**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington,D. C. 20549**

**FORM 10-KSB**

**(Mark One)**

**x**                              ANNUALREPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF 1934

**Forthe fiscal year ended December 31, 2006**

**OR**

**o**                                 TRANSITIONREPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF 1934

**CommissionFile Number 000-28883**

**VUBOTICS, INC.**

(Name of smallbusiness issuer in its charter)

| **Georgia**                                                     |   | **58-2212465**                        |
|-----------------------------------------------------------------|--------|---------------------------------------|
| (State or other jurisdiction of  incorporation or organization) |   | (I.R.S. Employer Identification  No.) |

**235Peachtree Street NE, Suite 1725, Atlanta, GA 30303**

(Address ofPrincipal Executive Offices) (Zip Code)

**(404) 474 2576**

(Registrant’stelephone number, including area code)

Securitiesregistered under Section 12(b) of the Exchange Act: **None**

Securitiesregistered under Section 12(g) of the Exchange Act:

**Common Stock, $0.001 parvalue**

(Title of class)

Check whether the issueris not required to file reports pursuant to Section 13 or 15(d) of the ExchangeAct. o

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

Check if there is nodisclosure of delinquent filers in response to Item 405 of Regulation S-Bcontained in this form, and no disclosure will be contained, to the best ofregistrant’s knowledge, in definitive proxy or information statementsincorporated by reference in Part III of this Form 10-KSB or any amendment tothis Form 10-KSB o.

Indicate by check markwhether the registrant is a shell company (as defined in rule 12b-2 of theExchange Act). Yes  o    No  x

Registrant’s revenues forthe twelve month period ended December 31, 2006: $37,000.

The aggregate marketvalue of the voting and non-voting common equity stock held by non-affiliatesof the Company computed by reference to the price at which the stock was sold,or the average bid and asked prices of such common equity on the OTC BulletinBoard, as of March 19, 2007 was $12,092,656 based on 44,787,616 shares at $0.27per share.

As of March 19, 2007, theRegistrant had outstanding 52,228,718 shares of Common Stock, $0.001 par value.

Documents incorporated byreference: **None**

Transitional Small Business Disclosure Format. Yes  o    No  x

 

----

**VUBOTICS,INC.**

**Index toAnnual Report on Form 10-KSB**
| **PART I**   |   |                                                                                                              |
|--------------|--------|-------------------------------------------------------------------------------------------------------------------|
|         |   |                                                                                                              |
| Item 1.      |   | Description of  Business                                                                                          |
| Item 2.      |   | Description of  Property                                                                                          |
| Item  3.     |   | Legal  Proceedings                                                                                                |
| Item 4.      |   | Submission of  Matters to a Vote of Security Holders                                                              |
|         |   |                                                                                                              |
| **PART II**  |   |                                                                                                              |
|         |   |                                                                                                              |
| Item 5.      |   | Market for  Common Equity, Related Stockholders Matters and Small Business Issuer  Purchases of Equity Securities |
| Item 6.      |   | Management’s  Discussion and Analysis or Plan of Operation                                                   |
| Item 7.      |   | Financial Statements                                                                                              |
| Item 8.      |   | Changes in and  Disagreements with Accountants on Accounting And Financial Disclosures                            |
| Item 8A.     |   | Controls and  Procedures                                                                                          |
| Item 8B.     |   | Other Information                                                                                                 |
|         |   |                                                                                                              |
| **PART III** |   |                                                                                                              |
|         |   |                                                                                                              |
| Item 9.      |   | Directors,  Executive Officers, Promoters and Control Person; Compliance with Section  16(a) of the Exchange Act  |
| Item 10.     |   | Executive  Compensation                                                                                           |
| Item 11.     |   | Security Owners of  Certain Beneficial Owners and Management and Related Stockholders Matters                     |
| Item 12.     |   | Certain Relationships  and Related Transactions                                                                   |
| Item 13.     |   | Exhibits                                                                                                          |
| Item 14.     |   | Principal Accountant  Fees and Services                                                                           |
|         |   |                                                                                                              |
|         |   | Signatures                                                                                                        |
|         |   | Exhibit Index                                                                                                     |

 

----

**PART I**

**Forward Looking Statements**

This annual report onForm 10-KSB contains forward looking statements within the meaning of Section27A of the Securities Act of 1933, as amended, and Section 21E of theSecurities Exchange Act of 1934, as amended, that are not historical, but areforward-looking in nature, including statements regarding VuBotics, Inc.’sexpectations, beliefs, intentions or strategies regarding the future. Inparticular, the discussion contained in this report under the heading “Management’sDiscussion and Analysis or Plan of Operation” includes forward-lookingstatements that reflect our current views with respect to future events andfinancial performance. We use words such as “expect,” “anticipate,” “believe,”and “intend” and similar expressions to identify forward-lookingstatements.  A number of importantfactors could individually or in the aggregate, cause actual results to differmaterially from those expressed or implied in any forward-lookingstatements.  Such factors include, but arenot limited to, our ability to develop successfully our products, tosuccessfully commercialize them, our ability to obtain additional financing,our ability to develop and maintain vendor relationships, and our ability toprotect our proprietary technology. Other risks that may impact the forward-looking statements contained inthis annual report on 10-KSB are described under the heading “Risk Factors.”

All statements other thanstatements of historical fact included in this report are forward lookingstatements. In the normal course of its business, the Company, in an effort tohelp keep its shareholders and the public informed about the Company’soperations, may from time-to-time issue certain statements, either in writingor orally, that contain or may contain forward looking statements. Although theCompany believes that the expectations reflected in such forward lookingstatements are reasonable, it can give no assurance that such expectations willprove to have been correct. Generally, these statements relate to businessplans or strategies, projected or anticipated benefits or other consequences ofsuch plans or strategies, past and possible future acquisitions and projectedor anticipated benefits from acquisitions made by or to be made by the Company,or projections involving anticipated revenues, earnings, levels of capitalexpenditures or other aspects of operating results. All phases of Company’soperations are subject to a number of uncertainties, risks and otherinfluences, many of which are outside the control of the Company and any one ofwhich, or a combination of which, could materially affect the results of theCompany’s proposed operations and whether forward looking statements made bythe Company ultimately prove to be accurate.

**ITEM 1.DESCRIPTION OF BUSINESS.**

**Business Strategy and Operations**

VuBotics, Inc. (the “Company”) is an IntellectualAsset Development and Marketing company with two non-operating subsidiaries,QR, and Truscom, a Japanese subsidiary. The purpose of the business is to identify, capture, build andcommercialize intellectual property acquired and/or licensed from individuals,corporations and governments and fully exploit their value in the globalmarkets.  Management has focused onassessing the existing inventory of Intellectual Assets and creating strategiesfor them.  From an execution perspective,the Company has two strategic components of its operations that will determineits success.

The first is the Company’s Concept to ProductGroup.  This IP focused group isregularly in the business of researching and building the Company’sIntellectual Asset Portfolio.  Theseportfolios include inventions, patents (in all their forms), trade secrets,processes, know-how, copyrights, trademarks required to build and protectvarious platforms and systems that could 1) be licensed directly into themarket; 2) be cross-licensed into other’s products and applications; or 3) bedeveloped into the Company’s products and applications for sale through theCompany’s Product to Market Group.  TheConcept to Product Group also creates the strategies for IP alignment andglobal deployment.  To do this mosteffectively, the Company intends to create an IP Holding company formed in themost tax efficient and IP protective environment and establish regionaloperating subsidiaries in proximity to revenue generating opportunities.  The IP Holding Company will also form thebasis for opportunistic joint ventures that further the Company’sobjectives.  While the Company’s existingportfolio is largely focused on reading technologies, the future direction ofthe portfolio is limited only by the Company’s ability to bring the rightexpertise into the group to build and protect it.

The second component of operations is the Company’sProduct to Market Group.  Thiscommercialization group is regularly in the business of identifying andpursuing markets for the Company’s products and applications as well asmanaging various pilot deployments that ultimately define the final attributesof the solution for each market.  TheProduct to Market Group is responsible for brand strategy, market timing,market communications, licensing strategies, pricing strategies, channelstrategies and sales resulting in the complete penetration of the targetedmarkets.  The group is keenly aware ofcompetitor positioning and how to strike the balance between speed to marketand maximizing the Company’s revenues. To do this most effectively, the Company intends to position regionaloperating subsidiaries under the IP Holding Company to work closely in themarkets with the appropriate alliances, channel partners and distributors aswell as managing pilot deployments at the Content Providers.  At ithe group’s and Management’s discretion,the Product to Market Group may decide to contract to sell other products that1) are not presently available from the Concept to Product Group and 2) arerequired to deliver the total market solution. It can be expected that such decisions are made to 1) accelerate theCompany’s products into the target market, 2) provide competitiveness, or 3)bring the Company’s products into 

3

----

markets inaccessible to existing channels.

During 2006, management focused primarily on buildingthe Company’s Intellectual Asset Portfolio and Products.

***Productsand Technology***

The first productplatform that VuBotics has developed is a reading system called VuITtm based on its patent pending technology. VuITis a hardware independent software system which changes the way in which textis displayed on many different mediums. Rather than treat the display like astatic piece of paper, VuIT dynamically feeds text to the viewer. The Companybelieves that this automated presentation has the potential to substantiallyincrease reading rate and improve comprehension in any language. Utilizing thesoftware application, words are then displayed one at a time, as large asdesired, and at a rate of speed optimized for the individual reader. The systemalso incorporates the capability of personalizing, tracking and modifying the experiencereal-time. The Company has completed the development of multiple VuITTMapplications and production ready systems for the Push eMail and the Broadcastmarkets.  The Company intends to developVuIT applications for Online deployments through Content Providers.  Each VuIT product is designed to 1) improvethe reading experience, 2) collect usage data and 3) position relevant matchingdata or enable contextual search.

Also underdevelopment is VuIT Mine, an Intelligent Agent search engine that collectsrelevant disparate data based on ontologies developed for the Military andintelligence communities.  It is theintent of the Company to fully develop this technology to enable fast andcost-effective searches of unstructured data for businesses in the financial,healthcare and research industries. There can be no assurances that all of the projected potentialapplications of the VuIT reading systems will function in a way that will meetthe Company’s product objectives or be accepted by the marketplace. See “RiskFactors.”

Certain Patentapplications have been made in connection with the technology and the relatedmethods of analysis, abstraction and delivery of electronic information. Whilethe company’s products are not dependent on a single patent, there can be noassurances that any of these patents will be granted. See “Risk Factors.”

In November, 2004, theCompany acquired QuantumReader, Inc. (“QR”) and the QR technology.

***Marketingand Markets***

The Companyintends to fully exploit the initial software application of VuIT, under thetrade name VuITTM email Reader, to the push email mobile communications usermarket through global distributors, adjacent sales channels and embedded withinthe devices.  Many of these salespartners are already in negotiation or in various stages of coordinatedsale.  The Company’s first product, VuITeMail Reader for BlackBerry (VeRBB) is available through individualsubscription and through enterprise deployment. It is the intent of the Company to penetrate the individual subscriptionmodel completely though device manufacturers and retail distributors throughoutthe world.  Subsequent versions ofenterprise and production-specific applications are designed to transitionVuBotics into long-term licensing agreements of various reading, tracking,advertising and relational search products sets in each vertical.  The Company has identified the followingvertical markets for VuIT Reading Systems:

·                  Enterprise eMailand Documents

·                  Legal Services

·                  FinancialServices

·                  Healthcare andMedical Industries

·                  Search andArchival Industry

·                  Broadcast

·                  News

·                  Sports

·                  Events

·                  Mobile

·                  Accessibility

·                  Online

·                  Advertising-PaidContent

·                  Games andInteractive Content

4

----

·                  Subscription-basedProductivity Enabled Content

·                  Accessibility

·                  RelationalSearch

·                  Text

·                  Video

·                  Music

·                  ProfessionalServices

·                  Integration andDelivery

There can be noguarantee the Company will either successfully develop or adapt the VuITReading System for these markets or, if the Company is successful in doing so,that these markets or any other markets will accept the product.  Subsequent products may or may not bedirected at similar markets through similar channels.  Each marketing strategy will be appropriatefor the size of the opportunity being generated.  These market relationships are often complexand require time to develop at the right level of negotiation as is typical ofbusiness to business product sales cycles. Similar to the VuIT family of products, there is an expectation thatonce creditable levels of market awareness exist, the length of each cycleshould shorten but there is no guarantee of this.

In August, theCompany entered into a landmark agreement with Research In Motion of Waterloo,Ontario.  They are the manufacturers ofBlackBerry products.  While the allianceagreement was not structured to create near-term revenues for the Company, ithas been instrumental in obtaining third party testing and validation of theVuIT eMail Reader for BlackBerry (VeRBB) product.  Such testing is required prior todistribution of applications on RIM products over the network.  While there are no guarantees, we believethat this alliance agreement will lead to near-term revenue producingopportunities through telecommunication carriers and application distributorsof BlackBerry products.

***Research and Product Development***

The Company has a significant commitment toresearch and product development.  TheCompany’s research and product development efforts are focused on developingits core technological competentics. VuBotics has conducted extensive research in development of its VuITreading systems and product platforms. During fiscal years 2005 and 2006, over $761,000 was spent on researchand product development.

***Patents, Trademarks and Proprietary Rights***

The Company relieson a combination of patent and trademark laws to establish its proprietaryrights in its products.  The Company ownsseveral issued and pending United States patents for its inventions.  The Company believes that the patents it ownsmay have been useful in protecting the Company’s proprietary products and maybe useful in protecting potential future products.

VuBotics hasobtained United States federal registration for a number of trademarksincluding its “VuBotics”, “VuIT”, stylized “V”, “NewSpeed”, “Information atBrainSpeed”, “Art of ZEM”, and “VuMetrics” trademarks.  Each of these trademarks is incorporated intoour website, marketing collateral and market communications to maximize theCompany’s efforts to brand itself and its products.

Vubotics isconstantly developing proprietary technology that protects the intellectualportfolio of the company and positions it to maximize its licensing revenue..This technology has the potential for additional patent protection. The companywill vigorously protect these inventions and continue to invest research fundsto further the promotion of VuBotics’ interests in its exploited markets andpromote the interests of VuBotics partners in creating other dimensions of useof the intellectual assets..

***Competition***

The Company believes thatcompetitors will emerge with a product that attempts to emulate VuITTM.Currently, there are no known competitors in the target markets with a productusing the technologies, trade secrets and patent pending techniques employed bythe 

5

----

Company. However, theacademic community has conducted research in similar technologies. Some of ourcompetitors may have greater manufacturing and marketing capabilities andgreater financial, technological and personnel resources.  The Company believes that the majorcompetetive factors with this evolving technology will be performance, quality,support and price.  The competitors thatare expected to emerge that could have greater resources than the Company areMicrosoft, Google, Macromedia and others. Although the Company may not be able to successfully compete againstthem it is our assertion that our IP protection and our leveraged licensingstrategy will make these companies much more likely to engage in business thanin the courts.

The Company has appliedfor patents on its technologies and techniques. Patents, trade marks and trade secrets could limit potential competitor’sability to create a product that would have the capabilities of VuITTM andsubsequent products.

***Employees***

As of March 30, 2007, theCompany had one full-time employee.  Inaddition, the Company has contracted with several consulting entities tofulfill specific roles and functions. Each consulting engagement has been designed to gain access to a levelof experience and technical expertise that would not be available throughtraditional employment strategies. Additionally, the ability to leverage consultants for strategy,marketing, financial, IP and product development has substantially increasedthe Company’s financial flexibility without undo obligation during times ofreduced cash flow.

The following table setsforth the major consultants engaged by the Company:

| Consultant                    | ** ** | **Services provided**                            | ** ** |
|-------------------------------|------------|-------------------------------------------------------|------------|
|                          |       |                                                  |       |
| Vision Factory,  Inc.         |       | Strategic  advice, marketing and business development |       |
| Ridenour and  Associates, LLC |       | Financial  reporting and accounting                   |       |
| Primus Software  Corporation  |       | Software  development                                 |       |
| JAHO  International, Inc.     |       | Software  development                                 |       |
| Memetex, Inc.                 |       | Software  development                                 |       |
| Creative Network, Inc.        |       | Marketing                                             |       |

**RecentDevelopments**

***August 2006Financing***

In August of 2006 we offered and sold 7,399,799 shares(the “Shares”), of common stock, $0.001 par value, together with warrants topurchase up to an additional 7,399,799 shares of Common Stock (the “Warrants”;the Warrants and Shares shall collectively be referred to as the “Securities”)for an aggregate amount of proceeds of $2,229,940 (the “Offering”). TheWarrants have an exercise price of $0.60 per common share and a term of fiveyears. The Securities were sold solely to accredited investors in aprivate placement offering exempt from registration under the Securities Act of1933.

In connection with the private placement, we enteredinto a Common Stock and Warrant Purchase Agreement (the “Purchase Agreement”),dated as of August 24, 2006, with purchasers of the securities that containscustomary representations, warranties and covenants. The warrants containcustomary provisions for adjustment to the exercise price in the event of stocksplits, combinations and dividends, and include certain cashless-exerciseprovisions.  The Warrants also contain anti-dilution adjustments to theexercise price and number of common shares issuable upon exercise in the eventof certain dilutive issuances of equity securities.

In connection with the private placement, we enteredinto a Registration Rights Agreement with the purchasers of the securitiespursuant to which we agreed to file a registration statement with the SECwithin 60 days of the closing and use commercially reasonable efforts to obtaineffectiveness of the registration statement within 90 days after the filingdate (subject to a 30 day extension if the registration statement is reviewedby the SEC). The registration statement will cover the resale of Sharesand the shares of Common Stock underlying the Warrants (the “Warrant Shares”). Our failure to abide by the effectiveness and certain other covenants containedin the Purchase Agreement relating to registration rights will result in ourobligation to pay liquidated damages to each purchaser in the form of cash orcommon stock priced at $0.30 per share, subject to adjustment, at the rate ofone percent of the amount equal to the product of (i) $0.30 and (ii) the numberof shares of Registrable Shares, as defined below, then held by each purchaserfor the initial 30 day period of the failure to have the registration statementbecome effective within 90 days after its filing date (or 120 days after itsfiling date if the registration statement is reviewed by the SEC, (and for each30-day period thereafter up to 15 months). Registrable Shares means each Shareand each Warrant Share.

Furthermore, under therequirements of the Purchase Agreement, we are required to hold a special or anannual meeting of our stockholders at which we are required to obtain approvalof our stockholders holding the majority of our common stock outstanding as 

6

----

of a certain record date,of a proposal to increase the number of authorized Common Stock to not lessthan 75,000,000 shares (“Stockholder Approval”).

If Stockholder Approval is not for any reason obtainedby the Stockholder Meeting Deadline, then we will be obligated to make thepayments to each purchaser (collectively the “Purchasers”) as set forth belowin the form of liquidated damages and not as a penalty. The amount to be paidby us to each purchaser shall be equal to 1% of the product of (i) $0.30 and(ii) the number of Warrant Shares issuable upon exercise of all of the Warrantsthen held by such purchaser for each 30-day period (or pro rata for a lesserperiod) after the Stockholder Meeting Deadline during which StockholderApproval is not obtained, subject to an overall limit of up to 50 months ofpartial liquidated damages. Therefore, based on 7,399,799 units sold, each30-day period we may be obligated to pay up to an aggregate of $22,199 inliquidated damages for failure to obtain Stockholder Approval for any reason bythe Stockholder Meeting Deadline.

On January 30, 2007, the Company’s shareholders viathe affirmative vote of a majority of the votes of common stock held by themapproved during the Company’s annual meeting for the Company to effect aReincorporation Merger (as defined below). As a result, the Company became aGeorgia Corporation and is currently authorized to issue up to 100,000,000shares of Common Stock. Therefore, as of January 30, 2007 as a result of ourfailure to obtain Stockholder Approval by the Stockholder Meeting Deadline, wewere obligated to pay to the Purchasers liquidated damages in an aggregateamount of $22,199.00. Furthermore, with the exception of the payment of saidliquidated damages amount of $22,199.00, as a result of the ReincorporationMerger we are no longer subject to liquidated damages associated with theStockholder Approval.

Neither the Shares offered and sold in the privateplacement nor the shares of Common Stock underlying the Warrants wereregistered under the Securities Act, and therefore may not be offered or soldin the United States absent registration or an applicable exemption fromregistration requirements. We offered and sold the above-referenced securitiesin reliance on the statutory exemption from registration in Section 4(2) of theSecurities Act, and on Rule 506 under the Securities Act.

***Annual Meeting ofStockholders — Proxy Statement on Schedule 14(a)***

On January 3, 2007, we filed with the SEC a definitiveProxy Statement on Schedule 14(a) (the “Proxy Statement”), which isincorporated by reference herein with respect to the annual meeting of ourstockholders which was held on January 30, 2007, at 4:30 p.m.,Eastern Standard Time, at the Capital City Club located at 53 W. BrookhavenDr. NE, Atlanta, Georgia 30319 (the “Annual Meeting”).

The following is a summary of the matters that ourshareholders of record as of December 1, 2006 (the “Record Date”) approved atthe Annual Meeting which took place on January 30, 2007:

(1)                                  Ourshareholders elected Philip E. Lundquist, Ronan A. Harris and Robert T. Eramianto the Board of Directors, whereby each director elected by the stockholderswill serve for a one-year term and until the election and qualification of hisor her successor:

(2)                                 Ourshareholders approved a proposal to change our state of incorporation fromNevada to Georgia by merging our company into our wholly-owned subsidiaryincorporated in Georgia (the “Reincorporation Merger”);

(3)                                  Ourshareholders ratified the appointment of E. Philip Bailey, CPA, PC as ourindependent registered public accounting firm for fiscal years 2006 and 2007.

***The Reincorporation Merger***

On January 30, 2007, our shareholders via theaffirmative vote of a majority of the votes of common stock held by themapproved during our annual meeting for us to effect a Reincorporation Mergerpursuant to a certain Merger Agreement (the “Merger Agreement”). Pursuant tothe Merger Agreement, each outstanding share of our Common Stock wasautomatically converted into one share of Vubotics Georgia, Inc. common stock,par value $.001 per share, at the effective time of the Reincorporation Merger.Subsequently, the Company changed its name from Vubotics Georgia, Inc. toVubotics, Inc. For more information, see the Proxy Statement which isincorporated by reference herein.

**RiskFactors**

***An investment in our common stock is very risky. In addition to theother information in this annual report on Form 10-KSB, you should considercarefully the following risk factors in evaluating us and our business. If anyof the events described in the following risk factors were to occur, ourbusiness, financial condition or result of our operations would suffer and, inthat event,***

7

----

***the trading price of the common stock could decline. Therefore, we urgeyou to carefully review this entire 10-KSB and consider the following riskfactors:***

**MaterialRisks Related To The Company’s Business**

***The Company has incurred significant operating losses sinceinception and the Company cannot assure you that the Company will ever achieveprofitability.***

Since the Company’sinception, the Company has incurred losses every quarter. The extent of theCompany’s future operating losses and the timing of profitability are highlyuncertain, and the Company may never achieve or sustain profitability. TheCompany has incurred significant net losses since inception, including netlosses of approximately $2,559,170 in 2006, $2,038,096 in 2005, $741,014 in2004, $391,309 in 2003 and $1,518,486 in 2002. At December 31, 2006, the Company had an accumulated deficit of$14,070,562. The Company anticipates that the Company will continue to incuroperating losses for the foreseeable future and it is possible that the Companywill never generate substantial revenues from product sales.

***The Company is a development stage company with a limitedoperating history that makes it impossible to reliably predict future growthand operating results.***

The Company has notdemonstrated that the Company can:

·                  Establish manyof the business functions necessary to operate, including sales, marketing,administrative and financial functions, and establish appropriate financialcontrols;

·                  Make, use, andsell future products without infringing upon third party intellectual propertyrights; or

·                  Respondeffectively to competitive pressures.

***If the Company fails to develop products, the Company willnot achieve significant revenues and the Company would be unlikely to be ableto continue its current level of operations and would be unable to meet itslong-term growth plans.***

The Company’s futurebusiness and financial success will depend on its ability to introduce newproducts and upgrade existing products into the marketplace. Developing newproducts and upgrades to existing and future products imposes burdens on theCompany’s management. This process is costly, and the Company cannot assure anyinvestor that the Company will be able to successfully develop any products orenhance any future products. If the Company’s product development efforts areunsuccessful, the Company will have incurred significant costs withoutrecognizing the expected benefits and business prospects will suffer.

***The Company may not be able to expand market acceptance ofthe use of products, which would severely harm the Company’s ability to achievesignificant revenues.***

The Company cannot assureany investor that the Company’s proposed products will achieve marketacceptance. Failure of the Company’s proposed products to gain marketacceptance would severely harm the Company’s business, financial condition andresults of operations.

***The Company’s future capital needs are uncertain. TheCompany will need to raise additional funds in the future and these funds maynot be available on acceptable terms or at all.***

The Company believes thatthe Company’s current cash and cash equivalents are not sufficient to meetprojected operating requirements through December 2007. Therefore, theCompany may seek additional funds from public and private stock or debtofferings, borrowings or other sources prior to such time. The Company’scapital requirements will depend on many factors, including:

·                  The revenuesgenerated by sales of products that the Company develops;

·                  The costsrequired to develop new products;

·                  The costs ofobtaining and defending patents, trademarks and copyrights of the Company’sproducts;

·                  The costsassociated with expanding the Company’s sales and marketing efforts;

8

----

·                  The expenses theCompany incurs in selling its products;

·                  The costsassociated with any expansion of operations;

·                  The costsassociated with capital expenditures; and

·                  The number andtiming of any business acquisitions or other strategic transactions.

As a result of thesefactors, the Company may need to raise additional funds, and these funds maynot be available on favorable terms, or at all. Furthermore, if the Companyissues equity or debt securities to raise additional funds, the Company’sexisting stockholders may experience dilution, and the new equity or debtsecurities may have rights, preferences and privileges senior to those of theCompany’s existing stockholders. In addition, if the Company raises additionalfunds through collaboration, licensing or other similar arrangements, it may benecessary to relinquish valuable rights to the Company’s potential products orproprietary technologies, or grant licenses on terms that are not favorable tothe Company. If the Company cannot raise funds on acceptable terms, the Companymay not be able to develop or enhance the Company’s products, execute theCompany’s business plan, take advantage of future opportunities, or respond tocompetitive pressures or unanticipated customer requirements.

***The Company’s success will depend on the Company’s abilityto attract and retain key personnel, programming and engineering staff. If theCompany fails to attract and retain key personnel and programming staff, theCompany may be unable to succeed in its market.***

The Company believesfuture success will depend on the Company’s ability to manage its growthsuccessfully, including attracting and retaining programmers, engineers andother highly skilled personnel. The Company’s key employees may terminate theiremployment with the Company at any time. Hiring qualified management andtechnical personnel is difficult due to the limited number of qualifiedprofessionals. If the Company fails to attract and retain personnel,particularly management and technical personnel, the Company may not be able tosucceed.

***If the Company fails to protect its intellectual propertyrights, others may take advantage of the Company’s ideas and compete directlyagainst the Company.***

The Company relies inpart on patents, trade secrets and other proprietary technologies to protectthe Company’s products. The Company may not be able to obtain or maintainadequate U.S. patent protection for new products or ideas, or prevent theunauthorized disclosure of the Company’s technical knowledge or other tradesecrets by the Company’s employees. Additionally, the laws of foreign countriesmay not protect the Company’s intellectual property rights to the same extentas the laws of the U.S. Even if the Company’s intellectual property rightsare adequately protected, litigation may be necessary to enforce them, whichcould result in substantial costs to the Company and substantial diversion ofthe attention of the Company’s management and key technical employees. If theCompany is unable to adequately protect the Company’s intellectual property,the Company’s competitors could use the Company’s intellectual property todevelop new products or enhance their existing products. This could harm theCompany’s competitive position, decrease its market share or otherwise harm itsbusiness.

**RisksRelated To Capital Structure**

***There is no assurance of an established public tradingmarket, which could adversely affect the ability of investors in the Company tosell their securities in the public markets.***

As of March 6, 2006, theCompany’s common stock was listed on the OTC Bulletin Board as a result of theCompany’s filing of Form 211 with the NASD. However, a regular trading marketfor the securities may not be sustained in the future. The OTC Bulletin Boardis an inter-dealer, over-the-counter market that provides significantly lessliquidity than the NASD’s automated quotation system (the “NASDAQ Stock Market”).Quotes for stocks included on the OTC Bulletin Board are not listed in thefinancial sections of newspapers as are those for the NASDAQ Stock Market.Therefore, prices for securities traded solely on the OTC Bulletin Boardmay be difficult to obtain and holders of common stock may be unable to reselltheir securities at or near their original offering price or at any price. Iflisted on any exchange, the market price for the Company’s common stock will beinfluenced by a number of factors, including:

·                  Theissuance of new equity securities in a future offering;

9

----

·                  Issuedand outstanding shares of the Company’s common stock becoming eligible forresale pursuant to contractual registration requirements or pursuant toexemptions from registration becoming available following the passage of time;

·                  Competitivedevelopments, including announcements by competitors of new products orservices or significant contracts, acquisitions, strategic partnerships, jointventures or capital commitments;

·                  Variationsin quarterly operating results;

·                  Changesin financial estimates by securities analysts;

·                  Thedepth and liquidity of the market for the Company’s common stock;

·                  Generaleconomic and other national conditions; and

·                  Changes ininterest rates.

***Thelimited prior public market and trading market may cause volatility in themarket price of the Company’s common stock in the event it becomes listed.***

As of December 31, 2005the Company’s stock was not actively traded on any market. Subsequent to December31, 2005, the Company’s stock became eligible to trade on the OTC BulletinBoard. Currently, there is a very low volume of trading activity in the Company’sstock. In the absence of an active trading market:

·                  Investors mayhave difficulty buying and selling or obtaining market quotations;

·                  Marketvisibility for the Company’s common stock may be limited; and

·                  A lack ofvisibility for the Company’s common stock may have a depressive effect on themarket for the Company’s common stock.

***TheCompany’s common stock may be considered a “penny stock” and may be difficult tosell.***

To be considered a “pennystock,” securities must meet one or more of the definitions in Rules 15g-2through 15g-6 promulgated under Section 15(g) of the Securities ExchangeAct of 1934, as amended. These include but are not limited to the following:(i) the stock trades at a price less than $5.00 per share;(ii) it is NOT traded on a “recognized” national exchange; (iii) itis NOT quoted on the NASDAQ Stock Market, or even if so, has a price less than$5.00 per share; or (iv) is issued by a company with net tangibleassets less than $2.0 million, if in business more than a continuous threeyears, or with average revenues of less than $6.0 million for the past threeyears. The principal result or effect of being designated a “penny stock” isthat securities broker-dealers cannot recommend the stock but must trade in iton an unsolicited basis. Section 15(g) of the Securities Exchange Act of1934, as amended, and Rule 15g-2 promulgated thereunder by the SEC requirebroker-dealers dealing in penny stocks to provide potential investors with adocument disclosing the risks of penny stocks and to obtain a manually signedand dated written receipt of the document before effecting any transaction in apenny stock for the investor’s account.

Potential investors inthe Company’s common stock are urged to obtain and read such disclosurecarefully before purchasing any shares that are deemed to be “penny stock.”Moreover, Rule 15g-9 requires broker-dealers in penny stocks to approvethe account of any investor for transactions in such stocks before selling anypenny stock to that investor. This procedure requires the broker-dealer to(i) obtain from the investor information concerning his or her financialsituation, investment experience and investment objectives;(ii) reasonably determine, based on that information, that transactions inpenny stocks are suitable for the investor and that the investor has sufficientknowledge and experience as to be reasonably capable of evaluating the risks ofpenny stock transactions; (iii) provide the investor with a writtenstatement setting forth the basis on which the broker-dealer made thedetermination in (ii) above; and (iv) receive a signed and dated copyof such statement from the investor, confirming that it accurately reflects theinvestor’s financial situation, investment experience and investmentobjectives. Compliance with these requirements may make it more difficult forholders of the Company’s common stock to resell their shares to third partiesor to otherwise dispose of them in the market or otherwise.

***Upon such time as******theCompany’s stock is actively traded, shares eligible for future sale may adverselyaffect the market price of the Company’s common stock, as the future sale of asubstantial amount of the Company’s stock in the public marketplace couldreduce the price of the Company’s common stock.***

10

----

From time to time,certain of the Company’s stockholders may be eligible to sell all or some oftheir shares of common stock by means of ordinary brokerage transactions in theopen market pursuant to Rule 144, promulgated under the Securities Act (“Rule 144”),subject to certain limitations. In general, pursuant to Rule 144, astockholder (or stockholders whose shares are aggregated) who has satisfied aone-year holding period may, under certain circumstances, sell within anythree-month period a number of securities which does not exceed the greater of1% of the then outstanding shares of common stock or the average weekly tradingvolume of the class during the four calendar weeks prior to such sale.Rule 144 also permits, under certain circumstances, the sale ofsecurities, without any limitations, by a non-affiliate of the Company that hassatisfied a two-year holding period.

***Upon such time as******theCompany’s stock is actively traded, if the Company fails to maintain effectiveinternal controls over financial reporting, the price of the Company’s******common stock may beadversely affected.***

The Company’s internalcontrols over financial reporting may have weaknesses and conditions that needto be addressed, the disclosure of which may have an adverse impact on theprice of the Company’s common stock. The Company is required to establish andmaintain appropriate internal controls over financial reporting. Failure toestablish those controls, or any failure of those controls once established,could adversely impact the Company’s public disclosures regarding the Company’sbusiness, financial condition or results of operations. In addition, management’sassessment of internal controls over financial reporting may identifyweaknesses and conditions that need to be addressed in the Company’s internalcontrols over financial reporting or other matters that may raise concerns forinvestors. Any actual or perceived weaknesses and conditions that need to beaddressed in the Company’s internal controls over financial reporting,disclosure of management’s assessment of the Company’s internal controls overfinancial reporting or disclosure of the Company’s public accounting firm’sattestation to or report on management’s assessment of the Company’s internalcontrols over financial reporting may have an adverse impact on the price ofthe Company’s common stock.

***Upon such time as the Company’s stock is actively traded,standards for compliance with Section 404 of the Sarbanes-Oxley Act of2002 may be burdenson, and if the Company fails to comply in a timely manner,the Company’s business could be harmed and the Company’s stock price coulddecline.***

Rules adopted by theSecurities and Exchange Commission pursuant to Section 404 of theSarbanes-Oxley Act of 2002 require annual assessment of the Company’s internalcontrol over financial reporting, and attestation of the assessment by theCompany’s independent registered public accountants. This requirement willfirst apply to the Company’s annual report for fiscal 2006. The standards thatmust be met for management to assess the internal control over financialreporting as effective are new and complex, and require significantdocumentation, testing and possible remediation to meet the detailed standards.The Company may encounter problems or delays in completing activities necessaryto make an assessment of the Company’s internal control over financialreporting. In addition, the attestation process by the Company’s independentregistered public accountants is new and the Company may encounter problems ordelays in completing the implementation of any requested improvements andreceiving an attestation of the assessment by the Company’s independentregistered public accountants. If the Company cannot assess the Company’sinternal control over financial reporting as effective, or the Company’sindependent registered public accountants are unable to provide an unqualifiedattestation report on such assessment, investor confidence and share value maybe negatively impacted.

***The Company does not foresee paying cash dividends in theforeseeable future.***

The Company has not paidcash dividends on its stock and it does not plan to pay cash dividends on itsstock in the foreseeable future.

**ITEM 2.DESCRIPTION OF PROPERTY.**

Our executive offices are located at 235 PeachtreeStreet NE, Suite 1725, Atlanta, GA 30303. We have a lease agreement for use of officespace at this location under a 24 month arrangement. The office space containsapproximately 1,923 square feet. We rent our office space at a monthly rate of$2,844.

We believe that our existing facilities will beadequate to meet our needs for the foreseeable future. Should we needadditional space, management believes it will be able to secure additionalspace at commercially reasonable rates.

**ITEM 3.LEGAL PROCEEDINGS.**

None.

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

None.

11

----

**PART II**

**ITEM 5.MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS, ANDSMALL BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES.**

Our common stockis traded on the OTC Bulletin Board, referred to herein as the OTCBB, under thesymbol “VBTC.OB” The following table sets forth, for the calendar periodsindicated, the range of the high and low last reported bid prices of our commonstock, as reported by the OTCBB.  The quotations represent inter-dealerprices without retail mark-ups, mark-downs or commissions, and may notnecessarily represent actual transactions.
| ** **                                                   | ** ** | **High** | ** ** | **Low** | ** ** |
|--------------------------------------------------------------|------------|----------|------------|---------|------------|
|                                                         |       |     |       |    |       |
| Fiscal Year 2005  (January 1, 2005 — December 31, 2005) |       |     |       |    |       |
| First quarter  (January 1, 2005 - March 31, 2005) **         |       | $        | 0.10       |    | $          | 0.10 |   |
| Second quarter  (April 1, 2005 — June 30, 2005)         |       | $        | 0.10       |    | $          | 0.02 |   |
| Third quarter  (July 1, 2005 — September 30, 2005)      |       | $        | 0.25       |    | $          | 0.05 |   |
| Fourth quarter  (October 1, 2005 — December 31, 2005)   |       | $        | 0.25       |    | $          | 0.01 |   |
|                                                         |       |     |       |    |       |
| Fiscal Year 2006  (January 1, 2006 — December 31, 2006) |       |     |       |    |       |
| First quarter  (January 1, 2006 - March 31, 2006)            |       | $        | 0.40       |    | $          | 0.15 |   |
| Second quarter  (April 1, 2006 — June 30, 2006)         |       | $        | 0.65       |    | $          | 0.25 |   |
| Third quarter  (July 1, 2006 — September 30, 2006)      |       | $        | 0.52       |    | $          | 0.37 |   |
| Fourth quarter (October  1, 2006 — December 31, 2006)   |       | $        | 0.62       |    | $          | 0.30 |   |

----

*For the periods indicated, the Company’s common stockwas not trading on its primary market.

** For the period indicated, trading in the Company’scommon stock resumed on March 14, 2005.

As of December 31,2006, there were approximately 554 holders of record of our common stock.

We have appointed Standard Registrar and TransferCompany, Inc., 12528 South 1840 East, Draper, Utah 84020, as transfer agent forour shares of common stock.

Dividend Policy

[The Company has never declared or paid any cashdividends on its common stock.  TheCompany currently intends to retain any earnings for use in its operations andexpansion of its business and therefore does not anticpate paying any cashdividends in the foreseeable future.][To be confirmed.]

Issuer Purchase

The Company did not repurchase any of its equitysecurities during the years ended December 31, 2006 and 2005.

**EquityCompensation Plan Information**

In May 2006, our Board of Directors adopted our 2006Stock Option and Restricted Share Plan (“2006 Incentive Award Plan” or “Plan”),to reserve 3,300,000 shares of the Company’s common stock for issuance upon theexercise of stock options or the grant of restricted shares, which adoption issubject to stockholder approval.  We planto seek stockholder approval in order to satisfy the requirements forperformance-based compensation under Section 162(m) of the InternalRevenue Code of 1986, as amended, the requirements under Section 422 ofthe Code with respect to incentive stock options to the extent such options aregranted under the 2006 Incentive Award Plan. The following may be granted underthe Plan: shares of restricted common stock; options to acquire shares of ourcommon stock intended to qualify as incentive stock options, or ISOs, underSection 422(b) of the Code; or non-qualified stock options to acquireshares of our common stock, or NSOs.

The Plan provides that the exercise price for ISOs andNSOs shall not be less than the fair market value per share of our common stockat the date of grant. The Company cannot reprice outstanding options grantedunder the 2006 Incentive Award Plan without the consent of its stockholders.The option exercise price must be paid in full at the time the notice ofexercise of the option is delivered to us and must be tendered in cash, or bypersonal or certified check. The Plan’s Administrator has the discretion topermit a participant to exercise by delivering a combination of shares andcash. Each option expires within 10 years of the date of grant. However, ifISOs 

12

----

are granted to persons owning more than 10% of ourvoting stock, the exercise price may not be less than 110% of the fair marketvalue per share at the date of grant, and the term of the ISOs may not exceedfive years. As of the six month period ending June 30, 2006, no securities weregranted under this plan.

Other than the2006 Incentive Award Plan, we maintain no other equity compensation planpursuant to which we may grant equity awards to eligible persons.

The following table summarizes our equity compensationplan information as of December 31, 2006.
| **Plan Category(1)**                               | ** ** | **Number of Shares to  Be Issued upon  Exercise of  Outstanding  Options, Warrants  and Rights)** | ** ** | **Weighted-Average  Exercise Price of  Outstanding Options,  Warrants and Rights  (b)** | ** ** | **Number of Shares  Remaining Available  for Future Issuance  Under Equity  Compensation Plans  (Excluding Shares  Reflected in  Column (a))  (c)** | ** ** |
|---------------------------------------------------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------------------------------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|
|                                                    |       |                                                                                                                                      |       |                                                                                                             |       |                                                                                                                                                                                                  |       |
| Equity  Compensation plans approved by stockholders     |       | 0                                                                                                                                         |       | N/A                                                                                                              |       | N/A                                                                                                                                                                                                   |       |
| Equity  Compensation plans not approved by stockholders |       | 0                                                                                                                                         |       | N/A                                                                                                              |       | 3,300,000                                                                                                                                                                                             |       |
| Total                                                   |       | 0                                                                                                                                         |       | N/A                                                                                                              |       | 3,300,000                                                                                                                                                                                             |       |

 

The Company has notdeclared dividends on its common stock and does not anticipate paying dividendson its common stock in the foreseeable future.

**ITEM 6.MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.**

**Business Overview**

The Company is a holding company with twonon-operating subsidiaries,Quantum Reader, Inc. (“QR”) and Truscom, a Japanesesubsidiary.

Vubotics isdeveloping an extensive intellectual asset portfolio for the purposes ofcreating products and direct licensing. Revenue models include sale of productthrough distributor, sale of product through channel, royalty from embeddedapplication on device, royalty from enabled application online, sharedadvertising revenue, sales of datapoints and outright licensing to third parties.  Given the nature of the revenue streams,VuBotics will use the best practices demonstrated by global IP entities tomaximize its tax efficiencies, create formidable barriers to competition and anscalable world class research effort. There can be no assurances that the projected potential applicationswill function in a way that will meet the Company’s revenue objectives or beaccepted by the marketplace. See “Risk Factors.”

Certain Patentapplications have been made in connection with the technology and the relatedmethods of analysis, abstraction and delivery of electronic information. Therecan be no assurances that these patents will be granted. See “Risk Factors”.

**Summary of Critical AccountingPolicies**

The Company has nominaloperating revenue as it is in the development process of its product. At suchtime as the Company has revenue, the Company intends to adopt such policies asrevenue recognition and stock compensation.

**Resultsof Operations**

General. The following discussionand analysis explains trends in the Company’s financial condition and resultsof operations for the years ended December 31, 2006 and 2005. The consolidatedfinancial statements and notes thereto included as part of the financialstatements should be read in conjunction with these discussions.

The Company incurred a net loss for the twelve monthsended December 31, 2006 of $2,653,447. This compares to a loss of $2,038,096for the same period in 2005, an increase of $615,351, or 30%

The Company recorded revenues of $37,000 for the yearended December 31, 2006 compared to $2,672 for the year ended December 31,2005. These revenues were derived from a pilot project with a major mediacontent provider.

13

----

The increase in net loss is primarily the result of anincrease in product development of $381,486, marketing costs of $501,833 andGeneral expenses of $655,263 offset by a gain on debt restructure of $798,046.

**Liquidityand Sources of Capital**

As of December 31,2006, the Company had a cash balance of $513,947, and $544,056 in total assets.The Company’s current liabilities decreased from $2,958,525 to $1,767,475. Thisdecrease is due to the restructure of notes payable whereby the terms weremodified and accrued interest was forgiven.  The Company’s notes payablewith an aggregate principal balance of $1,135,000 was restructured pursuant toagreements whereby the old notes and terms were exchanged for new notes and newterms.  Under the agreements, accrued interest of $935,546 was forgiven,interest rates were reduced to 10% and maturity was extended to December,2008.  In addition, accrued interest of $191,185 was combined with theoutstanding principal balance of one of the old notes into a new note.

Net cash used by operations was $1,614,989 related tothe costs and expense of generating business, which primarily consisted of feesto employees, software developers and repayments of accrued liabilities. Net cash used by investing activities was $32,213 consisting of equipmentpurchases.  On August 24, 2006, the Company sold 7,399,799 shares ofcommon stock together with warrants to purchase up to an additional 7,399,799shares of common stock for an aggregate of $2,219,940. The warrants have anexercise price of $0.60 per common share and a term of five years.  Netcash provided by financing activities was $2,160,966 for the twelve monthsended December 31, 2006 resulting from the sale of common stock, the issuanceof notes payable, and loans from a related party.  Notes payable on demandof $925,000 bear an interest rate of 10% per annum due December 31, 2008 andnotes payable of $360,659 bear an interest rate of 10% per annum due December15, 2008.  The company issued certain short-term notes with an aggregateprinciple amount of $235,000 due within twelve months.  The company paidthese notes along with interest of $5,000 in August 2006.

The Company has financed its operations primarilythrough the sale of its common stock and notes payable.

The Company believes that its cash needs for the nexttwelve months will be met by debt financings, loans from its directors,officers and shareholders and private placements of Company securities.However, there can be no assurances that the Company will be successful inobtaining sufficient funds needed for the subsequent development of itsbusiness.  If the Company issues more shares of its common stock itsshareholders may experience dilution in the value per share of their commonstock.

The Company continues to investigate the availability,source and terms for external financing, but has not entered into anyagreements at this time for such financing. The Company cannot assure fundswill be available from any source, or, if available, that the Company will beable to obtain the funds on terms agreeable to it. Any additional debt theCompany incurs could result in a substantial portion of its cash flows fromoperating activities, if any, being used for the payment of principal andinterest on the indebtedness, and could render the Company more vulnerable tocompetitive challenges and economic downturns.

**ITEM 7.FINANCIAL STATEMENTS.**

The financial statementsrequired by Item 310(a) of Regulation S-B are attached hereto as Exhibit A.

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

None.

**ITEM 8A.CONTROLS AND PROCEDURES.**

Based on his review and evaluation, which wascompleted in consultation with management in connection with the filing of thisForm 10-KSB, the Company’s Chief Executive Officer and Chief Financial Officerhas concluded that the design and operation of the Company’s disclosurecontrols and procedures (as defined in Rules 13a-14 and 15d-14 promulgatedunder the Securities Exchange Act of 1934, as amended (the “Exchange Act”))were effective as of December 31, 2006 and as of the date of this report, intimely alerting the Company’s management to material information required to beincluded in this Form 10-KSB and other Exchange Act filings. There were nochanges (including corrective actions with regard to significant deficienciesor material weaknesses) in the Company’s internal control over financialreporting that have materially affected, or are reasonably likely to materiallyaffect, the Company’s internal control over financial reporting.

**ITEM 8B.OTHER INFORMATION.**

14

----

None.

**PART III**

**ITEM 9.DIRECTORS, EXECUTIVE OFFICERS,PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTIONS 16(A) OF THE EXCHANGEACT.**

**DIRECTORS AND EXECUTIVE OFFICERS**

Our executive officers and directors and theirrespective ages and positions as of December 31, 2006 are as follows:
| **Name**             | ** ** | **Age** | ** ** | **Position**                                                   | ** ** |
|----------------------|------------|---------|------------|----------------------------------------------------------------|------------|
|                 |       |    |       |                                                           |       |
| Philip E.  Lundquist |       | 71      |       | Chief Executive  Officer, Chief Financial Officer and Chairman |       |
| Ronan A. Harris      |       | 36      |       | Director                                                       |       |
| Robert T.  Eramian*  |       | 62      |       | Director                                                       |       |

----

*Robert E. Eramian was appointed as a director of theCompany effective as of December 14, 2006.

The term of office of each director of the Companyends at the next annual meeting of the Company’s stockholders or when suchdirector’s successor is elected and qualifies. No date for the annual meetingof stockholders is specified in the Company’s bylaws or has been fixed by theBoard of Directors. Pursuant to the Company’s bylaws, the date of the annualmeeting is to be determined by the current Board of Directors. On or aboutDecember 20, 2006, the Company filed with the SEC a preliminary Proxy Statementon Schedule 14(a) with respect to the Company’s annual meeting of theshareholders to be held January 30, 2007.

The following information sets forth the backgroundsand business experience of the directors, executive officers and key employees:

**PHILIP E. LUNDQUIST**- Mr. Lundquist has served as Secretary/Chief Financial Officer and a Chairmanof the Board for the Company since January, 1999. On May 1, 2003, Mr. Lundquistwas elected President and Chief Executive Officer of the Company. From 1988 tothe present he has served as President of Lundquist Advisory Company, a companywhich provids corporate finance advisory services. He has held managementpositions at Reynolds Securities, Montgomery Securities, Inc. and Alex Brown& Sons in Miami, San Francisco and Baltimore. He was Director of CorporateFinance Deloitte & Touche, Atlanta, Georgia. Mr. Lundquist graduated fromWilliams College with a bachelors degree in political science and economics in1957. During 1962 to 1964, he attended the Institute of Investment Banking atthe Wharton School of Business, University of Pennsylvania.

**RONAN A. HARRIS** -In January 1999, Mr. Harris founded Aubyn Management Ltd. which specializes indeveloping new markets and business opportunities in Japan. From 1996 toJanuary 1999 he was employed as a consultant for JJ International, a financialconsulting firm. From December, 1993 to February, 1996 he was employed as anengineer at Mitsubishi Corporation. He graduated with honors from TheUniversity of Dublin with a degree in Electrical Engineering. Presently, Mr.Harris lives in Dublin, Ireland and is an executive with Google, Inc.

**ROBERT T. ERAMIAN** -Mr. Eramian is Managing Director with Strategos Financial LLC, where he hasbeen employed since 2005. Mr. Eramian works closely with Private FamilyOffices, Hedge Funds and Investment Advisors in his capacity as ManagingDirector at Strategos Financial, LLC.  From 2002 to 2005, Mr. Eramian wasthe National Sales Manager for the Philadelphia Financial Group.  From2000 to 2002, Mr. Eramian handled offerings designed exclusively for high networth clients while working at Deutsche Banc Alex Brown.  From 1994 to2000, Mr. Eramian served as the Chief Executive Officer of Iatros HealthcareCorp.  Prior to 1994 Mr. Eramian worked as an Independent Consultantassisting two companies go from start-ups to being listed on the NYSE. Mr. Eramian received his Bachelor of Arts from Merrimack College in 1966, hisMaster of Arts from Dayton University in 1967 and his Ph.D./ABD from EmoryUniversity in 1980.

**Family Relationships**

There are no family relationships among any of theofficers or directors of the Company.

**Board****Committees**

15

----

At this time, the Board has three committeesidentified. They are Governance, Compensation & Performance andStrategy.  The member of the GovernanceCommittee is Philip E. Lundquist, Chairman & CEO.  The member of the Compensation &Performance Committee is Robert Eramian, Director.  The member of the Strategy Committee is RonanHarris, Director.

**Code of Ethics**

The Company adopted a Code of Ethics (the “Code ofEthics”) applicable to the Company’s principal executive, financial andaccounting officer and persons performing similar functions. In addition, theCode of Ethics applies to the Company’s employees, officers, directors, agentsand representatives.  The Company’s Code of Ethics is intended to complywith the rules and regulations of the Securities and Exchange Commission andthe rules of the NASDAQ Stock Market.  The Code of Ethics is attachedhereto as Exhibit 14 and incoporated herein by reference and available, at nocost, from the Company upon written request to Philip E. Lundquist, Chief ExecutiveOfficer of Vubotics, Inc., 235 Peachtree Street NE, Suite 1725, Atlanta, GA30303.

**Director Compensation**

The following table sets forth with respect to thenamed director, compensation information inclusive of equity awards andpayments made in the fiscal year ended December 31, 2006.
| **Name  (a)**                | ** ** | **Fees  Earned  or Paid  in Cash  ($)  (b)** | ** ** | **Stock  Awards  ($)  (c)** | ** ** | **Option  Awards  ($)  (d)** | ** ** | **Non-Equity  Incentive Plan  Compensation  ($)  (e)** | ** ** | **Change in  Pension Value  and Nonqualified  Deferred  Compensation  Earnings  (f)** | ** ** | **All Other  Compensation  ($)  (g) (4)** | ** ** | **Total  ($)  (h)** | ** ** |
|------------------------------|------------|--------------------------------------------------------|------------|-----------------------------|------------|------------------------------|------------|-------------------------------------------------------------|------------|------------------------------------------------------------------------------------------------------|------------|-----------------------------------------------------|------------|---------------------|------------|
| **Philip  E. Lundquist (5)** |       | —                                                 |       | —                      |       | —                       |       | —                                                      |       | —                                                                                               |       | —                                              |       | —              |       |
| **Ronan  A. Harris**         |       | —                                                 |       | —                      |       | —                       |       | —                                                      |       | —                                                                                               |       | —                                              |       | —              |       |
| **Robert  T. Eramian (1)**   |       | —                                                 |       | —                      |       | —                       |       | —                                                      |       | —                                                                                               |       | —                                              |       | —              |       |
| **Craig  J. Larson (2)**     |       | —                                                 |       | —                      |       | —                       |       | —                                                      |       | —                                                                                               |       | —                                              |       | —              |       |
| **Roy Dantzman (3)**         |       | —                                                 |       | —                      |       | —                       |       | —                                                      |       | —                                                                                               |       | —                                              |       | —              |       |

----

(1)           Mr.Eramian appointed as a director ofthe Company effective as of December 14, 2006.

(2)           Craig J. Larson resigned as ChiefScientist and a director of the Company effective as of December 13, 2006.

(3)           Roy Dantzman resigned as a directorof the Company effective as of December 14, 2006.

(4)           With the exception of reimbursementof expenses incurred by our named executive officers during the scope of theiremployment, none of the named executive received any other compensation,perquisites, personal benefits in excess of $10,000.

(5)           See Executive Compensation tablebelow for the total amount of compensation received by Mr. Lundquist in hiscapacities as our CEO, President, CFO, Secretary and Treasurer.

Directors that arenon-officers of the Company do not receive a cash retainer annually nor do theyreceive any remuneration for attendance at a board meeting, other thanreimbursement for travel expenses.

**CORPORATEGOVERNANCE**

**Board Determination of Independence**

Our board of directors has determined that Messr.Eramian is each “independent” as that term is defined by the NationalAssociation of Securities Dealers Automated Quotations (“NASDAQ”).  Underthe NASDAQ definition, an independent director is a person who (1) is notcurrently (or whose immediate family members are not currently), and has notbeen over the past three years (or whose immediate family members have not beenover the past three years), employed by the company; (2) has not (or whoseimmediate family members have not) been paid more than $60,000 during thecurrent or past three fiscal years;  (3) has not (or whose immediatelyfamily has not) been a partner in or controlling shareholder or executiveofficer of an organization which the company made, or from which the companyreceived, payments in excess of the greater of $200,000 or 5% of thatorganizations consolidated gross revenues, in any of the most recent threefiscal years; (4) has not (or whose immediate family members have not), overthe past three years been employed as an executive officer of a company inwhich an executive officer of Vubotics has served on that company’scompensation committee; or (5) is not currently (or whose immediate familymembers are not currently), and has not been over the past three years (orwhose immediate family members have not been over the past three years) apartner of Vubotics’ outside 

16

----

auditor. A director who is, or at any time during thepast three years, was employed by the Company or by any parent or subsidiary ofthe Company, shall not be considered independent.

**Board of Directors Meetings andAttendance**

The Board of Directors has responsibility forestablishing broad corporate policies and reviewing our overall performancerather than day-to-day operations. The primary responsibility of our Board ofDirectors is to oversee the management of our company and, in doing so, servethe best interests of the company and our stockholders. The Board of Directorsselects, evaluates and provides for the succession of executive officers and,subject to stockholder election, directors. It reviews and approves corporateobjectives and strategies, and evaluates significant policies and proposedmajor commitments of corporate resources. Our Board of Directors alsoparticipates in decisions that have a potential major economic impact on ourcompany. Management keeps the directors informed of company activity throughregular communication, including written reports and presentations at Board ofDirectors.

We have no formal policy regarding director attendanceat the annual meeting of stockholders, although all directors are expected toattend the annual meeting of stockholders if they are able to do so. The boardof directors held 2 meetings in 2006, which were both telephonic. During bothof the board meetings, all board members were present, either by person or onthe telephone.

**ITEM 10. EXECUTIVE COMPENSATION.**

The following table provides certain summaryinformation concerning compensation awarded to, earned by or paid to our ChiefExecutive Officer and other named executive officers and directors of ourCompany whose total annual salary and bonus exceeded $100,000 (collectively,the “named officers”) for fiscal year ended December 31, 2006.

**Summary****Compensation Table**
| **Name & Principal Position**                        | ** ** | **Year** | ** ** | **Salary ($)** | ** ** | **Bonus  ($)** | ** ** | **Stock  Awards  ($)** | ** ** | **Option  Awards ($) *** | ** ** | **Non-Equity  Incentive Plan  Compensation  ($)** | ** ** | **Non-  Qualified Deferred  Compensation  Earnings ($)** | ** ** | **All  Other  Compensation  ($) (1)** | ** ** | **Total ($)** | ** ** |
|-------------------------------------------------------------------------|------------|----------|------------|---------------------|------------|----------------|------------|------------------------|------------|------------------------------------|------------|--------------------------------------------------------|------------|--------------------------------------------------------------------|------------|--------------------------------------------|------------|--------------------|------------|
| **Philip  Lundquist CEO, CFO,**

**Chairman,  Treasurer and Secretary** | ** ** | **2006** | ** ** | **40,833**          | ** ** | **—**     | ** ** | **360,300**            | **(2)**    | **—**                         | ** ** | **—**                                             | ** ** | **—**                                                         | ** ** | **—**                                 | ** ** | **401,133**        | ** ** |

(1) With theexception of reimbursement of expenses incurred by our named executive officersduring the scope of their employment and stated stock award amounts, none ofthe named executives received any other compensation, perquisites, personalbenefits in excess of $10,000.

(2) Mr. Lundquist received the following stock awardsduring the 2006 fiscal year in consideration for his services as the CEO, CFO,President, Chairman, Treasurer and Secretary of the Company for 2005 and 2006fiscal years: (i) 1,100,000 shares of Common Stock on April 11, 2006 valued at$0.25 per share for a total compensation of $275,000. The Company’s board ofdirectors approved the award in light of believing that total consideration of$275,000 was a fair estimate of the amount of compensation that should begranted to Mr. Lundquist for his services to the Company during fiscal year2005 and as of April 11, 2006 for the 2006 fiscal year, and that the price of$0.25 per share was a fair value of our common stock on April 11, 2006, despiteno trading activity being recorded as of that date; (ii) 342,000 shares ofCommon Stock on June 9, 2006 valued at $0.25 per share for a total compensationof $85,300. The Company’s board of directors approved the award in light ofbelieving that total consideration of $85,300 was a fair estimate of the amountof compensation that should be granted to Mr. Lundquist for his services to theCompany from April 11, 2006 to June 9, 2006 for the respective portion of 2006fiscal year. The respective grants of common stock of the Company to Mr.Lundquist vested immediately on each date of the grants.

(3) Effective as ofDecember 13, of 2006, Mr. Craig Larson resigned as our Chief Scientist anddirector. His annual compensation for the fiscal year ended December 31, 2006,did not exceed $100,000. See also “Transactionswith Related Persons, Promoters and Certain Control Persons” section set forthbelow, for further description of Mr. Larson’s total compensation forthe fiscal year ended December 31, 2006.

In addition, we do not have either (i) a plan thatprovides for the payment of retirement benefits, or benefits that will be paidprimarily following retirement, including but not limited to tax-qualifieddefined benefit plans, supplemental executive retirement plans, tax-qualifieddefined contribution plans and nonqualified defined contribution plans, a (ii)any contract, agreement, plan or arrangement, 

17

----

whether written or unwritten, that provides forpayment(s) to any of our named executive officers at, following, or inconnection with the resignation, retirement or other termination of any of ournamed executive officers, or in connection with a change in control of ourcompany or a change in any of our named executive officers’ responsibilitiesfollowing a change in control, with respect to each of our named executiveofficers.

The following table sets forth the compensation earnedby the Company’s Chief Executive Officer during the fiscal years ended December31, 2005 and 2004, respectively, and other executive officers whose annualcompensation exceeded $100,000 during these fiscal years.
| ** **                                              | ** ** | ** ** | ** ** | ** **       | ** ** | ** **     | ** ** | **Long-term**    | ** ** | ** **  | ** ** | ** **  | ** ** |
|---------------------------------------------------------|------------|------------|------------|------------------|------------|----------------|------------|------------------|------------|-------------|------------|-------------|------------|
| ** **                                              | ** ** | ** ** | ** ** | ** **       | ** ** | ** **     | ** ** | **compensation** | ** ** | **Payouts** | ** ** |
| ** **                                              | ** ** | ** ** | ** ** | **Annual**       | ** ** | **Restricted** | ** ** | **Number**       | ** ** | ** **  | ** ** | **All**     | ** ** |
| **Name & Principal**                      | ** ** | ** ** | ** ** | **Compensation** | ** ** | **Stock**      | ** ** | **of**           | ** ** | **LTIP**    | ** ** | **other**   | ** ** |
| **Position**                                            | ** ** | **Year**   | ** ** | **Salary**       | ** ** | **Bonus**      | ** ** | **Awards**       | ** ** | **Options** | ** ** | **payouts** | ** ** | **Compensation** | ** ** |
| ** **                                              | ** ** | ** ** | ** ** | **$**            | ** ** | **$**          | ** ** | ** **       | ** ** | **($)**     | ** ** | **($)**     | ** ** | ** ** | ** ** |
| ** **                                              | ** ** | ** ** | ** ** | ** **       | ** ** | ** **     | ** ** | ** **       | ** ** | ** **  | ** ** | ** **  | ** ** | ** ** | ** ** |
| **Philip  Lundquist**                                   |       | 2005       |       | 0                |       | 0              |       | 0                |       | 0           |       | 0           |       | $ | 160,000 | (1) |
| CEO, CFO,  President, Chairman, Treasurer and Secretary |       | 2004       |       | 0                |       | 0              |       | 0                |       | 0           |       | 0           |       | 250,000 | (2) |
|                                                    |       |       |       |             |       |           |       |             |       |        |       |        |       |   |   |
| **Craig  J. Larson (3)**                                |       | 2005       |       | 107,850          |       | 0              |       | 0                |       | 0           |       | 0           |       | $ | 0 |   |
| Chief Scientist and  Director                           |       | 2004       |       | 0                |       | 0              |       | 0                |       | 0           |       | 0           |       | 0 |   |

----

(1) During 2005 fiscalyear ended December 31, 2005, the Company granted Mr. Lunquist 900,000 sharesof its Common Stock valued at $0.10 per share for a total compensation of$90,000, 200,000 shares valued at $0.10 per share for a total compensation of$20,000 and 200,000 shares of its Common Stock for a total compensation of$50,000; thereby, resulting in a total compensation of $160,000 during 2005fiscal year, in consideration for his services as the CEO, CFO, President,Chairman, Treasurer and Secretary of the Company.

(2) During 2004 fiscalyear ended December 31, 2004, the Company granted Mr. Lunquist 2,500,000 sharesof its Common Stock valued at $0.10 per share for a total compensation of$250,000, in consideration for his services as the CEO, CFO, President,Chairman, Treasurer and Secretary of the Company.

(3) Mr. Larson resignedas Chief Scientist on December 13, 2006. See Summary Compensation Table,footnote #3, set forth above and “Transactionswith Related Persons, Promoters and Certain Control Persons” section set forthbelow, for Mr. Larson’s total compensation for the fiscal year endedDecember 31, 2006.

**OUTSTANDING EQUITY AWARDS AT FISCALYEAR-END**

The followingtable sets forth information concerning unexercised options; stock that has notvested; and equity incentive plan awards for each of our named executiveofficers outstanding as of the end of our fiscal year ended December 31, 2006. 
| ** **               | ** ** | **Option Awards**                                                         | ** ** | **Stock Awards**                                                            | ** ** |
|--------------------------|------------|--------------------------------------------------------------------------------|------------|----------------------------------------------------------------------------------|------------|
| ** **               | ** ** | ** **                                                                     | ** ** | ** **                                                                       | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | **Equity** | ** ** |
| ** **               | ** ** | ** **                                                                     | ** ** | ** **                                                                       | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | **Equity** | ** ** | **Incentive** | ** ** |
| ** **               | ** ** | ** **                                                                     | ** ** | ** **                                                                       | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | **Incentive** | ** ** | **Plan Awards:** | ** ** |
| ** **               | ** ** | ** **                                                                     | ** ** | ** **                                                                       | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | **Plan** | ** ** | **Market or** | ** ** |
| ** **               | ** ** | ** **                                                                     | ** ** | ** **                                                                       | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | **Awards:** | ** ** | **Payout** | ** ** |
| ** **               | ** ** | ** **                                                                     | ** ** | ** **                                                                       | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | **Number** | ** ** | **Value** | ** ** |
| **Name**                 | ** ** | **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  ($)** | ** ** | **Option  Expiration  Date** | ** ** | **Number  of Shares  or Units  of Stock  That  Have  Not  Vested  (#)** | ** ** | **Market  Value of  Shares  or  Units  of  Stock  That  Have  Not  Vested  ($)** | ** ** | **of  Unearned  Shares,  Units  or  Other  Rights  That  Have  Not  Vested  (#)** | ** ** | **of  Unearned  Shares,   Units  or  Other  Rights  That  Have  Not  Vested  ($)** | ** ** |
| **Philip  E. Lundquist** |       | —                                                                         |       | —                                                                           |       | — |   | — |   | — |   | — |   | — |   | — |   | — |   |
| **Craig Larson (1)**     |       | —                                                                         |       | —                                                                           |       | — |   | — |   | — |   | — |   | — |   | — |   | — |   |

----

(1)             Craig J. Larsonresigned as the Chief Scientist and a director of the Company effective as ofDecember 13, 2006.

18

----

In addition, we do not have either (i) a plan thatprovides for the payment of retirement benefits, or benefits that will be paidprimarily following retirement, including but not limited to tax-qualifieddefined benefit plans, supplemental executive retirement plans, tax-qualifieddefined contribution plans and nonqualified defined contribution plans, a (ii)any contract, agreement, plan or arrangement, whether written or unwritten,that provides for payment(s) to any of our named executive officers at,following, or in connection with the resignation, retirement or othertermination of any of our named executive officers, or in connection with achange in control of our company or a change in any of our named executiveofficers’ responsibilities following a change in control, with respect to eachof our named executive officers.

**Employment Agreements with ExecutiveOfficers**

We have no employmentagreements with our employees.  Inaddition, the Company has contracted with several consulting entities tofulfill specific roles and functions. Each consulting engagement has been designed to gain access to a levelof experience and technical expertise that would not be available throughtraditional employment strategies.

**DirectorCompensation**
| **Name**                  | ** ** | **Fees  Earned  or Paid in  Cash  ($)** | ** ** | **Stock Awards  ($)** | ** ** | **Non-Equity  Incentive Plan  Compensation  ($)** | ** ** | **Non-  Qualified Deferred  Compensation  Earnings ($)** | ** ** | **All  Other  Compensation  ($) (1)** | ** ** | **Total ($)** | ** ** |
|---------------------------|------------|---------------------------------------------------|------------|----------------------------|------------|--------------------------------------------------------|------------|--------------------------------------------------------------------|------------|--------------------------------------------|------------|--------------------|------------|
| **Ronan  A. Haris**       |       |                                              |       |                       |       |                                                   |       |                                                               |       |                                       |       |               |       |
| **Roy Rantzamn(1)**       | ** ** | ** **                                        | ** ** | ** **                 | ** ** | ** **                                             | ** ** | ** **                                                         | ** ** | ** **                                 | ** ** | ** **         | ** ** |
| **Robert T. Eramain (2)** | ** ** | ** **                                        | ** ** | ** **                 | ** ** | ** **                                             | ** ** | ** **                                                         | ** ** | ** **                                 | ** ** | ** **         | ** ** |

----

(1) Roy Dantzmanresigned from his position as a director on December 14, 2006.

(2) Robert T.Eramian was appointed as a Director on December 14, 2006.

The Company does not havecurrently pay any compensation to its Directors.

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

The following table sets forth information regardingthe beneficial ownership of the Company’s common stock as of  December 31,2006, except as otherwise indicated in the relevant footnote, by (1) eachperson or group that we know beneficially owns more than 5% of our commonstock, (2) each of our directors and the director nominees, (3) ourChief Executive Officer, and our four most highly compensated executiveofficers other than our Chief Executive Officer for the fiscal year endedDecember 31, 2005, collectively referred to in this report as the “NamedExecutive Officers,” and (4) all current executive officers and directorsas a group. Unless otherwise indicated, the address of each person identifiedbelow is c/o Vubotics, Inc., 235 Peachtree Street NE, Suite 1725, Atlanta, GA30303.

The percentages of beneficial ownership shown beloware based on 49,885,718 shares of our common stock outstanding as of December31, 2006, unless otherwise stated. Beneficial ownership is determined inaccordance with the rules of the Securities and Exchange Commission andgenerally includes those securities over which a person may exercise voting orinvestment power. In addition, shares of common stock which a person has theright to acquire upon the exercise of stock options within 60 days of December31, 2006 are deemed outstanding for the purpose of computing the percentageownership of that person, but are not deemed outstanding for computing thepercentage ownership of any other person. Except as indicated in the footnotesto this table or as affected by applicable community property laws, the personsnamed in the table have sole voting and investment power with respect to allshares of common stock beneficially owned.

19

----

 
| **Name**                                                                            | ** ** | **Title of Class** | ** ** | **Name and   Address of  Beneficial   Owner** | ** ** | **Amount and   Nature of   Benefical Owner** | ** ** | **Percentage of  Class  Beneficially  Owned** | ** ** |
|-------------------------------------------------------------------------------------|------------|------------------------------|------------|-------------------------------------------------------------------|------------|-----------------------------------------------------------------------|------------|----------------------------------------------------|------------|
| Philip E.  Lundquist (1)                                                            |       | 7,441,102                    |       | 14.90                                                             | %          | 7,441,102                                                             |       | 14.90                                              | %          |
| Ronan A. Harris  (2)                                                                |       | 589,323                      |       | 1.18                                                              | %          | 589,323                                                               |       | 1.18                                               | %          |
| Robert T.  Eramian (2)                                                              |       | 360,000                      |       | *                                                                 |       | 360,000                                                               |       | *                                                  |       |
| Potomac Capital  Management Inc. (3) 825 Third Avenue 33rd Floor New York, NY 10022 |       | 5,466,266                    |       | 10.96                                                             | %          | 5,466,266                                                             |       | 0                                                  | %          |
| All current directors  and named officers as a group (3 in all)                     |       | 8,390,425                    |       | 16.82                                                             | %          | 8,390,425                                                             |       | 16.82                                              | %          |

----

* Represents less than 1%.

(1             Includes1,239,019 shares held in trust for Philip E. Lundquist.

(2)           Beneficial ownership consistsentirely of common stock.

(3)           Consists of (i) 2,733,133 shares ofcommon stock, and (ii) 2,733,133 shares of common stock underlying the warrantsacquired by the indicated beneficial owner in the August 2006 financing. Suchexercise would assume the waiver by the beneficial owner of the provisionlimiting its ability to exercise the warrants to purchase up to 9.99% of theissued and outstanding shares of common stock.

**ITEM 12.CERTAIN RELATIONSHIPS ANDRELATED TRANSACTIONS.**

The following information summarizes certain transactionseither engaged in during the last two years or proposed to be engaged in by theCompany’s executive officers, directors, more than 5% stockholders, orimmediate family members of such persons.

**TRANSACTIONSWITH RELATED PERSONS, PROMOTERS AND CERTAIN CONTROL PERSONS**

During the fiscal years ending December 31, 2006 and2005, the Company issued a total of 7,190,483 shares, all at a price equalto market value, of which 1,948,483 were issued in repayment of cashadvances previously made by Mr. Lundquist to the Company, 2,500,000 were issuedin consideration of services rendered by Mr. Lundquist during prior years, and2,742,000 were issued in consideration of Mr. Lundquist’s services renderedduring 2005 and 2006.  As of December 31,2006, the outstanding amount of cash advances still owed to Mr. Lundquist bythe Company is $78,985.

In November, 2004, we acquired QuantumReader, Inc. (“QR”),pursuant to the acquisition of all of the issued and outstanding stock of QR ina stock for stock transaction. The transaction was valued at $102,574 with$2,574 being allocated for liabilities assumed and 1,000,000 shares of theCompany’s common stock issued for the technology of QR. As part of theacquisition, all intellectual property rights held by the developers of theQuantomReader technology were assigned to QR. The QuantumReader and its relatedtechnologies were initially created by Craig Larson, our then Chief Scientistand director. As part of the purchase of QR, we entered into an agreement withEkistics Research, LLC (“Ekistics”), an entity controlled by Mr. Larsonobligating us to pay Ekistics $135,900 for the industrial design andengineering services that were provided in 2005. During the fiscal year endedDecember 31, 2006, we paid $73,976 to Ekistics, for the industrial design andengineering services provided to us during the 2006 fiscal year. EffectiveDecember 13, 2006, Mr. Larson resigned as our Chief Scientist and director.

There have not been any other transactions or proposedtransactions during the fiscal years ended December 31, 2006, 2005 and 2004, towhich we were or are to be a party, in which our officers, directors ornominees had or are to have a direct or indirect material interest.

**Review, Approval or Ratification ofTransactions with Related Persons**

We believe that the terms of all of the abovetransactions are commercially reasonable and no less favorable to us than wecould have obtained from an unaffiliated third party on an arm’s length basis.Our policy requires that all related parties recuse themselves from negotiatingand voting on behalf of our company in connection with related partytransactions.

**Parents**

20

----

Not applicable

**Promoter and Certain Control Persons**

Not applicable.

**Section 16(a) Beneficial OwnershipReporting Complience**

Section 16(a) of the Securities Exchange Act of 1934requires the Company directors, executive officers and persons who own morethan ten percent of a registered class of the Company’s equity securities, tofile with the Securities and Exchange Commission (“SEC”) initial reports ofownership and reports of changes in ownership of common stock and the Company’sother equity securities. Officers, directors and greater than ten-percentbeneficial owners are required by SEC regulations to furnish the Company withcopies of all Section 16(a) reports they file. During the year ended December31, 2006, Form 3s and Form 5s for Messrs. Lundquist, Harris, Eramian, Teters,Larson and Dantzman were not filed as required. The Company has been informedby each of these individuals that these delinquent forms are in the process ofbeing filed.

**ITEM 13.EXHIBITS AND REPORTS ON FORM8-K.**

Exhibits.
| Exhibit No. | ** ** | **Description**                                                                                                                                                                                                                                        |
|-------------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|        |       |                                                                                                                                                                                                                                                   |
| 2.1         |       | Agreement and Plan of Reorganization between Silver  Strike Nevada and Christopher Partners, Inc., dated January 29, 1999.  (Incorporated by reference to Exhibit No. 8.1, to Form 10-SB, filed January  13, 2000.)                                    |
|        |       |                                                                                                                                                                                                                                                   |
| 3.1         |       | Articles of Incorporation of Silver Strike Mining  Company, Inc. (Incorporated by reference to Exhibit No. 2.1, to Form 10-SB,  filed January 13, 2000.)                                                                                               |
|        |       |                                                                                                                                                                                                                                                   |
| 3.2         |       | Certificate of Amendment to the Articles of  Incorporation filed July 8, 1996. (Incorporated by reference to Exhibit No.  2.2, to Form 10-SB, filed January 13, 2000.)                                                                                 |
|        |       |                                                                                                                                                                                                                                                   |
| 3.3         |       | Articles of Merger filed July 18, 1996.  (Incorporated by reference to Exhibit No. 2.3, to Form 10-SB, filed January  13, 2000.)                                                                                                                       |
|        |       |                                                                                                                                                                                                                                                   |
| 3.4         |       | Certificate of Amendment to Articles of  Incorporation filed July 23, 1998. (Incorporated by reference to Exhibit  No. 2.4, to Form 10-SB, filed January 13, 2000.)                                                                               |
|        |       |                                                                                                                                                                                                                                                   |
| 3.5         |       | Certificate of Amendment to Articles of  Incorporation filed February 12, 1999. (Incorporated by reference to Exhibit  No. 2.5, to Form 10-SB, filed January 13, 2000.)                                                                                |
|        |       |                                                                                                                                                                                                                                                   |
| 3.6         |       | Articles of Share Exchange filed February 26, 1999.  (Incorporated by reference to Exhibit No. 2.6, to Form 10-SB, filed January  13, 2000.)                                                                                                           |
|        |       |                                                                                                                                                                                                                                                   |
| 3.7         |       | Amended and Restated Bylaws of Vubotics, Inc.  (Incorporated by reference to Exhibit No. 2.7, to Form 10-SB, filed January  13, 2000.)                                                                                                                 |
| 4.1         |       | Preferred Stock Document. (Incorporated by reference  to Exhibit No. 4.1 to Form 10-QSB, filed November 13, 2000.)                                                                                                                                     |
|        |       |                                                                                                                                                                                                                                                   |
| 10.1        |       | Exclusive Sales Representative Agreement between  Truscom and XTec, dated October 11, 2000. (Incorporated by reference to  Exhibit No. 10.1 to the Form 10-QSB, filed November 13, 2000.)                                                              |
|        |       |                                                                                                                                                                                                                                                   |
| 10.2        |       | Consultant Agreement between Halifax and Columbia  Financial Group, Inc., dated January 2, 2001. (Incorporated by reference to  Exhibit 10.2 to the Form 10-KSB, filed March 29, 2001).                                                                |
|        |       |                                                                                                                                                                                                                                                   |
| 10.3        |       | Employment Agreement between Stephen E. Brisker and  Halifax International, Inc., dated June 1, 2001. (Incorporated by reference  to Exhibit 10.3 to Form 10-KSB filed April 15, 2002)                                                                 |
|        |       |                                                                                                                                                                                                                                                   |
| 10.4        |       | Plan and Agreement of Reorganization By and Between  QuantumReader, Inc. and Vubotics, Inc. dated November 17, 2004 (incorporated  by reference to Exhibit 10.4 to Form 10-KSB for the fiscal year ended  December 31, 2004 filed on October 14, 2005) |
|        |       |                                                                                                                                                                                                                                                   |

 

21

----

 
| 14.0   |   | Code of Ethics.                                                                                                                   |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                              |
| 23     |   | Consent of Independent Certified Public Accountant                                                                                |
|   |   |                                                                                                                              |
| 31     |   | Rule 13a — 14(a)/15d-14(a) Certification of Chief  Executive Officer.                                                        |
|   |   |                                                                                                                              |
| 31.1   |   | Rule 13a — 14(a)/15d-14(a) Certification of Chief  Financial Officer.                                                        |
|   |   |                                                                                                                              |
| 32     |   | Statement of Chief Executive Officer and Chief  Financial Officer pursuant to Section 1350 of Title 18 of the United States  Code |

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

Audit fees

Audited-Related Fees

Fees billed for professional services rendered for theaudit of the Company’s annual financial statements for the fiscal year endedDecember 31, 2006 and the reviews of the financial statements included in Forms10-QSB for fiscal 2006 are $14,250.

Tax Fees

None.

All Other Fees

None.

22

----

**SIGNATURES**

In accordance withSection 13 or 15(d) of the Exchange Act, the registrant caused this report tobe signed on its behalf by the undersigned, hereunto duly authorized.
|                       |   | VUBOTICS, INC.                                          |
|-----------------------|--------|---------------------------------------------------------|
|                  |   |                                                    |
| Dated: April 2,  2007 |   | /s/ Philip E. Lundquist                                 |
|                  |   |                                                    |
|                  |   | Philip E. Lundquist, Director, Chief Executive  Officer |
|                  |   | and Chief Financial Officer                             |

In accordance with the Exchange Act, this report hasbeen signed below by the following persons on behalf of the registrant and inthe capacities and on the dates indicated.
| Dated: April 2, 2007  |   | /s/ Philip E. Lundquist                                 |
|-----------------------|--------|---------------------------------------------------------|
|                  |   |                                                    |
|                  |   | Philip E. Lundquist, Director, Chief Executive  Officer |
|                  |   | and Chief Financial Officer                             |
|                  |   |                                                    |
|                  |   |                                                    |
| Dated: April 2,  2007 |   | /s/ Robert T. Eramian                                   |
|                  |   |                                                    |
|                  |   | Robert T. Eramian, Director                             |
|                  |   |                                                    |
|                  |   |                                                    |
| Dated: April 2,  2007 |   | /s/ Ronan A. Harris                                     |
|                  |   |                                                    |
|                  |   | Ronan A. Harris, Director                               |
|                  |   |                                                    |

 

23

----

**VUBOTICS,INC. AND SUBSIDIARIES**

**(FKAHalifax International, Inc.)**

**CONSOLIDATEDFINANCIAL STATEMENTS**

**DECEMBER31, 2006**

24

----

**TABLEOF CONTENTS**
| INDEPENDENT REGISTERED  PUBLIC ACCOUNTING FIRM’S REPORT |
|--------------------------------------------------------------|
|                                                         |
| CONSOLIDATED BALANCE SHEET                                   |
|                                                         |
| CONSOLIDATED STATEMENTS OF OPERATIONS                        |
|                                                         |
| CONSOLIDATED  STATEMENTS OF STOCKHOLDERS’ DEFICIT       |
|                                                         |
| CONSOLIDATED STATEMENTS OF  CASH FLOWS                       |
|                                                         |
| NOTES TO  CONSOLIDATED FINANCIAL STATEMENTS                  |

 

25

----

**INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM’SREPORT**

To the Board of Directors and Shareholders Vubotics,Inc (FKA Halifax International, Inc.) Atlanta, Georgia

We haveaudited the accompanying consolidated balance sheet of Vubotics, Inc. (aGeorgia corporation) and subsidiaries as of December 31, 2006, and the relatedconsolidated statements of operations, stockholders’ deficit and cash flows forthe year ended December 31, 2006. These consolidated financial statements arethe responsibility of the Company’s management. Our responsibility is toexpress an opinion on these consolidated financial statements based on ouraudit.

Weconducted our audits in accordance with the standards of the Public CompanyAccounting Oversight Board (United States). Those standards require that weplan and perform the audits to obtain reasonable assurance about whether theconsolidated financial statements are free of material misstatement. An auditincludes examining, on a test basis, evidence supporting the amounts anddisclosures in the consolidated financial statements. An audit also includesassessing the accounting principles used and significant estimates made bymanagement, as well as evaluating the overall consolidated financial statementpresentation. We believe that our audits provide a reasonable basis for ouropinion.

In ouropinion, the consolidated financial statements referred to above presentfairly, in all material respects, the financial position of Vubotics, Inc. andsubsidiaries as of December 31, 2006, and the results of its operations andcash flows for the year ended December 31, 2006, in conformity with U.S.generally accepted accounting principles.

Theaccompanying consolidated financial statements have been prepared assuming thatthe Company will continue as a going concern. As discussed in Note 8 to thefinancial statements, the Company has suffered recurring losses and has a netcapital deficiency. These conditions raise substantial doubt about its abilityto continue as a going concern. Management’s plans in regard to these mattersare also described in Note 8. The financial statements do not include anyadjustments relating to the recoverability and classification of asset carryingamounts or the amount and classification of liabilities that might resultshould the Company be unable to continue as a going concern.

WTUniack & Co., CPAs, P.C.

Atlanta,Georgia

March  30, 2007

26

----

**VUBOTICS, INC. AND SUBSIDIARIES**

**(FKA HALIFAX INTERNATIONAL, INC.)**

**CONSOLIDATEDBALANCE SHEET**

**DECEMBER 31,2006**
| **ASSETS**                                                                                               |   |        |    |
|----------------------------------------------------------------------------------------------------------|--------|-------------|---------|
|                                                                                                     |   |        |    |
| **Current  Assets**                                                                                      |   |        |    |
| Cash                                                                                                     |   | $           | 513,947 |   |
| Deposits                                                                                                 |   | 1,297       |    |
| **Total current assets**                                                                                 |   | 515,244     |    |
|                                                                                                     |   |        |    |
| **Other  Assets**                                                                                        |   |        |    |
| Fixed assets, net                                                                                        |   | 28,812      |    |
| Intangible asset                                                                                         |   | 102,529     |    |
| Impairment reserve                                                                                       |   | (102,529    | )       |
| Total other assets                                                                                       |   | 28,812      |    |
|                                                                                                     |   |        |    |
| **Total Assets**                                                                                         |   | $           | 544,056 |   |
|                                                                                                     |   |        |    |
| **LIABILITIES  AND STOCKHOLDERS’ DEFICIT**                                                          |   |        |    |
|                                                                                                     |   |        |    |
| **Current  Liabilities**                                                                                 |   |        |    |
| Notes payable — current portion                                                                     |   | $           | 400,000 |   |
| Accrued expenses                                                                                         |   | 1,215,434   |    |
| Accrued interest                                                                                         |   | 6,042       |    |
| Due to related party                                                                                     |   | 78,985      |    |
| Accrued payroll                                                                                          |   | 67,014      |    |
| **Total current liabilities**                                                                            |   | 1,767,475   |    |
|                                                                                                     |   |        |    |
| **Notes  Payable**                                                                                       |   | 702,344     |    |
|                                                                                                     |   |        |    |
| **Total liabilities**                                                                                    |   | 2,469,819   |    |
|                                                                                                     |   |        |    |
| **Stockholders’  (Deficit)**                                                                        |   |        |    |
| Common stock, $0.001 par value, 100,000,000 shares  authorized, 49,825,718 shares issued and outstanding |   | 49,826      |    |
| Preferred stock, $0.001 par value,25,000,000 shares  authorized, no shares issued and outstanding        |   | —      |    |
| Additional paid-in capital                                                                               |   | 12,189,250  |    |
| Accumulated deficit                                                                                      |   | (14,164,839 | )       |
|                                                                                                     |   | (1,925,763  | )       |
|                                                                                                     |   |        |    |
| **Total  Liabilities and Stockholders’ Deficit**                                                    |   | $           | 544,056 |   |

Theaccompanying notes are an integral part of these consolidated financialstatements.

27

----

**VUBOTICS, INC. AND SUBSIDIARIES**

**(FKA HALIFAX INTERNATIONAL, INC.)**

**CONSOLIDATEDSTATEMENTS OF OPERATIONS**

**FOR THEYEARS ENDED DECEMBER 31, 2006 AND 2005**
| ** **                                            | ** ** | **2006**   | ** ** | **2005**   | ** ** |
|-------------------------------------------------------|------------|------------|------------|------------|------------|
| ** **                                            | ** ** | ** ** | ** ** | ** ** | ** ** |
| Revenue                                               |       | $          | 37,000     |       | $          | 2,672 |   |
|                                                  |       |       |       |       |       |
| Cost of sales                                         |       | —     |       | 2,675      |       |
|                                                  |       |       |       |       |       |
| Gross profit                                          |       | 37,000     |       | (3         | )          |
|                                                  |       |       |       |       |       |
| Product  Development                                  |       | 568,671    |       | 187,185    |       |
| Sales and  marketing                                  |       | 774,421    |       | 272,588    |       |
| General and  administrative                           |       | 2,111,950  |       | 1,456,687  |       |
|                                                  |       | 3,455,042  |       | 1,916,460  |       |
|                                                  |       |       |       |       |       |
| Loss from  operations                                 |       | (3,418,042 | )          | (1,916,463 | )          |
|                                                  |       |       |       |       |       |
| Interest expense                                      |       | (45,084    | )          | (146,633   | )          |
| Gain on debt restructure                              |       | 798,046    |       | —     |       |
| Other income                                          |       | —     |       | 25,000     |       |
| Interest income                                       |       | 11,633     |       | —     |       |
|                                                  |       | 764,595    |       | (121,633   | )          |
|                                                  |       |       |       |       |       |
| Net loss                                              |       | $          | (2,653,447 | )          | $          | (2,038,096 | ) |
|                                                  |       |       |       |       |       |
| Net loss per  common share - basic and fully diluted  |       | $          | (0.06      | )          | $          | (0.06 | ) |
|                                                  |       |       |       |       |       |
| Weighted average number  of common shares outstanding |       | 43,158,271 |       | 31,829,906 |       |

Theaccompanying notes are an integral part of these consolidated financialstatements.

28

----

**VUBOTICS, INC. AND SUBSIDIARIES**

**(FKA HALIFAX INTERNATIONAL, INC.)**

**CONSOLIDATEDSTATEMENTS OF STOCKHOLDERS’ DEFICIT**

**FOR THEYEARS ENDED DECEMBER 31, 2006 AND 2005**
| ** **                                        | ** ** | ** **            | ** ** | ** **                | ** ** | **Common**  | ** ** | **Additional**  | ** ** | ** **             | ** ** | **Total**   | ** ** |
|---------------------------------------------------|------------|-----------------------|------------|---------------------------|------------|-------------|------------|-----------------|------------|------------------------|------------|-------------|------------|
| ** **                                        | ** ** | **Common Stock** | ** ** | **Stock to be** | ** ** | **Paid-In** | ** ** | **Accumulated** | ** ** | **Stockholders’** | ** ** |
| ** **                                        | ** ** | **Shares**            | ** ** | **Amount**                | ** ** | **Issued**  | ** ** | **Capital**     | ** ** | **Deficit**            | ** ** | **Deficit** | ** ** |
|                                              |       |                  |       |                      |       |        |       |            |       |                   |       |        |       |
| Balance, December 31,  2004                       |       | 26,127,609            |       | $                         | 26,128     |        | $          | 67              |       | $                      | 7,093,006  |        | $          | (9,473,296 | ) | $ | (2,354,095 | ) |
|                                              |       |                  |       |                      |       |        |       |            |       |                   |       |        |       |
| Issuance of common  stock for cash                |       | 2,533,333             |       | 2,533                     |       | (67         | )          | 480,034         |       | —                 |       | 482,500     |       |
|                                              |       |                  |       |                      |       |        |       |            |       |                   |       |        |       |
| Issuance of common  stock for services            |       | 6,385,332             |       | 6,385                     |       | —      |       | 932,511         |       | —                 |       | 938,896     |       |
|                                              |       |                  |       |                      |       |        |       |            |       |                   |       |        |       |
| Common stock redeemed                             |       | (49,000               | )          | (49                       | )          | —      |       | (7,201          | )          | —                 |       | (7,250      | )          |
|                                              |       |                  |       |                      |       |        |       |            |       |                   |       |        |       |
| Common stock to be  issued                        |       | 198,000               |       | —                    |       | 198         |       | 20,802          |       | —                 |       | 21,000      |       |
|                                              |       |                  |       |                      |       |        |       |            |       |                   |       |        |       |
| Net loss                                          |       | —                |       | —                    |       | —      |       | —          |       | (2,038,096             | )          | (2,038,096  | )          |
|                                              |       |                  |       |                      |       |        |       |            |       |                   |       |        |       |
| Balance, December 31,  2005                       |       | 35,195,274            |       | $                         | 34,997     |        | $          | 198             |       | $                      | 8,519,152  |        | $          | (11,511,392 | ) | $ | (2,957,045 | ) |
|                                              |       |                  |       |                      |       |        |       |            |       |                   |       |        |       |
| Issuance of common  stock for cash                |       | 8,822,133             |       | 9,021                     |       | (198        | )          | 2,271,578       |       | —                 |       | 2,280,401   |       |
|                                              |       |                  |       |                      |       |        |       |            |       |                   |       |        |       |
| Issuance of common  stock for settlement of loans |       | 1,948,483             |       | 1,948                     |       | —      |       | 435,373         |       | —                 |       | 437,321     |       |
|                                              |       |                  |       |                      |       |        |       |            |       |                   |       |        |       |
| Issuance of common  stock for services            |       | 3,859,828             |       | 3,860                     |       | —      |       | 963,147         |       | —                 |       | 967,007     |       |
|                                              |       |                  |       |                      |       |        |       |            |       |                   |       |        |       |
| Net loss                                          |       | —                |       | —                    |       | —      |       | —          |       | (2,653,447             | )          | (2,653,447  | )          |
|                                              |       |                  |       |                      |       |        |       |            |       |                   |       |        |       |
| Balance, December 31, 2006                        |       | 49,825,718            |       | $                         | 49,826     |        | $          | —          |       | $                      | 12,189,250 |        | $          | (14,164,839 | ) | $ | (1,925,763 | ) |

The accompanying notesare an integral part of these consolidated financial statements.

29

----

**VUBOTICS, INC. AND SUBSIDIARIES**

**(FKA HALIFAX INTERNATIONAL, INC.)**

**CONSOLIDATEDSTATEMENTS OF CASH FLOWS**

**FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005**
| ** **                                                                   | ** ** | **2006**   | ** ** | **2005**   | ** ** |
|------------------------------------------------------------------------------|------------|------------|------------|------------|------------|
| ** **                                                                   | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Cash  Flows From Operating Activities**                                    |       |       |       |       |       |
| Net loss                                                                     |       | $          | (2,653,447 | )          | $          | (2,038,096 | ) |
| Adjustments to  reconcile net loss to net cash used in operating activities: |       |       |       |       |       |
| Issuance of common stock for services                                        |       | 967,007    |       | 938,896    |       |
| Gain on debt restructure                                                     |       | (798,046   | )          | —     |       |
| Depreciation                                                                 |       | 3,401      |       | —     |       |
| Increase  (decrease) in operating liabilities:                               |       |       |       |       |       |
| Accounts payable and accrued expenses                                        |       | 833,098    |       | 96,709     |       |
| Accrued payroll and payroll liabilities                                      |       | 67,014     |       | —     |       |
| Accrued interest                                                             |       | (34,016    | )          | 146,633    |       |
| Net cash used in  operating activities                                       |       | (1,614,989 | )          | (855,858   | )          |
|                                                                         |       |       |       |       |       |
| **Cash  Flows From Investing Activities**                                    |       |       |       |       |       |
| Purchase of fixed assets                                                     |       | (32,213    | )          | —     |       |
|                                                                         |       |       |       |       |       |
| **Cash  Flows From Financing Activities**                                    |       |       |       |       |       |
| Proceeds from issuance of common stock                                       |       | 2,280,401  |       | 482,500    |       |
| Redemption of common stock                                                   |       | —     |       | (7,250     | )          |
| Proceeds from common stock to be issued                                      |       | —     |       | 21,000     |       |
| Principal payments on notes payable                                          |       | (286,733   | )          | —     |       |
| Loans from related party                                                     |       | 167,298    |       | 343,746    |       |
| Net cash  provided by financing activities                                   |       | 2,160,966  |       | 839,996    |       |
|                                                                         |       |       |       |       |       |
| Net increase  (decrease) in cash                                             |       | 513,764    |       | (15,862    | )          |
| Cash — beginning  of year                                               |       | 183        |       | 16,045     |       |
| Cash — end of  year                                                     |       | $          | 513,947    |       | $          | 183 |   |
|                                                                         |       |       |       |       |       |
| Supplemental  disclosures of cash flow information                           |       |       |       |       |       |
| Cash paid for interest                                                       |       | $          | 70,142     |       | $          | — |   |
| Cash paid for income taxes                                                   |       | $          | —     |       | $          | — |   |
|                                                                         |       |       |       |       |       |
| SUPPLEMENTAL DISCLOSURES OF  NON-CASH INVESTING AND FINANCING ACTIVITIES:    |       |       |       |       |       |
|                                                                         |       |       |       |       |       |

Theaccompanying notes are an integral part of these consolidated financialstatements.

30

----

**VUBOTICS,INC. AND SUBSIDIARIES**

**(FKAHALIFAX INTERNATIONAL, INC.)**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**DECEMBER31, 2005 AND 2004**

**NOTE 1 -ORGANIZATION AND DESCRIPTION OF BUSINESS**

***Business Operations***

In 2004, Halifax International, Inc. changed its nameto Vubotics, Inc. (the “Company”).

Vubotics, through one of its wholly-ownedsubsidiaries, QuantumReader, Inc., is developing a new type of software productcalled Quantum Reader. According to the Company. Quantum Reader is a hardwareindependent software system which changes the way in which text is displayed onelectronic displays.

**NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**

***Principles of Consolidation***

The consolidatedfinancial statements include the books of Vubotics, Inc. (formerly SilverStrike Mining Company) and its wholly owned subsidiaries Christopher Partners,Inc., QuantumReader, Inc., Truscom Inc., Annapolis Valley Ventures, Inc. andX-VU, LLC. All inter-company transactions and accounts have been eliminated

***Revenue Recognition***

The Company recognizesrevenue when persuasive evidence of an arrangement exists, fees are fixed ordeterminable, delivery has occurred and collection is reasonably assured.Revenue is not recognized until title has passed and risk of loss hastransferred to the customer, which occurs at time of shipment. Services to beperformed and revenue thus recognized have occurred and are acknowledged by thecustomer in a manner that readily suggests in form and in substance thatresources have been consumed and utilized and have met those customerexpectations, terms and conditions of which are usually set in contractualformat.

***Stock Based Compensation***

The Company has issuedand may issue stock in lieu of cash for certain transactions. The fair value ofthe stock, which is based on comparable cash purchases, third party quotations,or the value of services, whichever is more readily determinable, is used to valuethe transaction

***Use of Estimates***

The preparation offinancial statements in conformity with generally accepted accountingprinciples requires management to make estimates and assumptions that affectthe reported amounts of assets and liabilities and disclosure of contingentassets and liabilities at the date of the financial statements and the reportedamounts of revenue and expenses during the reporting period. Actual resultscould differ from those estimates. It is possible that the significant estimatesused will change within the next year.

***Impairment of Long-Lived Assets***

The Company reviewslong-lived assets for possible impairment whenever events or changes incircumstances indicate that the carrying amount of an asset may not berecoverable. If such assets are considered to be impaired, the impairment to berecognized is measured by the amount by which the carrying value exceeds thefair value of the assets, as measured by discounted cash flows over theremaining life of the assets.

***Basic and Diluted Per Common Share***

Under Statement ofFinancial Accounting Standards (“SFAS”) No. 128, “Earnings Per Share,” basic earningsper common share is computed by dividing income available to commonstockholders by the weighted average number of common shares assumed to beoutstanding during the period of computation. Diluted earnings per share iscomputed similar to basic earnings per share except that the denominator isincreased to include the number of additional common shares that would havebeen outstanding if the potential

31

----

common shares had beenissued and if the additional common shares were dilutive. Because the Companyhas incurred net losses, basic and diluted loss per share are the same sinceadditional potential common shares would be anti-dilutive.

***Income Taxes***

Deferred income taxassets and liabilities are recognized for the estimated tax effects oftemporary differences between the financial reporting and tax reporting basesof assets and liabilities and for loss carryforwards based on enacted tax lawsand rates. A valuation allowance is used to eliminate deferred income taxassets to the amount that is more likely than not to be utilized.

***Research and Development***

The Company expensesresearch and development costs as incurred.

***Significant Recent Accounting Pronouncements***

In March 2005, the SEC issued Staff Accounting Bulletin No. 107 (“SAB 107”), which offers guidance on SFAS 123(R). SAB 107 was issued to assist preparers by simplifying some of the implementation challenges of SFAS 123(R) while enhancing the information that investors receive. SAB 107 creates a framework that is premised on two overarching themes: (a) considerable judgment will be required by preparers to successfully implement SFAS 123(R), specifically when valuing employee stock ptions; and (b) reasonable individuals, acting in good faith, may conclude differently on the fair value of employee stock options.

In May 2005, the FASB issued SFAS 154, “Accounting Changes and Error Corrections”. SFAS No. 154 establishes new standards on accounting for changes in accounting principles. Pursuant to the new rules, all such changes must be accounted for by retrospective application to the financial statements of prior periods unless it is impracticable to do so. SFAS No. 154 supersedes Accounting Principles Bulletin (APB) Opinion 2, “Accounting for Changes” and SFAS No. 3 “Reporting Accounting Changes in Interim Financial Statements”, though it carries forward the guidance of those pronouncements with respect to accounting for changes in estimates, changes in the reporting entity, and error corrections. This statement is effective for accounting changes and error corrections made in years beginning after December 15, 2005, with early adoption permitted for changes and corrections made in years beginning after May 2005. The adoption of SFAS No. 154 did not have a material impact on the Company’s financial statements.

In June 2005, the Emerging Issues Task Force (“EITF”) reached consensus on Issue No. 05-6 (“Issue”), “Determining the Amortization Period for Leasehold Improvements”. This Issue provides guidance on determination of the amortization period for leasehold improvements that are purchased subsequent to the inception of the lease. Such leasehold improvements should be amortized over the lesser of the useful life of the asset, or the lease term that includes reasonably assured lease renewals. This Issue is effective for leasehold improvements acquired in the periods beginning after July 1, 2005. The Company does not expect the adoption of EITF No. 05-6 to have a material effect on its financial statements.

Key topics covered by SAB 107 include valuation models, expected volatility and expected term. The Company will apply the principles of SAB 107 in conjunction with its adoption of SFAS 123(R).

The adoption of EITF02-14 will not have a significant impact on the Company’s financialstatements.

In February 2006, theFASB issued SFAS 155, Accounting for Certain Hybrid Financial Instruments — anamendment of FASB Statements 133 and 140, (“SFAS155”). SFAS will be effectivefor the Company beginning January 1, 2007. The statement permits interests inhybrid financial instruments that contain an embedded derivative that wouldotherwise require bifurcation, to be accounted for as a single financial instrumentat fair value, with changes in fair value recognized in earnings. This electionis permitted on  an instrument byinstrument basis for all hybrid financial instruments held, obtained, or issuedas of the adoption date. The adoption had no impact to the Company’sconsolidated financial position, results of operations or cash flows.

In June 2006, the FASB issuedFASB Interpretation No. 48, Accounting for Uncertainty of Income Taxes-an interpretationof FASB Statement No. 109 (“FIN48”), Which clarifies the accounting for uncertaintyin income tax positions. This Interpretation requires that the Companyrecognize in the consolidated financial statements the impact of a tax positionthat is more likely than not to be sustained upon examination based on thetechnical merits of the position. The provisions of FIN 48 will be effective orthe Company as of the beginning of the Company’s 2008 fiscal year, with thecumulative effect of the change in accounting principle recorded as anadjustment to opening retained earnings. The provisions of FASB  Interpretation 48 are not expected to anyimpact on the Company’s financial statements.

In September 2006, theFASB issued FASB No. 158, Employers’ Accounting for Defined Benefit Pension andOther Postretirement Benefits (“FAS 158”). FAS 158 addresses the accounting fordefined benefit pension plans and other postretirement benefit plans 

32

----

(“plans”). Specifically,FAS 158 requires companies to recognize an asset for a plan’s over fundedstatus or a liability for a plan’s under funded status and to measure a plan’s assetsand its obligations that determine its funded status as of the end of the company’sfiscal year, the offset of which is recorded, net of tax, as a component ofother comprehensive income in shareholders’ equity. FAS 158 will be effectivefor the Company as of September 30, 2007 and applied prospectively. Theprovisions of FAS 158 are not expected to have any impact on the Company’sfinancial statements.

In September 2006, theFASB issued FASB statement No. 157, Fair Value Measurements (“FAS 157”). FAS157 establishes a single authoritative definition of fair value, sets out a frameworkfor measuring fair value and expands on required disclosures about fair valuemeasurement. FAS 157 is effective for the Company on October 1, 2008 and willbe applied prospectively. The provisions of FAS 157 are not expected to have amaterial impact on the Company’s financial statements.

Other recent accounting pronouncementsissued by the FASB (including its Emerging Issues Task Force (“EITF”)), theAmerican Institute of Certified Public Accountants (“AICPA”), and the SEC didnot or are not believed by management to have a material impact on the Company’spresent or future financial statements.

**NOTE 3 - NOTES PAYABLE**

The Company’s notespayable at December 31, 2006 are summarized as follows:

| 10% notes payable to a  stockholder. The note is unsecured.  |   | $       | 628,500   |   |
|--------------------------------------------------------------|--------|---------|-----------|--------|
|                                                         |   |    |      |
| 10% notes  payable to a stockholder. The note are unsecured. |   | 174,000 |      |
|                                                         |   |    |      |
| 10% notes  payable to a stockholder. The note are unsecured. |   | 299,844 |      |
|                                                         |   |    |      |
| Total notes payable                                          |   | $       | 1,102,344 |   |

The aggregate principal amounts of the notes payablematuring in subsequent years as of December 31, 2006 are as follows:

| Amount currently  outstanding: |   | $ | 702,344 |   |
|--------------------------------|--------|---|---------|--------|
| Currently Due:                 |   | $ | 400,000 |   |

**NOTE 4 — PURCHASE OF QUANTUM READER,INC. AND RELATED IMPAIRMENT**

The Company purchased theentire stock of QuantumReader, Inc. (“QR”) in a stock for stock transaction.The purchase price was valued at $102,529 with $2,529 being allocated forliabilities assumed and 1,000,000 shares of stock issued by the Company for thetechnology of the acquired company.

As mentioned in note 8,there exist significant concerns as to the Company’s viability as a goingconcern. Therefore in light of such concerns and for other reasons set forthbelow, the Company has reserved for the entire amount of those intangibleassets purchased.

The Companycurrently does not present any indefinite-lived intangible assets in itsbalance sheet. For the year ended December 31, 2005 and in accordance with SFASNo. 142, the Company performed its annual impairment test ofits intangible asset and concluded that an impairment existed at thatdate. The factors considered led to a substantial doubt of the Company’sability to recover its investment due to a lack of certainty in future cashflows calculated on an undiscounted basis. In addition, based on its fairmarket value estimate the related write down was required to record theintangible asset on its fair market value.

33

----

**NOTE 5 -INCOME TAXES**

The effective tax ratevaries from the maximum federal statutory rate as a result of the followingitems for the twelve months ended December 31, 2006 and 2005:
| ** **                                                  | ** ** | **December 31,  2006** | ** ** | **December 31,  2005** | ** ** |
|-------------------------------------------------------------|------------|-----------------------------|------------|-----------------------------|------------|
|                                                        |       |                        |       |                        |       |
| Tax benefit  computed at the maximum federal statutory rate |       | (34.0                       | )%         | (34.0                       | )%         |
|                                                        |       |                        |       |                        |       |
| State tax rate,  net of federal tax benefit                 |       | (4.5                        | )          | (4.5                        | )          |
|                                                        |       |                        |       |                        |       |
| Increase in  valuation allowance                            |       | 38.5                        |       | 38.5                        |       |
|                                                        |       |                        |       |                        |       |
| Effective income tax  rate                                  |       | 0.0                         | %          | 0.0                         | %          |

Deferred income tax assets and the related valuationallowances result principally from the potential tax benefits of net operatingloss carryforwards.

The Company has recordeda valuation allowance to reflect the uncertainty of the ultimate utilization ofthe deferred tax assets as follows:
| ** **                | ** ** | **December 31,  2006** | ** ** | **December 31,  2005** | ** ** |
|---------------------------|------------|-----------------------------|------------|-----------------------------|------------|
|                      |       |                        |       |                        |       |
| Deferred tax  assets      |       | $                           | 5,453,000  |                        | $          | 4,432,000 |   |
|                      |       |                        |       |                        |       |
| Less valuation  allowance |       | (5,453,000                  | )          | (4,432,000                  | )          |
|                      |       |                        |       |                        |       |
| Net deferred tax assets   |       | $                           | —     |                        | $          | — |   |

For financial statement purposes, no tax benefit hasbeen reported as the Company has had significant losses in recent years andrealization of the tax benefits is uncertain. Accordingly, a valuationallowance has been established in the full amount of the deferred tax asset.

At December 31, 2006, theCompany had net operating loss carryforwards of approximately $14,165,000 whichwill be available to offset future taxable income. These net operating losscarryforwards expire at various times through 2026. The utilization of the netoperating loss carryforwards is dependent upon the Company’s ability togenerate sufficient taxable income during the carryforward period.

**NOTE 6 -RELATED PARTY TRANSACTIONS**

Loans totaling a net of $273,850 were received fromPhilip E. Lundquist, an officer and shareholder, during the year ended December31, 2006.

During the fiscal years ending December 31, 2006 and2005, the Company issued a total of 7,190,483 shares, all at a price equalto market value, of which 1,948,483 were issued in repayment of cashadvances previously made by Mr. Lundquist to the Company, 2,500,000 were issuedin consideration of services rendered by Mr. Lundquist during prior years, and2,742,000 were issued in consideration of Mr. Lundquist’s services rendered during2005 and 2006. As of December 31, 2006, the outstanding amount of cash advancesstill owed to Mr. Lundquist by the Company is $78,985.

Subsequent to year end, John F. Ellingson wasappointed as President. During the year ended December 31, 2006, VisionFactory, LLC, 50% owned by Mr. Ellingson was paid $90,500 for Managementservices performed by Mr. Ellingson. In addition, Vision Factory, Inc. was paid$90,500 for Sales and marketing services performed by Mr. Ellingson’s partner.

**NOTE 7 - COMMITMENTS ANDCONTINGENCIES**

***None***

34

----

**NOTE 8 — GOING CONCERN**

These consolidatedfinancial statements have been prepared in accordance with generally acceptedaccounting principles applicable to a going concern, which contemplates therealization of assets and the satisfaction of liabilities and commitments inthe normal course of business. However, the Company has incurred net losses of$2,653,447 and $2,038,096 for the twelve months ended December 31, 2006 and2005, respectively. The Company also had a working capital deficiency of$1,252,231 and an equity deficiency of $1,925,763 at December 31, 2006 and hassignificant currently maturing debt and related accrued interest thereto. TheCompany has raised capital to fund the operating activities primarily throughprivate equity infusions from stockholders, loans through stockholders andother demand loans. The Company intends on financing its future developmentactivities and its working capital needs largely from the sale of public equitysecurities with some additional funding from other traditional financingsources, including term notes, until such time that funds provided byoperations are sufficient to fund working capital requirements.

These factors, amongothers, raise substantial doubt about the Company’s ability to continue as agoing concern for a reasonable period of time.

The consolidatedfinancial statements do not include any adjustments relating to therecoverability and classification of recorded asset amounts other than what isdescribed in Note 4.

**NOTE 9 — SUBSEQUENT EVENT —**(**Unaudited**)

On February 6, 2007, the Company was served with acomplaint which had been filed on January 29, 2007 in the Superior Court ofFulton County, Georgia by Ekistics Research, LLC and Craig J. Larson, a formerdirector and officer of the Company, against the Company and Vubotics Georgia,Inc. The complaint alleged, among other things, that the Company breached itsobligation to provide up to $500,000 for working capital, software development,inventory purchases and promotion of the QuantumReader software during the12-month period after the Company’s acquisition of QuantumReader, Inc. underthe Plan and Agreement of Reorganization dated November 17, 2004 among theCompany, Mr. larson and others. The plaintiffs were seeking monetary damages,as well as an injunction requiring the Company to provide Mr. Larson with anon-exclusive, worldwide, perpetual, irrevocable, paid-up license to theQuantumReader software.

On March, 2007, Ekistics Research, LLC and Mr. Larsonwithdrew the complaint.

On January 18, 2007, JohnF. Ellingson was appointed President of the Company (see Note 6).

35

----