U.S. SECURITIES AND EXCHANGE
                           COMMISSION Washington, D.C.
                                      20549

                                   FORM 10-KSB

 ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 2006

                         Commission File Number 0-30632

                  Schimatic Cash Transactions Network.com, Inc.
                  ---------------------------------------------
                 (Name of small business issuer in its charter)

              Nevada                                     88-0415947
              ------                                     ----------
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
 incorporation or organization)

     330 East Warm Springs Road
         Las Vegas, Nevada                                  89119
         -----------------                                  -----
(Address of principal executive offices)                  (Zip Code)

                                 (702) 361-3624
                                 --------------
                           (Issuer's telephone number)

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

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

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

                         Common Stock, Par Value $0.001
                         -------------------------------
                                (Title of Class)

                                       N/A
          ------------------------------------------------------------
          (Former name or former address, if changed since last report)

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

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

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

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

         State issuer's revenues for its most recent fiscal year. For the fiscal
year ended December 31, 2006, revenues were $131,357.

         State the aggregate market value of the voting and nonvoting common
equity held by non-affiliates computed by reference to the price at which the
common equity was sold, or the average bid and asked price of such common
equity, as of a specified date within the past 60 days. As of January 11, 2008,
the approximate aggregate market value of the voting and nonvoting common equity
held by non-affiliates of the issuer was $22,000,000.

         State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date. As of December 31, 2006,
issuer had 209,238,182 shares of issued and outstanding common stock, par value
$0.001.

DOCUMENTS INCORPORATED BY REFERENCE:
         A description of Documents Incorporated by Reference is contained in
Part III, Item 13 of this Report.

Transitional Small Business Disclosure Format: Yes |_| No |X|

                                       i
<PAGE>

                  SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
                        (A Development Stage Enterprise)

<TABLE>
<CAPTION>
                                                 TABLE OF CONTENTS

Item                                                 Description                                             Pages

<S>                                                                                                             <C>
Special Introductory Notes.......................................................................................1

                                                          Part I
Item 1    Description of Business................................................................................2
Item 2    Description of Property................................................................................4
Item 3    Legal Proceedings......................................................................................5
Item 4    Submission of Matters to a Vote of Security Holders....................................................6

                                                        Part II
Item 5    Market for Common Equity and Related Stockholder Matters...............................................7
Item 6    Management's Discussion and Analysis or Plan of Operation.............................................10
Item 7    Financial Statements..................................................................................12
Item 8    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure..................13
Item 8A   Controls and Procedures...............................................................................13
Item 8B   Other Information.....................................................................................13

                                                        Part III
Item 9    Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the
          Exchange Act..........................................................................................14
Item 10   Executive Compensation................................................................................15
Item 11   Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters........16
Item 12   Certain Relationships and Related Transactions........................................................17
Item 13   Exhibits and Reports on Form 8-K......................................................................18
Item 14   Principal Accountant Fees and Services................................................................19

          Signatures............................................................................................19
</TABLE>


                                       ii
<PAGE>

                           SPECIAL INTRODUCTORY NOTES

Forward-Looking Information

         This Annual Report on Form 10-KSB includes forward-looking statements
within the meaning of Section 21E of the Securities Exchange Act of 1934, as
amended. These statements are based on our beliefs and assumptions, and on
information currently available to us. The words "anticipated," "believe,"
"expect," "plan," "intended," "seek," "estimate," "project," "could," "may," and
similar expressions are intended to identify forward-looking statements. These
statements include, among others, information regarding future operations,
future capital expenditures, and future net cash flow. Such statements reflect
our current views with respect to future events and financial performance and
involves risks and uncertainties, including general economic and business
conditions, changes in foreign, political, social and economic conditions,
regulatory initiatives and compliance with governmental regulations, the ability
to achieve further market penetration and additional customers, and various
other matters, many of which are beyond our control. Our future results and
stockholder values may differ materially from those expressed in these
forward-looking statements. Many of the factors that will determine these
results and values are beyond our ability to control or predict. Investors are
cautioned not to put undue reliance on any forward-looking statements. For these
statements, we claim the protection of the safe harbor for forward-looking
statements contained in Section 21E of the Securities Exchange Act.

Filing of Delinquent Reports

         This delinquent report is filed for the year ended December 31, 2006,
and is one of several reports for subsequent periods that we are filing under
Section 13 of the Securities Exchange Act after their respective due dates. The
requirement to file the associated quarterly reports for this period has been
waived by the Securities and Exchange Commission. The unaudited quarterly data
that would normally be included in the required quarterly reports is contained
herein, at the end of Item 7 Financial Statements. This report contains
information for the period to which this report relates, but does not contain
all information covering periods subsequent to the report period. For
information covering other periods, please see the applicable reports for such
period.

                                       1
<PAGE>

                                     PART I


                         ITEM 1. DESCRIPTION OF BUSINESS

Overview

         Schimatic Cash Transactions Network.com, Inc. (the "Company") was
originally incorporated in the State of Florida under the name of Apple Tree
Capital Corp. on October 4, 1996. Apple Tree Capital Corp. never had any assets
or commenced operations.

         On November 12, 1998, Apple Tree simultaneously acquired Schimatic
Technologies, Inc. and R&D Technology Inc., two privately held Nevada
Corporations. On this date Apple Tree Capital Corp's name was changed to
Schimatic Technologies, Inc.

         Schimatic Technologies, Inc. had been organized principally based on a
business model for the future development of a freestanding Internet kiosk
capable of economical domestic and international funds transfers. R&D
Technology, Inc. had been organized based on a business model for the future
development of technology for the three-dimensional, virtual reality
presentation of products in freestanding Internet kiosks for online shopping.

         In January 1999, Schimatic Technologies, Inc. changed its name to
Schimatic Cash Transactions Network.com, Inc.

         In September 1999, Schimatic Cash Transactions Network.com, Inc.
acquired the business and assets of IC One, Inc., a developer of smart-card
technologies. The acquisition of IC One was treated as a reverse acquisition
under the purchase method of accounting in which the combination was reported as
a recapitalization of IC One. IC One is treated as the continuing entity for
accounting purposes, and the historical financial statements presented,
including the statement of stockholders' equity, are those of IC One. IC One was
deemed the acquirer and successor company. The key assets acquired with IC One
were patents and pending patents in the United States and other countries.

         Effective November 30, 2006, the Board of Directors of Schimatic Cash
Transactions Network.com, Inc. approved the Company's Articles of Conversion
changing the Company from a Florida to a Nevada corporation (the "Articles").
Under the Articles, the Company's shares will be converted on a 1-for-1 basis.

         With the acquisition of IC One, we commenced efforts to complete
commercialization of smart-card-based loyalty programs and ancillary services
and products as described in this document.

Products and Services Development

         Our products and services are designed to operate in conjunction with a
variety of business applications, the largest being the retail payments
industry. This industry is comprised of retail merchants and the infrastructure
of banks and other financial institutions, and card associations and technology
suppliers that enable them to process payment transactions.

         We anticipate that our software will be used to support these major
business sectors:

          o    Technology suppliers provide the centralized systems and services
               to process the electronic payment transactions. Large issuing
               banks frequently process their own charge card and electronic
               payments transactions, while smaller banks and other financial
               institutions outsource processing. Large processors have
               established market dominance through consolidation and subsequent
               economies of scale. Merchants pay fees to the banks for the
               privilege of accepting credit cards.
          o    Retail merchants and product manufacturers use discounts, points
               programs and other incentives to differentiate themselves from
               their competitors and to increase loyalty in the form of repeat
               spending or to initiate the initial purchase of a specific
               product or service. These programs are typically tied to the
               amount or frequency of customer spending, with the most prominent
               ones directly tied to a credit or debit card. Additionally, many
               other segments of the payments industry, such as the hospitality
               and travel industries, have programs designed to award points for
               each dollar spent that can be redeemed for free or upgraded goods
               or services.
          o    Loyalty consultants or advertising agencies would use the
               technology to implement incentive programs. The incentive
               programs are used to increase spend for existing consumers as
               well as to capture new consumers.

                                       2
<PAGE>

         We believe that the retail industry, as well as various other segments,
is in the initial stages of adopting smart cards and wireless devices to replace
the magnetic stripe cards that have existed in the marketplace for nearly 30
years. As this transition occurs, we believe there is an opportunity to market
our loyalty program software to the various organizations that comprise the
industry. We anticipate the majority of our revenue will come from marketing our
software to the organizations that provide the loyalty system infrastructure as
an adjunct to the electronic payments process. This includes banks and other
financial institutions, third-party payment processors, card associations,
coalition loyalty scheme operators, consultants and other software suppliers. In
some cases, we expect that our customers may also include retail merchants or
other businesses that wish to sponsor their own loyalty programs.

         The electronic payment industry is very mature, and because our
software is compatible with existing magnetic stripe card technology as well as
smart cards, we believe our software and intellectual property provide a
potential solution for those wishing to migrate from magnetic-stripe cards to
smart cards or other smart devices in order to grant loyalty rewards and
incentives.

         The ability of smart cards to store data or value makes them
particularly suited to loyalty programs that track and provide incentives to
repeat customers. Stored value is more convenient and safer than cash. When
combined with a software and hardware system for processing loyalty
transactions, the smart cards and other devices provide an opportunity to
develop loyalty programs that provide users with immediate, dynamically updated
incentives.

         In addition to the payments industry, we anticipate significant and
increased demand for more powerful and effective smart-card-based loyalty
programs in other industries such as gaming, transit, identification, access and
health care. We are actively seeking to introduce our intellectual property in
these other markets.

         We believe that we are able to offer services that fill these needs for
all of the aforementioned industry segments.

         Strategic Alliances

         We have developed and will continue to seek strategic relationships
with industry participants that may provide an alternate channel to deliver our
products and services by expanding our market reach and creating incentives
through revenue or technology sharing with strategic partners. We have
established the following strategic alliances.

         Phoenix Technology Holdings

         On April 6, 2006, the Company entered into a License Agreement with
Phoenix Technology Holdings ("Phoenix") a Turks and Caicos Islands company.
Under the terms of the agreement, the Company granted Phoenix an exclusive
license to use the Company's technology. Also, certain portions of the Company's
debt, including a significant portion of the Senior Secured Convertible Notes,
unpaid amounts owing to Airos Group for technology development services
rendered, and accrued interest were assumed by Phoenix and ceased accruing
additional interest. In order to maintain exclusivity, the Agreement calls for
certain performance targets to be met on an annual basis by Phoenix.

         Airos Group

         We entered into an agreement with Airos Group to complete the current
software development and integration services on the Ingenico terminal for
Scotiabank. Airos Group's primary focus is system integration, software
development, and quality assurance for the financial services industry with a
focus on smart card and payment terminals. Airos Group has provided integration
and development services to a variety of clients. In 2003, we replaced the above
agreement with a new agreement to complete the development of all product
components, including the card, terminal and host processing, plus integration
and customization services. This agreement was terminated effective April 30,
2006 when the Company entered into an agreement with Phoenix. Airos currently
provides management and administrative services to the Company.

         Thomas Jackson Performance Management, Inc.

         In September 2003, the Company granted Thomas Jackson Performance
Management, Inc., an unaffiliated company, the exclusive right to act as its
authorized sales agent in the United States, Canada, Mexico, Japan and
Australia. This agreement was terminated in May 2006.

                                       3
<PAGE>

         Intellectual Property

         Our intellectual property consists of software applications and a
system built around our process and methodology patents and includes application
software for loyalty programs that reside on cards or other portable electronic
devices and the terminals for the processing of loyalty and payments. We also
have a centralized processing system for loyalty program management and
accounting that can be used for our own loyalty customers and licensed to other
electronic payment processors that offer loyalty programs.
Patents

         We have U.S. Patent No. 5806045, issued on September 8, 1998, with
prior patent filings dating back to February 1994. Since that time, the patent
has also been issued in Australia (Patent No. 703349, October 1999), Mexico
(Patent No. 96/03161, November 2000), Japan (Patent No. 3416141, April 2003),
and Canada (Patent No. 2182596, April 2004). We refer to these patents issued or
pending collectively as the "Patents."

         The Patents are entitled: "Method and System for Allocating and
Redeeming Incentive Credits between a Portable Device and a Base Device," and
cover processes or methodologies associated with storing and redeeming loyalty
credits and incentives on a portable device and interacting with a base device
to calculate the amount of loyalty units to be credited or redeemed.

Trademarks, Copyrights and Trade Secrets

         We also rely on the protections afforded our intellectual property
under copyright, trademark and trade secret laws. We market or may market
products or services under the following trademarks:

               o    E-LLEGIANCE(TM) for our smart-card-based loyalty
                    applications;
               o    LOYALTY CENTRAL(TM) for our loyalty program management,
                    transa ction processing and accounting centralized
                    processing services;
               o    LOYALTYCENTRAL.COM(TM) for our loyalty program management
                    user interface; and
               o    SMART BANK(R) for specialized products services for
                    marketing to the financial services and banking industries.

Research and Development Program

         We incurred expenses of approximately $125,000 during 2006. The
payments for such services were satisfied primarily through the issuance of
either stock or stock options.

Competition

         Many of our existing competitors, as well as a number of potential new
competitors have longer operating histories, greater name recognition, larger
customer bases, and significantly greater financial, technical and marketing
resources than we have. Such competitors may be able to undertake more extensive
marketing campaigns, adopt more aggressive pricing policies, and make more
attractive offers to potential employees and distribution partners. We believe
that we can compete effectively, because we will offer our clients certain
capabilities that are protected by our patents that our competition cannot offer
without infringing our patents. However, patents can be difficult to defend and
there can be no assurance that our competitors will not develop products and
services that are equal or superior to ours, or that we can achieve greater
market acceptance than our competitors.

Employees

         On December 31, 2006 we had two employees including officers. One was
located in the Las Vegas, Nevada office and one in Oakville, Ontario, Canada.

                         ITEM 2. DESCRIPTION OF PROPERTY

         We rent our principal executive office located at 330 East Warm Springs
Road, Las Vegas, Nevada, 89119 on a month-to-month basis, for rent of
approximately $12,000 per year. These facilities are adequate for our
foreseeable needs.

                                       4
<PAGE>

                            ITEM 3. LEGAL PROCEEDINGS

         We are not a party to any material legal proceedings, and to our
knowledge, no such legal proceedings have been threatened against us, except as
follows:

Quint Star Management

         On August 30, 1999, Quint Star Management, Inc. initiated an action in
the Third Judicial District Court, Salt Lake City, Utah, against IC One, Inc.,
Arthur D. Bennett and Peter J. Bennee, for unpaid rent and related charges, plus
costs and attorney's fees, under the lease on our former principal executive
offices in Salt Lake City, Utah. Quint Star Management, Inc. vs. IC One, Inc.,
Arthur D. Bennett, and Peter Bennee (case no. 990908764EV). Following the entry
of judgment against IC One for $50,541 on December 7, 2000, IC One reached a
payment arrangement under which we are obligated to pay $5,000 per month, plus
ongoing obligations under the lease. The settlement obligation is guaranteed by
the parent, Schimatic Cash Transactions Network.com, Inc., and is secured by the
equipment, inventory, accounts and chattel paper of both the parent and IC One.
We are currently in default in our obligations under this agreement. Upon the
expiration of the lease, an amended judgment of $222,765 (a provision has been
provided for in the financial statements) was entered to reflect the additional
unpaid rent, interest and attorneys' fees.

PR Newswire Association, Inc. vs. Smart Chip Technologies, L.L.C.

         On May 21, 2003, PR Newswire Association, Inc. initiated an action
against the Company in the Superior Court of New Jersey, Hudson County for
unpaid amounts owed for services provided in the amount of approximately $4,000.
On July 18, 2003, a judgment was entered against the Company (a provision of
$4,000 has been provided for in the financial statements at December 31, 2004).
The Company is currently in default of the judgment and would be liable to pay
interest from the date of judgment until paid in full.

James E. Biorge

         We are reviewing, with the advice of legal counsel, whether we have
legal claims that may be asserted against James E. Biorge, a founder and officer
and director of IC One at the time it was acquired in September 1999. At the
time of such acquisition, we set aside in a special trust approximately 7.8
million shares of common stock to be used to resolve claims that may be asserted
against IC One by persons claiming an interest in or claim against IC One as a
successor-in-interest to the assets, operations and liabilities of CardOne,
which Mr. Biorge had also been instrumental in founding and which had been
involved in the initial development of the intellectual properties subsequently
acquired by IC One before IC One was acquired by us. We believe that all or a
portion of the 7.8 million shares then reserved to satisfy such claims, all of
which have subsequently been used for such purpose, should properly be the
responsibility of Mr. Biorge. In 1999 we advised Mr. Biorge that we intended to
assert a claim against him to hold him responsible for the 7.8 million shares to
satisfy CardOne related liabilities as well as other damages and that we would
offset our claims against shares to be issued to him, reserving the right to
seek such further damages. After we made such assertions in 1999, Mr. Biorge
refused to accept certificates for 11,503,138 shares of our common stock to
which he otherwise may have been entitled to receive in exchange for his stock
in IC One and those shares have been cancelled. We do not believe that it is
probable that Mr. Biorge will assert any claim against us for the shares
cancelled or other damages. If he does, we intend to assert and pursue
vigorously offsetting defenses and believe that there is a reasonable
possibility that the outcome of any claim, if asserted, would not be unfavorable
to us. We may pursue claims against Mr. Biorge and seek damages in addition to
cancellation of the shares.

         On October 2, 2007, James Biorge and Jami Biorge (Mr. Biorge's
daughter) initiated an action against the company in the United States District
Court for the District of Utah (Case # 07cv00129), seeking issuance of the
above-noted shares which were previously cancelled by the Company, as well as
attorney's fees and punitive damages. The Company plans to vigorously defend
itself and believes that there is a reasonable possibility that the outcome of
any claim would not be unfavorable to the Company. Additionally, the Company may
pursue claims against Mr. Biorge and seek damages in addition to cancellation of
the shares.

                                       5
<PAGE>

Richard Hauge and John Hipsley

         As of July 31, 2002, Messrs. Hauge and Hipsley ceased their employment
with the Company and signed agreements to accept their compensation on a
deferred basis. In December 2002, they signed additional agreements releasing
all rights to any claims based on the CardOne entities, terminating their
association with the Company, and agreed to accept options to purchase 725,000
shares of common stock each. In addition, the Company agreed to issue to Mr.
Hauge 700,000 shares of our stock for work performed through December 2002.

         On March 18, 2005, Richard Hauge and John Hipsley initiated an action
against the Company in the Third Judicial District Court, Salt Lake County,
State of Utah (Case # 050905213) alleging the Company breached prior employment
and settlement agreements. On July 16, 2007, Richard Hauge and the Company
entered into a separate Settlement Agreement, and the Company continues to
vigorously defend itself in the matter against John Hipsley.

Internal Revenue Service and Withholding Taxes

         Our wholly owned subsidiary, IC One, Inc., has received notification
from the Internal Revenue Service that IC One has an unpaid liability for
employment taxes and amounts withheld from employees' wages for the periods from
July 1, 1999, through September 30, 2001. IC One erroneously filed an employer
tax report for the quarter ended September 30, 2001, even though it did not have
any employees and paid no payroll after June 30, 2001. Accordingly, IC One was
not required to make federal tax deposits for the periods after June 30, 2001.
The Internal Revenue Service has filed tax liens against the Company with
respect to such amounts outstanding. As of December 31, 2006, the aggregate
amount owed by IC One, together with applicable penalties and interest, for the
period from July 1, 1999, through June 30, 2001, was approximately $1,347,524.
During 2006, total payments of $52,870.52 were made to the Internal Revenue
Service with respect to this balance outstanding. The Company is attempting to
negotiate with the Internal Revenue Service regarding payment of the amounts
owed by IC One.

         The total amount of unpaid employment taxes owed by the Company was
approximately $1,347,524 (including interest and penalties of approximately
$447,910). The Company continues to work with the Internal Revenue Service via
the appeals process to resolve its outstanding liability. The Company does not
believe that the liability will hinder the progress of the Company.


Utah State Tax Commission

         The State of Utah has filed tax liens of approximately $58,332 as of
December 31, 2006, for unpaid employee withholding taxes and related amounts.

California Employment Development Department

         The State of California has filed tax liens against us for unpaid
employee withholding taxes and related amounts aggregating approximately $77,721
as of December 31, 2006.

Nebraska Department of Revenue

         The State of Nebraska has filed tax liens against us for unpaid
employee withholding taxes and related amounts aggregating approximately $5,864
as of December 31, 2006.

Other Creditors

         From time to time, we are threatened by creditors to initiate
litigation to collect amounts owed by us and reported in our financial
statements. In cases in which litigation is threatened or initiated, we seek to
negotiate a settlement or forbearance agreement.

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

         In November 2006, the security holders voted to increase the authorized
share limit from 200,000,000 to 500,000,000 shares of common stock, $.001 par
value. The amendment was approved by the directors and shareholders. The number
of votes for the amendment by the shareholders was sufficient for approval.

                                       6
<PAGE>

                                     PART II


        ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         Since November 1998, our common stock has been traded in the
over-the-counter market and was quoted on the Over-the-Counter Electronic
Bulletin Board until March 2000. Thereafter, it has been quoted in the Pink
Sheets published by Pink Sheets, LLC, under the symbol SCTN. The trading volume
of the common stock is limited. This limited trading volume creates the
potential for significant changes in the trading price of the common stock as a
result of relatively minor changes in the supply and demand. It is likely that
trading prices and volumes for the common stock will fluctuate in the future,
without regard to our business activities.

         The following table sets forth the high and low closing bid quotations
for our common stock as reported on the Over-the-Counter Electronic Bulletin
Board or Pink Sheets, as appropriate, for the periods indicated, based on
interdealer bid quotations, without markup, markdown, commissions or
adjustments, which may not reflect actual transactions:

                                               High        Low
                                               ----        ---
2006
   Quarter ended December 31 ..............   $0.090     $0.060
   Quarter ended September 30..............    0.100      0.040
   Quarter ended June 30...................    0.070      0.050
   Quarter ended March 31..................    0.060      0.040

2005
   Quarter ended December 31 ..............   $0.080     $0.040
   Quarter ended September 30..............    0.080      0.030
   Quarter ended June 30...................    0.070      0.040
   Quarter ended March 31..................    0.090      0.050

2004
   Quarter ended December 31...............   $0.090     $0.060
   Quarter ended September 30..............    0.120      0.070
   Quarter ended June 30...................    0.180      0.090
   Quarter ended March 31..................    0.190      0.120


         As of December 31, 2006, we had approximately 1,000 stockholders of
record. We are unable to estimate the number of beneficial owners of our shares.

Penny Stock Regulations

         The Securities and Exchange Commission, or SEC, has promulgated rules
governing over-the-counter trading in penny stocks, defined generally as
securities trading below $5 per share that are not quoted on a securities
exchange or NASDAQ or which do not meet other substantive criteria. Under these
rules, our common stock is currently classified as a penny stock. As a penny
stock, our common stock is currently subject to rules promulgated by the SEC
that impose additional sales practice requirements on broker-dealers that sell
such securities to persons other than established customers and institutional
accredited investors. For transactions covered by the rule, the broker-dealer
must make a special suitability determination for the purchaser and receive the
purchaser's written consent to the transaction prior to sale. Further, if the
price of the stock is below $5 per share and the issuer does not have $2.0
million or more net tangible assets or is not listed on a registered national
securities exchange or NASDAQ, sales of such stock in the secondary trading
market are subject to certain additional rules promulgated by the SEC. These
rules generally require, among other things, that brokers engaged in secondary
trading of penny stocks provide customers with written disclosure documents,
monthly statements of the market value of penny stocks, disclosure of the bid
and asked prices, and disclosure of the compensation to the broker-dealer and
the salesperson working for the broker-dealer in connection with the
transaction. These rules and regulations may affect the ability of
broker-dealers to sell our common stock, thereby effectively limiting the
liquidity of our common stock. These rules may also adversely affect the ability
of persons that acquire our common stock to resell their securities in any
trading market that may exist at the time of such intended sale.

                                       7
<PAGE>

Dividend Policy

         We have never paid cash dividends on our common stock and do not
anticipate that we will pay dividends in the foreseeable future. We intend to
use any future earnings primarily for the expansion of our business.

Transfer Agent

         Our registrar and transfer agent is Standard Registrar and Transfer
Agency, 673 Bluebird N.E., Albuquerque, New Mexico 87122-1805, telephone number
(505) 828-2839.

Equity Compensation Plan Information

         As of December 31, 2006, we had issued options to purchase common
stock, but had no equity compensation plan that had been approved by our
stockholders. The following table shows the options issued and issuable under
our equity compensation plans:

<TABLE>
<CAPTION>

                                                                                                   Number of securities
                                                                                                   available for future
                                                                                                  issuance under equity
                                Number of securities to be       Weighted average exercise         compensation plans
                                  issued upon exercise of          prices of  outstanding         (excluding securities
      Plan Category                 outstanding options                  options                 reflected in column (a))
------------------------         ------------------------        -------------------------       ------------------------
                                            (a)                            (b)                             (c)
                                 ------------------------        -------------------------       ------------------------
<S>                                       <C>                             <C>                             <C>
Equity compensation plans
  approved by stockholders                        --                         --                           --

Equity compensation plans not
approved by security holders              36,916,533                      $0.10                           --
                                          ----------
       Total.................             36,916,533                      $0.10                           --
                                          ==========
</TABLE>

         As of December 31, 2006, we had outstanding options granted to various
current and former employees, consultants and others, including executive
officers and directors, to purchase an aggregate of 36,916,533 shares. The
options were granted at various exercise prices that were at or below the market
price for our common stock as of the date of grant. Such options are fully
exercisable without meeting any future vesting requirements. Such options are
not incentive stock options under the criteria established by the Internal
Revenue Service.

         We have granted to current and former officers, directors and employees
the option to convert an aggregate of $1,556,125 in accrued and past due
salaries and consulting fees as of December 31, 2006, into an aggregate of
22,212,917 shares of common stock at such time as they may deem appropriate.

Recent Sales of Unregistered Securities

         During the year ended December 31, 2006, we issued securities without
registration under the Securities Act of 1933 on the terms and circumstances
described in the following paragraphs.

         Unless otherwise indicated, all transactions were the result of
arm's-length negotiations. Transactions involving the issuances of securities to
persons that, at the time of such transactions, were either executive officers,
directors, principal stockholders, or other affiliates are noted and were not
the result of arm's length negotiations. In each case of the issuance of
securities to affiliates, unless otherwise noted, such affiliates purchased
securities on the same terms at which securities were sold to unrelated parties
in contemporaneous transactions, and such transactions were approved unanimously
by the disinterested directors.

         Certificates for all securities issued in the following transactions
bore a restrictive legend conspicuously on their face and stop-transfer
instructions were noted respecting such certificates on our stock transfer
records. The recipients acknowledged in writing that they were receiving
restricted securities and consented to a legend on the certificates issued and
stop-transfer instructions with the transfer agent.

                                       8
<PAGE>

         Common Stock
<TABLE>
<CAPTION>
                  Transaction                                                            Number
                  -----------                                                            ------
<S>                                                                                   <C>
Common Stock Outstanding at December 31, 2005                                         193,274,003

Financial, Development and Administrative Services..............................       15,964,179
         In February, July, August and December 2006, we issued an aggregate of
         15,964,179 shares of restricted common stock to five parties, each of
         whom was an accredited investor, as payment of $931,384 in financial,
         development and administrative services, or an average of approximately
         $0.06 per share. On the dates on which such transactions occurred
         during the above period, the market price for the common stock ranged
         between $0.05 and $0.07 per share.


Common Stock Outstanding at December 31, 2006                                         209,238,182
                                                                                      ===========
</TABLE>

         Issuance of Convertible Notes

         At December 31, 2006, we had outstanding secured convertible notes
payable of $237,000 (2005: $2,991,316) bearing interest at a rate of 12%
annually and secured by the Company's intellectual property. The notes mature at
various dates extending through September 2004. In a letter to note holders on
December 30, 2004, the Company advised all note holders that there had been a
technical delay in conversion to Common Stock, and that notes would be extended
on a month-by-month basis until resolution. In April 2006 note holders were
given three options; Option 1 was to assign the secured note and accrued
interest outstanding to Phoenix. Option 2 was to continue to earn interest on
the note until the Company was in a position to convert the note into common
stock. This happened in November 2006 when the Company's authorized share limit
was increased from 200,000,000 to 500,000,000. Option 3 was to pay off the
principal and interest outstanding on the note.

         Secured Convertible Promissory Notes Payable:
                 Balance - December 31, 2005                     $  2,991,316
                 Notes issued during 2006                              57,000
                 Notes assigned to Phoenix                         (2,811,316)
                 Notes converted to SCTN shares                            --
                 Notes paid out in full                                    --
                                                                 ------------
                 Ending Balance - December 31, 2006              $    237,000
                                                                 ============

         The subscribers of the above notes were one or more of the following: a
regular employee/consultant, an existing stockholder, or a family member or
personal or business associate of an affiliate, an employee, or a then-current
stockholder. Each was able to bear the financial risk of the investment. One or
more of our executive officers negotiated each transaction. No general
solicitation was used, no commission or other remuneration was paid in
connection with such transactions, and no underwriter participated. The
recipients acknowledged in writing that the notes constituted restricted
securities and that any stock received on conversion would constitute restricted
securities and consented to a legend on the certificates to be issued and
stop-transfer instructions with the transfer agent.

         At December 31, 2006, convertible promissory notes were convertible
into an aggregate of 4,740,000 shares of common stock.

                                       9
<PAGE>

         Uncompleted Securities Transaction with CEO America

         On May 17, 2002, the Company signed an agreement with CEO America, a
wholly-owned subsidiary of Consumer Economic Opportunities, whereby CEO America
agreed to pay an initial $150,000 to the Company and a second payment of
$350,000 on June 20, 2002 for ownership of the SCTN Patents with exclusive
rights for use of the patents being retained by SCTN. The agreement was to
include a 20% equity swap of the two companies. On June 4, 2002, the Company
placed title to the patents in escrow. In connection with the agreement, the
Company placed in escrow a certificate for 30,116,134 shares of SCTN common
stock as collateral. On July 2, 2002, CEO had not delivered the balance of the
money, nor had they complied with any other conditions of the escrow agreement.
The patent title and stock certificate were to remain in escrow pending either
repayment of the original $150,000 to CEO, or until the matter is settled. The
shares of common stock deposited in escrow were not considered to have been
issued or outstanding, and on April 19, 2005 the share certificate for
30,116,134 shares was cancelled. The $150,000 received from CEO America is
recorded as a non-interest bearing liability.

         Option Grants

         During the year ended December 31, 2006, we granted no options to
persons who were then officers, directors or others.

Exemptions from Registration

         Each of the above transactions was effected in reliance on the
exemption from registration provided in Section 4(2) of the Securities Act of
1933 as transactions not involving any public offering. In each case, the
offering was limited and without any general solicitation, there were a limited
number of investors, and the investors were sophisticated relative to an
investment in the Company and able to bear the economic risks of their
investment. Each transaction was negotiated with an officer of the Company to
answer questions from the investors and provide additional material information
requested, to the extent it could be provided without unreasonable effort or
expense. The investors had access to material information of the kind that
registration would provide. All certificates contained a restrictive legend and
stop-transfer instructions were placed against transfer of the certificates in
the absence of registration or an available exemption.

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

         We caution readers that important facts and factors described in this
Management's Discussion and Analysis of Financial Condition or Plan of Operation
and elsewhere in this document sometimes have affected, and in the future could
affect, our actual results, and could cause our actual results during the
current year and beyond to differ materially from those expressed in any
forward-looking statements made by us or on our behalf.

         As indicated in the Report of Independent Registered Public Accounting
Firm accompanying the financial statements in this report, we have suffered
recurring losses since inception, had significant negative cash flows from
operations, and have a net capital deficiency that raises substantial doubt
about our ability to continue as a going concern.

         Management is actively seeking additional equity or a combination of
equity and debt financing from new stockholders and/or lenders. In the past, we
have relied on issuing stock for outside services and for compensation to fund
our operating shortfalls; however, there is no assurance that we can continue to
fund a significant portion of our operating needs in this manner. In addition, a
significant portion of the $22.2 million in current liabilities is more than a
year past due. We are attempting to negotiate settlements of some of these debts
and continue to seek forbearance on others; however, there is no guarantee that
we will be successful in continuing to do so. Should we fail to obtain financing
on terms acceptable to us or negotiate settlements on past due debts, or fail in
obtaining forbearance, we may be forced by creditors to take other actions
including seeking protection under bankruptcy proceedings. There can be no
assurance that funding will be available on acceptable terms, if at all, or that
such funds, if raised, would enable us to achieve and maintain profitable
operations.

Authorized Common Stock

         As of December 31, 2006, we were authorized to issue 500.0 million
shares of common stock. At December 31, 2006, we had approximately 209.2 million
shares outstanding and an additional approximately 253.9 million shares issuable
upon the conversion of stock options, convertible debt and deferred
compensation.

                                       10
<PAGE>

Results of Operations

         During 2006, we incurred total expenses of approximately $3.9 million
compared to approximately $7.6 million in 2005. The decrease in expenses in 2006
as compared to 2005 is principally reflected in substantial decreases in
research and development expenses to approximately $125,000 in 2006, as compared
to approximately $1.6 million in 2005, decreases in interest expense to $2.0
million in 2006, as compared to $4.7 million in 2005, as well as decreases in
general and administrative expenses.

         Net Loss

         The net loss for the year ended December 31, 2006, was approximately
$3.8 million as compared to $7.6 million in the same period in 2005. The change
in the net loss was due to decreases in research and development, interest
expenses, and general and administrative expenses.

         Basic and diluted net loss per share for the fiscal year ended December
31, 2006, was $(0.02), compared to basic and diluted net loss per share of
$(0.04) for the fiscal year ended December 31, 2005.

         Liquidity

         Although we generated approximately $345,000 from financing activities,
our operating activities used net cash of approximately $348,000. These
activities contributed to a net working capital deficit as of December 31, 2006,
of approximately $22.1 million.

         Net cash used in operating activities for the fiscal year ended
December 31, 2006, was approximately $348,000, a decrease of approximately
$172,000 over the approximately $520,000 cash used in operating activities for
the fiscal year ended December 31, 2006.

Capital Resources

         Through December 31, 2006, we do not currently have any material
commitments for capital expenditures other than those expenditures incurred in
the ordinary course of business.

         From inception to December 31, 2006, our operating and investing
activities have used substantially more cash than they have generated. Because
we will continue to need substantial amounts of working capital to fund the
growth of our business, we expect to continue to experience significant negative
operating and investing cash flows for the foreseeable future. This estimate is
a forward-looking statement that involves risks and uncertainties. We will need
to raise additional capital in the future to meet our ongoing operating and
investing cash requirements. We may not be able to find additional financing on
favorable terms or at all. If we raise additional funds through the issuance of
securities, these securities may have rights, preferences or privileges senior
to those of our common stock, and our stockholders may experience additional
dilution to their equity ownership. We have a history of losses, have never been
profitable, and may never achieve profitability.

         We have just started to generate revenues and do not anticipate
generating significant revenues until some time in the future. We do not know
when we will achieve profitability. We expect to continue to incur losses for
the foreseeable future and we may never be profitable. If we do achieve
profitability in any period, we cannot be certain that we will sustain or
increase such profitability on a quarterly or annual basis. From inception
through December 31, 2006, we incurred total expenses of approximately $83.3
million. The independent auditors' report accompanying the financial statements
included in this report includes an explanatory paragraph stating that the
accumulated deficit and a working capital deficiency raise substantial doubt
about our ability to continue as a going concern. (See Note 2, Going Concern, of
the Notes to Consolidated Financial Statements). The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.

                                       11
<PAGE>

         We have funded our capital requirements and our business operations
primarily with funds provided from the issuance of common stock and stock
options and from borrowings, and the sale of common stock. For the year ended
December 31, 2006, we have received $175,000 from the subscription and sale of
common stock and $170,000 from notes and loans payable. We will require
additional financing to support our operations until we become profitable. Such
sources of financing could include capital infusions, additional equity
financing, or debt offerings. Management believed that as of December 31, 2006,
we would need approximately $5.0 million in equity or debt financing to achieve
revenues at a level to cover operating costs. Management is actively pursuing
obtaining additional funds. There can be no assurance that additional funding
will be available on acceptable terms, if at all, or that such funds if raised,
would enable us to achieve and maintain profitable operations. If we are not
able to obtain sufficient additional funds from investors, we may be unable to
sustain our operations.

Application of Critical Accounting Policies

         Research and development expenses consist primarily of compensation,
benefits and related expenses for personnel engaged in research and development
activities, outside contract and consulting expenses, material and supplies and
personnel costs to maintain our technology.

         General and administrative expenses consist of compensation, benefits
and related expenses for personnel engaged in general management, finance and
administrative positions. They also include expenses for financial advisory,
legal and accounting fees, advisory board expenses, insurance and other
expenses.

         Sales and marketing expenses consist of compensation, benefits and
related expenses for personnel engaged in sales, marketing, and related business
development activities. These expenses also include consultants, printing of
promotional materials, travel and general corporate expenses.

         The Company accounts for income taxes under Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes ("SFAS No. 109"). SFAS
No. 109 requires the recognition of deferred tax assets and liabilities for both
the expected impact of differences between the financial statements and tax
basis of assets and liabilities, and for the expected future tax benefit to be
derived primarily from tax loss carryforwards. The Company has established a
valuation allowance related to the benefits of net operating losses for which
utilization in future periods is uncertain. The Company believes it is more
likely than not that the Company will not realize the benefits of these
deductible differences in the near future and therefore a full valuation
allowance of approximately $28,600,000 is provided.

         As of December 31, 2006, the Company has approximately $71,500,000 of
federal net operating losses available to offset future taxable income, which if
not utilized will expire in 2026. No provision for income taxes has been
recorded in the financial statements as a result of continued losses. Any
benefit for income taxes as a result of utilization of net operating losses may
be limited as a result of change in control.

Off-balance sheet arrangements

         None.

                          ITEM 7. FINANCIAL STATEMENTS

         Our financial statements, including the auditors' report, are included
beginning at page F-1 immediately following the signature page of this report.

                                       12
<PAGE>

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

         On May 18, 2007, Schwartz Levitsky Feldman LLP ("SLF") were appointed
as our new independent auditors, commencing with the audit for the years ending
December 31, 2003, 2004, 2005 and 2006. Effective May 18, 2007, we dismissed
Marcum & Kliegman LLP ("MKLLP") as our independent auditors, which action was
approved by our board of directors.

         During the four most recent fiscal years and the interim period
preceding the engagement of SLF, we have not consulted with SLF regarding
either: (i) the application of accounting principles to a specified transaction,
either completed or proposed; or the type of audit opinion that might be
rendered on our financial statements, and either a written report or oral advice
was not provided to us by SLF that was an important factor considered by us in
reaching a decision as to an accounting, auditing or financial reporting issue;
or (ii) any matter that was either the subject of a "disagreement" or event
identified in response to Paragraph (a)(1)(iv) of Item 304, as those terms are
used in Item 304(a)(1)(iv) of Regulations S-B and S-K and the related
instructions to Item 304 of Regulations S-B and S-K.

         The report of SLF on our financial statements for the fiscal year ended
December 31, 2005 contained an expression of substantial doubt regarding our
ability to continue as a going concern.

                        ITEM 8A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

         As of the end of the periods covered by this report, the Company
conducted an evaluation, under the supervision and with the participation of the
principal executive officer and principal financial officer, of the Company's
disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)
under the Securities Exchange Act of 1934 (the "Exchange Act")). Based on this
evaluation, the principal executive officer and principal financial officer have
concluded that the Company's disclosure controls and procedures are effective to
ensure that information required to be disclosed by the Company in reports that
it files or submits under the Exchange Act is recorded, processed, summarized
and reported within the time period specified in Securities and Exchange
Commission's rules and forms.

Changes in Internal Controls Over Financial Reporting

         None.

                           ITEM 8B. OTHER INFORMATION

         None.

                                       13
<PAGE>

                                    PART III


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

Directors and Executive Officers

         Our bylaws provide for a board of from one to seven directors to be
elected at each annual meeting of stockholders, with each director to serve
until the next annual meeting and until such director's successor is elected and
qualified. Officers are elected and serve at the pleasure of the board of
directors.

         The following table sets forth the name, age and position of each of
our directors and executive officers at December 31, 2006:

Name                   Age                    Title
-----------------      ---   -------------------------------------
Miki Radivojsa         39    President, CEO, Chairman of the Board of Directors
David J Simon          60    Director
Bernard F. McHale      71    Director and CFO

         Executive officers are elected by the board of directors and serve
until their successors are duly elected and qualify, subject to earlier removal
by the board of directors. Directors are elected at the annual meeting of
stockholders to serve for their term and until their successors are duly elected
and qualify, or until their earlier resignation, removal from office, or death.
The remaining directors may fill any vacancy in the board of directors for an
unexpired term.

Business Experience of Executive Officers and Directors

         Miki Radivojsa, CEO of Airos Group, the Company's development partner,
joined the Company as our Chairman and CEO on August 17, 2005. Miki Radivojsa
has built a profitable and growing software development company and brings more
than 17 years of business and technical leadership experience in banking,
payments, chip, telecommunications, and embedded development. He has led the
development and deployment of more than 100 successful software projects for a
broad range of banking and payment applications including EMV, VISACASH, Mondex,
Proton, other smart card and POS applications, in addition to the construction
of Smart Chip Technologies' end-to-end loyalty, pre-paid stored value, and gift
card product suite. Mr. Radivojsa and the Airos Group were developers of the EMV
pilot in Barrie, Canada, representing the world's first multi-application smart
card implementation.

         David J. Simon has been a director since November 1998 and chairman of
the board from May 1999 until August 2005. He served as chief executive officer
from May 1999 until July 1999, from November 1999 until March 1, 2000, from May
15, 2002, until June 10, 2002, from August 2003 until August 2005. He served as
president and chief executive officer for R & D Technology, Inc., a Nevada
company that he helped found, from its inception August 31, 1998, until we
acquired it in November 1998. In all of Mr. Simon's employment in the past six
years, he was involved in the architecture, design, development, maintenance and
management of computer programs, software applications and systems. His career,
including as an employee and as a consultant, has been involved with computing
technology and spanned many diverse industries including banking, healthcare,
manufacturing, stock exchange and telecommunications.

         Bernard (Mac) F. McHale is the chief financial officer, treasurer and a
director. Mr. McHale has been a director since May 2002. He began his financial
services professional career 30 years ago after concluding a 20-year career in
the U.S. Navy, during which he earned his B.A. in Business Management and
Finance. Mr. McHale has been actively involved in managing his own financial
services company, Mid-America CAPITAL Group, in Las Vegas, Nevada, from December
1995 through April of 2002, until he became actively involved in the Company as
our director, treasurer and interim chief executive officer, until assuming the
position of chief financial officer in August of 2003.

Dependence on Key Management

         Our performance depends substantially on the continued services and
performance of our senior management. The loss of services of one or more of
these employees could have a material adverse effect on our business. There can
be no assurance that we will be successful in attracting and retaining such
personnel. Competition for such personnel is intense.

                                       14
<PAGE>

Compliance with Section 16(a) of the Exchange Act

         We believe all forms required to be filed under Section 16 of the
Exchange Act have been timely filed.

Code of Ethics

         Due to its limited operations, the Company has not yet adopted a Code
of Ethics.

                         ITEM 10. EXECUTIVE COMPENSATION

Summary Compensation

         The following table shows the compensation paid or accrued by us for
the last three fiscal years for each person serving as our chief executive
officer during 2006. No other executive officer or other person received annual
salary and bonus of $100,000 or more during 2006. Accordingly, the summary
compensation table does not include compensation of any other executive officer
or other person:

<TABLE>
<CAPTION>
                                                                                Long Term Compensation
                                                                 ------------------------------------------------------
                                   Annual Compensation                     Awards                       Payouts
                              --------------------------------   ---------------------------      ---------------------
                                                       Other     Restricted      Securities                   All Other
                      Year                             Annual       Stock        Underlying         LTIP       Compen-
Name and             Ended                            Compen-      Awards        Options/         Payouts      sation
Principal Position   Dec 31    Salary($)   Bonus($)  sation($)    (shares)       SARs(#)            ($)          ($)
------------------   ------    ---------   --------  ---------    --------       -------            ---          ---
<S>                   <C>      <C>         <C>       <C>                                          <C>         <C>
Miki Radijvosa        2006     $   --      $  --     $   --          --              --           $ --        $  --
  (CEO)(1)            2005     $   --      $  --     $   --          --              --           $ --        $  --
                      2004     $   --      $  --     $   --          --              --           $ --        $  --
</TABLE>

-------------
(1) Served as chief executive officer commencing August 2005 without
    compensation.

Employment and other Agreements

         Mr. McHale was engaged under a three year agreement commencing July 7,
2004 to serve as director and treasurer at compensation of $2,500 per month as
the Company's cash flow permits.

Option Grants in 2006

         No options were granted to any of the executive officers named in the
summary compensation table above.

Aggregate Option/SAR Exercises in Last Fiscal Year and FY-End Option/SAR Values

         The following table sets forth information with respect to the
exercise/exercisability of options and stock appreciation rights during the last
completed fiscal year by the executive officers named in the above summary
compensation table and the fiscal year-end values of unexercised options and
stock appreciation rights:

<TABLE>
<CAPTION>
        (a)                 (b)                  (c)             (d)                   (e)
                                                              Number of
                                                              Securities        Value of Unexercised
                                                              Underlying        In-the-Money
                                                              Unexercised       Options/SARs at FY
                                                              at FY End (#)     End ($)
                      Shares Acquired     Value Realized ($)  Exercisable/      Exercisable/
Name                   on Exercise (#)                        Unexercisable     Unexercisable
----                   ---------------    ------------------  -------------     -------------
<S>                           <C>                 <C>            <C>                   <C>
David J. Simon                --                  --             17,062,813/--        --/--
    President (CEO)
</TABLE>

                                       15
<PAGE>

Director Compensation

         During 2006, members of our board of directors who were not employees
received no cash compensation for services as a director or for attendance at or
participation in meetings. In the year ended December 31, 2006, there were no
options issued to board members.

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

         The following table sets forth, as of December 31, 2006, the name,
stockholdings and address of each person who owns of record, or was known by us
to own beneficially, 5% or more of the 209,238,182 shares of common stock then
issued and outstanding. Unless otherwise indicated, all shares consist of common
stock and all such shares are owned beneficially and of record by the named
person or group.

<TABLE>
<CAPTION>
                                                                 Amount and Nature
Title of Class    Name and Address of Beneficial Owner        of Beneficial Ownership    Percent of Class (1)

<S>               <C>                                         <C>          <C>  <C>             <C>
Common Stock      David Simon                                  3,957,839        Direct
                  330 E. Warm Springs Road.                   21,161,876    (2) Options
                  Las Vegas, Nevada 89119                     14,881,667        Rights
                                                              40,001,382        Total           8.6%

Common Stock      Bernard McHale                              24,783,327        Direct
                  7757 Foredawn Dr.                                    -        Options
                  Las Vegas, NV 89123                          5,870,000        Rights
                                                              30,653,327        Total           6.6%

Common Stock      Miki Radivojsa                                       -    (3) Direct
                  482 South Service Road, Suite 103                    -        Options
                  Oakville, Ontario, Canada L6J 2X6                    -        Rights
                                                                       -        Total           0.0%

Common Stock      Airos Group Inc.                            34,896,638    (3) Direct
                  482 South Service Road, Suite 103            2,900,000        Options
                  Oakville, Ontario, Canada L6J 2X6                    -        Rights
                                                              37,796,638        Total           8.2%

Shares of all named executives and directors as a group       63,637,804        Direct
                                            (3 persons)       24,061,876        Options
                                                              20,751,667        Rights
                                                             108,451,347        Total          23.4%
</TABLE>

(1) The percent of class is calculated on the basis of the amount of outstanding
securities, plus for each person or group, any securities that person or group
has the right to acquire within 60 days pursuant to options, conversion or other
rights.

(2) Consists of options to purchase 17,062,813 shares in Mr. Simon's name and
4,099,063 in the name of Elaine Beavon-Simon

(3) Mr. Radivojsa does not individually own any shares in the Company, however,
he is the controlling shareholder of Airos Group, Inc. and as such, he has the
power to direct the voting of those shares owned by Airos Group, Inc.

                                       16
<PAGE>

             ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         In September 2002 we issued David Simon, an executive officer and
director, a secured convertible promissory note for $310,462, with interest at
12%, as evidence of our obligation to repay him un-reimbursed expenses incurred
by him on our behalf and cash advances to us. As of December 31, 2006, the
outstanding principal balance of such notes, including accrued interest, was
assigned to Phoenix Technology Holdings Inc.

         Prior to becoming a director in May 2002, Bernard F. McHale purchased
on the same terms as sold to unaffiliated parties an aggregate of $180,000 in
common stock in the year 2000, $145,000 in a convertible promissory note that
was converted into stock in the year 2001, and an additional $910,000 in
principal amount of Limited Recourse Convertible Promissory Notes in the years
2001-2002, which were converted into the same principal amount of Secured
Recourse Convertible Promissory Notes on September 30, 2002. As of December 31,
2006, the outstanding principal balance of such notes, including accrued
interest, was assigned to Phoenix Technology Holdings Inc.

         In April 2003, we entered into a Development Agreement with Airos Group
Inc. to complete the development of all product components, including the card,
terminal and host processing, plus integration and customization services. The
fees are payable on a deferred basis until revenues begin. Airos Group Inc.
earned 6% per month in company stock, restricted by SEC Rule 144, for all fees
deferred until product revenues begin up to a maximum of $2,000,000 worth of
stock issued. In November 2003, we amended our agreement with Airos Group Inc.
to change the terms of our agreement to five years and adjust the rate of
reimbursement to various Airos personnel. We agreed to issue Airos 12,800,000
shares of restricted common stock, with 11,300,000 issuable immediately and the
balance issuable on the execution of the first qualified customer order through
Thomas Jackson Performance Management, Inc. Airos agreed to purchase 2,000,000
shares of restricted common stock at $0.30 per share, for a total of $600,000,
payable pursuant to the terms of promissory note in 24 consecutive monthly
installments of $25,000, commencing November 2003. Effective January 2005 the
deferred interest rate was increased to 8% and effective April 2005 it was
further increased to 10%. Interest stopped accruing in April 2006 when the total
outstanding payable plus interest was assigned to Phoenix Technology Holdings
Inc.

         In April 2006, the Company entered into an agreement with Phoenix
Technology Holdings Inc. when it became readily apparent to the Company's
management that the Company could no longer continue to operate as a viable
entity. Company management facilitated this agreement since the Company simply
did not have the capital to continue with its technology development, or to
integrate and deploy its technology to potential clients. The Company's
financial instability would not have allowed it to pass a due diligence test
with prospects desiring to license the Company's technology. To move the company
forward as a viable entity, Company management eliminated all expenses and risks
associated with marketing, sales, development as well as operational support
activities by exclusively licensing the Company's technology to Phoenix. This
action facilitated and increased the potential profitability of the Company by
eliminating expenses for the services that would be provided by Phoenix and by
eliminating significant interest expense. The services that would be provided by
Phoenix are estimated to be 50 to 70% of the gross revenue that would be
received by Phoenix. The agreement provides that the Company would receive 20%
of all Phoenix gross transaction revenue without exposing the Company to any of
the expenses and risk factors that Phoenix faces on every project. Phoenix`s
profitability is based on its operational efficiency including the minimizing of
operational risks concerning integration and deployment of the Company's
patented technology. This agreement has effectively transformed the Company into
a patented licensing loyalty technology company while retaining patented
intellectual property ownership within the Company. Most of the Company's gross
revenue will be net revenue since the Company has only two employees and minimal
overhead. Phoenix is contracting approximately 25 employees that provide
services to the Company. Almost all funding and revenue received by Phoenix fund
operational activities that produce income for both companies without additional
risk to the Company. No accrued salaries were part of notes assigned into
Phoenix and interest accrual stopped on secured notes and the Airos debt once
the agreement was entered into.

                                       17
<PAGE>

                                ITEM 13. EXHIBITS


     (a)  Exhibits:

<TABLE>
<CAPTION>
Exhibit
Number          Title of Document                                                                    Location
---------       ---------------------------------------------------------------------------          -------------
Item 3.         Articles of Incorporation and ByLaws
---------       ---------------------------------------------------------------------------          -------------
<S>             <C>                                                                                  <C>
   3.01         Articles of Incorporation of Apple Tree Capital Corp., filed October 4, 1996         Incorporated by
                                                                                                     Reference(2)

   3.02         Articles of Amendment to Apple Tree Capital Corp. (name change to Schimatic          Incorporated by
                Technologies, Inc.) filed November 13, 1998                                          Reference(1)

   3.03         Articles of Amendment to Schimatic Technologies, Inc. (name change to                Incorporated by
                SCHIMATIC Cash Transactions Network.com, Inc.) filed January 15, 1999                Reference(2)

   3.04         Bylaws of SCHIMATIC Cash Transactions Network.com, Inc. dated                        Incorporated by
                January 15, 1999                                                                     Reference(2)

   3.05         Articles of Amendment to Articles of Incorporation of SCHIMATIC Cash                 Incorporated by
                Transactions Network.com, Inc. dated June 30, 1999, filed June 26, 2000              Reference(3)

   3.06         Amendment to Articles of Incorporation (increase authorized shares to                Incorporated by
                500,000,000), dated November 29, 2006                                                Reference(4)

   3.07         Articles of Conversion Changing SCHIMATIC Cash Transactions Network.com,             Incorporated by
                Inc. from a Florida Corporation to a Nevada Corporation, dated December 22, 2006     Reference(5)

---------       ---------------------------------------------------------------------------          -------------
Item 10.        Material Contracts
---------       ---------------------------------------------------------------------------          -------------

  10.01         Agreement with Phoenix Technology Holdings Inc. dated April 6, 2006                  This filing

---------       ---------------------------------------------------------------------------          -------------
 Item 31        Section 302 Certifications
---------       ---------------------------------------------------------------------------          -------------

  31.01         Certification of Chief Executive Officer Pursuant to Section 302 of the
                Sarbanes-Oxley Act of 2002                                                           This filing

  31.02         Certification of Chief Financial Officer Pursuant to Section 302 of the
                Sarbanes-Oxley Act of 2002
                                                         This filing
---------       ---------------------------------------------------------------------------          -------------
 Item 32        Section 1350 Certifications
---------       ---------------------------------------------------------------------------          -------------

  32.01         Certification of Chief Executive Officer Pursuant to Section 906 of the              This filing
                Sarbanes-Oxley Act of 2002

  32.02         Certification of Chief Financial Officer Pursuant to Section 906 of the
                Sarbanes-Oxley Act of 2002                                                           This filing
</TABLE>

  ------------------------------
(1) Incorporated by reference from Amendment No. 3 to Form 10-SB/A filed on
    September 10, 2001.
(2) Incorporated by reference from Amendment No. 2 to Form 10-SB/A filed on
    April 13, 2000.
(3) Incorporated by reference from Amendment No. 5 to Form 10-SB/A filed on
    February 14, 2002.
(4) Incorporated by reference from an exhibit to Form 8-K filed on January 9,
    2007
(5) Incorporated by reference from an exhibit to Form 8-K filed on March 22,
    2007

                                       18
<PAGE>

         (b)      Reports on Form 8-K:

                  (i)      Form 8-K dated April 6, 2006 and filed January 8,
                           2007 and incorporated herein by reference, Entry into
                           Agreement with Phoenix Technology Holdings
                           Incorporated.

                  (ii)     Form 8-K dated November 29, 2006 and filed January 9,
                           2007 and incorporated herein by reference, Amendment
                           to Articles of Incorporation to increase the
                           authorized shares to 500,000,000 at $.001.

                  (iii)    Form 8-K dated December 22, 2006 and filed March 22,
                           2007 and incorporated herein by reference, Articles
                           of Conversion Changing SCHIMATIC Cash Transactions
                           Network.com, Inc. from a Florida Corporation to a
                           Nevada Corporation.


                 ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES


         The following is a summary of the fees billed to the Company by its
principal accountants during the fiscal years ended December 31, 2006 and
December 31, 2005.

Fee Category                               2006                        2005
--------------------------------------------------------------------------------
Audit Fees                               $15,800                     $15,800
Audit-Related Fees                          $0                          $0
Tax Fees                                    $0                          $0
All Other Fees                              $0                          $0

         Audit Fees consists of fees for professional services provided by our
principal accountants for the audit of the Company's annual financial statement
and reviews of the quarterly financial statements included in the Company's
statutory and regulatory filings.

         The Company does not have an Audit Committee, therefore, there is no
Audit Committee policy with respect to pre-approval of audit and non-audit
services of independent auditors. All services provided by our principal
accountant are performed in accordance with a written engagement letter between
us and the principal accountant. The Company approves all professional services
undertaken by the principal accountant prior to their execution.


                                   SIGNATURES

         In accordance with Section 13 or 15(d) of the Securities Exchange Act
of 1934, this report has been signed below on the registrant and in the
capacities and on the dates indicated.

                                  SCHIMATIC Cash Transactions Network.com, Inc.


Dated:  February 8, 2008          /s/ Miki Radivojsa
                                  ---------------------------------------
                                  Miki Radivojsa, President and
                                  Chief Executive Officer


Dated:  February 8, 2008          /s/ Bernard F. McHale
                                  ---------------------------------------
                                  Bernard F. McHale
                                  Treasurer (Chief Financial Officer)

                                       19
<PAGE>

                                     PART II

                          Item 7. FINANCIAL STATEMENTS

                                   FORM 10-KSB

                  SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.


                        CONSOLIDATED FINANCIAL STATEMENTS

                        AS OF DECEMBER 31, 2006 AND 2005

      Together With Report of Independent Registered Public Accounting Firm

                        (Amounts expressed in US Dollars)


                                TABLE OF CONTENTS


Report of Independent Registered Public Accounting Firm .....................F-2

Consolidated Balance Sheets as of December 31, 2006 and 2005.................F-3

Consolidated Statements of Operations and Comprehensive Loss for
the years ended December 31, 2006 and 2005...................................F-4

Consolidated Statements of Changes in Stockholders' Deficiency
for the years ended December 31, 2006 and 2005...............................F-5

Consolidated Statements of Cash Flows for the years ended
December 31, 2006 and 2005...................................................F-7

Notes to Consolidated Financial Statements...................................F-9


                                      F-1
<PAGE>

Schwartz Levitsky Feldman llp
CHARTERED ACCOUNTANTS
LICENSED PUBLIC ACCOUNTANTS
TORONTO o MONTREAL

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of Schimatic Cash Transactions
Network.Com, Inc.


We have audited the accompanying consolidated balance sheets of Schimatic Cash
Transactions Network.Com, Inc. (the "Company") as at December 31, 2006 and 2005
and the related consolidated statements of operations and comprehensive loss,
cash flows and stockholders' deficiency for the years then ended. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, based on our audits, the consolidated financial statements
referred to above present fairly, in all material respects, the financial
position of Schimatic Cash Transactions Network.Com, Inc. as of December 31,
2006 and 2005, and the results of its operations and comprehensive loss and its
cash flows for the years ended December 31, 2006 and 2005, in accordance with
generally accepted accounting principles in the United States of America.

The consolidated financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
consolidated financial statements, the Company has incurred net losses since
inception. Additionally, the Company has a net working capital deficiency and
stockholders' deficiency. These conditions raise substantial doubt about the
Company's ability to continue as a going concern. Management's plans in regard
to these matters are also described in Note 2. The consolidated financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.



                                                 "SCHWARTZ LEVITSKY FELDMAN LLP"

Toronto, Ontario, Canada                                   Chartered Accountants
January 14, 2008                                     Licensed Public Accountants




      1167 Caledonia Road
      Toronto, Ontario M6A 2X1

                                      F-2
<PAGE>

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
Consolidated Balance Sheets
As of December 31, 2006 and 2005
(Amounts expressed in US Dollars)

<TABLE>
<CAPTION>
                                                                              2006                 2005
                                                                               $                    $
                                            ASSETS
                                            ------
<S>                                                                       <C>                  <C>
CURRENT ASSETS:
  Cash                                                                          9,006               11,542
  Prepaid Expenses and other                                                   10,720               42,499
                                                                          -----------          -----------
      TOTAL CURRENT ASSETS                                                     19,726               54,041
                                                                          -----------          -----------
      TOTAL ASSETS                                                             19,726               54,041
                                                                          ===========          ===========
               LIABILITIES AND SHAREHOLDERS' DEFICIENCY
               ----------------------------------------
CURRENT LIABILITIES:
  Accounts payable - Vendor (note 11)                                       2,218,200            1,963,800
  Accounts payable - other                                                  1,566,606            7,166,788
  Accounts Payable-Phoenix (note 16)                                        8,387,164                    -
  Accrued wages and payroll taxes (note 14)                                 1,526,550            1,499,196
  Deferred compensation (note 7)                                            5,959,206            4,182,715
  Loans - CEO America (note 6)                                                150,000              150,000
  Loans -Phoenix (note 16)                                                    110,490                    -
  Amounts owed to employees and officers (notes 3 and 4)                    2,003,500            1,337,027
  Short term loans (note 12)                                                      500                  500
  Convertible notes payable (including amounts owed to officers
  $0 prior year $1,220,462 (note 5))                                          237,000            2,991,316
                                                                          -----------          -----------
      TOTAL CURRENT LIABILITIES                                            22,159,216           19,291,342
                                                                          -----------          -----------

GOING CONCERN (note 2)
COMMITMENTS AND CONTINGENCIES (notes 13, 14, 16, 17 and 19)
RELATED PARTY TRANSACTIONS (note 18)

SHAREHOLDERS' DEFICIENCY (note 9):
  Common stock - $.001 par value; 500,000,000 shares
    authorized; 209,238,182 shares issued and outstanding                     209,238              193,274
                (2005: 193,274,003)
  Additional paid-in capital                                               60,921,925           60,006,504
  Common stock subscription receivable                                              -             (175,000)
  Common stock subscribed                                                           -              200,000
  Deficit                                                                 (83,270,653)         (79,462,079)
                                                                          -----------          -----------
      TOTAL SHAREHOLDERS' DEFICIENCY                                      (22,139,490)         (19,237,301)
                                                                          -----------          -----------
      TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIENCY                           19,726               54,041
                                                                          ===========          ===========

                       The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>

                                      F-3
<PAGE>

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
Consolidated Statements of Operations and Comprehensive Loss
Years Ended December 31, 2006 and 2005
(Amounts expressed in US Dollars)

<TABLE>
<CAPTION>
                                                                            For the Years Ended
                                                                                December 31,
                                                                  ----------------------------------------
                                                                       2006                       2005
                                                                       ----                       ----
<S>                                                               <C>                        <C>
REVENUES :                                                        $     131,357              $           -
                                                                  -------------              -------------
EXPENSES:
  Selling, general and administrative                                 1,339,004                  2,951,119
  Interest expense                                                    2,600,927                  4,690,950
                                                                  -------------              -------------
      TOTAL EXPENSES                                                  3,939,931                  7,642,069
                                                                  -------------              -------------
NET LOSS                                                             (3,808,574)                (7,642,069)
                                                                  =============              =============
NET LOSS PER SHARE, BASIC AND DILUTED                             $       (0.02)             $       (0.04)

                                                                  =============              =============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
  OUTSTANDING, BASIC AND DILUTED                                    195,412,535                181,736,272
                                                                  =============              =============

COMPREHENSIVE LOSS
The components of comprehensive loss are as follows:

Net loss                                                          $  (3,808,574)             $  (7,642,069)
Other comprehensive income (loss) foreign currency
Translation                                                                   -                          -
Comprehensive Loss                                                $  (3,808,574)             $  (7,642,069)

                       The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>

                                      F-4
<PAGE>

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.

Consolidated Statements of Changes in Stockholders' Deficiency
For the years ended December 31, 2006 and December 31, 2005
(Amounts expressed in US dollars)

<TABLE>
<CAPTION>
                                                                                       Common     Common
                                                    Common Stock    Additional          Stock      Stock
                                         Number of                     Paid-in   Subscription      to be
                                            Shares        Amount       Capital     Receivable     Issued      Deficit         Total
                                                               $             $              $          $            $             $
<S>                                   <C>              <C>        <C>               <C>        <C>       <C>           <C>
(1)  BALANCE,  December 31, 2004       165,714,436       165,714    57,616,113       (250,000)   500,000  (71,820,010)  (13,788,183)

     Issuance of stock for services
     rendered:
     ($0.05 per share, February)           250,000           250        12,250                                      -        12,500
     ($0.05 per share, May)                  1,050             1            52                                                   53
     ($0.048 per share, June)              100,000           100         4,650                                                4,750
     ($0.06 per share, December)            88,669            89         5,231                                                5,320
     Issue of stock in lieu of
     interest payments:
     ($0.082 per share, May)            22,934,690        22,935     1,861,894                                            1,884,829
     Issue of stock for cash:
     ($0.07 per share, March)               70,355            70         4,855                                                4,925
     ($0.068 per share, March)             369,550           370        24,590                                               24,960

     ($0.07 per share, April)              100,000           100         6,900                                                7,000
     ($0.09 per share, April)              100,000           100         8,900                                                9,000
     ($0.05 per share, May)                248,000           248        12,152                                               12,400
     ($0.056 per share, May)                23,571            23         1,297                                                1,320
     ($0.07 per share, May)                142,857           143         9,857                                               10,000
     ($0.08 per share, May)                125,000           125         9,875                                               10,000
     ($0.09 per share, May)                 47,968            48         4,269                                                4,317
     ($0.123 per share, May)               150,000           150        18,225                                               18,375
     ($0.30 per share, May)              1,000,000         1,000       299,000                  (300,000)                         -
     ($0.068 per share, May)                13,450            13           895                                                  908
     ($0.08 per share, June)                62,500            63         4,937                                                5,000
     ($0.05 per share, June)               800,000           800        39,200                                               40,000
     ($0.05 per share, June)               100,000           100         4,900                                                5,000
     ($0.09 per share, June)                50,000            50         4,450                                                4,500
     ($0.05 per share, July)               200,000           200         9,800                                               10,000
     ($0.05 per share, July)               200,000           200         9,800                                               10,000
     ($0.06 per share, September)           58,413            58         3,447                                                3,505
     ($0.05 per share, October)            323,494           324        15,851                                               16,175
     Common stock subscription
     received                                    -             -             -         75,000                                75,000
     Stock option compensation                   -             -        13,114              -          -                     13,114
     Net Loss                                    -             -             -              -          -   (7,642,069)   (7,642,069)
     BALANCE,  December 31, 2005       193,274,003       193,274    60,006,504       (175,000)   200,000  (79,462,079)  (19,237,301)

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

                                      F-5
<PAGE>

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.

Consolidated Statements of Changes in Stockholders' Deficiency
For the years ended December 31, 2006 and December 31, 2005
(Amounts expressed in US dollars)

<CAPTION>
<S>                                     <C>             <C>       <C>               <C>         <C>        <C>           <C>
     Issuance of stock for services
     rendered:
     ($0.05 per share, February)         2,000,000         2,000        98,000                                              100,000
     ($0.05 per share, July)               200,000           200         9,800                                               10,000
     ($0.07 per share, August)           1,000,000         1,000        69,000                                               70,000
     ($0.05 per share, December)         3,000,000         3,000       147,000                                              150,000
     ($0.07 per share, December)           709,687           710        48,969                                               49,679
     ($0.048 per share, December)        1,153,333         1,153        54,265                                               55,418
     ($0.10 per share, December)           540,000           540        53,460                                               54,000
     ($0.046 per share, December)        1,307,080         1,307        58,277                                               59,584
     ($0.07 per share, December)         4,000,000         4,000       276,000                                              280,000
     ($0.05 per share, December)         2,054,079         2,054       100,650                                              102,704
     Adjustment of stock to be issued
     with payables to Phoenix                                                                   (200,000)                  (200,000)
     Common stock subscription
     received                                                                         175,000                               175,000
     Net Loss                                                                                              (3,808,574)   (3,808,574)
     BALANCE,  December 31, 2006       209,238,182       209,238    60,921,925              -          -  (83,270,653)  (22,139,490)





                       The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>

                                      F-6
<PAGE>

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
Consolidated Statement of Cash Flows
Years Ended December 31, 2006 and 2005
(Amounts expressed in US Dollars)

<TABLE>
<CAPTION>
                                                                     For the Years Ended
                                                                          December 31,
                                                            -------------------------------------
                                                                   2006                 2005
                                                            -------------------------------------
                                                                    $                    $
<S>                                                            <C>                  <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss                                                       (3,808,574)          (7,642,069)
Adjustments to reconcile net loss to net cash
used in operating activities:
Stock option compensation                                               -               13,114
Common stock issued for services
and compensation                                                  931,384               22,623
Common stock issued for interest expense                                -            1,884,829
Changes in current assets and liabilities:
Prepaid Expenses and other                                         31,778               16,073
Accounts payable and accrued expenses                           2,497,435            5,185,827
                                                            -------------------------------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES              (347,976)            (519,603)
                                                            -------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from (repayments of) loans payable - shareholders              -             (197,385)
Proceeds from loans payable-Phoenix                                88,000                    -
Proceeds from notes payable                                        82,440              225,000
Proceeds from common stock subscription
Received                                                          175,000               75,000
Sales of common stock                                                   -              197,385
Amounts owed to employees and officers                                  -              217,059
                                                            -------------------------------------
NET CASH PROVIDED BY  FINANCING ACTIVITIES                        345,440              517,059
                                                            -------------------------------------
NET DECREASE IN CASH                                               (2,536)              (2,544)

CASH AT BEGINNING OF PERIOD                                        11,542               14,086
                                                            -------------------------------------
CASH AT END OF PERIOD                                               9,006               11,542
                                                            -------------------------------------

   The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>

                                      F-7
<PAGE>

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
Consolidated Statement of Cash Flows
Years Ended December 31, 2006 and 2005
(Amounts expressed in US Dollars)

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
-------------------------------------------------

                                                         For the Years Ended
                                                            December 31,
                                                            ------------
                                                         2006           2005
                                                         ----           ----
  Cash paid during the year for:
    Interest                                         $    9,000     $    9,000
    Taxes                                                52,870              0
    Total                                            $   61,870     $    9,000
                                                     ==========     ==========

NON-CASH FINANCING AND INVESTING ACTIVITIES:
--------------------------------------------


  Issuance of common stock for interest              $        -     $1,884,829
                                                     ==========     ==========


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


                                      F-8
<PAGE>

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
Notes to Consolidated Financial Statements
December 31, 2006 and 2005
(Amounts expressed in US Dollars)

NOTE 1- THE COMPANY

Schimatic Cash Transactions Network.com, Inc. (the Company) is in the business
of research, development and integration of proprietary processes and software
technologies for the electronic payment industry, primarily involving consumer
loyalty programs. Schimatic Cash Transactions Network.com, Inc. operates
principally through its wholly-owned subsidiary, Smart Chip Technologies, LLC.
The Company licenses, markets and develops smart-card loyalty products through
its subsidiary, Smart Chip Technologies, LLC under the "Smart Chip" name.

The Company was previously in the development stage and commenced operations in
its planned line of business during the end of first quarter of 2006. On April
6, 2006, the Company entered into a License Agreement with Phoenix Technology
Holdings Incorporated, a Turks and Caicos Islands company. Under the terms of
the agreement, the Company granted Phoenix an exclusive license to use the
Company's technology.

NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Going Concern
-------------

The accompanying financial statements have been prepared according to United
States Generally Accepted Accounting Principles. The accompanying financial
statements have been prepared assuming that the Company will continue as a going
concern. The Company has incurred net losses of $83,270,653 since inception.
Additionally, the Company had a net working capital deficiency of $22,139,490
and a total shareholders' deficiency of $22,139,490 at December 31, 2006. These
conditions raise substantial doubt about the Company's ability to continue as a
going concern. The consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty.

Management expects to incur additional losses for the foreseeable future and
recognizes the need to raise capital through the future issuance of stock and/or
debentures in order to develop a viable business. The Company continues to
implement cost-cutting measures. It may also rely increasingly on strategic
alliances with others who will assume responsibility for financing specific
required development tasks, thus, reducing the Company's financial requirements
for the exploitation of its intellectual properties.

As of December 31, 2006, current liabilities are substantially past due. In the
event demands are made upon the Company which cannot be met and the associated
creditors successfully pursue action against the Company, the Company could be
exposed to additional costs of legal fees, interest or penalties, and may be
forced to take other defensive actions, including filing for bankruptcy.

The Company has been able to finance its operations primarily by raising capital
through the private placement of common stock and the issuance of convertible
debt.

On April 6, 2006, the Company entered into a License Agreement with Phoenix
Technology Holdings Incorporated, a related Turks and Caicos Islands company.
Under the terms of the agreement, the Company granted Phoenix an exclusive
license to use the Company's technology. Also, certain portions of the Company's
debt, including a significant portion of the Senior Secured Convertible Notes,
unpaid amounts owing to Airos Group for services rendered, and accrued salaries
were assumed by Phoenix and ceased accruing additional interest. In order to
maintain exclusivity, the Agreement calls for certain performance targets to be
met on an annual basis by Phoenix. As of April 18, 2007, the targets for the
first year were met.

                                      F-9
<PAGE>

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
Notes to Consolidated Financial Statements
December 31, 2006 and 2005
(Amounts expressed in US Dollars)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Principles of Consolidation
---------------------------

The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiaries, IC One and Smart Chip Technologies, LLC. All
significant inter-company balances and transactions have been eliminated in
consolidation.

Software Development Costs
--------------------------

Software development costs are expensed as incurred until technology feasibility
has been established. The Company defines the establishment of technological
feasibility as the completion of all planning, designing, coding and testing
activities that are necessary to establish products that meet design
specifications including functions, features and technical requirements. Costs
incurred by us between completion of the working model and the point at which
the product is ready for general release have not been significant. Accordingly,
no costs have been capitalized to date.

Revenue Recognition
-------------------

The Company has granted an exclusive license to Phoenix Technology Holding
Incorporated ("Phoenix"), to use, sub-license, reproduce, manufacture,
distribute, sell, and otherwise commercially exploit the technology at its own
costs, with no costs to be borne by the Company. Software revenue recognition
exists if an arrangement or contract to deliver software does not require
substantial customization, modification, or production of the software by the
Company. If and when the arrangement or contract will involve more than one
element, revenue recognition will be applied to each element separately. For
arrangements that do require substantial customization, modification, or
production of the software, paragraph 7 of SOP 97-2 mandates that the entire
arrangement be accounted for in conformity with Accounting Research Bulletin
(ARB) 45 and SOP 81-1, Accounting for Performance of Construction-Type and
Certain Production-Type Contracts. Similarly to SFAC 5, paragraphs 14 through 33
of SOP 97-2 detail four recognition criteria. These paragraphs detail the four
basic criteria needed for software revenue recognition: (1) persuasive evidence
that an arrangement exists, (2) delivery has occurred, (3) the vendor's fee is
fixed or determinable, and (4) collectability is probable. The Company
recognizes revenue based on the licensing contract with Phoenix where the
revenues are calculated at specified percentages of the revenues earned by
Phoenix through sub-licensing, professional services and transactions fees
earned from the sale and use of the technology.

Research and Development Costs
------------------------------
Research and development expenditures are charged to expense as incurred, unless
such costs are expected to be reimbursed. The Company capitalizes costs related
to acquired technologies that have achieved technological feasibility and have
alternative uses. Research and development expenses totaled approximately
$125,122 and $1,643,055 for the years ended December 31, 2006 and 2005,
respectively.

Property and Equipment
----------------------
Property and equipment are recorded at cost. Expenditures for major additions
and betterments are capitalized. Maintenance and repairs are charged to
operations as incurred. Depreciation of property and equipment is computed by
straight-line method over the assets estimated lives. Leasehold improvements are
amortized over the lesser of the lease term or the assets' useful lives. Upon
sale or retirement of plant and equipment, the related cost and accumulated
depreciation are removed from the accounts and any gain or loss is reflected in
operations. Prior to January 1, 2003, the assets were fully depreciated.

                                      F-10
<PAGE>

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
Notes to Consolidated Financial Statements
December 31, 2006 and 2005
(Amounts expressed in US Dollars)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Intangible Assets
-----------------
Intellectual Property is recorded at cost less impairment written down.
Impairment tests are performed at least once a year and when conditions
indicating possible impairment exist, intellectual property is written down if
the carrying amount exceeds the fair value or if significant doubt exists with
respect to recoverability. During the year ended December 31, 2003, Patents were
written down to nil value.

Stock-Based Compensation
------------------------
In December 2004, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 123 (Revised 2004), "Share-Based
Payment" (SFAS 123 (R)). SFAS 123 (R) requires companies to recognize
compensation cost for employee services received in exchange for an award of
equity instruments based on the grant-date fair value of the award. The Company
adopted the provisions of SFAS 123 (R) on January 1, 2006 using the "modified
prospective" application method of adoption which requires the Company to record
compensation cost related to unvested stock awards as of December 31, 2005 by
recognizing the unamortized grant date fair value of these awards over the
remaining service periods of those awards with no change in historical reported
earnings. As a result of using this method, the consolidated financial
statements for the year ended December 31, 2005 were not restated for the impact
of stock-based compensation expense. Awards granted after December 31, 2005 are
valued at fair value in accordance with the provisions of SFAS 123 (R) and
recognized on a straight line basis over the service periods of each award.

Had expense for the Company's stock- based compensation plans been determined
based on the grant-date fair value for 2005, consistent with the provisions of
SFAS 123 (R), the Company's reported and proforma net loss and net loss per
share for the year ended December 31, 2005 would be as follows:

<TABLE>
<CAPTION>
                                                                          Year ended

                                                                      December 31, 2005
                                                                      -----------------
<S>                                                                     <C>
         Net Loss-as reported                                           $(7,642,069)

         Add:Proforma stock-based compensation expense-as
         If grant date fair value had been applied to all
         Stock -based payment awards                                    $    13,114

             Less: Stock based compensation as reported                 $   (13,114)

         Net loss-proforma for stock based compensation
         expense                                                        $(7,642,069)

         Net loss per share-basic, as reported                          $     (0.04)

         Net loss per share-basic, proforma for stock- based
         Compensation expense                                           $     (0.04)
</TABLE>

As of December 31, 2006 there was $Nil of unrecognized expense related to
non-vested stock-based compensation arrangements granted.
No options were granted during the year ended December 31, 2006 under the
Company's stock-option plan.

                                      F-11
<PAGE>

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
Notes to Consolidated Financial Statements
December 31, 2006 and 2005
(Amounts expressed in US Dollars)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Income Taxes
------------
The Company accounts for income taxes in accordance with SFAS No.
109,"Accounting for Income Taxes". Deferred tax assets and liabilities are
recorded for differences between the financial statement and tax basis of the
assets and liabilities that will result in taxable or deductible amounts in the
future based on enacted tax laws and rates. Valuation allowances are established
when necessary to reduce deferred tax assets to the amount expected to be
realized. Income tax expense is recorded for the amount of income tax payable or
refundable for the period increased or decreased by the change in deferred tax
assets and liabilities during the period.

Loss per Common Share
---------------------
Basic and diluted loss per share has been calculated based upon the weighted
average number of common shares outstanding and excludes any potentially
dilutive securities. Stock options and convertible notes have been excluded as
common stock equivalents in the computation of diluted loss per share since the
results would be anti-dilutive. Obligations to issue additional shares, which
could potentially dilute earnings per share, were approximately 253,900,000 at
December 31, 2006 and 147,800,000 at December 31, 2005.

Use of Estimates
----------------
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
The main areas of estimates include the calculation of stock based compensation,
accrued liabilities and valuation allowance

Fair Value of Financial Instruments
-----------------------------------
The Company's financial instruments consist primarily of cash, notes payable and
Accounts payable and accrued expenses, which approximate fair value because of
their short maturities. The Company's notes payable approximate the fair value
of such instruments based upon management's best estimate of interest rates that
would be available to the Company for similar financial arrangements at December
31,2006.

Comprehensive Income (Loss)
---------------------------
The Company has adopted SFAS No. 130 Reporting Comprehensive Income (Loss). This
standard requires companies to disclose comprehensive income in their
consolidated financial statements. In addition to items included in net income,
comprehensive income includes items currently charged or credited directly to
stockholders' equity, such as foreign currency translation adjustments.
Impairment of Long - Lived Assets
---------------------------------

The Company reviews long-lived assets for impairment whenever circumstances and
situations change such that there is an indication that the carrying amounts may
not be recovered.

                                      F-12
<PAGE>

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
Notes to Consolidated Financial Statements
December 31, 2006 and 2005
(Amounts expressed in US Dollars)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Recent Pronouncements
---------------------
SFAS 153 - Exchanges of Non-monetary Assets -- an amendment of APB Opinion No.
29. The guidance in APB Opinion No. 29, Accounting for Non-monetary
Transactions, is based on the principle that exchanges of non-monetary assets
should be measured based on the fair value of the assets exchanged. The guidance
in that Opinion, however, included certain exceptions to that principle. This
Statement amends Opinion 29 to eliminate the exception for non-monetary
exchanges of similar productive assets and replaces it with a general exception
for exchanges of non-monetary assets that do not have commercial substance. A
non-monetary exchange has commercial substance if the future cash flows of the
entity are expected to change significantly as a result of the exchange. The
company believes that this standard would not have a material impact on its
financial position, results of operations or cash flows.

SFAS 123R - In December 2004, the FASB issued SFAS No. 123R, "Share-Based
Payment" ("SFAS 123R"). SFAS 123R revises FASB Statement No. 123 "Accounting for
Stock-Based Compensation" and supersedes APB Opinion No. 25 "Accounting for
Stock Issued to Employees". SFAS 123R requires all public and non-public
companies to measure and recognize compensation expense for all stock-based
payments for services received at the grant-date fair value, with the cost
recognized over the vesting period (or the requisite service period). SFAS 123R
is effective for non-small business issuers for all interim periods beginning
after June 15, 2005. SFAS 123R is effective for small business issuers for all
interim periods beginning after December 15, 2005. As such, the Company is
required to adopt these provisions commencing January 1, 2006. The Company
adopted the provisions of SFAS 123 (R) on January 1, 2006 using the "modified
prospective" application method of adoption which requires the Company to record
compensation cost related to unvested stock awards as of December 31, 2005 by
recognizing the unamortized grant date fair value of these awards over the
remaining service periods of those awards with no change in historical reported
earnings.

SFAS 154- In May 2005, the FASB issued Statement of Financial Accounting
Standard No 154, "Accounting Changes and Error Corrections," (SFAS 154)
effective for accounting changes and corrections of errors made in fiscal years
beginning after December 15, 2005. SFAS 154 replaces APB Opinion 20 and SFAS 3.
Among other changes, SFAS 154 requires retrospective application to prior
periods financial statements of changes in accounting principle, unless it is
impractical to determine either the period-specific effects or the cumulative
effect of the change. SFAS 154 also requires that a change in depreciation,
amortization, or depletion method for long-lived non-financial assets be
accounted for as a change in accounting estimate effected by a change in
accounting principle. The adoption of SFAS 154 will only affect the Company's
financial condition or results of operations if it has such changes or
corrections of errors in the future.
SFAS 155 - In February 2006, the FASB issued SAFS No. 155, Accounting for
Certain Hybrid Financial Instruments. SFAS is an amendment to SFAS 133 and 140.
SFAS 155 improves financial reporting by eliminating the exception from applying
SFAS 133 to interest in securitized financial assets so similar instruments are
accounted for similarly regardless of the form of instruments. SFAS 155 is
effective for all financial instruments acquired or issued after the beginning
of an entity's first fiscal year that begins after September 15, 2006. The
Company does not expect the adoption of SFAS 155 to have an impact on its
financial position or results of operation.

SFAS 156 - In March 2006, the FASB issued SFAS No. 156, "Accounting for
Servicing of Financial Assets", which amends SFAS No. 140, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities".
In a significant change to current guidance, SFAS No. 156 permits an entity to
choose either of the following subsequent measurement methods for each class of
separately recognized servicing assets and servicing liabilities: (1)
Amortization Method or (2) Fair Value Measurement Method. SFAS No. 156 is
effective as of the beginning of an entity's first fiscal year that begins after
September 15, 2006. The Company is currently reviewing the effect, if any, the
proposed guidance will have on its financial position and operations.

                                      F-13
<PAGE>

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
Notes to Consolidated Financial Statements
December 31, 2006 and 2005
(Amounts expressed in US Dollars)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Recent Pronouncements (Continued)
---------------------------------
FIN 48 - In July 2006, the FASB issued Interpretation No. 48, "Accounting for
Uncertainty in Income Taxes" ("FIN 48"). FIN 48 clarifies the accounting for
uncertainty in income taxes recognized in enterprises financial statements in
accordance with SFAS No. 109, "Accounting for Income Taxes". FIN 48 prescribes a
recognition threshold and measurement attributable for the financial statement
recognition and measurement of a tax position taken or expected to be taken in a
tax return. FIN 48 also provides guidance on derecognizing, classification,
interest and penalties, accounting in interim periods, disclosures and
transitions. FIN 48 is effective for fiscal years beginning after December 15,
2006. The Company is currently reviewing the effect, if any, FIN 48 will have on
its financial position and operations.

SFAS 157 -In September 2006, the FASB issued SFAS No. 157, "Fair Value Measures"
("SFAS No. 157"). SFAS No. 157 defines fair value, establishes a framework for
measuring fair value in generally accepted accounting principles ("GAAP"),
expands disclosures about fair value measurements, and applies under other
accounting pronouncements that require or permit fair value measurements. SFAS
No. 157 does not require any new fair value measurements, however the FASB
anticipates that for some entities, the application of SFAS No. 157 will change
current practice. SFAS No. 157 is effective for financial statements issued for
fiscal years beginning after November 15, 2007, which for the Company would be
its fiscal year beginning November 1, 2008. The Company is currently reviewing
the effect, if any, SFAS 157 will have on its financial position and operations.

SFAS 158 - In September 2006, the Financial Accounting Standards Board ("FASB")
issued SFAS No. 158, "Employers' Accounting for Defined Benefit Pension and
Other Postretirement Plans - an amendment of FASB Statements No. 87, 88, 106,
and 132(R)". This statement requires employers to recognize the overfunded or
underfunded status of a defined benefit postretirement plan (other than a
multiemployer plan) as an asset or liability in its statement of financial
position and to recognize changes in that funded status in the year in which the
changes occur through comprehensive income of a business entity or changes in
unrestricted net assets of a not-for-profit organization. This statement also
requires an employer to measure the funded status of a plan as of the date of
its year-end statement of financial position, with limited exceptions. The
provisions of SFAS No. 158 are effective for employers with publicly traded
equity securities as of the end of the fiscal year ending after December 15,
2006. The adoption of this statement is not expected to have a material effect
on the Company's future reported financial position or results of operations.

SAB 108 - In September 2006, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 108, "Considering the Effects of Prior Year
Misstatements when Quantifying Misstatements in Current Year Financial
Statements" (SAB 108). SAB 108 requires companies to evaluate the materiality of
identified unadjusted errors on each financial statement and related financial
statement disclosure using both the "rollover" approach and the "iron curtain"
approach. The rollover approach quantifies misstatements based on the amount of
the error in the current-year financial statement whereas the iron curtain
approach quantifies misstatements based on the effects of correcting the
misstatement existing in the balance sheet at the end of the current year,
irrespective of the misstatement's year(s) of origin. Financial statements would
require adjustment when either approach results in quantifying a misstatement
that is material. SAB 108 is effective for interim periods of the first fiscal
year ending after November 15, 2006.

                                      F-14
<PAGE>

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
Notes to Consolidated Financial Statements
December 31, 2006 and 2005
(Amounts expressed in US Dollars)

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Recent Pronouncements (Continued)
---------------------------------
SFAS 159 - In February 2007, the FASB issued SFAS No. 159 ("SFAS 159") - the
fair value option for financial assets and liabilities including in amendment of
SFAS 115. This Statement permits entities to choose to measure many financial
instruments and certain other items at fair value. The objective is to improve
financial reporting by providing entities with the opportunity to mitigate
volatility in reported earnings caused by measuring related assets and
liabilities differently without having to apply complex hedge accounting
provisions. This Statement is expected to expand the use of fair value
measurement objectives for accounting for financial instruments. This Statement
is effective as of the beginning of an entity's first fiscal year that begins
after November 15, 2007, and interim periods within those fiscal years. Early
adoption is permitted as of the beginning of a fiscal year that begins on or
before November 15, 2007, provided the entity also elects to apply the
provisions of FASB Statement No. 157, Fair value measurements. The Company is
currently evaluating the impact of SFAS No. 159 on its consolidated financial
statements.

Cash and Cash Equivalents
-------------------------
The Company considers all short-term highly liquid investments with a maturity
date of three months or less to be cash equivalents.

NOTE 3 - AMOUNTS OWED TO OFFICERS

Loans payable to officers are non-interest bearing advances made on behalf of
the Company that are unsecured and payable on demand.

NOTE 4 - AMOUNTS OWED TO EMPLOYEES

Amounts owed to employees are non-interest bearing advances made on behalf of
the Company that are unsecured and payable on demand.

NOTE 5 - CONVERTIBLE NOTES PAYABLE

At December 31, 2006, secured convertible notes payable of $ 237,000 (2005: $
2,991,316) bear interest at a rate of 12% annually and are secured by Company's
intellectual property. The notes mature at various dates extending through
September 2004. In a letter to Note holders on December 30, 2004, the Company
advised all note holders that there had been a technical delay in conversion to
Common Stock, and that notes would be extended on a month-by-month basis until
resolution. The issue was resolved on November 30, 2006 when the number of
authorized shares was increased.

The Company has the option to repay the notes and interest in cash or convert
them into common stock based on a conversion price of $.05 per share or the
holder can elect to convert the notes to common stock based on the above stated
conversion price. The holder can convert their notes anytime. If the Company
should force a conversion of these notes into common stock, then the holder will
receive an additional amount equal in value to 25% of the principal amount in
stock options priced at $0.05 per share that can be exercised within a 5 year
period in accordance with the terms and conditions of the note.

At December 31, 2006, these notes are convertible into 4,740,000 shares of
common stock (2005: 59,826,325).

On April 6, 2006, Noteholders holding notes valued at $2,811,316 plus accrued
interest of $1,275,257 elected to assign their notes to Phoenix Technology
Holdings Inc., a related company (see Note 16). This assigned debt is
convertible into 81,731,460 shares of common stock of the Company.

                                      F-15
<PAGE>

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
Notes to Consolidated Financial Statements
December 31, 2006 and 2005
(Amounts expressed in US Dollars)

NOTE 6 - LOANS PAYABLE - CEO AMERICA

On May 17, 2002, the Company signed an agreement with CEO America, a
wholly-owned subsidiary of Consumer Economic Opportunities, whereby CEO America
agreed to pay an initial $150,000 to the Company and a second payment of
$350,000 on June 20, 2002 for ownership of the SCTN Patents with exclusive
rights for use of the patents being retained by SCTN. The agreement was to
include a 20% equity swap of the two companies. On June 4, 2002, the Company
placed title to the patents in escrow. In connection with the agreement, the
Company placed in escrow a certificate for 30,116,134 shares of SCTN common
stock as collateral. On July 2, 2002, CEO had not delivered the balance of the
money, nor had they complied with any other conditions of the escrow agreement.
The patent title and stock certificate were to remain in escrow pending either
repayment of the original $150,000 to CEO, or until the matter is settled. The
shares of common stock deposited in escrow were not considered to have been
issued or outstanding, and on April 19, 2005 the share certificate for
30,116,134 shares was cancelled. The $150,000 received from CEO America is
recorded as a non-interest bearing liability.

NOTE 7 - DEFERRED COMPENSATION

In July 2002, various consultants, who were owed fees and/or other compensation,
signed deferred payment/compensation stock option agreements. The deferred
compensation agreements allow the holders to defer payment of their owed
compensation by electing to receive cash, common stock or stock options in
accordance with the terms of their agreements.

At December 31, 2006, deferred compensation, if the holders so elect, is
convertible into stock options totaling 42,316,648 shares (2005: 22,212,917
shares) of common stock which are potentially dilutive to earnings per share.

NOTE 8 - INCOME TAXES

At December 31, 2006, the Company has available unused net operating loss
carryovers of approximately $71,500,000 that may be applied against future
taxable income and expire at various dates through 2026. The Company has a
deferred tax asset arising from such net operating loss deductions and has
recorded a valuation allowance for the full amount of such deferred tax asset
since the likelihood of realization of the tax benefits cannot be determined.
These losses may be subject to substantial limitations as a result of IRC
Section 382 rules governing changes in control.

Further, the Company has not filed any federal, state or local income or
franchise tax returns for the years ended December 31, 2006, 2005, 2004, 2003,
2002 and 2001. Such failure may have a material adverse effect on the amount of
any net operating loss carry forwards and may subject the Company to fines.

<TABLE>
<CAPTION>
         Deferred tax asset:                              2006              2005

<S>                                                  <C>               <C>
           Net operating loss carry forward          $ 28,600,000      $ 27,040,000
           Valuation allowance                        (28,600,000)      (27,040,000)
                                                     ------------      ------------

              Net Deferred Tax Asset                 $          -      $          -
                                                     ============      ============
</TABLE>

Reconciliation between the statutory federal income tax rate and the effective
income rate of income tax expense for the year ended December 31, 2006 is as
follows:
------------------------------------------------------------------------------
                                              December 31, 2006
------------------------------------------------------------------------------

------------------------------------------------------------------------------
Statutory Federal and State Income Tax Rate    40.0%
------------------------------------------------------------------------------
Valuation Allowance                           (40.0%)
------------------------------------------------------------------------------

For the year ended December 31, 2006, the valuation allowance increased
approximately $1,560,000.

                                      F-16
<PAGE>

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
Notes to Consolidated Financial Statements
December 31, 2006 and 2005
(Amounts expressed in US Dollars)

NOTE 9 - SHAREHOLDERS' DEFICIENCY

Equity Transactions
-------------------
2006
----

On February 13, 2006, the Company issued 2,000,000 common shares in exchange for
past services valued at $100,000. The shares were issued at $0.05.

On July 14, 2006, the Company issued 200,000 common shares in exchange for past
services valued at $10,000. The shares were issued at $0.05.

On August 18, 2006, the Company issued 1,000,000 common shares in exchange for
past services valued at $70,000. The shares were issued at $0.07.

On December 15, 2006, the Company issued 3,000,000 common shares in exchange for
services valued at $150,000. The shares were issued at $0.05.

On December 15, 2006, the Company issued 709,687 common shares in exchange for
past services valued at $49,679. The shares were issued at $0.07.

On December 16, 2006, the Company issued 1,153,333 common shares in exchange for
past services valued at $55,418. The shares were issued at $0.048.

On December 20, 2006, the Company issued 540,000, 1,307,080, 4,000,000 and
2,054,079 common shares in exchange for past services valued at $54,000,
$59,584, $280,000 and $102,704, respectively. The shares were issued at $0.10,
$0.046, $0.07 and $0.05, respectively.

2005
----

On February 2, 2005 the Company issued 250,000 common shares in exchange for
services valued at $12,500. The shares were issued at $0.05.

On March 29, 2005 the Company issued 70,355 common shares in exchange for cash.
The shares were issued at $0.07.

On March 29, 2005 the Company issued 369,550 common shares in exchange for cash.
The shares were issued at $0.068.

On April 8, 2005, the Company issued 100,000 common shares in exchange for cash.
The shares were issued at $0.07

On April 28, 2005 the Company issued 100,000 common shares in exchange for cash.
The shares were issued at $0.09.

On May 4, 2005 the Company issued 248,000, 23,571, 142,857, 125,000, 47,968,
150,000 and 1,000,000 common shares in exchange for cash. The shares were issued
at $0.05, $0.056, $0.07, $0.08, $0.09, $0.123 and $0.30 respectively.

On May 4, 2005 the Company issued 1,050 common shares in exchange for past
services valued at $53. The shares were issued at $0.05.

On May 4, 2005, the Company issued 22,934,690 common shares for interest
payments of $1,884,829. The shares were issued at $0.082.

On May 4, 2005, the Company issued 13,450 common shares in exchange for cash.
The shares were issued at $0.068.

On June 2, 2005, the Company issued 62,500 common shares in exchange for cash.
The shares were issued at $0.08.

                                      F-17
<PAGE>

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
Notes to Consolidated Financial Statements
December 31, 2006 and 2005
(Amounts expressed in US Dollars)

NOTE 9 - SHAREHOLDERS' DEFICIENCY (Continued)

Equity Transactions (Continued)
-------------------------------

On June 6, 2005, the Company issued 800,000 common shares in exchange for cash.
The shares were issued at $0.05.

On June 15, 2005, the Company issued 100,000 and 50,000 common shares in
exchange for cash. The shares were issued at $0.05 and $0.09, respectively.

On June 15, 2005, the Company issued 100,000 common shares in exchange for
services valued at $4,750. The shares were issued at $0.048.


On July 9, 2005, the Company issued 200,000 common shares in exchange for cash.
The shares were issued at $0.05.

On July 21, 2005, the Company issued 200,000 common shares in exchange for cash.
The shares were valued at $0.05.

On September 14, 2005, the Company issued 58,413 common shares in exchange for
cash. The shares were valued at $ $0.06.

On October 31, 2005, the Company issued 323,494 common shares in exchange for
cash. The shares were valued at $ $0.05

On December 1, 2005, the Company issued 88,669 common shares in exchange for
services valued at $5,320. The shares were valued at $0.06.


Authorized Shares
-----------------
As at December 31, 2006, the Company is authorized to issue 500,000,000 shares
of common stock. At December 31, 2006, the Company had common stock shares
outstanding of 209,238,182 and an additional 253,886,081 shares issuable upon
the conversion of stock options, convertible debt and deferred compensation.

Effective November 29, 2006, the Board of Directors of the Company approved
amendments to the Articles of Incorporation to adopt an increase in the
Company's common stock from 200,000,000 to 500,000,000 shares. Furthermore,
during a special meeting of the Board of Directors on July 20, 2007, the Board
voted to approve a resolution to increase the number of authorized shares to
600,000,000. (Refer subsequent events).

NOTE 10 - STOCK OPTION PLAN

On December 8, 1999, the Company adopted an Employee Stock Option Plan (the
"Plan"). The Board of Directors administers the Plan. Under the Plan, the
Company may grant stock options, which may be incentive stock options ("ISO's")
as defined in the Internal Revenue Code, and stock awards or options which do
not qualify as ISO's to employees and officers. All employees of the Company are
eligible to participate in the Plan.

The Company did not issue any stock options during the year 2006. The fair value
of options is estimated on the date of grant using the Black-Scholes option
pricing model with the following assumptions used for stock options granted
during the year 2005: annual dividends of $0; expected volatility range of
51.78% to 58.02%, risk-free interest rate of 3.0%; and expected life of five to
ten years. The estimated weighted - average fair values of stock options granted
to employees, officers and directors during the year 2005 was approximately
$.03. The market price of shares during the time of grants ranged from $0.05 to
$0.07.

                                      F-18
<PAGE>

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
Notes to Consolidated Financial Statements
December 31, 2006 and 2005
(Amounts expressed in US Dollars)

NOTE 10 - STOCK OPTION PLAN (Continued)

                                                     Stock Options
                                                ------------------------
                                                                Weighted
                                                                Average
                                                                Exercise
                                                  Shares         Price
                                                  ------         -----
         Outstanding at December 31, 2004       48,425,299       $0.11
             Granted                               400,000        0.06
           Exercised                                     -           -
           Cancelled                            (7,142,470)      $0.17
         Outstanding at December 31, 2005       41,682,829       $0.11
             Granted                                     -           -
           Exercised                                     -           -
           Cancelled                            (4,766,296)      $0.14
         Outstanding at December 31, 2006       36,916,533       $0.10
On March 3, 2006, the Company cancelled 1,937,333 options that had been issued
to a past employee. On April 3, 2006, the Company cancelled 1,301,667 options
that had been issued to a past employee. On December 15, 2006 and December 16,
2006, the Company cancelled 527,296 and 1,000,000 options, respectively, that
had been issued to consulting companies for services rendered.
The following table summarizes the Company's stock options outstanding and
exercisable at December 31, 2006:

<TABLE>
<CAPTION>
                                      Options Outstanding                            Options Exercisable
                            ----------------------------------------            ----------------------------
                                             Weighted
                                              Average      Weighted                               Weighted
                                             Remaining     Average                                Average
Range of Exercise               Number      Contractual    Exercise                Number         Exercise
     Prices                  Outstanding       Life         Price                Exercisable        Price
     ------                  -----------       ----         -----                -----------        -----
                            (In Thousands)  (In Years)                         (In Thousands)
<S>                             <C>             <C>         <C>                    <C>              <C>
$0.00 - $0.23                   34,603          2.22        $0.08                  34,603           $0.08
$0.48 - $0.49                    2,314          3.63        $0.48                   2,314           $0.48
                                ------                                             ------
                                36,917                                             36,917
                                ======                                             ======
</TABLE>


                                      F-19
<PAGE>

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
Notes to Consolidated Financial Statements
December 31, 2006 and 2005
(Amounts expressed in US Dollars)

NOTE 11 -OUTSIDE RESEARCH AND DEVELOPMENT SERVICES

The Company retained a third-party vendor in 1997 to perform certain research
and development services relating to the Company's database technology. As of
December 31, 1999, cumulative costs incurred approximated $2,170,000, for which
the Company made cash payments of $200,000 in 1999 for such services rendered.
In 1999, the Company also issued to this vendor 2,100,000 shares of common stock
as collateral of the unpaid balance.

In June 2001, the Company reached a settlement and agreed to reduce the balance
of accounts payable to them by $770,000, to $1,200,000. The agreement resulted
in an extraordinary gain from settlement of $770,000. The agreement also calls
for the return to the Company of 2,100,000 shares of common stock placed in
escrow as collateral for the obligation. The agreement permits the Company to
repay the remaining amount over a period of time as long as fifteen months,
starting no later than September 30, 2001. The amounts expected to be repaid
will increase from $70,000 per month in September 2001 to $90,000 per month
through December 2002. During 2001, the Company made two of the four payments
due in 2001 which totaled to $140,000. The unpaid balance is $2,218,200,
including accrued interest charges of $1,158,200 as of December 31, 2006. In
December 2003, the Company received certificates for the return of all of the
2,100,000 shares of common stock which were then cancelled.

NOTE 12 - SHORT TERM LOANS

These short term loans and advances are non-interest bearing and were converted
to stock in 2007.

NOTE 13 - LITIGATION AND SETTLEMENT OF CLAIMS

The Company is currently a defendant or co-defendant in various legal actions
arising in the ordinary course of business. There can be no assurance, the
Company will be successful in defending these actions.

Quint Star Management , Inc. vs. IC One, Inc., Arthur D. Bennet, and
Peter Bennee
--------------------------------------------------------------------------------

On August 30, 1999, Quint Star Management, Inc. initiated an action in the Third
Judicial District Court, Salt Lake City, Utah, against IC One, Inc., Arthur D.
Bennett and Peter J. Bennee, for unpaid rent and related charges, plus costs and
attorney's fees, under the lease on our former principal executive offices in
Salt Lake City, Utah. Following the entry of judgment against IC One for $50,541
on December 7, 2000, IC One reached a payment arrangement under which we are
obligated to pay $5,000 per month, plus ongoing obligations under the lease. The
settlement obligation is guaranteed by the Company, and is secured by the
equipment, inventory, accounts and chattel paper of both the parent and IC One.

The Company is in default in its obligations under this agreement. Upon the
expiration of the lease, an amended judgment of $222,765 (a provision has been
provided for in the financial statements at December 31, 2003) was entered to
reflect the additional unpaid rent, interest and attorney's fees.

PR Newswire Association, Inc. vs. Smart Chip Technologies, L.L.C.
-----------------------------------------------------------------

On May 21, 2003, PR Newswire Association, Inc. initiated an action against the
Company in the Superior Court of New Jersey, Hudson County for unpaid amounts
owed for services provided in the amount of approximately $4,000. On July 18,
2003, a judgment was entered against the Company (a provision of $4,000 has been
provided for in the financial statements at December 31, 2004). The Company is
currently in default of the judgment and would be liable to pay interest from
the date of judgment until paid in full.

                                      F-20
<PAGE>

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
Notes to Consolidated Financial Statements
December 31, 2006 and 2005
(Amounts expressed in US Dollars)

NOTE 13 - LITIGATION AND SETTLEMENT OF CLAIMS (Continued)

James E. Biorge and Jami Biorge
-------------------------------

The Company is reviewing, with the advice of legal counsel, whether the Company
has legal claims that may be asserted against James E. Biorge, a founder and
officer and director of IC One at the time it was acquired in September 1999. At
the time of such acquisition, the Company set aside in a special trust
approximately 7.8 million shares of common stock to be used to resolve claims
that may be asserted against IC One by persons claiming an interest in or claim
against IC One as a successor-in-interest to the assets, operations and
liabilities of CardOne, which Mr. Biorge had also been instrumental in founding
and which had been involved in the initial development of the intellectual
properties subsequently acquired by IC One before IC One was acquired by us. The
Company believes that all or a portion of the 7.8 million shares then reserved
to satisfy such claims, all of which have subsequently been used for such
purpose, should properly be the responsibility of Mr. Biorge. On the basis of
our previous assertion that the Company may make such a claim against Mr. Biorge
and perhaps other reasons not known to the Company, Mr. Biorge has refused to
accept certificates for 11,503,138 shares of Company's common stock to which he
would have been entitled to receive in exchange for his stock in IC One.

On October 2, 2007, James Biorge and Jami Biorge (Mr. Biorge's daughter)
initiated an action against the company in the United States District Court for
the District of Utah (Case # 07cv00129), seeking the above-noted shares which
were previously cancelled by the Company, as well as attorney's fees and
punitive damages. The Company plans to vigorously defend itself and believes
that there is a reasonable possibility that the outcome of any claim would not
be unfavorable to the Company. Additionally, the Company may pursue claims
against Mr. Biorge and seek damages in addition to cancellation of the shares.

Richard Hauge and John Hipsley
------------------------------

As of July 31, 2002, Messrs. Hauge and Hipsley ceased their employment with us
and signed agreements to accept their compensation on a deferred basis. In
December 2002, they signed additional agreements releasing all rights to any
claims based on the CardOne entities, terminating their association with the
Company, and agreed to accept options to purchase 725,000 shares of common stock
each. In addition, the Company agreed to issue to Mr. Hauge 700,000 shares of
our stock for work performed through December 2002.

On March 18, 2005, Richard Hauge and John Hipsley initiated an action against
the Company in the Third Judicial District Court, Salt Lake County, State of
Utah (Case # 050905213) alleging the Company breached prior employment and
settlement agreements. On July 16, 2007, Richard Hauge and the Company entered
into a separate Settlement Agreement, and the Company continues to vigorously
defend itself in the matter against John Hipsley.

Other Creditors
---------------

From time to time, the Company is threatened by creditors to initiate litigation
to collect amounts owed by the Company and reported on its financial statements.
In cases in which litigation is threatened or initiated, the Company seeks to
negotiate a settlement or forbearance agreement.

                                      F-21
<PAGE>

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
Notes to Consolidated Financial Statements
December 31, 2006 and 2005
(Amounts expressed in US Dollars)

NOTE 13 - LITIGATION AND SETTLEMENT OF CLAIMS (Continued)

Joseph E. Diamond
-----------------

On February 19, 2004, Joseph E. Diamond was appointed Senior Vice-President of
Administration and Finance. In addition to these duties, on November 12, 2004
Mr. Diamond was elected CEO of the Company. Mr. Diamond was relieved as CEO of
the Company and resigned his previous position on December 16, 2004. On January
26, 2005, Therese Diamond (Mr. Diamond's spouse) filed a complaint against the
Company in the Superior Court of California, County of Los Angeles bearing case
number LC-070391 and on February 4, 2005 Joseph Diamond filed a complaint
against the Company in the Superior Court of California, County of Los Angeles
bearing case number LC-070495. On February 3, 2006, the parties entered into a
Settlement and Release Agreement under which the Company agreed to issue
7,250,000 shares of common stock (see Note 9 - Stockholder's Deficiency and Note
22 - Subsequent Events) which resolved the matters and they were subsequently
dismissed by the Courts. The amount was recorded as a Deferred Compensation
liability in the amount of $462,500.

Retention Management Group, Inc.
--------------------------------

On July 25, 2004, the Company entered into a Licensing Agreement with Retention
Management Group, Inc.(RMG), a Barbados company, in which RMG was granted a
license to market, distribute and sublicense SCTN applications and products. On
March 10, 2006, the Company asserted claims against RMG in case no. A518577
filed in the Eighth Judicial District Court of Nevada, Clark County. On May 31,
2006, the Company and RMG entered into a Settlement Agreement and Release. Under
the terms of this agreement, the Company agreed to pay RMG $ 90,000, and the
Licensing Agreement between the Company and RMG was terminated. Accordingly,
case no. A518577 was dismissed by the Court on June 23, 2006. The settlement was
paid by Phoenix Technologies and is recorded as a liability to Phoenix.

Donald W. Mayer
---------------

On June 1, 2005, Donald W. Mayer, an investor in the Company, initiated an
action in The Superior Court of the State of Washington, In and For the County
of King, case no. 05-2-18115-0-SEA in which the Company was named one of several
defendants. On May 13, 2006, the Parties entered into a Settlement Agreement and
Release. Accordingly, the Company was dismissed as a defendant in the case.

Verlo Howell
------------

On November 30, 2005, Verlo Howell initiated an action against the Company in
the Third Judicial District Court for Salt Lake County, Utah, civil no.
05-092-1235 for unpaid wages, interest and attorney costs. Mr. Howell was hired
as the Company's Executive Vice-President of Sales and Marketing pursuant to an
Employment Agreement dated May 17, 2005. On September 8, 2005, Mr. Howell's
employment was terminated with cause by the Company. We intend to assert and
pursue offsetting defenses and believe that there is a reasonable possibility
that the outcome of any claim, if asserted, would not be unfavorable to us.

                                      F-22
<PAGE>

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
Notes to Consolidated Financial Statements
December 31, 2006 and 2005
(Amounts expressed in US Dollars)

NOTE 14 - PAYROLL TAXES

Internal Revenue Service
------------------------

The Company's wholly owned subsidiary, IC One, Inc., has received notification
from the Internal Revenue Service that IC One has an unpaid liability for
employment taxes and amounts withheld from employees' wages for the periods from
July 1, 1999, through September 30, 2001. IC One erroneously filed an employer
tax report for the quarter ended September 30, 2001, even though it did not have
any employees and paid no payroll after June 30, 2001. Accordingly, IC One was
not required to make federal tax deposits for the periods after June 30, 2001.
The Internal Revenue Service has filed tax liens against the Company with
respect to such amounts outstanding. As of December 31, 2006, the aggregate
amount owed by IC One, together with applicable penalties and interest, for the
period from July 1, 1999, through June 30, 2001, was approximately $1,347,524.
The Company is attempting to negotiate with the Internal Revenue Service
regarding payment of the amounts owed by IC One.

The total amount of unpaid employment taxes owed by the Company was
approximately $1,347,524 (including interest and penalties of approximately
$447,910). The Company continues to work with the Internal Revenue Service via
the appeals process to resolve its outstanding liability. The Company does not
believe that the liability will hinder the progress of the Company.

Utah State Tax Commission
-------------------------

The State of Utah has filed tax liens against the Company of approximately
$58,332 as of December 31, 2006, for unpaid employee withholding taxes and
related amounts.

California Employment Development Corporation
---------------------------------------------

The State of California has filed tax liens against the Company for unpaid
employee withholding taxes and related amounts aggregating approximately
$77,721as of December 31, 2006.

Nebraska Department of Revenue
------------------------------

The State of Nebraska has filed tax liens against the Company for unpaid
employee withholding taxes and related amounts aggregating approximately $5,864
as of December 31, 2006. On June 26, 2007, the Company paid its tax obligation
to the State of Nebraska in full.

NOTE 15 - STRATEGIC ALLIANCES

The Company has established strategic alliances to market its products and
services. (Refer Note 13 - Litigation for licensing agreement signed with
Retention Management Group, Inc. and Note 16 for licensing agreement signed with
Phoenix Technology Holdings, Inc.)

NOTE 16- PHOENIX TECHNOLOGY HOLDINGS, INC.

On April 6, 2006, the Company entered into a License Agreement with Phoenix
Technology Holdings Incorporated, a related Turks and Caicos Islands company.
Under the terms of the agreement, the Company granted Phoenix an exclusive
license to use the Company's technology. Also, certain portions of the Company's
debt, including a significant portion of the Senior Secured Convertible Notes,
unpaid amounts owing to Airos Group for services rendered, and accrued salaries
were assumed by Phoenix and ceased accruing additional interest. Further, the
agreement provides for Phoenix to loan monies to the Company, at Phoenix's
discretion at the rate of one percent (1%) per month, compounded monthly until
paid in full. Any such loan shall be deducted from any payments due by Phoenix
under the agreement. In order to maintain exclusivity, the Agreement calls for
certain performance targets to be met. As of April 18, 2007, these targets have
been met.

                                      F-23
<PAGE>

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
Notes to Consolidated Financial Statements
December 31, 2006 and 2005
(Amounts expressed in US Dollars)

NOTE 17 - EMPLOYMENT AGREEMENTS

As of December 31, 2006, the Company was no longer obligated under any
employment Agreements.

NOTE 18 - RELATED PARTY TRANSACTIONS

As of December 31, 2005 the Company was liable to executive officers and
directors For secured convertible promissory notes for $1,220,462, with interest
at 12%. Interest on such notes accrued approximated $189,000 for 2005. These
notes were assigned to Phoenix Technology Holdings Inc. in April 2006 (see Note
16 - above). Also during 2006, a director maintained a current account with the
Company to assist the Company meet its operating expenses. As of December 31,
2006, there was a receivable of $5,100 (2005: payable of $27,000) approximately
from this director. The amount is recorded as an offset to Accounts Payable -
Other, and was paid in March 2007.

Further, as per Note 16 (above), Phoenix agrees to loan monies to the Company at
the rate of one percent (1%) per month, compounded monthly. As of December 31,
2006 there was a payable of $110,490 to Phoenix.

NOTE 19 - LEASE COMMITMENT

The Company leased office space under an operating lease, which expired in 2003.
The Company now rents its principal executive offices at Las Vegas, Nevada on a
month-to-month basis, for combined rent of $12,000 per year.

NOTE 20 - DELISTING AND LATE FILINGS

The Company did not file required reports with the SEC on a timely basis and was
delisted from the OTC Bulletin Board (the "OTC"). The Company currently trades
on the Pink Sheets.
The Company is also not current with its corporate income tax return filings.
The Company's financial statements do not reflect a reserve for any potential
fines or penalties that may result from such delisting or late filings.

NOTE 21-NEVADA CORPORATION

During a special meeting of the Board of Directors on November 30, 2006, the
Board voted to approve a resolution to convert the Company from a Florida
corporation to a Nevada corporation.

NOTE 22-SUBSEQUENT EVENTS

A)   Subsequent issue of common shares:

On January 30, 2007, the Company issued 5,850,000 common shares for past
services valued at $292,500. The shares were issued at $0.05.

On January 30, 2007, the Company issued 1,500,000, 83,333 and 94,716,005 common
shares in exchange for services, cash and interest. The shares were issued at
$0.05.

On February 5, 2007, the Company issued 2,123,208 common shares to convert
secured notes valued at $107,333. The shares were issued at $0.05.

On February 8, 2007, the Company issued 615,091 common shares to convert secured
notes valued at $30,793.75. The shares were issued at $0.05.

On February 21, 2007, the Company issued 6,400,000 common shares in exchange for
past services valued at $448,000. The shares were issued at $0.07.

On March 21, 2007, the Company issued 21,000,000 and 800,000 common shares in
exchange for past services valued at $1,260,000 and $56,000, respectively. The
shares were issued at $0.06 and $0.07, respectively.

                                      F-24
<PAGE>

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
Notes to Consolidated Financial Statements
December 31, 2006 and 2005
(Amounts expressed in US Dollars)

NOTE 22-SUBSEQUENT EVENTS (Continued)

A)   Subsequent issue of common shares (Continued):

On March 26, 2007, the Company issued 5,565,000 and 540,000 common shares for
past services valued at $ 278,250.00 and $54,000, respectively. The shares were
issued at $0.05 and $0.10, respectively.

On May 17, 2007, the Company issued 1,500,000 and 2,578,125 common shares for
cash and past services, respectively valued at $75,000.00 and $135,000,
respectively. The shares were issued at $0.05.

On May 30, 2007, the Company issued 500,000 and 48,521 common shares for cash
and past services, respectively valued at $25,000.00 and $2,426, respectively.
The shares were issued at $0.05.

On June 1, 2007, the Company issued 1,000,000 common shares in exchange for cash
valued at $50,000.00. The shares were issued at $0.05.

On June 11, 2007, the Company issued 400,000 common shares in exchange for cash
valued at $20,000.00. The shares were issued at $0.05.

On June 12, 2007, the Company issued 100,324,827 common shares to convert
secured notes valued at $5,016,241. The shares were issued at $0.05.

On June 13, 2007, the Company issued 1,129,874 common shares for past services
valued at $56,494. The shares were issued at $0.05.

On June 17, 2007, the Company issued 516,048 common shares to convert secured
notes valued at $25,802. The shares were issued at $0.05.

On June 28, 2007, the Company issued 400,300 common shares for past services
valued at $ 20,015. The shares were issued at $0.05.

On July 1, 2007, the Company issued 6,000,000 common shares for past services
valued at $300,000. The shares were issued at $0.05.

On July 9, 2007, the Company issued 306,908 common shares in exchange for cash
valued at $58,000. The shares were issued at $0.19.

On July 11, 2007, the Company issued 6,500,000 common shares for past services
valued at $400,646. The shares were issued at $0.06.

On July 20, 2007, the Company issued 8,661,648 common shares for past services
valued at $432,542. The shares were issued at $0.05.

On August 2, 2007, the Company issued 63,742,180 common shares to convert
secured notes valued at 3,187,164. The shares were valued at $0.05.

On September 26, 2007, the Company issued 200,000 common shares in exchange for
cash valued at $25,000. The shares were issued at $0.125.

On September 26, 2007, the Company issued 160,000 common shares in exchange for
cash valued at $25,000. The shares were issued at $0.156.

On October 30, 2007, the Company issued 400,000 common shares in exchange for
cash valued at $40,000. The shares were issued at $0.10.

B)   Options
On March 9, 2007, the Company cancelled 21,161,876 options that had been issued
to past employees.

On March 26, 2007 and March 28, 2007, the Company cancelled 2,861,958 and
1,038,615 options, respectively, that had been issued to past employees.

On July 16, 2007 the Company cancelled 4,098,333 options that had been issued to
past employees.

                                      F-25
<PAGE>

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
Notes to Consolidated Financial Statements
December 31, 2006 and 2005
(Amounts expressed in US Dollars)

NOTE 22-SUBSEQUENT EVENTS (Continued)

C) Events

Phoenix Technology Holdings, Inc.
--------------------------------

On April 6, 2006, the Company entered into a License Agreement with Phoenix
Technology Holdings Incorporated, a related Turks and Caicos Islands company.
Under the terms of the agreement, the Company granted Phoenix an exclusive
license to use the Company's technology. Also, certain portions of the Company's
debt, including a significant portion of the Senior Secured Convertible Notes,
unpaid amounts owing to Airos Group for services rendered, and accrued salaries
were assumed by Phoenix and ceased accruing additional interest. Further, the
agreement provides for Phoenix to loan monies to the Company, at Phoenix's
discretion, at the rate of one percent (1%) per month, compounded monthly until
paid in full. Any such loan shall be deducted from any payments due by Phoenix
under the agreement. In order to maintain exclusivity, the Agreement calls for
certain performance targets to be met. As of April 18, 2007, these targets have
been met.

Change in Auditors
------------------

During a meeting of the Board of Directors on May 18, 2007, the Board voted to
approve a resolution which dismissed Marcum & Kliegman, LLP as the Company's
independent registered public accounting firm and engaged Schwartz Levitsky
Feldman LLP as the Company's independent registered public accounting firm. The
change in independent registered public accounting firms is not the result of
any disagreement with Marcum & Kliegman, LLP.

Elimination of Senior Secured Debt
----------------------------------

In January of 2007, Noteholders which did not elect to assign their debt to
Phoenix Technology Holding, Inc. were given the option to receive their
principal investment plus accrued interest either in the form of cash or shares
in the Company. By June 2007, the last of these repayments were made, and all
Senior Secured Notes have been retired.

Increase in Authorized Shares
-----------------------------

During a special meeting of the Board of Directors on July 20, 2007, the Board
voted to approve a resolution to increase the number of authorized shares to
600,000,000.

Menalco, FZE and The International Investor, K.S.C.C.
-----------------------------------------------------

On August 30, 2007, The International Investor, K.S.C.C., a Kuwait-based
company, initiated an action in the United States District Court for the
District of Nevada, case # 07-CV-1178, in which the Company was named as a
co-defendant, seeking damages in the amount of over $100,000,000. The
allegations, which have not been proven in a court of law, include conspiracy in
violation of statutes prohibiting racketeering, misappropriation of trade
secrets, fraud, civil conspiracy to defraud, unjust enrichment, breach of
contract, breach of fiduciary trust and unfair competition. The company filed
its counter-claim on September 25, 2007 and plans to vigorously defend and
counter sue TII for breach of contract, fraud, interference with contractual
relations, misappropriation of trade secrets, conversion, unjust enrichment and
to seek both compensatory and punitive damages well in excess of $20 million.

                                      F-26
<PAGE>

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
Notes to Consolidated Financial Statements
December 31, 2006 and 2005
(Amounts expressed in US Dollars)

NOTE 22-SUBSEQUENT EVENTS (Continued)

C) Events (Continued)

Statute-Barred Accounts Payable
-------------------------------

As of December 31, 2007, certain accounts payable of the Company are
Statute-Barred under Utah law from being collected by creditors. However, under
US GAAP, the Company still records them as a liability. As of December 31, 2007,
the amount is approximately $2,530,000. This amount includes the $41,000
previously Statute-Barred as of December 31, 2006.


NOTE 23-ECONOMIC DEPENDENCE

On April 6, 2006, the Company entered into a License Agreement with Phoenix
Technology Holdings Incorporated, a related Turks and Caicos Islands company.
Under the terms of the agreement, the Company granted Phoenix an exclusive
license to use the Company's technology. The total revenue of $131,357 during
2006 (prior year: $nil) is from this License Agreement. This is the Company's
only source of revenue.

NOTE 24-SEGMENT INFORMATION

All assets of the Company are located are in the United States of America. For
the fiscal year ended December 31, 2006, revenues were earned in the following
countries:
United States of America     1.3%
Canada                      13.8%
Turks & Caicos Islands      84.9%



                                      F-27
<PAGE>

                  SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.


                    UNAUDITED QUARTERLY FINANCIAL STATEMENTS

First Quarter (through March 31, 2006)......................................F-29

Condensed Notes to First Quarter Financial Statements.......................F-34

Second Quarter (through June 30, 2006)......................................F-48

Condensed Notes to Second Quarter Financial Statements......................F-52

Third Quarter (through September 30, 2006)..................................F-66

Condensed Notes to Third Quarter Financial Statements.......................F-70


                                      F-28
<PAGE>

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
Interim Consolidated Balance Sheets
As of March 31, 2006 and December 31, 2005
(Amounts expressed in US Dollars)

<TABLE>
<CAPTION>
                                                                         (Unaudited)              (Audited)
                                                                           March 31,             December 31,
                                                                             2006                    2005
                                                                              $                       $
<S>                                                                        <C>                 <C>
                                            ASSETS
                                            ------
CURRENT ASSETS:
  Cash                                                                         42,382              11,542
  Prepaid Expenses and other                                                   42,311              42,499
                                                                          -----------         -----------
      TOTAL CURRENT ASSETS                                                     84,693              54,041
                                                                          -----------         -----------
      TOTAL ASSETS                                                             84,693              54,041
                                                                          ===========         ===========
               LIABILITIES AND SHAREHOLDERS' DEFICIENCY
               ----------------------------------------
CURRENT LIABILITIES:
  Accounts payable - Vendor                                                 2,027,400           1,963,800
  Accounts payable - other                                                  7,342,841           7,166,788
  Accrued wages and payroll taxes (note 11)                                 1,514,210           1,499,196
  Deferred compensation                                                     5,424,054           4,205,411
  Loans - CEO America                                                         150,000             150,000
  Amounts owed to employees and officers (notes 5 and 6)                    1,314,331           1,314,331
  Short term loans                                                                500                 500
  Convertible notes payable (including amounts owed to officers
  $1,220,462 prior year $1,220,462)                                         3,048,316           2,991,316
                                                                          -----------         -----------
      TOTAL CURRENT LIABILITIES                                            20,821,652          19,291,342
                                                                          -----------         -----------


SHAREHOLDERS' DEFICIENCY (note 7):
  Common stock - $.001 par value; 200,000,000 shares
    authorized; 195,274,003 shares issued and outstanding                     195,274             193,274
                (2005: 193,274,003)
  Additional paid-in capital                                               60,104,504          60,006,504
  Common stock subscription receivable                                       (175,000)           (175,000)
  Common stock subscribed                                                     200,000             200,000
  Deficit accumulated                                                     (81,061,737)        (79,462,079)
                                                                          -----------         -----------
      TOTAL SHAREHOLDERS' DEFICIENCY                                      (20,736,959)        (19,237,301)
                                                                          -----------         -----------
      TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIENCY                           84,693              54,041
                                                                          ===========         ===========

                             See condensed notes to interim unaudited consolidated financial statements.
</TABLE>

                                      F-29
<PAGE>

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.

Interim Consolidated Statements of Operations and Comprehensive Loss
For the three month period Ended March 31, 2006 and 2005
(Amounts expressed in US Dollars)
(Unaudited)

<TABLE>
<CAPTION>
                                                                     For the Quarter                For the Three Months
                                                                     Ended March 31,                   Ended March 31,
                                                            -------------------------------     -------------------------------
                                                                 2006               2005              2006             2005
                                                                 ----               ----              ----             ----
                                                                  $                  $                 $                $
<S>                                                         <C>               <C>               <C>               <C>
EXPENSES:
  Selling, general and administrative (note 12)                   182,306           712,950           182,306           712,950
  Depreciation and amortization                                         -                 -                 -                 -
  Write-off of common stock subscription
    receivable                                                          -                 -                 -                 -
  Loss on impairment of intangible assets                               -                 -                 -                 -
  Interest expense                                              1,417,352           602,902         1,417,352           602,902
                                                            -------------     -------------     -------------     -------------
      TOTAL EXPENSES                                            1,599,658         1,315,852         1,599,658         1,315,852
                                                            -------------     -------------     -------------     -------------
LOSS BEFORE EXTRAORDINARY ITEM                                 (1,599,658)       (1,315,852)       (1,599,658)       (1,315,852)

EXTRAORDINARY ITEM - LOSS ON
  EXTINGUISHMENT OF DEBT                                                -                 -                 -                 -
                                                            -------------     -------------     -------------     -------------
NET LOSS                                                    $  (1,599,658)    $  (1,315,852)    $  (1,599,658)    $  (1,315,852)
                                                            =============     =============     =============     =============
NET LOSS PER SHARE, BASIC AND DILUTED                       $       (0.01)    $       (0.01)    $       (0.01)    $       (0.01)

                                                            =============     =============     =============     =============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
  OUTSTANDING, BASIC AND DILUTED                              193,970,632       165,801,515       193,970,632       165,801,515
                                                            =============     =============     =============     =============

COMPREHENSIVE LOSS
The components of comprehensive loss are as follows:

Net loss                                                    $  (1,599,658)    $  (1,315,852)
Other comprehensive income (loss) foreign currency
Translation                                                             -                 -
Comprehensive Loss                                          $  (1,599,658)    $  (1,315,852)

                             See condensed notes to interim unaudited consolidated financial statements.
</TABLE>

                                      F-30
<PAGE>

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.

Interim Consolidated Statements of Changes in Stockholders' Deficiency
For the Periods Ended December 31, 2005 and March 31, 2006
(Amounts expressed in US dollars)

<TABLE>
<CAPTION>
                                                                                 Common    Common
                                                Common Stock    Additional        Stock     Stock Deferred
                                       Number of                   Paid-in Subscription     to be  Compen-     Deficit
                                          Shares      Amount       Capital   Receivable    Issued   sation Accumulated        Total
<S>                                 <C>             <C>        <C>             <C>       <C>            <C><C>          <C>
     BALANCE,  December  31, 2004    165,714,436     165,714    57,616,113     (250,000)  500,000        - (71,820,010) (13,788,183)
     (Audited)

     Issuance of stock for
     services rendered:
     ($0.05 per share, February)         250,000         250        12,250                                                   12,500
     ($0.05 per share, May)                1,050           1            52                                                       53
     ($0.048 per share, June)            100,000         100         4,650                                                    4,750
     $0.06 per share, December            88,669          89         5,231                                                    5,320
     Issue of stock in lieu of
     interest payments:
     (0.082 per share, May)           22,934,690      22,935     1,861,894                                                1,884,829
     Issue of stock for cash:
     ($0.07 per share, March)             70,355          70         4,855                                                    4,925
     ($0.068 per share, March)           369,550         370        24,590                                                   24,960
     ($0.07 per share, April)            100,000         100         6,900                                                    7,000
     ($0.09 per share, April)            100,000         100         8,900                                                    9,000
     ($0.05 per share, May)              248,000         248        12,152                                                   12,400
     ($0.056 per share, May)              23,571          23         1,297                                                    1,320
     ($0.07 per share, May)              142,857         143         9,857                                                   10,000
     ($0.08 per share, May)              125,000         125         9,875                                                   10,000
     ($0.09 per share, May)               47,968          48         4,469                                                    4,317
     ($0.123 per share, May)             150,000         150        18,225                                                   18,375
     ($0.30 per share, May)            1,000,000       1,000       299,000               (300,000)                                -
     ($0.068 per share, May)              13,450          13           895                                                      908
     ($0.08 per share, June)              62,500          63         4,937                                                    5,000
     ($0.05 per share, June)             800,000         800        39,200                                                   40,000
     ($0.05 per share, June)             100,000         100         4,900                                                    5,000
     ($0.09 per share, June)              50,000          50         4,450                                                    4,500
     ($0.05 per share, July)             200,000         200         9,800                                                   10,000
     ($0.05 per share, July)             200,000         200         9,800                                                   10,000

                                      F-31
<PAGE>

<CAPTION>
                                                                                 Common    Common
                                                Common Stock    Additional        Stock     Stock Deferred
                                       Number of                   Paid-in Subscription     to be  Compen-     Deficit
                                          Shares      Amount       Capital   Receivable    Issued   sation Accumulated        Total
<S>                                 <C>           <C>          <C>             <C>       <C>            <C><C>          <C>
     BALANCE, December 31, 2005      193,274,003     193,274    60,006,504     (175,000)  200,000        - (79,462,079) (19,237,301)
     (Audited)
     Issuance of stock for services
     rendered:
     ($0.05 per share, February)       2,000,000       2,000        98,000                                                  100,000
     Net Loss                                                                                               (1,599,658)  (1,599,658)
     BALANCE, March 31, 2006         195,274,003     195,274    60,104,504     (175,000)  200,000        - (81,061,737) (20,836,959)
     (Unaudited)

                             See condensed notes to interim unaudited consolidatedfinancial statements.
</TABLE>

                                      F-32
<PAGE>

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
Interim Statement of Cash Flows
Three months Ended March 31, 2006 and 2005
(Amounts expressed in US Dollars)
(Unaudited)

<TABLE>
<CAPTION>
                                                                      Three Months Ended
                                                                           March 31,
                                                            -------------------------------------

                                                                 2006                  2005
                                                            -------------------------------------
                                                                  $                     $
<S>                                                            <C>                  <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss                                                       (1,599,658)          (1,315,852)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization                                           -                    -
Stock option compensation                                               -               10,733
Adjustment for variable accounting of options
Amortization of deferred option compensation                            -                    -
Common stock issued for services
and compensation                                                  100,000               12,500
Common stock issued for interest expense                                -                    -
Common stock issued to settle CardOne
Claims
Common stock issued for directors' fees
Write-off of common stock subscription
receivable                                                              -                    -
(Gain) loss on extinguishment of debt                                   -                    -
Loss on impairment of assets                                            -                    -
Changes in current assets and liabilities:
Prepaid Expenses and other                                            188               (3,933)
Accounts payable and accrued expenses                           1,447,870            1,142,753

                                                            -------------------------------------
NET CASH USED IN OPERATING ACTIVITIES                             (51,600)            (153,799)
                                                            -------------------------------------

CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment                                   -                    -
Acquisition of patents                                                  -                    -
Investment in real estate joint venture                                 -                    -

                                                            -------------------------------------
NET CASH USED IN INVESTING ACTIVITIES                                   -                    -
                                                            -------------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from (repayments of) loans payable - shareholders              -              (29,885)
Loans - CEO America                                                     -                    -
Proceeds from notes payable                                        82,440              200,000
Proceeds from common stock subscription
Received                                                                -               50,000
Sales of common stock                                                   -               29,885
Amounts owed to employees and officers                                  -               54,300

                                                            -------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES                          82,440              304,300
                                                            -------------------------------------

NET INCREASE (DECREASE) IN CASH                                    30,840              150,501

CASH AT BEGINNING OF PERIOD                                        11,542               14,086

                                                            -------------------------------------
CASH AT END OF PERIOD                                              42,382              164,587
                                                            -------------------------------------


     See condensed notes to interim unaudited consolidated financial statements.
</TABLE>

                                      F-33
<PAGE>

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
Condensed Notes to Interim Consolidated Financial Statements
March 31, 2006
(Amounts expressed in US Dollars)
(Unaudited)

NOTE 1- THE COMPANY

Schimatic Cash Transactions Network.com, Inc. (the Company) is in the business
of research, development and integration of proprietary processes and software
technologies for the electronic payment industry, primarily involving consumer
loyalty programs. Schimatic Cash Transactions Network.com, Inc. operates
principally through its wholly-owned subsidiary, Smart Chip Technologies, LLC.
The Company licenses, markets and develops smart-card loyalty products through
its subsidiary, Smart Chip Technologies, LLC under the "Smart Chip" name.

The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information. Accordingly, they do not include all of the information
and footnotes required by U.S. generally accepted accounting principles for
complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary to make the
financial statements not misleading have been included. Operating results for
the three months ended March 31, 2006, are not indicative of the results that
may be expected for the year ended December 31, 2006. The unaudited condensed
consolidated financial statements should be read in conjunction with the audited
consolidated financial statements for the year ended December 31, 2005.

The Company was previously in the development stage and commenced operations in
its planned line of business during the end of first quarter of 2006. On April
6, 2006, the Company entered into a License Agreement with Phoenix Technology
Holdings Incorporated, a Turks and Caicos Islands company. Under the terms of
the agreement, the Company granted Phoenix an exclusive license to use the
Company's technology.

NOTE 2- GOING CONCERN

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company and has incurred a net
loss of $81,061,737 since inception. Additionally, the Company had a net working
capital deficiency of $20,736,959 and a total shareholders' deficiency of
$20,736,959 at March 31, 2006. These conditions raise substantial doubt about
the Company's ability to continue as a going concern. The consolidated financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.

Management expects to incur additional losses for the foreseeable future and
recognizes the need to raise capital through the future issuance of stock and/or
debentures in order to develop a viable business. The Company continues to
implement cost-cutting measures. It may also rely increasingly on strategic
alliances with others who will assume responsibility for financing specific
required development tasks, thus, reducing the Company's financial requirements
for the exploitation of its intellectual properties.

As of March 31, 2006, current liabilities are substantially past due. In the
event demands are made upon the Company which cannot be met and the associated
creditors successfully pursue action against the Company, the Company could be
exposed to additional costs of legal fees, interest or penalties, and may be
forced to take other defensive actions, including filing for bankruptcy.

The Company has been able to finance its operations primarily by raising capital
through the private placement of common stock and the issuance of convertible
debt.

                                      F-34
<PAGE>

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
Condensed Notes to Interim Consolidated Financial Statements
March 31, 2006
(Amounts expressed in US Dollars)
(Unaudited)

NOTE-3 PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiaries, IC One and Smart Chip Technologies, LLC. All
significant inter-company balances and transactions have been eliminated in
consolidation.

NOTE 4-STOCK BASED COMPENSATION

The Company follows Statement of Financial Accounting Standards ("SFAS") No.
123, "Accounting for Stock-Based Compensation." SFAS No. 123 establishes
accounting and reporting standards for stock-based employee compensation plans.
This statement allows companies to choose between the fair value based method of
accounting as defined in this statement and the intrinsic value based method of
accounting as prescribed by Accounting Principles Board Opinion No. 25 ("APB
25"), "Accounting for Stock Issued to Employees."

The Company has elected to continue to follow the accounting guidance provided
by APB 25, as permitted for stock-based compensation relative to the Company's
employees. Stock and options granted to other parties in connection with
providing goods and services to the Company are accounted for under the fair
value method as prescribed by SFAS 123.

In December 2002, the Financial Accounting Standard Board ("FASB") issued SFAS
No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure -
an Amendment of SFAS Statement No. 123". This statement amends SFAS No. 123 to
provide alternative methods of transition for a voluntary change to the fair
value-based method of accounting for stock-based employee compensation. In
addition, SFAS No. 148 amends the disclosure requirements of SFAS No. 123 to
require prominent disclosures in both annual and interim financial statements
about the method of accounting for stock-based employee compensation and the
effect of the method used on reported results. SFAS No. 148 also requires that
those effects be disclosed more prominently by specifying the form, content, and
location of those disclosures. We have adopted the increased disclosure
requirements of SFAS No. 148 for the three month period ended March 31, 2006.

                                      F-35
<PAGE>

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
Condensed Notes to Interim Consolidated Financial Statements
March 31, 2006
(Amounts expressed in US Dollars)
(Unaudited)

NOTE 4- STOCK BASED COMPENSATION (Continued)

The additional disclosures required by SFAS No. 148 are as follows:

<TABLE>
<CAPTION>
                                                                For the Three Months          For the Three Months
                                                                   Ended March 31,               Ended March 31,
                                                                2006            2005          2006             2005
                                                                ----            ----          ----             ----
<S>                                                         <C>            <C>            <C>            <C>
 Net loss attributable to common stockholders,
   as reported .........................................    $(1,599,658)   $ (1,315,852)  $(1,599,658)   $  (1,315,852)
 Add:  Stock-based employee compensation
   expense included in reported net income,
   net of related tax effect ...........................              -          10,733             -           10,733
 Less:  Total stock-based compensation
   expense determined under the Black-Scholes fair value
   based method of all awards* .........................              -         (10,733)            -          (10,733)
Pro forma net loss attributable to
   common stockholders .................................    $(1,599,658)   $ (1,315,852)  $(1,599,658)   $  (1,315,852)
                                                            ===========    ============   ===========    =============
 Basic and diluted net loss attributable to
   common stockholders
 As reported ...........................................    $     (0.01)   $      (0.01)  $     (0.01)   $       (0.01)
                                                            ===========    ============   ===========    =============



Pro forma ..............................................    $    (0.01)    $     (0.01)   $     (0.01)   $       (0.01)
</TABLE>

No stock options were granted by the Company for the three month period ended
March 31, 2006.


Loss Per Share

Basic and diluted loss per share has been calculated based upon the weighted
average number of common shares outstanding and excludes any potentially
dilutive securities. Stock options and convertible notes have been excluded as
common stock equivalents in the computation of diluted loss per share since the
results would be anti-dilutive. Obligations to issue additional shares, which
could potentially dilute earnings per share, were approximately 163,000,000 at
March 31, 2006.

                                      F-36
<PAGE>

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
Condensed Notes to Interim Consolidated Financial Statements
March 31, 2006
(Amounts expressed in US Dollars)
(Unaudited)

NOTE 5 - AMOUNTS OWED TO OFFICERS

Loans payable to officers are non-interest bearing advances made on behalf of
the Company that are unsecured and payable on demand.

NOTE 6 - AMOUNTS OWED TO EMPLOYEES

Amounts owed to employees are non-interest bearing advances made on behalf of
the Company that are unsecured and payable on demand.

NOTE 7 - SHAREHOLDERS' DEFICIENCY

Equity Transactions
-------------------

Three months ended March 31, 2006
---------------------------------

On February 13, 2006, the Company issued 2,000,000 common shares in exchange for
past services valued at $100,000. The shares were issued at $0.05.

Three months ended March 31, 2005
---------------------------------

On February 2, 2005 the Company issued 250,000 common shares in exchange for
services valued at $12,500. The shares were issued at $0.05.

On March 29, 2005 the Company issued 70,355 common shares in exchange for cash.
The shares were issued at $0.07.

On March 29, 2005 the Company issued 369,550 common shares in exchange for cash.
The shares were issued at $0.068.

NOTE 8- AUTHORIZED SHARES
-------------------------
As at March 31, 2006, the Company is authorized to issue 200,000,000 shares of
common stock. At March 31, 2006, the Company had common stock shares outstanding
of 195,274,003 and an additional 163,043,144 shares issuable upon the conversion
of stock options, convertible debt and deferred compensation. As a result, the
Company would exceed the authorized amount by 158,317,147. The Company would be
required to seek shareholder approval to increase the shares authorized limits
in order to satisfy its potential conversion of dilutive securities.

As an alternative, the Company may purchase shares of common stock in the open
market, or seek to repay the indebtedness in lieu of conversion.

Effective November 29, 2006, the Board of Directors of the Company approved
amendments to the Articles of Incorporation to adopt an increase in the capital
stock of the Company's common stock from 200,000,000 to 500,000,000 shares.
Furthermore, during a special meeting of the Board of Directors on July 20,
2007, the Board voted to approve a resolution to increase the number of
authorized shares to 600,000,000. (Refer Note 16 - Subsequent Events).

NOTE 9 - STOCK OPTION PLAN

On December 8, 1999, the Company adopted an Employee Stock Option Plan (the
"Plan"). The Board of Directors administers the Plan. Under the Plan, the
Company may grant stock options, which may be incentive stock options ("ISO's")
as defined in the Internal Revenue Code, and stock awards or options which do
not qualify as ISO's to employees and officers. All employees of the Company are
eligible to participate in the Plan.

                                      F-37
<PAGE>

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
Condensed Notes to Interim Consolidated Financial Statements
March 31, 2006
(Amounts expressed in US Dollars)
(Unaudited)

NOTE 9 - STOCK OPTION PLAN (Continued)

No stock options were granted by the Company for the three month period ended
March 31, 2006.

                                                     Stock Options
                                                ------------------------
                                                                Weighted
                                                                Average
                                                                Exercise
                                                  Shares         Price
                                                  ------         -----

     Outstanding at December 31, 2004           48,425,299       $0.11
         Granted                                   400,000       $0.06
       Exercised                                         -           -
       Cancelled                                (7,142,470)      $0.17
     Outstanding at December 31, 2005           41,682,829       $0.10
         Granted                                         -           -
       Exercised                                         -           -
       Cancelled                                (1,937,333)      $0.18
       Outstanding at March 31, 2006            39,745,496       $0.11


The following table summarizes the Company's stock options outstanding and
exercisable at March 31, 2006:

<TABLE>
<CAPTION>
                                      Options Outstanding                            Options Exercisable
                            ----------------------------------------            ----------------------------
                                             Weighted
                                              Average      Weighted                               Weighted
                                             Remaining     Average                                Average
Range of Exercise               Number      Contractual    Exercise                Number         Exercise
     Prices                  Outstanding       Life         Price                Exercisable        Price
     ------                  -----------       ----         -----                -----------        -----
                            (In Thousands)  (In Years)                         (In Thousands)
<S>                            <C>             <C>          <C>                    <C>              <C>
$0.00 - $0.23                   37,365          2.95        $0.08                  37,365           $0.08
$0.48 - $0.49                    2,380          4.37        $0.48                   2,380           $0.48
$0.64 - $0.80                        -             -            -                       -               -
                                ------                                             ------
                                39,745                                             39,745
                                ======                                             ======
</TABLE>



                                      F-38
<PAGE>

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
Condensed Notes to Interim Consolidated Financial Statements
March 31, 2006
(Amounts expressed in US Dollars)
(Unaudited)


NOTE 10 - LITIGATION AND SETTLEMENT OF CLAIMS

The Company is currently a defendant or co-defendant in various legal actions
arising in the ordinary course of business. There can be no assurance, the
Company will be successful in defending these actions.

Quint Star Management , Inc. vs. IC One, Inc., Arthur D. Bennet, and
Peter Bennee
--------------------------------------------------------------------------------

On August 30, 1999, Quint Star Management, Inc. initiated an action in the Third
Judicial District Court, Salt Lake City, Utah, against IC One, Inc., Arthur D.
Bennett and Peter J. Bennee, for unpaid rent and related charges, plus costs and
attorney's fees, under the lease on our former principal executive offices in
Salt Lake City, Utah. Following the entry of judgment against IC One for $50,541
on December 7, 2000, IC One reached a payment arrangement under which we are
obligated to pay $5,000 per month, plus ongoing obligations under the lease. The
settlement obligation is guaranteed by the Company, and is secured by the
equipment, inventory, accounts and chattel paper of both the parent and IC One.
The Company is in default in its obligations under this agreement. Upon the
expiration of the lease, an amended judgment of $222,765 (a provision has been
provided for in the financial statements at December 31, 2003) was entered to
reflect the additional unpaid rent, interest and attorney's fees.

Grish vs. Schimatic Cash Transactions Network.com a/b/a Smart Chip Technologies,
Inc. f/k/a IC One, Inc.
--------------------------------------------------------------------------------

On September 18, 2001, we were served with a summons and complaint for an action
filed by Marilyn Grish in the Third Judicial District Court, Salt Lake County,
Utah, for breach of an independent contractor's contract and seeking unspecified
damages. On October 12, 2001, the Company filed an answer and a counterclaim
against Ms. Grish and intended to defend this matter vigorously. Ms. Grish had
taken no further action in this case and the court indicated that, unless Ms.
Grish certified she was ready for trial by August 4, 2004, the case would be
dismissed. Accordingly, the case was dismissed on August 4, 2004.

Eximsoft International, LLC and Eximsoft Technologies Pvt. Ltd.
---------------------------------------------------------------

In October 2001, IC One, Inc. entered into a settlement agreement with Eximsoft
International, LLC and Eximsoft Technologies Pvt. Ltd. to resolve claims by the
Eximsoft entities that IC One had contracted and received computer software
development and programming services and had failed to pay as agreed. IC One
agreed to pay $30,000 and provided Eximsoft with a confession of judgment that
could be filed in the Third District Court in Salt Lake City, Utah, in the event
that IC One failed to make the agreed payments. IC One paid the agreed $30,000
during 2002 and the original confession of judgment was returned by Eximsoft to
us in November 2003.

Sandra Lueck vs. Schimatic Cash Transactions Network.com, Inc. d/b/a Smart Chip
Technologies, Smart Chip Technologies L.L.C., and IC One, Inc.
--------------------------------------------------------------------------------

On August 16, 2002, Sandra Lueck initiated an action against the Company for
unpaid wages, interest, costs and attorney's fees. On October 31, 2002, judgment
was entered against the Company in the amounts of $11,400 for unpaid wages,
$3,300 as a continuation of wages, court costs and attorney's fees of $1,753,
and interest from the date of judgment until paid in full. On or about June 30,
2003, the Company entered into a release and settlement agreement compromising,
resolving, and settling all matters and issues between the parties. The Company
paid a total of $18,750 and a satisfaction of judgment was filed with the Third
Judicial District Court on October 14, 2003.

                                      F-39
<PAGE>

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.

Condensed Notes to Interim Consolidated Financial Statements
March 31, 2006
(Amounts expressed in US Dollars)
(Unaudited)

NOTE 10 - LITIGATION AND SETTLEMENT OF CLAIMS (Continued)

Greg Morrison vs. Smart Chip Technologies, L.L.C.
-------------------------------------------------

On April 4, 2003, Greg Morrison initiated an action against the Company in the
Third Judicial District Court for Salt Lake County, Utah for unpaid wages in the
amount of $7,948, unpaid reimbursement expenses totaling $11,868, interest on
those amounts from the date of termination, court costs and attorney's fees. The
Company agreed to pay Mr. Morrison a total of $7,500 to resolve this matter. The
Company's final payment under this agreement was made prior to July 31, 2004,
and this matter has be dismissed.

PR Newswire Association, Inc. vs. Smart Chip Technologies, L.L.C.
-----------------------------------------------------------------

On May 21, 2003, PR Newswire Association, Inc. initiated an action against the
Company in the Superior Court of New Jersey, Hudson County for unpaid amounts
owed for services provided in the amount of approximately $4,000. On July 18,
2003, a judgment was entered against the Company (a provision of $4,000 has been
provided for in the financial statements at December 31, 2004). The Company is
currently in default of the judgment and would be liable to pay interest from
the date of judgment until paid in full.

James E. Biorge and Jami Biorge
-------------------------------

The Company is reviewing, with the advice of legal counsel, whether the Company
has legal claims that may be asserted against James E. Biorge, a founder and
officer and director of IC One at the time it was acquired in September 1999. At
the time of such acquisition, the Company set aside in a special trust
approximately 7.8 million shares of common stock to be used to resolve claims
that may be asserted against IC One by persons claiming an interest in or claim
against IC One as a successor-in-interest to the assets, operations and
liabilities of CardOne, which Mr. Biorge had also been instrumental in founding
and which had been involved in the initial development of the intellectual
properties subsequently acquired by IC One before IC One was acquired by us. The
Company believes that all or a portion of the 7.8 million shares then reserved
to satisfy such claims, all of which have subsequently been used for such
purpose, should properly be the responsibility of Mr. Biorge. On the basis of
our previous assertion that the Company may make such a claim against Mr. Biorge
and perhaps other reasons not known to the Company, Mr. Biorge has refused to
accept certificates for 11,503,138 shares of Company's common stock to which he
would have been entitled to receive in exchange for his stock in IC One.

On October 2, 2007, James Biorge and Jami Biorge (Mr. Biorge's daughter)
initiated an action against the company in the United States District Court for
the District of Utah (Case # 07cv00129), seeking the above-noted shares which
were previously cancelled by the Company, as well as attorney's fees and
punitive damages. The Company plans to vigorously defend itself and believes
that there is a reasonable possibility that the outcome of any claim would not
be unfavorable to the Company. Additionally, the Company may pursue claims
against Mr. Biorge and seek damages in addition to cancellation of the shares.

                                      F-40
<PAGE>

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.

Condensed Notes to Interim Consolidated Financial Statements
March 31, 2006
(Amounts expressed in US Dollars)
(Unaudited)

NOTE 10 - LITIGATION AND SETTLEMENT OF CLAIMS (Continued)

Richard Hauge and John Hipsley
------------------------------

As of July 31, 2002, Messrs. Hauge and Hipsley ceased their employment with us
and signed agreements to accept their compensation on a deferred basis. In
December 2002, they signed additional agreements releasing all rights to any
claims based on the CardOne entities, terminating their association with the
Company, and agreed to accept options to purchase 725,000 shares of common stock
each. In addition, the Company agreed to issue to Mr. Hauge 700,000 shares of
our stock for work performed through December 2002.

Verlo Howell
------------

On November 30, 2005, Verlo Howell initiated an action against the Company in
the Third Judicial District Court for Salt Lake County, Utah, civil no.
05-092-1235 for unpaid wages, interest and attorney costs. Mr. Howell was hired
as the Company's Executive Vice-President of Sales and Marketing pursuant to an
Employment Agreement dated May 17, 2005. On September 8, 2005, Mr. Howell's
employment was terminated with cause by the Company. We intend to assert and
pursue offsetting defenses and believe that there is a reasonable possibility
that the outcome of any claim, if asserted, would not be unfavorable to us.

Other Creditors
---------------
From time to time, the Company is threatened by creditors to initiate litigation
to collect amounts owed by the Company and reported on its financial statements.
In cases in which litigation is threatened or initiated, the Company seeks to
negotiate a settlement or forbearance agreement.

NOTE 11 - PAYROLL TAXES

Internal Revenue Service
------------------------
The Company's wholly owned subsidiary, IC One, Inc., has received notification
from the Internal Revenue Service that IC One has an unpaid liability for
employment taxes and amounts withheld from employees' wages for the periods from
July 1, 1999, through September 30, 2001. IC One erroneously filed an employer
tax report for the quarter ended September 30, 2001, even though it did not have
any employees and paid no payroll after June 30, 2001. Accordingly, IC One was
not required to make federal tax deposits for the periods after June 30, 2001.
The Internal Revenue Service has filed tax liens against the Company with
respect to such amounts outstanding. As of March 31, 2006, the aggregate amount
owed by IC One, together with applicable penalties and interest, for the period
from July 1, 1999, through June 30, 2001, was approximately $1,350,000. The
Company is attempting to negotiate with the Internal Revenue Service regarding
payment of the amounts owed by IC One.
The total amount of unpaid employment taxes owed by the Company was
approximately $1,350,000 (including interest and penalties of approximately
$398,000). The Company continues to work with the Internal Revenue Service via
the appeals process to resolve its outstanding liability. The Company does not
believe that the liability will hinder the progress of the Company.

Other Creditors
---------------
From time to time, the Company is threatened by creditors to initiate litigation
to collect amounts owed by the Company and reported on its financial statements.
In cases in which litigation is threatened or initiated, the Company seeks to
negotiate a settlement or forbearance agreement.

                                      F-41
<PAGE>

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
Condensed Notes to Interim Consolidated Financial Statements
March 31, 2006
(Amounts expressed in US Dollars)
(Unaudited)

NOTE 11 - PAYROLL TAXES (Continued)

Internal Revenue Service
------------------------
The Company's wholly owned subsidiary, IC One, Inc., has received notification
from the Internal Revenue Service that IC One has an unpaid liability for
employment taxes and amounts withheld from employees' wages for the periods from
July 1, 1999, through September 30, 2001. IC One erroneously filed an employer
tax report for the quarter ended September 30, 2001, even though it did not have
any employees and paid no payroll after June 30, 2001. Accordingly, IC One was
not required to make federal tax deposits for the periods after June 30, 2001.
The Internal Revenue Service has filed tax liens against the Company with
respect to such amounts outstanding. As of March 31, 2006, the aggregate amount
owed by IC One, together with applicable penalties and interest, for the period
from July 1, 1999, through June 30, 2001, was approximately $1,350,000. The
Company is attempting to negotiate with the Internal Revenue Service regarding
payment of the amounts owed by IC One.
The total amount of unpaid employment taxes owed by the Company was
approximately $1,350,000 (including interest and penalties of approximately
$398,000). The Company continues to work with the Internal Revenue Service via
the appeals process to resolve its outstanding liability. The Company does not
believe that the liability will hinder the progress of the Company.

Utah State Tax Commission
-------------------------
The State of Utah has filed tax liens against the Company of approximately
$57,000 as of March 31, 2006, for unpaid employee withholding taxes and related
amounts.

California Employment Development Corporation
---------------------------------------------
The State of California has filed tax liens against the Company for unpaid
employee withholding taxes and related amounts aggregating approximately $75,500
as of March 31, 2006.

Nebraska Department of Revenue
------------------------------
The State of Nebraska has filed tax liens against the Company for unpaid
employee withholding taxes and related amounts aggregating approximately $5,700
as of March 31, 2006. On June 26, 2007, the Company paid its tax obligation to
the State of Nebraska in full.

NOTE 12- SELLING GENERAL AND ADMINISTRATIVE EXPENSES

For the three month period ended March 31, 2006, selling, general and
administrative expenses totaled $182,306.

NOTE 13 - STRATEGIC ALLIANCES

The Company has established strategic alliances to market its products and
services. (Refer Note 16 - Subsequent Events for licensing agreements signed
with Retention Management Group, Inc. and Phoenix Technology Holdings, Inc.)

NOTE 14 - EMPLOYMENT AGREEMENTS

As of March 31, 2006, the Company was no longer obligated under two employment
agreements with certain officers.

                                      F-42
<PAGE>

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
Condensed Notes to Interim Consolidated Financial Statements
March 31, 2006
(Amounts expressed in US Dollars)
(Unaudited)

NOTE 15 - DELISTING AND LATE FILINGS

The Company did not file required reports with the SEC on a timely basis and was
delisted from the OTC Bulletin Board (the "OTC"). The Company currently trades
on the Pink Sheets.

The Company is also not current with its corporate income tax return filings.

The Company's financial statements do not reflect a reserve for any potential
fines or penalties that may result from such delisting or late filings.

NOTE 16- SUBSEQUENT EVENTS

A)   Subsequent issue of common shares:

On July 14, 2006, the Company issued 200,000 common shares in exchange for past
services valued at $10,000. The shares were issued at $0.05.

On August 18, 2006, the Company issued 1,000,000 common shares in exchange for
past services valued at $70,000. The shares were issued at $0.07.

On December 15, 2006, the Company issued 3,000,000 common shares in exchange for
services valued at $150,000. The shares were issued at $0.05.

On December 15, 2006, the Company issued 709,687 common shares in exchange for
past services valued at $49,678. The shares were issued at $0.07.

On December 16, 2006, the Company issued 1,153,333 common shares in exchange for
past services valued at $55,418. The shares were issued at $0.05.

On December 20, 2006, the Company issued 540,000, 1,307,080, 4,000,000 and
2,054,079 common shares in exchange for past services valued at $54,000,
$59,584, $280,000 and $102,704, respectively. The shares were issued at $0.10,
$0.05, $0.07 and $0.05, respectively.

On January 30, 2007, the Company issued 5,850,000 common shares for past
services valued at $292,500. The shares were issued at $0.05.

On February 5, 2007, the Company issued 2,123,208 common shares to convert
secured notes valued at $107,333. The shares were issued at $0.05.

On February 8, 2007, the Company issued 615,091 common shares to convert secured
notes valued at $30,793.75. The shares were issued at $0.05.

On February 21, 2007, the Company issued 6,400,000 common shares in exchange for
past services valued at $448,000. The shares were issued at $0.07.

On March 21, 2007, the Company issued 21,000,000 and 800,000 common shares in
exchange for past services valued at $1,260,000 and $56,000, respectively. The
shares were issued at $0.06 and $0.07, respectively.

On March 26, 2007, the Company issued 5,565,000 and 540,000 common shares for
past services valued at $ 278,250.00 and $54,000, respectively. The shares were
issued at $0.05 and $0.10, respectively.

On May 17, 2007, the Company issued 1,500,000 and 2,578,125 common shares for
cash and past services, respectively valued at $75,000.00 and $135,000,
respectively. The shares were issued at $0.05.

                                      F-43
<PAGE>

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
Condensed Notes to Interim Consolidated Financial Statements
March 31, 2006
(Amounts expressed in US Dollars)
(Unaudited)

NOTE 16- SUBSEQUENT EVENTS (Continued)

A)   Subsequent issue of common shares (Continued):

On May 30, 2007, the Company issued 500,000 and 48,521 common shares for cash
and past services, respectively valued at $25,000.00 and $2,426, respectively.
The shares were issued at $0.05.

On June 1, 2007, the Company issued 1,000,000 common shares in exchange for cash
valued at $50,000.00. The shares were issued at $0.05.

On June 11, 2007, the Company issued 400,000 common shares in exchange for cash
valued at $20,000.00. The shares were issued at $0.05.

On June 12, 2007, the Company issued 100,324,827 common shares to convert
secured notes valued at $5,016,241. The shares were issued at $0.05.

On June 13, 2007, the Company issued 1,129,874 common shares for past services
valued at $56,494. The shares were issued at $0.05.

On June 17, 2007, the Company issued 516,048 common shares to convert secured
notes valued at $25,802. The shares were issued at $0.05.

On June 28, 2007, the Company issued 400,300 common shares for past services
valued at $ 20,015. The shares were issued at $0.05.

On July 1, 2007, the Company issued 6,000,000 common shares for past services
valued at $300,000. The shares were issued at $0.05.

On July 9, 2007, the Company issued 306,908 common shares in exchange for cash
valued at $58,000.00. The shares were issued at $0.19.

On July 11, 2007, the Company issued 6,500,000 common shares for past services
valued at $400,646. The shares were issued at $0.06.

On July 20, 2007, the Company issued 8,661,648 common shares for past services
valued at $432,542. The shares were issued at $0.05.

On August 2, 2007, the Company issued 63,742,180 common shares to convert
secured notes valued at 3,187,164. The shares were valued at $0.05.

On September 26, 2007, the Company issued 200,000 common shares in exchange for
cash valued at $25,000. The shares were issued at $0.125.

On September 26, 2007, the Company issued 160,000 common shares in exchange for
cash valued at $25,000. The shares were issued at $0.156.

On October 30, 2007, the Company issued 400,000 common shares in exchange for
cash valued at $40,000. The shares were issued at $0.10.

B)   Options:

On April 3, 2006, the Company cancelled 1,301,667 options that had been issued
to a past employee. On December 15, 2006 and December 16, 2006, the Company
cancelled 527,296 and 1,000,000 options, respectively, that had been issued to
consulting companies for services rendered.

On March 9, 2007, the Company cancelled 19,161,876 options that had been issued
to past employees.

On March 26, 2007 and March 28, 2007, the Company cancelled 2,861,958 and
1,038,615 options, respectively, that had been issued to past employees.

On July 16, 2007 the Company cancelled 4,098,333 options that had been issued to
past employees.

                                      F-44
<PAGE>

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
Condensed Notes to Interim Consolidated Financial Statements
March 31, 2006
(Amounts expressed in US Dollars)
(Unaudited)

NOTE 16- SUBSEQUENT EVENTS (Continued)

C) Events

Joseph E. Diamond
-----------------
On February 19, 2004, Joseph E. Diamond was appointed Senior Vice-President of
Administration and Finance. In addition to these duties, on November 12, 2004
Mr. Diamond was elected CEO of the Company. Mr. Diamond was relieved as CEO of
the Company and resigned his previous position on December 16, 2004. On January
26, 2005, Therese Diamond (Mr. Diamond's spouse) filed a complaint against the
Company in the Superior Court of California, County of Los Angeles bearing case
number LC-070391 and on February 4, 2005 Joseph Diamond filed a complaint
against the Company in the Superior Court of California, County of Los Angeles
bearing case number LC-070495. On February 3, 2006, the parties entered into a
Settlement and Release Agreement which resolved the matters and they were
subsequently dismissed by the Courts.

Canadian Patent
---------------
On April 20, 2004, the Canadian Intellectual Property Office granted the Company
patent number 2,182,596.

Retention Management Group, Inc.
--------------------------------
On July 25, 2004, the Company entered into a Licensing Agreement with Retention
Management Group, Inc.(RMG), a Barbados company, in which RMG was granted a
license to market, distribute and sublicense SCTN applications and products. On
March 10, 2006, the Company asserted claims against RMG in case no. A518577
filed in the Eighth Judicial District Court of Nevada, Clark County. On May 31,
2006, the Company and RMG entered into a Settlement Agreement and Release. Under
the terms of this agreement, the Company agreed to pay RMG $ 90,000, and the
Licensing Agreement between the Company and RMG was terminated. Accordingly,
case no. A518577 was dismissed by the Court on June 23, 2006.

Marilyn Grish
-------------

On September 18, 2001, we were served with a summons and complaint for an action
filed by Marilyn Grish in the Third Judicial District Court, Salt Lake County,
Utah, for breach of an independent contractor's contract and seeking unspecified
damages. On October 12, 2001, the Company filed an answer and a counterclaim
against Ms. Grish and intended to defend this matter vigorously. Ms. Grish had
taken no further action in this case and the court indicated that, unless Ms.
Grish certified she was ready for trial by August 4, 2004, the case would be
dismissed. The case was dismissed on August 4, 2004.

David Simon
-----------
Concurrent with Mr. Diamond being relieved as CEO of the Company on December 16,
2004, David Simon assumed the role of CEO.

Donald W. Mayer
---------------

On June 1, 2005, Donald W. Mayer, an investor in the Company, initiated an
action in The Superior Court of the State of Washington, In and For the County
of King, case no. 05-2-18115-0-SEA in which the Company was named one of several
defendants. On May 13, 2006, the Parties entered into a Settlement Agreement and
Release. Accordingly, the Company was dismissed as a defendant in the case.

                                      F-45
<PAGE>

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
Condensed Notes to Interim Consolidated Financial Statements
March 31, 2006
(Amounts expressed in US Dollars)
(Unaudited)

NOTE 16- SUBSEQUENT EVENTS (Continued)

C) Events (Continued)

Miki Radivojsa
--------------

On August 8, 2005, Miki Radivojsa, CEO of Airos Group, the Company's development
partner, was elected to the Board of Directors. On August 17, 2005, Mr.
Radivojsa was elected Chairman and CEO of the Company, replacing David Simon.

Statute-Barred Accounts Payable
-------------------------------

As of December 31, 2005, certain accounts payable of the Company are
Statute-Barred under Utah law from being collected by creditors. However, under
US GAAP, the Company still records them as a liability. As of December 31, 2005,
the amount is approximately 41,000.

Phoenix Technology Holdings, Inc.
--------------------------------

On April 6, 2006, the Company entered into a License Agreement with Phoenix
Technology Holdings Incorporated, a Turks and Caicos Islands company. Under the
terms of the agreement, the Company granted Phoenix an exclusive license to use
the Company's technology. Also, certain portions of the Company's debt,
including a significant portion of the Senior Secured Convertible Notes, unpaid
amounts owing to Airos Group for services rendered, and accrued salaries were
assumed by Phoenix and ceased accruing additional interest. Further, the
agreement provides for Phoenix to loan monies to the Company, at Phoenix's
discretion, at the rate of one percent (1%) per month, compounded monthly until
paid in full. Any such loan shall be deducted from any payments due by Phoenix
under the agreement. In order to maintain exclusivity, the Agreement calls for
certain performance targets to be met. As of April 18, 2007, these targets have
been met.

Nevada Corporation
------------------

During a special meeting of the Board of Directors on November 30, 2006, the
Board voted to approve a resolution to convert the Company from a Florida
corporation to a Nevada corporation.

Increase in Authorized Shares
-----------------------------

During a special meeting of the Board of Directors on November 30, 2006, the
Board voted to approve a resolution to increase the number of authorized shares
to 500,000,000.

Change in Auditors
------------------

During a meeting of the Board of Directors on May 18, 2007, the Board voted to
approve a resolution which dismissed Marcum & Kliegman, LLP as the Company's
independent registered public accounting firm and engaged Schwartz Levitsky
Feldman LLP as the Company's independent registered public accounting firm. The
change in independent registered public accounting firms is not the result of
any disagreement with Marcum & Kliegman, LLP.

                                      F-46
<PAGE>

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
Condensed Notes to Interim Consolidated Financial Statements
March 31, 2006
(Amounts expressed in US Dollars)
(Unaudited)

NOTE 16- SUBSEQUENT EVENTS (Continued)

C) Events (Continued)

Elimination of Senior Secured Debt
----------------------------------

In Janaury of 2007, Noteholders which did not elect to assign their debt to
Phoenix Technology Holding, Inc. were given the option to receive their
principal investment plus accrued interest either in the form of cash or shares
in the Company. By June 2007, the last of these repayments were made, and all
Senior Secured Notes have been retired.

Increase in Authorized Shares
-----------------------------

During a special meeting of the Board of Directors on July 20, 2007, the Board
voted to approve a resolution to increase the number of authorized shares to
600,000,000.

Menalco, FZE and The International Investor, K.S.C.S.
-----------------------------------------------------

On August 30, 2007, The International Investor, K.S.C.C., a Kuwait-based
company, initiated an action in the United States District Court for the
District of Nevada, case # 07-CV-1178, in which the Company was named as a
co-defendant, seeking damages in the amount of $100,000,000. The allegations,
which have not been proven in a court of law, include conspiracy in violation of
statues prohibiting racketeering, misappropriation of trade secrets, fraud,
civil conspiracy to defraud, unjust enrichment, breach of contract, breach of
fiduciary trust and unfair competition. The company filed its counter-claim on
September 25, 2007 and plans to vigorously defend and counter sue TII for breach
of contract, fraud, interference with contractual relations, misappropriation of
trade secrets, conversion, unjust enrichment and to seek both compensatory and
punitive damages well in excess of $100 million.

Statute-Barred Accounts Payable
-------------------------------

As of December 31, 2007, certain accounts payable of the Company are
Statute-Barred under Utah law from being collected by creditors. However, under
US GAAP, the Company still records them as a liability. As of December 31, 2007,
the amount is approximately $2,530,000. This amount includes the $41,000
previously Statute-Barred as of December 31, 2006.


                                      F-47
<PAGE>

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.

Interim Consolidated Balance Sheets
As of June 30, 2006 and December 31, 2005
(Amounts expressed in US Dollars)

<TABLE>
<CAPTION>
                                                                          (Unaudited)              (Audited)
                                                                             June 30,             December 31,
                                                                             2006                    2005
                                                                              $                       $
<S>                                                                        <C>                 <C>
                                            ASSETS
                                            ------
CURRENT ASSETS:
  Cash                                                                           5,668              11,542
  Prepaid Expenses and other                                                    49,811              42,499
                                                                           -----------         -----------
      TOTAL CURRENT ASSETS                                                      55,479              54,041
                                                                           -----------         -----------
      TOTAL ASSETS                                                              55,479              54,041
                                                                           ===========         ===========
               LIABILITIES AND SHAREHOLDERS' DEFICIENCY
               ----------------------------------------
CURRENT LIABILITIES:
  Accounts payable - Vendor                                                  2,091,000           1,963,800
  Accounts payable - other                                                   2,014,489           7,166,788
  Accounts payable - Phoenix                                                 8,387,164
  Accrued wages and payroll taxes (note 11)                                  1,531,668           1,499,196
  Deferred compensation                                                      6,248,558           4,205,411
  Loans - CEO America                                                          150,000             150,000
  Loans - Phoenix                                                               12,250
  Amounts owed to employees and officers (notes 5 and 6)                     1,314,331           1,314,331
  Short term loans                                                                 500                 500
  Convertible notes payable (including amounts owed to officers
  $1,220,462 prior year $1,220,462)                                            237,000           2,991,316
                                                                           -----------         -----------
      TOTAL CURRENT LIABILITIES                                             21,986,960          19,291,342
                                                                           -----------         -----------


SHAREHOLDERS' DEFICIENCY (note 7):
  Common stock - $.001 par value; 200,000,000 shares
    authorized; 195,274,003 shares issued and outstanding                      195,274             193,274
                (2005: 193,274,003)
  Additional paid-in capital                                                60,104,504          60,006,504
  Common stock subscription receivable                                               -            (175,000)
  Common stock subscribed                                                            -             200,000
  Deficit accumulated                                                      (82,231,259)        (79,462,079)
                                                                           -----------         -----------
      TOTAL SHAREHOLDERS' DEFICIENCY                                       (21,931,481)        (19,237,301)
                                                                           -----------         -----------
      TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIENCY                            55,479              54,041
                                                                           ===========         ===========

                       See condensed notes to interim unaudited consolidated financial statements.
</TABLE>

                                      F-48
<PAGE>

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.

Interim Consolidated Statements of Operations and Comprehensive Loss
For the six month period Ended June 30, 2006 and 2005
(Amounts expressed in US Dollars)
(Unaudited)

<TABLE>
<CAPTION>
                                                                     For the Quarter                    For the Six Months
                                                                      Ended June 30,                      Ended June 30,
                                                            -------------------------------     -------------------------------
                                                                 2006               2005              2006             2005
                                                                 ----               ----              ----             ----
                                                                  $                  $                 $                $
<S>                                                         <C>               <C>               <C>               <C>
EXPENSES:
  Selling, general and administrative (note 12)                   218,596           663,417           400,902         1,376,367
  Depreciation and amortization                                         -                 -                 -                 -
  Write-off of common stock subscription
    receivable                                                          -                 -                 -                 -
  Loss on impairment of intangible assets                               -                 -                 -                 -
  Interest expense                                                950,926         1,381,891         2,368,278         1,984,794
                                                            -------------     -------------     -------------     -------------
      TOTAL EXPENSES                                            1,169,522         2,045,308         2,769,180         3,361,161
                                                            -------------     -------------     -------------     -------------
LOSS BEFORE EXTRAORDINARY ITEM                                 (1,169,522)       (2,045,308)       (2,769,180)       (3,361,161)

EXTRAORDINARY ITEM - LOSS ON
  EXTINGUISHMENT OF DEBT                                                -                 -                 -                 -
                                                            -------------     -------------     -------------     -------------
NET LOSS                                                    $  (1,169,522)    $  (2,045,308)    $  (2,769,180)    $  (3,361,161)
                                                            =============     =============     =============     =============
NET LOSS PER SHARE, BASIC AND DILUTED                       $       (0.01)    $       (0.01)    $       (0.01)    $       (0.02)

                                                            =============     =============     =============     =============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
  OUTSTANDING, BASIC AND DILUTED                              195,274,003       175,043,600       194,629,559       170,473,902
                                                            =============     =============     =============     =============

COMPREHENSIVE LOSS
The components of comprehensive loss are as follows:

Net loss                                                    $  (1,169,522)    $  (2,045,308)
Other comprehensive income (loss) foreign currency
Translation                                                             -                 -
Comprehensive Loss                                          $  (1,169,522)    $  (2,045,308)

                       See condensed notes to interim unaudited consolidated financial statements.
</TABLE>


                                      F-49
<PAGE>

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.

Interim Consolidated Statements of Changes in Stockholders' Deficiency
For the Periods Ended December 31, 2005 and June 30, 2006
(Amounts expressed in US dollars)

<TABLE>
<CAPTION>
                                                                                 Common    Common
                                                Common Stock    Additional        Stock     Stock Deferred
                                       Number of                   Paid-in Subscription     to be  Compen-      Deficit
                                          Shares      Amount       Capital   Receivable    Issued   sation  Accumulated       Total
<S>                                 <C>             <C>       <C>              <C>       <C>            <C><C>          <C>
     BALANCE,  December  31, 2004    165,714,436    165,714    57,616,113      (250,000)  500,000        - (71,820,010) (13,788,183)
     (Audited)

     Issuance of stock for services
     rendered:
     ($0.05 per share, February)         250,000        250        12,250                                                    12,500
     ($0.05 per share, May)                1,050          1            52                                                        53
     ($0.048 per share, June)            100,000        100         4,650                                                     4,750
     $0.06 per share, December            88,669         89         5,231                                                     5,320
     Issue of stock in lieu of
     interest payments:
     (0.082 per share, May)           22,934,690     22,935     1,861,894                                                 1,884,829
     Issue of stock for cash:
     ($0.07 per share, March)             70,355         70         4,855                                                     4,925
     ($0.068 per share, March)           369,550        370        24,590                                                    24,960
     ($0.07 per share, April)            100,000        100         6,900                                                     7,000
     ($0.09 per share, April)            100,000        100         8,900                                                     9,000
     ($0.05 per share, May)              248,000        248        12,152                                                    12,400
     ($0.056 per share, May)              23,571         23         1,297                                                     1,320
     ($0.07 per share, May)              142,857        143         9,857                                                    10,000
     ($0.08 per share, May)              125,000        125         9,875                                                    10,000
     ($0.09 per share, May)               47,968         48         4,469                                                     4,317
     ($0.123 per share, May)             150,000        150        18,225                                                    18,375
     ($0.30 per share, May)            1,000,000      1,000       299,000                (300,000)                                -
     ($0.068 per share, May)              13,450         13           895                                                       908
     ($0.08 per share, June)              62,500         63         4,937                                                     5,000
     ($0.05 per share, June)             800,000        800        39,200                                                    40,000
     ($0.05 per share, June)             100,000        100         4,900                                                     5,000
     ($0.09 per share, June)              50,000         50         4,450                                                     4,500
     ($0.05 per share, July)             200,000        200         9,800                                                    10,000
     ($0.05 per share, July)             200,000        200         9,800                                                    10,000
     ($0.06 per share, September)         58,413         58         3,447                                                     3,505
     ($0.05 per share, October)          323,494        324        15,851                                                    16,175
     Common stock subscription                                                   75,000                                      75,000
     received
     Stock option compensation                                     13,114                                                    13,114
     Net Loss                                                                                               (7,642,069)  (7,642,069)

     BALANCE, December 31, 2005      193,274,003    193,274    60,006,504      (175,000)  200,000        - (79,462,079) (19,237,301)
     (Audited)
     Issuance of stock for services
     rendered:
     ($0.05 per share, February)       2,000,000      2,000        98,000                                                   100,000
     Adjustment of stock to be issued                                                    (200,000)                         (200,000)
     with payables to Phoenix
     Common stock subscription                                                  175,000                                     175,000
     received
     Net Loss                                                                                               (2,769,180)  (2,769,180)
     BALANCE, June 30, 2006          195,274,003    195,274    60,104,504             -         -        - (82,231,259) (21,931,481)
     (Unaudited)

                       See condensed notes to interim unaudited consolidated financial statements.
</TABLE>


                                      F-50
<PAGE>

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
Interim Statement of Cash Flows
Six months Ended June 30, 2006 and 2005
(Amounts expressed in US Dollars)
(Unaudited)

<TABLE>
<CAPTION>
                                                                     Six Months Ended
                                                                         June 30,
                                                           --------------------------------------

                                                              2006                      2005
                                                           --------------------------------------
                                                                $                        $
<S>                                                        <C>                       <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss                                                   (2,769,180)               (3,361,160)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization                                       -                         -
Stock option compensation                                           -                    13,114
Adjustment for variable accounting of options
Amortization of deferred option compensation                        -                         -
Common stock issued for services
and compensation                                              100,000                    17,303
Common stock issued for interest expense                            -                 1,884,829
Common stock issued to settle CardOne
Claims
Common stock issued for directors' fees
Write-off of common stock subscription
receivable                                                          -                         -
(Gain) loss on extinguishment of debt                               -                         -
Loss on impairment of assets                                        -                         -
Changes in current assets and liabilities:
Prepaid Expenses and other                                     (7,312)                  (88,022)
Accounts payable and accrued expenses                       2,400,928                 1,149,212

                                                           --------------------------------------
NET CASH USED IN OPERATING ACTIVITIES                        (275,564)                 (384,724)
                                                           --------------------------------------

CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment                               -                         -
Acquisition of patents                                              -                         -
Investment in real estate joint venture                             -                         -

                                                           --------------------------------------
NET CASH USED IN INVESTING ACTIVITIES                               -                         -
                                                           --------------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from (repayments of) loans payable - shareholders          -                  (157,705)
Loans - Phoenix                                                12,250                         -
Proceeds from notes payable                                    82,440                   200,000
Proceeds from common stock subscription
received                                                      175,000                    75,000
Sales of common stock                                               -                   157,705
Amounts owed to employees and officers                              -                   108,459

                                                           --------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES                     269,690                   383,459
                                                           --------------------------------------

NET INCREASE (DECREASE) IN CASH                                (5,874)                   (1,266)

CASH AT BEGINNING OF PERIOD                                    11,542                    14,086

                                                           --------------------------------------
CASH AT END OF PERIOD                                           5,668                    12,820
                                                           --------------------------------------



                       See condensed notes to interim unaudited consolidated financial statements.
</TABLE>

                                      F-51
<PAGE>

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
Condensed Notes to Interim Consolidated Financial Statements
June 30, 2006
(Amounts expressed in US Dollars)
(Unaudited)


NOTE 1- THE COMPANY

Schimatic Cash Transactions Network.com, Inc. (the Company) is in the business
of research, development and integration of proprietary processes and software
technologies for the electronic payment industry, primarily involving consumer
loyalty programs. Schimatic Cash Transactions Network.com, Inc. operates
principally through its wholly-owned subsidiary, Smart Chip Technologies, LLC.
The Company licenses, markets and develops smart-card loyalty products through
its subsidiary, Smart Chip Technologies, LLC under the "Smart Chip" name.

The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information. Accordingly, they do not include all of the information
and footnotes required by U.S. generally accepted accounting principles for
complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary to make the
financial statements not misleading have been included. Operating results for
the six months ended June 30, 2006, are not indicative of the results that may
be expected for the year Ended December 31, 2006. The unaudited condensed
consolidated financial statements should be read in conjunction with the audited
consolidated financial statements for the year ended December 31, 2005.

The Company was previously in the development stage and commenced operations in
its planned line of business during the end of first quarter of 2006. On April
6, 2006, the Company entered into a License Agreement with Phoenix Technology
Holdings Incorporated, a Turks and Caicos Islands company. Under the terms of
the agreement, the Company granted Phoenix an exclusive license to use the
Company's technology.

NOTE 2- GOING CONCERN

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company and has incurred a net
loss of $82,231,259 since inception.

Additionally, the Company had a net working capital deficiency of $21,931,481
and a total shareholders' deficiency of $21,931,481 at June 30, 2006. These
conditions raise substantial doubt about the Company's ability to continue as a
going concern. The consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty.

Management expects to incur additional losses for the foreseeable future and
recognizes the need to raise capital through the future issuance of stock and/or
debentures in order to develop a viable business. The Company continues to
implement cost-cutting measures. It may also rely increasingly on strategic
alliances with others who will assume responsibility for financing specific
required development tasks, thus, reducing the Company's financial requirements
for the exploitation of its intellectual properties.

As of June 30, 2006, current liabilities are substantially past due. In the
event demands are made upon the Company which cannot be met and the associated
creditors successfully pursue action against the Company, the Company could be
exposed to additional costs of legal fees, interest or penalties, and may be
forced to take other defensive actions, including filing for bankruptcy.

The Company has been able to finance its operations primarily by raising capital
through the private placement of common stock and the issuance of convertible
debt.

                                      F-52
<PAGE>

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
Condensed Notes to Interim Consolidated Financial Statements
June 30, 2006
 (Amounts expressed in US Dollars)
(Unaudited)

NOTE-3 PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiaries, IC One and Smart Chip Technologies, LLC. All
significant inter-company balances and transactions have been eliminated in
consolidation.

NOTE 4-STOCK BASED COMPENSATION

The Company follows Statement of Financial Accounting Standards ("SFAS") No.
123, "Accounting for Stock-Based Compensation." SFAS No. 123 establishes
accounting and reporting standards for stock-based employee compensation plans.
This statement allows companies to choose between the fair value based method of
accounting as defined in this statement and the intrinsic value based method of
accounting as prescribed by Accounting Principles Board Opinion No. 25 ("APB
25"), "Accounting for Stock Issued to Employees."

The Company has elected to continue to follow the accounting guidance provided
by APB 25, as permitted for stock-based compensation relative to the Company's
employees. Stock and options granted to other parties in connection with
providing goods and services to the Company are accounted for under the fair
value method as prescribed by SFAS 123.

In December 2002, the Financial Accounting Standard Board ("FASB") issued SFAS
No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure -
an Amendment of SFAS Statement No. 123". This statement amends SFAS No. 123 to
provide alternative methods of transition for a voluntary change to the fair
value-based method of accounting for stock-based employee compensation. In
addition, SFAS No. 148 amends the disclosure requirements of SFAS No. 123 to
require prominent disclosures in both annual and interim financial statements
about the method of accounting for stock-based employee compensation and the
effect of the method used on reported results. SFAS No. 148 also requires that
those effects be disclosed more prominently by specifying the form, content, and
location of those disclosures. We have adopted the increased disclosure
requirements of SFAS No. 148 for the six month period ended June 30, 2006.

                                      F-53
<PAGE>

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
Condensed Notes to Interim Consolidated Financial Statements
June 30, 2006
(Amounts expressed in US Dollars)
(Unaudited)

NOTE 4- STOCK BASED COMPENSATION-CONT'D

The additional disclosures required by SFAS No. 148 are as follows:

<TABLE>
<CAPTION>
                                                                 For the Three Months               For the Six Months
                                                                    Ended June 30,                    Ended June 30,
                                                                 2006            2005              2006            2005
                                                                 ----            ----              ----            ----
<S>                                                        <C>               <C>             <C>               <C>
Net loss attributable to common stockholders,
  as reported ....................................         $  (1,169,522)    $(2,045,308)    $  (2,769,180)    $(3,361,161)
Add:  Stock-based employee compensation
  expense included in reported net income,
  net of related tax effect ......................                     -           2,381                 -          13,114
Less:  Total stock-based compensation
  expense determined under the Black-Scholes fair value
  based method of all awards* ....................                     -         (2,381)                 -         (13,114)
Pro forma net loss attributable to
  common stockholders ............................         $  (1,169,522)    $(2,045,308)    $  (2,769,180)    $(3,361,161)
                                                           =============     ===========     =============     ===========
Basic and diluted net loss attributable to
  common stockholders
As reported ......................................         $       (0.01)    $     (0.01)    $       (0.01)    $     (0.02)
                                                           =============     ===========     =============     ===========



Pro forma ........................................         $       (0.01)    $     (0.01)    $       (0.01)    $     (0.02)

No stock options were granted by the Company for the six month period ended June 30, 2006.
</TABLE>

Loss Per Share

Basic and diluted loss per share has been calculated based upon the weighted
average number of common shares outstanding and excludes any potentially
dilutive securities. Stock options and convertible notes have been excluded as
common stock equivalents in the computation of diluted loss per share since the
results would be anti-dilutive. Obligations to issue additional shares, which
could potentially dilute earnings per share, were approximately 248,700,000 at
June 30, 2006.

                                      F-54
<PAGE>

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
Condensed Notes to Interim Consolidated Financial Statements
June 30, 2006
(Amounts expressed in US Dollars)
(Unaudited)

NOTE 5 - AMOUNTS OWED TO OFFICERS

Loans payable to officers are non-interest bearing advances made on behalf of
the Company that are unsecured and payable on demand.

NOTE 6 - AMOUNTS OWED TO EMPLOYEES

Amounts owed to employees are non-interest bearing advances made on behalf of
the Company that are unsecured and payable on demand.

NOTE 7 - SHAREHOLDERS' DEFICIENCY

Equity Transactions
-------------------

Six months ended June 30, 2006
------------------------------

On February 13, 2006, the Company issued 2,000,000 common shares in exchange for
past services valued at $100,000. The shares were issued at $0.05.

Six months ended June 30, 2005
------------------------------

On February 2, 2005 the Company issued 250,000 common shares in exchange for
services valued at $12,500. The shares were issued at $0.05.

On March 29, 2005 the Company issued 70,355 common shares in exchange for cash.
The shares were issued at $0.07.

On March 29, 2005 the Company issued 369,550 common shares in exchange for cash.
The shares were issued at $0.068.

On April 8, 2005, the Company issued 100,000 common shares in exchange for cash.
The shares were issued at $0.07

On April 28, 2005 the Company issued 100,000 common shares in exchange for cash.
The shares were issued at $0.09.

On May 4, 2005 the Company issued 248,000, 23,571, 142,857, 125,000, 47,968,
150,000 and 1,000,000 common shares in exchange for cash. The shares were issued
at $0.05, $0.056, $0.07, $0.08, $0.09, $0.123 and $0.30 respectively.

On May 4, 2005 the Company issued 1,050 common shares in exchange for past
services valued at $53. The shares were issued at $0.05.

On May 4, 2005, the Company issued 22,934,690 common shares for interest
payments of $1,884,829. The shares were issued at $0.082.

On May 4, 2005, the Company issued 13,450 common shares in exchange for cash.
The shares were issued at $0.068.

On June 2, 2005, the Company issued 62,500 common shares in exchange for cash.
The shares were issued at $0.08.

On June 6, 2005, the Company issued 800,000 common shares in exchange for cash.
The shares were issued at $0.05.

On June 15, 2005, the Company issued 100,000 and 50,000 common shares in
exchange for cash. The shares were issued at $0.05 and $0.09, respectively.

On June 15, 2005, the Company issued 100,000 common shares in exchange for
services valued at $4,750. The shares were issued at $0.048.

                                      F-55
<PAGE>

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
Condensed Notes to Interim Consolidated Financial Statements
June 30, 2006
(Amounts expressed in US Dollars)
(Unaudited)

NOTE 8- AUTHORIZED SHARES
-----------------
As at June 30, 2006, the Company is authorized to issue 200,000,000 shares of
common stock. At June 30, 2006, the Company had common stock shares outstanding
of 195,274,003 and an additional 248,703,575 shares issuable upon the conversion
of stock options, convertible debt and deferred compensation. As a result, the
Company would exceed the authorized amount by 243,977,578. The Company would be
required to seek shareholder approval to increase the shares authorized limits
in order to satisfy its potential conversion of dilutive securities.

As an alternative, the Company may purchase shares of common stock in the open
market, or seek to repay the indebtedness in lieu of conversion.

Effective November 29, 2006, the Board of Directors of the Company approved
amendments to the Articles of Incorporation to adopt an increase in the capital
stock of the Company's common stock from 200,000,000 to 500,000,000 shares.
Furthermore, during a special meeting of the Board of Directors on July 20,
2007, the Board voted to approve a resolution to increase the number of
authorized shares to 600,000,000. (Refer Note 16 - Subsequent Events).

NOTE 9 - STOCK OPTION PLAN

On December 8, 1999, the Company adopted an Employee Stock Option Plan (the
"Plan"). The Board of Directors administers the Plan. Under the Plan, the
Company may grant stock options, which may be incentive stock options ("ISO's")
as defined in the Internal Revenue Code, and stock awards or options which do
not qualify as ISO's to employees and officers. All employees of the Company are
eligible to participate in the Plan.

No stock options were granted by the Company for the six month period ended June
30, 2006.

                                                      Stock Options
                                                -----------------------
                                                               Weighted
                                                               Average
                                                               Exercise
                                                  Shares        Price
                                                  ------        -----

         Outstanding at December 31, 2004        48,425,299     $0.11
             Granted                                400,000     $0.06
           Exercised                                      -         -
           Cancelled                             (7,142,470)    $0.17
         Outstanding at December 31, 2005        41,682,829     $0.11
             Granted                                      -         -
           Exercised                                      -         -
           Cancelled                             (3,239,000)    $0.16
           Outstanding at June 31, 2006          38,443,829     $0.10


                                      F-56
<PAGE>

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
Condensed Notes to Interim Consolidated Financial Statements
June 30, 2006
(Amounts expressed in US Dollars)
(Unaudited)

The following table summarizes the Company's stock options outstanding and
exercisable at June 30, 2006:

<TABLE>
<CAPTION>
                                      Options Outstanding                            Options Exercisable
                            ----------------------------------------            ----------------------------
                                             Weighted
                                              Average      Weighted                               Weighted
                                             Remaining     Average                                Average
Range of Exercise               Number      Contractual    Exercise                Number         Exercise
     Prices                  Outstanding       Life         Price                Exercisable        Price
     ------                  -----------       ----         -----                -----------        -----
                            (In Thousands)  (In Years)                         (In Thousands)
<S>                            <C>             <C>          <C>                    <C>              <C>
$0.00 - $0.23                   36,130          2.64        $0.08                  36,130           $0.08
$0.48 - $0.49                    2,314          4.13        $0.48                   2,314           $0.48
$0.64 - $0.80                        -             -            -                       -               -
                                ------                                             ------
                                38,444                                             38,444
                                ======                                             ======
</TABLE>

NOTE 10 - LITIGATION AND SETTLEMENT OF CLAIMS

The Company is currently a defendant or co-defendant in various legal actions
arising in the ordinary course of business. There can be no assurance, the
Company will be successful in defending these actions.

Quint Star Management , Inc. vs. IC One, Inc., Arthur D. Bennet, and
Peter Bennee
--------------------------------------------------------------------------------

On August 30, 1999, Quint Star Management, Inc. initiated an action in the Third
Judicial District Court, Salt Lake City, Utah, against IC One, Inc., Arthur D.
Bennett and Peter J. Bennee, for unpaid rent and related charges, plus costs and
attorney's fees, under the lease on our former principal executive offices in
Salt Lake City, Utah. Following the entry of judgment against IC One for $50,541
on December 7, 2000, IC One reached a payment arrangement under which we are
obligated to pay $5,000 per month, plus ongoing obligations under the lease. The
settlement obligation is guaranteed by the Company, and is secured by the
equipment, inventory, accounts and chattel paper of both the parent and IC One.
The Company is in default in its obligations under this agreement. Upon the
expiration of the lease, an amended judgment of $222,765 (a provision has been
provided for in the financial statements at December 31, 2003) was entered to
reflect the additional unpaid rent, interest and attorney's fees.

                                      F-57
<PAGE>

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
Condensed Notes to Interim Consolidated Financial Statements
June 30, 2006
(Amounts expressed in US Dollars)
(Unaudited)

NOTE 10 - LITIGATION AND SETTLEMENT OF CLAIMS (Continued)

Grish vs. Schimatic Cash Transactions Network.com a/b/a Smart Chip Technologies,
Inc. f/k/a IC One, Inc.
--------------------------------------------------------------------------------

On September 18, 2001, we were served with a summons and complaint for an action
filed by Marilyn Grish in the Third Judicial District Court, Salt Lake County,
Utah, for breach of an independent contractor's contract and seeking unspecified
damages. On October 12, 2001, the Company filed an answer and a counterclaim
against Ms. Grish and intended to defend this matter vigorously. Ms. Grish had
taken no further action in this case and the court indicated that, unless Ms.
Grish certified she was ready for trial by August 4, 2004, the case would be
dismissed. Accordingly, the case was dismissed on August 4, 2004.


Eximsoft International, LLC and Eximsoft Technologies Pvt. Ltd.
---------------------------------------------------------------

In October 2001, IC One, Inc. entered into a settlement agreement with Eximsoft
International, LLC and Eximsoft Technologies Pvt. Ltd. to resolve claims by the
Eximsoft entities that IC One had contracted and received computer software
development and programming services and had failed to pay as agreed. IC One
agreed to pay $30,000 and provided Eximsoft with a confession of judgment that
could be filed in the Third District Court in Salt Lake City, Utah, in the event
that IC One failed to make the agreed payments. IC One paid the agreed $30,000
during 2002 and the original confession of judgment was returned by Eximsoft to
us in November 2003.

Sandra Lueck vs. Schimatic Cash Transactions Network.com, Inc. d/b/a Smart Chip
Technologies, Smart Chip Technologies L.L.C., and IC One, Inc.
--------------------------------------------------------------------------------

On August 16, 2002, Sandra Lueck initiated an action against the Company for
unpaid wages, interest, costs and attorney's fees. On October 31, 2002, judgment
was entered against the Company in the amounts of $11,400 for unpaid wages,
$3,300 as a continuation of wages, court costs and attorney's fees of $1,753,
and interest from the date of judgment until paid in full. On or about June 30,
2003, the Company entered into a release and settlement agreement compromising,
resolving, and settling all matters and issues between the parties. The Company
paid a total of $18,750 and a satisfaction of judgment was filed with the Third
Judicial District Court on October 14, 2003.

Greg Morrison vs. Smart Chip Technologies, L.L.C.
------------------------------------------------

On April 4, 2003, Greg Morrison initiated an action against the Company in the
Third Judicial District Court for Salt Lake County, Utah for unpaid wages in the
amount of $7,948, unpaid reimbursement expenses totaling $11,868, interest on
those amounts from the date of termination, court costs and attorney's fees. The
Company agreed to pay Mr. Morrison a total of $7,500 to resolve this matter. The
Company's final payment under this agreement was made prior to July 31, 2004,
and this matter has be dismissed.

                                      F-58
<PAGE>

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
Condensed Notes to Interim Consolidated Financial Statements
June 30, 2006
(Amounts expressed in US Dollars)
(Unaudited)

NOTE 10 - LITIGATION AND SETTLEMENT OF CLAIMS (Continued)

PR Newswire Association, Inc. vs. Smart Chip Technologies, L.L.C.
-----------------------------------------------------------------

On May 21, 2003, PR Newswire Association, Inc. initiated an action against the
Company in the Superior Court of New Jersey, Hudson County for unpaid amounts
owed for services provided in the amount of approximately $4,000. On July 18,
2003, a judgment was entered against the Company (a provision of $4,000 has been
provided for in the financial statements at December 31, 2004). The Company is
currently in default of the judgment and would be liable to pay interest from
the date of judgment until paid in full.

James E. Biorge and Jami Biorge
-------------------------------

The Company is reviewing, with the advice of legal counsel, whether the Company
has legal claims that may be asserted against James E. Biorge, a founder and
officer and director of IC One at the time it was acquired in September 1999. At
the time of such acquisition, the Company set aside in a special trust
approximately 7.8 million shares of common stock to be used to resolve claims
that may be asserted against IC One by persons claiming an interest in or claim
against IC One as a successor-in-interest to the assets, operations and
liabilities of CardOne, which Mr. Biorge had also been instrumental in founding
and which had been involved in the initial development of the intellectual
properties subsequently acquired by IC One before IC One was acquired by us. The
Company believes that all or a portion of the 7.8 million shares then reserved
to satisfy such claims, all of which have subsequently been used for such
purpose, should properly be the responsibility of Mr. Biorge. On the basis of
our previous assertion that the Company may make such a claim against Mr. Biorge
and perhaps other reasons not known to the Company, Mr. Biorge has refused to
accept certificates for 11,503,138 shares of Company's common stock to which he
would have been entitled to receive in exchange for his stock in IC One.

On October 2, 2007, James Biorge and Jami Biorge (Mr. Biorge's daughter)
initiated an action against the company in the United States District Court for
the District of Utah (Case # 07cv00129), seeking the above-noted shares which
were previously cancelled by the Company, as well as attorney's fees and
punitive damages. The Company plans to vigorously defend itself and believes
that there is a reasonable possibility that the outcome of any claim would not
be unfavorable to the Company. Additionally, the Company may pursue claims
against Mr. Biorge and seek damages in addition to cancellation of the shares.

Richard Hauge and John Hipsley
------------------------------

As of July 31, 2002, Messrs. Hauge and Hipsley ceased their employment with us
and signed agreements to accept their compensation on a deferred basis. In
December 2002, they signed additional agreements releasing all rights to any
claims based on the CardOne entities, terminating their association with the
Company, and agreed to accept options to purchase 725,000 shares of common stock
each. In addition, the Company agreed to issue to Mr. Hauge 700,000 shares of
our stock for work performed through December 2002.

Verlo Howell
------------

On November 30, 2005, Verlo Howell initiated an action against the Company in
the Third Judicial District Court for Salt Lake County, Utah, civil no.
05-092-1235 for unpaid wages, interest and attorney costs. Mr. Howell was hired
as the Company's Executive Vice-President of Sales and Marketing pursuant to an
Employment Agreement dated May 17, 2005. On September 8, 2005, Mr. Howell's
employment was terminated with cause by the Company. We intend to assert and
pursue offsetting defenses and believe that there is a reasonable possibility
that the outcome of any claim, if asserted, would not be unfavorable to us.

                                      F-59
<PAGE>

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
Condensed Notes to Interim Consolidated Financial Statements
June 30, 2006
(Amounts expressed in US Dollars)
(Unaudited)

NOTE 10 - LITIGATION AND SETTLEMENT OF CLAIMS (Continued)

Other Creditors
---------------
From time to time, the Company is threatened by creditors to initiate litigation
to collect amounts owed by the Company and reported on its financial statements.
In cases in which litigation is threatened or initiated, the Company seeks to
negotiate a settlement or forbearance agreement.

NOTE 11 - PAYROLL TAXES

Internal Revenue Service
------------------------
The Company's wholly owned subsidiary, IC One, Inc., has received notification
from the Internal Revenue Service that IC One has an unpaid liability for
employment taxes and amounts withheld from employees' wages for the periods from
July 1, 1999, through September 30, 2001. IC One erroneously filed an employer
tax report for the quarter ended September 30, 2001, even though it did not have
any employees and paid no payroll after June 30, 2001. Accordingly, IC One was
not required to make federal tax deposits for the periods after June 30, 2001.
The Internal Revenue Service has filed tax liens against the Company with
respect to such amounts outstanding. As of June 30, 2006, the aggregate amount
owed by IC One, together with applicable penalties and interest, for the period
from July 1, 1999, through June 30, 2001, was approximately $1,367,000. The
Company is attempting to negotiate with the Internal Revenue Service regarding
payment of the amounts owed by IC One.
The total amount of unpaid employment taxes owed by the Company was
approximately $1,367,000 (including interest and penalties of approximately
$414,000). The Company continues to work with the Internal Revenue Service via
the appeals process to resolve its outstanding liability. The Company does not
believe that the liability will hinder the progress of the Company.

Utah State Tax Commission
-------------------------
The State of Utah has filed tax liens against the Company of approximately
$57,500 as of June 30, 2006, for unpaid employee withholding taxes and related
amounts.

California Employment Development Corporation
---------------------------------------------
The State of California has filed tax liens against the Company for unpaid
employee withholding taxes and related amounts aggregating approximately $75,500
as of June 30, 2006.

Nebraska Department of Revenue
------------------------------
The State of Nebraska has filed tax liens against the Company for unpaid
employee withholding taxes and related amounts aggregating approximately $5,800
as of June 30, 2006. On June 26, 2007, the Company paid its tax obligation to
the State of Nebraska in full.

NOTE 12- SELLING GENERAL AND ADMINISTRATIVE EXPENSES

For the six month period ended June 30, 2006, selling, general and
administrative expenses totaled $400,902.

NOTE 13 - STRATEGIC ALLIANCES

The Company has established strategic alliances to market its products and
services.  (Refer Note 16 - Subsequent Events for licensing agreements
signed with Retention Management Group, Inc. and Phoenix Technology
Holdings, Inc.)

                                      F-60
<PAGE>

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
Condensed Notes to Interim Consolidated Financial Statements
June 30, 2006
(Amounts expressed in US Dollars)
(Unaudited)

NOTE 14 - EMPLOYMENT AGREEMENTS

As of June 30, 2006, the Company was no longer obligated under two employment
agreements with certain officers.


NOTE 15 - DELISTING AND LATE FILINGS

The Company did not file required reports with the SEC on a timely basis and was
delisted from the OTC Bulletin Board (the "OTC"). The Company currently trades
on the Pink Sheets.

The Company is also not current with its corporate income tax return filings.

The Company's financial statements do not reflect a reserve for any potential
fines or penalties that may result from such delisting or late filings.

NOTE 16- SUBSEQUENT EVENTS

A)   Subsequent issue of common shares:

On July 14, 2006, the Company issued 200,000 common shares in exchange for past
services valued at $10,000. The shares were issued at $0.05.

On August 18, 2006, the Company issued 1,000,000 common shares in exchange for
past services valued at $70,000. The shares were issued at $0.07.

On December 15, 2006, the Company issued 3,000,000 common shares in exchange for
services valued at $150,000. The shares were issued at $0.05.

On December 15, 2006, the Company issued 709,687 common shares in exchange for
past services valued at $49,678. The shares were issued at $0.07.

On December 16, 2006, the Company issued 1,153,333 common shares in exchange for
past services valued at $55,418. The shares were issued at $0.05.

On December 20, 2006, the Company issued 540,000, 1,307,080, 4,000,000 and
2,054,079 common shares in exchange for past services valued at $54,000,
$59,584, $280,000 and $102,704, respectively. The shares were issued at $0.10,
$0.05, $0.07 and $0.05, respectively.

On January 30, 2007, the Company issued 5,850,000 common shares for past
services valued at $292,500. The shares were issued at $0.05.

On February 5, 2007, the Company issued 2,123,208 common shares to convert
secured notes valued at $107,333. The shares were issued at $0.05.

On February 8, 2007, the Company issued 615,091 common shares to convert secured
notes valued at $30,793.75. The shares were issued at $0.05.

On February 21, 2007, the Company issued 6,400,000 common shares in exchange for
past services valued at $448,000. The shares were issued at $0.07.

On March 21, 2007, the Company issued 21,000,000 and 800,000 common shares in
exchange for past services valued at $1,260,000 and $56,000, respectively. The
shares were issued at $0.06 and $0.07, respectively.

On March 26, 2007, the Company issued 5,565,000 and 540,000 common shares for
past services valued at $ 278,250.00 and $54,000, respectively. The shares were
issued at $0.05 and $0.10, respectively.

On May 17, 2007, the Company issued 1,500,000 and 2,578,125 common shares for
cash and past services, respectively valued at $75,000.00 and $135,000,
respectively. The shares were issued at $0.05.

                                      F-61
<PAGE>

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
Condensed Notes to Interim Consolidated Financial Statements
June 30, 2006
(Amounts expressed in US Dollars)
(Unaudited)

NOTE 16- SUBSEQUENT EVENTS (Continued)

A)   Subsequent issue of common shares (Continued):

On May 30, 2007, the Company issued 500,000 and 48,521 common shares for cash
and past services, respectively valued at $25,000.00 and $2,426, respectively.
The shares were issued at $0.05.

On June 1, 2007, the Company issued 1,000,000 common shares in exchange for cash
valued at $50,000.00. The shares were issued at $0.05.

On June 11, 2007, the Company issued 400,000 common shares in exchange for cash
valued at $20,000.00. The shares were issued at $0.05.

On June 12, 2007, the Company issued 100,324,827 common shares to convert
secured notes valued at $5,016,241. The shares were issued at $0.05.

On June 13, 2007, the Company issued 1,129,874 common shares for past services
valued at $56,494. The shares were issued at $0.05.

On June 17, 2007, the Company issued 516,048 common shares to convert secured
notes valued at $25,802. The shares were issued at $0.05.

On June 28, 2007, the Company issued 400,300 common shares for past services
valued at $ 20,015. The shares were issued at $0.05.

On July 1, 2007, the Company issued 6,000,000 common shares for past services
valued at $300,000. The shares were issued at $0.05.

On July 9, 2007, the Company issued 306,908 common shares in exchange for cash
valued at $58,000.00. The shares were issued at $0.19.

On July 11, 2007, the Company issued 6,500,000 common shares for past services
valued at $400,646. The shares were issued at $0.06.

On July 20, 2007, the Company issued 8,661,648 common shares for past services
valued at $432,542. The shares were issued at $0.05.

On August 2, 2007, the Company issued 63,742,180 common shares to convert
secured notes valued at 3,187,164. The shares were valued at $0.05.

On September 26, 2007, the Company issued 200,000 common shares in exchange for
cash valued at $25,000. The shares were issued at $0.125.

On September 26, 2007, the Company issued 160,000 common shares in exchange for
cash valued at $25,000. The shares were issued at $0.156.

On October 30, 2007, the Company issued 400,000 common shares in exchange for
cash valued at $40,000. The shares were issued at $0.10.

B)   Options:

On December 15, 2006 and December 16, 2006, the Company cancelled 527,296 and
1,000,000 options, respectively, that had been issued to consulting companies
for services rendered.

On March 9, 2007, the Company cancelled 19,161,876 options that had been issued
to past employees.

On March 26, 2007 and March 28, 2007, the Company cancelled 2,861,958 and
1,038,615 options, respectively, that had been issued to past employees.

On July 16, 2007 the Company cancelled 4,098,333 options that had been issued to
past employees.

                                      F-62
<PAGE>

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
Condensed Notes to Interim Consolidated Financial Statements
June 30, 2006
(Amounts expressed in US Dollars)
(Unaudited)

NOTE 16- SUBSEQUENT EVENTS (Continued)

C) Events

Joseph E. Diamond
-----------------

On February 19, 2004, Joseph E. Diamond was appointed Senior Vice-President of
Administration and Finance. In addition to these duties, on November 12, 2004
Mr. Diamond was elected CEO of the Company. Mr. Diamond was relieved as CEO of
the Company and resigned his previous position on December 16, 2004. On January
26, 2005, Therese Diamond (Mr. Diamond's spouse) filed a complaint against the
Company in the Superior Court of California, County of Los Angeles bearing case
number LC-070391 and on February 4, 2005 Joseph Diamond filed a complaint
against the Company in the Superior Court of California, County of Los Angeles
bearing case number LC-070495. On February 3, 2006, the parties entered into a
Settlement and Release Agreement which resolved the matters and they were
subsequently dismissed by the Courts.

Canadian Patent
---------------

On April 20, 2004, the Canadian Intellectual Property Office granted the Company
patent number 2,182,596.

Retention Management Group, Inc.
--------------------------------

On July 25, 2004, the Company entered into a Licensing Agreement with Retention
Management Group, Inc.(RMG), a Barbados company, in which RMG was granted a
license to market, distribute and sublicense SCTN applications and products. On
March 10, 2006, the Company asserted claims against RMG in case no. A518577
filed in the Eighth Judicial District Court of Nevada, Clark County. On May 31,
2006, the Company and RMG entered into a Settlement Agreement and Release. Under
the terms of this agreement, the Company agreed to pay RMG $ 90,000, and the
Licensing Agreement between the Company and RMG was terminated. Accordingly,
case no. A518577 was dismissed by the Court on June 23, 2006.

Marilyn Grish
-------------

On September 18, 2001, we were served with a summons and complaint for an action
filed by Marilyn Grish in the Third Judicial District Court, Salt Lake County,
Utah, for breach of an independent contractor's contract and seeking unspecified
damages. On October 12, 2001, the Company filed an answer and a counterclaim
against Ms. Grish and intended to defend this matter vigorously. Ms. Grish had
taken no further action in this case and the court indicated that, unless Ms.
Grish certified she was ready for trial by August 4, 2004, the case would be
dismissed. The case was dismissed on August 4, 2004.

David Simon
-----------
Concurrent with Mr. Diamond being relieved as CEO of the Company on December 16,
2004, David Simon assumed the role of CEO.

                                      F-63
<PAGE>

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
Condensed Notes to Interim Consolidated Financial Statements
June 30, 2006
(Amounts expressed in US Dollars)
(Unaudited)

NOTE 16- SUBSEQUENT EVENTS (Continued)

C) Events

Donald W. Mayer
---------------

On June 1, 2005, Donald W. Mayer, an investor in the Company, initiated an
action in The Superior Court of the State of Washington, In and For the County
of King, case no. 05-2-18115-0-SEA in which the Company was named one of several
defendants. On May 13, 2006, the Parties entered into a Settlement Agreement and
Release. Accordingly, the Company was dismissed as a defendant in the case.

Miki Radivojsa
--------------

On August 8, 2005, Miki Radivojsa, CEO of Airos Group, the Company's development
partner, was elected to the Board of Directors. On August 17, 2005, Mr.
Radivojsa was elected Chairman and CEO of the Company, replacing David Simon.

Statute-Barred Accounts Payable
-------------------------------

As of December 31, 2005, certain accounts payable of the Company are
Statute-Barred under Utah law from being collected by creditors. However, under
US GAAP, the Company still records them as a liability. As of December 31, 2005,
the amount is approximately 41,000.

Phoenix Technology Holdings, Inc.
--------------------------------

On April 6, 2006, the Company entered into a License Agreement with Phoenix
Technology Holdings Incorporated, a Turks and Caicos Islands company. Under the
terms of the agreement, the Company granted Phoenix an exclusive license to use
the Company's technology. Also, certain portions of the Company's debt,
including a significant portion of the Senior Secured Convertible Notes, unpaid
amounts owing to Airos Group for services rendered, and accrued salaries were
assumed by Phoenix and ceased accruing additional interest. Further, the
agreement provides for Phoenix to loan monies to the Company, at Phoenix's
discretion, at the rate of one percent (1%) per month, compounded monthly until
paid in full. Any such loan shall be deducted from any payments due by Phoenix
under the agreement. In order to maintain exclusivity, the Agreement calls for
certain performance targets to be met. As of April 18, 2007, these targets have
been met.

Nevada Corporation
------------------

During a special meeting of the Board of Directors on November 30, 2006, the
Board voted to approve a resolution to convert the Company from a Florida
corporation to a Nevada corporation.

Increase in Authorized Shares
-----------------------------

During a special meeting of the Board of Directors on November 30, 2006, the
Board voted to approve a resolution to increase the number of authorized shares
to 500,000,000.

                                      F-64
<PAGE>

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
Condensed Notes to Interim Consolidated Financial Statements
June 30, 2006
(Amounts expressed in US Dollars)
(Unaudited)

NOTE 16- SUBSEQUENT EVENTS (Continued)

C) Events

Change in Auditors
------------------

During a meeting of the Board of Directors on May 18, 2007, the Board voted to
approve a resolution which dismissed Marcum & Kliegman, LLP as the Company's
independent registered public accounting firm and engaged Schwartz Levitsky
Feldman LLP as the Company's independent registered public accounting firm. The
change in independent registered public accounting firms is not the result of
any disagreement with Marcum & Kliegman, LLP.

Elimination of Senior Secured Debt
----------------------------------

In Janaury of 2007, Noteholders which did not elect to assign their debt to
Phoenix Technology Holding, Inc. were given the option to receive their
principal investment plus accrued interest either in the form of cash or shares
in the Company. By June 2007, the last of these repayments were made, and all
Senior Secured Notes have been retired.

Increase in Authorized Shares
-----------------------------

During a special meeting of the Board of Directors on July 20, 2007, the Board
voted to approve a resolution to increase the number of authorized shares to
600,000,000.

Menalco, FZE and The International Investor, K.S.C.C.
-----------------------------------------------------

On August 30, 2007, The International Investor, K.S.C.C., a Kuwait-based
company, initiated an action in the United States District Court for the
District of Nevada, case # 07-CV-1178, in which the Company was named as a
co-defendant, seeking damages in the amount of $100,000,000. The allegations,
which have not been proven in a court of law, include conspiracy in violation of
statues prohibiting racketeering, misappropriation of trade secrets, fraud,
civil conspiracy to defraud, unjust enrichment, breach of contract, breach of
fiduciary trust and unfair competition. The company filed its counter-claim on
September 25, 2007 and plans to vigorously defend and counter sue TII for breach
of contract, fraud, interference with contractual relations, misappropriation of
trade secrets, conversion, unjust enrichment and to seek both compensatory and
punitive damages well in excess of $100 million.

Statute-Barred Accounts Payable
-------------------------------

As of December 31, 2007, certain accounts payable of the Company are
Statute-Barred under Utah law from being collected by creditors. However, under
US GAAP, the Company still records them as a liability. As of December 31, 2007,
the amount is approximately $2,530,000. This amount includes the $41,000
previously Statute-Barred as of December 31, 2006.

                                      F-65
<PAGE>

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.

Interim Consolidated Balance Sheets
As of September 30, 2006 and December 31, 2005
(Amounts expressed in US Dollars)

<TABLE>
<CAPTION>
                                                                      (Unaudited)           (Audited)
                                                                        Sept 30,           December 31,
                                                                         2006                  2005
                                                                          $                     $
<S>                                                                   <C>                    <C>
                                            ASSETS
                                            ------
CURRENT ASSETS:
  Cash                                                                     3,178                 11,542
  Prepaid Expenses and other                                              49,811                 42,499
                                                                     -----------            -----------
      TOTAL CURRENT ASSETS                                                52,989                 54,041
                                                                     -----------            -----------
      TOTAL ASSETS                                                        52,989                 54,041
                                                                     ===========            ===========
               LIABILITIES AND SHAREHOLDERS' DEFICIENCY
               ----------------------------------------
CURRENT LIABILITIES:
  Accounts payable - Vendor                                            2,159,320              1,963,800
  Accounts payable - other                                             1,943,172              7,166,788
  Accounts payable - Phoenix                                           8,387,164
  Accrued wages and payroll taxes (note 11)                            1,545,649              1,499,196
  Deferred compensation                                                6,248,558              4,205,411
  Loans - CEO America                                                    150,000                150,000
  Loans - Phoenix                                                         89,303
  Amounts owed to employees and officers (notes 5 and 6)               1,314,331              1,314,331
  Short term loans                                                           500                    500
  Convertible notes payable (including amounts owed to officers
  $1,220,462 prior year $1,220,462)                                      237,000              2,991,316
                                                                     -----------            -----------
      TOTAL CURRENT LIABILITIES                                       22,074,997             19,291,342
                                                                     -----------            -----------


SHAREHOLDERS' DEFICIENCY (note 7):
  Common stock - $.001 par value; 200,000,000 shares
    authorized; 196,474,003 shares issued and outstanding                196,474                193,274
                (2005: 193,274,003)
  Additional paid-in capital                                          60,183,304             60,006,504
  Common stock subscription receivable                                         -               (175,000)
  Common stock subscribed                                                      -                200,000
  Deficit accumulated                                                (82,401,786)           (79,462,079)
                                                                     -----------            -----------
      TOTAL SHAREHOLDERS' DEFICIENCY                                 (22,022,008)           (19,237,301)
                                                                     -----------            -----------
      TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIENCY                      48,269                 54,041
                                                                     ===========            ===========

                       See condensed notes to interim unaudited consolidated financial statements.
</TABLE>

                                      F-66
<PAGE>

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.

Interim Consolidated Statements of Operations and Comprehensive Loss
For the nine month period Ended September 30, 2006 and 2005
(Amounts expressed in US Dollars)
(Unaudited)

<TABLE>
<CAPTION>

                                                                   For the Quarter                    For the Nine Months
                                                                    Ended Sept 30,                       Ended Sept 30,
                                                           -------------------------------     -------------------------------
                                                                 2006              2005              2006             2005
                                                                 ----              ----              ----             ----
                                                                  $                 $                 $                $
<S>                                                        <C>               <C>               <C>               <C>
REVENUE:                                                          14,620                 -            14,620                 -
                                                           -------------     -------------     -------------     -------------
EXPENSES:
  Selling, general and administrative (note 12)                   98,222           585,048           499,124         1,961,414
  Depreciation and amortization                                        -                 -                 -                 -
  Write-off of common stock subscription
    receivable                                                         -                 -                 -                 -
  Loss on impairment of intangible assets                              -                 -                 -                 -
  Interest expense                                                86,925         1,274,829         2,455,202         3,259,623
                                                           -------------     -------------     -------------     -------------
      TOTAL EXPENSES                                             185,147         1,859,877         2,954,326         5,221,037
                                                           -------------     -------------     -------------     -------------
LOSS BEFORE EXTRAORDINARY ITEM                                  (170,527)       (1,859,877)       (2,939,707)       (5,221,037)

EXTRAORDINARY ITEM - LOSS ON
  EXTINGUISHMENT OF DEBT                                               -                 -                 -                 -
                                                           -------------     -------------     -------------     -------------
NET LOSS                                                   $    (170,527)    $  (1,859,877)    $  (2,939,707)    $  (5,221,037)
                                                           =============     =============     =============     =============
NET LOSS PER SHARE, BASIC AND DILUTED                      $       (0.00)    $       (0.01)    $       (0.02)    $       (0.03)

                                                           =============     =============     =============     =============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
  OUTSTANDING, BASIC AND DILUTED                             195,732,699       192,707,375       195,002,679       177,826,014
                                                           =============     =============     =============     =============

COMPREHENSIVE LOSS
The components of comprehensive loss are as follows:

Net loss                                                   $    (170,527)    $  (1,859,877)
Other comprehensive income (loss) foreign currency
Translation                                                            -                 -
Comprehensive Loss                                         $    (170,527)    $  (1,859,877)

                       See condensed notes to interim unaudited consolidated financial statements.
</TABLE>

                                      F-67
<PAGE>

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.

Interim Consolidated Statements of Changes in Stockholders' Deficiency
For the Periods Ended December 31, 2005 and September 30, 2006
(Amounts expressed in US dollars)

<TABLE>
<CAPTION>
                                                                                 Common    Common
                                                Common Stock    Additional        Stock     Stock Deferred
                                       Number of                   Paid-in Subscription     to be  Compen-      Deficit
                                          Shares      Amount       Capital   Receivable    Issued   sation  Accumulated       Total
<S>                                 <C>             <C>        <C>             <C>       <C>            <C><C>          <C>
     BALANCE,  December  31, 2004    165,714,436     165,714    57,616,113     (250,000)  500,000        - (71,820,010) (13,788,183)
     (Audited)

     Issuance of stock for services
     rendered:
     ($0.05 per share, February)         250,000         250        12,250                                                   12,500
     ($0.05 per share, May)                1,050           1            52                                                       53
     ($0.048 per share, June)            100,000         100         4,650                                                    4,750
     $0.06 per share, December            88,669          89         5,231                                                    5,320
     Issue of stock in lieu of
     interest payments:
     (0.082 per share, May)           22,934,690      22,935     1,861,894                                                1,884,829
     Issue of stock for cash:
     ($0.07 per share, March)             70,355          70         4,855                                                    4,925
     ($0.068 per share, March)           369,550         370        24,590                                                   24,960
     ($0.07 per share, April)            100,000         100         6,900                                                    7,000
     ($0.09 per share, April)            100,000         100         8,900                                                    9,000
     ($0.05 per share, May)              248,000         248        12,152                                                   12,400
     ($0.056 per share, May)              23,571          23         1,297                                                    1,320
     ($0.07 per share, May)              142,857         143         9,857                                                   10,000
     ($0.08 per share, May)              125,000         125         9,875                                                   10,000
     ($0.09 per share, May)               47,968          48         4,469                                                    4,317
     ($0.123 per share, May)             150,000         150        18,225                                                   18,375
     ($0.30 per share, May)            1,000,000       1,000       299,000               (300,000)                                -
     ($0.068 per share, May)              13,450          13           895                                                      908
     ($0.08 per share, June)              62,500          63         4,937                                                    5,000
     ($0.05 per share, June)             800,000         800        39,200                                                   40,000
     ($0.05 per share, June)             100,000         100         4,900                                                    5,000
     ($0.09 per share, June)              50,000          50         4,450                                                    4,500
     ($0.05 per share, July)             200,000         200         9,800                                                   10,000
     ($0.05 per share, July)             200,000         200         9,800                                                   10,000
     ($0.06 per share, September)         58,413          58         3,447                                                    3,505
     ($0.05 per share, October)          323,494         324        15,851                                                   16,175
     Common stock subscription                                                   75,000                                      75,000
     received
     Stock option compensation                                      13,114                                                   13,114
     Net Loss                                                                                               (7,642,069)  (7,642,069)

     BALANCE, December 31, 2005      193,274,003     193,274    60,006,504     (175,000)  200,000        - (79,462,079) (19,237,301)
     (Audited)
     Issuance of stock for services
     rendered:
     ($0.05 per share, February)       2,000,000       2,000        98,000                                                  100,000
     ($0.05 per share, July)             200,000         200         9,800                                                   10,000
     ($0.07 per share, August)         1,000,000       1,000        69,000                                                   70,000
     Adjustment of stock to be issued                                                    (200,000)                         (200,000)
     with payables to Phoenix
     Common stock subscription                                                  175,000                                     175,000
     received
     Net Loss                                                                                               (2,939,707)  (2,939,707)
     BALANCE, September 30, 2006     196,474,003     196,474    60,183,304            -         -        - (82,401,786) (22,022,008)
     (Unaudited)

                       See condensed notes to interim unaudited consolidated financial statements.
</TABLE>

                                      F-68
<PAGE>

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
Interim Statement of Cash Flows
Nine months Ended September 30, 2006 and 2005
(Amounts expressed in US Dollars)
(Unaudited)

<TABLE>
<CAPTION>
                                                                      Nine Months Ended
                                                                        September 30,
                                                            --------------------------------------

                                                                2006                      2005
                                                            --------------------------------------
                                                                 $                         $
<S>                                                          <C>                       <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss                                                     (2,939,707)               (5,221,037)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization                                         -                         -
Stock option compensation                                             -                    13,114
Adjustment for variable accounting of options
Amortization of deferred option compensation                          -                         -
Common stock issued for services
and compensation                                                180,000                    17,303
Common stock issued for interest expense                              -                 1,884,829
Common stock issued to settle CardOne
Claims
Common stock issued for directors' fees
Write-off of common stock subscription
receivable                                                            -                         -
(Gain) loss on extinguishment of debt                                 -                         -
Loss on impairment of assets                                          -                         -
Changes in current assets and liabilities:
Prepaid Expenses and other                                       (7,312)                   (9,674)
Accounts payable and accrued expenses                         2,407,192                 2,891,902

                                                            --------------------------------------
NET CASH USED IN OPERATING ACTIVITIES                          (359,827)                 (423,563)
                                                            --------------------------------------

CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment                                 -                         -
Acquisition of patents                                                -                         -
Investment in real estate joint venture                               -                         -

                                                            --------------------------------------
NET CASH USED IN INVESTING ACTIVITIES                                 -                         -
                                                            --------------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from (repayments of) loans payable - shareholders            -                  (181,210)
Loans - Phoenix                                                  89,303                         -
Proceeds from notes payable                                      82,440                   200,000
Proceeds from common stock subscription
received                                                        175,000                    75,000
Sales of common stock                                                 -                   181,210
Amounts owed to employees and officers                                -                   158,559

                                                            --------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES                       346,743                   433,559
                                                            --------------------------------------

NET INCREASE (DECREASE) IN CASH                                 (13,084)                    9,996

CASH AT BEGINNING OF PERIOD                                      11,542                    14,086

                                                            --------------------------------------
CASH AT END OF PERIOD                                            (1,542)                   24,082
                                                            --------------------------------------


                       See condensed notes to interim unaudited consolidated financial statements.
</TABLE>


                                      F-69
<PAGE>

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
Condensed Notes to Interim Consolidated Financial Statements
September 30, 2006
(Amounts expressed in US Dollars)
(Unaudited)

NOTE 1- THE COMPANY

Schimatic Cash Transactions Network.com, Inc. (the Company) is in the business
of research, development and integration of proprietary processes and software
technologies for the electronic payment industry, primarily involving consumer
loyalty programs. Schimatic Cash Transactions Network.com, Inc. operates
principally through its wholly-owned subsidiary, Smart Chip Technologies, LLC.
The Company licenses, markets and develops smart-card loyalty products through
its subsidiary, Smart Chip Technologies, LLC under the "Smart Chip" name.

The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information. Accordingly, they do not include all of the information
and footnotes required by U.S. generally accepted accounting principles for
complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary to make the
financial statements not misleading have been included. Operating results for
the nine months ended September 30, 2006, are not indicative of the results that
may be expected for the year ended December 31, 2006. The unaudited condensed
consolidated financial statements should be read in conjunction with the audited
consolidated financial statements for the year ended December 31, 2005.

The Company was previously in the development stage and commenced operations in
its planned line of business during the end of first quarter of 2006. On April
6, 2006, the Company entered into a License Agreement with Phoenix Technology
Holdings Incorporated, a Turks and Caicos Islands company. Under the terms of
the agreement, the Company granted Phoenix an exclusive license to use the
Company's technology.

NOTE 2- GOING CONCERN


The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company and has incurred a net
loss of $82,401,786 since inception. Additionally, the Company had a net working
capital deficiency Of $22,022,008 and a total shareholders' deficiency of
$22,022,008 at September 30, 2006. These conditions raise substantial doubt
about the Company's ability to continue as a going concern. The consolidated
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.

Management expects to incur additional losses for the foreseeable future and
recognizes the need to raise capital through the future issuance of stock and/or
debentures in order to develop a viable business. The Company continues to
implement cost-cutting measures. It may also rely increasingly on strategic
alliances with others who will assume responsibility for financing specific
required development tasks, thus, reducing the Company's financial requirements
for the exploitation of its intellectual properties.

As of September 30, 2006, current liabilities are substantially past due. In the
event demands are made upon the Company which cannot be met and the associated
creditors successfully pursue action against the Company, the Company could be
exposed to additional costs of legal fees, interest or penalties, and may be
forced to take other defensive actions, including filing for bankruptcy.

The Company has been able to finance its operations primarily by raising capital
through the private placement of common stock and the issuance of convertible
debt.

NOTE-3 PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiaries, IC One and Smart Chip Technologies, LLC. All
significant inter-company balances and transactions have been eliminated in
consolidation.

                                      F-70
<PAGE>

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
Condensed Notes to Interim Consolidated Financial Statements
September 30, 2006
(Amounts expressed in US Dollars)
(Unaudited)

NOTE 4-STOCK BASED COMPENSATION

The Company follows Statement of Financial Accounting Standards ("SFAS") No.
123, "Accounting for Stock-Based Compensation." SFAS No. 123 establishes
accounting and reporting standards for stock-based employee compensation plans.
This statement allows companies to choose between the fair value based method of
accounting as defined in this statement and the intrinsic value based method of
accounting as prescribed by Accounting Principles Board Opinion No. 25 ("APB
25"), "Accounting for Stock Issued to Employees."

The Company has elected to continue to follow the accounting guidance provided
by APB 25, as permitted for stock-based compensation relative to the Company's
employees. Stock and options granted to other parties in connection with
providing goods and services to the Company are accounted for under the fair
value method as prescribed by SFAS 123.

In December 2002, the Financial Accounting Standard Board ("FASB") issued SFAS
No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure -
an Amendment of SFAS Statement No. 123". This statement amends SFAS No. 123 to
provide alternative methods of transition for a voluntary change to the fair
value-based method of accounting for stock-based employee compensation. In
addition, SFAS No. 148 amends the disclosure requirements of SFAS No. 123 to
require prominent disclosures in both annual and interim financial statements
about the method of accounting for stock-based employee compensation and the
effect of the method used on reported results. SFAS No. 148 also requires that
those effects be disclosed more prominently by specifying the form, content, and
location of those disclosures. We have adopted the increased disclosure
requirements of SFAS No. 148 for the nine month period ended September 30, 2006.

                                      F-71
<PAGE>

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
Condensed Notes to Interim Consolidated Financial Statements
September 30, 2006
(Amounts expressed in US Dollars)
(Unaudited)

NOTE 4- STOCK BASED COMPENSATION (Continued)

The additional disclosures required by SFAS No. 148 are as follows:

<TABLE>
<CAPTION>
                                                                 For the Three Months                For the Nine Months
                                                                    Ended Sept 30,                     Ended Sept 30,
                                                                2006              2005              2006            2005
                                                                ----              ----              ----            ----
<S>                                                         <C>             <C>               <C>               <C>
Net loss attributable to common stockholders,
  as reported ....................................          $  (170,527)    $  (1,859,877)    $  (2,939,707)    $(5,221,037)
Add:  Stock-based employee compensation
  expense included in reported net income,
  net of related tax effect ......................                    -                 -                 -          13,114
Less:  Total stock-based compensation
  expense determined under the Black-Scholes fair value
  based method of all awards* ....................                    -                 -                 -         (13,114)
Pro forma net loss attributable to
  common stockholders ............................          $  (170,527)    $  (1,859,877)    $  (2,939,707)    $(5,221,037)
                                                            ===========     =============     =============     ===========
Basic and diluted net loss attributable to
  common stockholders
As reported ......................................          $     (0.00)    $       (0.01)    $      (0.02)     $     (0.03)
                                                            ===========     =============     =============     ===========



Pro forma ........................................          $     (0.00)    $       (0.01)    $       (0.02)    $     (0.03)

No stock options were granted by the Company for the nine month period ended September 30, 2006.
</TABLE>

Loss Per Share

Basic and diluted loss per share has been calculated based upon the weighted
average number of common shares outstanding and excludes any potentially
dilutive securities. Stock options and convertible notes have been excluded as
common stock equivalents in the computation of diluted loss per share since the
results would be anti-dilutive. Obligations to issue additional shares, which
could potentially dilute earnings per share, were approximately 248,900,000 at
September 30, 2006.

                                      F-72
<PAGE>

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
Condensed Notes to Interim Consolidated Financial Statements
September 30, 2006
(Amounts expressed in US Dollars)
(Unaudited)

NOTE 5 - AMOUNTS OWED TO OFFICERS

Loans payable to officers are non-interest bearing advances made on behalf of
the Company that are unsecured and payable on demand.

NOTE 6 - AMOUNTS OWED TO EMPLOYEES

Amounts owed to employees are non-interest bearing advances made on behalf of
the Company that are unsecured and payable on demand.

NOTE 7 - SHAREHOLDERS' DEFICIENCY

Equity Transactions
-------------------

Nine months ended September 30, 2006
------------------------------------

On February 13, 2006, the Company issued 2,000,000 common shares in exchange for
past services valued at $100,000. The shares were issued at $0.05.

On July 14, 2006, the Company issued 200,000 common shares in exchange for past
services valued at $10,000. The shares were issued at $0.05.

On August 18, 2006, the Company issued 1,000,000 common shares in exchange for
past services valued at $70,000. The shares were issued at $0.07.

Nine months ended September 30, 2005
------------------------------------

On February 2, 2005 the Company issued 250,000 common shares in exchange for
services valued at $12,500. The shares were issued at $0.05.

On March 29, 2005 the Company issued 70,355 common shares in exchange for cash.
The shares were issued at $0.07.

On March 29, 2005 the Company issued 369,550 common shares in exchange for cash.
The shares were issued at $0.068.

On April 8, 2005, the Company issued 100,000 common shares in exchange for cash.
The shares were issued at $0.07

On April 28, 2005 the Company issued 100,000 common shares in exchange for cash.
The shares were issued at $0.09.

On May 4, 2005 the Company issued 248,000, 23,571, 142,857, 125,000, 47,968,
150,000 and 1,000,000 common shares in exchange for cash. The shares were issued
at $0.05, $0.056, $0.07, $0.08, $0.09, $0.123 and $0.30 respectively.

On May 4, 2005 the Company issued 1,050 common shares in exchange for past
services valued at $53. The shares were issued at $0.05.

On May 4, 2005, the Company issued 22,934,690 common shares for interest
payments of $1,884,829. The shares were issued at $0.082.

On May 4, 2005, the Company issued 13,450 common shares in exchange for cash.
The shares were issued at $0.068.

On June 2, 2005, the Company issued 62,500 common shares in exchange for cash.
The shares were issued at $0.08.

On June 6, 2005, the Company issued 800,000 common shares in exchange for cash.
The shares were issued at $0.05.

                                      F-73
<PAGE>


SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
Condensed Notes to Interim Consolidated Financial Statements
September 30, 2006
(Amounts expressed in US Dollars)
(Unaudited)

NOTE 7 - SHAREHOLDERS' DEFICIENCY (Continued)

Equity Transactions (Continued)
-------------------------------

On June 15, 2005, the Company issued 100,000 and 50,000 common shares in
exchange for cash. The shares were issued at $0.05 and $0.09, respectively.

On June 15, 2005, the Company issued 100,000 common shares in exchange for
services valued at $4,750. The shares were issued at $0.048.

On July 9, 2005, the Company issued 200,000 common shares in exchange for cash.
The shares were issued at $0.05.

On July 21, 2005, the Company issued 200,000 common shares in exchange for cash.
The shares were valued at $0.05.

On September 14, 2005, the Company issued 58,413 common shares in exchange for
cash. The shares were valued at $ $0.06.

NOTE 8- AUTHORIZED SHARES

As at September 30, 2006, the Company is authorized to issue 200,000,000 shares
of common stock. At September 30, 2006, the Company had common stock shares
outstanding of 196,474,003 and an additional 248,889,339 shares issuable upon
the conversion of stock options, convertible debt and deferred compensation. As
a result, the Company would exceed the authorized amount by 245,363,342. The
Company would be required to seek shareholder approval to increase the shares
authorized limits in order to satisfy its potential conversion of dilutive
securities.

As an alternative, the Company may purchase shares of common stock in the open
market, or seek to repay the indebtedness in lieu of conversion.

Effective November 29, 2006, the Board of Directors of the Company approved
amendments to the Articles of Incorporation to adopt an increase in the capital
stock of the Company's common stock from 200,000,000 to 500,000,000 shares.
Furthermore, during a special meeting of the Board of Directors on July 20,
2007, the Board voted to approve a resolution to increase the number of
authorized shares to 600,000,000. (Refer Note 16 - Subsequent Events).

NOTE 9 - STOCK OPTION PLAN

On December 8, 1999, the Company adopted an Employee Stock Option Plan (the
"Plan"). The Board of Directors administers the Plan. Under the Plan, the
Company may grant stock options, which may be incentive stock options ("ISO's")
as defined in the Internal Revenue Code, and stock awards or options which do
not qualify as ISO's to employees and officers. All employees of the Company are
eligible to participate in the Plan.

No stock options were granted by the Company for the nine month period ended
September 30, 2006.

                                      F-74
<PAGE>

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
Condensed Notes to Interim Consolidated Financial Statements
September 30, 2006
(Amounts expressed in US Dollars)
(Unaudited)

                                                        Stock Options
                                                ---------------------------
                                                               Weighted
                                                               Average
                                                               Exercise
                                                  Shares         Price
                                                  ------         -----

         Outstanding at December 31, 2004        48,425,299      $0.11
             Granted                                400,000      $0.06
           Exercised                                      -          -
           Cancelled                             (7,142,470)     $0.17
         Outstanding at December 31, 2005        41,682,829      $0.11
             Granted                                      -          -
           Exercised                                      -          -
           Cancelled                             (3,239,000)     $0.16
          Outstanding at September 30, 2006      38,443,829      $0.10


The following table summarizes the Company's stock options outstanding and
exercisable at September 30, 2006:

<TABLE>
<CAPTION>
                                      Options Outstanding                            Options Exercisable
                            ----------------------------------------           ----------------------------
                                             Weighted
                                              Average      Weighted                               Weighted
                                             Remaining     Average                                Average
Range of Exercise               Number      Contractual    Exercise                Number         Exercise
     Prices                  Outstanding       Life         Price                Exercisable        Price
     ------                  -----------       ----         -----                -----------        -----
                            (In Thousands)  (In Years)                         (In Thousands)
<S>                            <C>             <C>          <C>                    <C>              <C>
$0.00 - $0.23                   36,130          2.39        $0.08                  36,130           $0.08
$0.48 - $0.49                    2,314          3.88        $0.48                   2,314           $0.48
$0.64 - $0.80                        -             -            -                       -               -
                                ------                                             ------
                                38,444                                             38,444
                                ======                                             ======
</TABLE>


                                      F-75
<PAGE>

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.

Condensed Notes to Interim Consolidated Financial Statements
September 30, 2006
(Amounts expressed in US Dollars)
(Unaudited)

NOTE 10 - LITIGATION AND SETTLEMENT OF CLAIMS

The Company is currently a defendant or co-defendant in various legal actions
arising in the ordinary course of business. There can be no assurance, the
Company will be successful in defending these actions.

Quint Star Management , Inc. vs. IC One, Inc., Arthur D. Bennet, and
Peter Bennee
--------------------------------------------------------------------------------

On August 30, 1999, Quint Star Management, Inc. initiated an action in the Third
Judicial District Court, Salt Lake City, Utah, against IC One, Inc., Arthur D.
Bennett and Peter J. Bennee, for unpaid rent and related charges, plus costs and
attorney's fees, under the lease on our former principal executive offices in
Salt Lake City, Utah. Following the entry of judgment against IC One for $50,541
on December 7, 2000, IC One reached a payment arrangement under which we are
obligated to pay $5,000 per month, plus ongoing obligations under the lease. The
settlement obligation is guaranteed by the Company, and is secured by the
equipment, inventory, accounts and chattel paper of both the parent and IC One.
The Company is in default in its obligations under this agreement. Upon the
expiration of the lease, an amended judgment of $222,765 (a provision has been
provided for in the financial statements at December 31, 2003) was entered to
reflect the additional unpaid rent, interest and attorney's fees.

Grish vs. Schimatic Cash Transactions Network.com a/b/a Smart Chip Technologies,
Inc. f/k/a IC One, Inc.
--------------------------------------------------------------------------------

On September 18, 2001, we were served with a summons and complaint for an action
filed by Marilyn Grish in the Third Judicial District Court, Salt Lake County,
Utah, for breach of an independent contractor's contract and seeking unspecified
damages. On October 12, 2001, the Company filed an answer and a counterclaim
against Ms. Grish and intended to defend this matter vigorously. Ms. Grish had
taken no further action in this case and the court indicated that, unless Ms.
Grish certified she was ready for trial by August 4, 2004, the case would be
dismissed. Accordingly, the case was dismissed on August 4, 2004.


Eximsoft International, LLC and Eximsoft Technologies Pvt. Ltd.
---------------------------------------------------------------

In October 2001, IC One, Inc. entered into a settlement agreement with Eximsoft
International, LLC and Eximsoft Technologies Pvt. Ltd. to resolve claims by the
Eximsoft entities that IC One had contracted and received computer software
development and programming services and had failed to pay as agreed. IC One
agreed to pay $30,000 and provided Eximsoft with a confession of judgment that
could be filed in the Third District Court in Salt Lake City, Utah, in the event
that IC One failed to make the agreed payments. IC One paid the agreed $30,000
during 2002 and the original confession of judgment was returned by Eximsoft to
us in November 2003.

Sandra Lueck vs. Schimatic Cash Transactions Network.com, Inc. d/b/a Smart Chip
Technologies, Smart Chip Technologies L.L.C., and IC One, Inc.
--------------------------------------------------------------------------------

On August 16, 2002, Sandra Lueck initiated an action against the Company for
unpaid wages, interest, costs and attorney's fees. On October 31, 2002, judgment
was entered against the Company in the amounts of $11,400 for unpaid wages,
$3,300 as a continuation of wages, court costs and attorney's fees of $1,753,
and interest from the date of judgment until paid in full. On or about June 30,
2003, the Company entered into a release and settlement agreement compromising,
resolving, and settling all matters and issues between the parties. The Company
paid a total of $18,750 and a satisfaction of judgment was filed with the Third
Judicial District Court on October 14, 2003.

                                      F-76
<PAGE>

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
Condensed Notes to Interim Consolidated Financial Statements
September 30, 2006
(Amounts expressed in US Dollars)
(Unaudited)

NOTE 10 - LITIGATION AND SETTLEMENT OF CLAIMS (Continued)

Greg Morrison vs. Smart Chip Technologies, L.L.C.
------------------------------------------------

On April 4, 2003, Greg Morrison initiated an action against the Company in the
Third Judicial District Court for Salt Lake County, Utah for unpaid wages in the
amount of $7,948, unpaid reimbursement expenses totaling $11,868, interest on
those amounts from the date of termination, court costs and attorney's fees. The
Company agreed to pay Mr. Morrison a total of $7,500 to resolve this matter. The
Company's final payment under this agreement was made prior to July 31, 2004,
and this matter has be dismissed.

PR Newswire Association, Inc. vs. Smart Chip Technologies, L.L.C.
-----------------------------------------------------------------

On May 21, 2003, PR Newswire Association, Inc. initiated an action against the
Company in the Superior Court of New Jersey, Hudson County for unpaid amounts
owed for services provided in the amount of approximately $4,000. On July 18,
2003, a judgment was entered against the Company (a provision of $4,000 has been
provided for in the financial statements at December 31, 2004). The Company is
currently in default of the judgment and would be liable to pay interest from
the date of judgment until paid in full.

James E. Biorge
---------------

The Company is reviewing, with the advice of legal counsel, whether the Company
has legal claims that may be asserted against James E. Biorge, a founder and
officer and director of IC One at the time it was acquired in September 1999. At
the time of such acquisition, the Company set aside in a special trust
approximately 7.8 million shares of common stock to be used to resolve claims
that may be asserted against IC One by persons claiming an interest in or claim
against IC One as a successor-in-interest to the assets, operations and
liabilities of CardOne, which Mr. Biorge had also been instrumental in founding
and which had been involved in the initial development of the intellectual
properties subsequently acquired by IC One before IC One was acquired by us. The
Company believes that all or a portion of the 7.8 million shares then reserved
to satisfy such claims, all of which have subsequently been used for such
purpose, should properly be the responsibility of Mr. Biorge. On the basis of
our previous assertion that the Company may make such a claim against Mr. Biorge
and perhaps other reasons not known to the Company, Mr. Biorge has refused to
accept certificates for 11,503,138 shares of Company's common stock to which he
would have been entitled to receive in exchange for his stock in IC One.

On October 2, 2007, James Biorge and Jami Biorge (Mr. Biorge's daughter)
initiated an action against the company in the United States District Court for
the District of Utah (Case # 07cv00129), seeking the above-noted shares which
were previously cancelled by the Company, as well as attorney's fees and
punitive damages. The Company plans to vigorously defend itself and believes
that there is a reasonable possibility that the outcome of any claim would not
be unfavorable to the Company. Additionally, the Company may pursue claims
against Mr. Biorge and seek damages in addition to cancellation of the shares.

CardOne Development Company and CardOne Corporation
---------------------------------------------------

As of July 31, 2002, Messrs. Hauge and Hipsley ceased their employment with us
and signed agreements to accept their compensation on a deferred basis. In
December 2002, they signed additional agreements releasing all rights to any
claims based on the CardOne entities, terminating their association with the
Company, and agreed to accept options to purchase 725,000 shares of common stock
each. In addition, the Company agreed to issue to Mr. Hauge 700,000 shares of
our stock for work performed through December 2002.

                                      F-77
<PAGE>


SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
Condensed Notes to Interim Consolidated Financial Statements
September 30, 2006
(Amounts expressed in US Dollars)
(Unaudited)

NOTE 10 - LITIGATION AND SETTLEMENT OF CLAIMS (Continued)

Verlo Howell
------------

On November 30, 2005, Verlo Howell initiated an action against the Company in
the Third Judicial District Court for Salt Lake County, Utah, civil no.
05-092-1235 for unpaid wages, interest and attorney costs. Mr. Howell was hired
as the Company's Executive Vice-President of Sales and Marketing pursuant to an
Employment Agreement dated May 17, 2005. On September 8, 2005, Mr. Howell's
employment was terminated with cause by the Company. We intend to assert and
pursue offsetting defenses and believe that there is a reasonable possibility
that the outcome of any claim, if asserted, would not be unfavorable to us.

Other Creditors
---------------
From time to time, the Company is threatened by creditors to initiate litigation
to collect amounts owed by the Company and reported on its financial statements.
In cases in which litigation is threatened or initiated, the Company seeks to
negotiate a settlement or forbearance agreement.

NOTE 11 - PAYROLL TAXES

Internal Revenue Service
------------------------
The Company's wholly owned subsidiary, IC One, Inc., has received notification
from the Internal Revenue Service that IC One has an unpaid liability for
employment taxes and amounts withheld from employees' wages for the periods from
July 1, 1999, through September 30, 2001. IC One erroneously filed an employer
tax report for the quarter ended September 30, 2001, even though it did not have
any employees and paid no payroll after June 30, 2001. Accordingly, IC One was
not required to make federal tax deposits for the periods after June 30, 2001.
The Internal Revenue Service has filed tax liens against the Company with
respect to such amounts outstanding. As of September 30, 2006, the aggregate
amount owed by IC One, together with applicable penalties and interest, for the
period from July 1, 1999, through June 30, 2001, was approximately $1,380,000.
The Company is attempting to negotiate with the Internal Revenue Service
regarding payment of the amounts owed by IC One. The total amount of unpaid
employment taxes owed by the Company was approximately $1,380,000 (including
interest and penalties of approximately $431,000). The Company continues to work
with the Internal Revenue Service via the appeals process to resolve its
outstanding liability. The Company does not believe that the liability will
hinder the progress of the Company.

Utah State Tax Commission
-------------------------
The State of Utah has filed tax liens against the Company of approximately
$58,000 as of September 30, 2006, for unpaid employee withholding taxes and
related amounts.

California Employment Development Corporation
---------------------------------------------
The State of California has filed tax liens against the Company for unpaid
employee withholding taxes and related amounts aggregating approximately $77,000
as of September 30, 2006.

Nebraska Department of Revenue
------------------------------
The State of Nebraska has filed tax liens against the Company for unpaid
employee withholding taxes and related amounts aggregating approximately $5,800
as of September 30, 2006. On June 26, 2007, the Company paid its tax obligation
to the State of Nebraska in full.

                                      F-78
<PAGE>

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
Condensed Notes to Interim Consolidated Financial Statements
September 30, 2006
(Amounts expressed in US Dollars)
(Unaudited)

NOTE 12- SELLING GENERAL AND ADMINISTRATIVE EXPENSES

For the nine month period ended September 30, 2006, selling, general and
administrative expenses totaled $585,048.

NOTE 13 - STRATEGIC ALLIANCES

The Company has established strategic alliances to market its products and
services.  (Refer Note 16 - Subsequent Events for licensing agreements
signed with Retention Management Group, Inc. and Phoenix Technology
Holdings, Inc.)

NOTE 14 - EMPLOYMENT AGREEMENTS

As of June 30, 2006, the Company was no longer obligated under two employment
agreements with certain officers.

NOTE 15 - DELISTING AND LATE FILINGS

The Company did not file required reports with the SEC on a timely basis and was
delisted from the OTC Bulletin Board (the "OTC"). The Company currently trades
on the Pink Sheets.

The Company is also not current with its corporate income tax return filings.

The Company's financial statements do not reflect a reserve for any potential
fines or penalties that may result from such delisting or late filings.

NOTE 16- SUBSEQUENT EVENTS

A)   Subsequent issue of common shares:

On December 15, 2006, the Company issued 3,000,000 common shares in exchange for
services valued at $150,000. The shares were issued at $0.05.

On December 15, 2006, the Company issued 709,687 common shares in exchange for
past services valued at $49,678. The shares were issued at $0.07.

On December 16, 2006, the Company issued 1,153,333 common shares in exchange for
past services valued at $55,418. The shares were issued at $0.05.

On December 20, 2006, the Company issued 540,000, 1,307,080, 4,000,000 and
2,054,079 common shares in exchange for past services valued at $54,000,
$59,584, $280,000 and $102,704, respectively. The shares were issued at $0.10,
$0.05, $0.07 and $0.05, respectively.

On January 30, 2007, the Company issued 5,850,000 common shares for past
services valued at $292,500. The shares were issued at $0.05.

On February 5, 2007, the Company issued 2,123,208 common shares to convert
secured notes valued at $107,333. The shares were issued at $0.05.

On February 8, 2007, the Company issued 615,091 common shares to convert secured
notes valued at $30,793.75. The shares were issued at $0.05.

On February 21, 2007, the Company issued 6,400,000 common shares in exchange for
past services valued at $448,000. The shares were issued at $0.07.

On March 21, 2007, the Company issued 21,000,000 and 800,000 common shares in
exchange for past services valued at $1,260,000 and $56,000, respectively. The
shares were issued at $0.06 and $0.07, respectively.

                                      F-79
<PAGE>

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
Condensed Notes to Interim Consolidated Financial Statements
September 30, 2006
(Amounts expressed in US Dollars)
(Unaudited)

NOTE 16- SUBSEQUENT EVENTS (Continued)

A)   Subsequent issue of common shares (Continued):

On March 26, 2007, the Company issued 5,565,000 and 540,000 common shares for
past services valued at $ 278,250.00 and $54,000, respectively. The shares were
issued at $0.05 and $0.10, respectively.

On May 17, 2007, the Company issued 1,500,000 and 2,578,125 common shares for
cash and past services, respectively valued at $75,000.00 and $135,000,
respectively. The shares were issued at $0.05.

On May 30, 2007, the Company issued 500,000 and 48,521 common shares for cash
and past services, respectively valued at $25,000.00 and $2,426, respectively.
The shares were issued at $0.05.

On June 1, 2007, the Company issued 1,000,000 common shares in exchange for cash
valued at $50,000.00. The shares were issued at $0.05.

On June 11, 2007, the Company issued 400,000 common shares in exchange for cash
valued at $20,000.00. The shares were issued at $0.05.

On June 12, 2007, the Company issued 100,324,827 common shares to convert
secured notes valued at $5,016,241. The shares were issued at $0.05.

On June 13, 2007, the Company issued 1,129,874 common shares for past services
valued at $56,494. The shares were issued at $0.05.

On June 17, 2007, the Company issued 516,048 common shares to convert secured
notes valued at $25,802. The shares were issued at $0.05.

On June 28, 2007, the Company issued 400,300 common shares for past services
valued at $ 20,015. The shares were issued at $0.05.

On July 1, 2007, the Company issued 6,000,000 common shares for past services
valued at $300,000. The shares were issued at $0.05.

On July 9, 2007, the Company issued 306,908 common shares in exchange for cash
valued at $58,000.00. The shares were issued at $0.19.

On July 11, 2007, the Company issued 6,500,000 common shares for past services
valued at $400,646. The shares were issued at $0.06.

On July 20, 2007, the Company issued 8,661,648 common shares for past services
valued at $432,542. The shares were issued at $0.05.

On August 2, 2007, the Company issued 63,742,180 common shares to convert
secured notes valued at 3,187,164. The shares were valued at $0.05.

On September 26, 2007, the Company issued 200,000 common shares in exchange for
cash valued at $25,000. The shares were issued at $0.125.

On September 26, 2007, the Company issued 160,000 common shares in exchange for
cash valued at $25,000. The shares were issued at $0.156.

On October 30, 2007, the Company issued 400,000 common shares in exchange for
cash valued at $40,000. The shares were issued at $0.10.

                                      F-80
<PAGE>

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
Condensed Notes to Interim Consolidated Financial Statements
September 30, 2006
(Amounts expressed in US Dollars)
(Unaudited)

NOTE 16- SUBSEQUENT EVENTS (Continued)

B)   Options:

On December 15, 2006 and December 16, 2006, the Company cancelled 527,296 and
1,000,000 options, respectively, that had been issued to consulting companies
for services rendered.

On March 9, 2007, the Company cancelled 19,161,876 options that had been issued
to past employees.

On March 26, 2007 and March 28, 2007, the Company cancelled 2,861,958 and
1,038,615 options, respectively, that had been issued to past employees.

On July 16, 2007 the Company cancelled 4,098,333 options that had been issued to
past employees.

C) Events

Joseph E. Diamond
-----------------

On February 19, 2004, Joseph E. Diamond was appointed Senior Vice-President of
Administration and Finance. In addition to these duties, on November 12, 2004
Mr. Diamond was elected CEO of the Company. Mr. Diamond was relieved as CEO of
the Company and resigned his previous position on December 16, 2004. On January
26, 2005, Therese Diamond (Mr. Diamond's spouse) filed a complaint against the
Company in the Superior Court of California, County of Los Angeles bearing case
number LC-070391 and on February 4, 2005 Joseph Diamond filed a complaint
against the Company in the Superior Court of California, County of Los Angeles
bearing case number LC-070495. On February 3, 2006, the parties entered into a
Settlement and Release Agreement which resolved the matters and they were
subsequently dismissed by the Courts.

Canadian Patent
---------------

On April 20, 2004, the Canadian Intellectual Property Office granted the Company
patent number 2,182,596.

Retention Management Group, Inc.
--------------------------------

On July 25, 2004, the Company entered into a Licensing Agreement with Retention
Management Group, Inc.(RMG), a Barbados company, in which RMG was granted a
license to market, distribute and sublicense SCTN applications and products. On
March 10, 2006, the Company asserted claims against RMG in case no. A518577
filed in the Eighth Judicial District Court of Nevada, Clark County. On May 31,
2006, the Company and RMG entered into a Settlement Agreement and Release. Under
the terms of this agreement, the Company agreed to pay RMG $ 90,000, and the
Licensing Agreement between the Company and RMG was terminated. Accordingly,
case no. A518577 was dismissed by the Court on June 23, 2006.

                                      F-81
<PAGE>

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
Condensed Notes to Interim Consolidated Financial Statements
September 30, 2006
(Amounts expressed in US Dollars)
(Unaudited)

NOTE 16- SUBSEQUENT EVENTS (Continued)

C) Events (Continued)

Marilyn Grish
-------------

On September 18, 2001, we were served with a summons and complaint for an action
filed by Marilyn Grish in the Third Judicial District Court, Salt Lake County,
Utah, for breach of an independent contractor's contract and seeking unspecified
damages. On October 12, 2001, the Company filed an answer and a counterclaim
against Ms. Grish and intended to defend this matter vigorously. Ms. Grish had
taken no further action in this case and the court indicated that, unless Ms.
Grish certified she was ready for trial by August 4, 2004, the case would be
dismissed. The case was dismissed on August 4, 2004.

David Simon
-----------
Concurrent with Mr. Diamond being relieved as CEO of the Company on December 16,
2004, David Simon assumed the role of CEO.

Donald W. Mayer
---------------

On June 1, 2005, Donald W. Mayer, an investor in the Company, initiated an
action in The Superior Court of the State of Washington, In and For the County
of King, case no. 05-2-18115-0-SEA in which the Company was named one of several
defendants. On May 13, 2006, the Parties entered into a Settlement Agreement and
Release. Accordingly, the Company was dismissed as a defendant in the case.

Miki Radivojsa
--------------

On August 8, 2005, Miki Radivojsa, CEO of Airos Group, the Company's development
partner, was elected to the Board of Directors. On August 17, 2005, Mr.
Radivojsa was elected Chairman and CEO of the Company, replacing David Simon.

Statute-Barred Accounts Payable
-------------------------------

As of December 31, 2005, certain accounts payable of the Company are
Statute-Barred under Utah law from being collected by creditors. However, under
US GAAP, the Company still records them as a liability. As of December 31, 2005,
the amount is approximately 41,000.

                                      F-82
<PAGE>

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
Condensed Notes to Interim Consolidated Financial Statements
September 30, 2006
(Amounts expressed in US Dollars)
(Unaudited)

NOTE 16- SUBSEQUENT EVENTS (Continued)

C) Events (Continued) Phoenix Technology Holdings, Inc.
-------------------------------------------------------

On April 6, 2006, the Company entered into a License Agreement with Phoenix
Technology Holdings Incorporated, a Turks and Caicos Islands company. Under the
terms of the agreement, the Company granted Phoenix an exclusive license to use
the Company's technology. Also, certain portions of the Company's debt,
including a significant portion of the Senior Secured Convertible Notes, unpaid
amounts owing to Airos Group for services rendered, and accrued salaries were
assumed by Phoenix and ceased accruing additional interest. Further, the
agreement provides for Phoenix to loan monies to the Company, at Phoenix's
discretion, at the rate of one percent (1%) per month, compounded monthly until
paid in full. Any such loan shall be deducted from any payments due by Phoenix
under the agreement. In order to maintain exclusivity, the Agreement calls for
certain performance targets to be met. As of April 18, 2007, these targets have
been met.

Nevada Corporation
------------------

During a special meeting of the Board of Directors on November 30, 2006, the
Board voted to approve a resolution to convert the Company from a Florida
corporation to a Nevada corporation.

Increase in Authorized Shares
-----------------------------

During a special meeting of the Board of Directors on November 30, 2006, the
Board voted to approve a resolution to increase the number of authorized shares
to 500,000,000.

Change in Auditors
------------------

During a meeting of the Board of Directors on May 18, 2007, the Board voted to
approve a resolution which dismissed Marcum & Kliegman, LLP as the Company's
independent registered public accounting firm and engaged Schwartz Levitsky
Feldman LLP as the Company's independent registered public accounting firm. The
change in independent registered public accounting firms is not the result of
any disagreement with Marcum & Kliegman, LLP.

Elimination of Senior Secured Debt
----------------------------------

In Janaury of 2007, note holders which did not elect to assign their debt to
Phoenix Technology Holding, Inc. were given the option to receive their
principal investment plus accrued interest either in the form of cash or shares
in the Company. By June 2007, the last of these repayments were made, and all
Senior Secured Notes have been retired.

Increase in Authorized Shares
-----------------------------

During a special meeting of the Board of Directors on July 20, 2007, the Board
voted to approve a resolution to increase the number of authorized shares to
600,000,000.

                                      F-83
<PAGE>

SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
Condensed Notes to Interim Consolidated Financial Statements
September 30, 2006
(Amounts expressed in US Dollars)
(Unaudited)

NOTE 16- SUBSEQUENT EVENTS (Continued)

C) Events (Continued)

The International Investor
--------------------------

On August 30, 2007, The International Investor, K.S.C.C., a Kuwait-based
company, initiated an action in the United States District Court for the
District of Nevada, case # 07-CV-1178, in which the Company was named as a
co-defendant, seeking damages in the amount of $100,000,000. The allegations,
which have not been proven in a court of law, include conspiracy in violation of
statues prohibiting racketeering, misappropriation of trade secrets, fraud,
civil conspiracy to defraud, unjust enrichment, breach of contract, breach of
fiduciary trust and unfair competition. The company filed its counter-claim on
September 25, 2007 and plans to vigorously defend and counter sue TII for breach
of contract, fraud, interference with contractual relations, misappropriation of
trade secrets, conversion, unjust enrichment and to seek both compensatory and
punitive damages well in excess of $100 million.

Statute-Barred Accounts Payable
-------------------------------

As of December 31, 2007, certain accounts payable of the Company are
Statute-Barred under Utah law from being collected by creditors. However, under
US GAAP, the Company still records them as a liability. As of December 31, 2007,
the amount is approximately $2,530,000. This amount includes the $41,000
previously Statute-Barred as of December 31, 2006.




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