SECURITIES AND EXCHANGE
COMMISSION


WASHINGTON,
D.C. 20549









FORM
10-K




(Mark
One)




T
            ANNUAL REPORT PURSUANT TO
      SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934




For the
fiscal year ended December 31, 2007.




or




£
            TRANSITION REPORT PURSUANT TO
      SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934




For the
transition period from _______________ to _______________.




Commission
File No.  000-27879




MARSHALL
HOLDINGS INTERNATIONAL, INC.


(Exact
name of issuer as specified in its charter)




Nevada
            
            88-0301278(State
      or other jurisdiction of incorporation or organization)
            
            (I.R.S.  Employer
      Identification No.)2555
      East Washburn Road, North Las Vegas, Nevada
            
            89081(Address
      of principal executive offices)
            
            (Zip
      Code)





Registrant’s
telephone number, including area code: (702) 317-2400







Securities
      registered pursuant to Section 12(b) of the Act:
            
            None(Title
      of class and name of exchange on which registered)Securities
      registered pursuant to Section 12(g) of the Act:
            
            Common
      stock, par value $0.001 per share(Title
      of class)




Indicate
by check mark if the registrant is a well known seasoned issuer, as defined in
Rule 405 of the Securities Act.  Yes £No T




Indicate
by check mark if the registrant is not required to file reports pursuant to
Sections 13 or 15(d) of the Exchange Act.  Yes TNo £




Indicate
by check mark if the registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or 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 oNo x




Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not 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-K. T













Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.




Large
      accelerated filer £
            
            Accelerated
      filer £Non-accelerated
      filer £ (Do not
      check if a smaller reporting company)
            
            Smaller
      reporting company T




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




State the
aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the common equity was
last sold, or the average bid and asked price of such common equity, as of the
last business day of the registrant’s most recently completed second fiscal
quarter:  $674,236.




Indicate
the number of shares outstanding of each of the registrant’s classes of common
stock as of April 10, 2008: 6,992,357,320.


Documents
incorporated by reference:  None.











TABLEOF CONTENTS




ITEM
      1.
            
            DESCRIPTION OF BUSINESS.
            
            1ITEM
      2.
            
            DESCRIPTION OF PROPERTY.
            
            14ITEM
      3.
            
            LEGAL PROCEEDINGS.
            
            14ITEM
      4.
            
            SUBMISSION OF MATTERS TO A VOTE OF SECURITY
      HOLDERS.
            
            17ITEM
      5.
            
            MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
      MATTERS.
            
            17ITEM
      6.
            
            MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF
      OPERATION.
            
            20ITEM
      7.
            
            FINANCIAL STATEMENTS.
            
            23ITEM
      8.
            
            CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
      AND FINANCIAL DISCLOSURE.
            
            23ITEM
      8A.
            
            CONTROLS AND PROCEDURES.
            
            24ITEM
      8B.
            
            OTHER INFORMATION.
            
            25ITEM
      9.
            
            DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
      PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE
      ACT.
            
            25ITEM
      10.
            
            EXECUTIVE COMPENSATION.
            
            28ITEM
      11.
            
            SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
      MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
            
            31ITEM
      12.
            
            CERTAIN RELATIONSHIPS AND RELATED
      TRANSACTIONS.
            
            32ITEM
      13.
            
            EXHIBITS.
            
            33ITEM
      14.
            
            PRINCIPAL ACCOUNTANT FEES AND SERVICES.
            
            32




Table of Contents





PART
I


Item1.
            Description
      of Business.




Company
Overview




As used
herein the term (“Marshall”) refers to Marshall Holdings International, Inc.,
formerly Gateway Distributors, Ltd., a Nevada corporation, its subsidiaries and
predecessors, unless the context indicates otherwise.  Marshall was
originally incorporated in the State of Nevada on May 26,
1993.  Marshall markets and distributes different nutritional and/or
health and wellness products.  The products, which Marshall sells, are
intended to provide nutritional supplementation to the users; the products are
not intended to diagnose, treat, cure or prevent any disease.




On August
15, 2002, Marshall acquired all equity interest in Los Cabos Freedom Movement, a
Wisconsin LLC, d/b/a Grandma Hammans Specialty Foods (“Grandma Hammans”) for
$217,500.  Marshall formed a wholly owned subsidiary, Grandma Hammans
Specialty Foods (“Grandma Hammans”) on July 3, 2003 to run the wholesale
operations of Marshall.




We formed
a wholly owned subsidiary, The Right Solution Gateway, on January 7, 2003 to
house the assets of TRSG Corporation and to run the retail operations of
Marshall.




On April
30, 2004, we formed a wholly owned subsidiary, Gateway Venture Holdings, Inc.
(“GVH”).  Our Las Vegas property and fixed assets of Marshall are
recorded in this subsidiary.




Also on
April 30, 2004, Marshall formed a wholly owned subsidiary, Aspen Cove Resort
Incorporated to run the operations of Aspen Cove Resort (formerly Beaver Dam
Lodge) located near Panguitch, Utah.  The lodge had been purchased on
April 15, 2004 and was owned by GVH.




On May
30, 2004, an agreement was signed with Quality Distribution Services of Nevada
to create a new corporation, Quality Distribution Services of Arizona, Inc.
(“QDS”).  QDS was incorporated in Nevada on June 7, 2004 and was 51
percent owned by Marshall.  QDS was a wholesale beverage distributor
in the Phoenix, Arizona area.  During 2005, Marshall elected not to
recognize QDS as an equity position, but as an investment.  The
corporation has since been revoked and not in business.




On
November 30, 2004, Marshall formed a wholly owned subsidiary, Marshall Corporate
Administration, Inc (“MCA”), formerly Gateway Corporate Administration which is
engaged in marketing and management services.




In
December 2004, we moved our corporate office and warehouse location to 3220
Pepper Lane, Las Vegas, Nevada 89120.




On
December 21, 2004, Marshall entered an Asset Purchase Agreement to purchase 51
percent of Los Cabos Beverage then owned by Blaine Wendtland
(“Wendtland”).  The 51 percent interest in Los Cabos Beverage and its
assets were acquired by Marshall in exchange for Wendtland receiving all rights
to Grandma Hammans GHF product and Wendtland assuming and paying off the debt of
$193,833 owing to Los Cabos Freedom Movement LLC and Ed Wendtland.




On
December 30, 2004, Marshall formed a 51 percent owned subsidiary, Los Cabos
Beverage Inc. (“LCB”) to handle the operations of the sale of private label
water.




On
February 28, 2005, Marshall entered into an agreement with Blaine Wendtland
wherein he assumed all ownership and obligations of Los Cabos Beverage and
Marshall terminated its commitments and relationships with Los Cabos Beverage
and Blaine Wendtland.




1
 Table of Contents





On June
2, 2005, Marshall sold it’s wholly owned subsidiary, Aspen Cove Resort
Incorporated, in combination with selling the building and real estate on which
the resort is located.




On
September 30, 2005, Marshall sold its building and real estate which housed its
warehouse and corporate offices located 3220 Pepper Lane, Las Vegas, Nevada
89120.




On March
13, 2006, Marshall purchased a smaller commercial property located at 2555 East
Washburn Road, North Las Vegas, Nevada.  Our operations and warehouse
are operating out of the new facilities.




On June
30, 2006, Marshall purchased all of the operations and assets of Marshall
Distributing Company in Salt Lake City, Utah.  Marshall Distributing
distributes over 150 different manufacturers lines of over 6,000 natural health
products.




On August
31, 2006, Marshall formed a wholly owned subsidiary Mountain West Holdings, Inc.
to facilitate the website and e-commerce operations.




Corporate
Offices




Marshall’s
executive office is located at 2555 East Washburn Road, North Las Vegas, Nevada
89081 as of the date of this filing.  The telephone number to call for
information remains (702) 317-2400.




Business
Operations




Marshall
is a company dedicated to providing life enhancing products and services through
modern distribution channels and technology.  Marshall’s has
strategically positioned itself for growth and expansion into the market place
for the development, marketing and sales of wellness products and
services.




We have
three principal subsidiaries.  The first is The Right Solution
Gateway.  The Right Solution Gateway is a network marketing company
that sells whole food nutrition, health and dietary supplements and skin care
products throughout North America, Russia, Japan and Indonesia.  We
believe that through special blends, whole foods, such as grains and vegetables,
can be combined to help produce optimum health.  The right solution
owns and maintains many original and proprietary supplement
formulations.




The Right
Solution Gateway’s products are marketed through a network marketing system
within the United States and wholesale personal import sales outside the United
States.  Network marketing enables Marshall’s independent distributors
in the United States to earn profits by selling our products to retail
consumers.  Distributors may also develop their own distributor
downline organizations by sponsoring others to do business in any market where
The Right Solution Gateway operates, entitling the sponsors to receive overrides
or commissions (cash incentives, including royalties and bonuses) on product
sales within their downline organizations.




Management
believes that its network marketing system is ideally suited to its products,
which emphasize a healthy lifestyle, because sales of such products are
strengthened by ongoing personal contact between retail consumers and
distributors, most of whom use The Right Solution Gateway’s products
themselves.  The Right Solution Gateway’s network marketing system
appeals to a broad cross-section of people, particularly those seeking to
supplement family income, start a home-based business, or pursue employment
opportunities other than conventional, full-time employment.




The
second principal subsidiary is Marshall Distributing, a natural products
distribution company that has been in business since 1974 and has sold into over
3,500 health food stores, pharmacies and medical offices around the country not
to mention doing complete order fulfillment for many up and coming on-line
stores.  Marshall Distributing carries over 6,000 natural products and
supplements comprising over 150 manufactures.  Our unique product mix
consists of a wide variety of natural products ranging from popular herbs and
health supplements to body care and fitness.  Marshall Distributing
offers complete lines of teas, herbs, vitamins, health foods, minerals,
homeopathic remedies, natural cosmetics, skin care, pet care, cold &
wellness products, weight management products, and much more.




2
 Table of Contents





Marshall
Distributing carries the top branded natural products and because of its long
standing in the market as a natural product distributor can offer many popular
lines that are now unattainable from other sources.  Just a few of
those manufacturers are names such as Nature’s Way, Twin Labs, Dr.
Christopher’s, Celestial Seasoning, Natrol, Nature’s Answer, Spectrum, Xlear,
American Health, Hyland’s, and many more.  Marshall Distributing
recently launched its proprietary formulations of condition specific herbal
supplements under its Home Harvest label.




Over the
years Marshall Distributing has established product mix that has a proven track
record.  It is continually searching for the best, most reputable
products on the market.  Constantly tracking sales and watching the
industry from the inside it can bring in only the most popular products with
proven results and good margins.




Marshall
Distributing sets itself apart with a reputation in the natural products
industry going back over 30 years while looking forward by creating unique
channels of wholesale and retail distribution for its already popular product
mix.




Additionally,
Marshall Distributing has reconfigured its warehouse and optimized for small
order product movement.  This optimization has positioned Marshall
Distributing as a fulfillment house for natural products and
supplements.  Marshall Distributing is already functioning as
fulfillment house for multiple web-sites looking to get away from product
inventory and shipping.  These web-sites are at various stages of
development and do take time to get going but have the potential to create
exponential sales opportunities for Marshall Distributing’s product
mix.  Through technological advances in Marshall Distributing’s
systems (API Interface) these outside sites can also be linked directly to its
back end order processing and inventory.




The third
principal subsidiary is Mountain West Holdings.  Mountain West
Holdings owns an e-commerce platform that facilitates online sales of products
through web-sites.  It contains Web Health Stores that provides the
actual online or virtual storefronts for customers.  This platform
fully integrates with Marshall Distributing fulfillment center.  Sales
of products, through this platform, continue to grow and add additional benefits
for the customer base.




Marshall
has other subsidiaries with the intention of having a diversified base to allow
revenue from additional sources which should enhance Marshall’s ability to
benefit from other types of resources.  These subsidiaries are Gateway
Venture Holdings Inc. and Marshall Corporate Administration.




Products




The Right
Solution Gateway markets and distributes different nutritional and/or health and
skin care products.  The nutritional/health products, which The Right
Solution Gateway sells, are intended to provide nutritional supplementation to
the users; the products are not intended to diagnose, treat, cure or prevent any
disease.




The Right
Solution Gateway’s top selling products are:




·
            Body
      Gard with Lactoferrin




·
            Femme




·
            Fulvic
      Factor




·
            Lifetonic




·
            LifeZymePlus




·
            Master
      Formula Powder




·
            Natural
      Immunity







3
 Table of Contents





·
            New
      Life Corrective A, B and C




·
            Superfood
      (Powder and Capsules)




Services




Product Return Policy for Retail
Customers.  The Right Solution Gateway has a 100% money-back
guarantee on all of its products for retail customers.  It is the
responsibility of each Team Member to refund the purchase price to any
unsatisfied customer.  The customer’s request must be made within 30
days of the date of the product purchase to be valid.  If the product
was used, the empty or partially filled container must be returned to The Right
Solution Gateway.  Upon receipt of the container and a copy of the
customer’s retail sales receipt with their name, address and telephone number,
The Right Solution Gateway will promptly send a replacement to the Team
Member.  The Right Solution Gateway does not make cash
refunds.  The Right Solution Gateway’s product return policy for
retail customers has been approved by the Direct Selling Association (the
“DSA”), a national industry trade organization of network marketing companies
whose objective is to provide aid, support and guidance to the network marketing
industry.




Product Return Policy for Team
Members.  A Team Member who is dissatisfied with a product may
request a refund or credit within 30 days of the date of the product’s
purchase.  Full, partially full, and empty bottles are eligible for
refund.  However, only one partially filled or empty container per
individual product will be honored.  Unused products purchased during
this same period are eligible for a refund if they are in the original
packaging, factory sealed, and in resalable condition.  Shipping
expenses are not eligible for refund.  The Right Solution Gateway’s
product return policy for Team Members has been approved by the
DSA.




Markets




Based on
Information Resources, Inc. data for retailers, health and natural store
sales-tracking surveys, company sales data, internet data, and figures appearing
in the trade press, it is estimated that United States retail sales of
nutritional supplements totaled over $5 billion in 2007 and predicted 7% overall
annual gains through 2009.




Overall,
56% of US adults use supplements.  About 34% of total adults use
supplements once a day.  About 7% of total adults use supplements more
than once daily.  The top indicator for use of supplements is
age.  Among supplement users overall, 55 to 72-year olds are the prime
bracket, followed closely by adults age 73 or over.  This
over-representation sharpens among consumers who use supplements once or more a
day: adults age 73 or over show the highest propensity to use supplements once a
day followed by those age 55-72, while adults age 55-64 show the highest
propensity to use supplements more than once a day.




Nutritional
supplements are currently sold in various market places including mass market,
natural food stores, multi level, and on the internet.  The largest
sales gains are expected in the mass market and through the
Internet.  With over 220 million North Americans now on-line, Internet
sales are slated for 20% to 30% growth through 2010.




Products
clearly identified as condition-specific continue to attract a larger following,
having increased their share of total tracked sales of nutritional supplements
by 2% of the last 4 years and have increased their sales by 56%, compared with
an overall market sales increase of 7%.




At least
1000 companies market nutritional supplements in the United States, although
relatively few manage even a single point of market share.  While
still highly fragmented overall, the competition is more concentrated at the
mass-market level than at the health/natural store level, with private-label
products now accounting for approximately one-third of the mass-market
sales.  During the past five years, private label has increased its
collective share of the overall market by nearly two percentage points, from 28%
to 29.9% - more than triple the share of any of its nearest branded
competitors.




We feel
that aging “Boomers” –
with their relative affluence and strong interest in preventive health measures
– are the driving force behind the nutritional supplements market, and
age-related condition-specific products will continue to proliferate in the
years ahead.  Joint and bone health, eye and brain health, heart
health, immune support, menopausal conditions, sexual dysfunction, and sagging
skin all represent opportunities for companies to develop and market important
products.  Given the overweight/obesity epidemic in this country,
weight-related conditions and diabetes will also push to the forefront of trends
in age-related products, right up there with osteoporosis prevention and
cholesterol control.  At the same time, supplement marketers will
focus increasingly on the younger set, a market set still largely untapped, and
one that in many other markets is viewed as essential to court in order to
develop life-long customers.




4
 Table of Contents





Distribution
and Marketing




The Right
Solution Gateway’s products are distributed primarily through a network
marketing system, consisting of a network of
distributors.  Distributors are generally independent contractors who
purchase products directly from The Right Solution Gateway for personal use or
for resale to consumers within the United States.  Distributors may
elect to work on a full-time or part-time basis.  The Right Solution
Gateway believes that its network marketing system appeals to a broad
cross-section of people, particularly those seeking to supplement family income,
start a home-based business or pursue employment opportunities other than
conventional, full-time employment and that a majority of its distributors work
on a part-time basis.  The Right Solution Gateway believes that its
network marketing system is ideally suited to marketing its products because
ongoing personal contact between consumers and distributors strengthens sales of
such products.




Within
the United States, distributors may earn profits by purchasing The Right
Solution Gateway’s products at wholesale prices (which are discounted 40 percent
from suggested retail prices) and selling The Right Solution Gateway’s products
to customers at suggested retail prices.  All distributors, who
sponsor new distributors and establish their own downline organizations may earn
commissions on product sales on their downline.




To become
a distributor, a person must be sponsored by an existing distributor, pay an
annual fee (which is currently $15.00), and be placed into a Tracking Center,
which is a point from which The Right Solution Gateway “tracks” the sales volume
of the distributor and the sales volume of a distributor’s downline
organization.  Each distributor has three legs in their organization
and commissions are based on volume requirements for these three
legs.  The strongest performing leg is the first leg, the second
strongest is the second leg and all other legs make up the third
leg.  In order to receive any commissions or bonuses a distributor
must make an initial purchase of $100 in personal purchase volume.  To
maintain qualification for any commissions or bonuses, a distributor must
purchase a minimum of $100 to $150 depending on total volume of The Right
Solution Gateway’s products every month.  All distributors are allowed
to participate in The Right Solution Gateway’s growth by sponsoring new
distributors.




The Right
Solution Gateway computes the wholesale volumes purchased at the close of each
business day during the month.  Commissions are paid monthly based on
the qualifying level.




Additional
bonus money can be earned through the Right Start Program.  A
distributor may sign up for an “Autoship Program” which helps protect
distributors from losing qualification by automatically shipping them a
qualifying order monthly.  In addition, when a distributor signs up
for the Autoship Program, the distributor becomes qualified to receive a bonus
(the “Right Start Bonus”) for each new personally sponsored
distributor.  The amount of the Right Start Bonus will be 50 percent
of the new distributor’s first order.




The Right
Solution Gateway maintains a computerized system for processing distributor
orders and calculating distributor commission and bonus payments, which enables
it to remit such payments to distributors monthly.  The Right Solution
Gateway believes that prompt remittance of commission is vital to maintaining a
motivated network of distributors and that its distributors’ loyalty to The
Right Solution Gateway has been enhanced by The Right Solution Gateway’s history
of consistently making commission and bonus payments on a scheduled
basis.




Internet.  The
Right Solution Gateway maintains a site on the Internet at
“www.rightsolution.com.”  The Right Solution Gateway has enhanced the
system to allow on-line ordering and volume checks by the
distributors.




5
 Table of Contents





Marketing.  Each
distributor is responsible for sales of The Right Solution Gateway’s product
within his or her downline.  The Right Solution Gateway relies on word
of mouth and testimonials from previous or existing customers for its primary
advertising.  The Right Solution Gateway has developed sales
materials, which have been professionally prepared by a graphic designer and
reviewed for DSA and regulatory compliance.  These sales materials
include product descriptions.




Sponsoring.  The
Right Solution Gateway has established a system for the sponsoring of new
distributors.  The Right Solution Gateway prepares communication and
educational training materials for distributors to assist in the sponsoring of
new distributors.  The Right Solution Gateway also engages in weekly
conference calls with distributors and sends newsletter email blasts to its
distributors.  The Right Solution Gateway has an established advisory
board for assistance and consultation in connection with sponsoring
matters.




Product
Distribution.  Marshall’s products are distributed to all
markets from Marshall’s warehouse located in Las Vegas, Nevada or the
Distributions Center in Salt Lake City, Utah.




Competition




The Right
Solution Gateway is subject to significant competition for the recruitment of
distributors from other network marketing organizations, including those that
market nutritional, health and dietary supplements, as well as those, which
market other types of products.  Some of The Right Solution Gateway’s
competitors are substantially larger and have available considerably greater
financial resources than Marshall.  The Right Solution Gateway’s
ability to remain competitive depends, in significant part, on The Right
Solution Gateway’s success in enrolling and retaining distributors through an
attractive compensation plan and other incentives.  The Right Solution
Gateway believes that its bonus availability program, recognition and rewards
program, and other compensation and incentive programs provide its distributors
with significant earning potential.  However, there can be no
assurance that The Right Solution Gateway’s programs for recruitment and
retention of distributors will be successful.




The
multilevel marketing plan “Every One Wins” is designed to expedite the
possibility of earning monthly incomes while the distributor builds a business,
where most companies take months for their distributors to realize comparable
incomes.  The average person in this industry can start as a
distributor for The Right Solution Gateway and realize income rather
quickly.




The
market for nutritional, health, and dietary supplements is characterized by
extensive competition, frequent new product introductions, short product life
cycles, rapid price declines, and eroding profit margins, and changing customer
preferences.  This market segment includes numerous manufacturers,
distributors, marketers, retailers, and physicians that actively compete for the
business of consumers, both in the United States and Canada.  The
market is highly sensitive to the introduction of new products that may rapidly
capture a significant share of the market.  The Right Solution Gateway
expects to continue to face substantial competition in its efforts to
successfully capture a significant share of the market.  There are a
number of companies that currently offer competing products, and it can be
expected that other companies will introduce additional competing products in
the future.  In addition, there are a variety of channels of
distribution for nutritional supplements other than through network marketing
and distribution systems, including direct response marketing, specialty retail
health and nutrition stores, drug stores, and supermarkets.  Many of
The Right Solution Gateway’s existing and potential competitors have greater
financial, marketing, distribution, and research capabilities than
Marshall.  The performance of Marshall will depend on its ability to
develop and market new products that can gain customer acceptance and loyalty,
as well as its ability to adapt its product offerings to meet changing pricing
considerations and other market factors and diversify its distribution channels
through wholesale retail locations and Internet stores.




Product
Manufacturing and Development




Marshall
anticipates continuing to expand its product line through the development of new
products.  New product ideas are derived from a number of sources,
including trade publications, scientific and health journals, Marshall’s
executives, staff, consultants, and outside parties.  In addition,
local counsel and other representatives are retained by Marshall to investigate
product formulation matters as they relate to regulatory compliance and other
issues.




6
 Table of Contents





All of
Marshall’s products are provided by outside companies.  Marshall has
agreements in place with all of its current manufactures that assure
availability for it anticipated growth.  Marshall’s ownership of
product formulations and trademarks for substantially all of Marshall’s
nutritional products gives Marshall a great deal of protection from
competition.




Marshall’s
ability to enter new markets and sustain satisfactory levels of sales in each
market has been in the past and is likely to continue to be dependent in
significant part upon its own ability and the ability of its manufacturers to
develop new products and reformulate existing products for introduction into
Marshall’s markets.  Since 1998, Marshall has significantly expanded
its in-house product research and development and product formulation staff,
which now consists of an employee of Marshall, its Medical Advisory Board,
outside advisor, and manufacturers, who are increasingly involved in such
activities.




Marshall
owns the proprietary rights to substantially all of its health and nutritional
supplements, formulations and trademarks for The Right Solution
subsidiary.  In addition Marshall also owns the proprietary rights to
many of its nutritional supplement formulations and trademarks for Marshall
Distributing subsidiary.  Marshall has formed several alliances with
its manufacturers to assure, among other things, that the products are
organically grown and that inventory levels will remain constant.




Insurance




Although
Marshall does not engage in the manufacture of any of the products it markets
and sells, Marshall could be exposed to product liability
claims.  Marshall has not had any such claims to
date.  Although Marshall maintains a limited amount of liability
insurance, each of Marshall’s manufacturers provides additional insurance of at
least $2 million covering products, which Marshall sells.  There can,
however, be no assurance that Marshall will not be subject to claims in the
future or that available insurance coverage will be adequate.  A
partially or completely uninsured claim against Marshall, if successful and of
sufficient magnitude, would have a material adverse effect on
Marshall.




Trademarks




Marshall
has received federal trademark registration for THE RIGHT SOLUTION® and has
applied for federal trademark registration for PURAME® and HOME
HARVEST®.  Marshall intends to continue to seek trademark protection
for a number of the products and brand names under which Marshall’s products are
marketed, where applicable.  There can be no assurance that such
protection will be obtained.  Marshall will be required to rely upon
common law concepts of confidentiality and trade secret laws to protect its
product formulations.  There can be no assurance that the foregoing
will protect the formulations or provide adequate remedies for Marshall in the
event of unauthorized use or disclosure of such formulations, or that others
will not be able to independently develop such
formulations.  Marshall’s product formulations are not protected by
patents and are generally not patentable.  Marshall intends to obtain
international trademarks as Marshall enters foreign
markets.  Trademark registrations are either issued or pending in the
United States Patent and Trademark Office and in comparable agencies in many
other countries.  Marshall considers its trademarks and trade names to
be an important factor in its business.




Government
Regulation




Marshall
is subject to and affected by extensive laws, governmental regulations,
administrative determinations, court decisions, and similar constraints (as
applicable, at the federal, state and local levels) including, among other
things, regulations pertaining to:




·
            The
      formulation, manufacturing, packaging, labeling, distribution,
      importation, sale and storage of Marshall’s
  products;




·
            Product
      claims and advertising (including direct claims and advertising by
      Marshall as well as claims and advertising by distributors, for which
      Marshall may be held responsible);




·
            Marshall’s
      network marketing system;




7
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·
            Transfer
      pricing and similar regulations that affect the personal import laws;
      and




·
            Taxation
      of distributors, which in some instances may impose an obligation on
      Marshall to collect the taxes and maintain appropriate
      records.




The
formulation, manufacturing, packaging, storing, labeling, advertising,
distribution, and sale of Marshall’s products are subject to regulation by one
or more governmental agencies, including the Food and Drug Administration
(“FDA”), the Federal Trade Commission (“FTC”), the Consumer Product Safety
Commission (“CPSC”), the United States Department of Agriculture (“USDA”), the
Environmental Protection Agency (“EPA”) and the United States Postal
Service.  Marshall’s activities are also regulated by various agencies
of the states and localities.  The FDA, in particular, regulates the
formulation, manufacture, and labeling of foods and dietary supplements, such as
those distributed by Marshall.  FDA regulations require manufacturers
and distributors of certain products to meet relevant good manufacturing
practice (“GMP”) regulations for the preparation, packing and storage of these
products.  GMP’s for dietary supplements have yet to be promulgated,
but are expected to be proposed.  Marshall does not anticipate that
the promulgation of any GMP’s for dietary supplements would have a material
impact on Marshall.




The 1994
Dietary Supplement Health and Education Act (“DSHEA”) revised the provisions of
the Federal Food, Drug and Cosmetic Act (“FFDCA”) concerning the composition and
labeling of dietary supplements and, Marshall believes, is generally favorable
to the dietary supplement industry.  The legislation creates a new
statutory class of “dietary supplements.”  This new class includes
vitamins, minerals, herbs, amino acids, and other dietary substances for human
use to supplement the diet, and the legislation grandfathers, with certain
limitations, dietary ingredients that were on the market before October 15,
1994.  A dietary supplement which contains a new dietary ingredient
(i.e., one not on the
market before October 15, 1994) will require evidence of a history of use or
other evidence of safety establishing that it is reasonably expected to be
safe.  Manufacturers of dietary supplements that make certain types of
statements on dietary supplements, including certain product performance claims,
must have substantiation that such statements are truthful and not
misleading.




The
majority of the products marketed by Marshall are classified as dietary
supplements under the FFDCA.  In addition, the adoption of new
regulations in any of Marshall’s markets, or changes in the interpretation of
existing regulations, could have a material adverse effect on
Marshall.  In September 1997, the FDA issued regulations governing the
labeling and marketing of dietary supplement products.  The
regulations cover the following:




·
            The
      identification of dietary supplements and their nutrition and ingredient
      labeling;




·
            The
      terminology to be used for nutrient content claims, health content claims,
      and statements of nutritional
support;




·
            Labeling
      requirements for dietary supplements for which “high potency” and
      “antioxidant” claims are made;




·
            Notification
      procedures for statements on dietary supplements;
  and




·
            Pre-market
      notification requirements for new dietary ingredients in dietary
      supplements.




The
notification procedures became effective in November 1997, while the new
labeling requirements became effective in March 1999.  Marshall was
required to revise a substantial number of its product labels by the effective
date.  In addition, Marshall is required to continue its ongoing
program of securing substantiation of its product performance claims and of
notifying the FDA of certain types of performance claims made for its
products.




In
addition, in certain markets, including the United States, claims made with
respect to dietary supplements or other products of Marshall may change the
regulatory status of the products.  In the U.S., for example, it is
possible that the FDA could take the position that claims made for certain of
Marshall’s products place those products within the scope of an FDA
“over-the-counter” (“OTC”) drug monograph.  OTC monographs prescribe
permissible ingredients and appropriate labeling language, and require the
marketer or supplier of the products to register and file annual drug listing
information with the FDA.  In the event that the FDA asserted that
product claims for some of Marshall’s products caused them to fall within the
scope of OTC monographs, Marshall would be required either to comply with the
applicable monographs or change the claims made in connection with the
products.  There can be no assurance that Marshall could do so
effectively, or that any such changes would not adversely affect sales and
marketing of an affected product.  Marshall’s substantiation program
involves compiling and reviewing the scientific literature pertinent to the
ingredients contained in Marshall’s products.




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As a
marketer of food and dietary supplements and other products that are ingested by
consumers, Marshall is subject to the risk that one or more of the ingredients
in its products may become the subject of adverse regulatory
action.  For example, on April 10, 1996, the FDA issued a statement
warning consumers not to purchase or ingest dietary supplements containing
ephedrine (found in the ingredient Ma Huang) that are claimed to produce such
effects as euphoria, heightened awareness, increased sexual sensations, or
increased energy, because these products pose significant adverse health risks,
including dizziness, headache, gastrointestinal distress, irregular heartbeat,
heart palpitations, heart attack, strokes, seizures, psychosis, and
death.  Marshall does not market either of its products containing Ma
Huang (Trim Easy and Trim Easy Plus) with any of these claims.  On
June 4, 1997, the FDA issued a proposed regulation for dietary supplements
containing ephedrine alkaloids.  The proposed regulation would
prohibit dietary supplements containing eight milligrams or more of ephedrine
alkaloids per serving, and would not permit such products to contain any other
stimulant, diuretic, or laxative ingredients.  In addition, labeling
of supplements would be prohibited from suggesting or recommending conditions of
use that would result in an intake of eight milligrams or more of ephedrine
alkaloids within a six-hour period, or a total daily intake of 24 milligrams or
more.  The FDA proposal would also require a warning not to take the
product for more than seven days, and would prohibit the supplements from being
represented, either expressly or implicitly, as being suitable for long-term
uses, such as for weight loss or body building.  Similarly, claims for
increased energy, increased mental concentration, or enhanced well- being that
encourage the consumer to take more of the product to achieve more of the
purported effect would be required to be accompanied by a warning stating that
taking more than the recommended serving may cause a heart attack, stroke,
seizure, or death.




Marshall
has discontinued its products containing Ma Huang with the restrictions on this
ingredient.  While Marshall believes that its products containing Ma
Huang could be reformulated and re-labeled, there can be no assurance in that
regard or that reformulation and/or re-labeling would not have an adverse effect
on sales of such product.




Marshall
has also discontinued its product containing Natural Progesterone with the
restrictions on this ingredient.  While Marshall believes that its
product containing Natural Progesterone could be reformulated and re-labeled,
there can be no assurance in that regard or that reformulation and/or
re-labeling would not have an adverse effect on sales of such
product.




Some of
the products marketed by Marshall are considered conventional foods and are
currently labeled as such.  Both this category of products and dietary
supplements are subject to the Nutrition Labeling and Education Act (“NLEA”),
and regulations promulgated there under, which regulates health claims,
ingredient labeling, and nutrient content claims characterizing the level of a
nutrient in the product.




The FTC,
which exercises jurisdiction over the advertising of all Marshall’s products,
has in the past several years; instituted enforcement actions against several
dietary supplement companies for false and misleading advertising of certain
products.  These enforcement actions have resulted in consent decrees
and monetary payments by the companies involved.  In addition, the FTC
has increased its scrutiny of the use of testimonials, such as those, which are
utilized by Marshall.  While Marshall has not been the target of FTC
enforcement action for the advertising of its products, there can be no
assurance that the FTC will not question Marshall’s advertising or other
operations in the future.  In November 1998, the FTC issued a guide
for the dietary supplement industry, describing how the FTC applies the law,
which it administers to dietary supplements advertisements.  It is
unclear whether the FTC will subject such advertisements, including those of
Marshall, to increased surveillance to ensure compliance with the principles set
forth in the guide.




The Right
Solution Gateway’s principal suppliers are American Nutritional Corporation,
Best Formulations, Botanical Blessings, Nutranomics, Paragon Labs and Robinson
Pharma.  Lead times for product delivery range from four to 10
weeks.




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Through
its manuals, seminars, and other training materials and programs, Marshall
attempts to educate its distributors as to the scope of permissible and
impermissible activities in each market.  Marshall also investigates
allegations of distributor misconduct.  However, Marshall’s
distributors are independent contractors, and Marshall is not able to directly
monitor all distributor activities.  As a consequence, there can be no
assurance that Marshall’s distributors will comply with applicable
regulations.  Misconduct by distributors could have a material adverse
effect on Marshall in a particular market or in general.




In
markets outside the United States, including Japan, prior to commencing
operations or marketing its products, Marshall may be required to obtain
approvals, licenses, or certifications from a country’s ministry of health or
comparable agency.  Approvals or licensing may be conditioned on
reformulation of Marshall’s products for the market or may be unavailable with
respect to certain products or product ingredients.  Marshall must
also comply with local product labeling and packaging regulations that vary from
country to country.




Marshall
is unable to predict the nature of any future laws, regulations,
interpretations, or applications, nor can it predict what effect additional
governmental regulations or administrative orders, when and if promulgated,
would have on its business in the future.  They could, however,
require the reformulation of certain products not able to be reformulated,
imposition of additional record keeping requirements, expanded documentation of
the properties of certain products, expanded or different labeling and
additional scientific substantiation regarding product ingredients, safety or
usefulness.  Any or all such requirements could have a material
adverse effect on Marshall’s results of operations and financial
condition.




Network
Marketing System




Marshall’s
network marketing system is subject to a number of federal and state regulations
administered by the FTC and various state agencies.  Regulations
applicable to network marketing organizations are generally directed at ensuring
that product sales are ultimately made to consumers and that advancement within
such organizations be based on sales of the organizations’ products rather than
investments in the organizations or other non-retail sales related
criteria.  For instance, in certain markets there are limits on the
extent to which distributors may earn commissions on sales generated by
distributors that were not directly sponsored by the
distributor.  Where required by law, Marshall obtains regulatory
approval of its network marketing system or, where such approval is not required
the favorable opinion of local counsel as to regulatory
compliance.  However, Marshall remains subject to the risk that, in
one or more of its markets, its marketing system could be found not to be in
compliance with applicable regulations.  Failure by Marshall to comply
with these regulations could have a material adverse effect on Marshall in a
particular market or in general.




Marshall
is also subject to the risk of private party challenges to the legality of its
network marketing system.  For example, in Webster v. Omnitrition
International, Inc., 79 F.3d 776 (9th Cir. 1996), the “multi-level
marketing” program of Omnitrition International, Inc. (“Omnitrition”) was
challenged in a class action by certain Omnitrition distributors who alleged
that Omnitrition was operating an illegal “pyramid scheme” in violation of
federal and state laws.  Marshall believes that its network marketing
system satisfies the standards set forth in the Omnitrition case and other
applicable statutes and case law defining a legal marketing system, in part
based upon significant differences between Marshall’s marketing system and that
described in the Omnitrition case.  Further, it is an ongoing part of
Marshall’s business to monitor and respond to regulatory and legal developments,
including those that may affect its network marketing
system.  However, the regulatory requirements concerning
network-marketing systems do not include “bright line” rules and are inherently
fact-based.  An adverse judicial determination with respect to
Marshall’s network marketing system could have a material adverse effect on
Marshall.  Among other things, such a determination could require
Marshall to make modifications to its network marketing system, result in
negative publicity or have a negative impact on distributor
morale.  In addition, adverse rulings by courts in any proceedings
challenging the legality of multi-level marketing systems, even in those not
involving Marshall, could have a material adverse effect on
Marshall.




The Right
Solution Gateway has had correspondence with the State of South Dakota which
indicates that the multilevel marketing program does not violate any portion the
South Dakota Business Opportunity Act.  The company is free to offer
and sell its business opportunity in South Dakota and is not required to
register with the state.




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Compliance
Procedures




As
indicated above, Marshall, its products and its network marketing system are
subject, both directly and indirectly through distributors’ conduct, to numerous
federal, state, and local laws and regulations in all its markets.  In
order to assist Marshall in achieving and maintaining compliance with these
numerous laws and regulations, Marshall has hired a local Las Vegas firm to
handle all compliance issues.  This firm has expertise in rules and
regulations governing our industry.




In 1996,
Marshall began to institute formal regulatory compliance measures by developing
a system to identify specific complaints against distributors and to remedy any
violations by distributors through appropriate sanctions, including warnings,
suspensions and, when necessary, terminations.  In its manuals,
seminars and other training programs and materials, Marshall emphasizes that
distributors are prohibited from making therapeutic claims for Marshall’s
products.




Marshall’s
general policy regarding acceptance of distributor applications from individuals
who do not reside in one of Marshall’s markets is to refuse to accept such
individual’s distributor application.




In order
to comply with regulations that apply to both Marshall and its distributors,
Marshall conducts considerable research into the applicable regulatory framework
prior to entering any new market to identify all necessary licenses and
approvals and applicable limitations on Marshall’s operations in that
market.  Marshall devotes substantial resources to obtaining such
licenses and approvals and bringing its operations into compliance with such
limitations.  Marshall also researches laws applicable to distributor
operations and revises or alters its distributor manuals and other training
materials and programs to provide distributors with guidelines for operating a
business, marketing, and distributing Marshall’s products and similar matters,
as required by applicable regulations in each market.  Marshall,
however, is unable to monitor its supervisors and distributors effectively to
ensure that they refrain from distributing Marshall’s products in countries
where Marshall has not commenced operations, and Marshall does not devote
significant resources to such monitoring.  In the event that Marshall
discovers distributor misconduct, it imposes disciplinary measures against the
distributor ranging from probation to expulsion.




In
addition, regulations in existing and new markets are often ambiguous and
subject to considerable interpretive and enforcement discretion by the
responsible regulators.  Moreover, even when Marshall believes that it
and its distributors are initially in compliance with all applicable
regulations, new regulations are regularly being added and the interpretation of
existing regulations is subject to change.  Further, the content and
impact of regulations to which Marshall is subject may be influenced by public
attention directed at Marshall, its products or its network marketing system, so
that extensive adverse publicity about Marshall, its products or its network
marketing system may result in increased regulatory scrutiny.




It is an
ongoing part of Marshall’s business to anticipate and respond to such new and
changing regulations and make corresponding changes in Marshall’s operations to
the extent practicable.  However, while Marshall devotes considerable
resources to maintaining its compliance with regulatory constraints in each of
its markets, there can be no assurance that Marshall would be found to be in
full compliance with applicable regulations in all of its markets at any given
time or that the regulatory authorities in one or more markets will not assert,
either retroactively or prospectively or both, that Marshall’s operations are
not in full compliance.  Such assertions or the effect of adverse
regulations in one market could negatively affect Marshall in other markets as
well by causing increased regulatory scrutiny in those other markets or as a
result of the negative publicity generated in those other
markets.  Such assertions could have a material adverse effect on
Marshall in a particular market or in general.  Furthermore, depending
upon the severity of regulatory changes in a particular market and the changes
in Marshall’s operations that would be necessitated to maintain compliance, such
changes could result in Marshall experiencing a material reduction in sales in
such market or determining to exit such market altogether.  In such
event, Marshall would attempt to devote the resources previously devoted to such
market to a new market or markets or other existing markets, but there can be no
assurance that such transition would not have an adverse effect on Marshall’s
business and results of operations either in the short or long
term.




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Research
and Development




The
amount we have spent for research and development over the pat two years is
negligible and not applicable at this time.




Environmental
Protections




We are
subject to various environmental laws pertaining to the disposal of
waste.  We contract for disposal of our waste with a licensed disposal
facility.  We do not expect to incur liabilities related to compliance
with environmental laws; however, we cannot make a definitive
prediction.  The costs we incur in disposal of waste have not been
significant.




Employees




Marshall’s
future financial success depends to a large degree upon the efforts of Messrs.
Bailey, Ternes, and Plante, our officers and directors.  Messrs.
Bailey, Ternes and Plante have played major roles in developing and executing
Marshall’s business strategy.  The loss of Messrs. Bailey, Ternes or
Plante could have an adverse effect on Marshall’s business and chances for
profitable operations.  While Marshall intends to employ additional
management and marketing personnel in order to minimize the critical dependency
upon any one person, there can be no assurance that Marshall will be successful
in attracting and retaining the persons needed.  If Marshall does not
succeed in retaining and motivating the current employees and attracting new
high quality employees, Marshall’s business could be adversely
affected.  Marshall does not maintain key man life insurance on the
lives of Messrs. Bailey, Ternes or Plante.




We
currently employ 16 people consisting of 14 full time employees and 2 part time
employees.  We also maintain independent consultants for other aspects
of our business.  As Marshall grows, we will need to attract an
unknown number of additional qualified employees.  Although Marshall
has experienced no work stoppages and believes the relationships with employees
are good, Marshall could be unsuccessful in attracting and retaining the persons
needed.  None of the employees are currently represented by a labor
union.  Marshall expects to have a ready source of available labor to
support growth.




Related
Business Strategy




As a
company that acquires or creates companies that have potential to grow in
revenue to provide an opportunity in the field of distribution of products or
services that enhance the lives of individuals through modern technology,
Marshall’s current purpose is to seek, investigate and, if such investigation
warrants, acquire an interest in business opportunities presented to Marshall by
persons or firms who or which desire to seek the perceived advantages of a
corporation which is registered under the Securities Exchange Act of 1934, as
amended.  Marshall does not restrict its search to any specific
business; industry or geographical location and may participate in a business
venture of virtually any kind or nature.




Marshall
may seek a business opportunity with entities which have recently commenced
operations, or which wish to utilize the public marketplace in order to raise
additional capital in order to expand into new products or markets, to develop a
new product or service or for other corporate purposes.  Marshall may
acquire assets and establish wholly owned subsidiaries in various businesses or
acquire existing businesses as subsidiaries.  Marshall will continue
to seek out potential merger candidates, acquisitions or business opportunities
that enable expansion of market channels for distribution and sales of product
to benefit and enhance the lives of individuals around the world.




As part
of Marshall’s investigation of potential merger candidates, Marshall’s officers
and directors will meet personally with management and key personnel, may visit
and inspect material facilities, obtain independent analysis or verification of
certain information provided, check references of management and key personnel
and take other reasonable investigative measures, to the extent of Marshall’s
financial resources and management expertise.  The manner in which
Marshall participates in an opportunity will depend on the nature of the
opportunity, the respective needs and desires of Marshall and other parties, the
management of the opportunity, Marshall’s relative negotiation strength and that
of the other management.




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Marshall
intends to concentrate on identifying preliminary prospective business
opportunities that may be brought to Marshall’s attention through present
associations of its officers and directors, or by stockholders.  In
analyzing prospective business opportunities, Marshall will consider such
matters as the available technical, financial and managerial resources; working
capital and other financial requirements; history of operations, if any;
prospects for the future; nature of present and expected competition; the
quality and experience of management services which may be available and the
depth of that management; the potential for further research, development or
exploration; specific risk factors not now foreseeable but which then may be
anticipated to impact Marshall’s proposed activities; the potential for growth
or expansion; the potential for profit; the perceived public recognition or
acceptance of products, services or trades; name identification; and other
relevant factors.




Marshall’s
officers and directors will meet personally with management and key personnel of
the business opportunity as part of the investigation.  Marshall will
not acquire or merge with any company for which audited financial statements
cannot be obtained within a reasonable period of time after closing of the
proposed transaction, as required by the Exchange Act.




Marshall
will not restrict its search to any specific kind of firms, but may acquire a
venture which is in its preliminary or development stage, which is already in
operation, or which is in essentially any stage of its corporate
life.  It is impossible to predict at this time the status of any
business in which Marshall may become engaged, in that such business may need to
seek additional capital, may desire to have its shares publicly traded or may
seek other perceived advantages which Marshall may offer.




Reverse
Splits




During
the twelve months ended December 31, 2003, Marshall implemented a reverse stock
split on the basis of one post-split share for every 3,000 pre-split
shares.  During the twelve months ended December 31, 2004, Marshall
implemented three reverse stock splits as follows: one split on the basis of one
post-split share for every 900 pre-split shares, one split on the basis of one
post-split share for every 1,000 pre-split shares, and one split on the basis of
one post-split share for every 1,000 pre-split shares.  During the
twelve months ended December 31, 2005, Marshall implemented a reverse stock
split on the basis of one post-split share for every 500 pre-split
shares.  During the twelve months ended December 31, 2006, Marshall
implemented a reverse stock split on the basis of one post-split share for every
1,000 pre-split shares.




All share
and per share amounts presented in Marshall’s financial statements which are
part of this Annual Report on Form 10-K have been restated retroactively to
reflect the reverse splits as if they had occurred on the first day of the first
period presented, or January 1, 2007.  However, all share and per
share amounts have not been restated retroactively to reflect the reverse splits
in the narrative portion of this Annual Report on Form
10-K.  Consequently, the retroactive restatement may cause some
apparent inconsistencies between the narrative portion of this Annual Report on
Form 10-K and Marshall’s other filings with the Securities and Exchange
Commission on one hand, and the financial statements and accompanying notes
forming part of this Annual Report on Form 10-K on the other hand.




Marshall
Financial Results May be Affected by Factors Outside of Management’s
Control




Marshall’s
future operating results may vary significantly from quarter to quarter due to a
variety of factors, many of which are outside management’s
control.  Marshall’s anticipated expense levels are based, in part, on
estimates of future revenues and may vary from the
projections.  Marshall may be unable to adjust spending rapidly enough
to compensate for any unexpected revenue shortfall.  Accordingly, any
significant shortfall in revenues in relation to Marshall’s planned expenditures
would materially adversely affect business, operating results, and financial
condition.




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Management
cannot predict with certainty Marshall’s revenues and operating
results.  Further, we believe that period-to-period comparisons of
operating results are not necessarily a meaningful indication of future
performance.




Item1A.
            Risk
      Factors.




Not
applicable.




Item1B.
            Unresolved
      Staff Comments.




None




Item2.
            Properties.




The
registrant purchased an office building and warehouse facility located at 2555
East Washburn Road, North Las Vegas, Nevada 89081 in March 2006 for a purchase
price of $1,200,000.  The purchase price was paid in the form of cash
in the amount of $50,000 and a promissory note in the amount of
$1,150,000.  As of the date of this report, the registrant owes
$956,250 on the promissory note.  We do not lease any property for
office or warehouse use.  We believe that all of our facilities are
adequate for our current operations.  We expect that we could locate
other suitable facilities at satisfactory rates, should we need more or
alternative space.




Item3.
            Legal
      Proceedings.




Suburban Capital Corporation v.
Gateway Distributors, Ltd., Rick Bailey and Flo Ternes, and Neptune
Communications,Case No. 03-CV-7559.  On August 13, 2003,
Suburban Capital Corporation filed a civil action in the Circuit Court of DuPage
County, Illinois against our wholly-owned subsidiary, Marshall Distributors, and
two of its officers, Richard A. Bailey and Florian R. Ternes.  On
December 15, 2003, U.S. District Judge Charles R. Norgle, Sr., granted the
registrant’s Notice of Removal and removed the case to the United States
District Court for the Northern District of Illinois.  Gateway
Distributors, Ltd. changed its corporate name to Marshall Holdings
International, Inc. on December 4, 2006.




Suburban
Capital’s complaint alleges breach of contract and fraud
claims.  Suburban Capital seeks a declaratory judgment regarding the
validity of an alleged advisor agreement with Gateway, specific performance of
that agreement and injunctive relief, including temporary restraining order as
well as preliminary and permanent injunctions.  The complaint seeks
$550,000 together with its costs of enforcement including reasonable attorney’s
fees as well as punitive damages in the amount of $500,000.




On
November 17, 2003, Gateway filed an answer and affirmative defenses which
asserted that the Plaintiff’s claims are barred by the principles of undue
influence, duress, in pari
delicto, estoppel, and illegality.




On
January 24, 2004, the Securities and Exchange Commission was granted an order
appointing a receiver over Suburban Capital Corporation in Securities and Exchange Commission
v. Frank J. Custable, Jr., Sara Wetzel, Suburban Capital Corp., Francis Scott
Widen, Wasatch Pharmaceutical, Inc., David Giles, Gary Heesch, Pacel Corp.,
David Calkins, Gateway Distributors, Ltd., Richard Bailey and ThermoElastic
Technologies, Inc., Case No. 03-C-2182.




On
January 10, 2005, Gateway filed a counterclaim against Suburban for breach of a
Stock Purchase Agreement dated November 27, 2002.  Gateway’s claims
include breach of contract and, in the alternative, unjust
enrichment.  The counterclaim seeks a judgment which orders Suburban
to assume the debts and obligations - currently valued at more than $306,667 -
contained in the November 27, 2002 Stock Purchase Agreement and additional
monetary damages.




Our
attorneys have been instructed to both vigorously defend the claims made against
Gateway and prosecute claims made against Suburban.




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Securities and Exchange Commission v
Frank J. Custable, Jr., Sara Wetzel, Suburban Capital Corp., Francis Scott
Widen, Wasatch Pharmaceutical Inc., David Giles, Gary Heesch, Pacel Corp., David
Calkins, Gateway Distributors, Ltd., Richard Bailey and ThermoElastic
Technologies, Inc.,Case No. 03-C-2182.On March 28,
2003, the Securities and Exchange Commission filed a civil action in the United
States District Court for the Northern District of Illinois against Gateway and
Richard Bailey.




On March
28, 2003, the Commission obtained a Temporary Restraining Order (a “TRO”) from
the United States District Court for the Northern District of Illinois,
temporarily restraining Frank J. Custable, Jr., of Glendale Heights, Illinois,
Suburban Capital Corp., Sara Wetzel, of Glenview, Illinois, and Francis Scott
Widen of Buffalo Grove, Illinois, from violating the anti-fraud, registration
and reporting provisions of the federal securities laws.  Custable is
a recidivist who, in 1994, was permanently enjoined from violating the
anti-fraud provisions of the federal securities laws as part of a prior
Commission enforcement action.  As part of the TRO, the Court also
entered orders freezing the assets of Custable, Suburban Capital, Wetzel and
Widen to repatriate assets, temporarily prohibiting Custable and Suburban
Capital from participating in penny stock offerings and from trading in any
securities, requiring all defendants to give an accounting and prohibiting
document destruction.




The
Commission’s complaint alleged that Custable has orchestrated an ongoing scheme
to violate registration, antifraud and reporting violations of the federal
securities laws.  The scheme, as alleged in the complaint, began in at
least November 2001, has involved at least seven different penny stocks and has
generated at least $4.3 million in ill-gotten gains.  According to the
complaint, Custable fraudulently concealed his ownership interest in the seven
penny stocks by having Suburban Capital, Wetzel, Widen and various other
individuals engage in a host of securities transactions on his
behalf.  The complaint further alleged that Custable, Wetzel and
Suburban Capital have obtained stock through fraudulent Form S-8 registrations
(normally intended to allow distribution of securities to employees and
consultants) and through a scheme to counterfeit nearly half of the outstanding
stock in Blagman Media International, Inc., a company whose stock is quoted on
the OTC Electronic Bulletin Board.  The complaint alleged that
Custable and the other defendants illegally dumped massive quantities of the
improperly registered shares on the general public.




The
Commission’s complaint also named as defendants four public companies whose
stock is quoted on the OTC Electronic Bulletin Board (Bulletin Board Companies)
and four officers of the Bulletin Board Companies.  The other
defendants named in the Commission’s complaint are Thermo Elastic Technologies,
Inc., Wasatch Pharmaceutical, Inc., David Giles and Gary Heesch, who are two of
Wasatch’s officers, Pacel Corp., David Calkins, who is an officer of Pacel,
Gateway Distributors, Ltd., and Richard Bailey, an officer of
Gateway.  The complaint also named Pine Services as a relief
defendant.  The complaint alleged that Custable, Suburban Capital and
Wetzel violated Section 17(a) of the Securities Act of 1933 (Securities Act) and
Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule
10b-5 thereunder.  The complaint also alleged that Custable violated
Section 13(d) of the Exchange Act and Rules 13d-1 and 13d-2 thereunder by
failing to report his ownership interest in the penny stocks involved in his
scheme.  The Commission alleged in its complaint that Custable,
Wetzel, Widen and Suburban Capital violated Section 5(a) and 5(c) of the
Securities Act.  The complaint also alleged that Wasatch, Heesch and
Giles violated Sections 5(a), 5(c) and 17(a) of the Securities Act and Section
10(b) of the Exchange Act and Rule 10b-5 thereunder, by engaging in several sham
S-8 transactions with Custable and Suburban Capital.  The complaint
alleged that ThermoElastic, Gateway, Pacel, Bailey and Calkins violated Section
17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5
thereunder by engaging in fraudulent S-8 transactions with Custable and Suburban
Capital.




Apart
from emergency relief, the Commission sought the entry of preliminary and
permanent injunctive relief, disgorgement, civil penalties, a penny stock bar
against Custable, Suburban Capital, Wetzel, Widen, Heesch, Giles, Calkins and
Bailey and an order barring Heesch, Giles, Calkins and Bailey from serving as an
officer or director of a public company.




On
November 18, 2004, the Securities and Exchange Commission filed a Second Amended
complaint in the United States District Court for the Northern District of
Illinois against Gateway and Richard Bailey.  The Second Amended
complaint, which incorporates all of the allegations in the March 28, 2003 civil
action referenced above, also includes new allegations as to Gateway and Mr.
Bailey.




15
 Table of Contents





The
action is styled Securities
and Exchange Commission v Frank J. Custable, Jr., Sara Wetzel, Suburban Capital
Corp., Francis Scott Widen, Wasatch Pharmaceutical Inc., David Giles, Gary
Heesch, Pacel Corp., David Calkins, Gateway Distributors, Ltd., Richard Bailey,
ThermoElastic Technologies, Inc., Robert Blagman, Blagman Media International,
Inc., and Brad Nordling, Case No. 03-C-2182.  The additional
allegations as to Richard Bailey include purported violations of Section 5(a)
and (c) of the Securities Act.  The Securities and Exchange Commission
seeks entry of permanent injunctive relief, disgorgement, civil penalties, a
penny stock bar against Custable, Suburban Capital, Wetzel, Widen, Heesch, Giles
and an order barring Heesch, Giles, Calkins and Bailey from serving as an
officer or director of a public company.




Our
attorneys have been instructed to vigorously defend the claims made against the
registrant and Mr. Bailey.




Administrative Subpoena by the
Bureau of Consumer Protection of the Nevada Attorney General’s
Office.In December, 2003, we were served with an
administrative subpoena issued by the Bureau of Consumer Protection of the
Nevada Attorney General’s Office.  The subpoena sought documents in
furtherance of that Bureau’s investigation whether we violated federal or state
consumer protection regulations and statutes in connection with the sale of
“Y-motion,” a topically applied yam cream product.




At about
the same time, we were served in Nevada with a virtually identical subpoena
issued by the Consumer Protection Division of the Office of the Attorney General
of Maryland seeking the same documents.  As a matter of prudence, we
have taken the position that the subpoena from the Maryland Attorney General’s
office is void for lack of jurisdiction; nevertheless, in the spirit of
cooperation and candor, we have copied the Maryland Attorney General’s office
with its responses to the Nevada subpoena as a courtesy.




The
representative of the Maryland Attorney General’s office purports to speak for a
compact of attorneys general in 32-states and to have authority to negotiate
issues arising from the sale of “Y-motion” in those states.




This
matter involves the questions whether sale of “Y-motion” is illegal per se
because it is considered a drug; whether we made health claims in connection
with its sale in violation of federal and state regulations; and whether we had
involvement with a questionable marketing scheme through which other vendors
have sold similar yam cream products.




We sold
“Y-motion” in many of the states represented by the attorneys general
compact.




We
responded to the Nevada subpoena and to follow-up inquiries by producing
responsive documents in our possession, with courtesy copies provided to the
Maryland Attorney General’s office.  We have also retained the
services of a consultant who is well versed in the compliance with relevant
state and federal regulations to advise us.




A
settlement was made with the Maryland Attorney General.  On May 4,
2006, Assurance of Voluntary Compliance documents were signed.  On
June 14, 2006 final judicial approval was received on the signed
documents.  This includes a civil penalty of $100,000 and restitution
to consumers of $25,000.  If the amount paid to consumers for claims
is less than $25,000, the civil penalty will be increased to the difference
between $25,000 and the amount paid in restitution.  The civil penalty
is payable in monthly installments of $5,000 and the restitution is to be paid
as claims are presented.




Global Media Corp. v. Gateway
Distributors, Ltd., Case No. 06CV 13415.  United Stated
District Court southern District of New York Filed January,
2007.  There has been a breech of contract suit filed by Global Media
Corp., which alleges that a single meeting held on January 28, 2004 resulted in
a series of agreements entered into by four entities for licensing and marketing
of hair removal product known as “Forever Gone.”  Among those
agreements, plaintiff alleges that defendant Gateway Distributors, Ltd. agreed
to pay $2,000,000 in Gateway stock for marketing and materials and
services.  Plaintiff thus claims that it assembled a team of
consultants, provided materials, work, labor and services to us and that we
failed to issue the stock.  The plaintiff has not yet identified the
so-called agreements, consultants, nominees and the work and materials allegedly
delivered.  The Plaintiff has confirmed that the so-called agreement
with Gateway has never been reduced to writing.  Rather, counsel
represented that its claim of an agreement with Gateway is based upon a
combination of verbal statements and miscellaneous unidentified,
writings.  Gateway asserts that it did not receive the consulting
services and materials and expects the suit to be dismissed and is contemplating
a counter suit against Global Media Inc.  The case was settled on
April 3, 2008 by our agreement to issue $150,000 worth of our free-trading stock
to the Plaintiff.




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Threatened SEC Enforcement
Action.In May 2007, the Enforcement Division of the Chicago
Regional Office (“Enforcement”) of the Securities and Exchange Commission
(“SEC”) issued letters to the registrant, to the registrant’s chief executive
officer, Richard A. Bailey, and to the registrant’s chief operating officer,
Florian R. Ternes, in which Enforcement informed each of the recipients that it
intended to recommend to the SEC that a civil injunctive action be brought
against them for alleged violations of Sections 5(a) and (c) of the Securities
Act of 1933 (“Wells Notices”).  In conversation with Enforcement
Staff, counsel for the registrant, Bailey and Ternes were informed that
Enforcement’s recommendation is based on its investigation of the registrant’s
Employee Stock Incentive Plan, which was the subject of the registrant’s S-8
registration statements filed between 2003 and 2005.  The basis of
Enforcement’s position in its Wells Notices is its belief that the ESIP plan’s
primary purpose was to raise capital for the registrant and therefore violated
Section 5 of the Securities Act of 1933.  Enforcement Staff have
recently informed counsel for the registrant, Bailey and Ternes that the Staff
intends to make their formal recommendation to the SEC in the near
future.




Other
than as stated above, we are not engaged in any other material litigation, and
are unaware of any material claims or complaints that could result in future
material litigation.  We will seek to minimize disputes with our
customers but recognize the inevitability of legal action in today’s business
environment as an unfortunate price of conducting business.




Item4.
            Submission
      of Matters to a Vote of Security
Holders.




None.




PART
II




Item5.
            Market
      for Registrant’s Common
      Equity, Related Stockholder Matters and Issuer Purchases of Equity
      Securities.




Beginning
in August 2001, the shares of our common stock were traded on the
Over-the-Counter Bulletin Board (the “OTCBB”) under the symbol
“GTWY.OB.”  On December 6, 2002, our symbol changed to
“GWYD.OB.”  On June 28, 2004, our symbol changed to
“GWAD.OB.”  On September 3, 2004 our symbol changed to
“GAWY.OB.”  On December 20, 2004, our symbol changed to
“GAWD.OB.”  On March 28, 2005, our symbol changed to
“GWDB.OB.”  On December 2006, our symbol changed to
MHII.OB.  The following table shows the quarterly high and low bid
prices for our common stock over the last two completed fiscal years, as
reported on the OTCBB, as adjusted for stock splits and reverse stock
splits.  The prices represent quotations by dealers without
adjustments for retail mark-ups, mark-downs or commission and may not represent
actual transactions.




Calendar
      Year 2006
            High
            LowFirst
      Quarter
            0.0007
            0.0001Second
      Quarter
            0.0003
            0.0001Third
      Quarter
            0.0002
            0.0001Fourth
      Quarter
            0.08
            0.0001Calendar
      Year 2007
            High
            LowFirst
      Quarter
            0.017
            0.013Second
      Quarter
            0.0045
            0.0037Third
      Quarter
            0.0008
            0.0007Fourth
      Quarter
            0.0003
            0.0001







As of
April 4, 2008, we had 89 record holders of shares of our common stock
outstanding.  The number of record holders was determined from the
records of our transfer agent and does not include beneficial owners of our
common stock whose shares are held in the names of various securities brokers,
dealers and registered clearing agencies.  There is no trading market
for the shares of our preferred stock.




17
 Table of Contents





Dividends




We have
never declared or paid any cash dividends on our common stock.  We do
not anticipate paying any cash dividends to stockholders in the foreseeable
future.  In addition, any future determination to pay cash dividends
will be at the discretion of our board of directors and will be dependent upon
our financial condition, results of operations, capital requirements and such
other factors as our board deems relevant.  However, we have entered
into agreements that restrict our ability to pay dividends on our common stock
until such time as our obligations under Notes Payable and certain of other
obligations described in this report have been satisfied.




Equity
Compensation Plan Information




The
following table provides information regarding the registrant’s equity
compensation plans as of the end of the registrant’s most recently completed
fiscal year with respect to compensation plans (including individual
compensation arrangements) under which equity securities of the registrant are
authorized for issuance, aggregated as follows:




Plan Category
            Number
      of securities (in thousands) 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 (excluding securities reflected in column (a))(a)
            (b)
            (c)Equity
      compensation plans approved by security holders
            None
            None
            NoneEquity
      compensation plans not approved by security holders
            None
            None
            NoneTotal
            None
            None
            None




Recent
Sales of Unregistered Securities




On
October 31, 2007, we executed and closed a Purchase Agreement with D. L. Claire
Capital Corporation, Inc., a Delaware corporation and CAMOFI Master LDC and
CAMHZN Master LDC, which Purchase Agreement was executed in accordance with and
in reliance upon the exemption from securities registration for offers and sales
to accredited investors pursuant to Rule 506 under Regulation D as promulgated
under the Securities Act of 1933, as amended (the “1933 Act”), and/or Section
4(2) of the 1933 Act.
  Pursuant
to the Purchase Agreement, CAMOFI and CAMHZN purchased a 12% Secured Promissory
Note of D. L. Claire in the amount of $650,000 (the
“Note”).  Moreover, pursuant to an agreement with D.L. Claire, we
received the sum of $390,000 as a result of the transaction.
  D. L.
Claire’s obligations to repay the Note were secured by all of the assets of
Marshall pursuant to a Security Agreement (the “Security Agreement”), certain
real estate and by certain stock (the “Pledged Shares”) pledged by D. L. Claire
and certain stockholders of Marshall (each a “Pledgor” and together, the
“Pledgors”) pursuant to separate Security Interest and Pledge Agreements (the
“Pledge Agreements”).  In addition, we issued to CAMOFI and CAMHZN a
warrant to purchase 1,624,999 shares of our common stock.  All of the
Warrant Shares shall have registration rights, which gave CAMOFI and CAMHZN
piggy-back registration rights if Marshall participates (whether voluntarily or
by reason of an obligation to a third party) in the registration of any shares
of our common stock.  The registration rights will expire at such time
as the holder can sell all of its remaining Registrable Securities under Rule
144 promulgated under the Securities Act.  Regardless, however, we
were obligated to file a registration statement covering the Registrable
Securities no later than January 31, 2008, which we failed to do.
  As a
result of the failure to file the registration statement, then D. L. Claire will
make payment to CAMOFI and CAMHZN, for each Computation Period (as defined in
the agreement) an amount equal to 2% of the aggregate principal amount of the
Note then outstanding (the “Periodic Amount”) provided however, that no event
shall the aggregate liquidated damages exceed 18% of the principal
amount.  The term “Computation Period” means each thirty (30) day
period commencing on the effective date of the Subsequent Registration Statement
and ending on the date on which there are one or more effective registration
statements covering CAMOFI and CAMHZN’s sale of all of the Holder’s
shares.  The Periodic Amount shall be due without further demand or
notice from CAMOFI and CAMHZN.
  Pursuant
to a guarantee executed on October 31, 2007, Marshall guaranteed payment of the
Note and all obligations of D. L. Claire to CAMOFI and CAMHZN.
  Pursuant
to a letter agreement dated October 31, 2007, as further consideration for the
execution of the above described Purchase Agreement we agreed to issue
250,000,000 shares of our common stock to CAMOFI and CAMHZN.
  18
  During
the fiscal year ended December 31, 2007, Marshall sold 1,180,000,000 common
shares in private transactions not involving a public offering.  All of the
1,180,000,000 shares bear a legend restricting their disposition.
  ·
              On
      May 15, 2007, Marshall issued 5,000,000 shares of our common stock to Joel
      Boodoosingh, in exchange for services rendered valued at
      $50,000.
  ·
              On
      August 21, 2007, Marshall issued 300,000,000 shares of our common stock to
      Jacob Canseli, in exchange for services rendered valued at
      $30,000.
  ·
              On
      October 29, 2007, Marshall issued 100,000,000 shares of our common stock
      to CAMOFI Master LDC, in exchange for services rendered valued at
      $90,000.
  ·
              On
      October 31, 2007, Marshall issued 250,000,000 shares of our common stock
      to CAMOFI Master LDC, in exchange for services rendered valued at
      $250,000.
  ·
              On
      November 1, 2007, Marshall issued 6,277,300 shares of our common stock to
      CAMOFI Master LDC, in exchange for services rendered valued at
      $8,160.49.
  ·
              On
      November 1, 2007, Marshall issued 22,227,000 shares of our common stock to
      CAMHZN Master LDC, in exchange for services rendered valued at
      $28,895.10.
  ·
              On
      November 1, 2007, Marshall issued 71,495,700 shares of our common stock to
      Capitoline Advisory Group, in exchange for services rendered valued at
      $92,944.41.
  ·
              On
      November 1, 2007, Marshall issued 100,000,000 shares of our common stock
      to Jacob Canceli, in exchange for services rendered valued at
      $10,000.
  ·
              On
      November 30, 2007, Marshall issued 200,000,000 shares of our common stock
      to Preferred Ventures, in exchange for services rendered valued at
      $20,000.
  ·
              On
      November 30, 2007, Marshall issued 100,000,000 shares of our common stock
      to Allan Gold, in exchange for services rendered valued at
      $10,000.
  ·
              On
      December 5, 2007, Marshall issued 30,000,000 shares of our common stock to
      Roger Pawson, in exchange for services rendered valued at
      $3,000.
  ·
              On
      December 5, 2007, Marshall issued 245,000,000 shares of our common stock
      to Jacob Canceli, in exchange for services rendered valued at
      $24,500.
  ·
              On
      December 24, 2007, Marshall issued 200,000,000 shares of our common stock
      to Roger Pawson, in exchange for services rendered valued at
      $20,000.
  All
purchasers were provided with access to all of Marshall’s filings with the
United States Securities and Exchange Commission, including the
following:
  Marshall’s
annual report to stockholders for the most recent fiscal year, the definitive
proxy statement filed in connection with that annual report, and a copy of
Marshall’s most recent Form 10-KSB under the Exchange Act.
  The
information contained in an annual report on Form 10-KSB under the Exchange
Act.
  The
information contained in any reports or documents required to be filed by
Marshall under Sections 13(a), 14(a), 14(c), and 15(d) of the Exchange Act since
the distribution or filing of the reports specified above.
  A
description of any material changes in Marshall’s affairs that were not
disclosed in the documents furnished.
  Copies of all of the documents executed by us in
connection with the above described Purchase Agreement are attached to this
report.
  Purchases of Equity Securities by the Registrant and
Affiliated Purchasers
  There
were no purchases of our equity securities by the registrant or any affiliated
purchasers during any month within the fourth quarter of the fiscal year covered
by this report.


19
 Table of Contents


Item6.
              Management’s Discussion
      and Analysis of Financial Condition and Results of
    Operations.
  Statements
included in this Management’s Discussion and Analysis of Financial Condition and
Results of Operations, and in future filings by us with the Securities and
Exchange Commission, in our press releases and in oral statements made with the
approval of an authorized executive officer which are not historical or current
facts are “forward-looking statements” and are subject to certain risks and
uncertainties that could cause actual results to differ materially from
historical earnings and those presently anticipated or projected.  We
wish to caution readers not to place undue reliance on any such forward-looking
statements, which speak only as of the date made.  The following
important factors, among others, in some cases have affected and in the future
could affect our actual results and could cause our actual financial performance
to differ materially from that expressed in any forward-looking
statement:


·
            The
      extremely competitive conditions that currently exist in the market for
      companies similar to Marshall Holdings;
and




·
            Lack
      of resources to maintain our good standing status and requisite filings
      with the Securities and Exchange
Commission.




The
foregoing list should not be construed as exhaustive and we disclaim any
obligation subsequently to revise any forward-looking statements to reflect
events or circumstances after the date of such statements or to reflect the
occurrence of anticipated or unanticipated events.




Results
of Operations




Comparison
of consolidated results of operations for the years ended December 31, 2007 with
December 31, 2006


Revenues.  Sales
for the year ended December 31, 2007 increased $1,448,000 to $5,205,000 from
sales of $3,757,000 for the year ended December 31, 2006, an increase of
38.5%.  The increase in sales was primarily due to a few large
transactions occurring in the first two quarters of 2007 and are not considered
to be reoccurring.  We are currently soliciting for bulk orders in the
international markets but we are unable to forecast or project any large orders
at this time.




Gross
profit of $3,631,000 for the year ended December 31, 2007, was $918,000, or
33.8% higher than the gross profit of $2,713,000 for the year ended December 31,
2006.  As a percentage of sales, gross profit for 2007 as compared to
the same period in the prior year decreased approximately 2% from 72% to
70%.  The decrease in gross profit as a percentage of sales primarily
resulted from slightly higher costs of product.




Expenses.  Selling,
general and administrative expenses in the year ended December 31, 2007, totaled
$4,606,000, which is a $1,257,000 or 22% decrease as compared to the 2006
period.  The change is attributable to a decrease of $2,037,000 in
expenses associated with outside consulting paid with stock to certain
consultants hired to assist Marshall with acquiring additional operations, real
estate, product research and marketing plans and an increase of 534,000 general
and administrative costs related to additional personnel and operations from the
acquisition of Marshall Distributing subsidiary.  The remaining
difference is attributable to an increase of depreciation expense to 159,000
from 82,000.
  Losses.  Marshall
had a net loss from operations of $974,000 for the year ended December 31, 2007,
compared to a net loss from operations of $3,150,000 in 2006.  The
majority of the decrease of the loss resulted from the decrease of selling
general and administrative expenses of $1,579,000 and the increased gross profit
of $918,000.  The total net loss for the year ended December 31, 2007
was $3,574,000 compared to a total net loss of $3,735,000 for the year ended
December 31, 2006.  The majority of expenses resulting in the total
net loss of 3,274,000 was an impairment charge taken on intangible assets in
accordance with FAS 142 in the amount of $2,474,000.


No income
tax benefit was recorded on the loss for the year ended December 31, 2007, as
management of Marshall was unable to determine that it was more likely than not
that such benefit would be realized.  At December 31, 2007, Marshall
had a net operating loss for income tax purposes of approximately $26
million.




Liquidity
and Capital Resources




Marshall’s
working capital needs and capital expenditure requirements have increased as a
result of increased cost associated with operations.  Required working
capital and capital expenditure requirements are expected to be met from cash
flows from operations, potential future acquisitions, borrowings, and the sale
of Marshall’s equity securities.  For fiscal year 2007, Marshall’s
working capital decreased $564,000 to a deficit working capital amount of
$165,000 from a positive $399,000 at December 31, 2006.  This decrease
was primarily attributable to the reduction of inventory on hand and an increase
in accounts payable.  For our purposes, we define working capital as
accounts receivable plus inventory less accounts payable.




Operating
Activities.For fiscal year 2007, Marshall’s operations used
cash flow of $1,152,000 compared to net cash used of $1,334,000 for the previous
fiscal year, a decrease in cash used of $182,000.  Cash was consumed
by the loss of $3,274,000, less non-cash expenses of $2,474,000 for an
impairment charge write down of intangible assets as well as the non-cash
expense of 890,000 for stock issued for services and 159,000 for depreciation.
Current assets used cash from operations as well as they increased by
$1,406,000from previous years.  A decrease in accounts receivable of
$116,000 provided cash.  Inventory levels decreased by $368,000,
providing cash for operations as well.  Cash consumed in operations
was reduced by the net increase of $813,000 in accounts payable and accrued
expenses.




20
 Table of Contents





Investing
Activities.Marshall had a cash flow provided by investing
activities of $86,000 in 2007, as compared to cash used by investing activities
of $13,000 in 2006.




Financing
Activities.Net cash inflows from financing activities
generated $1,025,000 during the year ended December 31,
2007.  Marshall received net proceeds of $80,000 from the sale of
common stock and $945,000 in proceeds from the increase in short term
debt.  The short term debt included a $500,000 six month note payable
at an interest rate of 10%.  It also included a note to a company
named CAMOFI in which Marshall co-signed with DL Claire a promissory note in the
amount of $650,000.  Marshall received $390,000 and DL Claire received
the balance.  The note is due and payable in May 2008.  As
part of the consideration of the note to CAMOFI, CAMOFI received 250,000,000
shares of our common stock.  The officers of Marshall have pledged
28,915,125 shares of our Series A preferred stock as security for the repayment
of the note.  The officers maintain the voting rights of the preferred
stock so long as no default has occurred under pledge agreement.




Net cash
inflows from financing activities generated $1,315,000 during the year ended
December 31, 2006.  Marshall received net proceeds of $139,000 from
the sale of common stock and $1,175,000 in proceeds from the increase in short
term debt in 2006.




Other
Results




Cash,
cash equivalents and marketable securities totaled $19,000 at December 31, 2007
compared to $61,000 at December 31, 2006, a decrease of $42,000.




Marshall’s
stockholders equity (deficiency) decreased $2,304,000 to a negative stockholders
equity of $1,917,000 in 2007 from a positive stockholders equity of $387,000 in
2006.




Management
anticipates that its expansion strategy will require significant expenditures
for the investment in the expansion of operations, as well as increased general
and administrative expenses primarily due to the hiring of additional personnel
and advertising expenses related to operations.  These expenditures
are expected to be funded by revenues from operations.  Marshall
continues selling equity securities to fund expansion
activities.  Selling, general and administrative expenses are also
expected to increase in future periods due to the increased legal and accounting
expenses incurred by Marshall in order to establish and maintain its reporting
status with the Securities and Exchange Commission.  In addition,
Marshall intends to pursue, as part of its business strategy, future growth
through acquisitions which may involve the expenditure of significant
funds.  Depending upon the nature, size and timing of future
acquisitions, Marshall may be required to obtain additional debt or equity
financing in connection with such future acquisitions.  There can be
no assurance, however, that additional financing will be available to Marshall,
when and if needed, on acceptable terms or at all.  Management
believes that future cash flow from operations and equity sales will be
sufficient to fund these expenditures.




Marshall
relied heavily on the issuance of its common stock to pay consultants and other
professionals pursuant to Form S-8 registration statements during 2007 and
2006.  The result of such issuances was reverse stock splits, one in
the first quarter of 2005 for one for 500 and one in the fourth quarter of 2006
for one for 1000.  Based upon Marshall’s current financial situation
and intention of procuring and marketing new products, it is likely that
Marshall may rely on the issuance of its shares to pay consultants and other
professionals during 2008.




We have
issued 70 million shares of our Series A preferred stock to Messrs Bailey and
Ternes as of April 9, 2008 for debt owed to them by us in part of a debt
restructuring transaction.  Marshall is currently in the process of
restructuring as much debt as possible for the relative health of the company in
order to satisfy current obligations.




21
 Table of Contents





Critical
Accounting Policies




The
preparation of Marshall’s consolidated financial statements in conformity with
accounting principles generally accepted in the United States requires us to
make estimates and judgments that affect reported assets, liabilities, revenues,
and expenses, and the disclosure of contingent assets and
liabilities.  Marshall bases estimates and judgments on historical
experience and on various other assumptions management believes to be reasonable
under the circumstances.  Future events, however, may differ markedly
from current expectations and assumptions.  While there are a number
of significant accounting policies affecting Marshall’s consolidated financial
statements, management believes the following critical accounting policies
involve the most complex, difficult and subjective estimates and
judgments.




Accounts
Receivable.Accounts receivable balances are stated net of
allowances for doubtful accounts.  Marshall records allowances for
doubtful accounts when it is probable that the accounts receivable balance will
not be collected.  When estimating the allowances for doubtful
accounts, Marshall takes into consideration such factors as its day-to-day
knowledge of the financial position of specific clients, the industry and
historical activity.  Increases in the allowance for doubtful accounts
are recorded as charges to bad debt expense and are reflected in operating
expenses in Marshall’s statements of operations.  Write-offs of
uncollectible accounts are charged against the allowance for doubtful
accounts.




Inventories.Inventories,
consisting primarily of nutritional, health, beauty products, and beverages, are
stated at cost computed by the first-in, first-out (FIFO) method of
accounting.




Long-Lived
Assets.Marshall records property and equipment at
cost.  Depreciation of the assets is recorded on the straight-line
basis over the estimated useful lives of the assets.  Dispositions of
property and equipment are recorded in the period of disposition and any
resulting gains or losses are charged to income or expense when the disposal
occurs.




Through
Marshall’s acquisition activities, intangible assets have been recorded in the
financial statements.  Marshall performs annual impairment testing
annually of its intangible assets under the provisions of statement of Financial
Accounting Standards No. 142, using the expected present value technique as
provided for by FASB Concepts Statement No. 7 “Using Cash Flow Information and
Present Value In Accounting Measurements.”




Revenue
Recognition.Marshall’s revenues are recognized when products
are shipped or delivered to unaffiliated customers.  The Securities
and Exchange Commission’s Staff Accounting Bulletin (SAB) No. 104, which
provides guidance on the application of generally accepted accounting principles
to select revenue recognition issues.  Marshall has concluded that its
revenue recognition policy is appropriate and in accordance with SAB No.
104.  Revenue is recognized under development and distribution
agreements only after the following criteria are met: (i) there exists adequate
evidence of the transactions; (ii) delivery of goods has occurred or services
have been rendered; and (iii) the price is not contingent on future activity and
collectability is reasonably assured.




Stock-based
Compensation.  SFAS No. 123(R), Share-Based Payment, defines
the fair-value-based method of accounting for stock-based employee compensation
plans and transactions used by Marshall to account for its issuances of equity
instruments to record compensation cost for stock-based employee compensation
plans at fair value as well as to acquire goods or services from
non-employees.  Transactions in which Marshall issues stock-based
compensation to employees, directors and advisors and for goods or services
received from non-employees are accounted for based on the fair value of the
equity instruments issued.  Marshall utilizes pricing models in
determining the fair values of options and warrants issued as stock-based
compensation.  These pricing models utilize the market price of
Marshall’s common stock and the exercise price of the option or warrant, as well
as time value and volatility factors underlying the positions.




Recently
Issued Accounting Pronouncements




In
December 2007, the FASB issued Statement of Financial Accounting Standard No.
141 (R), Business Combinations(“SFAS 141 (R)”), which becomes effective for fiscal periods beginning
after December 15, 2008.  SFAS No. 141 (R) requires all business
combinations completed after the effective date to be accounted for by applying
the acquisition method (previously referred to as the purchase
method).  Companies applying this method will have to identify the
acquirer, determine the acquisition date and purchase price and recognize at
their acquisition date fair values of the identifiable assets acquired,
liabilities assumed, and any non-controlling interests in the
acquiree.  In the case of a bargain purchase the acquirer is required
to reevaluate the measurements of the recognized assets and liabilities at the
acquisition date and recognize a gain on that date if an excess
remains.  Marshall does not expect the adoption of this statement to
have a material impact on its financial statements.




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In
December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements, an Amendment of ARB 51(“SFAS 160”)
which becomes effective for fiscal periods beginning after December 15,
2008.  This statement amends ARB 51 to establish accounting and
reporting standards for the non-controlling interest in a subsidiary and for the
deconsolidation of a subsidiary.  The statement requires ownership
interests in subsidiaries held by parties other than the parent be clearly
identified, labeled, and presented in the consolidated statement of financial
position within equity, but separate from the parent’s equity.  The
statement also requires consolidated net income to be reported at amounts that
include the amounts attributable to both the parent and the non-controlling
interest with disclosure on the face of the consolidated statement of income, of
the amounts of consolidated net income attributable to the parent and to the
non-controlling interest.  In addition this statement establishes a
single method of accounting for changes in a parent’s ownership interest in a
subsidiary that do not result in deconsolidation and requires that a parent
recognize a gain or loss in net income when a subsidiary is
deconsolidated.  Marshall does not expect the adoption of this
statement to have a material impact on its financial statements.




In
February 2007, the FASB issued Statement No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities — Including an amendment to FASB
Statement No. 115.  This statement permits companies to choose
to measure many financial instruments and other items at fair
value.  The objective is to improve financial reporting by providing
entities with the opportunity to mitigate volatility in reported earnings caused
by measuring related assets and liabilities differently without having to apply
complex hedge accounting provisions.  This Statement is expected to
expand the use of fair value measurement of accounting for financial
instruments.  This statement applies to all entities, including not
for profit.




The fair
value option established by this statement permits all entities to measure
eligible items at fair value at specified election dates.  This
statement is effective as of the beginning of an entity’s first fiscal year that
begins after November 15, 2007.




Marshall
is currently assessing the impact adoption of SFAS No. 159 will have on its
financial statements.




In
September 2006, the FASB issued SFAS No. 157, Fair Value
Measurement.  This statement defines fair value, establishes a
framework for measuring fair value in generally accepted accounting principles,
and expands disclosures about fair value measurements.  This statement
applies under other accounting pronouncements that require or permit fair value
measurements.  SFAS No. 157 is effective for fiscal years beginning
after November 15, 2007.  Marshall is currently assessing the impact
of the adoption of SFAS No. 157 will have on its financial
statements.




In
December 2007, the FASB ratified EITF No. 07-1, Accounting for Collaborative
Arrangements.EITF 07-1 defines collaborative arrangements and
establishes reporting requirements for transactions between participants in a
collaborative arrangement and between participants in the arrangement and third
parties.  EITF 07-1 also establishes the appropriate income statement
presentation and classification for joint operating activities and payments
between participants, as well as the sufficiency of the disclosures related to
these arrangements.  EITF 07-1 is effective for fiscal years beginning
after December 15, 2008, and would be applied retrospectively as a change in
accounting principle for collaborative arrangements existing at the effective
date.  Marshall is currently evaluating the potential impact, if any
of EITF 07-1 on its financial statements.




In March
of 2008 the FASB issued SFAS No. 161, Disclosures about Derivative
Instruments and Hedging Activities, an amendment of FASB No. 133Accounting for Derivative
Instruments and Hedging Activities. The use and complexity of derivative
instruments and hedging activities have increased significantly over the past
several years. Constituents have expressed concerns that the existing disclosure
requirements in FASB Statement No. 133, Accounting for Derivative
Instruments and Hedging Activities, do not provide adequate information
about how derivative and hedging activities affect an entity’s financial
position, financial performance, and cash flows. Accordingly, this Statement
requires enhanced disclosures about an entity’s derivative and hedging
activities and thereby improves the transparency of financial reporting. This
Statement is effective for financial statements issued for fiscal years and
interim periods beginning after November 15, 2008, with early application
encouraged. This Statement encourages, but does not require, comparative
disclosures for earlier periods at initial adoption. Marshall does not expect
the adoption of this statement to have an impact on its financial
statements.




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Off-Balance
Sheet Arrangements




Marshall
does not have any off-balance sheet arrangements.




Item
      6A.
              Quantitative
      and Qualitative Disclosures About Market
Risk.




Not
applicable.




Item7.
            Financial
      Statements and Supplementary Data.




The
financial statements and related notes are included as part of this report as
indexed in the appendix on pages F-1 through F-7.




Item8.
            Changes
      in and Disagreements With Accountants on Accounting and Financial
      Disclosure.




As
reported in the Current Report on Form 8-K filed by the registrant on March 28,
2007, on February 27, 2007, the registrant terminated Lawrence Scharfman, CPAPC
as the principal accountant engaged to audit the registrant’s financial
statements.




Lawrence
Scharfman, CPAPC reported on the registrant’s financial statements for the year
ended December 31, 2005 and did not contain an adverse opinion or a disclaimer
of opinion, and were not qualified or modified as to uncertainty, audit scope,
or accounting principles, except that Lawrence Scharfman’s report for the year
ended December 31, 2005 raised substantial doubt about the registrant’s ability
to continue as a going concern.  Lawrence Scharfman, CPAPC was not
engaged as the registrant’s independent auditor for the fiscal years ended
December 31, 2004 or 2003.




On
February 27, 2007, we engaged Madsen & Associates, CPA’s Inc., certified
public accountants, as our independent accountant to report on our balance sheet
as of December 31, 2006, and the related combined statements of income,
stockholders’ equity and cash flows for the year then ended.  Madsen
& Associates, CPA’s Inc. served as the registrant’s independent auditors for
the fiscal year ended December 31, 2004 and 2003.




The
decision to change accountants and the engagement of Madsen & Associates was
recommended and approved by the registrant’s board of directors.




During
the recent fiscal year and any subsequent interim period through February
27,2007, there have not been any disagreements between the registrant and
Lawrence Scharfman, CPAPC on any matter of accounting principles or practices,
financial statement disclosures, or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of Lawrence Scharfman, CPAPC,
would have caused it to make reference to the subject matter of the
disagreements in connection with its reports on the financial statements for
such periods.




During
the registrant’s most recent fiscal year and any subsequent interim period prior
to the engagement of Madsen & Associates, neither management nor anyone on
the registrant’s behalf consulted with Madsen regarding either (i) the
application of accounting principles to a specified transaction, either
contemplated or proposed, or the type of audit opinion that might be rendered on
Madsen’s financial statements or (ii) any matter that was either the subject of
a “disagreement” or a “reportable event,” as those terms are defined in
Regulation S-K, Items 304(a)(1)(iv) and 304(a)(1)(v).




24
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We
provided Lawrence Scharfman, CPAPC with a copy of the disclosures contained in
our Current Report on Form 8-K, filed with the Commission on March 28,
2007.  Lawrence Scharfman, CPAPC responses were filed as an exhibit to
the registrant’s Form 8-K, filed with the Commission on March 28,
2007.




Item8A.
            Controls
      and Procedures.




See Item
8A(T) below.




Item8A(T).
            Controls
      and Procedures.




The term
disclosure controls and procedures means controls and other procedures of an
issuer that are designed to ensure that information required to be disclosed by
the issuer in the reports that it files or submits under the Exchange Act (15
U.S.C. 78a, et seq.) is
recorded, processed, summarized and reported, within the time periods specified
in the Commission’s rules and forms.  Disclosure controls and
procedures include, without limitation, controls and procedures designed to
ensure that information required to be disclosed by an issuer in the reports
that it files or submits under the Exchange Act is accumulated and communicated
to the issuer’s management, including its principal executive and principal
financial officers, or persons performing similar functions, as appropriate to
allow timely decisions regarding required disclosure.




The term
internal control over financial reporting is defined as a process designed by,
or under the supervision of, the issuer’s principal executive and principal
financial officers, or persons performing similar functions, and effected by the
issuer’s board of directors, management and other personnel, to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
generally accepted accounting principles and includes those policies and
procedures that:




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




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




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




Our
management, including our chief executive officer and chief financial officer,
does not expect that our disclosure controls and procedures or our internal
controls over financial reporting will prevent all error and all
fraud.  A control system, no matter how well conceived and operated,
can provide only reasonable, not absolute, assurance that the objectives of the
control system are met.  Further, the design of a control system must
reflect the fact that there are resource constraints, and the benefits of
controls must be considered relative to their costs.  Because of
inherent limitations in all control systems, internal control over financial
reporting may not prevent or detect misstatements, and no evaluation of controls
can provide absolute assurance that all control issues and instances of fraud,
if any, within the registrant have been detected.  Also, projections
of any evaluation of effectiveness to future periods are subject to the risk
that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may
deteriorate.




Evaluation of Disclosure and
Controls and Procedures.Our management is responsible for
establishing and maintaining adequate internal control over financial reporting
as defined in Rule 13a-15(f) under the Exchange Act.  Our internal
control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with accounting
principles generally accepted in the United States.  We carried out an
evaluation, under the supervision and with the participation of our management,
including our chief executive officer and chief financial officer, of the
effectiveness of the design and operation of our disclosure controls and
procedures as of the end of the period covered by this report.  The
evaluation was undertaken in consultation with our accounting
personnel.  Based on that evaluation, our chief executive officer and
chief financial officer concluded that our disclosure controls and procedures
are currently effective to ensure that information required to be disclosed by
us in the reports that we file or submit under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified in the
SEC’s rules and forms.    business or if we engage in an
extraordinary transactions.




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Changes in Internal Controls Over
Financial Reporting.There were no changes in the internal
controls over our financial reporting that occurred during the period covered by
this report that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.




This
annual report does not include an attestation report of the registrant’s
registered public accounting firm regarding internal control over financial
reporting.  Management’s report was not subject to attestation by the
registrant’s registered public accounting firm pursuant to temporary rules of
the Securities and Exchange Commission that permit the registrant to provide
only management’s report in this annual report.




Item8B.  Other
Information.




None.




PART
III




Item9.
            Directors,
      Executive Officers, and Corporate
Governance.




The
registrant’s directors and executive officer are:




Name
            Age
            Position
            Position Held
      SinceRichard
      A. Bailey
            51
            Chief
      Executive Officer and
              Chairman
      of the Board of Directors
            1993Florian
      R. Ternes
            58
            Director,
      Chief Operating Officer and Secretary
            1998W.
      Jamie Plante
            39
            Chief
      Financial Officer
            2006




The
members of our board of directors are subject to change from time to time by the
vote of the stockholders at special or annual meetings to elect
directors.  Our current board of directors consists of two
directors.  There are no arrangements or understandings between any of
our directors and any other person pursuant to which he was or is to be selected
as a director or nominee for director.




The
foregoing notwithstanding, except as otherwise provided in a certificate or any
resolution or resolutions of the board designating a series of our preferred
stock, directors who are elected at an annual meeting of stockholders, and
directors elected in the interim to fill vacancies and newly created
directorships, will hold office for the term for which elected and until their
successors are elected and qualified or until their earlier death, resignation
or removal.




Whenever
the holders of any class or classes of stock or any series thereof are entitled
to elect one or more directors pursuant to any resolution or resolutions of the
board designating a series of our preferred stock, vacancies and newly created
directorships of such class or classes or series thereof may generally be filled
by a majority of the directors elected by such class or classes or series then
in office, by a sole remaining director so elected or by the unanimous written
consent or the affirmative vote of a majority of the outstanding shares of such
class or classes or series entitled to elect such director or
directors.  Officers are elected annually by the
directors.  There are no family relationships among our directors and
officers.  There are no arrangements or understandings between any of
our officers and any other person pursuant to which he was or is to be selected
as an officer.




We may
employ additional management personnel, as our board of directors deems
necessary.  We have not identified or reached an agreement or
understanding with any other individuals to serve in management positions, but
do not anticipate any problem in employing qualified staff.




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 Table of Contents





A
description of the business experience during the past five years for each of
the directors and executive officers of the registrant is set forth
below.




Richard
A. Bailey has served as the chairman and chief executive officer of the
registrant since our inception in May 1993.  In 1981, Mr. Bailey
purchased a small, local mobile wash company in North Las Vegas,
Nevada.  He expanded operations to include aviation services, growing
the company from two employees in 1981 to in excess of three hundred by
1988.  He served as president of the business as it grew to $7,000,000
a year in revenue, operating in twenty-seven cities throughout the United
States.  In 1990, Mr. Bailey became involved in the network
marketing/direct selling business.  In 1997, Mr. Bailey elected to
sell the aviation company to International Total Services in order to devote one
hundred percent of his time to Marshall.  Mr. Bailey will serve as
director until the next annual shareholders meeting.  For a discussion
of legal proceedings pertaining to Mr. Bailey, see “Item 3.  Legal
Proceedings” of this report.  Mr. Bailey was discharged in bankruptcy
on August 5, 2002 in Case No. 02-14289, In Re: Richard A. Bailey, in
the United States Bankruptcy Court, District of Nevada.




Florian
R. Ternes has served as chief operating officer and secretary of the registrant
since 1998.  He became a director of the registrant in
1999.  Mr. Ternes has been in involved in the airline industry running
several large hubs for various airlines which included the Northwest
International Company in Los Angeles, the Detroit Hub for Republic Airlines, and
the Denver Hub for Continental Airlines.  In 1995, he left the airline
industry to join Richard A. Bailey in other business
opportunities.  As one of those ventures, he became president of a
nutritional company.  In January 1998, Mr. Ternes joined the
registrant.  For a discussion of legal proceedings pertaining to Mr.
Ternes, see “Item 3. Legal Proceedings” of this report.




W. Jamie
Plante graduated from the University of Pacific in 1993 Summa Cum Laude with a
Bachelor degree in Finance.  He was hired out of school by Arthur
Andersen LLP and worked for the next four years.  Mr. Plante then
accepted a position with a client as controller for nine
companies.  In 1997, he became an independent CPA and performed
contract services for that same client with an addition of several other clients
including contract chief financial officer services.  He accepted the
chief financial officer position at Marshall Distributing LLC in July
2004.  When the registrant acquired Marshall Distributing LLC, Mr.
Plante was named chief financial officer of the registrant where he has
concentrated his efforts on financial management and public reporting, internal
controls, budgeting and projections, inventory and asset management as well as
technology integration and management.




Section
16(a) Beneficial Ownership Reporting Compliance




Under
Section 16(a) of the Exchange Act, the directors and certain of the officers,
and persons holding more than 10 percent of the registrant’s common stock are
required to file forms reporting their beneficial ownership of our common stock
and subsequent changes in that ownership with the Securities and Exchange
Commission.  Such persons are also required to furnish management with
copies of all forms so filed.




Based
solely upon a review of copies of such forms filed on Forms 3, 4, and 5, the
following forms were not filed timely for the year ending December 31,
2007:




·
                Mr.
      Bailey failed to timely file a Form 4 for the conversion of 5,000,000
      shares of Series A preferred stock into 5,000,000,000 shares of common
      stock on January 3, 2007; a Form 4 for the reversal of the conversion
      of  5,000,000 shares of Series A preferred stock into
      5,000,000,000 shares of common stock on March 28, 2007; and a Form 4 for
      the conversion of 4,000,000 shares of Series A preferred stock into
      4,000,000,000 shares of common stock on August 20,
  2007.
  ·
                Mr.
      Ternes failed to timely file a Form 4 for the conversion of 2,000,000
      shares of Series A preferred stock into 2,000,000,000 shares of common
      stock on December 14, 2006; a Form 4 for the conversion of 5,000,000
      shares of Series A preferred stock into 5,000,000,000 shares of common
      stock on January 3, 2007; a Form 4 for the reversal of the conversion
      of  5,000,000 shares of Series A preferred stock into
      5,000,000,000 shares of common stock on March 28, 2007; a Form 4 for the
      return of 2,000,000,000 shares of common stock on June 4, 2007; and a Form
      4 for the conversion of 57,000 shares of Series A preferred stock into
      57,000,000 shares of common stock on June 4,
  2007.


Committees
of the Board of Directors




The
registrant’s board of directors has not created any standing compensation,
nominating, finance, executive, or audit committees.  All of such
functions are handled by the board.




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 Table of Contents





Corporate
Governance




There
have been no material changes to the procedures by which security holders may
recommend nominees to the registrant’s board of directors, where those changes
were implemented after the registrant last provided disclosure in response to
the requirements of this Item.




Communication
with Directors




Stockholders
and other interested parties may contact any of our directors by writing to them
at Marshall Holdings International, Inc., 2555 East Washburn Road, North Las
Vegas, Nevada 89081, Attention: Corporate Secretary.




Our board
has approved a process for handling letters received by us and addressed to any
of our directors.  Under that process, the Secretary reviews all such
correspondence and regularly forwards to the directors a summary of all such
correspondence, together with copies of all such correspondence that, in the
opinion of the Secretary, deal with functions of the board or committees thereof
or that he otherwise determines requires their attention.  Directors
may at any time review a log of all correspondence received by us that is
addressed to members of the board and request copies of such
correspondence.




Code
of Ethics for Senior Executive Officers and Senior Financial
Officers




We have
adopted an amended Code of Ethics for Senior Executive Officers and Senior
Financial Officers that applies to our president, chief executive officer, chief
operating officer, chief financial officer, and all financial officers,
including the principal accounting officer.  The code provides as
follows:




·
            Each
      officer is responsible for full, fair, accurate, timely and understandable
      disclosure in all periodic reports and financial disclosures required to
      be filed by us with the Securities and Exchange Commission or disclosed to
      our stockholders and/or the public.




·
            Each
      officer shall immediately bring to the attention of the audit committee,
      or disclosure compliance officer, any material information of which the
      officer becomes aware that affects the disclosures made by us in our
      public filings and assist the audit committee or disclosure compliance
      officer in fulfilling its responsibilities for full, fair, accurate,
      timely and understandable disclosure in all periodic reports required to
      be filed with the Securities and Exchange
  Commission.




·
            Each
      officer shall promptly notify our general counsel, if any, or the
      president or chief executive officer as well as the audit committee of any
      information he may have concerning any violation of our Code of Business
      Conduct or our Code of Ethics, including any actual or apparent conflicts
      of interest between personal and professional relationships, involving any
      management or other employees who have a significant role in our financial
      reporting, disclosures or internal
controls.




·
            Each
      officer shall immediately bring to the attention of our general counsel,
      if any, the president or the chief executive officer and the audit
      committee any information he may have concerning evidence of a material
      violation of the securities or other laws, rules or regulations applicable
      to us and the operation of our business, by us or any of our
      agents.




·
            Any
      waiver of this Code of Ethics for any officer must be approved, if at all,
      in advance by a majority of the independent directors serving on our board
      of directors.  Any such waivers granted will be publicly
      disclosed in accordance with applicable rules, regulations and listing
      standards.




We have
posted a copy of our Code of Ethics on our website at
www.rightsolution.com.  In addition, we have filed a copy of our Code
of Ethics as Exhibit 14 to our filing on Form 10-KSB filed with the Securities
and Exchange Commission on April 14, 2004.  We will provide to any
person without charge, upon request, a copy of our Code of
Ethics.  Any such request should be directed to our corporate
secretary at 2555 East Washburn Road, North Las Vegas, Nevada 89081, telephone
(702) 317-2400, fax (702) 595-0141, or by e-mail
info@rightsolution.com.




28
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Item10.
            Executive
      Compensation.




Summary
of Cash and Certain Other Compensation




At
present we have only 3 executive officers.  The compensation program
for future executives will consists of three key elements which will be
considered by a compensation committee to be appointed:




·
            A
      base salary;




·
            A
      performance bonus; and




·
            Periodic
      grants and/or options of our common
stock.




Base Salary.  Our
chief executive officer and all other senior executive officers receive
compensation based on such factors as competitive industry salaries, a
subjective assessment of the contribution and experience of the officer, and the
specific recommendation by our chief executive officer.




Performance
Bonus.  A portion of each officer’s total annual compensation
is in the form of a bonus.  All bonus payments to officers must be
approved by our compensation committee based on the individual officer’s
performance and company performance.




Stock
Incentive.  Stock options are granted to executive officers
based on their positions and individual performance.  Stock options
provide incentive for the creation of stockholder value over the long term and
aid significantly in the recruitment and retention of executive
officers.  The compensation committee considers the recommendations of
the chief executive officer for stock option grants to executive officers (other
than the chief executive officer) and approves, disapproves or modifies such
recommendation.




Summary
Compensation Table




The
following table sets forth, for our named executive officers for the two
completed fiscal years ended December 31, 2007 and 2006:




Name and Principal Position
            Year
            
            Salary ($)
            
            
            Bonus
      ($)
            
            
            Stock
      Awards ($)
            
            
            Option
      Awards ($)
            
            
            Non-Equity
      Incentive Plan Compensation ($)
            
            
            Nonqualified
      Deferred Compensation ($)
            
            
            All
      Other Compensation ($)
            
            
            Total
      ($)Richard
      A. Bailey (1)
            2007
            
            $
            240,000
            
            
            $
            0
            
            
            $
            0
            
            
            $
            0
            
            
            $
            0
            
            
            $
            0
            
            
            $
            0
            
            
            $
            240,0002006
            
            $
            240,000
            
            
            $
            0
            
            
            $
            0
            
            
            $
            0
            
            
            $
            0
            
            
            $
            0
            
            
            $
            0
            
            
            $
            240,000Florian
      R. Ternes (2)
            2007
            
            $
            204,000
            
            
            $
            0
            
            
            $
            0
            
            
            $
            0
            
            
            $
            0
            
            
            $
            0
            
            
            $
            0
            
            
            $
            204,0002006
            
            $
            204,000
            
            
            $
            0
            
            
            $
            0
            
            
            $
            0
            
            
            $
            0
            
            
            $
            0
            
            
            $
            0
            
            
            $
            204,000W.
      Jamie Plante (3)
            2007
            
            $
            100,000
            
            
            $
            0
            
            
            $
            0
            
            
            $
            0
            
            
            $
            0
            
            
            $
            0
            
            
            $
            0
            
            
            $
            100,0002006
            
            $
            100,000
            
            
            $
            0
            
            
            $
            5,000
            
            
            $
            0
            
            
            $
            0
            
            
            $
            0
            
            
            $
            0
            
            
            $
            105,000


__________


(1)
            Our
      chief executive officer and
director.


(2)
            Our
      chief operating officer and
director.


(3)
            Our
      chief financial officer.




Outstanding
Equity Awards at Fiscal Year-End




The
following table provides information for each of our named executive officers as
of the end of our last completed fiscal year, December 31, 2007:




29
 Table of Contents




Option Awards
            
            
            Stock AwardsName
            
            Number
      of Securities Underlying Unexercised Options (#) Exercisable
            
            
            Number
      of Securities Underlying Unexercised Options (#) Unexercisable
            
            
            Equity
      Incentive Plan Awards: Number of Securities Underlying Unexercised
      Unearned Options (#)
            
            
            Option
      Exercise Price ($)
            
            
            Option
      Expiration Date
            
            
            Number
      of Shares or Units of Stock That Have Not Vested
            
            
            Market
      Value of Shares or Units of Stock That Have Not Vested
            
            
            Equity
      Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights
      That Have Not Vested
            
            
            Equity
      Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or
      Other Rights That Have NotVested
      ($)Richard
      A. Bailey (1)
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0Florian
      R. Ternes (2)
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0W.
      Jamie Plante (3)
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0


__________


(1)
            Our
      chief executive officer.


(2)
            Our
      chief operating officer.


(3)
            Our
      chief financial officer.




Director
Compensation




The
following table provides concerning the compensation of our directors as of the
end of our last completed fiscal year, December 31, 2007:




Name
            
            Fees
      Earned or Paid in Cash($)
            
            
            Stock
      Awards ($)
            
            
            OptionAwards($)
            
            
            Non-Equity
      Incentive Plan Compensation($)
            
            
            Nonqualified
      Deferred Compensation Earnings
              ($)
            
            
            All
      Other Compensation ($)
            
            
            Total
      ($)Richard
      A. Bailey (1)
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0Florian
      R. Ternes (2)
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0


__________


(1)
            Our
      chief executive officer.


(2)
            Our
      chief operating officer.




Employment
Agreements




The
registrant entered into an employment agreement (the “Bailey Employment
Agreement”) with Richard A. Bailey, our president and chief executive officer,
dated May 1, 1999.  The Bailey Employment Agreement provides
termination of the employment at the will of either the registrant or Mr. Bailey
and a base salary of $100,000 annually commencing May 1, 1999, which shall be
reviewed periodically.  In 2003, such review resulted in an increase
and the car allowance included in the May 1, 1999 agreement was implemented
during 2003 for Mr. Bailey.  In the event that the registrant is
unable to pay the annual salary, we will issue to Mr. Bailey one share of our
common stock for each dollar owed at the end of the fiscal year in which such
failure occurs.




In the
event that Mr. Bailey’s employment is terminated as a result of:




·
            his
      retirement under the retirement
program;




·
            his
      disability resulting in absence from his duties to the registrant on a
      full-time basis for over one year;




·
            his
      death;




·
            a
      material reduction in his responsibilities or title;
  or




·
            a
      reduction of his cash compensation by more than 10 percent below the
      highest annual salary from time to time in
  effect;




then we
are obligated to pay to Mr. Bailey, as severance and/or liquidated damages, an
amount equal to one and one-half times his highest annual earnings during his
employment with the registrant each year for a period of five
years.  Effective April 10, 2004, Mr. Bailey agreed to a salary of
$240,000 annually with the remainder of the agreement remaining in
force.




30
 Table of Contents





The
registrant entered into an employment agreement (the “Ternes Employment
Agreement”) with Florian R. Ternes, our secretary and chief operating officer,
dated May 1, 1999.  The Ternes Employment Agreement provides
termination of the employment at the will of either the registrant or Mr. Ternes
and a base salary of $85,000 annually commencing May 1, 1999, which shall be
reviewed periodically.  In 2003, such review resulted in an increase
and the car allowance included in the May 1, 1999 agreement was implemented
during 2003 for Mr. Ternes.  In the event that the registrant is
unable to pay the annual salary, we will issue to Mr. Ternes one share of our
common stock for each dollar owed at the end of the fiscal year in which such
failure occurs.




In the
event that Mr. Ternes’ employment is terminated as a result of:




·
            his
      retirement under the retirement
program;




·
            his
      disability resulting in absence from his duties to the registrant on a
      full-time basis for over one year;




·
            his
      death;




·
            a
      material reduction in his responsibilities or title;
  or




·
            a
      reduction of his cash compensation by more than 10 percent below the
      highest annual salary from time to time in
  effect;




then we
are obligated to pay to Mr. Ternes, as severance and/or liquidated damages, an
amount equal to one and one-half times his highest annual earnings during his
employment with the registrant each year for a period of five
years.  Effective April 10, 2004, Mr. Ternes agreed to a salary of
$204,000 annually with the remainder of the agreement remaining in
force.




The
registrant entered into an employment agreement (the “Plante Employment
Agreement”) with Jamie Plante CPA, our chief financial officer, dated July 1,
2006.  The Plante Employment Agreement provides termination of the
employment at the will of either the registrant or Mr. Plante.  The
Plante Employment Agreement provides for a base salary of $100,000 annually
commencing July 1, 2006, which shall be reviewed periodically.




In the
event that Mr. Plante’s employment is terminated as a result of:




·
            his
      retirement under the retirement
program;




·
            his
      disability resulting in absence from his duties to the registrant on a
      full-time basis for over one year;




·
            his
      death;




·
            a
      material reduction in his responsibilities or title;
  or




·
            a
      reduction of his cash compensation by more than 10 percent below the
      highest annual salary from time to time in
  effect;




then we
are obligated to pay to Mr. Plante, as severance and/or liquidated damages, an
amount equal to one and one-half times his highest annual earnings during his
employment with Marshall each year for a period of five years.




31
 Table of Contents





Item11.
            Security
      Ownership of Certain Beneficial Owners and Management And Related
      Stockholder Matters.




The
following table sets forth, as of April 10, 2008, information concerning
ownership of our voting securities by:




·
            Each
      person who owns beneficially more than five percent of the outstanding
      shares of our common stock;




·
            Each
      person who owns beneficially more than five percent of the outstanding
      shares of our preferred stock;




·
            Each
      director;




·
            Each
      named executive officer; and




·
            All
      directors and officers as a group.




Common
      Shares BeneficiallyOwned
      (2)
            
            
            Preferred
      Shares BeneficiallyOwned
      (2)Name of Beneficial
      Owner (1)
            
            Number
            
            
            Percent
            
            
            Number
            
            
            PercentRichard
      A. Bailey (5)
            
            
            4,000,000,024
            
            
            
            59.33
            
            
            
            46,486,000
            (3)
            
            
            47.00
            (3)Florian
      R. Ternes (6)
            
            
            57,023,024
            
            
            
            *
            
            
            
            52,429,000
            (3)
            
            
            53.00
            (3)W.
      Jamie Plante (7)
            
            
            50,000
            
            
            
            *
            
            
            
            10,000,000
            (4)
            
            
            5.41
            (4)All
      directors and executive officers as a group (three
persons)
            
            
            4,057,073,048
            
            
            
            59.33
            
            
            
            108,915,000
            (3)(4)Ryan
      Nielsen
            
            
            50,000
            
            
            
            *
            
            
            
            10,000,000
            (4)
            
            
            5.41
            (4)Neptune
      Communications, Inc. (8)
            
            
            -0-
            
            
            
            -0-
            
            
            
            125
            (3)
            
            
            *
            (3)Jack
      Zufelt
            
            
            375,000
            
            
            
            *
            
            
            
            5,000,000
            (4)
            
            
            2.7
            (4)Francois
      Vautour
            
            
            -0-
            
            
            
            -0-
            
            
            
            10,000,000
            (4)
            
            
            5.41
            (4)Joe
      Guarnera
            
            
            -0-
            
            
            
            -0-
            
            
            
            20,000,000
            (4)
            
            
            10.81
            (4)Peter
      Hammer
            
            
            -0-
            
            
            
            -0-
            
            
            
            25,000,000
            (4)
            
            
            13.51
            (4)Penny
      Penelope Stowe (9)
            
            
            500
            
            
            
            *
            
            
            
            50,000,000
            (4)
            
            
            27.03
            (4)


__________________


*
              Less
      than one percent.


(1)
              Unless
      otherwise indicated, the address for each of these stockholders is c/o
      Marshall Holdings International, Inc., 2555 East Washburn Road, North Las
      Vegas, Nevada 89081.  Also, unless otherwise indicated, each
      person named in the table above has the sole voting and investment power
      with respect to our shares of common stock which he beneficially
      owns.
  (2)
                Beneficial
      ownership is determined in accordance with the rules of the Securities and
      Exchange Commission.  As of April 10, 2008, 6,992,357,320 shares
      of our common stock were issued and outstanding, 98,915,000 shares of our
      Series A preferred stock were issued and outstanding and 185,000,000
      shares of our Series B preferred stock were issued and
      outstanding.  On all matters submitted to a vote of the holders
      of the common stock, including, without limitation, the election of
      directors, a holder of shares of the Series A preferred stock is entitled
      to the number of votes on such matters equal to the number of shares of
      the Series A preferred stock held by such holder multiplied by
      1,000.  On all matters submitted to a vote of the holders of the
      common stock, including, without limitation, the election of directors, a
      holder of shares of the Series B preferred stock is entitled to the number
      of votes on such matters equal to the number of shares of the Series B
      preferred stock held by such holder.  Therefore, Mr. Bailey will
      have the power to vote 50,486,000,024 shares of our common stock and Mr.
      Ternes will have the power to vote  52,486,023,024 shares of our
      common stock.  Together, Messrs. Bailey and Ternes will have the
      power to vote 102,972,023,048 shares of the common stock, which number
      exceeds the number of our issued and outstanding shares of our common
      stock.
 (3)
              Series
      A preferred stock.
 (4)
              Series
      B preferred stock.
 (5)
              Mr.
      Bailey is our chief executive officer and a
  director
 (6)
              Mr.
      Ternes is our chief operating officer, director and corporate
      secretary.
 (7)
              Mr.
      Plante is our chief financial
officer.
 (8)
              Neptune
      Communications, Inc., a Nevada corporation, is controlled by Florian R.
      Ternes, our chief operating officer, director and corporate
      secretary.
 (9)
              Ms.
      Stowe is our controller.


Changes
in Control




Other as
stated above:




·
            There
      are no arrangements, known to us, including any pledge by any person of
      our securities, the operation of which may at a subsequent date result in
      a change in control of the registrant;
and




32
 Table of Contents





·
            There
      are no arrangements or understandings with respect to election of
      directors or other matters.




Item12.
            Certain
      Relationships and Related Transactions, and Director
      Independence.




There are
no material transactions regarding relationships and related transactions and
director independence.




Item14.
            Principal
      Accountant Fees and Services.




Audit
Fees




On
February 27, 2007, we engaged Madsen & Associates, CPA’s Inc., certified
public accountants, as our independent accountant to report on our balance sheet
as of December 31, 2007, and the related combined statements of income,
stockholders’ equity and cash flows for the year then ended.  Madsen
& Associates, CPA’s Inc. served as the registrant independent auditors for
the fiscal year ended December 31, 2004 and 2003.  For the fiscal year
ended December 31, 2005, Lawrence Scharfman CPAPC served as our independent
accountant.




The
aggregate fees billed by Madsen & Associates, CPA’s Inc. for professional
services rendered for the audit of the our annual financial statements for the
fiscal year ended December 31, 2005, and for the reviews of the financial
statements included in our quarterly reports on Form 10-QSB for the same fiscal
year, were $55,000 and $10,000, respectively.




The
aggregate fees billed by Madsen & Associates, CPA’s Inc. for professional
services rendered for the audit of the our annual financial statements for the
fiscal year ended December 31, 2007, and for the reviews of the financial
statements included in our quarterly reports on Form 10-QSB for the same fiscal
year, were $55,000 and $10,000, respectively.




Audit-Related
Fees




The
aggregate audit-related fees billed by Madsen & Associates, CPA’s Inc. for
the fiscal year ended December 31, 2006, were $0.  These fees were
charged for services that were reasonably related to the performance of the
audit or review of our audited financial statements.




The
aggregate audit-related fees billed by Madsen & Associates, CPA’s Inc. for
the fiscal year ended December 31, 2007, were $0.  These fees were
charged for services that were reasonably related to the performance of the
audit or review of our audited financial statements.




33
 Table of Contents





Tax
Fees




There
were no fees billed by Lawrence Scharfman CPAPC or Madsen & Associates,
CPA’s Inc.  in the last two fiscal year ended December 31, 2007 for
tax compliance, tax advice and planning services.




All
Other Fees




There
were no other fees billed by Lawrence Scharfman CPAPC or Madsen &
Associates, CPA’s Inc. in the last two fiscal years ended April 30, 2007 for
professional services rendered other than those described above.




Audit
Committee Pre-Approval Policies and Procedures




The audit
committee has adopted a policy requiring pre-approval by the committee of all
services (audit and non-audit) to be provided by its independent
auditor.  All fiscal 2007 and 2006 services were pre-approved by the
audit committee.  The audit committee considers the provision of
non-audit services to be compatible with maintaining the independence of
Lawrence Scharfman CPAPC or Madsen & Associates, CPA’s Inc.







34
 Table of Contents





PART
IV




Item15.
            Exhibits,
      Financial Statement Schedules.




(a)           Financial
Statements.  The financial statements and related notes are
included as part of this report as indexed in the appendix on pages F-1 through
F-7.




(b)           Exhibits.




Exhibit
      No.
            
            Identification of
      Exhibit10.1**
            
            Donald
      Hansen Settlement Agreement effective February 2004(Incorporated by
      reference as Exhibit 10.1 to Form 10-QSB (Commission File No.
      000-27879), filed on May 22, 2006).10.2**
            
            Donald
      Hansen stock option (Incorporated by reference as Exhibit 10.2 to
      Form 10-QSB (Commission File No. 000-27879), filed on May 22,
      2006).10.3**
            
            Steve
      Owens Option Agreement dated February 01, 2006 (Incorporated by reference
      as Exhibit 10.3 to Form 10-QSB (Commission File No. 000-27879), filed
      on May 22, 2006).10.4**
            
            Steve
      Hayden Consulting Agreement dated March 01, 2006 (Incorporated by
      reference as Exhibit 10.4 to Form 10-QSB (Commission File No.
      000-27879), filed on May 22, 2006).10.5**
            
            Maryland
      Attorney General Assurance of Voluntary Compliance (Incorporated by
      reference as Exhibit 10.5 to Form 10-QSB (Commission File No.
      000-27879), filed on May 22, 2006).10.6**
            
            Binding
      Letter of Intent, dated as of June 19, 2006 among Gateway Distributors,
      Ltd., Marshall Distributing, LLC, and EMS Business Development, Inc.
      (Incorporated by reference as Exhibit 10.1 to Form 8-K (Commission
      File No. 000-27879), filed on July 24, 2006).10.7**
            
            Allan
      Gold Consulting Agreement, dated March 16, 2006 (Incorporated by reference
      as Exhibit 10.6 to Form 10-QSB (Commission File No. 000-27879), filed
      on August 21, 2006).10.8**
            
            Peter
      Hammer Employment Agreement, dated May 8, 2006 (Incorporated by reference
      as Exhibit 10.7 to Form 10-QSB (Commission File No. 000-27879), filed
      on August 21, 2006).10.9**
            
            Marshall
      Distributing Letter of Intent (Incorporated by reference as
      Exhibit 10.8 to Form 10-QSB (Commission File No. 000-27879), filed on
      August 21, 2006).10.10**
            
            Binding
      Letter of Intent, dated as of June 19, 2006 among Gateway Distributors,
      Ltd., Marshall Distributing, LLC, and EMS Business Development, Inc.
      (Incorporated by reference as Exhibit 10.1 to Form 8-K/A (Commission
      File No. 000-27879), filed on September 14, 2006).10.11**
            
            Contract
      for Sale of Business and Assets, dated as of June 30, 2006, between
      Marshall Distributing, LLC, EMS Business Development, Inc., Terry D.
      Nielson and Gateway Distributors, Ltd. (Incorporated by reference as
      Exhibit 10.2 to Form 8-K/A (Commission File No. 000-27879), filed on
      September 14, 2006).10.12**
            
            Gateway
      Distributors, Ltd. Liability Undertaking executed June 30, 2006
      (Incorporated by reference as Exhibit 10.3 to Form 8-K/A (Commission
      File No. 000-27879), filed on September 14, 2006).10.13**
            
            Gateway
      Distributors, Ltd. Operations and Assets Notes issued to Marshall
      Distributing, LLC and EMS Business Development, Inc., in the amount of
      5,230,000.00, dated June 30, 2006 (Incorporated by reference as
      Exhibit 10.4 to Form 8-K/A (Commission File No. 000-27879), filed on
      September 14, 2006).10.14**
            
            Security
      Agreement made and entered into and effective as of June 30, 2006, by and
      between Gateway Distributors, Ltd., Marshall Distributing, LLC, EMS
      Business Development, Inc. and Terry D. Nielsen (Incorporated by reference
      as Exhibit 10.5 to Form 8-K/A (Commission File No. 000-27879), filed
      on September 14, 2006).10.15**
            
            Gateway
      Distributors, Ltd. All-Inclusive Promissory Note Secured by All-Inclusive
      Trust Deed in the amount of $770,000.00, issued to Terry D. Nielson and
      Laniel S. Nielson, dated June 30, 2006 (Incorporated by reference as
      Exhibit 10.6 to Form 8-K/A (Commission File No. 000-27879), filed on
      September 14, 2006).





35
 Table of Contents





10.16**
            
            All-Inclusive
      Trust Deed with Assignment of Rents, made as of June 30, 2006, between
      Gateway Distributors, Ltd., Empire Land Title, Inc., Terry D. Nielson and
      Laniel S. Nielson (Incorporated by reference as Exhibit 10.7 to Form
      8-K/A (Commission File No. 000-27879), filed on September 14,
      2006).10.17**
            
            Assignment
      and Bill of Sale, executed as of June 30, 2006, by Marshall Distributing,
      LLC, EMS Business Development, Inc., and Gateway Distributors, Ltd.
      (Incorporated by reference as Exhibit 10.8 to Form 8-K/A (Commission
      File No. 000-27879), filed on September 14, 2006).10.18**
            
            Turn-Key
      Financial Services, LLC Escrow Instruction Letter dated August 2006
      (Incorporated by reference as Exhibit 10.9 to Form 8-K/A (Commission
      File No. 000-27879), filed on September 14, 2006).10.19**
            
            Termination
      of Lease Agreement between Terry D. Nielson, Laniel S. Nielson and
      Marshall Distributing, LLC, dated June 30, 2006 (Incorporated by reference
      as Exhibit 10.10 to Form 8-K/A (Commission File No. 000-27879), filed
      on September 14, 2006).10.20**
            
            Marshall
      Distributors, Inc. Assignment and Bill of Sale (Incorporated by reference
      as Exhibit 10.9 to Form 10-QSB (Commission File No. 000-27879), filed
      on November 20, 2006).10.21**
            
            Marshall
      Distributors, Inc. Contract for Sale of Business Assets (Incorporated by
      reference as Exhibit 10.10 to Form 10-QSB (Commission File No.
      000-27879), filed on November 20, 2006).10.22**
            
            Marshall
      Distributors, Inc. Liability Undertaking Agreement (Incorporated by
      reference as Exhibit 10.11 to Form 10-QSB (Commission File No.
      000-27879), filed on November 20, 2006).10.23**
            
            Marshall
      Distributors, Inc. Operations & Assets Note (Incorporated by reference
      as Exhibit 10.12 to Form 10-QSB (Commission File No. 000-27879),
      filed on November 20, 2006).10.24**
            
            Marshall
      Distributors, Inc. Security Agreement (Incorporated by reference as
      Exhibit 10.13 to Form 10-QSB (Commission File No. 000-27879), filed
      on November 20, 2006).10.25**
            
            Kozmary
      Consulting Agreement, dated August 10, 2006 (Incorporated by reference as
      Exhibit 10.14 to Form 10-QSB (Commission File No. 000-27879), filed
      on November 20, 2006).10.26**
            
            Guarnera
      Consulting Agreement, dated August 14, 2006 (Incorporated by reference as
      Exhibit 10.15 to Form 10-QSB (Commission File No. 000-27879), filed
      on November 20, 2006).10.27**
            
            American
      Bath Binding Letter of Intent, dated July 1, 2006 (Incorporated by
      reference as Exhibit 10.16 to Form 10-QSB (Commission File No.
      000-27879), filed on November 20, 2006).10.28**
            
            American
      Bath Agreement, dated September 1, 2006 (Incorporated by reference as
      Exhibit 10.17 to Form 10-QSB (Commission File No. 000-27879), filed
      on November 20, 2006).10.29**
            
            Botanicals
      Confidentiality and Restricted Use Agreement, dated November 16, 2006
      (Incorporated by reference as Exhibit 10.18 to Form 10-KSB
      (Commission File No. 000-27879), filed on April 16,
  2007).10.30**
            
            Gary
      Heath Stock Option Agreement, dated February 03, 2006 (Incorporated by
      reference as Exhibit 10.23 to Form 10-KSB (Commission File No.
      000-27879), filed on April 16, 2007).10.31**
            
            American
      Bath Intellectual Property Agreement, dated October 01, 2006 (Incorporated
      by reference as Exhibit 10.24 to Form 10-KSB (Commission File No.
      000-27879), filed on April 16, 2007).10.32**
            
            American
      Bath Inventory and Equipment Loan Agreement, dated October 01, 2006
      (Incorporated by reference as Exhibit 10.25 to Form 10-KSB
      (Commission File No. 000-27879), filed on April 16,
  2007).10.33**
            
            Janssen
      Consulting Agreement, dated February 08, 2007 (Incorporated by reference
      as Exhibit 10.19 to Form 10-KSB (Commission File No. 000-27879),
      filed on April 16, 2007).10.34**
            
            Janssen
      Secured Promissory Note, dated February 09, 2007 (Incorporated by
      reference as Exhibit 10.20 to Form 10-KSB (Commission File No.
      000-27879), filed on April 16, 2007).10.35**
            
            Wanda
      Boone Consignment Agreement between Marshall Distributing and Wanda Boone,
      dated March 15, 2007 (Incorporated by reference as Exhibit 10.21 to
      Form 10-KSB (Commission File No. 000-27879), filed on April 16,
      2007).10.36**
            
            Wanda
      Boone Consignment Agreement between The Right Solution Gateway and Wanda
      Boone, dated March 15, 2007 (Incorporated by reference as
      Exhibit 10.22 to Form 10-KSB (Commission File No. 000-27879), filed
      on April 16, 2007).10.37*
            
            CAMHZN
      Master LDC 12% Secured Promissory Note due May 1, 2008.10.38*
            
            CAMOFI
      Master LDC12% Secured
      Promissory Note due May 1, 2008.10.39*
            
            Guarantee
      dated as of October 31, 2007 made by David Fuselier.10.40*
            
            Letter
      Agreement dated October 31, 2007 by CAMOFI Master LDC and CAMHZN Master
      LDC.10.41*
            
            MHII
      Guarantee dated as of October 31,
2007.





36
 Table of Contents





10.42*
            
            Nevada
      Mortgage dated October 31, 2007.10.43*
            
            Utah
      Mortgage dated October 31, 2007.10.44*
            
            Purchase
      Agreement dated as of October 31, 2007 by and among D. L. Claire Capital,
      Inc., Marshall Holdings International, Inc. and CAMOFI Master
      LDC.10.45*
            
            Security
      Agreement dated as of October 31, 2007 among D. L. Claire Capital, Inc.
      and Marshall Holdings International, Inc.10.46*
            
            Security
      Interest and Pledge Agreement dated as of October 31, 2007 by and among
      CAMOFI Master LDC, CAMHZN Master LDC, D. L. Claire Capital, Inc., Marshall
      Holdings International, Inc. and Richard A. Bailey, Florian R. Ternes, and
      Neptune Communications, Inc.10.47*
            
            Common
      Stock Purchase Warrant issued to CAMHZN Master LDC.10.48*
            
            Common
      Stock Purchase Warrant issued to CAMOFI Master LDC.14**
            
            Code
      of Ethics.31.1*
            
            Certification
      of Richard A. Bailey, Chief Executive Officer of Marshall Holdings
      International, Inc., pursuant to 18 U.S.C. §1350, as adopted pursuant to
      §302 of the Sarbanes-Oxley Act of 2002.31.2*
            
            Certification
      of W. Jamie Plante, Chief Financial Officer of Marshall Holdings
      International, Inc., pursuant to 18 U.S.C. §1350, as adopted pursuant to
      §302 of the Sarbanes-Oxley Act of 2002.32.1*
            
            Certification
      of Richard A. Bailey, Chief Executive Officer of Marshall Holdings
      International, Inc., pursuant to 18 U.S.C. §1350, as adopted pursuant to
      §906 of the Sarbanes-Oxley Act of 2002.32.2*
            
            Certification
      of W. Jamie Plante, Chief Financial Officer of Marshall Holdings
      International, Inc., pursuant to 18 U.S.C. §1350, as adopted pursuant to
      §906 of the Sarbanes-Oxley Act of
2002.






**
            Previously
      Filed


*
            Filed
      Herewith




SIGNATURES




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






MARSHALL
      HOLDINGS INTERNATIONAL, INC.Date:
      April 15, 2008.
            By
            /s/ Richard A. BaileyRichard
      A. Bailey, Chief Executive OfficerBy
            /s/ W. Jamie PlanteW.
      Jamie Plante, Chief Financial
Officer





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




Signature
            
            Title
            
            Date/s/ Richard A.
      Bailey
            
            Chief
      Executive Officer andChairman
      of the Board of Directors
            
            April
      15, 2008/s/ Florian R.
      Ternes
            
            Director,
      Chief Operating Officer and Secretary
            
            April
      15, 2008/s/ W. Jamie
      Plante
            
            Chief
      Financial Officer
            
            April
      15, 2008





37




MARSHALLHOLDINGS INTERNATIONAL, INC.  AND
SUBSIDIARIES




-
CONTENTS -





PAGE
      NUMBERReport
      of Independent Registered Public Accounting Firm
            
            F-1Financial
      Statements:Balance
      Sheet
            
            F-2Statement
      of Operations
            
            F-4Statement
      of Changes in Stockholders' Equity (Deficiency)
            
            F-5Statement
      of Cash Flows
            
            F-6Notes
      to Financial Statements
            
            F-7





Contents




MADSEN& ASSOCIATES, CPA’s Inc.


Certified
Public Accountants and Business Consultants


684 East
Vine St #3


Murray,
UT 84107


Telephone
801-268-2632


Fax
801-262-3978








Board of
Directors


Marshall
Holdings International, Inc.








Report of Independent
Registered Accounting Firm








We have
audited the accompanying consolidated balance sheets of Marshall Holdings
International, Inc. (formerly Gateway Distributors, Ltd.) and Subsidiaries as of
December 31, 2007 and 2006, and the related consolidated statements of
operations, stockholders’ equity, and cash flows for the years then
ended.  These financial statements are the responsibility of the
Company’s management.  Our responsibility is to express an opinion on
these financial statements based on our audits.





We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform an audit to obtain reasonable assurance whether the
financial statements are free of material misstatement.  The company
is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audit included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the company’s internal control
over financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used, significant estimates made by management and 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 aspects, the financial position of Marshall Holdings
International, Inc. (formerly Gateway Distributors, Ltd.) and Subsidiaries as of
December 31, 2007 and 2006, and the results of its consolidated operations and
cash flows for the years then ended in conformity with accounting principles
generally accepted in the United States of America.





The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern.  As disclosed in the consolidated
financial statements and notes to the consolidated financial statements, the
Company will need additional working capital for its planned activity and to
service its debt. This raises substantial doubt about the Company's ability to
continue as a going concern. Management's plans regarding these matters are
described in the notes to the consolidated financial statements. The
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.











Madsen
& Associates CPA’s, Inc.


April 11,
2008


Salt Lake
City, Utah





F-1
 Contents





MARSHALLHOLDINGS INTERNATIONAL, INC.  AND
SUBSIDIARIES


AUDITED
CONSOLIDATED BALANCE SHEET


(CONDENSED
FINANCIAL STATEMENTS)


December
31, 2007 and 2006





Year
      Ended
            
            
            Year
      EndedDecember
      31,
            
            
            December
      31,2007
            
            
            2006ASSETSCURRENT
      ASSETS:Cash
      and cash equivalents
            
            $
            19,045
            
            
            
            61,083Accounts
      Receivable (net allowance of 81,611 &11,075)
            
            
            76,715
            
            
            
            193,071Inventories
            
            
            623,247
            
            
            
            991,337Note
      Receivable
            
            
            4,395,375
            
            
            
            1,709,122Prepaids
            
            
            24,925
            
            
            
            12,962Total
      Current Assets
            
            
            5,139,307
            
            
            
            2,967,575PROPERTY
      & EQUIPMENTProperty
      and Equipment, at cost
            
            
            3,583,390
            
            
            
            3,627,972(Less)
      accumulated depreciation and amortization
            
            
            (558,063
            )
            
            
            (477,296
            )Total
      Property & Equipment
            
            
            3,025,327
            
            
            
            3,150,676OTHER
      ASSETSCustomer
      Lists
            
            
            500,000
            
            
            
            500,000Distributor
      Rights
            
            
            672,400
            
            
            
            1,779,500Websites
      and e-commerce Programs
            
            
            797,400
            
            
            
            1,750,000Other
      Assets
            
            
            1,752,382
            
            
            
            2,286,016Total
      Other Assets
            
            
            3,722,182
            
            
            
            6,315,516Total
      Assets
            
            
            11,886,816
            
            
            
            12,433,767




(See
Notes to Financial Statements)




The
accompanying notes are an integral part of the audited financial
statements.





F-2
 Contents





MARSHALL
HOLDINGSINTERNATIONAL, INC.  AND SUBSIDIARIES


AUDITED
CONSOLIDATED BALANCE SHEET


(CONDENSED
FINANCIAL STATEMENTS)





Year
      Ended
            
            
            Year
      EndedDecember
      31,
            
            
            December
      31,2007
            
            
            2006LIABILITIESCURRENT
      LIABILITIES:Accounts
      payable:Trade
      Regular
            
            $
            864,462
            
            
            
            784,977Accrued
      expenses:Payroll
      and employee benefits
            
            
            766,715
            
            
            
            402,105Payroll
      taxes
            
            
            272,096
            
            
            
            233,435Interest
            
            
            520,411
            
            
            
            442,944Other
            
            
            529,876
            
            
            
            213,503Notes
      Payable
            
            
            9,116,089Current
      maturities of long-term debt
            
            
            40,495
            
            
            
            7,953,917Total
      current liabilities
            
            
            12,110,144
            
            
            
            10,030,881LONG-TERM
      DEBT
            
            
            1,693,908
            
            
            
            2,016,001Total
      Liabilities
            
            
            13,804,052
            
            
            
            12,046,882Commitments
      and Contingencies
            
            
            -STOCKHOLDERS'
      EQUITYSeries
      A Preferred stock - $.001 par value;Authorized - 100,000,000 shares;Issued
      and outstanding at December 31 2007and 2006 28,915,125 and 32,972,125,
      respectively
            
            
            28,915
            
            
            
            32,972Series
      B Preferred stock - $.001 par value;Authorized at December 31, 2007 and
      20061,000,000,000 and 100,000,000 respectively;Issued and outstanding at
      December 31, 2007 and 2006 185,000,000 and 185,000,000,
      respectively
            
            
            185,000
            
            
            
            185,000Common
      stock, - $.001 par value Authorized - 25,000,000,000 shares Issued and
      outstanding at December 31,2007 and 2006 6,577,357,320 and 2,117,957,320
      respectively
            
            
            6,577,357
            
            
            
            2,117,957Additional
      paid-in capital
            
            
            17,976,624
            
            
            
            21,162,117Accumulated
      (deficit)
            
            
            (26,385,132
            )
            
            
            (23,111,161
            )Net
      Stockholders' Equity
            
            
            (1,917,236
            )
            
            
            386,885Total
      Liabilities & Stockholders' Equity
            
            $
            11,886,816
            
            
            
            12,433,767




(See
Notes to Financial Statements)




The
accompanying notes are an integral part of the audited financial
statements.





F-3
 Contents





MARSHALLHOLDINGS INTERNATIONAL, INC.AND SUBSIDIARIES


AUDITED
CONSOLIDATED STATEMENTS OF OPERATIONS


(CONDENSED
FINANCIAL STATEMENTS)








Year
      Ended
            
            
            Year
      EndedDecember
      31,
            
            
            December
      31,2007
            
            
            2006SALES
            
            $
            5,204,952
            
            
            $
            3,757,181COST
      OF SALES
            
            
            1,573,908
            
            
            
            1,044,400GROSS
      PROFIT
            
            
            3,631,044
            
            
            
            2,712,781SELLING,
      GENERAL AND ADMINISTRATIVE EXPENSES:Depreciation
      Expense
            
            
            158,914
            
            
            
            82,035Professional
      Services Not Classified Elsewhere
            
            
            1,347,306
            
            
            
            3,083,881Product
      Development
            
            
            74,229
            
            
            
            228,527All
      Other Selling, General and Administrative
            
            
            3,025,068
            
            
            
            2,468,156TOTAL
      SELLING, GENERAL AND ADMINISTRATIVEEXPENSES
            
            
            4,605,517
            
            
            
            5,862,599INCOME
      (LOSS) FROM OPERATIONS
            
            
            (974,473
            )
            
            
            (3,149,818
            )OTHER
      INCOME (EXPENSE):Other
      Income
            
            
            110,623
            
            
            
            34,285Interest
      Income
            
            
            225,693Loss
      on Sale of Property
            
            
            (12,319
            )Intangible
      Impairment Charge
            
            
            (2,473,922
            )(Loss)
      on QDS Investment
            
            
            
            
            
            
            (200,000
            )Interest
      Expense
            
            
            (449,573
            )
            
            
            (419,704
            )TOTAL
      OTHER INCOME (EXPENSE):
            
            
            (2,599,498
            )
            
            
            (585,419
            )NET
      INCOME (LOSS) BEFORE PROVISION FOR INCOME TAX
            
            
            (3,573,971
            )
            
            $
            (3,735,237
            )PROVISION
      FOR INCOME TAXES
            
            
            (0.00
            )
            
            
            (0.00
            )BASIC
      AND DILUTED EARNINGS (LOSS) PER SHARE
            
            $
            (0.00
            )
            
            $
            (0.00
            )BASIC
      & DILUTED WEIGHTED AVERAGE SHARES OF COMMON STOCK
            
            
            2,740,267,046
            
            
            
            108,246,279




See Notes
to Financial Statements





F-4
 Contents




MARSHALLHOLDINGS INTERNATIONAL, INC.  AND
SUBSIDIARIES


CONSOLIDATED
STATEMENT OF STOCKHOLDERS' EQUITY


FOR THE
PERIODS ENDED DECEMBER 31, 2007 AND DECEMBER 31, 2006





Preferred
              Stock
      Par Value $0.001
            
            
            Common
      Stock
              Par
      Value $0.001Shares
            
            
            Amount
            
            
            Shares
            
            
            Amount
            
            
            Paid
      in Excess of Par
            
            
            Accumulated
      (Deficit)
            
            
            Net
      Equity (Deficiency)Balance
      for December 31, 2005
            
            
            29,972,125
            
            
            
            29,972
            
            
            
            2,967,011
            
            
            
            2,967
            
            
            
            20,506,249
            
            
            
            (19,375,924
            )
            
            
            1,163,263Common
      Stock Issued:For
      Services - Restricted Stock
            
            
            
            
            
            
            
            
            
            
            340,309
            
            
            
            340
            
            
            
            12,238
            
            
            
            
            
            
            
            12,580For
      Services - Unrestricted Stock
            
            
            
            
            
            
            
            
            
            
            13,650,000
            
            
            
            13,650
            
            
            
            2,772,550
            
            
            
            
            
            
            
            2,786,200For
      Cash - Restricted
            
            
            
            
            
            
            
            
            
            
            101,000,000
            
            
            
            101,000
            
            
            
            38,080
            
            
            
            
            
            
            
            139,080Preferred
      Stock IssuedPreferred
      Stock B
            
            
            170,000,000
            
            
            
            170,000
            
            
            
            
            
            
            
            
            
            
            
            (151,000
            )
            
            
            
            
            
            
            19,000Preferred
      Stock A
            
            
            18,000,000
            
            
            
            18,000
            
            
            
            2,000,000,000
            
            
            
            2,000,000
            
            
            
            (2,016,000
            )
            
            
            
            
            
            
            2,000Loss
      for the Period
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (3,735,238
            )
            
            
            (3,735,238
            )Balance
      for December 31, 2006
            
            
            217,972,125
            
            
            
            217,972
            
            
            
            2,117,957,320
            
            
            
            2,117,957
            
            
            
            21,162,117
            
            
            
            (23,111,161
            )
            
            
            386,885Common
      Stock Issued:For
      Services - Unrestricted Stock
            
            
            
            
            
            
            
            
            
            
            1,222,400,000
            
            
            
            1,222,400
            
            
            
            (120,050
            )
            
            
            
            
            
            
            1,102,350For
      Cash - Restricted
            
            
            
            
            
            
            
            
            
            
            1,180,000,000
            
            
            
            1,180,000
            
            
            
            (1,012,500
            )
            
            
            
            
            
            
            167,500Preferred
      Stock IssuedPreferred
      Stock BPreferred
      Stock A
            
            
            (4,057,000
            )
            
            
            (4,057
            )
            
            
            2,057,000,000
            
            
            
            2,057,000
            
            
            
            (2,052,943
            )Loss
      for the Period
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (3,573,971
            )
            
            
            (3,573,971
            )Balance
      for December 31, 2007
            
            
            213,915,125
            
            
            
            213,915
            
            
            
            6,577,357,320
            
            
            
            6,577,357
            
            
            
            17,926,624
            
            
            
            (26,685,132
            )
            
            
            (1,917,236
            )




See Notes
to Financial Statements




The
accompanying notes are an integral part of the audited financial
statements.





F-5
 Contents




MARSHALLHOLDINGS INTERNATIONAL, INC.  AND
SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF CASH FLOWS


(CONDENSED
INTERIM FINANCIAL STATEMENTS)




(RESTATED)Year
      Ended
            
            
            Year
      EndedDecember
      31,
            
            
            December
      31,2007
            
            
            2006CASH
      FLOW FROM OPERATING ACTIVITIES:Net
      Income
            
            $
            (3,573,971
            )
            
            $
            (3,735,237
            )Adjustments
      to reconcile Net Income to
      net cash provided by operating activities:Stock
      Issued for Services
            
            
            1,189,850
            
            
            
            2,819,780Depreciation
            
            
            158,914
            
            
            
            82,035Intangible
      Assets Impairment Charge
            
            
            2,473,922Changes
      in operating assets and liabilities:(Increase)
      in Accounts Receivable
            
            
            116,356
            
            
            
            (169,314
            )(Increase)
      Decrease in Inventory
            
            
            368,090
            
            
            
            (618,061
            )(Increase)
      Decrease in Other Current Assets
            
            
            (2,698,216
            )
            
            
            (1,291,510
            )Increase
      (Decrease in Accounts Payable
            
            
            57,487
            
            
            
            583,669In
      Increase in Other Current Liabilities
            
            
            755,227
            
            
            
            994,481Net
      cash (used) provided by operating activities
            
            
            (1,152,342
            )
            
            
            (1,334,156
            )CASH
      FLOWS FROM INVESTING ACTIVITIES:(Purchase)
      of Prop., Plant & Equipment
            
            
            
            
            
            
            (12,573
            )Proceeds
      from sale of Prop., Plant &
      Equip
            
            
            119,412(Increase)
      in Other Assets
            
            
            (33,568
            )Net
      cash (used) provided by investing activities
            
            
            85,844
            
            
            
            (12,573
            )CASH
      FLOWS FROM FINANCING ACTIVITIES:Proceeds
      from issuance of Notes Payable
            
            
            944,458
            
            
            
            1,175,427Proceeds
      from issuance of stock
            
            
            80,000
            
            
            
            139,080Net
      cash provided (used)by financing activities
            
            
            1,024,458
            
            
            
            1,314,507Net
      cash Increase ((Decrease) for period
            
            
            (42,039
            )
            
            
            (32,222
            )Cash
      at beginning of period
            
            
            61,084
            
            
            
            93,306Cash
      at end of period
            
            $
            19,045
            
            
            $
            61,084NON-CASH
      INVESTING AND FINANCING ACTIVITIESPurchase
      of Other Assets
            
            
            
            
            
            
            (3,703,595
            )Purchase
      of Property, Plant & Equipment
            
            
            
            
            
            
            (3,136,979
            )Increase
      in Notes Payable
            
            
            
            
            
            
            6,840,574




See Notes
to Financial Statements




The
accompanying notes are an integral part of the audited financial
statements.   F-6
 Contents


MARSHALLHOLDINGS INTERNATIONAL, INC.




NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS




December
31, 2007 and 2006




NOTE
1 - ORGANIZATION, HISTORY AND BUSINESS ACTIVITY:




The
Company incorporated on May 26th, 1993 as a Nevada corporation under the name of
Gateway Distributors, Ltd.  It has subsequently changed its name to
Marshall Holdings International, Inc.(“the Company”).




The
Company is a distributor of vitamins, nutritional supplements, whole health
foods and skin care products mainly in the United States of America and Canada,
with some sales in Russia and Indonesia.  Many of the formulas used in
the products the Company sells and distributes are made from its own
formulas.




On August
15th, 2002, the Company purchased all of the operations and assets including
formulas and trademark of Grandma Hammans Specialty Foods LLC.  On
June 4, 2003, the Company incorporated in Nevada Grandma Hammans Specialty Foods
(“GH”) and moved the operations, assets and liabilities related to this purchase
into GH.




On
December 31, 2002, the Company sold its ownership interest in TRSG Corporation
(“TRSG”) previously a majority owned subsidiary.  TRSG is recognized
in these consolidated financial statements to the point of sale, which is
December 31, 2002.




On
December 31, 2002, the Company bought all of the assets and assumed a
significant portion of the debts of TRSG.  This transaction is
reported on the purchase method of accounting using the carrying value on the
books of TRSG as the cost basis on the books of the Company.




On
January 7, 2003, the Company organized The Right Solution Gateway, a wholly
owned subsidiary (“TRS Gateway”).  All operations of the Company that
were previously handled via TRSG were transferred into TRS Gateway.




On April
30, 2004, Marshall formed a wholly owned subsidiary, Gateway Venture Holdings,
Inc.  (“GVH”).  The Las Vegas property and fixed assets of
Marshall are recorded in the financial statements of this
subsidiary.




Also on
April 30, 2004, Gateway formed a wholly owned subsidiary, Aspen Cove Resort
Incorporated (“ACR”) to run the operations of Aspen Cove Resort (formerly Beaver
Dam Lodge) located in Panguitch Utah.  The lodge had been purchased on
April 15, 2004 and is listed as real estate in the financial statements of
GVH.




On May
30, 2004, an agreement was signed with Quality Distribution Services of Nevada
to create a new corporation, Quality Distribution Services of Arizona, Inc
(“QDS”).  QDS was incorporated in Nevada on June 7, 2004 and was 51%
owned by Marshall.  QDS was a wholesale beverage distributor in the
Phoenix, Arizona area.  The corporation has since been revoked and not
in business and as such, the remaining carrying value was written down and taken
as a loss in the first quarter of 2006.




On
November 30, 2004, Gateway formed a wholly owned subsidiary, Gateway Corporate
Administration, Inc (“GCA”).  On August 31, 2006 the name of the
corporation was changed to Marshall Corporate Administration.  The
company is engaged in marketing and management services.




In
December, 2004 Marshall moved its corporate office and warehouse location to
3220 Pepper Lane, Las Vegas, Nevada 89120.




On
December 21, 2004 the Company entered an Asset Purchase Agreement for 51% of Los
Cabos Beverage, then owned by Blaine Wendtland (“Wendtland”).  The 51%
interest in Loc Cabos Beverage and its assets were acquired by the Company in
exchange for Wendtland receiving all rights to Grandma Hammans GHF product and
Wendtland assuming and paying off the debts of $193,833 Grandma Hammans owed to
Los Cabos Freedom Movement LLC and to Ed Wendtland.





F-7
 Contents







On
December 30, 2004, Marshall formed a 51% owned subsidiary, Los Cabos Beverage
Inc (“Los Cabos”) to handle the operations of the sale of private label
water.




On
February 28, 2005, the sales of Los Cabos did not meet expectations and the
Company entered into an agreement with Blaine Wendtland wherein he assumed all
ownership and obligations and the Company terminated its commitments and
relationships with Los Cabos and Blaine Wendtland.




On June
2, 2005, the Company sold its wholly owned subsidiary, Aspen Cove Resort
Incorporated (“ACR”), in combination with selling the building and real estate
on which the resort.  The gain was reported as Gain on Sale of
Property under Other Income on the 2005 financials.




On
September 30, 2005, the Company sold its property which housed the corporate
offices and warehouse located at 3220 Pepper Lane, Las Vegas, Nevada
89120.  The gain was reported as Gain on Sale of Property under Other
Income on the 2005 financials.




In March,
2006 Gateway purchased warehouse property and moved its corporate warehouse
location to 2555 East Washburn Road, North Las Vegas, Nevada
89081.  The corporate offices are housed temporarily offsite, until
the offices can be built out in the building.




On June
30, 2006, The Company purchased all of the operations and assets of Marshall
Distributing Company in Salt Lake City, UT.  Marshall Distributing
distributes over 150 different manufacturers lines and over 6000 natural health
products.




On August
31, 2006, Marshall formed a wholly owned subsidiary Mountain West Holdings,
Inc.  to facilitate the website and e-commerce
operations.




NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:




(a)- PRINCIPLES OF
CONSOLIDATION




As
of  December 31, 2007 the Company has the following wholly owned
subsidiaries:




-The
Right Solution Gateway (multilevel marketing and retail sales)




-
Marshall Distributing, Inc.  formerly Grandma Hammans Specialty Foods,
(wholesale distribution)




- Gateway
Venture Holdings, Inc.  (house and manage the real estate, vehicles
and equipment of the Company)




-
Marshall Corporate Administration formerly Gateway Corporate Administration,
Inc.  (Marketing and Management)




-
Mountain West Holdings, Inc.  (website and e-commerce
sales)




The
Company also owned a 51% interest in Quality Distribution Services of Arizona, a
wholesale distributor of non-alcoholic beverages and food.  In 2004,
the Company reported the operations of QDS in the financial
statement.  Beginning in 2005, the Company did not report the
operations of this company in the financial statements, but recognized it as an
investment, not as an equity position (See Note “Investment in Quality
Distribution Services of Arizona” (“QDS”)).  During the first quarter
2006, the Company wrote off it's investment in QDS as the corporate entity was
revoked and out of business as of July 1, 2006.




The
Company acquired the business assets and operations of Marshall Distributing,
LLC, a Utah limited liability company and a portion of EMS Business Development,
Inc., a California corporation in July of 2006.  These assets have
been assigned to the previously inactive subsidiary Grandma Hammans Specialty
Foods and the subsidiary has appropriately changed its name to Marshall
Distributing, Inc. (“Marshall Dist”).  The asset purchase includes the
operations and warehouse facility.




The
Company created a new subsidiary corporation, Mountain West Holdings, Inc. which
includes some of the assets acquired from EMS Business Development, Inc., a
California corporation.  The operation includes website and e-commerce
channels of distributions and retail sales.





F-8
 Contents




The
Company has utilized and appropriately changed the name of Gateway Corporate
Administration to Marshall Corporate Administration (“MCA”).  MCA is a
marketing and management company that utilizes new technology and personnel to
facilitate market penetration directly to the end consumer and to provide
management services directly related to the facilitation of rapid
growth.




The
accompanying consolidated financial statements include the accounts of its
subsidiaries, except for QDS.  All significant intercompany balances
and transactions have been eliminated.




(b) - CASH AND CASH
EQUIVALENTS




For
purposes of the statement of cash flows, cash equivalents include cash in banks
and all highly liquid investments with original maturities of three months or
less.




(c) - ACCOUNTS
RECEIVABLE




Management
uses the allowance for bad debt method in accordance with the generally accepted
accounting principles to account for bad debts.




(d) - RECEIVABLE ESIP STOCK
PLAN




Stock
sales through the Employee Stock Incentive Plan (ESIP) sold at year end are
reported as a receivable rather than negative equity provided they are received
within 60 days after year end.  There were no funds due at December
31, 2007.




(e) -
INVENTORIES




Inventories,
consisting primarily of nutritional, health, beauty products, and beverages, are
stated at cost computed by the first-in, first-out (FIFO) method of
accounting.




(f) - PROPERTY AND
EQUIPMENT




Property
and equipment are stated at cost.  Major replacements and
refurbishings are capitalized while replacements, maintenance and repairs which
do not improve or extend the life of the respective assets are
expensed.




(g) - DEPRECIATION AND
AMORTIZATION




The
Company provides for depreciation of property, plant and equipment principally
by use of declining balance and straight-line methods for financial reporting
purposes.  Property and equipment are depreciated over the following
estimated useful lives:





Property
      - Real Estate
            
            39
      yearsLeasehold
      improvements
            
            39
      yearsFurniture
      and fixtures
            
            5 -
      7 yearsMachinery
      and equipment
            
            3 -
      5 yearsTransportation
      equipment
            
            5 -
      7 years




Depreciation
expense for the years ended December 31, 2007 and 2006 was $158,914 and $82,035,
respectively.




(h) – INTANGIBLE
ASSETS




Through
the Company’s acquisition activities, intangible assets have been recorded in
the financial statements.  The Company performs annual impairment
testing of its intangible assets under the provisions of statement of Financial
Accounting Standards No.  142, using the expected present value
technique as provided for by FASB Concepts Statement No.  7 “Using
Cash Flow Information and Present Value In Accounting
Measurements”.





F-9
 Contents




The
company recognized an impairment charge write down of its intangible assets of
$2,473,922 for the year ended December 31, 2007.




(i) – OTHER
ASSETS




The
amount in other assets is condensed and includes distributor rights, customer
lists, website and e-commerce sites and programs, products pending production,
formulas, and other various assets.




(j) - INCOME
TAXES




The
Company has adopted the provisions of statements of Financial Accounting
Standards No.  109, “Accounting for Income Taxes,” which incorporates
the use of the asset and liability approach of accounting for income
taxes.  The asset and liability approach requires the recognition of
deferred tax assets and liabilities for the expected future consequences of
temporary differences between the financial reporting basis and the income tax
basis of assets and liabilities.




(k) - FAIR VALUES OF
FINANCIAL INSTRUMENTS




The
carrying amounts of the Company's cash, accounts receivable, accounts payable
and accrued expenses approximate fair value because of the short maturity of
these items.  Term debt secured by various properties have interest
rates attached to them commensurate with the finance market at the time and
management believes approximate fair values in the short as well as the long
term.  It is currently not practicable to estimate the fair value of
the other debt obligations because these note agreements contain unique terms,
conditions, covenants and restrictions which were negotiated at arm's length
with the Company's lenders, and there is no readily determinable similar
instrument on which to base an estimate of fair value.  Accordingly,
no computation or adjustment to fair value has been determined.




(l) -COMPREHENSIVE
INCOME




The
Company has adopted SFAS No. 130 Reporting Comprehensive Income.  The
Company has no reportable differences between net income and comprehensive
income, therefore a statement of comprehensive income has not been
presented.




(m) - REVENUE
RECOGNITION




Revenue
is recognized in the period in which the products are shipped or services are
performed.




(n) - EARNINGS (LOSS) PER
SHARE




Basic and
diluted earnings (loss) per share are computed on a weighted average of shares
issued and outstanding through the year.  The only common stock
equivalents relate to outstanding stock options (which have been measured to
have immaterial fair value at December 31, 2007 and 2006); however, since the
Company has net operating losses for the periods ending December 31, 2007 and
2006, the common stock equivalents would be anti-dilutive.  Therefore,
basic and diluted EPS are the same.




(o) - ADVERTISING
COSTS.




The
Company conducts non-direct response advertising for which the costs are
expensed when incurred.  Total advertising costs of $6,680 and $19,273
were incurred for the years ended December 31, 2007 and 2006,
respectively.




The
Company had capitalized the advertising costs associated with the production of
an infomercial in previous years in accordance with the Statement of Position 93-7 Reporting
on Advertising Costs.The company has determined that the
viability of the infomercial was no longer valid.  The company
expensed the capitalized costs in the fourth quarter of 2007 in the amount of $
414,222.





F-10
 Contents




(p) -
RECLASSIFICATIONS




Certain
amounts in 2006 have been reclassified and represented to conform to the current
financial statement presentation.




(q) - USE OF
ESTIMATES




The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States 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 may differ from those
estimates.




(r) – STOCK BASED
COMPENSATION







The
Company has adopted SFAS No. 123(R), Share-Based Payment, defines the
fair-value-based method of accounting for stock-based employee compensation
plans and transactions used by Marshall to account for its issuances of equity
instruments to record compensation cost for stock-based employee compensation
plans at fair value as well as to acquire goods or services from
non-employees.  Transactions in which Marshall issues stock-based
compensation to employees, directors and advisors and for goods or services
received from non-employees are accounted for based on the fair value of the
equity instruments issued.  Marshall utilizes pricing models in
determining the fair values of options and warrants issued as stock-based
compensation.  These pricing models utilize the market price of
Marshall’s common stock and the exercise price of the option or warrant, as well
as time value and volatility factors underlying the positions.






(s) – CONCENTRATION
RISK




The
Company reports no significant concentrations.




(t) - OTHER RECENT
ACCOUNTING PRONOUNCEMENTS




The
Company does not expect that the adoption of other recent accounting
pronouncements to have any material impact on its financial
statements.




NOTE
3 – MARSHALL DISTRIBUTING ACQUISITION OF OPERATIONS AND ASSETS




The
Company completed the acquisition of the business assets of Marshall
Distributing, LLC, a Utah limited liability company and a portion of EMS
Business Development, Inc., a California corporation.  These assets
have been assigned to the currently inactive subsidiary Grandma Hammans
Specialty Foods and the subsidiary has had an appropriate name change to
Marshall Distributing, Inc.  The asset purchase includes the
operations and warehouse facility.  The date in which all of the final
terms and conditions were met was on or about August 6, 2006.  The
effective close date was June 30, 2006. The
Company acquired the assets and operations of Marshall Distributing for a total
purchase price of $7,241,301. The assets and operations included a fully
integrated 27,000 square foot distribution facility, equipment and fixed assets,
website and e-commerce platforms, distribution rights, customer lists,
inventory, accounts receivable and other related business assets.




The
assets and operations of Marshall Distributing were acquired for strategic
business purposes. Marshall International Inc. desired to expand it’s current
business operations into the wholesale distribution channels enabling further
market penetration into the wellness market. Both Marshall Distributing and The
right solution sell similar products but through different channels. Furthermore
the technology and integration into the e-commerce website platform allowed yet
another retail channel to reach customers and increase sales of it’s nutritional
based products. The acquisition brought another 6,000 products and over 150
manufacturers for product sourcing and expansion. The acquisition was a natural
fit in the evolution of Marshall Holdings International, Inc. diversification
into the wellness market that continues to grow and expand.




F-11
 Contents




MARSHALL
      DISTIBUTINGCONDENSED
      BALANCE SHEET(STATEMENT
      OF ACQUIRED ASSETS AND LIABILITIES)June
      30,2006ASSETSCURRENT
      ASSETS:Cash
      and cash equivalents
            
            $
            386,967Accounts
      Receivable
            
            
            225,919Inventories
            
            
            689,803Prepaids
            
            
            18,571Total
      Current Assets
            
            
            1,321,260PROPERTY
      & EQUIPMENTProperty
      and Equipment, at cost
            
            
            1,947,984(Less)
      accumulated depreciation and amortization
            
            
            (67,443
            )Total
      Property & Equipment
            
            
            1,880,541OTHER
      ASSETSCustomer
      Lists
            
            
            500,000Distributor
      Rights
            
            
            1,779,500Websites
      and e-commerce Programs
            
            
            1,750,000Total
      Other Assets
            
            
            4,039,500Total
      Assets
            
            
            7,241,301




F-12
 Contents





LIABILITIESCURRENT
      LIABILITIES:Accounts
      payable:Trade
      Regular
            
            $
            297,623Accrued
      expenses:Accrued
      Liabilities
            
            
            94,247Total
      current liabilities
            
            
            391,870LONG-TERM
      DEBT
            
            
            6,849,431Total
      Liabilities
            
            
            7,241,301




NOTE
4 - GRANDMA HAMMANS AND LOS CABOS BEVERAGE:




The
Company purchased the assets of Grandma Hammans Specialty Foods, LLC, from
Blaine Wendtland on August 15, 2002.  On December 21, 2004 the assets
and liabilities of Grandma Hammans, other than some minor residual receivables
and payables, passed to Blaine Wendtland in exchange for a 51% interest in the
sale of private label water that Blaine Wendtland had
developed.  Grandma Hammans subsidiary includes all of the assets and
liabilities of Marshall Distributing acquired in July of 2006.




NOTE
5 -RELATED PARTIES:




The
Company entered into an agreement December 12, 2003 with The Chelsea Collection
Inc, a Nevada corporation (“Chelsea Collection”) that was finalized on March 15,
2004 and later clarified on a few points on May 4, 2004.  Chelsea
Collection is majority owned by the officers of the Company and Francois
Vautour, an unrelated third party.  Chelsea Collection, in an
agreement dated November 25, 2003, acquired among other things from Francois
Vautour and others all United States and Canada rights, trademarks, formulas and
licenses of the Jeunesse by Francois Vautour and the GH3 skin care
line.




In the
agreement the Company has with Chelsea Collection, the Company will have the
opportunity to acquire the same Francois Vautour skin care line from Chelsea
Collection for virtually the same price and terms as Chelsea Collection is
buying it from Francois Vautour.  The terms of the agreement involves
a purchase price of $4,000,000, payments are computed based on 15% of the gross
sales less cost of goods sold with a minimum weekly payment of
$10,000.  Once the purchase price is paid, then a royalty of up to 15%
of the gross sales less cost of goods sold steps into place and continues
thereafter.  The cost outlays have been charged to the statement of
operations as a selling, general and administrative expense, which were $163,971
for the period, ended December 31, 2006.




No title
or ownership passes to the Company or to Chelsea Collection until the November
25, 2003 agreement between Chelsea Collection and Francois Vautour is satisfied,
the payment of which is described in the prior paragraph.  The Company
has opted not to capitalize the purchase price.  Therefore, all monies
paid have been expensed.




During
the third quarter 2005, the Company sold to the Chelsea Collection its
controlling block of preferred stock in PolarWearZ, Inc.  (refer to
note “Real Estate Sales”) for $250,000.  Chelsea Collection changed
the name of the corporation to “The Chelsea Collection, Inc.” As of June 30,
2006, the company recognized a gain on sale of stock in the amount of
$50,000.





F-13
 Contents




The
Company also sold an additional block of common stock in Polar Wear Z,
Inc.  of 8,520,000 shares during the third quarter of 2005 to Chelsea
Collection, Inc.  for $400,000.  The company reported no
gain or loss on the transaction.  During 2005, the Chelsea Collection
paid $311,700, leaving a balance owed of $88,300.




On
September 29, 2006, The Chelsea Collection, Inc. changed its name to G-H-3
International Inc.




In May of
2007 a settlement was reached with G-H-3 International, Inc. in which Francois
Vatour received back all of the rights to the Chelsea Collection Skin care line
by G-H-3 International, Inc. in lieu of any future payments or
obligation.




NOTE
6 - INVESTMENT IN QUALITY DISTRIBUTION SERVICES OF ARIZONA (“QDS”):




On May
30, 2004, an agreement was signed with Quality Distribution Services of Nevada
creating a wholesale beverage distribution center in the Phoenix, Arizona
area.  For this joint venture, Quality Distribution Services of
Arizona, Inc (“QDS”) was incorporated in Nevada on June 7, 2004, of which 51%
was owned by Gateway.




The
Company invested $282,700 during 2004 and another $50,000 through March 31, 2005
to assist in the development of the company.  Due to lack of
operations and no identifiable future cash flows, for the period ended December
31, 2005, the Company determined this investment was impaired to a carrying
value of $200,000.




During
2006, management has determined it is in the best interest of the Company not to
continue funding this joint venture.  Accordingly, the Company
recorded an impairment loss during the period ended December 31, 2006 for the
remaining investment balance of $200,000.




NOTE
7- REAL ESTATE ACQUISITIONS AND SALES:




In a
single agreement on June 2, 2005, the Company sold Aspen Cove Resort (property)
and the subsidiary Aspen Cove Resort, Inc.  (operations of Aspen Cove
Resort), hereafter referred to as “Aspen Cove,” to Cal-Bay International
(“Cal-Bay”).  Aspen Cove sold for approximately
$2,600,000.  The purchase price was paid with (1) 32,000,000 million
shares of restricted Preferred Series B stock of Cal-Bay, valued at $1,600,000,
(2) the controlling block of stock (restricted preferred stock) in PolarWearZ,
Inc., an inactive no asset corporation, valued at $200,000, (3) 8,520,000 free
trading shares of common stock in PolarWearZ, Inc.  (approximately 15%
of the common stock outstanding) valued at $400,000, (4) mortgage debt
assumption, and (5) cash paid to the mortgage holder catching up the past due
mortgage payments.  Because there was no distinction made between the
sale of the Aspen Cove property and operations (subsidiary), the transaction was
recognized as one sale and netted into one gain, effective June 2,
2005.  The operations of Aspen Cove Resort are reflected only thru
June 2, 2005, the date the Company ceased owning the operations.




The
valuation of Cal-Bay stock received from the sale of Aspen Cove and the Valley
Drive real estate, is for a guaranteed minimum sales price of $0.05 per share
upon conversion from preferred “B” non voting stock to voting common
stock.  The preferred stock is non-dilutable and, as per the
agreement, upon sale as common stock it is guaranteed to sell for no less than
$0.05 per share, or additional shares will be issued to compensate for any
shortage.  The gain on this sale of approximately $1,276,000 has been
recognized in the 2005 Statement of Operations as part of the “Gain on Sale of
property.”




During
the second quarter of 2005, the Company sold a residential property in Las Vegas
for approximately $250,000 to Cal-Bay.  Under the terms of the
agreement the purchase price was paid by (1) 2,800,000, shares of Cal-Bay
International non-dilutable Preferred “B” stock, guaranteed value at $0.05 per
share, for$140,000 (2) debt assumption of the underlying mortgage, and, (3) cash
paid to the mortgage holder catching up the past due mortgage
payments.  The loss on this sale has been recognized in the 2005
Statement of Operations as “Loss on Sale of Valley Dr House” in the amount of
$26,024.




The
Company purchased a smaller commercial property on March
13.  2006.  The warehouse/operations have been moved to this
building.  The offices are operating out of a temporary location while
the office portion of the building is completed.





F-14
 Contents




The
Company acquired the existing offices and warehouse of Marshall Distributing on
July 1, 2006 in the purchase agreement.




NOTE
8 – NOTES PAYABLE




The
Company acquired the assets of Marshall Distributing LLC and EMS Business
Development on July 1, 2006 and included in the consideration were three
separate notes payable totaling $6,840,574. The first note payable was in the
amount of $5, 230,000 due and payable on September 1, 2007 at a variable rate of
interest based on prime plus. The second note payable was for $770,000 due and
payable on September 1, 2007 with an interest rate of 9.74%. The third note
payable was in the amount of $840,574 payable over the next 18 years at 0%
interest. The notes were properly classified between notes payable, current
maturities of long term debt and long term for the year ending December 31,
2007. The creditor is currently working with the Company in an effort to resolve
the debt.




The
Company also acquired a building in 2006 in the amount of $1,200,000 with an
original mortgage of $956,250 at an interest rate of 8.25% due on April 1, 2013.
The Company has taken a second mortgage out with an original amount of $330,000
with an interest rate of 16%.  The second mortgage is due and payable
on September 14, 2008.




The
Company also has historical notes payable totaling $1,827,933 including accrued
interest and principal due and payable before December 31,
2007.   These notes payable consist of various amounts of
principal and interest ranging from 9% to 14%. The Company is currently working
on a debt restructure for its creditors.




The
Company has taken a second mortgage out on the building in Salt Lake City in the
amount of $500,000 in February of 2007. The note was a short term note due and
payable in September of 2007 with an interest rate of 10%. The creditor is
currently working with the company in resolving the note.




The
Company has entered into a short term obligation with DL Claire in which the
Company received $390,000 in November of 2007 and DL Claire received the
balance. The Company co-signed on a note for $650,000 with DL Claire. The
obligation is due in May of 2008.




The
summary of notes payable is as follows:







Notes
      Payable
            
            $
            9,116,089Current
      Maturities of Long Term Debt
            
            $
            40,495Long
      Term Debt
            
            $
            1,693,908




NOTE
9 – EQUITY




(a)
REVERSE STOCK SPLITS:




On
December 4, 2006, the Company enacted a 1000 for 1 reverse stock
split.  The financial statements have reflected this reverse stock
split retroactively to the beginning of the reporting period of these financial
statements.




(b)
EMPLOYEE STOCK INCENTIVE PLAN (“ESIP”):




Since
2003, the Company has filed with the Securities and Exchange Commission (“SEC”)
several forms S-8 with respect to Employee Stock Incentive Plans (“ESIP”) and
its increases in stock approved to issue under such plans.  No
additional increases in stock have been submitted or approved to issue under
such plans since August 2004.




During
2004, the total number of shares approved to issue in these plans was
18,200,000,000 (18 billion, 200 million).  Stock issued to employees
through the plan is not affected by reverse splits until after it has been
sold.  The remaining unissued stock at any time remains unchanged
despite what happens to the stock once it is issued (i.e., stock reverse splits,
dividends, etc.).  As of December 31, 2006, there are no remaining
shares approved to be issued under the ESIP plans.




During
January 1 through December 31, 2007 and 2006 no stock was issued out of the ESIP
plan.  There are currently no shares issued and unsold under the ESIP
plan.





F-15
 Contents




(c)
NON-EMPLOYEE, DIRECTORS AND CONSULTANTS RETAINER STOCK PLANS
(“RSP”):




The
Company continually seeks to improve its financial position by seeking investors
in exchange for equity in the Company.  The value assigned to the
stock for these transactions will vary based on the market value of the stock or
services performed at the time, whichever is more readily
ascertainable.




Since
2003, the Company has filed with the Securities and Exchange Commission (“SEC”)
several forms S-8 with respect to Non-Employee Directors and Consultants
Retainer Stock Plans (“RSP”) and its increases in stock approved to issue under
such plans.  On July 27, 2006 a Form S-8, Non-Employee Consultants
Retainer Stock Plan for the Year 2006, was submitted for 7,000,000,000 (7
billion) shares.




During
2004, the total number of shares approved to issue in these plans were
8,500,000,000 (8 billion 500 million).  As of December 31, 2006, the
total remaining unissued shares under the RSP plans are
2,047,450,000.  During 2005, the Company issued 1,093,000,000 shares
out of the RSP plan before stock splits.




During
January 1 through December 31, 2006, the Company issued 11,102,550,000 shares
out of the RSP plan.




During
January 1 through December 31, 2007, the Company issued 972,400,000 shares out
of the RSP plan.




(d)
AUTHORIZATION OF SERIES “B” PREFERRED STOCK AND ISSUANCE OF RESTRICTED PREFERRED
“B” STOCK TO CONSULTANTS:




On
January 18, 2005, the Company authorized 100,000,000 shares of Series B
Preferred Stock with a par value of $0.001 per share.  Series B
preferred stock is convertible to common stock on a one for one basis and on all
matters submitted to a vote of the holders of the common stock, including,
without limitation, the election of directors, a holder of shares of the Series
B preferred stock is entitled to the number of votes on such matters equal to
the number of shares of the Series B preferred stock held by such
holder.




During
2005, the Company issued 15,000,000 restricted shares of Series B preferred
stock to consultants for services rendered with an assigned value of
$15,000.




On August
29, 2006, the Company authorized an increase of Series B Preferred Stock with a
par value of $0.001 per share to 1,000,000,000 shares.




During
January 1 through December 31, 2006, the Company issued 170,000,000 shares of
Series B preferred stock.  The value of these issuances was recorded
at $19,000.




During
January 1 through December 31, 2007, the Company did not issue any Series B
preferred stock.




(e)
RESTRICTED STOCK ISSUED TO OFFICERS (RELATED PARTY TRANSACTIONS):




During
January 1 through December 31, 2006, the Company issued 20,000,000 restricted
preferred A stock to officers.




During
January 1 through December 31, 2007, the Company did not issue any additional
stock to officers.




NOTE
10 - OTHER ASSETS:




Other
Assets include the Cal-Bay International Stock received in connection of the
real estate transaction in June of 2005 in which  The purchase price
was paid with (1) 32,000,000 million shares of restricted Preferred Series B
stock of Cal-Bay, guaranteed at .05 per share.  The current carrying
value on the balance sheet is reflected
at          $ 1,133,548 as of
December 31, 2007.




Other
assets also include costs incurred to develop a new product
line.  These costs will not be recognized as inventory until a
marketing plan has been developed and implemented.  Management is of
the opinion that the estimated fair value of product awaiting marketing exceeds
the cost recognized on the Balance Sheet.





F-16
 Contents




NOTE
11 - GOING CONCERN:




There
have been significant recurring losses and negative cash flows from operations,
which have resulted in a working capital deficiency.  In the event the
Company is unable to raise additional operating capital, the aforementioned
conditions raise substantial doubt about the Company's ability to continue as a
going concern.  The financial statements do not include any
adjustments that might result from the occurrence of such conditions, and have
been prepared assuming that the Company will continue as a going
concern.




The
Company plans to raise the working capital it needs through equity financing and
other debt funding.




NOTE
12 - COMMITMENTS AND CONTINGENCIES:




In the
normal course of business the Company experienced a change in position by the
Bureaus of Consumer Protection of Nevada and Maryland dealing with a now
discontinued product the Company previously sold to the public.  A
settlement was made with the Maryland Attorney General on the investigation
regarding a change in position by the Bureaus of Consumer Protection of Nevada
and Maryland dealing with a now discontinued product the Company previously sold
to the public.  On May 4, 2006, Assurance of Voluntary Compliance
documents were signed.  This includes a Civil Penalty of $100,000 and
restitution to consumers of $25,000.  If the amount paid to consumers
for claims is less than $25,000, the Civil Penalty will be increased to the
difference between $25,000 and the amount paid in restitution.  The
Civil Penalty is payable in monthly installments of $5,000 and the restitution
is to be paid as claims are presented.  The Company has accrued a
liability as of December 31, 2006 and 2005 in the amount of $125,000 for the
above contingency.




A
creditor of the Company, Allergy Research group/Nutricology filed in the
District Court of Clark County, Nevada an action against the Company on an
unpaid open account for goods and merchandise, Case No. A-487334, in the amount
of $168,000.  The Company contested the amount claimed and made
payment toward the uncontested amount while negotiations with the plaintiff
continued.  The Company offered to pay, through counsel, the sum of
$50,000 with a payment of $10,000 upon acceptance of the offer and $5,000 per
month until paid.  The offer was accepted and payments have been made
and the debt is paid in full.  The Company has recognized, in the
financial statements, part of the “accounts payable” in the liabilities of the
balance sheet to cover these contingencies




On
January 11, 2001, the Company acquired approximately 76% of the outstanding
shares of common stock of TRSG Corporation (“TRSG”).  The Company sold
its interests in TRSG as of December 31, 2002 for $15,000.  At this
time the Company also acquired all of the assets and accrued certain liabilities
of TRSG.  The creditors of TRSG continue to assert claims against the
Company.  Management is unable to estimate the possible loss exposure,
but believes the ultimate losses would be minimal for the Company because the
debts of TRSG paid by the Company are debts of TRSG and not the
Company.




The
Securities and Exchange Commission has filed complaints against Suburban Capital
and the Company and its CEO.  At this juncture, legal counsel is
unable to predict what the possible outcome of these matters will
be.




As of
September 18, 2006, Management finalized negotiations, initiated in 2003, with
the Internal Revenue Service (“IRS”) to settle past taxes due.  An
agreement was reached that the compromise previously submitted to the IRS was
withdrawn on July 24, 2006.  The offer deposit of $250,000 was to be
credited as the initial installment payment.  A second installment
payment of $75,000 was to be paid within 90 days of the agreement acceptance
date, September 18, 2006.  Payments of $50,000 per month will begin in
the fourth month after the acceptance date and will continue each month until
the liability is paid in full, approximately 10 months.  The payments
were due by the 20th day of
the month.  The company has been unable to perform and make the
payments as a result of operating cash deficiency and therefore the company has
accrued a liability for the above in the amounts of $575,231 and $587,336 for
the years ended December 31, 2007 and 2006 respectively.  The company
is currently in renegotiations with the IRS to establish a payment plan that
they can maintain.





NOTE
13– RESTATEMENT OF FINANCIAL STATEMENTS TO PROVIDE CLARIFICATION AND ADDITIONAL
DISCLOSURE




F-17
 Contents





Management
is issuing restated financial statements for 2006 in an effort to further
clarify and properly reflect the acquisition of the assets and operations of
Marshall Distributing LLC effective July 1, 2006 and to provide additional
disclosures of debt regarding notes payable.





The
changes include:





A
restated statement of the 2006 statement of cashflows with a reclassification
and additional disclosure of investing activities and financing
activities.  Increases in the property, plant and equipment were
reflected in the body of the statement of cashflows that were acquired with debt
and therefore the increases to both the property, plant and equipment and the
debt have been subsequently broken out and disclosed separately as a non-cash
investing and financing activities.





The 2006
balance sheet liabilities section has been restated for notes payable
classification and current maturities of long term debt.





The
footnote number 3 regarding the acquisition of the assets and operations of
Marshall Distributing has been expanded to satisfy all of the required
disclosures pertaining to business combinations under SFAS 141.




NOTE
14 - SUBSEQUENT EVENTS:




Global Media Corp. v. Gateway
Distributors, Ltd., Case No. 06CV 13415.  United Stated
District Court southern District of New York Filed January,
2007.  There has been a breech of contract suit filed by Global Media
Corp., which alleges that a single meeting held on January 28, 2004 resulted in
a series of agreements entered into by four entities for licensing and marketing
of hair removal product known as “Forever Gone.”  Among those
agreements, plaintiff alleges that defendant Gateway Distributors, Ltd. agreed
to pay $2,000,000 in Gateway stock for marketing and materials and
services.  Plaintiff thus claims that it assembled a team of
consultants, provided materials, work, labor and services to us and that we
failed to issue the stock.  The plaintiff has not yet identified the
so-called agreements, consultants, nominees and the work and materials allegedly
delivered.  The Plaintiff has confirmed that the so-called agreement
with Gateway has never been reduced to writing.  Rather, counsel
represented that its claim of an agreement with Gateway is based upon a
combination of verbal statements and miscellaneous unidentified,
writings.  Gateway asserts that it did not receive the consulting
services and materials and expects the suit to be dismissed and is contemplating
a counter suit against Global Media Inc.  The case was settled on
April ___, 2008 by our agreement to issue $150,000 worth of our free-trading
stock to the Plaintiff.




The
Company has issued 70 million shares of Series A preferred stock to Messrs
Bailey and Ternes as of April 9, 2008 for debt owed to them by the company in
part of a debt restructuring transaction as the Company is currently in the
process of restructuring as much debt as possible for the relative health of the
Company in order to satisfy current obligations.






F-18