funds in 2006. There can be no assurance that the requisite financing will be consummated in the necessary time frame or on terms
acceptable to us. Should we be unable to raise sufficient funds, we may be required to curtail our operating plans or worst case, cease operations. No assurance can be given that we will be able to operate profitably on a consistent basis, or at
all, in the future.

Cash Requirements

We believe we
will need an additional $500,000 to continue operations over the next twelve months. These expenses include the following:



|                                              |  |   |        
|--------------------------------------------- |  | - | -------
|Marketing                                     |  | $ | 73,000 
|Officers salaries and related taxes          |  |   | 120,000
|Other general and admin expenses              |  |   | 30,000 
|Payroll and related taxes                     |  |   | 50,000 
|Liability insurance                           |  |   | 40,000 
|Legal, accounting and other professional fees |  |   | 100,000
|Rent                                          |  |   | 10,000 
|Travel                                        |  |   | 40,000 
|Director fees                                 |  |   | 30,000 
|Web design and hosting                        |  |   | 2,000  
|Other computer and office equipment           |  |   | 5,000  
|                                              |  |   |        
|Total                                         |  | $ | 500,000
|                                              |  |   |        

If we are unable to raise the required capital, we will need to reduce current and expected expenses in the
future. The most significant reduction would be in marketing of our product. This may greatly reduce our ability to generate sales.



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Results of Operations

Comparison of the fiscal year ended December 31, 2006 and December 31, 2005.

CONSOLIDATED FINANCIAL
INFORMATION



|                                |  |      |            |   |      |   |            |  
|------------------------------- |  | ---- | ---------- | - | ---- | - | ---------- | -
|                                |  | 2006 |            |   | 2005 |  
|Net sales                       |  | $    | 500        |   |      | $ |           |  
|Cost of sales                   |  |      | (300       | ) |      |   |           |  
|General and administrative      |  |      | (2,007,900 | ) |      |   | (1,111,400 | )
|Interest income (expense), net  |  |      | (106,100   | ) |      |   | (70,100    | )
|Loss on discontinued operations |  |      | (400       | ) |      |   | (222,000   | )
|                                |  |      |            |   |      |   |            |  
|Net loss                        |  | $    | (2,114,200 | ) |      | $ | (1,403,500 | )
|                                |  |      |            |   |      |   |            |  

Net Sales. Net sales from continuing operations were approximately $500 in 2006. Our product was in
development until July 2006 and we sold only twelve copies of our software in the second half of 2006.

Cost of Sales. Cost of sales from
continuing operations was $300 in 2006. These costs are the resulting credit card processing fees.

General and administrative
expenses. General and administrative expenses increased by $896,500. This increase can be attributed to costs associated with hiring additional employees, investor relations, marketing of our new product, and impairment of our software.

Interest income and expense, net. Net interest income from bank savings was $200 and $1,700 for 2006 and 2005, respectively. The net
interest expense from loans, stock compensation, and beneficial conversion features were $106,300 and $71,800 in 2006 and 2005, respectively.

Loss
on discontinued operations. In August 2006, we discontinued the operations of our golf business. The business has had limited operations since closing its store in February 2005.

Liquidity and Capital Resources

We had cash balances totaling approximately $1,400 as of December 31, 2006.
Historically, our principal source of funds has been cash generated from financing activities.

We believe that we will require an additional $500,000 to
fund our currently anticipated requirements for ongoing operations for our existing business for the next twelve-month period. We currently must raise additional funds to sustain operations.

Cash flow from operations. We have been unable to generate either significant liquidity or cash flow to fund our current operations. We frequently change
our pricing structure to take into account our customers fluctuating cash flows, service and product needs. We anticipate that cash flows from operations will be insufficient to fund our business operations for the next twelve-month period.

Cash flows from financing activities. Net cash provided by financing activities was generated from secured promissory notes, convertible
promissory notes, and the sale of our restricted common stock.



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Variables and Trends

We have a limited operating history in connection with the current operation of our web site and software development. Accordingly, the comparison of the financial data for the periods presented may not be a meaningful indicator of our
future performance and must be considered in light of our limited operating history and our outsourcing of certain operations of our golf Internet website.

Critical Accounting Policies

We make use of estimates and assumptions that impact the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenue and expenses during the reporting period. On an ongoing basis, we evaluate our estimates, including those related to share-based payments, deferred tax assets and impairment of
intangibles. These estimates and assumptions are based on historical results and trends as well as our forecasts as to how these might change in the future.

We believe the following critical accounting policies, among others, impact the significant judgments and estimates we use in the preparation of our financial statements:

Revenue Recognition.

Revenue was earned by the Company from the sale of software upon delivery of a license to the
customer, provided that persuasive evidence of an arrangement exists, the license fee is fixed and determinable, and collection of the fee is considered probable.

Share-Based Payments

Before January 1, 2006, the Company accounted for stock-based compensation under the recognition and measurement
principles of Accounting Principles Board Opinion (APB) No. 25, Accounting for Stock Issued to Employees (APB 25), and related interpretations. The Company did not recognize compensation expense related to
stock options granted to employees and directors where the exercise price was at or above fair value at the date of grant. Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation, established
accounting and disclosure requirements using a fair-value-based method of accounting for stock-based employee compensation plans. As permitted by SFAS No. 123, the Company elected to continue to apply the intrinsic-value-based method of APB
No. 25 described above, and adopted only the disclosure requirements of SFAS No. 123, as amended by SFAS No. 148, Accounting For Stock-Based CompensationTransition and Disclosure.

On January 1, 2006, the start of the first quarter of fiscal 2006, the Company adopted the provisions of Statement of Financial Accounting Standards No. 123
(revised 2004), Share-Based Payment (SFAS No. 123(R)) which requires that the costs resulting from all share-based payment transactions be



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recognized in the financial statements at their fair values. The Company adopted SFAS No. 123(R) using the modified prospective application method under
which the provisions of SFAS No. 123(R) apply to new awards and to awards modified, repurchased, or cancelled after the adoption date. Additionally, compensation cost for the portion of the awards for which the requisite service has not been
rendered that are outstanding as of the adoption date is recognized in the Statement of Operations over the remaining service period after the adoption date based on the awards original estimate of fair value. Results for prior periods have
not been restated.

Income Taxes.The Company accounts for income taxes utilizing the asset and liability method. This approach requires the
recognition of deferred tax assets and liabilities for the expected future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and
operating loss and tax credit 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. The
effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enacted date. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to
be realized.

In June 2006, The Financial Accounting Standards Board (FASB) issued Interpretation No. 48, Accounting for Uncertainty in Income
Taxes, an interpretation of FASB Statement No. 109 (FIN 48). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprises financial statements in accordance with FASB Statement No. 109, Accounting
for Income Taxes (SFAS 109). This Interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 is
effective for fiscal years beginning after December 15, 2006. The Company will adopt FIN 48 effective January 1, 2007 as required. We do not expect the adoption of this statement to have a significant impact on the Companys financial position
or results of operation.

Impairment of Long-Lived Assets. The carrying values of long-lived assets are reviewed if the facts and
circumstances indicate a potential impairment of their carrying values. Management evaluates the recoverability of the net carrying value of its property and equipment and goodwill by comparing the carrying values to the estimated future
undiscounted cash flows. A deficiency in these cash flows relative to the carrying amounts is an indication of the need for a write-down due to impairment. The impairment write-down would be the difference between the carrying amounts and the fair
value of these assets. Any loss on impairment is recognized by a charge to operations in the period identified. During 2006, management determined the intangibles relating to our Silent Sword acquisition were impaired and accordingly recorded an
impairment charge.

Recent Accounting Pronouncements

In February 2006, the Financial Accounting Standards Board (FASB) issued SFAS 155, Accounting for Certain Hybrid Financial Instruments, (SFAS 155) which clarifies when certain financial instruments and features
of financial instruments must be treated as derivatives and reported on the balance sheet at fair value with changes in fair value reported in net income. We will implement SFAS 155 beginning with financial instruments acquired on or after
January 1, 2007, which is the effective date of SFAS 155. We do not expect the adoption of SFAS 155 to have a material impact on our financial position at our date of adoption. However, SFAS 155 may affect future income recognition for certain
financial instruments that contain certain embedded derivatives as any changes in their fair values will be recognized in net income each period.

In
September 2006, the FASB issued SFAS No. 157, Fair Value Measurements, to define fair value, establish a framework for measuring fair value in accordance with generally accepted accounting principles, and expand disclosures
about fair value measurements. SFAS No. 157 will be effective for fiscal years beginning after November 15, 2007, thus it will start affecting the Company on April 1, 2008, the beginning of the Companys 2008 fiscal year. The
Company is assessing the impact the adoption of SFAS No. 157 will have on the Companys consolidated financial position and results of operations.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities  including an amendment of FASB Statement No. 115 (SFAS 159). SFAS 159 permits entities to
measure eligible assets and liabilities at fair value. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. SFAS 159 is effective for fiscal years beginning after November 15, 2007. We
will adopt SFAS 159 on April 1, 2008, and have not yet determined the impact, if any, on our consolidated financial statements.

Off Balance Sheet
Arrangements

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial
condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.



|ITEM 7. | FINANCIAL STATEMENTS
|------- | --------------------

The financial statements required to be filed
hereunder are set forth on pages F-1 through F-17 and are incorporated herein by this reference.



|ITEM 8. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
|------- | -------------------------------------------------------------------------------------

None.



|ITEM 8A. | CONTROLS AND PROCEDURES
|-------- | -----------------------

(a) Evaluation of disclosure controls
and procedures. Under the supervision and with the participation of our senior management, including our chief executive officer and principal financial officer, we conducted



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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 amended, as of the end of the period covered by this Annual Report (the Evaluation Date). Based on this evaluation, our chief executive officer and principal financial officer concluded as of the
Evaluation Date that our disclosure controls and procedures were, to the best of their knowledge, effective such that the information relating to Inverted, including our consolidated subsidiaries, required to be disclosed in our Securities and
Exchange Commission (SEC) reports (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (ii) is accumulated and communicated to Inverteds management, including
our chief executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

(b) Changes in
internal control over financial reporting. There have been no changes in our internal control over financial reporting that occurred during the year ended December 31, 2006 that have materially affected or are reasonably likely to
materially affect our internal control over financial reporting.



|ITEM 8B. | OTHER INFORMATION
|-------- | -----------------

None

PART III



|ITEM 9. | DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS: COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
|------- | ----------------------------------------------------------------------------------------------------------------

The names of our executive officers and directors, their ages as of August 16, 2007, and the positions currently held by each are as follows:



|                 |  |     |  |                                                    
|---------------- |  | --- |  | ---------------------------------------------------
|Name             |  | Age |  | Position                                           
|Steven Weldon    |  | 31  |  | Chief Executive Officer and Chief Financial Officer
|Charles Wernicke |  | 39  |  | Chief Technology Officer and Director              
|William Parsons  |  | 58  |  | Director                                           
|Dwight Day       |  | 42  |  | Director                                           

Steven Weldon, a Certified Public Accountant,has served as our Chief
Financial Officer since September 2005 and our CEO since March 2007. Prior to joining Inverted Paradigms Corporation, Mr. Weldon was the Tax Manager for Westgate Resorts, Ltd., a timeshare developer, since July 2000. Mr. Weldon was an
adjunct professor at Florida Southern College from January 2002 to October 2005. Since May 2005, Mr. Weldon has served as the president, sole stockholder and director of Steven W. Weldon, PA, a public accounting firm providing tax and
accounting services. Mr. Weldon received his Bachelor of Science degree and his Masters in Business Administration from Florida Southern College.

Charles Wernicke has served as the Chief Technology Officer and Director of the Company beginning in February 2006. Mr. Wernicke has been the President of Emergency Computer Services, Inc., a
computer service company since January 1993 and was the Chief Technology Officer of Delta Insights, LLC from June 2004 to January 2006. Mr. Wernicke attended Manatee Community College.

William Parsons has served as a Director of the Company since August 2004. Mr. Parsons was a Partner with Arthur Anderson from
1992-2002. Mr. Parsons is currently an Executive Vice President and Partner with SENN-Delaney Leadership, where he has been since 2002. In addition, Mr. Parsons is the general partner of Parsons Partners. Mr. Parsons received his
Bachelor of Science degree at Clarkson University and his Masters in Business Administration from UCLA.

Dwight Dayhas
served as a Director of the Company since August 13, 2003. Mr. Day has served as a Director of BAC International since 2002. Mr. Day has served as Vice President of Mechanical Associates, Inc. from 2001 to 2004 and HVAC Contractors
Supply since 1994. Additionally, Mr. Day has been President of KMA Mechanical from 1991 to the present.



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Board of Directors and Committees

The directors are elected to one-year terms. Each director holds office until the expiration of the directors term, until the directors successor has been duly elected and qualified or until the earlier of
such directors resignation, removal or death.

We have established an Audit Committee, Executive Compensation Committee and a Restricted Stock Plan
Distribution Committee.

Audit Committee. The Audit Committee approves the selection of our independent accountants and meets and interacts with the
independent accountants to discuss issues related to our financial reporting. In addition, the Audit Committee reviews the scope and results of the audit with the independent accountants, reviews with management and the independent accountants our
annual operating results, considers the adequacy of our internal accounting procedures and considers and reports to the Board of Directors with respect to other auditing and accounting matters, fees to be paid to our independent auditors and the
performance of our independent auditors. The Audit Committee consists of Messrs. Day, Parsons, both of whom are non-employee directors, and Weldon. The Audit Committee also includes at least one member  Mr. William Parson 
determined by the Board to meet the qualifications of an audit committee financial expert, as defined by SEC rules. The Board of Directors has not adopted a written charter of the Audit Committee. As CFO, Mr. Weldon is not
considered independent as that term is defined by Rule 4200(a)(15) of the NASDs listing standards. The Audit Committee met seven times in 2006.

Executive Compensation Committee. The Executive Compensation Committee reviews and recommends to the Board of Directors the salaries, and benefits of all employees, consultants, directors and other individuals compensated by us. The
Executive Compensation Committee currently consists of Messrs. Day and Parsons, both of whom are non-employee directors. None of our executive officers or directors presently serves, or has served, on the Executive Compensation Committee of another
company whose executive officers or directors served on our Board of Directors. Members of our Board of Directors own our common stock, as further described in, the Principal Stockholders section of this prospectus.

Restricted Stock Plan Distribution Committee. The Restricted Stock Plan Distribution Committee selects eligible persons to receive restricted stock awards under
the Companys 2006 Restricted Stock Plan, determines the number of restricted stock awards to be granted  the number of shares of common stock to which such restricted stock awards will relate, specifies times at which restricted stock
awards will be vested, sets other terms and conditions of restricted stock awards, prescribes forms of restricted stock award agreements, interprets and specifies rules and regulations relating to the 2006 Restricted Stock Plan, and makes all other
determinations that may be necessary or advisable for the administration of the 2006 Restricted Stock Plan. Members of our Restricted Stock Plan Distribution Committee include Messrs. Day and Parsons.

Section 16(a) Beneficial Ownership Reporting Compliance.

Based
solely upon a review of Forms 3, 4 and 5, and amendments to these forms furnished to us, each of the following parties, who are subject to the reporting requirements of Section 16(a) of the Exchange Act, were delinquent in filing all such required
reports with respect to fiscal year 2006:

Dwight Day  Mr. Day failed to file a Form 4 regarding shares received as compensation for
his service on the Board of Directors.

William ParsonsMr. Parsons failed to file a Form 4 regarding shares received as
compensation for his service on the Board of Directors.



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The Company has taken steps to educate its officers, directors and ten percent owners regarding their personal reporting
obligations and has provided them with additional information to prevent further delinquent filings.

Code of Ethics

The Company has adopted the Inverted Paradigms Corporation Code of Ethics (the Code of Ethics) which applies to our Chief Executive Officer, Chief Financial
Officer and other finance organization employees. If we make any substantive amendments to the Code of Ethics or grant to our Chief Executive Officer or Chief Financial Officer any waiver, including any implicit waiver, from a provision of the Code
of Ethics, we will disclose the nature of such amendment or waiver on our website or in a report on Form 8-K.



|ITEM 10. | EXECUTIVE COMPENSATION
|-------- | ----------------------

We did not have any other executive
officers or other employees serving at the end of fiscal year 2006 whose total annual salary and bonus exceeded $100,000. The following table sets forth certain information regarding the compensation of our Officers for 2006, 2005 and 2004.

Summary Compensation Table



|                                              |  |      |  |           |  |          |  |                 |  |                  |  |                                           |  |                                               |  |                           |  |          
|--------------------------------------------- |  | ---- |  | --------- |  | -------- |  | --------------- |  | ---------------- |  | ----------------------------------------- |  | --------------------------------------------- |  | ------------------------- |  | ---------
|Name and Position                             |  | Year |  | Salary($) |  | Bonus($) |  | StockAwards ($) |  | OptionAwards ($) |  | Non-EquityIncentive Plan Compensation ($) |  | Nonqualified DeferredCompensationEarnings ($) |  | All OtherCompensation ($) |  | Total ($)
|Steven Weldon, CEO and CFO                    |  | 2006 |  | 77,538    |  |         |  |                |  |                 |  |                                          |  |                                              |  |                          |  | 77,538   
|                                              |  | 2005 |  | 12,923    |  |         |  |                |  |                 |  |                                          |  |                                              |  |                          |  | 12,923   
|                                              |  | 2004 |  |          |  |         |  |                |  |                 |  |                                          |  |                                              |  |                          |  |         
|Charles Wenicke, CTO and Director             |  | 2006 |  | 55,000    |  |         |  |                |  |                 |  |                                          |  |                                              |  |                          |  | 55,000   
|                                              |  | 2005 |  |          |  |         |  |                |  |                 |  |                                          |  |                                              |  |                          |  |         
|                                              |  | 2004 |  |          |  |         |  |                |  |                 |  |                                          |  |                                              |  |                          |  |         
|Stewart York, former CEO and former Director  |  | 2006 |  | 79,500    |  |         |  |                |  |                 |  |                                          |  |                                              |  |                          |  | 79,500   
|                                              |  | 2005 |  |          |  |         |  |                |  |                 |  |                                          |  |                                              |  |                          |  |         
|                                              |  | 2004 |  |          |  |         |  |                |  |                 |  |                                          |  |                                              |  |                          |  |         
|Dwain Brannon, former CEO and former Director |  | 2006 |  |          |  |         |  | 40,000          |  |                 |  |                                          |  |                                              |  |                          |  | 40,000   
|                                              |  | 2005 |  | 14,533    |  |         |  |                |  |                 |  |                                          |  |                                              |  |                          |  | 14,533   
|                                              |  | 2004 |  | 99,092    |  |         |  |                |  |                 |  |                                          |  |                                              |  |                          |  | 99,092   

Employment Agreements

On February 23, 2006, we entered into an Employment Agreement with Chuck Wernicke to become the Chief Technology Officer. Mr. Wernicke will earn an annual salary of $96,000. He will also participate in the executive benefit
package offered to other executives in the Company during the term of his employment. The length of this agreement is for one year. This agreement was cancelled on April 19, 2007.



18



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##### Table of Contents

2006 Restricted Stock Plan

On March 21, 2006, our Board of Directors adopted the Inverted Paradigms Corporation 2006 Restricted Stock Plan (the 2006 Plan) and was submitted and approved by our stockholders at the 2006 Annual Meeting. The terms of the
2006 Plan provide for grants of restricted stock awards. The purpose of the 2006 Plan is to provide a means through which the Company and its subsidiaries may attract key personnel to enter into and remain in the employ of the Company and its
subsidiaries, as well as to provide a means whereby those key persons upon whom the responsibilities of the successful administration and management of the Company rest, and whose present and potential contributions to the welfare of the Company are
of importance, can acquire and maintain stock ownership, thereby strengthening their commitment to the welfare of the Company and promoting the mutuality of interests between those key individuals and the Companys stockholders.

Under the plan, the total number of shares of common stock that may be subject to the granting of awards under the plan during the term of the plan shall be equal to
6,000,000 shares, plus the number of shares with respect to which awards previously granted thereunder that are forfeited or cancelled or terminated. As of December 31, 2006, we have granted no shares of restricted stock under the 2006 Plan.

Directors Compensation

Non-employee directors
are paid a monthly retainer of $1,000 for serving on the Board of Directors, $500 each meeting attended, and $250 per meeting if a member is unable to attend in person but attends telephonically. Each Board member also receives 1,500 shares of our
common stock per quarter of service. We also reimburse directors for reasonable travel expenses incurred in connection with traveling to meetings, including first class air travel and accommodations.



|ITEM 11. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
|-------- | --------------------------------------------------------------

The following table presents information known to us, as of August 16, 2007, relating to the beneficial ownership of common stock by:



| |  |  | each person who is known by us to be the beneficial holder of more than 5% of our outstanding common stock;
| | - |  | -----------------------------------------------------------------------------------------------------------



| |  |  | each of our named executive officers and directors; and
| | - |  | -------------------------------------------------------



| |  |  | our directors and executive officers as a group.
| | - |  | ------------------------------------------------

We believe that all persons named in the table have sole voting and investment power with respect to all shares beneficially owned by them, except as noted.

Percentage ownership in the following table is based on 37,645,143 shares of common stock outstanding as of Augsut 16, 2007. A person is deemed to be the
beneficial owner of securities that can be acquired by that person within 60 days from the date of this Annual Report upon the exercise of options, warrants or convertible securities. Each beneficial owners percentage ownership is determined
by dividing the number of shares beneficially owned by that person by the base number of outstanding shares, increased to reflect the shares underlying options, warrants or other convertible securities included in that persons holdings, but
not those underlying shares held by any other person.



19



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##### Table of Contents

|                                       |  |                                                   |  |                                        |  
|-------------------------------------- |  | ------------------------------------------------- |  | -------------------------------------- | -
|                                       |  |                                                   |  |                                        |  
|Name of Beneficial Owner               |  | Number of Shares of CommonStock BeneficiallyOwned |  | Percentage of SharesBeneficially Owned |  
|Charles Wenicke                        |  | 3,666,907                                         |  | 9.74                                   | %
|Dwight Day(1)                          |  | 658,143                                           |  | 1.75                                   |  
|William Parsons(1)                     |  | 226,333                                           |  | 0.60                                   |  
|Stewart York                           |  | 309,171                                           |  | 0.82                                   |  
|Susan Burns                            |  | 1,988,451                                         |  | 5.28                                   |  
|All directors and officers (7 persons) |  | 4,860,554                                         |  | 12.91                                  | %

---

|(1) | Unless otherwise noted, the address of each person listed is c/o Inverted Paradigms Corporation, 2203 North Lois Avenue, Suite 929 Tampa, FL 33607
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------



|ITEM 12. | CERTAIN RELATIONSHIPS, AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
|-------- | -------------------------------------------------------------------------

None



|ITEM 13. | EXHIBITS
|-------- | --------

Exhibits and Financial Statements.



|(A) | Financial Statements and Schedules
|--- | ----------------------------------



| | See | Index to Financial Statements
| | --- | -------------------------------



|(B) | Exhibits
|--- | --------



|              |  |                                                                                                                                                                                                            
|------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|EXHIBITNUMBER |  | DESCRIPTION                                                                                                                                                                                                
|              | 
|3.1           |  | Form of Articles of Incorporation of LiquidGolf Holding Corporation(1)                                                                                                                                     
|              | 
|3.2           |  | Bylaws of LiquidGolf Holding Corporation(2)                                                                                                                                                                
|              | 
|10.1          |  | Agreement and Plan of Merger by and among Nomadic Collaboration International, Inc., LGC Acquisition Company, and LiquidGolf Corporation dated February 12, 2003(3)                                        
|              | 
|10.2          |  | LiquidGolf Holding Corporation 2003 Restricted Stock Plan(4)                                                                                                                                               
|              | 
|10.3          |  | Software Purchase Agreement date January 31, 2006 between the Company and Delta Insights, LLC(8)                                                                                                           
|              | 
|10.4          |  | Employment Agreement between Company and Chuck Wernicke dated February 23, 2006(7)                                                                                                                         
|              | 
|21.1          |  | Subsidiaries of the Company(5)                                                                                                                                                                             
|              | 
|31.1          |  | Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Securities and Exchange Act Rules 13a-14 and 15d-14 as Adopted Pursuant to 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.*                            
|              | 
|99.1          |  | Audit Committee Pre-Approval Policy(6)                                                                                                                                                                     



20



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##### Table of Contents

---

|* | Filed Herewith
|- | --------------

|(1) | Incorporated by reference to Exhibit 3.1 of the Companys Form SB-2 (filed 1/30/03) (No. 333-111865)
|--- | ----------------------------------------------------------------------------------------------------

|(2) | Incorporated by reference to Exhibit 3.2 of the Companys Form SB-2 (filed 1/30/03) (No. 333-111865).
|--- | -----------------------------------------------------------------------------------------------------

|(3) | Incorporated by reference to Exhibit 10.1 of the Companys Form SB-2 (filed 1/30/03) (No. 333-111865).
|--- | ------------------------------------------------------------------------------------------------------

|(4) | Incorporated by reference to the Companys Proxy Statement on Schedule 14A (filed 8/01/03) (No. 000- 27131).
|--- | ------------------------------------------------------------------------------------------------------------

|(5) | Incorporated by reference to Exhibit 21.1 of the Companys Form 10KSB (filed 3/29/04) (No. 000-27131).
|--- | ------------------------------------------------------------------------------------------------------

|(6) | Incorporated by reference to Exhibit 99.1 of the Companys Form 10KSB (filed 3/29/04) (No. 000-27131).
|--- | ------------------------------------------------------------------------------------------------------

|(7) | Incorporated by reference to Exhibit 10.1 of the Companys Form 8-K (filed 2/27/06) (No. 000-27131).
|--- | ----------------------------------------------------------------------------------------------------

|(8) | Incorporated by reference to Exhibit 99.1 of the Companys Form 8-K (filed 2/02/06) (No. 000-27131).
|--- | ----------------------------------------------------------------------------------------------------



|ITEM 14. | PRINCIPAL ACCOUNTANT FEES AND SERVICES
|-------- | --------------------------------------



|                      |  |             |        |             |   |       
|--------------------- |  | ----------- | ------ | ----------- | - | ------
|                      |  | Fiscal 2006 |        | Fiscal 2005
|Audit Fees(1)         |  | $           | 51,000 |             | $ | 48,000
|Audit-Related Fees(2) |  |             | 28,500 |             |   | -0-   
|Tax Fees(3)           |  |             | 8,500  |             |   | 8,500 
|                      |  |             |        |             |   |       
|Subtotal              |  | $           | 88,000 |             | $ | 56,500
|All other Fees(4)     |  |             | -0-    |             |   | -0-   
|Total                 |  | $           | 88,000 |             | $ | 56,500
|                      |  |             |        |             |   |       

---

|(1) | Audit Fees  Audit fees billed to the Company by Tedder, James,
Worden & Associates, P.A. for auditing the Companys annual financial statements and reviewing the financial statements included in the Companys Quarterly Reports on Form 10-QSB.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Audit-Related Fees  Audit-related fees, which were $28,500 for fiscal
2006, were fees billed to the Company for the restatements of its financial statements in February 2007 not reported under Audit Fees above.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Tax Fees Tax fees billed to the Company by Tedder, James,
Worden & Associates, P.A. include the preparation of all state and federal returns for 2005. The Company anticipates billings by Tedder, James, Worden & Associates, P.A. for the preparation of all state and federal returns for 2006
to be approximately $8,500.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | All Other Fees  There were no other fees billed by during the last
two fiscal years for products and services provided.
|--- | ------------------------------------------------------------------------------------------------------------------------



21



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##### Table of Contents

Pre-approval of Audit and Non-Audit Services of Independent Auditor

The Board of Directors policy is to pre-approve all audit and non-audit services provided by the independent auditors. These services may include audit services,
audit-related services, tax services and other services. Pre-approval is generally provided for up to 12 months from the date of pre-approval and any pre-approval is detailed as to the particular service or category of services. The Board of
Directors may delegate pre-approval authority to one or more of its members when expedition of services is necessary. The Board of Directors has determined that the provision of non-audit services by Tedder, James, Worden & Associates, P.A.
is compatible with maintaining its independence.



22



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##### Table of Contents

SIGNATURES

In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



|                       |  |                                |  |                                                    
|---------------------- |  | ------------------------------ |  | ---------------------------------------------------
|                       |  | INVERTED PARADIGMS CORPORATION
|Dated: August 30, 2007 |  |                                |  |                                                    
|                       |  |                               
|                       |  | By:                            |  | /S/ Steven Weldon                                  
|                       |  | Name:                          |  | Steven Weldon                                      
|                       |  | Title:                         |  | Chief Executive Officer and Chief Financial Officer

In accordance with the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the dates indicated.



|                       |  |                                |  |                     
|---------------------- |  | ------------------------------ |  | --------------------
|                       |  | INVERTED PARADIGMS CORPORATION
|Dated: August 30, 2007 |  |                                |  |                     
|                       |  |                               
|                       |  | By:                            |  | /S/ Charles Wernicke
|                       |  | Name:                          |  | Charles Wernicke    
|                       |  | Title:                         |  | Director            
|                       |  |                               
|                       |  | By:                            |  | /S/ Dwight Day      
|                       |  | Name:                          |  | Dwight Day          
|                       |  | Title:                         |  | Director            
|                       |  |                               
|                       |  | By:                            |  | /S/ William Parsons 
|                       |  | Name:                          |  | William Parsons     
|                       |  | Title:                         |  | Director            



23



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##### Table of Contents

INVERTED PARADIGMS CORPORATION AND SUBSIDIARIES

Table of Contents



|                                                                                                              |  |    
|------------------------------------------------------------------------------------------------------------- |  | ---
|Report of Independent Registered Certified Public Accounting Firm                                             |  | F-1
|                                                                                                              | 
|Consolidated Financial Statements:                                                                            |  |    
|                                                                                                              | 
|Consolidated Balance Sheet  December 31, 2006                                                                |  | F-2
|                                                                                                              | 
|Consolidated Statements of Operations  Years ended December 31, 2006 and 2005                                |  | F-3
|                                                                                                              | 
|Consolidated Statements of Stockholders Equity (Capital Deficiency)  Years ended December 31, 2006 and 2005 |  | F-4
|                                                                                                              | 
|Consolidated Statements of Cash Flows  Years ended December 31, 2006 and 2005                                |  | F-5
|                                                                                                              | 
|Notes to Consolidated Financial Statements                                                                    |  | F-6



---

##### Table of Contents

Report of Independent Registered Certified Public Accounting Firm

To the Board of Directors and Stockholders of Inverted
Paradigms Corporation and Subsidiaries:

We have audited the accompanying consolidated balance sheet of Inverted Paradigms Corporation and Subsidiaries as
of December 31, 2006, and the related consolidated statements of operations, stockholders equity (capital deficiency), and cash flows for the years ended December 31, 2006 and 2005. These financial statements are the responsibility
of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits
in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. 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 Inverted Paradigms Corporation and Subsidiaries as of December 31, 2006, and the results of their operations and their
cash flows for the years ended December 31, 2006 and 2005, in conformity with U.S. generally accepted accounting principles.

The accompanying
consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the consolidated financial statements, the Company has incurred net losses and negative cash flows from
operations since inception and has a working capital deficiency as well as a capital deficiency. These factors, and the need for additional financing in order for the Company to meet its business plans, raise substantial doubt about its ability to
continue as a going concern. Managements plans in regard to these matters are also discussed in Note 3. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.



|                                              
|----------------------------------------------
|/s/ Tedder, James, Worden and Associates, P.A.
|                                              
|Orlando, Florida                              
|August 23, 2007                               



F-1



---

##### Table of Contents

INVERTED PARADIGMS CORPORATION AND SUBSIDIARIES

Consolidated Balance Sheet

December 31, 2006



|                                                                                                  |  |   |             |  
|------------------------------------------------------------------------------------------------- |  | - | ----------- | -
|Assets                                                                                            |  |   |             |  
|Current assets:                                                                                   |  |   |             |  
|Cash                                                                                              |  | $ | 1,390       |  
|                                                                                                  |  |   |             |  
|Total current assets                                                                              |  |   | 1,390       |  
|Other assets:                                                                                     |  |   |             |  
|Property and equipment, net                                                                       |  |   | 16,137      |  
|Deposits                                                                                          |  |   | 260         |  
|                                                                                                  |  |   |             |  
|Total other assets                                                                                |  |   | 16,397      |  
|                                                                                                  |  |   |             |  
|Total assets                                                                                      |  | $ | 17,787      |  
|                                                                                                  |  |   |             |  
|Liabilities and Stockholders Equity (Capital Deficiency)                                         |  |   |             |  
|Current liabilities:                                                                              |  |   |             |  
|Accounts payable                                                                                  |  | $ | 165,217     |  
|Other current liabilities                                                                         |  |   | 318,469     |  
|Due to related parties                                                                            |  |   | 34,383      |  
|Notes payable  stockholders                                                                      |  |   | 575,637     |  
|                                                                                                  |  |   |             |  
|Total current liabilities                                                                         |  |   | 1,093,706   |  
|Stockholders equity (capital deficiency):                                                        |  |   |             |  
|Common stock, $0.001 par, 100,000,000 shares authorized, 37,645,143 shares issued and outstanding |  |   | 37,644      |  
|Additional paid-in capital                                                                        |  |   | 38,599,353  |  
|Accumulated deficit                                                                               |  |   | (39,712,916 | )
|                                                                                                  |  |   |             |  
|Total capital deficiency                                                                          |  |   | (1,075,919  | )
|                                                                                                  |  |   |             |  
|Total liabilities and stockholders equity (capital deficiency)                                   |  | $ | 17,787      |  
|                                                                                                  |  |   |             |  

See accompanying notes to consolidated financial statements.



F-2



---

##### Table of Contents

INVERTED PARADIGMS CORPORATION AND SUBSIDIARIES

Consolidated Statements of Operations

For the years ended December 31, 2006 and 2005



|                                                                    |  |      |            |   |      |   |            |  
|------------------------------------------------------------------- |  | ---- | ---------- | - | ---- | - | ---------- | -
|                                                                    |  | 2006 |            |   | 2005 |  
|Net sales                                                           |  | $    | 480        |   |      | $ |           |  
|Cost of sales                                                       |  |      | (336       | ) |      |   |           |  
|                                                                    |  |      |            |   |      |   |            |  
|Gross profit                                                        |  |      | 144        |   |      |   |           |  
|                                                                    |  |     
|General and administrative expenses                                 |  |      | (1,907,062 | ) |      |   | 1,111,449  |  
|Impairment of intangible assets                                     |  |      | (100,796   | ) |      |   |           |  
|                                                                    |  |      |            |   |      |   |            |  
|Loss from continuing operations                                     |  |      | (2,007,714 | ) |      |   | (1,111,449 | )
|                                                                    |  |     
|Other income (expense):                                             |  |      |            |   |      |   |            |  
|Interest income                                                     |  |      | 241        |   |      |   | 1,737      |  
|Interest expense                                                    |  |      | (106,351   | ) |      |   | (68,738    | )
|Other                                                               |  |      |           |   |      |   | (3,071     | )
|                                                                    |  |      |            |   |      |   |            |  
|Net other (expense) income                                          |  |      | (106,110   | ) |      |   | (70,072    | )
|                                                                    |  |      |            |   |      |   |            |  
|Net loss from continuing operations                                 |  |      | (2,113,824 | ) |      |   | (1,181,521 | )
|Loss from discontinued operations                                   |  |      | (372       | ) |      |   | (222,021   | )
|                                                                    |  |      |            |   |      |   |            |  
|Net loss                                                            |  | $    | (2,114,196 | ) |      | $ | (1,403,542 | )
|                                                                    |  |      |            |   |      |   |            |  
|Net loss per share from continuing operations  basic and diluted   |  | $    | (0.07      | ) |      | $ | (0.11      | )
|                                                                    |  |      |            |   |      |   |            |  
|Net loss per share from discontinued operations  basic and diluted |  | $    | (0.00      | ) |      | $ | (0.00      | )
|                                                                    |  |      |            |   |      |   |            |  
|Weighted average shares outstanding  basic and diluted             |  |      | 30,886,310 |   |      |   | 13,004,154 |  
|                                                                    |  |      |            |   |      |   |            |  

See accompanying notes to consolidated financial statements.



F-3



---

##### Table of Contents

INVERTED PARADIGMS CORPORATION AND SUBSIDIARIES

Consolidated Statements of Stockholders Equity
(Capital Deficiency)

For the years ended December 31, 2006 and 2005



|                                                             |  |              |  |                           |        |  |                     |            |   |       |   |             |   |  |   |            |  
|------------------------------------------------------------ |  | ------------ |  | ------------------------- | ------ |  | ------------------- | ---------- | - | ----- | - | ----------- | - |  | - | ---------- | -
|                                                             |  | Common
stock |  | Additionalpaid-in capital |        |  | Accumulated deficit |            |   | Total |  
|                                                             |  | Shares       |  | Amount                    |        |  |                    
|Balance, December 31, 2004                                   |  | 12,894,729   |  | $                         | 12,894 |  | $                   | 36,302,528 |   |       | $ | (35,595,178 | ) |  | $ | 720,244    |  
|                                                             |  |              |  |                           |        |  |                     |            |   |       |   |             |   |  |   |            |  
|                                                             |  |              |  |                           |       
|Deferred stock based employee compensation                   |  |             |  |                           |       |  |                     | 314,867    |   |       |   |            |   |  |   | 314,867    |  
|                                                             |  |              |  |                           |       
|Issuance of common stock for directors compensation          |  | 272,000      |  |                           | 272    |  |                     | 35,728     |   |       |   |            |   |  |   | 36,000     |  
|                                                             |  |              |  |                           |       
|Cost incurred in conjunction with conversion of Note Payable |  |             |  |                           |       |  |                     | (3,000     | ) |       |   |            |   |  |   | (3,000     | )
|                                                             |  |              |  |                           |       
|Issuance of common stock for conversion of note payable      |  | 129,595      |  |                           | 130    |  |                     | 10,238     |   |       |   |            |   |  |   | 10,368     |  
|                                                             |  |              |  |                           |       
|Issuance of common stock for conversion of note payable      |  | 57,076       |  |                           | 57     |  |                     | 5,137      |   |       |   |            |   |  |   | 5,194      |  
|                                                             |  |              |  |                           |       
|Issuance of common stock for services                        |  | 66,668       |  |                           | 67     |  |                     | 6,600      |   |       |   |            |   |  |   | 6,667      |  
|                                                             |  |              |  |                           |       
|Warrants issued to broker                                    |  |             |  |                           |       |  |                     | 2,300      |   |       |   |            |   |  |   | 2,300      |  
|                                                             |  |              |  |                           |       
|Net loss                                                     |  |             |  |                           |       |  |                     |           |   |       |   | (1,403,542  | ) |  |   | (1,403,542 | )
|                                                             |  |              |  |                           |        |  |                     |            |   |       |   |             |   |  |   |            |  
|Balance, December 31, 2005                                   |  | 13,420,068   |  | $                         | 13,420 |  | $                   | 37,339,398 |   |       | $ | (37,598,720 | ) |  | $ | (245,902   | )
|                                                             |  |              |  |                           |        |  |                     |            |   |       |   |             |   |  |   |            |  
|                                                             |  |              |  |                           |       
|Deferred stock based employee compensation                   |  |             |  |                           |       |  |                     | 57,706     |   |       |   |            |   |  |   | 57,706     |  
|                                                             |  |              |  |                           |       
|Issuance of common stock for directors fees                 |  | 600,000      |  |                           | 600    |  |                     | 27,400     |   |       |   |            |   |  |   | 28,000     |  
|                                                             |  |              |  |                           |       
|Issuance of common stock for conversion of promissory note   |  | 1,600,029    |  |                           | 1,600  |  |                     | 56,801     |   |       |   |            |   |  |   | 58,401     |  
|                                                             |  |              |  |                           |       
|Issuance of common stock for purchase of Silent Sword        |  | 10,000,000   |  |                           | 10,000 |  |                     | 140,000    |   |       |   |            |   |  |   | 150,000    |  
|                                                             |  |              |  |                           |       
|Issuance of common stock for services                        |  | 4,789,751    |  |                           | 4,789  |  |                     | 534,285    |   |       |   |            |   |  |   | 539,074    |  
|                                                             |  |              |  |                           |       
|Contributions from stockholder for payment of services       |  |             |  |                           |       |  |                     | 75,000     |   |       |   |            |   |  |   | 75,000     |  
|                                                             |  |              |  |                           |       
|Cashless warrant exercise                                    |  | 1,000,000    |  |                           | 1,000  |  |                     | (1,000     | ) |       |   |            |   |  |   |           |  
|                                                             |  |              |  |                           |       
|Sale of common stock, net of issuance costs                  |  | 6,235,295    |  |                           | 6,235  |  |                     | 353,715    |   |       |   |            |   |  |   | 359,950    |  
|                                                             |  |              |  |                           |       
|Issuance of warrants in connection with promissory notes     |  |             |  |                           |       |  |                     | 5,400      |   |       |   |            |   |  |   | 5,400      |  
|                                                             |  |              |  |                           |       
|Interest on beneficial conversion feature of promissory note |  |             |  |                           |       |  |                     | 10,648     |   |       |   |            |   |  |   | 10,648     |  
|                                                             |  |              |  |                           |       
|Net loss                                                     |  |             |  |                           |       |  |                     |           |   |       |   | (2,114,196  | ) |  |   | (2,114,196 | )
|                                                             |  |              |  |                           |        |  |                     |            |   |       |   |             |   |  |   |            |  
|Balance, December 31, 2006                                   |  | 37,645,143   |  | $                         | 37,644 |  | $                   | 38,599,353 |   |       | $ | (39,712,916 | ) |  | $ | (1,075,919 | )
|                                                             |  |              |  |                           |        |  |                     |            |   |       |   |             |   |  |   |            |  

See accompanying notes to consolidated financial statements.



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INVERTED PARADIGMS CORPORATION AND SUBSIDIARIES

Consolidated Statements of Cash Flows

For the years ended December 31, 2006 and 2005



|                                                                                                       |  |      |            |   |      |   |            |  
|------------------------------------------------------------------------------------------------------ |  | ---- | ---------- | - | ---- | - | ---------- | -
|                                                                                                       |  | 2006 |            |   | 2005 |  
|Cash flow from operating activities:                                                                   |  |      |            |   |      |   |            |  
|Net loss                                                                                               |  | $    | (2,114,196 | ) |      | $ | (1,403,542 | )
|Adjustments to reconcile net loss to cash used in operating activities:                                |  |      |            |   |      |   |            |  
|Amortization of deferred stock-based employee compensation                                             |  |      | 57,706     |   |      |   | 314,867    |  
|Amortization of stock issued for services                                                              |  |      | 539,074    |   |      |   | 408,750    |  
|Consulting fee paid by stockholder                                                                     |  |      | 75,000     |   |      |   |           |  
|Stock issued to directors for services                                                                 |  |      | 28,000     |   |      |   | 36,000     |  
|Stock issued to vendors for services                                                                   |  |      |           |   |      |   | 6,667      |  
|Depreciation and amortization                                                                          |  |      | 23,119     |   |      |   |           |  
|Interest resulting from beneficial conversion feature of promissory notes                              |  |      | 10,648     |   |      |   | 65,000     |  
|Impairment of intangible assets                                                                        |  |      | 100,796    |   |      |   |           |  
|Non-cash interest on promissory notes                                                                  |  |      | 41,050     |   |      |   | 2,200      |  
|Changes in operating assets and liabilities:                                                           |  |      |            |   |      |   |           |  
|Other current assets                                                                                   |  |      | 9,267      |   |      |   | 182,372    |  
|Other assets                                                                                           |  |      | (80        | ) |      |   | 4,077      |  
|Accounts payable                                                                                       |  |      | (39,203    | ) |      |   | 75,086     |  
|Accrued expenses                                                                                       |  |      | 274,914    |   |      |   | (21,637    | )
|Due to related parties                                                                                 |  |      | 34,383     |   |      |   |           |  
|                                                                                                       |  |      |            |   |      |   |            |  
|Net cash used in continuing operating activities                                                       |  |      | (959,522   | ) |      |   | (330,160   | )
|Net cash provided by (used in) discontinued operations                                                 |  |      | 64,891     |   |      |   | (26,711    | )
|                                                                                                       |  |      |            |   |      |   |            |  
|Net cash used in operating activities                                                                  |  |      | (894,631   | ) |      |   | (356,871   | )
|                                                                                                       |  |     
|Cash flows from investing activities:                                                                  |  |      |            |   |      |   |            |  
|Purchase of property and equipment                                                                     |  |      | (18,946    | ) |      |   |           |  
|Cash acquired in connection with Silent Sword                                                          |  |      | 28,894     |   |      |   |           |  
|Proceeds from collection of loan receivable                                                            |  |      | 10,000     |   |      |   |           |  
|Proceeds from the sale of certificate of deposit                                                       |  |      |           |   |      |   | 35,000     |  
|Issuance of loan receivable                                                                            |  |      |           |   |      |   | (10,000    | )
|                                                                                                       |  |      |            |   |      |   |            |  
|Net cash provided by continuing investing activities                                                   |  |      | 19,948     |   |      |   | 25,000     |  
|Net cash provided by discontinued investing activities                                                 |  |      |           |   |      |   |           |  
|                                                                                                       |  |      |            |   |      |   |            |  
|Net cash provided by investing activities                                                              |  |      | 19,948     |   |      |   | 25,000     |  
|                                                                                                       |  |     
|Cash flows from financing activities:                                                                  |  |      |            |   |      |   |            |  
|Fees paid to issue convertible note                                                                    |  |      |           |   |      |   | (3,000     | )
|Proceeds from issuing restricted stock                                                                 |  |      | 359,950    |   |      |   |           |  
|Proceeds from notes payable to stockholders                                                            |  |      | 346,618    |   |      |   | 265,562    |  
|                                                                                                       |  |      |            |   |      |   |            |  
|Net cash provided by continuing financing activities                                                   |  |      | 706,568    |   |      |   | 242,732    |  
|Net cash used in discontinued financing activities                                                     |  |      |           |   |      |   | (9,915     | )
|                                                                                                       |  |      |            |   |      |   |            |  
|Net cash provided by financing activities                                                              |  |      | 706,568    |   |      |   | 252,647    |  
|                                                                                                       |  |      |            |   |      |   |            |  
|                                                                                                       |  |     
|Net decrease in cash                                                                                   |  |      | (168,115   | ) |      |   | (79,224    | )
|                                                                                                       |  |     
|Cash, beginning of year                                                                                |  |      | 169,505    |   |      |   | 248,729    |  
|                                                                                                       |  |      |            |   |      |   |            |  
|                                                                                                       |  |     
|Cash, end of year                                                                                      |  | $    | 1,390      |   |      | $ | 169,505    |  
|                                                                                                       |  |      |            |   |      |   |            |  
|                                                                                                       |  |     
|Supplemental disclosures of cash flow information:                                                     |  |      |            |   |      |   |            |  
|Cash paid during the year for Interest                                                                 |  | $    |           |   |      | $ | 561        |  
|                                                                                                       |  |      |            |   |      |   |            |  
|Supplemental disclosures of non-cash investing and financing activities:                               |  |      |            |   |      |   |            |  
|Issuance of 10,000,000 shares of common stock in connection with the purchase of Silent Sword software |  | $    | 150,000    |   |      | $ |           |  
|                                                                                                       |  |      |            |   |      |   |            |  
|Conversion of note payable into common stock                                                           |  | $    | 50,000     |   |      | $ | 15,562     |  
|                                                                                                       |  |      |            |   |      |   |            |  
|Issuance of warrants in connection with note payable                                                   |  | $    | 5,400      |   |      | $ | 7,300      |  
|                                                                                                       |  |      |            |   |      |   |            |  

See accompanying notes to consolidated financial statements.

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##### Table of Contents

INVERTED PARADIGMS CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

NOTE 1  ORGANIZATION AND PRINCIPLES OF CONSOLIDATIONS

Reporting Entity. Inverted Paradigms Corporation (Inverted or the Company) was incorporated in the State of Nevada on December 18, 1997. On September 29, 2003, the
Company completed a re-incorporation merger into a Delaware Corporation thus changing the state of incorporation from Nevada to Delaware. The Company is in the business of developing and selling our software Silent Sword.

Name Change.On April 28, 2006 a majority of the stockholders approved changing the name of the Company from Horizon Holding Corporation to Inverted
Paradigms Corporation.

NOTE 2  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation. The consolidated financial statements include the accounts of Inverted Paradigms Corporation and its three wholly-owned subsidiaries. All significant intercompany accounts
and transactions are eliminated in the consolidated financial statements.

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

Revenue Recognition. Revenue is earned by the Company from the sale of software upon delivery of a license to the customer, provided that persuasive evidence of an arrangement exists, the license
fee is fixed and determinable, and collection of the fee is considered probable.

Prior to the discontinuation of our operations of Liquidgolf (see Note
4), the Company used the gross method of revenue recognition, as prescribed under EITF 99-19, Reporting Revenue Gross as a Principal versus Net as an Agent, as the Company was the primary obligor in the transaction and was obligated to
pay the supplier for work performed regardless of whether the customer accepted the product.

Cash and Cash Equivalents.The Company
considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents.

Property and
Equipment. Property and equipment are carried at cost, less accumulated depreciation. Major replacements and improvements that extend the useful lives of property and equipment are capitalized. Routine maintenance and repairs are charged to
expense when incurred. Depreciation is computed using the straight-line method over the following estimated useful lives of the related assets:



|                        |  |                       
|----------------------- |  | ----------------------
|Description             |  | Estimated Useful Lives
|Computers and Equipment |  | 3-5 years             
|Furniture and fixtures  |  | 5 years               
|Software                |  | 3 years               

Impairment of Long-Lived Assets. The carrying values of long-lived assets are reviewed if the facts
and circumstances indicate a potential impairment of their carrying values. Management evaluates the recoverability of the net carrying value of its property and equipment and goodwill by comparing the carrying values to the estimated future
undiscounted cash flows. A deficiency in these cash flows relative to the carrying amounts is an indication of the need for a write-down due to impairment. The impairment write-down would be the difference between the carrying amounts and the fair
value of these assets. Any loss on impairment is recognized by a charge to operations in the period identified. During 2006, management determined the intangibles relating to our Silent Sword acquisition were impaired and accordingly recorded an
impairment charge (See Note 10).

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##### Table of Contents

INVERTED PARADIGMS CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

NOTE 2  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED



Income Taxes.The Company accounts for income taxes utilizing the asset and liability method. This approach requires the recognition of deferred tax assets and liabilities for the expected future tax
consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit 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. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enacted date. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.

In June 2006, the Financial Accounting Standards Board (FASB) issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes, an
interpretation of FASB Statement No. 109 (FIN 48). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprises financial statements in accordance with FASB Statement No. 109, Accounting for
Income Taxes (SFAS 109). This Interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 is
effective for fiscal years beginning after December 15, 2006. The Company will adopt FIN 48 effective January 1, 2007 as required. The Company does not expect the adoption of this statement to have a significant impact on the
Companys financial position or results of operation.

Share-Based Payments.

On January 1, 2006, the start of the first quarter of fiscal 2006, the Company adopted the provisions of Statement of Financial Accounting Standards
No. 123 (revised 2004), Share-Based Payment (SFAS No. 123(R)) which requires that the costs resulting from all share-based payment transactions be recognized in the financial statements at their fair values. The
Company adopted SFAS No. 123(R) using the modified prospective application method under which the provisions of SFAS No. 123(R) apply to new awards and to awards modified, repurchased, or cancelled after the adoption date. Additionally,
compensation cost for the portion of the awards for which the requisite service has not been rendered that are outstanding as of the adoption date is recognized in the Consolidated Statements of Operations over the remaining service period after the
adoption date based on the original estimate of fair value. Results for prior periods have not been restated.

Website Design Costs. Website
design costs, if any, include direct costs incurred by the Company to develop and enhance the Companys website.

Software Development Costs -The Company capitalizes software development costs incurred, if any, to develop certain of the Companys products in accordance with Financial Accounting Standards No. 86, Accounting for the Costs of Computer Software to be
Sold, Leased or Otherwise Marketed (SFAS 86). Costs are capitalized only after the technological feasibility of the project has been established. In accordance with Statement of Financial Accounting Standards No. 142 Goodwill and
Other Intangible Assets (SFAS No. 142), the Company has recorded its software development costs as a definite-lived intangible asset and is amortizing these costs over the three-year estimated useful life of the software. All other costs to
develop software, either in the preliminary project stage or post implementation stage are expensed as incurred.

Due to Related Parties. Due
to related parties represents amounts owed to directors and/or officers for unpaid employee reimbursements and director fees. These amounts are unsecured, non-interest bearing and are due on demand.

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INVERTED PARADIGMS CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

NOTE 2  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED



Net Loss Per Share Information.Basic and diluted loss per share is calculated by dividing net loss by the weighted-average number of common shares outstanding during the reporting period. The Companys common stock
warrants have been excluded from the diluted loss per share computation since their effect is anti-dilutive.

Fair Value of Financial
Instruments. The carrying amount of cash and cash equivalents, loan receivable, accounts payable, other current liabilities, due to related parties, and stockholder loans approximates fair value because of the short maturity of those
instruments.

NOTE 3  BASIS OF PRESENTATION

The
Companys consolidated financial statements have been prepared assuming the Company will continue as a going concern. The Company has experienced net losses since February 16, 1999 (date of inception), which losses have caused an
accumulated deficit of approximately $39,600,000 as of December 31, 2006 and has a working capital deficiency as well as a capital deficiency. In addition, the Company has consumed cash in its continuing operating activities of approximately
$940,000 and $330,000 for the years ended December 31, 2006 and 2005, respectively. These factors, among others, raise substantial doubt about the Companys ability to continue as a going concern.

Management has been able, thus far, to finance the losses through a series of private placements. The Company is continuing to seek other sources of financing and
attempting to explore alternate ways of generating revenues through partnerships with other businesses. Conversely, the maintenance of our website and the development of our software segment is expected to result in operating losses for the
foreseeable future. There are no assurances that the Company will be successful in achieving its goals.

In view of these conditions, the Companys
ability to continue as a going concern is dependent upon its ability to obtain additional financing or capital sources, to meet its financing requirements, and ultimately to achieve profitable operations. Management believes that its current and
future plans provide an opportunity to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and
classification of liabilities that may be necessary in the event the Company cannot continue as a going concern.

NOTE 4  DISCONTINUED OPERATIONS

Discontinued Operations. In June 2006, the Company decided to discontinue the operations of a subsidiary, Liquidgolf Holding Corporation,
due to the inability to attract affiliates to its golf retail website. As a result, the Company recorded a loss from discontinued operations of $372 and $222,021 during the years ended December 31, 2006 and 2005, respectively.

NOTE 5  OTHER CURRENT LIABILITIES

Other
current liabilities consist of the following as of December 31, 2006:



|                 |  |   |        
|---------------- |  | - | -------
|Accrued payroll  |  | $ | 244,366
|Accrued interest |  |   | 46,258 
|Other            |  |   | 27,845 
|                 |  |   |        
|                 |  | $ | 318,469
|                 |  |   |        

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INVERTED PARADIGMS CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

NOTE 6  NOTES PAYABLE  STOCKHOLDERS

Notes payable  stockholders are summarized as follows as of December 31, 2006:



|                                                                                                                                                                                                                                                                                            |  |   |        
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | - | -------
|November 2005  Unsecured promissory note payable for $200,000, interest at 11%, maturity date was April 2006. As additional consideration, 50,000 shares of stock should have been delivered
at maturity (Note 8). Note payable is in default and due upon demand as of December 31, 2006. |  | $ | 200,000
|                                                                                                                                                                                                                                                                                            | 
|March 2006  Unsecured promissory note payable for $250,000, interest at 11%, maturity date was April 2006. As additional consideration, 75,000 shares of stock should have been delivered at
maturity (Note 8). Note payable is in default and due upon demand as of December 31, 2006.    |  |   | 250,000
|                                                                                                                                                                                                                                                                                            | 
|July 2006  Unsecured, non-interest bearing, promissory note payable for $20,000, maturity date was August 2006. Note payable is in default and due upon demand as of December 31,
2006.                                                                                                    |  |   | 20,000 
|                                                                                                                                                                                                                                                                                            | 
|November 2006  Unsecured convertible promissory note payable for $13,309, interest at 12%, maturity date was February 2007. As additional consideration, 150,000 shares of stock should have
been delivered at maturity (Note 8).                                                          |  |   | 13,309 
|                                                                                                                                                                                                                                                                                            | 
|November 2006  Unsecured convertible promissory note payable for $13,309, interest at 12%, maturity date was February 2007. As additional consideration, 150,000 shares of stock should have
been delivered at maturity (Note 8).                                                          |  |   | 13,309 
|                                                                                                                                                                                                                                                                                            | 
|November 2006  Unsecured promissory note payable for $50,000, interest at 12%, maturity date was May 2007. As additional consideration, 150,000 shares of stock should have been delivered
at maturity (Note 8).                                                                           |  |   | 50,000 
|                                                                                                                                                                                                                                                                                            |  |   |        
|                                                                                                                                                                                                                                                                                            | 
|Total notes payable  stockholders                                                                                                                                                                                                                                                          |  |   | 546,618
|                                                                                                                                                                                                                                                                                            | 
|Inverted common stock payable at maturity for various promissory notes                                                                                                                                                                                                                      |  |   | 29,019 
|                                                                                                                                                                                                                                                                                            |  |   |        
|                                                                                                                                                                                                                                                                                            | 
|Total                                                                                                                                                                                                                                                                                       |  | $ | 575,637
|                                                                                                                                                                                                                                                                                            |  |   |        

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##### Table of Contents

INVERTED PARADIGMS CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

NOTE 7 INCOME TAXES

At December 31, 2006, the Company had net operating loss carryforwards for income tax purposes of
approximately $38,800,000 available as offsets against future taxable income. The net operating loss carryforwards are expected to expire at various times from 2019 through 2026.

The tax effects of the primary temporary differences giving rise to the Companys deferred tax assets and liabilities are as follows for the year ended December 31, 2006:



|                                |  |      |             |  
|------------------------------- |  | ---- | ----------- | -
|                                |  | 2006 |            
|Deferred tax assets:            |  |      |             |  
|Net operating loss carryforward |  | $    | 14,700,000  |  
|Start-up costs                  |  |      | 4,000       |  
|Stock based compensation        |  |      | 22,000      |  
|                                |  |      |             |  
|Total deferred tax assets       |  |      | 14,726,000  |  
|Less valuation allowance        |  |      | (14,726,000 | )
|                                |  |      |             |  
|                                | 
|Net deferred tax asset          |  | $    |            |  
|                                |  |      |             |  

Because of the Companys lack of earnings history, the deferred tax assets have been fully offset by a
valuation allowance. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax
assets is dependent upon the generation of future taxable income during those periods that the temporary differences become deductible. During the years ended December 31, 2006, the increase in deferred tax asset valuation allowance amounted to
approximately $604,000.

U.S. tax rules impose limitations on the use of net operating losses and tax credits following certain defined changes in stock
ownership under Section 382 of the Internal Revenue Code and the accompanying Treasury Regulations. Calculating the impact of Section 382 would be a very costly and time consuming process. By completing this calculation, we would be
required to include a valuation allowance for the amount of net operating losses limited by Section 382. Since we currently offset 100% of our deferred asset with a valuation allowance, we believe we do not need to complete this calculation
until such time we become profitable and are required to for the filing of our federal income tax return in a profitable year.

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##### Table of Contents

INVERTED PARADIGMS CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

NOTE 8  STOCKHOLDERS EQUITY (CAPITAL DEFICIENCY)

Common Stock.The Board of Directors has authorized 100,000,000
shares of common stock with a par value of $.001. Each share of common stock entitles its holder to one vote on all matters submitted to vote of the stockholders. The holders of common stock do not have cumulative voting rights or preemptive rights.

2005 Secured Promissory Notes. On July 7, 2005, the Company sold in a private placement, secured promissory notes in the amounts of
$5,000 and $10,000 to two stockholders. The note holder has the sole option of converting the principal represented by this note into our common stock at a strike price equal to a 50 percent discount to the average closing bid price of the stock for
the ten days immediately prior to the conversion. The notes payable has a conversion feature for which the Company recognized $15,000 to interest expense during the year ended December 31, 2005 as a result of the beneficial conversion feature.
On November 28, 2005, we issued 129,595 shares of our common stock to satisfy the principal and accrued interest on the $10,000 promissory note. On December 6, 2005, we issued 57,076 shares of our common stock to satisfy the principal and
interest on the $5,000 promissory note.

The Company sold, in a private placement, an unsecured promissory note in the amount of $200,000 to a stockholder
in November 2005. At maturity, in addition to the payment of principal and accrued interest, the Company will deliver, as additional incentive for making the loan, 50,000 shares of our common stock. These shares will be restricted securities, as
defined by the Securities Act of 1933, as Amended. As of December 31, 2006, the compensation shares have not been issued to the note holder. The November 2005 Loan agreement became effective on November 15, 2005, at which time our stock
was trading at $0.10 per share. As a result, $5,000 has been amortized as interest expense though December 31, 2006.

The Company sold, in a private
placement, an unsecured convertible promissory note in the amount of $50,000 December of 2005. The note payable has a conversion feature for which the Company recognized $50,000 to interest expense during the year ended December 31, 2005 as a
result of the beneficial conversion feature. On December 20, 2006, we issued 1,600,029 shares of our common stock to satisfy the principal and interest on the $50,000 promissory note.

Also, as part of the November and December 2005 note agreements, the broker acquired a warrant as compensation, issued by the Company, to purchase 50,000 shares of
common stock at $0.50 per share and the warrant is exercisable at issuance. The fair value of the warrant amounted to $2,300 based on the Black-Scholes pricing model and is being amortized over the life of the loan. The Company used the following
assumptions in determining this value:



|               |  |        
|-------------- |  | -------
|Risk-free rate |  | 5%     
|Expected life  |  | 3 years
|Volatility     |  | 121%   
|Dividend Yield |  | 0%     

As of December 31, 2006, the fair value of the warrants have been fully amortized with $1,600 and $700 being
charged to interest expense for the years ended December 31, 2006 and 2005, respectively.

2006 Promissory Notes.On November 20,
2006, we sold in a private placement, an unsecured promissory note in the amount of $50,000. Interest accrues on the outstanding principal balance from and after November 20, 2006 at a rate of 12% per annum. At maturity, March 17,
2007, in addition to the payment of principal and accrued interest, we will deliver 150,000 shares of our common stock as additional incentive for making the loan. The stock is considered restricted securities as defined by the Securities Act of
1933, as amended. The fair value of these shares amounts to $10,500 and is being amortized over the length of the loan. During the year ended December 31, 2006, approximately $6,000 was included in interest expense in our consolidated
statements of operations.

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##### Table of Contents

INVERTED PARADIGMS CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

NOTE 8  STOCKHOLDERS EQUITY (CAPITAL DEFICIENCY), CONTINUED



On November 8, 2006, we sold in a private placement, unsecured promissory notes in the amount of $26,618 to two stockholders. Interest accrues on the outstanding principal balance beginning November 8, 2006 at a rate of
12% per annum. At maturity, February 7, 2007, in addition to the payment of principal and accrued interest, we will deliver 300,000 shares of our common stock as additional incentive for making the loan. The stock is considered restricted
securities as defined by the Securities Act of 1933, as amended. The fair value of these shares amounts to $21,000 and is being amortized over the length of the loan. During the year ended December 31, 2006, approximately $12,000 was included
in interest expense in our consolidated statements of operations. The compensation shares were issued in July 2007. In addition, this note payable has a conversion feature for which the Company recognized $10,648 of interest expense during the year
ended December 31, 2006.

On March 9, 2006, we sold in a private placement, an unsecured promissory note in the amount of $250,000 to a
stockholder. Interest accrues on the outstanding principal balance beginning March 9, 2006 at a rate of 11% per annum. At maturity, October 31, 2006, in addition to the payment of principal and accrued interest, we will deliver 75,000
shares of our common stock as additional incentive for making the loan. The stock is considered restricted securities as defined by the Securities Act of 1933, as amended. As of December 31, 2006, the compensation shares have not been issued to
the note holder. The fair value of these shares amounts to $13,500 and is being amortized over the length of the loan. During the year ended December 31, 2006, $13,500 was included in interest expense in our consolidated statements of
operations. As of December 31, 2006 we have defaulted on this loan.

Also, as part of the this transactions, the broker acquired a warrant to purchase
50,000 shares of our common stock at $0.50 per share which is exercisable at issuance. The fair value of the warrant amounted to $5,400 based on the Black-Scholes pricing model and is being amortized over the life of the loan. The Company used the
following assumptions in determining this value:



|               |  |        
|-------------- |  | -------
|Risk-free rate |  | 5%     
|Expected life  |  | 3 years
|Volatility     |  | 121%   
|Dividend Yield |  | 0%     

$5,400 has been amortized and changed to interest expense during the year ended December 31, 2006.

Sale of Restricted Common Stock. On August 7, 2006, we closed an agreement (the Agreement) with an individual for the
purchase of 294,118 shares of our common stock for $25,000. The stock is considered restricted securities as defined by Rule 144 promulgated under the Securities Act of 1933, as amended.

Warrant Exercise.On July 13, 2006, 594,118 warrants were exercised in a cashless exercise. As a result of this transaction, the Company issued 1,000,000 shares of common stock.

Subscription Agreement. On May 30, 2006, we closed an agreement with an investor (the Investor) for the purchase of 2,941,177 shares of
our common stock for $250,000. The stock issued to the Investor is considered restricted securities as defined by Rule 144 promulgated under the Securities Act of 1933, as amended. We also issued two classes of warrants in accordance with this
agreement. Class A warrants allows the Investor to purchase 2,941,177 shares at $0.25 per share and Class B warrants allows the Investor to purchase 2,941,177 shares at $0.35 a share. Both classes expire on May 30, 2011.

We incurred $32,500 in fees associated with this transaction that were charged to additional paid-in capital during the year ended December 31, 2006. Also, as part
of this transaction, we issued a warrant as compensation to purchase 294,118 shares of common stock at $0.085 per share and the warrant is exercisable at issuance. The warrants may be exercised in cash or by an exchange of the value thereof as a
cashless exercise.

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INVERTED PARADIGMS CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

NOTE 8  STOCKHOLDERS EQUITY (CAPITAL DEFICIENCY), CONTINUED



Stock Purchase Agreement.On April 3, 2006, the Company entered into a stock purchase agreement
with an investor (the Investor II). This agreement allows the Investor II to purchase a maximum of 35,000,000 shares of common stock of the Company at a purchase price of 20% of the bid price. These shares are deemed restricted
securities as defined in Rule 144 of the Securities Act of 1933. The Investor II purchased 3,000,000 shares on April 17, 2006 for $135,000. This agreement expired on September 30, 2006.

We incurred $17,550 in fees associated with this transaction that were charged to additional paid-in capital during the year ended December 31, 2006. Also, as part
of this transaction, we issued a warrant as compensation to purchase 300,000 shares of common stock at $0.045 per share and the warrant is exercisable at issuance. The warrants may be exercised in cash or by an exchange of the value thereof as a
cashless exercise.

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INVERTED PARADIGMS CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

NOTE 8  STOCKHOLDERS EQUITY, CONTINUED



|     |  |                                          |  |               |   |  |               |       |                 |                 
|---- |  | ---------------------------------------- |  | ------------- | - |  | ------------- | ----- | --------------- | ----------------
|Year |  | Warrant Type                             |  | WarrantShares |   |  | ExercisePrice |       | Expiration Date
|2002 |  | Class A warrants                         |  | 1,220,000     |   |  | $             | 1.00  |                 | April - May 2007
|2003 |  | Class A warrants cancelled               |  | (160,000      | ) |  |               |       |                 |                 
|2003 |  | Class A warrants exercised               |  | (63,000       | ) |  |               | 1.00  |                 |                 
|     |  |                                          |  |               |   |  |               |       |                 |                 
|     |  |                                          |  | 997,000       |   |  |               |       |                 |                 
|     |  |                                          |  |              
|2002 |  | Class B warrants                         |  | 1,220,000     |   |  |               | 1.50  |                 | April - May 2007
|2002 |  | Class B warrants cancelled               |  | (160,000      | ) |  |               |       |                 |                 
|     |  |                                          |  |               |   |  |               |       |                 |                 
|     |  | Total Class B warrants outstanding       |  | 1,060,000     |   |  |               |       |                 |                 
|     |  | Total Notes payable warrants outstanding |  |              |   |  |               |       |                 |                 
|     |  |                                          |  |              
|2004 |  | Notes payable warrants                   |  | 50,000        |   |  |               | 0.92  |                 | None            
|     |  |                                          |  |              
|2004 |  | Private placement warrants               |  | 3,718,491     |   |  |               | 0.75  |                 | Aug. - Oct. 2007
|     |  |                                          |  |              
|2005 |  | Broker warrants                          |  | 50,000        |   |  |               | 0.50  |                 | Dec. 2008       
|     |  |                                          |  |              
|2006 |  | Broker warrants                          |  | 50,000        |   |  |               | 0.50  |                 | Mar. 2009       
|     |  |                                          |  |              
|2006 |  | Warrants                                 |  | 300,000       |   |  |               | 0.045 |                 | Apr. 2011       
|2006 |  | Warrant exercise                         |  | (300,000      | ) |  |               | 0.045 |                 |                 
|     |  |                                          |  |               |   |  |               |       |                 |                 
|     |  |                                          |  |              |   |  |               |       |                 |                 
|     |  |                                          |  |              
|2006 |  | Warrants                                 |  | 294,118       |   |  |               | 0.085 |                 | May 2011        
|2006 |  | Warrant exercise                         |  | (294,118      | ) |  |               | 0.085 |                 |                 
|     |  |                                          |  |               |   |  |               |       |                 |                 
|     |  |                                          |  |              |   |  |               |       |                 |                 
|     |  |                                          |  |              
|2006 |  | Class A warrants                         |  | 2,941,177     |   |  |               | 0.085 |                 | May 2011        
|     |  |                                          |  |              
|2006 |  | Class B warrants                         |  | 2,941,177     |   |  |               | 0.085 |                 | May 2011        
|     |  |                                          |  |               |   |  |               |       |                 |                 
|     |  |                                          |  |              
|     |  | Total warrants outstanding               |  | 11,807,845    |   |  |               |       |                 |                 
|     |  |                                          |  |               |   |  |               |       |                 |                 

NOTE 9  RESTRICTED STOCK-BASED COMPENSATION

On March 21, 2006, the Board of Directors adopted the Inverted Paradigms Corporation 2006 Restricted Stock Plan (the 2006 Plan) and
recommended that it be submitted to our stockholders for their approval at the 2006 Annual Meeting. The 2006 Plan was approved by the stockholders on April 28, 2006. The terms of the 2006 Plan provide for grants of restricted stock awards.

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INVERTED PARADIGMS CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

NOTE 9  RESTRICTED STOCKBASED COMPENSATION, CONTINUED



Under the 2006 Plan, the total number of shares of restricted common stock that may be subject to the granting of Awards during the term of the 2006 Plan shall be equal to 6,000,000 shares. Shares with respect to which awards previously
granted that are forfeited, cancelled or terminated are returned to the plan and may be reissued.

Effective January 1, 2006, the Company adopted the
provisions of Statement of Financial Accounting Standards No. 123R, Accounting for Stock-Based Compensation (SFAS No. 123R), which requires stock-based compensation to be measured based on the fair value of the
awards on the grant date. The Company elected the modified prospective method of transition as permitted by SFAS No. 123R. Under this transition method, the Company is required to record compensation expense for all awards granted
after the date of adoption and for the unvested portion of previously granted awards that were outstanding at the date of adoption, and accordingly, periods prior to adoption are not restated. The Company has not historically granted stock options
to employees. However, for the year ended December 31, 2006, total equity-based compensation of approximately $57,000 was included in operating expense, resulting from the amortization of previously issued restricted stock awards. In addition,
the Company expensed $210,000 of restricted stock awards resulting from a grant of 983,618 shares of restricted stock, as described below.

Restricted
Stock

During the year ended December 31, 2006, the Company granted the following shares of restricted stock as compensation:



| |  |  | 600,000 shares were issued to four board members to satisfy $28,000 of previously accrued compensation. These shares have a weighted average grant date fair value
of approximately $0.05.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 250,000 shares were issued to our former CEO as severance payment. These shares have a weighted average grant date fair value of approximately $40,000. This amount
has been fully expensed during the year ended December 31, 2006.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 4,375,000 shares were issued with a value of $400,000. The shares were issued for investor relation expenses that have been fully expensed during the year ended
December 31, 2006.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 285,714 shares were issued as consulting fees to Utek Corporation. The shares were valued at $120,000 and the fees are being amortized over a one year period. In
December 2006, this consulting agreement was canceled and 170,645 shares were returned to the Company and $38,329 was expensed during the year ended December 31, 2006.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

All of the above restricted stock units vested immediately upon issuance.

NOTE 10  IMPAIRMENT OF INTANGIBLE ASSETS

In December 2006, the Company recognized an impairment loss on our intangible assets due to
the inability to continue selling and developing our software. The impairment loss relates to the Companys Silent SwordTM software and related trademarks. As a result, the Company recorded an impairment charge of $100,796 in the accompanying
consolidated statement of operations for the year ended December 31, 2006.

NOTE 11  COMMITMENTS AND CONTINGENCIES

Settlement Agreement. On February 9, 2006, the Company entered into a settlement agreement with a stockholder. This stockholder had priority rights with Delta
Insights, LLC (Delta) in that he was to be returned his $100,000 investment in Delta in the event of the sale of Deltas technology. When Delta sold its Silent Sword software to the Company, the shareholder believed he was
entitled to the return of his investment. To avoid any litigation, the Company entered into a settlement agreement that required a cash payment of $25,000 paid immediately and a $75,000 payment to be made as funds are raised by the Company. The
settlement expense of $100,000 is included in general and administrative expenses in the accompanying consolidated statements of operations for the year ended

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INVERTED PARADIGMS CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

NOTE 11  COMMITMENTS AND CONTINGENCIES, CONTINUED



December 31, 2006. As of December 31, 2006, the Company has paid $75,000 towards this liability, with the unpaid portion of $25,000 included in
accrued expenses in the accompanying consolidated balance sheet as of December 31, 2006.

Consulting Agreement. On June 9, 2006, the
Company entered into an agreement (the Agreement I) with Big Apple Consulting U.S.A., Inc. (the Consultant) to provide the Company with investor relations and management consulting services for a period of one year. The fees
for these services are $75,000 per month. The Company issued 4,750,000 restricted shares on July 17, 2006 to an escrow agent for payment of the monthly fee. The first months fee of $75,000 was paid by a third party and charged to
additional paid-in capital.

The Consultant also has the right to purchase $1,000,000 of common stock at a 35% discount to the market of the ten day
average closing bid price; however, at no time shall the ten day average closing bid price be calculated at a price per share less than $0.40.

Office
Lease. On February 7, 2006, the Company committed to a non-cancelable operating lease on operating facilities which expires February 28, 2009. On September 1, 2006, the Company broke this lease and vacated the property. The
landlord leased the vacated space to another tenant in December 2006. The Company has accrued $19,774 which is included in accounts payable for the four months of rent outstanding.

NOTE 12  SUBSEQUENT EVENTS

Consulting Agreement. On May 1, 2007, the Company entered into an
agreement (the Agreement II) with Consultant to terminate Agreement I. The Agreement II provides that Consultant will be compensated 4,750,000 shares issued to escrow for services performed. These services have been valued at $300,000
and included in General and Administrative expenses in the accompanying consolidated statements of operations during the year ended December 31, 2006.

Settlement Agreements. In April 2007, the Company settled outstanding payroll with four employees of the Company for $79,000. Half of the funds are to be paid when the Company raises $250,000 in operating capital and the remaining
funds are to be paid when a total of $500,000 in operating capital has been raised. Also, as part of these settlements, the employment agreement with Charles Wernicke has been cancelled.

Office Lease. On April 25, 2007, the Company entered into a settlement agreement with its previous landlord for $5,000 to settle the termination of its lease.

2007 Promissory Notes. On March 16, 2007, we entered into an unsecured promissory note in the amount of $22,037 with our former Chief Executive Officer to
convert unpaid employee reimbursements from due to related parties to a promissory note. Interest accrues on the outstanding principal balance from and after March 16, 2007 at a rate of 10% per annum. At maturity, March 17, 2008, in
addition to the payment of principal and accrued interest, we will deliver as additional incentive for making the loan, 250,000 shares of our common stock.

On June 4, 2007, we sold, in a private placement, four unsecured convertible promissory notes in the amount of $90,000. Interest accrues on the outstanding principal balance from and after March 16, 2007 at a rate of 5%, plus the
prime rate, per annum. At maturity, June 4, 2008, the lender or the borrower have the option of converting the notes to restricted common stock at one third of the average closing share price of the stock for the ten days prior to the
conversion date.

On July 26 and August 7, 2007, we sold, in a private placement, unsecured convertible promissory notes in the amount of
$27,500. Interest accrues on the outstanding principal balance from and after July 27 and August 7, 2007

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INVERTED PARADIGMS CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

NOTE 12  SUBSEQUENT EVENTS, CONTINUED



at a rate of 5%, plus the prime rate, per annum. At maturity, July 26 and August 7, 2008, the lender or the borrower have the option of converting
the notes to restricted common stock at one third of the average closing share price of the stock for the ten days prior to the conversion date.

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