|   | UNITED STATESSECURITIES AND EXCHANGE COMMISSION |   |
|--------|-------------------------------------------------|--------|

| Washington, D.C. 20549 |
|------------------------|

| Form 10-KSB |
|-------------|

| [X] | Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 forthe Fiscal Year Ended December 31, 2007 |
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| [ ] | Transition Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 forthe Transition Period From ________ to ________ |
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| Commission File No. 33-19961 |
|------------------------------|

|   | Diamond I, Inc. |   |
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| (Name of Small Business Issuer in its Charter) |
|------------------------------------------------|

|   | Delaware                                                      |   | 01-0623010                          |   |
|--------|---------------------------------------------------------------|--------|-------------------------------------|--------|
|   | (State or Other Jurisdiction ofIncorporation or Organization) |   | (IRS Employer IdentificationNumber) |   |

|   | 8733 Siegen Lane, Suite 309, Baton Rouge, LA 70810           |   |
|--------|--------------------------------------------------------------|--------|
|   | (Address of Principal Executive Offices, Including Zip Code) |   |

|   | (225) 341-4004                                   |   |
|--------|--------------------------------------------------|--------|
|   | (Issuer's Telephone Number, Including Area Code) |   |

|   | Securities Registered under Section 12(b) of the Exchange Act: None |   |
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| Securities Registered under Section 12(g) of the Exchange Act: None |
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| Check whether the issuer is not required to file reports pursuant to Section 13 or 15(d) of theExchange Act. [  ] |
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| Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of theExchange Act during the past 12 months (or for such shorter period that the registrant wasrequired to file such reports), and (2) has been subject of such filing requirements for the past 90days. Yes [ X ] No [  ] |
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| Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-Bcontained 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 Form10-KSB or any amendment to this Form 10-KSB. [X] |
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| Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of theExchange Act). Yes [  ] No [ X ] |
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| Registrant's revenues for its most recent fiscal year were $-0-. |
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| The aggregate market value of the voting stock held by non-affiliates computed based on theclosing price of such stock as of April 11, 2007, was approximately $1,000,000. |
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| The number of shares outstanding of the issuer's common equity as of April 11, 2008, was342,016,707 shares of common stock, par value $.001. |
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| Documents Incorporated by Reference: None. |
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| Transitional Small Business Disclosure Format (check one): Yes [ ] No [ X ] |
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|   |
|--------|

| PART I |
|--------|

| Item 1. | Description of Business |
|---------|-------------------------|

| Events of 2007 |
|----------------|

| In March 2007, we entered into an agreement with NewMarket Technology, Inc., a publicly-tradedcompany, pursuant to which NewMarket (and/or an affiliate) was to purchase certain of oursecurities for $2,000,000, including approximately $50,000 in cash, pre-closing.  With theapproximately $30,000 in cash we received from NewMarket pre-closing, we completed theprototype of our GS3(TM) (third-generation) wireless hand-held gaming unit, the hand-heldcomponent of our WifiCasino(TM) wireless gaming system.  However, the agreement withNewMarket expired on June 7, 2007, without a closing thereunder and we never obtained theexpected funding.  Due to the expiration of this agreement, the cash received NewMarket has beenreclassified as a “short-term payable - third party” in the accompanying financial statements. |
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| Our Company Now |
|-----------------|

| We are currently pursuing three lines of business: (1) free online casinos; (2) oil and gas; and (3)wireless gaming. Our efforts in developing each of these lines of business has been impaired dueto our severe lack of capital during the past 18 months.  However, despite this lack of capital, wehave opened the first two of our planned online “casinos”, IslandBlueCasino.net andVegasBetLive.com, and have begun to derive revenues from these web sites through the use ofa click-through advertising program.  In addition, we have entered into an agreement to acquiresix producing oil and gas properties located in the State of Texas.  We are currently attemptingto complete the acquisition of the first of these properties and believe that we will be able to doso during the second quarter of 2008.  Finally, during 2007, we completed the development of ourGS3(TM) (third-generation) wireless hand-held gaming unit, the hand-held component of ourWifiCasino(TM) wireless gaming system.  We have been unable to make any significant progressin commercially exploiting this product, due our inability to obtain needed capital. |
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| Online Casinos |
|----------------|

| General.  Currently, our most active business segment is our online gaming.  During the lastquarter of 2007, we launched our first online casino, IslandBlueCasino.com, a free, for-entertainment-only online poker site.  IslandBlueCasino.com features Texas Hold ’em and Omahapoker tables and is legal for users in the United States.  In March 2008, we launched our secondonline casino, VegasBetLive.com.  VegasBetLive.com is similar to IslandBlueCasino.com andfeatures a users blog.  Currently, these web sites are averaging approximately 30,000 distinct“hits” (visitors) per month. |
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| Strategy.  We have launched IslandBlueCasino.net and VegasBetLive.com, and intend to launchadditional online gaming web sites, as a means of creating a revenue stream for our company,much the same way that traditional magazine publishers generate revenues from their businesses:advertising.  As traditional magazine publishers seek ever-increasing subscription rates uponwhich to base advertising rates, we seek to establish an ever-increasing number of Internetvisitors, or “traffic”, to each of our gaming web pages, thereby increasing mathematically ouropportunities to generate revenues through “click-through” advertising and e-commercecommissions, through the use of click-through advertising programs, including GoogleAdsense(TM), Commission Junction, AdBright and LinkShare.  To date, this strategy has provento be successful, as we have begun to derive click-through advertising revenues from our onlinecasinos. |
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| Search Engine Optimization.  We employ search engine optimization strategies in our effort toincrease the number of visitors to our online casinos.  When we refer to a “search engine”, we arereferring to an Internet search engine, such as Google or ask.com, that searches for informationon the public Internet. In general, a search engine allows the user to request links to web pagecontent meeting specific user-generated search criteria, typically a given word or phrase. Basedon the user-generated search criteria, a search engine generates a list of web pages that match, toone degree or another, the user’s criteria. This list is usually sorted with some measure ofrelevance to the user-generated search criteria, such as “poker” or “Texas Hold ‘em”.  Searchengines operate through the use of algorithms. |
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| Search engine optimization is an outgrowth of search engine marketing that serves to improve thenumber and/or quality of visitors to a web page.  In general, search engine optimization techniquesappeal to machine algorithms to increase search engine relevance and, ultimately, web pagetraffic. This is analogous to circulation in magazines and other periodicals and to foot traffic inretail advertising.  Search engines display different kinds of listings on a search engine resultspage, including paid advertising, in the form of pay-per-click advertisements and paid-inclusionlistings, as well as unpaid “organic” search results, that is not-for-pay search results, andkeyword-specific listings, such as news stories, definitions, map locations and images. Searchengine organization is concerned with improving the number and position of a web page’s listingin the organic search results.  While we believe our search engine optimization efforts will, overtime, serve to increase traffic to our gaming web sites, there is no assurance that such will be thecase. |
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| Click-Through Advertising and E-Commerce Commissions.  On each of IslandBlueCasino.netand VegasBetLive.com, we have placed, and all of our future gaming web sites we will place,numerous advertising “buttons”, or links, of our sponsors. Visitors to these web pages will be ableto click these advertising buttons to obtain more information about an advertiser. Through ouragreement with various online “click-through” advertising facilitators, including Amzaon.com,we are paid for each visitor who “clicks” an advertising button. For each click, we are paidbetween $.01 and $.50, with most per-click payments being between $.01 and $.05.  We currentlyderive approximately $400 per month from these per-click payments. |
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| In addition, some of our advertising buttons will link directly to an e-commerce, or merchandisesale, web site. Through agreements with advertising facilitators, like Amazon.com and Google,we are to be paid a commission on sales made by a particular e-commerce site attributable to ourweb-page visitor. Our commissions will vary from 5% to 50% of sales made by an e-commercesite, depending on the exact nature of the merchandise sold. |
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| To continue to increase our revenues from our online casinos, it will be necessary to increase thegross number of visitors to all of our gaming web sites.  Any increase in the number of visitorsto our web pages increases mathematically our opportunities to derive revenues through ourclick-through and e-commerce agreements. |
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| Internet Industry and Competition.  We compete in the world’s ultimate free market - the Internet.We compete for the attention of Internet users against every other web page on the Internet. Ourbusiness model requires that we attract as many Internet users to our web sites as possible.Because the Internet, by its very nature, is in a constant state of change, we may never besuccessful in attracting enough traffic to our web sites to earn a profit.  Our online casinos lackbrand-name recognition and it is likely that none will become well-known to Internet users.Instead, it is likely that Internet users will be lead to our online casinos as a result of a key-wordsearch utilizing an Internet search engine, such as Google or Yahoo. |
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| Oil and Gas |
|-------------|

| General.  In January 2008, following a period during which our management had receivednumerous business propositions from oil and gas industry participants, our board of directorsdetermined to diversify our business first into the oil and gas industry.  To that end, in January2008, we entered into an agreement with a private Texas company to acquire six producing oil andgas properties.  It was our intention to complete the acquisition of the first of these properties bythe end of the first quarter of 2008.  However, due to circumstances beyond our control, we havenot yet completed the acquisition of the first property.  We believe that we will be able to do so,during the second quarter of 2008. |
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| Strategy.  We are pursuing a strategy of acquiring near-term oil and gas production withoutsacrificing our long-term success.  To accomplish this objective we are focused on: acquiring and,where appropriate, developing oil and gas production, including secondary recovery operations;lease acquisitions in areas of established production, thereby achieving stable, predictableproduction rates; and developing and maintaining a low-risk property portfolio through diversifiedoil and gas activities.  Over time, we intend to focus our efforts on the development of completeenergy solutions, through the development of a vertically integrated company.  We believe ourstrategy will result in our being largely insulated from energy market fluctuations, whileparticipating in one of the most profitable industries in the world.  We cannot make anyassurances that we will be successful in establishing our oil and gas operations or that, ifestablished, our oil and gas operations will ever earn a profit. |
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| Oil and Gas Industry.  The oil and gas industry is involved in the global processes of exploration,extraction, refining, transporting and marketing petroleum products.  For the last several years,the oil and gas industry has generally been characterized by extremely volatile commodity prices.During recent years, world oil prices have increased sharply in response to increases in demandfrom developing economies, the perceived threat of supply disruptions in producing areas and, tosome degree, the weakness in the U.S. dollar versus other currencies.  Significant factors that willimpact 2008 commodity prices include developments in the issues currently impacting Iraq andIran and the Middle East, demand of Asian and European markets and the extent to which oilexporting nations are able to continue to manage oil supply through export quotas.  However, isthe strength of the U.S. economy and the prospect of a recession that can be expected to have thegreatest impact on oil and gas prices during the next 12 months.  Another industry factor that willdirectly affect our company’s ability to earn a profit from our oil and gas endeavors is thecontinuing increase in operating costs. |
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| Competition.  The oil and gas industry is highly competitive. A large number of companies,including major integrated and other independent companies, and individuals engage in theexploration for and development of oil and gas properties, and there is a high degree ofcompetition for oil and gas properties suitable for development or exploration. There is highcompetition for acquisitions of oil and gas properties and we may be unable to compete effectivelyfor properties, due to our lack of capital.  The principal competitive factors in the acquisition ofoil and gas properties include the staff and data necessary to identify, evaluate and acquire suchproperties and the financial resources necessary to acquire and develop the properties.  We maynot be able to compete effectively in the oil and gas industry, due to our management’s lack ofexperience.  Substantially all of our competitors are larger and have financial and other resourcesgreater than we have. |
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| Regulation.  Once we acquire an oil and gas property, our operations will be subject to stringentand complex foreign, federal, state and local laws and regulations governing environmentalprotection, as well as the discharge of materials into the environment.  These laws, rules andregulations may also restrict the rate of oil and gas production below the rate that would otherwisebe possible. The regulatory burden on the oil and gas industry increases the cost of doing businessin the industry and consequently affects profitability. Additionally, United States Congress andstate legislatures, federal and state agencies and foreign government and agencies frequently reviseenvironmental laws and regulations, and the clear trend in environmental regulation is to placemore restrictions and limitations on activities that may affect the environment.  Due to thisregulatory burden, we may never produce enough oil and gas to earn a profit. |
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| Wireless Gaming |
|-----------------|

| During 2007, we completed the development of our GS3(TM) (third-generation) wireless hand-held gaming unit, the hand-held component of ouru WifiCasino(TM) wireless gaming system.However, we were unable to make any significant progress in commercially exploiting thisproduct, due to our inability to obtain needed capital.  Unless and until we obtain approximately$200,000, we will be unable to achieve significant progress in exploiting our WifiCasino product. |
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| With passage of Nevada Law AB471, which authorizes the use of mobile communication devices,such as our WifiCasino GS wireless gaming system, for gaming in public areas in Nevada casinos,we are currently pursuing the development of our hand-held wireless gaming business.  During2007 and the first quarter of 2008, we lacked adequate capital with which to complete thedevelopment of our wireless gaming products and otherwise to pursue aggressively our businessplan. |
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| What is Wi-Fi?  The term “Wi-Fi” is short for “wireless fidelity” and refers to an industry standardfor wireless equipment that meets published 802.11(x) standards.  Wi-Fi equipment operates inunlicensed spectra, such as 2.4 and 5.8 Ghz. |
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| What is WiFiCasino GS and the GS3?  The WifiCasino GS is a Wi-Fi-based gaming system foron-premises use by casinos/resorts, the user-friendly wireless hand-held unit of which is knownas the GS3. |
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| Our WifiCasino GS is a secure wireless PDA-based gambling and media network designed forLas Vegas-style casinos and resorts, as well as cruise ships and race tracks. The WifiCasino GSis designed to allow patrons to gamble anywhere on a casino’s, ship’s or track’s premises (aspermitted by regulatory bodies), including in their rooms, pool-side and at the bar.  Using unique,proprietary technologies, including patent-pending voice-recognition and finger-print biometricsecurity technologies, the WifiCasino GS offers a highly secure and consumer-friendly gamblingsolution. |
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| In addition, the WifiCasino GS is capable of extending beyond gambling applications, to includeproviding Internet access, obtaining resort information, ordering meals and drinks, accessingconcierge services, etc.  With future applications in mind, the WifiCasino GS’s modular designwill accommodate future plug-in modules that provide additional functionality, thereby permittingthe host resort to provide its patrons with new forms of services and experiences. |
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| Implementation Options.  The WifiCasino GS can be setup solely as a wireless gambling productor can be implemented as a full resort services/gambling/management/media system, dependingon the preferences of the resort.  Our system can be integrated into a resort’s existing ITinfrastructure or can be installed and operated as a stand-alone system. |
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| The WifiCasino GS is made up of five integrated systems that deliver wireless gambling,multimedia applications and customer relationship management: (a) SecureGamble provides thegambling and security features allowing users to gamble from wireless hand-held units within thehotel.; (b) MediaServe is a modular system that handles the non-gambling media, marketing andother amenities and services; (c) AirTrack is the location tracking system; (d) GSAdmin is themanagement and administration system for the WifiCasino GS; and (e) OpenHand is the statisticalrecording and analysis engine of the system. |
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| Market Development. |
|---------------------|

| State of Nevada.  With the passage of Nevada Law AB471, which authorizes the use of mobilecommunication devices, such as our WifiCasino GS wireless gaming system, for gaming in publicareas in Nevada casinos, we are actively pursuing business relationships with Nevada casinos, aswell as preparing to enter into the process of gaining a license for our WifiCasino GS product.We have signed a non-binding letter of intent with The Palms Resort and Casino, a premier LasVegas property, wherein The Palms has agreed to continue to develop our working relationshiprelating to our WifiCasino GS wireless gaming system.  We cannot predict when a formalarrangement will be reached with The Palms. |
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| Other Venues.  We are also working to secure a cruise ship on which to implement one of ourWifiCasino GS systems.  We have had preliminary discussions with the owners of one or morecruise ships.  We have also had preliminary discussions with the owners of one or more horseracing facilities, with respect to its establishing a WifiCasino GS system on such a facility.  Wecannot assure you that we will be successful in these efforts. |
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| International Activities.  Prior to 2007, we pursued potential business opportunities in severalcountries, including the Republic of the Philippines, Jamaica and Mexico.  These efforts were notsuccessful. |
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| Gaming Industry Background.  For 2007, worldwide gaming revenues have been estimated tohave been in excess of $130 billion.  For 2007, U.S. casino-based gaming revenues are estimatedto have been in excess of $90 billion. |
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| According to industry sources, casino-based gaming revenues are expected to increase each yearfor the foreseeable future.  Historically, revenues from slot machines and poker have comprisedapproximately 70% of total gaming revenues.  Due to the long-term high popularity of slotmachines, as well as the current popularity of “Texas Hold’em” poker, our WiFiCasino GS willinitially offer video slots and poker games to users. |
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| Gaming-Related Equipment and Software. All of the equipment used in our WiFiCasino GSsystems will be off-the-shelf or modified-off-the-shelf items.  Inasmuch as there are severalmanufacturers of the types of equipment we require, we expect no problems in obtaining neededequipment at competitive prices. |
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| In configuring the WiFiCasino GS system for use, we use a combination of open-use software andsoftware developed by us.  In addition, we incorporate our patent-pending voice-recognition andfinger-print biometric security technologies into the WifiCasino GS.  Our management believesthat our ‘voice-print’ and ‘finger-print’ security technologies are valuable technologies in the fieldof biometrically-secured wireless casino, pari-mutual and sportsbook gaming, because, with thesetechnologies incorporated into our WifiCasino GS products, we will be in a strong position toassure regulators that our wireless, hand-held gaming system will be used only by authorizedusers. |
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| Gaming Industry Competition.   The gaming industry is extremely competitive.  We competeagainst many large gaming companies who have far greater resources, financial and otherwise,than do we.  We cannot provide any assurance that we will be able to compete effectively, whichwill adversely affect our financial condition. |
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| Gaming Regulation and Licensing. |
|----------------------------------|

| General Regulation of Shareholders of Publicly Traded Companies.  In most jurisdictions, anybeneficial owner of our common stock is subject, on a discretionary basis, to being required to fileapplications with gaming regulatory authorities, to being investigated and found suitable orqualified as such. In addition, shareholders whose holdings of our common stock exceed certaindesignated percentages are subject to certain reporting and qualification requirements imposed bystate and federal gaming regulators and any shareholder, if found to be unsuitable, may be requiredto immediately dispose of its holdings of our common stock. |
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| Further, we must obtain a registration, license, approval or finding of suitability and equipmentapproval in all jurisdictions before we can offer gaming devices for sale to licensed gamingoperations within those jurisdictions. The licensing process usually involves the licensing orapproval of certain officers, directors and shareholders of a corporation, and approval of thespecific product that a company intends to offer for sale. |
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| Nevada Regulatory Matters.  In Nevada, gaming is under the control of the Nevada GamingCommission and the Nevada Gaming Control Board (collectively, the “Nevada GamingAuthorities”).  As a manufacturer and distributor of gaming equipment, we will be required toobtain approval from the Nevada Gaming Authorities to sell our gaming equipment in Nevada.As a “Registered Company”, we will be required to file periodic reports, including detailedfinancial reports, with the Nevada Gaming Authorities, to assure our compliance with applicablelaws.  In addition, substantially all material loans, leases, sales of securities and similar financingtransactions by us will be required to be reported to, or approved by the Nevada GamingAuthorities. |
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| Applicable Nevada law also states that any beneficial holder of a Registered Corporation's votingsecurities, regardless of the number of shares owned, may be required to file an application, beinvestigated and have his suitability determined as a beneficial holder of the RegisteredCorporation's voting securities if the Nevada Gaming Authorities have reason to believe that suchownership would otherwise be inconsistent with the declared policies of the State of Nevada. Theapplicant must pay all costs of investigation incurred by the Nevada Gaming Authorities inconducting any such investigation. |
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| Nevada law requires any person who acquires beneficial ownership of more than 5% of aRegistered Corporation's voting securities to report the acquisition to the Nevada GamingAuthorities. Such law also requires that beneficial owners of more than 10% of a RegisteredCorporation's voting securities apply to the Nevada Gaming Authorities for a finding of suitabilitywithin thirty days after the Chairman of the Nevada Board mails the written notice requiring suchfiling, with certain exceptions for “institutional investors”.  If the beneficial holder of votingsecurities who must be found suitable is a corporation, partnership or trust, it must submit detailedbusiness and financial information including a list of beneficial owners. The applicant is requiredto pay all costs of investigation.   Any person who fails or refuses to apply for a finding ofsuitability or a license within thirty days after being ordered to do so by the Nevada GamingAuthorities or the Chairman of the Nevada Gaming Board, may be found unsuitable. |
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| We will be required to maintain a current stock ledger in Nevada which may be examined by theNevada Gaming Authorities at any time. If any securities are held in trust by an agent or by anominee, the record holder may be required to disclose the identity of the beneficial owner to theNevada Gaming Authorities. Failure to make such disclosure may be grounds for finding therecord holder unsuitable. We will also be required to render maximum assistance in determiningthe identity of the beneficial owner. The Nevada Gaming Authorities have the power to requireour stock certificates to bear a legend indicating that the securities are subject to Nevada law. |
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| As a Registered Corporation, we will not be able to make a public offering of our securities, suchas an IPO or follow-on offering, without the prior approval of the Nevada Gaming Authorities,if the securities or proceeds therefrom are intended to be used to construct, acquire or financegaming facilities in Nevada, or to retire or extend obligations incurred for such purposes.Approval of a public offering, if given, does not constitute a finding, recommendation or approvalby the Nevada Gaming Authorities as to the accuracy or adequacy of the offering disclosuredocuments or the investment merits of the securities offered. Any representation to the contraryis unlawful. |
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| Changes in control of a Registered Corporation through merger, consolidation, stock or assetacquisitions, management or consulting agreements, or any act or conduct by a person wherebyhe obtains control, may not occur without the prior approval of the Nevada Gaming Authorities. |
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| Nevada Law AB471.  In June 2005, Nevada Law AB471, which authorizes the use of mobilecommunication devices, such as our WifiCasino GS wireless gaming system, for gaming in publicareas in Nevada casinos, was signed into law.  In March 2006, the Nevada Gaming Commissionadopted final implementing regulations with respect to Nevada Law AB471.  We intend to submitmake an application for a gaming license with respect to our WifiCasino GS products.  The exactdate of our application is not yet determinable, due to our need of additional capital with whichto pay the costs associated therewith.  To our knowledge, to date, no hand-held mobile gamingdevice has been licensed by the Nevada Gaming Commission. |
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| Federal Regulation.  The Federal Gambling Devices Act of 1962 (the "Federal Act") makes itunlawful, in general, for a person to manufacture, deliver or receive gaming machines, gamingmachine type devices and components across state lines or to operate gaming machines, unlessthat person has first registered with the Attorney General of the United States. We will be requiredto register and to renew our registration annually, which we intend to do. In addition, variousrecord keeping equipment identification requirements are imposed by the Federal Act. Violationof the Federal Act may result in seizure and forfeiture of the equipment, as well as other penalties. |
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| Native American Gaming.  Gaming on Native American lands, including the terms and conditionsunder which gaming equipment can be sold or leased to Native American tribes, is or may besubject to regulation under the laws of the tribes, the laws of the host state, the Indian GamingRegulatory Act of 1988 ("IGRA"), which is administered by the National Indian GamingCommission (the "NIGC") and the Secretary of the U.S. Department of the Interior (the"Secretary"), and also may be subject to the provisions of certain statutes relating to contracts withNative American tribes, which are administered by the Secretary. As a precondition to gaminginvolving gaming machines, IGRA requires that the tribe and the state have entered into a writtenagreement (a "tribal-state compact") that specifically authorizes such gaming, and that has beenapproved by the Secretary, with notice of such approval published in the Federal Registrar.Tribal-state compacts vary from state to state. Many require that equipment suppliers meetongoing registration and licensing requirements of the state and/or the tribe and some imposebackground check requirements on the officers, directors, and shareholders of gaming equipmentsuppliers. Under IGRA, tribes are required to regulate all commercial gaming under ordinancesapproved by the NIGC. Such ordinances may impose standards and technical requirements ongaming hardware and software, and may impose registration, licensing and background checkrequirements to gaming equipment suppliers and their officers, directors, and shareholders. |
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| Application of Future or Additional Regulatory Requirements.  In the future, we intend to seekthe necessary registrations, licenses, approvals and findings of suitability for us, our products andour personnel in other U.S. and foreign jurisdictions in which we identify significant salespotential for our products. However, there can be no assurance that such registrations, licenses,approvals or findings of suitability will be obtained and will not be revoked, suspended orconditioned or that we will be able to obtain the necessary approvals for our future products asthey are developed in a timely manner, or at all. If a registration, license, approval or finding ofsuitability is required by a regulatory authority and we fail to seek or do not receive the necessaryregistration, license, approval or finding of suitability, we may be prohibited from selling ourproducts for use in the respective jurisdiction or may be required to sell our products through otherlicensed entities at a reduced profit to us. |
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| Research and Development |
|--------------------------|

| We believe that to compete favorably we must invest in research and development of our gamingproducts.  However, due to our lack of capital, it is likely that our research and developmentactivities will be minimal through the remainder of 2008. |
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| Employees |
|-----------|

| We currently have two employees, both of whom are officers.  We also retain the services ofindependent contractors and outside professionals on an as-needed basis. |
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| Item 2. | Description of Property |
|---------|-------------------------|

| Facilities |
|------------|

| Our president, David Loflin, provides the office space needed for our company at no charge.  Atsuch time as we obtain sufficient capital, we will relocate our corporate operations to a largerfacility. |
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| Intellectual Property |
|-----------------------|

| We have pending patent applications with respect to certain aspects of our WiFiCasino GSwireless gaming system.  We believe that obtaining these patents, as well as any future patentsrelated to our products, is extremely important and we intend to pursue these patents vigorously.However, we can offer no assurance that we will be granted any patents relating to ourWiFiCasino GS wireless gaming system. |
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| In addition, we rely on a combination of trademark laws, trade secret laws and disclosurerestrictions to protect our intellectual property rights. We also enter into confidentialityagreements with our employees, consultants and other third parties who have access to sensitiveand proprietary information. Diamond I(TM), as well as its associated mark, and WiFiCasinoGS(TM) are designations that we use and for which we intend to obtain registered trademarks. |
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| If a claim is asserted that we have infringed the intellectual property of a third party, we may berequired to seek licenses to that technology. Licenses from third parties may not continue to beavailable to us at a reasonable cost, or at all. |
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| Additionally, the steps we have taken to protect our intellectual property rights may not beadequate. Third parties may infringe or misappropriate our proprietary rights. Competitors mayalso independently develop technologies that are substantially equivalent or superior to thetechnologies we employ in our business.  If we fail to protect our proprietary rights adequately,our competitors could offer similar services, potentially significantly harming our competitiveposition and decreasing our revenues. |
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|   |
|--------|

| Item 3. | Legal Proceedings |
|---------|-------------------|

| We are not currently involved in any legal proceedings. |
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|   |
|--------|

| Item 4. | Submission of Matters to Vote of Security Holders |
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| During 2007, we did not submit any matters to our shareholders. |
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|   |
|--------|

| PART II |
|---------|

| Item 5. | Market for Common Equity and Related Stockholder Matters |
|---------|----------------------------------------------------------|

| Market Information |
|--------------------|

| Our common stock is quoted on the OTC Bulletin Board, under the symbol “DMOI”.  Previously,our common stock has been quoted on the OTC Bulletin Board, under the symbols “AQWF”,“AVWF” and “CVNT”.  The table below sets forth, for the periods indicated, the high and lowbid prices for our common stock, as reported by the OTC Bulletin Board. |
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|   | Quarter Ended |   | High Bid* |   | Low Bid * |   |
|--------|---------------|--------|-----------|--------|-----------|--------|

|   | March 31, 2005 |   | $.37 |   | $.08 |   |
|--------|----------------|--------|------|--------|------|--------|

|   | June 30, 2005 |   | $.11 |   | $.04 |   |
|--------|---------------|--------|------|--------|------|--------|

|   | September 30, 2005 |   | $.08 |   | $.02 |   |
|--------|--------------------|--------|------|--------|------|--------|

|   | December 31, 2005 |   | $.05 |   | $.02 |   |
|--------|-------------------|--------|------|--------|------|--------|

|   | March 31, 2006 |   | $.14 |   | $.02 |   |
|--------|----------------|--------|------|--------|------|--------|

|   | June 30, 2006 |   | $.08 |   | $.021 |   |
|--------|---------------|--------|------|--------|-------|--------|

|   | September 30, 2006 |   | $.038 |   | $.017 |   |
|--------|--------------------|--------|-------|--------|-------|--------|

|   | December 31, 2006 |   | $.028 |   | $.007 |   |
|--------|-------------------|--------|-------|--------|-------|--------|

|   | March 31, 2007 |   | $.036 |   | $.009 |   |
|--------|----------------|--------|-------|--------|-------|--------|

|   | June 30, 2007 |   | $.0102 |   | $.029 |   |
|--------|---------------|--------|--------|--------|-------|--------|

|   | September 30, 2007 |   | $.004 |   | $.015 |   |
|--------|--------------------|--------|-------|--------|-------|--------|

|   | December 31, 2007 |   | $.005 |   | $.018 |   |
|--------|-------------------|--------|-------|--------|-------|--------|

|   | March 31, 2008 |   | $.003 |   | $.0078 |   |
|--------|----------------|--------|-------|--------|--------|--------|

|  * | The foregoing prices have been adjusted to reflect a four-for-one forward splitof our common stock occurring in September 2004. |
|---------|---------------------------------------------------------------------------------------------------------------------------------|

| These prices represent quotations between dealers without adjustment for retail mark-ups, mark-downs or commissions, and may not necessarily represent actual transactions. |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| You should note that our common stock, like many technology-related stocks, is likely toexperience significant fluctuations in its price and trading volume.  We cannot predict the futuretrading patterns of our common stock. |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Holders |
|---------|

| On April 11, 2007, the number of record holders of our common stock, excluding nominees andbrokers, was 197 holding 342,016,707 shares. |
|-----------------------------------------------------------------------------------------------------------------------------------------|

| Dividends |
|-----------|

| We have never paid cash dividends on our common stock. We intend to re-invest any futureearnings into the company for the foreseeable future. |
|-----------------------------------------------------------------------------------------------------------------------------------------------|

| Securities Authorized for Issuance Under Equity Compensation Plans |
|--------------------------------------------------------------------|

| Plan Category |   | Number ofsecurities to beissued uponexercise ofoutstandingoptions, warrantsand rights |   | Weightedaverage exerciseprice ofoutstandingoptions,warrants, andrights |   | Number ofsecuritiesremainingavailable forfuture issuance |
|---------------|--------|---------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------|--------|----------------------------------------------------------|

| Equity compensation plansapproved by securityholders |   | -0- |   | -0- |   | -0- |
|------------------------------------------------------|--------|-----|--------|-----|--------|-----|

| Equity compensation plansnot approved by securityholders |   | (1) |   | (2) |   | 3,360,000(3) |
|----------------------------------------------------------|--------|-----|--------|-----|--------|--------------|

| Individual CompensationArrangements |   | -0- |   | -0- |   | -0- |
|-------------------------------------|--------|-----|--------|-----|--------|-----|

| (1) | The precise number of shares to be issued upon exercise of outstanding options cannot bedetermined, as the exercise price of such options is based on future market prices. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | The precise weighted average exercise price of outstanding options cannot be determined,as the exercise price of such options is based on future market prices. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | This figure represents the number of shares of our common stock, as of April 11, 2008,remaining available for issuance under our Second Amended and Restated 2004 StockOwnership Plan. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Recent Issuances of Unregistered Securities |
|---------------------------------------------|

| During the three months ended December 31, 2007, we issued the following unregisteredsecurities: |
|--------------------------------------------------------------------------------------------------|

| 1.     | (a) | Securities Sold. In December 2007, 500,000 shares of our common stock were issued.                                                                                                                                                                                                                                                                           |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | (b) | Underwriter or Other Purchasers. Such shares of common stock were issued to FLLShamrock, LLC.                                                                                                                                                                                                                                                                |
|   | (c) | Consideration. Such shares of common stock were issued as a bonus and were valued,in the aggregate, at $3,000.                                                                                                                                                                                                                                               |
|   | (d) | Exemption from Registration Claimed. These securities are exempt from registrationunder the Securities Act of 1933, as amended, pursuant to the provisions of Section4(2) thereof and Rule 506 thereunder, as a transaction not involving a public offering.These purchasers were sophisticated investors capable of evaluating an investmentin our company. |

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

| Item 6. | Management’s Discussion and Analysis of Financial Condition and Results ofOperations |
|---------|--------------------------------------------------------------------------------------------|

| FORWARD-LOOKING STATEMENTS |
|----------------------------|

| This report by Diamond I, Inc. contains forward-looking statements. These are statementsregarding financial and operating performance and results and other statements that are nothistorical facts. The words "expect", "project", "estimate", "believe", "anticipate", "intend", "plan","forecast" and similar expressions are intended to identify forward-looking statements. Certainimportant risks could cause results to differ materially from those anticipated by some of theforward-looking statements. Some, but not all, of the important risks that could cause actualresults to differ materially from those suggested by the forward-looking statements include, amongother things: |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| - | Events that deprive us of the services of our president and largest shareholder, DavidLoflin; |
|---|-----------------------------------------------------------------------------------------------|

| - | Whether or not we can successfully establish a market for our wireless gaming products; |
|---|-----------------------------------------------------------------------------------------|

| - | Whether we are able to obtain adequate capital with which to pursue our full businessplan; and |
|---|------------------------------------------------------------------------------------------------|

| - | Other uncertainties, all of which are difficult to predict and many of which are beyond ourcontrol. |
|---|-----------------------------------------------------------------------------------------------------|

| We do not intend to update forward-looking statements. |
|--------------------------------------------------------|

| Business Development |
|----------------------|

| Online Casinos.  We are currently generating approximately $400 per month in revenues fromIslandBlueCasino.net and VegasBetLive.com, through our click-through advertising programs.Access to capital would permit us to expand our cadre of online casinos at a greater rate. |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| We have launched IslandBlueCasino.net and VegasBetLive.com, and intend to launch additionalonline gaming web sites, as a means to creating a revenue stream for our company, much the sameway that traditional magazine publishers generate revenues from their businesses: advertising.As traditional magazine publishers seek ever-increasing subscription rates upon which to baseadvertising rates, we seek to establish an ever-increasing number of Internet visitors, or “traffic”,to each of our gaming web pages, thereby increasing mathematically our opportunities to generaterevenues through “click-through” advertising and e-commerce commissions, through the use ofclick-through advertising programs, including Google Adsense(TM), Commission Junction,AdBright and LinkShare.  To date, this strategy has proven to be successful, as we have begun toderive click-through advertising revenues from our online casinos. |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Oil and Gas.  We have not generated any revenues from this line of business. |
|------------------------------------------------------------------------------|

| In January 2008, following a period during which our management had received numerousbusiness propositions from oil and gas industry participants, our board of directors determined todiversify our business first into the oil and gas industry.  To that end, in January 2008, we enteredinto an agreement with a private Texas company to acquire six producing oil and gas properties.It was our intention to complete the acquisition of the first of these properties by the end of thefirst quarter of 2008.  However, due to circumstances beyond our control, we have not yetcompleted the acquisition of the first property.  We believe that we will be able to do so, duringthe second quarter of 2008. |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| We are pursuing a strategy of acquiring near-term oil and gas production without sacrificing ourlong-term success.  To accomplish this objective we are focused on: acquiring and, whereappropriate, developing oil and gas production, including secondary recovery operations; leaseacquisitions in areas of established production, thereby achieving stable, predictable productionrates; and developing and maintaining a low-risk property portfolio through diversified oil and gasactivities.  Over time, we intend to focus our efforts on the development of complete energysolutions, through the development of a vertically integrated company.  We believe our strategywill result in our being largely insulated from energy market fluctuations, while participating inone of the most profitable industries in the world.  We cannot make any assurances that we willbe successful in establishing our oil and gas operations or that, if established, our oil and gasoperations will ever earn a profit. |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Wireless Gaming.  We have not generated any revenues from this line of business. |
|----------------------------------------------------------------------------------|

| During 2007, we completed the development of our GS3(TM) (third-generation) wireless hand-held gaming unit, the hand-held component of ouru WifiCasino(TM) wireless gaming system.However, we were unable to make any significant progress in commercially exploiting thisproduct, due our inability to obtain needed capital.  Unless and until we obtain approximately$200,000, we will be unable to achieve significant progress in exploiting our WifiCasino product. |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Our business prospects in the State of Nevada were greatly enhanced in March 2006, with theadoption of final regulations implementing Nevada Law AB471, which authorizes the use ofmobile communication devices, such as our WifiCasino GS wireless gaming system, for gamingin public areas in Nevada casinos. |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| In furtherance of our plan to develop the business potential of our WifiCasino GS products, wehave, to the extent permitted by our capital position, taken the following actions: |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| - | completed final design and three-dimensional model of the first generation of ourWifiCasino GS that embodies our finger-print security technology; |
|---|----------------------------------------------------------------------------------------------------------------------------------------------------|

| - | signed a letter of intent with The Palms Resort and Casino, wherein The Palms has agreedto continue to develop our working relationship relating to our WifiCasino GS wirelessgaming system; |
|---|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| - | acquired Touchdev Limited, a developer of an array of internally-derived and copyrightedgaming software products, with wireless PDA and cellular-phone-based capabilities.Touchdev has created 12 different games, including Texas Hold’em Poker. |
|---|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| In March 2006, we acquired the rights to pending patents relating to voice-recognition, or “voice-print” security technology.  Our board of directors, with the recommendation of management,determined to acquire these patent rights, due to its belief that the security provided by our “voice-print” technology, when coupled with our patent-pending finger-print security technology, wouldbe a significant point in our favor, as we solicit venues.  We will be able to assure venues (and thelocal government) that those who cannot game legally will not be able to do so. |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Our marketing plan in Nevada revolves around establishing a greater physical presence of ourpersonnel, who are to conduct our marketing activities on a face-to-face basis with the owners oftarget venues, i.e., casinos.  The success of our WifiCasino GS marketing efforts in Nevada will,like other gaming sales efforts, be largely dependent on our ability to establish positive personalrelationships with appropriate decision-makers. |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| To accomplish any of our business plan, we must obtain substantial capital.  Without capital, wewill not be successful in doing so. |
|-------------------------------------------------------------------------------------------------------------------------------------|

| Also, we cannot make any assurance  that we will be able to achieve a level of revenues adequateto generate sufficient cash flow from operations or obtain additional financing through privateplacements, public offerings and/or bank financing necessary to support our working capitalrequirements. |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Critical Accounting Policies |
|------------------------------|

| While we believe that the factors considered provide a meaningful basis for the accountingpolicies applied in the preparation of the consolidated financial statements, we cannot guaranteethat our estimates and assumptions will be accurate. If such estimates and assumptions prove tobe inaccurate, we may be required to make adjustments to these estimates in future periods. |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Revenue Recognition.  We charged our customers  service fees for Internet access and recognizedthe revenue in the month the services are provided. |
|----------------------------------------------------------------------------------------------------------------------------------------------------|

| Litigation and Tax Assessments.  Should we become involved in lawsuits, we intend to assess thelikelihood of any adverse judgments or outcomes of any of these matters as well as the potentialrange of probable losses. A determination of the amount of accrual required, if any, for thesecontingencies will be made after careful analysis of each matter. The required accrual may changefrom time to time, due to new developments in any matter or changes in approach (such as achange in settlement strategy) in dealing with these matters. |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Additionally, in the future, we may become engaged in various tax audits by federal and stategovernmental authorities incidental to our business activities. We anticipate that we will recordreserves for any estimated probable losses for any such proceeding. |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Stock-Based Compensation.  We account for stock-based compensation based on the provisionsof Statement of Financial Accounting Standards No. 123.  In December 2004, the FinancialAccounting Standards Board issued Statement of Financial Accounting Standards No. 123(Revised 2004), Share-Based Payment, (FAS-123R).  This statement replaces FAS-123,Accounting for Stock-Based Compensation, supersedes APB Opinion No. 25, Accounting forStock Issued to Employees, and amends FAS-95, Statement of Cash Flows.  FAS-123R requirescompanies to apply a fair-value-based measurement method in accounting for share-basedpayment transactions with employees and to record compensation cost for all stock awards grantedafter the required effective date and for awards modified, repurchased or cancelled after that date.The scope of FAS-123R encompasses a wide range of share-based compensation arrangements,including share options, restricted share plans, performance-based awards, share appreciationrights and employee share purchase plans.  FAS-123R was effective for us on January 1, 2006. |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Results of Operations |
|-----------------------|

| During 2006, we had no revenues from operations and we do not expect to generate any revenuesfrom our operations for the remainder of 2007, unless the Wi-Fi Internet access marketing planof NewMarket is successful.  We cannot assure you that NewMarket’s business plan will besuccessful. |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Liquidity and Capital Resources |
|---------------------------------|

| We have incurred losses from inception of $30,575,831 and we have lacked adequate capital withwhich to accomplish our business objectives.  At December 31, 2007, we had a working capitaldeficit of $489,360 and we remain substantially illiquid. |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| During 2007, we obtained a total of $40,400 from stock sales to third parties and on account froma single third party, which funds have been used to pay costs associated with our wireless gamingbusiness and for operating expenses.  We are actively seeking capital for use in our business.  Wecan make no assurance that we will obtain enough to continue our business operations. |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Our Capital Needs.  Our current level of operations can be maintained for the next twelve months.We anticipate our capital needs will be met through the sale of shares for cash, exercise of optionsand issuance of shares for services. |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Capital Expenditures |
|----------------------|

| During 2007, we made no capital expenditures.  During 2006, we purchased $861,133 in patents,equipment and software, by issuing shares of our common stock and warrants to purchase ourcommon stock.  We currently have limited capital with which to make any significant capitalexpenditures.  Should we obtain significant funding, of which there is no assurance, we would beable to make significant expenditures for equipment.  The amounts of these patent, equipment andsoftware purchases cannot be predicted due to the uncertainty of funding levels and timing.However, without additional capital, we intend to make no capital expenditures. |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

| Item 7. | Financial Statements |
|---------|----------------------|

| The financial statements required to be furnished under this Item 7 are attached at the end of thisAnnual Report on Form 10-KSB. An index to our financial statements is also included below inItem 13(a). |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

| Item 8. | Changes In and Disagreements With Accountants on Accounting and FinancialDisclosure |
|---------|-------------------------------------------------------------------------------------|

| On April 30, 2007, we dismissed Malone & Bailey, P.C. as our independent auditor. At the timeof the dismissal, there was no disagreement with respect to any matter of accounting principlesor practices, financial statement disclosure or auditing scope or procedure. On April 30, 2007, weengaged Farmer, Fuqua & Huff, P.C. as our new independent auditor, to audit our financialstatements for the year ended December 31, 2007, and succeeding years.  The decision to changeauditors was approved by the audit committee of our board of directors, as well as our board ofdirectors. On April 29, 2005, we dismissed Lopez, Blevins, Bork & Associates, LLP as ourindependent auditor. At the time of the dismissal, there was no disagreement with respect to anymatter of accounting principles or practices, financial statement disclosure or auditing scope orprocedure. On April 29, 2005, we engaged Malone & Bailey, P.C. as our new independent auditor,to audit our financial statements for the year ended December 31, 2005, and succeeding years.The decision to change auditors was approved by the audit committee of our board of directors,as well as our board of directors. |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

| Item 8A. | Controls and Procedures |
|----------|-------------------------|

| Evaluation of Controls and Procedures |
|---------------------------------------|

| As of December 31, 2007, an evaluation was performed by our President and Acting ChiefFinancial Officer of the effectiveness of the design and operation of our disclosure controls andprocedures. Based on that evaluation, our management, including our President and Acting ChiefFinancial Officer, concluded that our disclosure controls and procedures were not effective as ofDecember 31, 2007.  Our evaluation identified deficiencies related to the accuracy andcompleteness of our accounting records and disclosures resulting in substantial adjustmentsidentified by our independent auditors.  These deficiencies are due to the limited resourcescurrently available to the Company.  Management is making efforts to utilize its resources moreeffectively to eliminate these deficiencies until the Company is able to obtain sufficient funds forbusiness development, including improvements in internal controls and procedures.  There havebeen no significant changes in our internal controls or in other factors that could significantlyaffect internal controls subsequent to December 31, 2007. |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Management’s Assessment of Internal Controls Over Financial Reporting |
|-----------------------------------------------------------------------------|

| Our management is responsible for establishing and maintaining adequate internal control overfinancial reporting. Internal control over financial reporting is defined in Rules 13a-15(f) and15d-15(f) under the Securities Exchange Act. Our management assessed the effectiveness of ourinternal control over financial reporting as of December 31, 2007, using the framework set forthin Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizationsof the Treadway Commission. Based upon this assessment, our management concluded that, asof December 31, 2007, our internal control over financial reporting was not effective.  Due to ourlack of capital, our management determined that our control environment, risk assessmentfunctions, control activities, information and communication functions and monitoring systemswere not effective. |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| This Annual Report does not include an attestation report of our registered public accounting firmregarding internal control over financial reporting.  Our management’s report was not subject toattestation by our registered public accounting firm, pursuant to temporary rules of the Securitiesand Exchange Commission that permit us to provide only management’s report in this AnnualReport. |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

| PART III |
|----------|

| Item 9. | Directors, Executive Officers, Promoters and Control Persons; Compliance withSection 16(a) of the Exchange Act |
|---------|----------------------------------------------------------------------------------------------------------------|

| Directors and Officers |
|------------------------|

| The following table sets forth the officers and directors of Diamond I, Inc. |
|------------------------------------------------------------------------------|

|   | Name |   | Age |   | Position(s) |
|--------|------|--------|-----|--------|-------------|

|   | David Loflin |   | 50 |   | President, Acting Chief Financial Officer andDirector |
|--------|--------------|--------|----|--------|-------------------------------------------------------|

|   | Waddell D. Loflin |   | 57 |   | Executive Vice President, Secretary and Director |
|--------|-------------------|--------|----|--------|--------------------------------------------------|

|   | Gregory A. Bonner |   | 50 |   | Director |
|--------|-------------------|--------|----|--------|----------|

|   | Ira R. Witkin |   | 48 |   | Director |
|--------|---------------|--------|----|--------|----------|

|   | David Loflin and Waddell D. Loflin are brothers. |
|--------|--------------------------------------------------|

| Our current officers and directors serve until the next annual meeting of our board of directors oruntil their respective successors are elected and qualified.  All officers serve at the discretion ofour board of directors.  Family relationships between our officers and directors are noted above.Certain information regarding the backgrounds of each of the officers and directors is set forthbelow. |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| DAVID LOFLIN is our founder.  He resigned as an executive officer and director of USURFAmerica, Inc. (now Cardinal Communications, Inc. (OTCBB Symbol: CDNC) in October 2003,after serving in those capacities for seven years. |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| WADDELL D. LOFLIN is one of our original officers and directors.  For more than the five yearsprior to April 2003, Mr. Loflin served as vice president, secretary and director of USURFAmerica, Inc. (now Cardinal Communications, Inc.).  From April to June 2003, Mr. Loflinworked as a private consultant. |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| GREGORY A. BONNER has, since 2004, been engaged in private entrepreneurial endeavors.For over 20 years prior to that time, Mr. Bonner served Albemarle Corporation, a large chemicalscompany, in several capacities, including business development manager, product/marketingmanager and customer service specialist.  Mr. Bonner is a graduate of Georgia Institute ofTechnology in Atlanta, with a BS degree in Chemistry. |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| IRA R. WITKIN is currently a program director at IBM. In that capacity, Mr. Witkin hasresponsibility for over 200 developers and marketing professionals worldwide. During his 25 yearcareer, Mr. Witkin has held numerous positions with a focus on information technology as itrelates to the travel and transportation, computer servicing, financial, manufacturing andcommunications industries. Mr. Witkin is a graduate of Rensselaer Polytechnic Institute in Troy,New York, with a BS degree in Computer Science and minors in management and marketing. |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Board of Directors |
|--------------------|

| Our full board did not meet during 2007; however, it took action by unanimous written consentin lieu of a meeting on four occasions. |
|--------------------------------------------------------------------------------------------------------------------------------------|

| Executive Committee |
|---------------------|

| Our board of directors created an executive committee to facilitate management between meetingsof the full board of directors. The executive committee is composed of David Loflin (chairman),Waddell D. Loflin and Gregory A. Bonner. Pursuant to our bylaws, between meetings of the fullboard, the executive committee has the full power and authority of the board in the managementof our business and affairs, except to the extent limited by Delaware law. Pursuant to the bylawsof the executive committee, as adopted by the full board, the executive committee has theauthority to exercise all powers of the board, except the power: |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| - | to declare dividends; |
|---|-----------------------|

| - | to sell or otherwise dispose of all or substantially all of our assets; |
|---|-------------------------------------------------------------------------|

| - | to recommend to our shareholders any action requiring their approval; and |
|---|---------------------------------------------------------------------------|

| - | to change the membership of any committee, fill the vacancies thereon or dischargeany committee. |
|---|--------------------------------------------------------------------------------------------------|

| During 2007, the Executive Committee did not meet; however, it took action by unanimouswritten consent in lieu of a meeting on 12 occasions. |
|----------------------------------------------------------------------------------------------------------------------------------------------|

| Audit Committee |
|-----------------|

| The audit committee of our board of directors is composed of Ira R. Witkin (chairman), GregoryA. Bonner and David Loflin. Our board has appointed Messrs. Witkin, Bonner and Loflin to theaudit committee. The purposes of the audit committee are: |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| - | to oversee the quality and integrity of the financial statements and other financialinformation we provide to any governmental body or the public; |
|---|----------------------------------------------------------------------------------------------------------------------------------------------------|

| - | to oversee the independent auditors’ qualifications and independence; |
|---|-----------------------------------------------------------------------------|

| - | to oversee the performance of our independent auditors; |
|---|---------------------------------------------------------|

| - | to oversee our systems of internal controls regarding finance, accounting, legal complianceand ethics that management and the board have established or will establish in the future; |
|---|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| - | to establish procedures for the receipt, retention and treatment of complaints regardingaccounting, internal controls, and other auditing matters and for the confidential,anonymous submission by our employees of concerns regarding questionable accountingor auditing matters; |
|---|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| - | to provide an open avenue of communication among the independent auditors, financialand senior management, the internal auditing department, and the board, alwaysemphasizing that the independent auditors are accountable to the audit committee; and |
|---|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| - | to perform such other duties as are directed by the board. |
|---|------------------------------------------------------------|

| During 2007, the Audit Committee did not meet, but did take action by written consent on oneoccassion. |
|--------------------------------------------------------------------------------------------------------|

| Compensation of Directors |
|---------------------------|

| We do not pay any of our directors for their services as directors.  It is possible that ourmanagement could begin to pay our directors for meetings attended, grant a small number of stockoptions or issue shares of our common stock for their services.  However, no specificdetermination in this regard has been made. |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| In November 2003, two of our directors, Gregory A. Bonner and Ira R. Witkin, were each issued10,000 shares of our common stock each, in payment of future services as directors.  There shareswere valued, for financial reporting purposes, at $3.85 per share, or $77,000, in the aggregate. |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| In June 2004, each of Messrs. Bonner and Witkin, were issued 200,000 shares of our commonstock, in payment of their services as directors.  There shares were valued, for financial reportingpurposes, at $.4375 per share, or $150,000, in the aggregate.  In October 2004, each of Messrs.Bonner and Witkin, were issued 100,000 shares our common stock, in payment of their servicesas directors.  There shares were valued, for financial reporting purposes, at $.08 per share, or$32,000, in the aggregate. |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| In March 2005, each of Messrs. Bonner and Witkin, were issued 100,000 shares our commonstock, in payment of their services as directors.  There shares were valued, for financial reportingpurposes, at $.08 per share, or $32,000, in the aggregate.  In July 2005, each of Messrs. Bonnerand Witkin, were issued 100,000 shares our common stock, in payment of their services asdirectors.  There shares were valued, for financial reporting purposes, at $.048 per share, or$4,800, in the aggregate.  In October 2005, each of Messrs. Bonner and Witkin, were issued100,000 shares our common stock, in payment of their services as directors.  There shares werevalued, for financial reporting purposes, at $035 per share, or $3,500, in the aggregate. |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| In January 2006, each of Messrs. Bonner and Witkin were issued 100,000 shares our commonstock, in payment of their services as directors.  There shares were valued, for financial reportingpurposes, at $.03 per share, or $6,000, in the aggregate.  In July 2006, each of Messrs. Bonner andWitkin were issued 100,000 shares our common stock, in payment of their services as directors.There shares were valued, for financial reporting purposes, at $.03 per share, or $6,000, in theaggregate.  In November 2006, each of Messrs. Bonner and Witkin were issued 100,000 sharesour common stock, in payment of their services as directors.  There shares were valued, forfinancial reporting purposes, at $.012 per share, or $2,400, in the aggregate. |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| In May 2007, each of Messrs. Bonner and Witkin were issued 100,000 shares our common stock,in payment of their services as directors.  There shares were valued, for financial reportingpurposes, at $.021 per share, or $4,200, in the aggregate. |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Limitation of Liability and Indemnification |
|---------------------------------------------|

| Our restated certificate of incorporation contains provisions limiting the liability of directors. Ourrestated certificate of incorporation provides that a director will not be personally liable to us orto our shareholders for monetary damages for any breach of fiduciary duty as a director, but willcontinue to be subject to liability for the following: |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| - | any breach of the director’s duty of loyalty to us or to our shareholders; |
|---|----------------------------------------------------------------------------------|

| - | acts or omissions not in good faith or that involve intentional misconduct or a knowingviolation of law; |
|---|----------------------------------------------------------------------------------------------------------|

| - | unlawful payment of dividends or unlawful stock repurchases or redemptions; and |
|---|---------------------------------------------------------------------------------|

| - | any transaction from which the director derived an improper personal benefit. |
|---|-------------------------------------------------------------------------------|

| If Delaware law is amended to authorize corporate action further eliminating or limiting thepersonal liability of a director, then the liability of our directors will be eliminated or limited tothe fullest extent permitted by Delaware law, as so amended. Our restated certificate ofincorporation does not eliminate a director’s duty of care and, in appropriate circumstances,equitable remedies such as injunctive or other forms of non-monetary relief remain availableunder Delaware law. Our restated certificate of incorporation does not affect a director’sresponsibilities under any other laws, such as state or federal securities laws or state or federalenvironmental laws. |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| In addition, we have entered into agreements to indemnify our directors and executive officers tothe fullest extent permitted under Delaware law, including the non-exclusivity provisions ofDelaware law, and under our bylaws, subject to limited exceptions. These agreements, amongother things, provide for indemnification of our directors and executive officers for fees, expenses,judgments, fines, and settlement amounts incurred by any of these persons in any action orproceeding to which any of those persons is, or is threatened to be, made a party by reason of theperson’s service as a director or officer, including any action by us, arising out of that person’sservices as our director or officer or that person’s services provided to any other company orenterprise at our request. We believe that these bylaw provisions and agreements are necessaryto attract and retain qualified persons as directors and officers. We also intend to maintain liabilityinsurance for our officers and directors. |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| The limitation of liability and indemnification provisions in our restated certificate ofincorporation and bylaws may discourage shareholders from bringing a lawsuit against directorsfor breach of their fiduciary duties. They may also reduce the likelihood of derivative litigationagainst directors and officers, even though an action, if successful, might benefit us and ourshareholders. A shareholder’s investment may be adversely affected to the extent we pay the costsof settlement and damage awards against directors and officers pursuant to these indemnificationprovisions. |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

| Item 10. | Executive Compensation |
|----------|------------------------|

| The following table sets forth certain compensation information for: (i) each person who servedas the chief executive officer of Diamond I, Inc. at any time during the year ended December 31,2007, 2006 and 2005, regardless of compensation level, and (ii) each of our other executiveofficers, other than the chief executive officer, serving as an executive officer at any time during2007, 2006 and 2005.  The foregoing persons are collectively referred to herein as the “namedexecutive officers”.  Compensation information is shown for the years ended December 31, 2007,2006 and 2005. |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Summary Compensation Table |
|----------------------------|

| Name andPrincipalPosition | Year | Salary($) | Bonus($) | StockAwards($) | OptionAwards($) | Non-EquityIncentive PlanCompensation($) | Nonquali-fiedDeferredCompen-sationEarnings($) | AllOtherCompen-sation ($) | Total($) |
|---------------------------|------|-----------|----------|----------------|-----------------|-----------------------------------------|-----------------------------------------------|---------------------------|----------|

| DavidLoflin | 2007 | 384,454(1) | --- | --- | --- | --- | --- | --- | 384,454(1) |
|-------------|------|------------|-----|-----|-----|-----|-----|-----|------------|

| PresidentandActingChiefFinancialOfficer | 2006 | 180,000(2) | 300,000(3) | --- | --- | --- | --- | --- | 480,000(2,3) |
|-----------------------------------------|------|------------|------------|-----|-----|-----|-----|-----|--------------|

|   | 2005 | 180,000(4) | 513,500(5) | --- | --- | --- | --- | --- | 693,500(4,5) |
|--------|------|------------|------------|-----|-----|-----|-----|-----|--------------|

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

| WaddellD. Loflin | 2007 | 254,968(6) | --- |   | --- | --- | --- | --- | 254,968(6) |
|------------------|------|------------|-----|--------|-----|-----|-----|-----|------------|

| ExecutiveVicePresidentandSecretary | 2006 | 120,000(7) | 99,000(8) | --- | --- | --- | --- | --- | 219,000(7,8) |
|------------------------------------|------|------------|-----------|-----|-----|-----|-----|-----|--------------|

|   | 2005 | 120,000(9) | 181,000(10) | --- | --- | --- | --- | --- | 301,000(9,10) |
|--------|------|------------|-------------|-----|-----|-----|-----|-----|---------------|

| (1) | Mr. David Loflin was paid $12,100 of his 2007 salary; $167,900 of his 2007 salary wasnot paid.  This amount has been accrued.  In addition, Mr. Loflin was issued 9,735,904shares of our common stock in payment of $204,454 in accrued salary. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Mr. David Loflin was paid $20,546 of his 2006 salary; $159,454 of his 2006 salary wasnot paid.  This amount was accrued at December 31, 2006, then was paid is shares of ourcommon stock during 2007. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | Mr. David Loflin's bonus amount was paid by the issuance of a total of 13,000,000 sharesof our common stock. 8,000,000 of such shares were valued at $.03 per share; and5,000,000 of such shares were valued at $.012 per share.  Each valuation reflects theclosing price of our common stock, as reported by the OTC Bulletin Board, on therespective dates of issuance. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (4) | Mr. David Loflin was paid $65,385 of his 2005 salary; $114,615 of his 2005 salary wasnot paid and Mr. Loflin has waived payment of the unpaid salary.  The unpaid salaryamount was accounted for as contributed capital. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (5) | Mr. David Loflin's bonus amount was paid by the issuance of a total of 7,500,000 sharesof our common stock.  3,000,000 of such shares were valued at $.11 per share; 2,000,000of such shares were valued at $.048 per share; and 2,500,000 of such shares were valuedat $.035 per share.  Each valuation reflects the closing price of our common stock, asreported by the OTC Bulletin Board, on the respective dates of issuance. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (6) | Mr. Waddell Loflin was paid $3,200 of his 2007 salary; $116,800 of his 2007 salary wasnot paid.  This amount has been accrued.  In addition, Mr. Loflin was issued 6,427,047shares of our common stock in payment of $134,968 in accrued salary. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (7) | Mr. Waddell Loflin was paid $14,032 of his 2006 salary; $105,968 of his 2006 salary wasnot paid.  This amount was accrued at December 31, 2006, then was paid is shares of ourcommon stock during 2007. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (8) | Mr. Waddell Loflin's bonus amount was paid by the issuance of a total of 4,500,000 sharesof our common stock. 2,500,000 of such shares were valued at $.03 per share; and2,000,000 of such shares were valued at $.012 per share.  Each valuation reflects theclosing price of our common stock, as reported by the OTC Bulletin Board, on therespective dates of issuance. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (9) | Mr. Waddell Loflin was paid $55,576 of his 2005 salary; $64,424 of his 2005 salary wasnot paid and Mr. Loflin has waived payment of the unpaid salary.  The unpaid salaryamount was accounted for as contributed capital. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (10) | Mr. Waddell Loflin's bonus amount was paid by the issuance of a total of 2,750,000 sharesof our common stock.  1,000,000 of such shares were valued at $.11 per share; 750,000of such shares were valued at $.048 per share; and 1,000,000 of such shares were valuedat $.035 per share.  Each valuation reflects the closing price of our common stock, asreported by the OTC Bulletin Board, on the respective dates of issuance. |
|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Employment Contracts and Termination of Employment and Change-in-Control Agreements |
|-------------------------------------------------------------------------------------|

| David Loflin Employment Agreement.  David Loflin has entered into an employment agreementto serve as our president for three years, ending in September 2009.  Mr. Loflin’s annual salaryis $180,000.  In 2007, Mr. Loflin received $12,100 of his salary, with the balance being accrued.In 2006, Mr. Loflin received $20,546 of his salary.  In connection with his employment agreement,Mr. Loflin executed an indemnity agreement, a confidentiality agreement and an agreement notto compete. |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Waddell D. Loflin Employment Agreement.  Waddell D. Loflin has entered into an employmentagreement to serve as our executive president for three years, ending in September 2009.  Mr.Loflin’s annual salary is $120,000.  In 2007, Mr. Loflin received $3,200 of his salary, with thebalance being accrued.  In 2006, Mr. Loflin received $14,032 of his salary.  In connection withhis employment agreement, Mr. Loflin executed an indemnity agreement, a confidentialityagreement and an agreement not to compete. |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| We have no compensatory plan or arrangement that results or will result from the resignation,retirement or any other termination of an executive officer’s employment or from a change incontrol or a change in an executive officer’s responsibilities following a change in control. |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Outstanding Option Awards at Year End |
|---------------------------------------|

| The following table provides certain information regarding unexercised options to purchasecommon stock, stock options that have not vested and equity-incentive plan awards outstandingat December 31, 2007, for each named executive officer. |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Outstanding Equity Awards at Fiscal Year-End |
|----------------------------------------------|

|   | Option Awards | Stock Awards |
|--------|---------------|--------------|

| Name | Number ofSecuritiesUnderlyingUnexercisedOptions (#)Exercisable | Number ofSecuritiesUnderlyingUnexercisedOptions (#)Unex-ercisable | EquityIncentive PlanAwards:Number ofSecuritiesUnderlyingUnexercisedUnearnedOptions (#) | OptionExercisePrice | OptionExpirationDate | NumberofShares orUnits ofStockThatHaveNotVested(#) | MarketValue ofShares orUnits ofStockThatHaveNotVested($) | EquityIncentivePlanAwards:Number ofUnearnedShares, UnitsorOtherRightsThatHaveNotVested (#) | EquityIncentivePlanAwards:Market orPayoutValueofUnearnedShares, UnitsorOtherRightsThatHaveNotVested ($) |
|------|----------------------------------------------------------------|-------------------------------------------------------------------|----------------------------------------------------------------------------------------|---------------------|----------------------|----------------------------------------------------|----------------------------------------------------------|--------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------|

| David Loflin | --- | --- | --- | --- | n/a | --- | n/a | --- | --- |
|--------------|-----|-----|-----|-----|-----|-----|-----|-----|-----|

| Waddell D.Loflin | --- | --- | --- | --- | n/a | --- | n/a | --- | --- |
|------------------|-----|-----|-----|-----|-----|-----|-----|-----|-----|

| Director Compensation |
|-----------------------|

| The following table sets forth the compensation paid to our directors for our fiscal years endedDecember 31, 2007, 2006 and 2005. |
|-----------------------------------------------------------------------------------------------------------------------------------|

| Director Compensation |
|-----------------------|

|          NameYear | FeesEarnedor Paidin Cash($) | StockAwards($) | OptionAwards($) | Non-EquityIncentive PlanCompensation($) | NonqualifiedDeferredCompensationEarnings($) | AllOtherCompensation($) | Total($) |
|----------------------------------------------------------------|-----------------------------|----------------|-----------------|-----------------------------------------|---------------------------------------------|-------------------------|----------|

| DavidLoflin | 2007 | --- | --- | --- | --- | --- | --- | --- |
|-------------|------|-----|-----|-----|-----|-----|-----|-----|

|   | 2006 | --- | --- | --- | --- | --- | --- | --- |
|--------|------|-----|-----|-----|-----|-----|-----|-----|

|   | 2005 | --- | --- | --- | --- | --- | --- | --- |
|--------|------|-----|-----|-----|-----|-----|-----|-----|

| WaddellD. Loflin | 2007 | --- | --- | --- | --- | --- | --- | --- |
|------------------|------|-----|-----|-----|-----|-----|-----|-----|

|   | 2006 | --- | --- | --- | --- | --- | --- | --- |
|--------|------|-----|-----|-----|-----|-----|-----|-----|

|   | 2005 | --- | --- | --- | --- | --- | --- | --- |
|--------|------|-----|-----|-----|-----|-----|-----|-----|

| GregoryA. Bonner | 2007 | --- | 2,100 | --- | --- | --- | --- | 2,100 |
|------------------|------|-----|-------|-----|-----|-----|-----|-------|

|   | 2006 | --- | 7,200 | --- | --- | --- | --- | 7,200 |
|--------|------|-----|-------|-----|-----|-----|-----|-------|

|   | 2005 | --- | 20,150 | --- | --- | --- | --- | 20,150 |
|--------|------|-----|--------|-----|-----|-----|-----|--------|

| Ira R.Witkin | 2007 | --- | 2,100 | --- | --- | --- | --- | 2,100 |
|--------------|------|-----|-------|-----|-----|-----|-----|-------|

|   | 2006 | --- | 7,200 | --- | --- | --- | --- | 7,200 |
|--------|------|-----|-------|-----|-----|-----|-----|-------|

|   | 2005 | --- | 20,150 | --- | --- | --- | --- | 20,150 |
|--------|------|-----|--------|-----|-----|-----|-----|--------|

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

| Item 11. | Security Ownership of Certain Beneficial Owners and Management |
|----------|----------------------------------------------------------------|

| The following table sets forth, as of the date hereof, information regarding beneficial ownershipof our capital stock by the following: |
|-----------------------------------------------------------------------------------------------------------------------------------------|

| - | each person, or group of affiliated persons, known by us to be the beneficial owner ofmore than five percent of any class of our voting securities; |
|---|-----------------------------------------------------------------------------------------------------------------------------------------------------|

| - | each of our directors; |
|---|------------------------|

| - | each of the named executive officers; and |
|---|-------------------------------------------|

| - | all directors and executive officers as a group. |
|---|--------------------------------------------------|

| Beneficial ownership is determined in accordance with the rules of the SEC, based on voting orinvestment power with respect to the securities. In computing the number of shares beneficiallyowned by a person and the percentage ownership of that person, shares of common stockunderlying warrants held by that person are deemed to be outstanding if the warrants areexercisable within 60 days of the date hereof. All percentages in this table are based on a total of361,016,707 shares of common stock outstanding as of the date hereof, which amount includesa total of 19,000,000 shares underlying currently outstanding and exercisable warrants.  Exceptas indicated in the footnotes below, we believe, based on information furnished to us, that thepersons and entities named in the table below have sole voting and investment power with respectto all shares of common stock shown as beneficially owned by them. Unless otherwise indicated,the address for each of the shareholders in the table below is c/o Diamond I, Inc., 8733 SiegenLane, Suite 309, Baton Rouge, Louisiana 70810. |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Beneficially Owned |   |
|--------|--------------------|--------|

| Name and Address of Beneficial Owner |   | Shares |   | Percent (1) |   |
|--------------------------------------|--------|--------|--------|-------------|--------|

| David Loflin |   | 42,255,904 (2) |   | 11.70% |   |
|--------------|--------|----------------|--------|--------|--------|

| Waddell D. Loflin |   | 10,900,000 |   | 3.02% |   |
|-------------------|--------|------------|--------|-------|--------|

| Gregory A. Bonner |   | 1,190,000 |   | * |   |
|-------------------|--------|-----------|--------|---|--------|

| Ira R. Witkin |   | 1,190,000 |   | * |   |
|---------------|--------|-----------|--------|---|--------|

| All executive officers and directors as agroup (4 persons) |   | 48,942,856 (2) |   | 13.56% |   |
|------------------------------------------------------------|--------|----------------|--------|--------|--------|

| Newlan & Newlan(3) |   | 28,204,514 |   | 7.81% |   |
|------------------------|--------|------------|--------|-------|--------|

| Heyer Capital Fund(4)(14) |   | 6,000,000(5) |   | 1.66% |   |
|---------------------------|--------|--------------|--------|-------|--------|

| 1008212 Alberta Ltd.(6)(14) |   | 6,000,000(7) |   | 1.66% |   |
|-----------------------------|--------|--------------|--------|-------|--------|

| Douglasdale Capital Ltd.(8)(14) |   | 6,000,000(9) |   | 1.66% |   |
|---------------------------------|--------|--------------|--------|-------|--------|

| Douglasbank Capital Ltd.(10)(14) |   | 6,000,000(11) |   | 1.66% |   |
|----------------------------------|--------|---------------|--------|-------|--------|

| Shelter Capital Ltd.(12) |   | 4,000,000(13) |   | 1.11% |   |
|--------------------------|--------|---------------|--------|-------|--------|

| * | Less than 1% |
|---|--------------|

| (1) | Based on 361,016,707 shares outstanding, including a total of 19,000,000 sharesunderlying currently outstanding and exercisable warrants. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | 3,400,000 of these shares are owned by Phoenix Trust.  David Loflin is the trustee of thisentity and possesses voting and investment control of the shares owned by it. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | Newlan & Newlan’s address is 2652 F.M. 407, Suite 230, Bartonville, Texas 76226.  L.A. Newlan, Jr. and Eric Newlan are the partners in the law firm of Newlan & Newlan, ourlegal counsel, and own, directly and directly, a total number of shares shown. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (4) | Heyer Capital’s address is 418 Douglas Park View S.E., Calgary, Alberta, Canada T2Z2R1. Peter Rochow is the owner of this entity and possesses voting and investment controlof the shares owned by it. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (5) | 5,000,000 of these shares have been issued; 1,000,000 of these shares have not beenissued, but underlie currently exercisable warrants. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------|

| (6) | 1008212 Alberta’s address is 418 Douglas Park View S.E., Calgary, Alberta, Canada T2Z2R1.  Joanne Rochow is the owner of this entity and possesses voting and investmentcontrol of the shares owned by it. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (7) | 5,000,000 of these shares have been issued; 1,000,000 of these shares have not beenissued, but underlie currently exercisable warrants. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------|

| (8) | Douglasdale Capital’s address is 418 Douglas Park View S.E., Calgary, Alberta, CanadaT2Z 2R1. Peter Rochow possesses voting and investment control of the shares owned bythis entity.  Mr. Rochow disclaims any beneficial ownership of the shares owned by thisentity. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (9) | 5,000,000 of these shares have been issued; 1,000,000 of these shares have not beenissued, but underlie currently exercisable warrants. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------|

| (10) | Douglasbank Capital’s address is 418 Douglas Park View S.E., Calgary, Alberta, CanadaT2Z 2R1. Peter Rochow possesses voting and investment control of the shares owned bythis entity.  Mr. Rochow disclaims any beneficial ownership of the shares owned by thisentity. |
|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (11) | 5,000,000 of these shares have been issued; 1,000,000 of these shares have not beenissued, but underlie currently exercisable warrants. |
|------|-----------------------------------------------------------------------------------------------------------------------------------------|

| (12) | Shelter Capital’s address is P.O. Box 64, Providenciales, Turks and Caicos Islands.  PeterRochow possesses voting and investment control of the shares owned by this entity.  Mr.Rochow disclaims any beneficial ownership of the securities owned by this entity. |
|------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (13) | None of these shares has been issued, but underlie currently exercisable warrants. |
|------|------------------------------------------------------------------------------------|

| (14) | Heyer Capital Fund, Douglasdale Capital Ltd. and Douglasbank Capital Ltd. havecommon management, Mr. Peter Rochow, who possesses the power of disposition overthe securities owned by these entities; the beneficial ownership of each of these entitiesis different. Mr. Rochow disclaims any beneficial ownership of the shares owned by theseentities, except for those owned by Heyer Capital Fund, of which he is the beneficialowner. |
|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

| Item 12. | Certain Relationships and Related Transactions |
|----------|------------------------------------------------|

| Acquisition of Diamond I Technologies, Inc. |
|---------------------------------------------|

| On January 18, 2005, pursuant to an agreement and plan of reorganization, we acquired all of theoutstanding capital stock of Diamond I Technologies, Inc., a Nevada corporation (DITech), byissuing a total of 70,591,026 shares of our common stock to the shareholders of DITech.  Thereorganization agreement provides for further issuances of shares of our common stock, uponDITech’s satisfying certain performance standards, as follows:  (a) we are obligated to issue anadditional 35,295,513 shares to the shareholders of DITech, if, on or before the date which is twoyears from the consummation of the reorganization agreement, DITech shall have completed thedesign and installation of a hand-held Wi-Fi-based gaming system in a first-class hotel/casino withno fewer than 400 guest rooms located in the State of Nevada (the “Target System”), to the effectthat the Target System is 100% operational and ready for use by guests of the host hotel/casino,which readiness shall include the approval of the Nevada Gaming Commission; and (b)  we areobligated to issue an additional 35,295,513 shares to the shareholders of DITech, if, on or beforethe date which is five years from the consummation of the reorganization agreement, the TargetSystem shall have operated at a profit, as determined by generally accepted accounting principles,for a period of three consecutive months.  In 2005, we issued a total of 1,000,000 shares of ourcommon stock to the former owners of DITech, in consideration of their waiving certain fundingobligations contained in the original acquisition agreement.  These shares were valued, forfinancial reporting purposes, at $.038 per share, or $38,000, in the aggregate. |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| In determining the number of shares of our common stock to be issued to the shareholders ofDITech, our board of directors did not employ any standard valuation formula or any otherstandard measure of value.  Rather, the number of shares issued to the shareholders of DITech wasdetermined through arm’s-length negotiations. |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 2007 Stock Bonuses |
|--------------------|

| During 2007, two of our directors, Gregory A. Bonner and Ira R. Witkin, were each issued100,000 shares our common stock, in payment of their services for 2007 as directors.  Theseshares were valued, for financial reporting purposes, at $.021 per share, or $4,200, in theaggregate. |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 2006 Stock Bonuses |
|--------------------|

| During 2006, Mr. David Loflin was issued a total of 13,000,000 shares our common stock, forretention bonuses for his serving as our president for 2006.  Mr. Waddell Loflin was issued a totalof 4,500,000 shares our common stock, for retention bonuses for his serving as our executive vicepresident for 2006.  Also, two of our directors, Gregory A. Bonner and Ira R. Witkin, were eachissued 300,000 shares our common stock, in payment of their services for 2006 as directors.10,900,000 of these shares were valued, for financial reporting purposes, at $.03 per share, or$327,000, in the aggregate.  7,200,000 of these shares were valued, for financial reportingpurposes, at $.012 per share, or $86,400, in the aggregate. |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 2005 Stock Bonuses |
|--------------------|

| During 2005, Mr. David Loflin was issued a total of 7,500,000 shares of our common stock, asbonus for his serving as our president.  3,000,000 of such shares were valued at $.11 per share;2,000,000 of such shares were valued at $.048 per share; and 2,500,000 of such shares werevalued at $.035 per share.  These shares were valued, in the aggregate for financial reportingpurposes, at $513,500. Each valuation reflects the closing price of our common stock, as reportedby the OTC Bulletin Board, on the respective dates of issuance. |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| During 2005, Mr. Waddell Loflin was issued a total of 2,750,000 shares of our common stock.1,000,000 of such shares were valued at $.11 per share; 750,000 of such shares were valued at$.048 per share; and 1,000,000 of such shares were valued at $.035 per share.  These shares werevalued, in the aggregate for financial reporting purposes, at $181,000.  Each valuation reflects theclosing price of our common stock, as reported by the OTC Bulletin Board, on the respective datesof issuance. |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| In March 2005, each of Messrs. Bonner and Witkin, were issued 100,000 shares our commonstock, in payment of their services as directors.  These shares were valued, for financial reportingpurposes, at $.08 per share, or $32,000, in the aggregate.  In July 2005, each of Messrs. Bonnerand Witkin, were issued 100,000 shares our common stock, in payment of their services asdirectors.  These shares were valued, for financial reporting purposes, at $.048 per share, or$4,800, in the aggregate.  In October 2005, each of Messrs. Bonner and Witkin, were issued100,000 shares our common stock, in payment of their services as directors.  These shares werevalued, for financial reporting purposes, at $035 per share, or $3,500, in the aggregate. |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 2004 Stock Bonuses |
|--------------------|

| During 2004, Mr. David Loflin was issued 2,857,152 shares of our common stock, as bonus forhis serving as our president.  These shares were valued, for financial reporting purposes, at $.08per share, or $228,572, in the aggregate. |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| During 2004, Mr. Waddell Loflin was issued 1,785,714 shares of our common stock, as bonusfor his serving as our president.  These shares were valued, for financial reporting purposes, at$.08 per share, or $142,857, in the aggregate. |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| During 2004, each of Messrs. Bonner and Witkin was issued 100,000 shares our common stock,in payment of their services as directors.  These shares were valued, for financial reportingpurposes, at $.08 per share, or $16,000, in the aggregate. |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 2003 Stock Bonuses |
|--------------------|

| In August 2003, one of our directors, Waddell D. Loflin, was issued 500,000 shares of ourcommon stock as a bonus for his service as a director.  As a result of our four-for-one forwardstock split, these shares now total 2,000,000.  These shares were valued at $50,000 for financialreporting purposes. |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| In November 2003, two of our directors, Gregory A. Bonner and Ira R. Witkin, were issued10,000 shares our common stock each, in payment of future services as directors.  As a result ofour four-for-one forward stock split, these shares now total 80,000.  There shares were valued, forfinancial reporting purposes, at $77,000, in the aggregate. |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 2003 Change in Control Transaction |
|------------------------------------|

| In June 2003, we experienced a change in control.  Pursuant to a stock purchase agreement, FMFInvestments, Ltd., a Texas limited partnership, purchased 611,000 shares, or 54.59%, of ouroutstanding common stock from Eric Anderson.  FMF Investments paid Mr. Anderson a total of$70,000 in cash, which funds were obtained by FMF Investments through its other businessactivities and not as a loan. |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Following FMF Investments’ acquiring control, our then-directors resigned and FMF Investments,acting by written consent in lieu of a meeting of a majority of shareholders, elected David Loflinand Waddell D. Loflin as our directors. |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 2003 Stock Purchase Agreement |
|-------------------------------|

| In June 2003, pursuant to a stock purchase agreement, we acquired all of the outstanding capitalstock of Air-Q Corp., a Nevada corporation (Air-Q NV), by issuing a total of 11,000,000 sharesof our common stock to the shareholders of Air-Q Corp.  In connection with our acquiring Air-QNV, our president, David Loflin, was issued 9,000,000 shares of our common stock and FMFInvestments, Ltd. was issued 2,000,000 shares of our common stock.  In determining the numberof shares of our common stock to be issued to the shareholders of Air-Q NV, our board ofdirectors did not employ any standard valuation formula or any other standard measure of value. |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Air-Q NV is now known as Diamond I Technologies, Inc. |
|-------------------------------------------------------|

| 2003 Securities Sales |
|-----------------------|

| In June 2003, we entered into four securities purchase agreements.  We entered into agreementswith Douglasdale Capital Ltd., Douglasbank Capital Ltd., Heyer Capital Fund and 1008212Alberta Ltd.  Under each of these agreements, we issued securities for cash in the amount of$125,000 for a total of $500,000 under these agreements.  We sold each of these entities (1)1,250,000 shares of our common stock, (2) 1,250,000 common stock purchase warrants topurchase a like number of shares at an exercise price of $.20 per share, (3) 1,250,000 commonstock purchase warrants to purchase a like number of shares at an exercise price of $.30 per share,(4) 1,250,000 common stock purchase warrants to purchase a like number of shares at an exerciseprice of $.40 per share and (5) 1,250,000 common stock purchase warrants to purchase a likenumber of shares at an exercise price of $.50 per share.  In April 2004, each of these entitiesagreed to cancel all of their respective common stock purchase warrants, in exchange for1,250,000 common stock purchase warrants to purchase a like number of shares at an exerciseprice of $1.00 per share.  As a result of our four-for-one forward stock split, each of these entitiesnow holds 5,000,000 common stock purchase warrants to purchase a like number of shares at anexercise price of $0.25 per share.  All of the warrants are exercisable for five years. |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| At the time of these transactions, the entities that purchased securities from us were under thecommon management of Peter Rochow.  The beneficial ownership of these entities is differentand Mr. Rochow disclaims any beneficial ownership of these entities, except for Heyer CapitalFund. |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 2003 Finder’s Fee |
|-------------------------|

| In connection with the sales of securities described under “2003 Securities Purchases” above, wepaid Shelter Capital, Ltd. a finder’s fee.  For its efforts as a finder, Shelter Capital received 10%of the cash proceeds derived by us and common stock purchase warrants, as follows:  (1)1,000,000 warrants to purchase a like number of shares at an exercise price of $.20 per share; (2)1,000,000 warrants to purchase a like number of shares at an exercise price of $.30 per share; (3)1,000,000 warrants to purchase a like number of shares at an exercise price of $.40 per share; and(4) 1,000,000 warrants to purchase a like number of shares at an exercise price of $.50 per share.As a result of our four-for-one forward stock split, Shelter Capital now holds (A) 4,000,000warrants to purchase a like number of shares at an exercise price of $.05 per share; (B) 4,000,000warrants to purchase a like number of shares at an exercise price of $.075 per share; (C) 4,000,000warrants to purchase a like number of shares at an exercise price of $.10 per share; and (D)4,000,000 warrants to purchase a like number of shares at an exercise price of $.125 per share.All of these warrants are exercisable for five years and expire in September 2008.  Shelter Capitalis managed by Peter Rochow, a principal in each of the entities who purchased securities from us,who disclaims any beneficial ownership of Shelter Capital. |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Employment Agreements |
|-----------------------|

| David Loflin Employment Agreement.  David Loflin has entered into an employment agreementto serve as our president for three years, ending in September 2009.  Mr. Loflin’s annual salaryis $180,000.  In 2007, Mr. Loflin received $12,100 of his salary, with the balance being accrued.In 2006, Mr. Loflin received $20,546 of his salary.  In connection with his employment agreement,Mr. Loflin executed an indemnity agreement, a confidentiality agreement and an agreement notto compete. |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Waddell D. Loflin Employment Agreement.  Waddell D. Loflin has entered into an employmentagreement to serve as our executive president for three years, ending in September 2009.  Mr.Loflin’s annual salary is $120,000.  In 2007, Mr. Loflin received $3,200 of his salary, with thebalance being accrued.  In 2006, Mr. Loflin received $14,032 of his salary.  In connection withhis employment agreement, Mr. Loflin executed an indemnity agreement, a confidentialityagreement and an agreement not to compete. |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Director and Officer Indemnification |
|--------------------------------------|

| Our restated certificate of incorporation contains provisions limiting liability of directors.  Inaddition, we have entered into agreements to indemnify our directors and officers to the fullestextent permitted under Delaware law.  Please see “Item 9. Directors, Executive Officers,Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act”. |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

| Item 13. | Exhibits and Reports on Form 8-K |
|----------|----------------------------------|

| (a)(1) Financial Statements |
|-----------------------------|

|   | Index to Financial Statements of Diamond I, Inc. |
|--------|--------------------------------------------------|

| - | Report of Independent Registered Public Accounting Firm |
|---|---------------------------------------------------------|

| - | Report of Independent Registered Public Accounting Firm |
|---|---------------------------------------------------------|

| - | Consolidated Balance Sheet as of December 31, 2007 |
|---|----------------------------------------------------|

| - | Consolidated Statements of Revenues and Expenses for the Years Ended December 31,2007 and 2006, and the Period from June 17, 2003 (Inception), Through December 31,2007 |
|---|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| - | Consolidated Statements of Stockholders' Equity (Deficit) for the Period from June 17,2003 (Inception), Through December 31, 2007 |
|---|-----------------------------------------------------------------------------------------------------------------------------------|

| - | Consolidated Statements of Cash Flows for the Years Ended December 31, 2007 and2006, and the Period from June 17, 2003 (Inception) Through December 31, 2007 |
|---|--------------------------------------------------------------------------------------------------------------------------------------------------------------|

| - | Notes to Consolidated Financial Statements |
|---|--------------------------------------------|

| (a)(2) Exhibits |
|-----------------|

| ExhibitNo. |   | Description |
|------------|--------|-------------|

| 21.1 * |   | Subsidiaries of Registrant. |
|--------|--------|-----------------------------|

| 31.1 * |   | Certification of Chief Executive Officer required by Rule 13a-14(a) or Rule15d-14(b). |
|--------|--------|---------------------------------------------------------------------------------------|

| 31.2 * |   | Certification of Chief Financial Officer required by Rule 13a-14(a) or Rule15d-14(b). |
|--------|--------|---------------------------------------------------------------------------------------|

| 32.1 * |   | Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350enacted by Section 906 of the Sarbanes-Oxley Act of 2002. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------|

| 32.2 * |   | Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350enacted by Section 906 of the Sarbanes-Oxley Act of 2002. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------|

| * Filed herewith. |   |
|-------------------|--------|

| (b) Reports on Form 8-K |
|-------------------------|

| During the three months ended December 31, 2007, we did not file a Current Report on Form 8-K.Since December 31, 2007, we have not filed a Current Report on Form 8-K. |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

| Item 14. | Principal Accountant Fees and Services |
|----------|----------------------------------------|

| The following table sets forth fees billed to us by our auditors during the fiscal years endedDecember 31, 2007 and 2006, for: (i) services rendered for the audit of our annual financialstatements and the review of our quarterly financial statements, (ii) services by our auditors thatare reasonably related to the performance of the audit or review of our financial statements andthat are not reported as Audit Fees, (iii) services rendered in connection with tax compliance, taxadvice and tax planning and (iv) all other fees for services rendered. |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |   | Year EndedDecember 31, 2007 |   | Year EndedDecember 31, 2006 |   |
|--------|--------|--------|-----------------------------|--------|-----------------------------|--------|

|   | Audit fees |   | $20,500 |   | $31,891 |   |
|--------|------------|--------|---------|--------|---------|--------|

|   | Audit related fees |   | $0 |   | $0 |   |
|--------|--------------------|--------|----|--------|----|--------|

|   | Tax |   | $0 |   | $0 |   |
|--------|-----|--------|----|--------|----|--------|

|   | All other fees |   | $0 |   | $0 |   |
|--------|----------------|--------|----|--------|----|--------|

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

| SIGNATURES |
|------------|

| In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant caused this report tobe signed on its behalf by the undersigned, thereunto duly authorized. |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | DIAMOND I, INC. |
|--------|-----------------|

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

|   | By: | /s/ DAVID LOFLIN |   |
|--------|-----|------------------|--------|

|   | David LoflinPresident |   |
|--------|-----------------------|--------|

| Pursuant to the requirements of the Securities Act of 1933, as amended, this Annual Report onForm 10-KSB has been signed by the following persons in the capacities and on the datesincluded: |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|             |   |                                                                                                             |   |           |
|------------------|--------|------------------------------------------------------------------------------------------------------------------|--------|----------------|
| /s/ DAVID LOFLIN |   |                                                                                                             |   | April 15, 2008 |
| David Loflin     |   | President (principal executiveofficer), Acting ChiefAccounting Officer (principalfinancial officer) and Director |   |           |

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

| /s/ WADDELL D. LOFLIN |   |                                  |   | April 15, 2008 |
|-----------------------|--------|---------------------------------------|--------|----------------|
| Waddell D. Loflin     |   | Vice President, Secretary andDirector |   |           |

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

| /s/ GREGORY A. BONNER |   |     |   | April 15, 2008 |
|-----------------------|--------|----------|--------|----------------|
| Gregory A. Bonner     |   | Director |   |           |

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

|                |   |     |   | April __, 2008 |
|---------------------|--------|----------|--------|----------------|
|  Ira R. Witkin |   | Director |   |           |

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

| Supplemental Information to be Furnished With Reports Filed Pursuant to Section 15(d) of theExchange Act by Non-reporting Issuers. |
|------------------------------------------------------------------------------------------------------------------------------------|

| As of the date of this Annual Report on Form 10-KSB, no annual report or proxy material hasbeen sent to security holders of Diamond I, Inc.  It is anticipated that an annual report and proxymaterial will be furnished to security holders subsequent to the filing of this Annual Report onForm 10-KSB. |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
|---------------------------------------------------------|

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

| To the Board of Directors andShareholders of Diamond I, Inc. |
|--------------------------------------------------------------|

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

| We have audited the accompanying consolidated balance sheet of Diamond I, Inc. andsubsidiaries as of December 31, 2007 and the related consolidated statement of revenues andexpenses, stockholders’ equity  (deficit) and cash flows for the year ended December 31, 2007.Diamond I, Inc.’s management is responsible for these consolidated financial statements. Ourresponsibility is to express an opinion on these consolidated financial statements based on ouraudits. |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| We conducted our audits in accordance with the standards of the Public Company AccountingOversight Board (United States). Those standards require that we plan and perform the audit toobtain reasonable assurance about whether the consolidated financial statements are free ofmaterial misstatement. The company is not required to have, nor were we engaged to perform,an audit of its internal control over financial reporting.  Our audit included consideration ofinternal control over financial reporting as a basis for designing audit procedures that areappropriate in the circumstances, but not for the purpose of expressing an opinion on theeffectiveness of the company's internal control over financial reporting.  Accordingly, weexpress no such opinion.  An audit also includes examining, on a test basis, evidencesupporting the amounts and disclosures in the consolidated financial statements, assessing theaccounting principles used and significant estimates made by management, as well asevaluating the overall financial statement presentation.  We believe that our audits provide areasonable basis for our opinion. |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| In our opinion, the consolidated financial statements referred to above present fairly, in allmaterial respects, the financial position of Diamond I, Inc. and subsidiaries as of December 31,2007 and the consolidated results of their operations and their cash flows for the year endedDecember 31, 2007 in conformity with accounting principles generally accepted in the UnitedStates of America. |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| The accompanying consolidated financial statements have been prepared assuming thatDiamond I, Inc. will continue as a going concern. As discussed in Note 2 to the consolidatedfinancial statements, Diamond I, Inc. suffered losses from operations and has a working capitaldeficiency, which raises substantial doubt about its ability to continue as a going concern.Management’s plans regarding those matters also are described in Note 2. The consolidatedfinancial statements do not include any adjustments that might result from the outcome of thisuncertainty. |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

| /s/ FARMER, FUQUA & HUFF, P.C. |
|------------------------------------|

| Farmer, Fuqua & Huff, P.C.Plano, TexasApril 14, 2008 |
|----------------------------------------------------------|

| REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
|---------------------------------------------------------|

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

| To the Board of DirectorsDiamond I, Inc.(A Development Stage Company)Baton Rouge, LA |
|--------------------------------------------------------------------------------------|

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

| We have audited the accompanying consolidated statements of revenues and expenses,shareholders' equity, and cash flows of Diamond I, Inc. for the year ended December 31, 2006.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 onour audit. |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| We conducted our audit in accordance with the standards of the Public Company AccountingOversight Board (United States). Those standards require that we plan and perform an audit toobtain reasonable assurance about whether the consolidated financial statements are free ofmaterial misstatement. An audit also includes examining, on a test basis, evidence supportingthe amounts and disclosures in the consolidated financial statements, assessing the accountingprinciples used and significant estimates made by management, as well as evaluating theoverall financial statement presentation. We believe that our audit provides a reasonable basisfor our opinion. |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| In our opinion, the consolidated financial statements referred to above present fairly, in allmaterial respects, the  results of Diamond I, Inc.’s operations and cash flows for the perioddescribed in conformity with accounting principles generally accepted in the United States ofAmerica. |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| The accompanying consolidated financial statements have been prepared assuming thatDiamond I, Inc. will continue as a going concern. As discussed in Note 2 to the consolidatedfinancial statements, Diamond I, Inc. suffered losses from operations and has a working capitaldeficiency, which raises substantial doubt about its ability to continue as a going concern.Management's plans regarding those matters also are described in Note 2. The consolidatedfinancial statements do not include any adjustments that might result from the outcome of thisuncertainty. |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

| /s/ MALONE & BAILEY, P.C. |
|-------------------------------|

| Malone & Bailey, P.C.www.malone-bailey.comHouston, TexasApril 16, 2007 |
|----------------------------------------------------------------------------|

|   | DIAMOND I, INC. |   |
|--------|-----------------|--------|

|   | (a development stage company) |   |
|--------|-------------------------------|--------|

|   | CONSOLIDATED BALANCE SHEET |   |
|--------|----------------------------|--------|

|   | December 31, 2007 |   |
|--------|-------------------|--------|

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

| ASSETS |
|--------|

| Current assets: |   |   |
|-----------------|--------|--------|

|   | Cash | $294 |   |
|--------|------|------|--------|

|   | Total Current Assets | 294 |   |
|--------|----------------------|-----|--------|

| Equipment, net of accumulated depreciation of $100,911 | 1,204 |   |
|--------------------------------------------------------|-------|--------|

|   | Total Assets | $1,498 |   |
|--------|--------------|--------|--------|

| LIABILITIES AND STOCKHOLDERS' DEFICIT |
|---------------------------------------|

| Current Liabilities: |   |   |
|----------------------|--------|--------|

|   | Accounts payable | $4,500 |   |
|--------|------------------|--------|--------|

|   | Accrued expenses | 293,032 |   |
|--------|------------------|---------|--------|

|   | Short-term payable - third party | 30,400 |   |
|--------|----------------------------------|--------|--------|

|   | Short-term note payable - related party | 41,640 |   |
|--------|-----------------------------------------|--------|--------|

|   | Accrued interest - shareholders | 7,582 |   |
|--------|---------------------------------|-------|--------|

|   | Dividend payable on preferred stock | 112,500 |   |
|--------|-------------------------------------|---------|--------|

|   | Total current liabilities | 489,654 |   |
|--------|---------------------------|---------|--------|

|   | Commitments |   |   |
|--------|-------------|--------|--------|

| Stockholders’ equity: |   |   |
|-----------------------------|--------|--------|

|   | Series A Convertible Preferred Stock, $.001 parvalue, 50,000,000 shares authorized, 500,000 SeriesA shares issued and outstanding | 500 |   |
|--------|-----------------------------------------------------------------------------------------------------------------------------------|-----|--------|

|   | Common stock, $.001 par value; 700,000,000 sharesauthorized, 342,016,707 shares issued andoutstanding | 342,017 |   |
|--------|-------------------------------------------------------------------------------------------------------|---------|--------|

|   | Subscription receivable | (128,000) |   |
|--------|-------------------------|-----------|--------|

|   | Additional paid-in capital | 29,873,158 |   |
|--------|----------------------------|------------|--------|

|   | Deficit accumulated during the development stage | (30,575,831) |   |
|--------|--------------------------------------------------|--------------|--------|

|   | Total Stockholders' Deficit | (488,156) |   |
|--------|-----------------------------|-----------|--------|

|   | Total Liabilities and Stockholders’ Equity | $1,498 |   |
|--------|--------------------------------------------------|--------|--------|

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

|   | DIAMOND I, INC. |   |
|--------|-----------------|--------|

|   | (a development stage company) |   |
|--------|-------------------------------|--------|

|   | STATEMENTS OF REVENUES ANDEXPENSES |   |
|--------|------------------------------------|--------|

|   | For the Years Ended December 31, 2007 and 2006, andthe Period from June 17, 2003 (Inception), Through December 31, 2007 |   |
|--------|-------------------------------------------------------------------------------------------------------------------------|--------|

|   | Year Ended December 31, |   |   |
|--------|-------------------------|--------|--------|

|   | 2007 |   | 2006 |   | Inceptionthrough12/31/2007 |
|--------|------|--------|------|--------|----------------------------|

| Revenues | $--- |   | $--- |   | $10,784 |
|----------|------|--------|------|--------|---------|

| Internet access costs | --- |   | --- |   | (32,850) |
|-----------------------|-----|--------|-----|--------|----------|

| Gross profit (loss) | --- |   | --- |   | (22,066) |
|---------------------|-----|--------|-----|--------|----------|

| OPERATING EXPENSES |   |   |   |   |   |
|--------------------|--------|--------|--------|--------|--------|

|   | Professional and consulting fees | 421,584 |   | 476,620 |   | 4,183,672 |
|--------|----------------------------------|---------|--------|---------|--------|-----------|

|   | Compensation expense | 307,200 |   | 1,050,186 |   | 5,182,776 |
|--------|----------------------|---------|--------|-----------|--------|-----------|

|   | Depreciation and amortization | 110,126 |   | 111,910 |   | 297,476 |
|--------|-------------------------------|---------|--------|---------|--------|---------|

|   | Impairment loss | 664,569 |   | --- |   | 17,473,096 |
|--------|-----------------|---------|--------|-----|--------|------------|

|   | General and administrative | 2,677 |   | 36,105 |   | 3,387,305 |
|--------|----------------------------|-------|--------|--------|--------|-----------|

|   | Total Operating Expenses | 1,506,156 |   | 1,674,821 |   | 30,524,325 |
|--------|--------------------------|-----------|--------|-----------|--------|------------|

| LOSS FROM OPERATIONS | (1,506,156) |   | (1,674,821) |   | (30,546,391) |
|----------------------|-------------|--------|-------------|--------|--------------|

| OTHER INCOME (EXPENSE) | (3,348) |   | (27,234) |   | (29,440) |
|------------------------|---------|--------|----------|--------|----------|

| NET LOSS | $(1,509,504) |   | $(1,702,055) |   | (30,575,831) |
|----------|--------------|--------|--------------|--------|--------------|

| Deemed Dividend on Preferred Stock | --- |   | --- |   | (165,442) |
|------------------------------------|-----|--------|-----|--------|-----------|

| Cumulative Preferred Dividends | (30,000) |   | (30,000) |   | (112,500) |
|--------------------------------|----------|--------|----------|--------|-----------|

| Net Loss Charged to CommonShareholders | $(1,539,504) |   | $(1,732,055) |   | $(30,853,773) |
|----------------------------------------|--------------|--------|--------------|--------|---------------|

| Net loss applicable to commonshareholders |   |   |   |   |   |
|-------------------------------------------|--------|--------|--------|--------|--------|

|   | Basic and diluted | $(0.01) |   | $(0.01) |   |   |
|--------|-------------------|---------|--------|---------|--------|--------|

| Weighted average number of sharesoutstanding |   |   |   |   |   |
|----------------------------------------------|--------|--------|--------|--------|--------|

|   | Basic and diluted | 316,091,864 |   | 254,459,362 |   |   |
|--------|-------------------|-------------|--------|-------------|--------|--------|

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

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

|   | DIAMOND I, INC. |   |
|--------|-----------------|--------|

|   | (a development stage company) |   |
|--------|-------------------------------|--------|

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

|   | CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT) |   |
|--------|----------------------------------------------------------------|--------|

|   |  For the Period from June 17, 2003 (Inception), Through December31, 2007 |   |
|--------|-------------------------------------------------------------------------------|--------|

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

|   | Preferred Stock |   | Common Stock |   |
|--------|-----------------|--------|--------------|--------|

|   | Shares |   | Amount |   | Shares |   | Amount |   | Additional Paid-inCapital |   | SubscriptionReceivable |   | DeficitAccumulated DuringtheDevelopment Stage |   | Total |
|--------|--------|--------|--------|--------|--------|--------|--------|--------|---------------------------|--------|------------------------|--------|-----------------------------------------------|--------|-------|

| Issuance ofcommon stock tofounders | - |   | $ - |   | 44,000,000 |   | $44,000 |   | $(43,000) |   | $ - |   | $ - |   | $1,000 |
|------------------------------------|---|--------|-----|--------|------------|--------|---------|--------|-----------|--------|-----|--------|-----|--------|--------|

| Stock issued inreverse acquisition | - |   | - |   | 4,476,816 |   | 4,477 |   | (3,358) |   | - |   | - |   | 1,119 |
|------------------------------------|---|--------|---|--------|-----------|--------|-------|--------|---------|--------|---|--------|---|--------|-------|

| Stock issued forservices | - |   | - |   | 12,610,000 |   | 12,610 |   | 2,012,216 |   | - |   | - |   | 2,024,826 |
|--------------------------|---|--------|---|--------|------------|--------|--------|--------|-----------|--------|---|--------|---|--------|-----------|

| Stock issued forcash and warrants,net of cost | - |   | - |   | 20,000,000 |   | 20,000 |   | 430,000 |   | - |   | - |   | 450,000 |
|-----------------------------------------------|---|--------|---|--------|------------|--------|--------|--------|---------|--------|---|--------|---|--------|---------|

| Net loss | - |   | - |   | - |   | - |   | - |   | - |   | (2,409,433) |   | (2,409,433) |
|----------|---|--------|---|--------|---|--------|---|--------|---|--------|---|--------|-------------|--------|-------------|

| Balance, December31, 2003 | - |   | - |   | 81,086,816 |   | 81,087 |   | 2,395,858 |   | - |   | (2,409,433) |   | 67,512 |
|---------------------------|---|--------|---|--------|------------|--------|--------|--------|-----------|--------|---|--------|-------------|--------|--------|

| Preferred stockissued for cash andwarrants | 500,000 |   | 500 |   | - |   | - |   | 499,500 |   | - |   | - |   | 500,000 |
|--------------------------------------------|---------|--------|-----|--------|---|--------|---|--------|---------|--------|---|--------|---|--------|---------|

| Stock issued inacquisition | - |   | - |   | 824,000 |   | 824 |   | 380,276 |   | - |   | - |   | 381,100 |
|----------------------------|---|--------|---|--------|---------|--------|-----|--------|---------|--------|---|--------|---|--------|---------|

|   | Preferred Stock |   | Common Stock |   |
|--------|-----------------|--------|--------------|--------|

|   | Shares |   | Amount |   | Shares |   | Amount |   | Additional Paid-inCapital |   | SubscriptionReceivable |   | DeficitAccumulated DuringtheDevelopment Stage |   | Total |
|--------|--------|--------|--------|--------|--------|--------|--------|--------|---------------------------|--------|------------------------|--------|-----------------------------------------------|--------|-------|

| Stock issued forwi-fi hotspots | - |   | - |   | 208,000 |   | 208 |   | 120,692 |   | - |   | - |   | 120,900 |
|--------------------------------|---|--------|---|--------|---------|--------|-----|--------|---------|--------|---|--------|---|--------|---------|

| Stock issued forcash on optionexercise | - |   | - |   | 1,640,435 |   | 1,640 |   | 148,360 |   | - |   | - |   | 150,000 |
|----------------------------------------|---|--------|---|--------|-----------|--------|-------|--------|---------|--------|---|--------|---|--------|---------|

| Stock issued forsalary | - |   | - |   | 338,826 |   | 339 |   | 41,661 |   | - |   | - |   | 42,000 |
|------------------------|---|--------|---|--------|---------|--------|-----|--------|--------|--------|---|--------|---|--------|--------|

| Stock issued forservices | - |   | - |   | 6,480,465 |   | 6,481 |   | 1,494,637 |   | - |   | - |   | 1,506,118 |
|--------------------------|---|--------|---|--------|-----------|--------|-------|--------|-----------|--------|---|--------|---|--------|-----------|

| Stock issued asbonuses | - |   | - |   | 5,522,856 |   | 5,523 |   | 577,905 |   | - |   | - |   | 583,428 |
|------------------------|---|--------|---|--------|-----------|--------|-------|--------|---------|--------|---|--------|---|--------|---------|

| Beneficialconversion featureembedded inpreferred stock andwarrants | - |   | - |   | - |   | - |   | 165,442 |   | - |   | - |   | 165,442 |
|--------------------------------------------------------------------|---|--------|---|--------|---|--------|---|--------|---------|--------|---|--------|---|--------|---------|

| Deemed dividendon preferred stock | - |   | - |   | - |   | - |   | (165,442) |   | - |   | - |   | (165,442) |
|-----------------------------------|---|--------|---|--------|---|--------|---|--------|-----------|--------|---|--------|---|--------|-----------|

| Net loss | - |   | - |   | - |   | - |   | - |   | - |   | (3,382,265) |   | (3,382,265) |
|----------|---|--------|---|--------|---|--------|---|--------|---|--------|---|--------|-------------|--------|-------------|

| Balance, December31, 2004 | 500,000 |   | 500 |   | 96,101,398 |   | 96,102 |   | 5,663,889 |   | - |   | (5,791,698) |   | (31,207) |
|---------------------------|---------|--------|-----|--------|------------|--------|--------|--------|-----------|--------|---|--------|-------------|--------|----------|

| Stock issued inacquisition | - |   | - |   | 77,650,129 |   | 77,650 |   | 16,228,877 |   | - |   | - |   | 16,306,527 |
|----------------------------|---|--------|---|--------|------------|--------|--------|--------|------------|--------|---|--------|---|--------|------------|

| Stock issued forcash on warrantexercise | - |   | - |   | 11,079,984 |   | 11,080 |   | 509,320 |   | (24,400) |   | - |   | 496,000 |
|-----------------------------------------|---|--------|---|--------|------------|--------|--------|--------|---------|--------|----------|--------|---|--------|---------|

| Stock issued forsalary | - |   | - |   | 3,153,107 |   | 3,153 |   | 256,260 |   | - |   | - |   | 259,413 |
|------------------------|---|--------|---|--------|-----------|--------|-------|--------|---------|--------|---|--------|---|--------|---------|

| Shareholderreceivable | - |   | - |   | 2,560,956 |   | 2,561 |   | 48,839 |   | - |   | - |   | 51,400 |
|-----------------------|---|--------|---|--------|-----------|--------|-------|--------|--------|--------|---|--------|---|--------|--------|

| Stock issued forservices | - |   | - |   | 20,085,870 |   | 20,086 |   | 1,167,911 |   | - |   | - |   | 1,187,997 |
|--------------------------|---|--------|---|--------|------------|--------|--------|--------|-----------|--------|---|--------|---|--------|-----------|

| Stock issued forpurchase option | - |   | - |   | 1,300,000 |   | 1,300 |   | 49,200 |   | - |   | - |   | 50,500 |
|---------------------------------|---|--------|---|--------|-----------|--------|-------|--------|--------|--------|---|--------|---|--------|--------|

|   | Preferred Stock |   | Common Stock |   |
|--------|-----------------|--------|--------------|--------|

|   | Shares |   | Amount |   | Shares |   | Amount |   | Additional Paid-inCapital |   | SubscriptionReceivable |   | DeficitAccumulated DuringtheDevelopment Stage |   | Total |
|--------|--------|--------|--------|--------|--------|--------|--------|--------|---------------------------|--------|------------------------|--------|-----------------------------------------------|--------|-------|

| Stock issued asbonuses | - |   | - |   | 15,350,000 |   | 15,350 |   | 866,100 |   | - |   | - |   | 881,450 |
|------------------------|---|--------|---|--------|------------|--------|--------|--------|---------|--------|---|--------|---|--------|---------|

| Warrant expense | - |   | - |   | - |   | - |   | 2,072,603 |   | - |   | - |   | 2,072,603 |
|-----------------|---|--------|---|--------|---|--------|---|--------|-----------|--------|---|--------|---|--------|-----------|

| Stock issued forwaiver | - |   | - |   | 1,000,000 |   | 1,000 |   | 37,000 |   | - |   | - |   | 38,000 |
|------------------------|---|--------|---|--------|-----------|--------|-------|--------|--------|--------|---|--------|---|--------|--------|

| Donated capital,officers’ salaries | - |   | - |   | - |   |   |   | 279,808 |   | - |   | - |   | 279,808 |
|------------------------------------------|---|--------|---|--------|---|--------|--------|--------|---------|--------|---|--------|---|--------|---------|

| Cumulativedividend onpreferred stock | - |   | - |   | - |   | - |   | (52,500) |   | - |   | - |   | (52,500) |
|--------------------------------------|---|--------|---|--------|---|--------|---|--------|----------|--------|---|--------|---|--------|----------|

| Net loss | - |   | - |   | - |   | - |   | - |   | - |   | (21,572,574) |   | (21,572,574) |
|----------|---|--------|---|--------|---|--------|---|--------|---|--------|---|--------|--------------|--------|--------------|

| Balance, December31, 2005 | 500,000 |   | 500 |   | 225,720,488 |   | 225,721 |   | 27,078,468 |   | (24,400) |   | (27,364,272) |   | (83,983) |
|---------------------------|---------|--------|-----|--------|-------------|--------|---------|--------|------------|--------|----------|--------|--------------|--------|----------|

| Stock issued asbonuses: |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|-------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|

| January 2006 | - |   | - |   | 4,700,000 |   | 4,700 |   | 136,300 |   | - |   | - |   | 141,000 |
|--------------|---|--------|---|--------|-----------|--------|-------|--------|---------|--------|---|--------|---|--------|---------|

| July 2006 | - |   | - |   | 6,200,000 |   | 6,200 |   | 179,800 |   | - |   | - |   | 186,000 |
|-----------|---|--------|---|--------|-----------|--------|-------|--------|---------|--------|---|--------|---|--------|---------|

| November 2006 | - |   | - |   | 7,200,000 |   | 7,200 |   | 79,200 |   | - |   | - |   | 86,400 |
|---------------|---|--------|---|--------|-----------|--------|-------|--------|--------|--------|---|--------|---|--------|--------|

| Stock issued forservices: |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|---------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|

| January 2006 | - |   | - |   | 3,000,000 |   | 3,000 |   | 87,000 |   | - |   | - |   | 90,000 |
|--------------|---|--------|---|--------|-----------|--------|-------|--------|--------|--------|---|--------|---|--------|--------|

| February 2006 | - |   | - |   | 1,107,142 |   | 1,107 |   | 26,712 |   | - |   | - |   | 27,819 |
|---------------|---|--------|---|--------|-----------|--------|-------|--------|--------|--------|---|--------|---|--------|--------|

| March 2006 | - |   | - |   | 400,000 |   | 400 |   | 9,240 |   | - |   | - |   | 9,640 |
|------------|---|--------|---|--------|---------|--------|-----|--------|-------|--------|---|--------|---|--------|-------|

| April 2006 | - |   | - |   | 739,982 |   | 740 |   | 31,686 |   | - |   | - |   | 32,426 |
|------------|---|--------|---|--------|---------|--------|-----|--------|--------|--------|---|--------|---|--------|--------|

| May 2006 | - |   | - |   | 166,600 |   | 167 |   | 4,231 |   | - |   | - |   | 4,398 |
|----------|---|--------|---|--------|---------|--------|-----|--------|-------|--------|---|--------|---|--------|-------|

| June 2006 | - |   | - |   | 200,000 |   | 200 |   | 9,560 |   | - |   | - |   | 9,760 |
|-----------|---|--------|---|--------|---------|--------|-----|--------|-------|--------|---|--------|---|--------|-------|

|   | Preferred Stock |   | Common Stock |   |
|--------|-----------------|--------|--------------|--------|

|   | Shares |   | Amount |   | Shares |   | Amount |   | Additional Paid-inCapital |   | SubscriptionReceivable |   | DeficitAccumulated DuringtheDevelopment Stage |   | Total |
|--------|--------|--------|--------|--------|--------|--------|--------|--------|---------------------------|--------|------------------------|--------|-----------------------------------------------|--------|-------|

| July 2006 | - |   | - |   | 400,000 |   | 400 |   | 10,800 |   | - |   | - |   | 11,200 |
|-----------|---|--------|---|--------|---------|--------|-----|--------|--------|--------|---|--------|---|--------|--------|

| August 2006 | - |   | - |   | 6,976,190 |   | 6,976 |   | 185,786 |   | - |   | - |   | 192,762 |
|-------------|---|--------|---|--------|-----------|--------|-------|--------|---------|--------|---|--------|---|--------|---------|

| September 2006 | - |   | - |   | 5,100,000 |   | 5,100 |   | 86,800 |   | - |   | - |   | 91,900 |
|----------------|---|--------|---|--------|-----------|--------|-------|--------|--------|--------|---|--------|---|--------|--------|

| October 2006 | - |   | - |   | 500,000 |   | 500 |   | 8,120 |   | - |   | - |   | 8,620 |
|--------------|---|--------|---|--------|---------|--------|-----|--------|-------|--------|---|--------|---|--------|-------|

| November 2006 | - |   | - |   | 7,410,000 |   | 7,410 |   | 79,092 |   | - |   | - |   | 86,502 |
|---------------|---|--------|---|--------|-----------|--------|-------|--------|--------|--------|---|--------|---|--------|--------|

| Stock issued forexercise ofwarrants | - |   | - |   | 7,493,354 |   | 7,493 |   | 192,507 |   | (200,000) |   | - |   | - |
|-------------------------------------|---|--------|---|--------|-----------|--------|-------|--------|---------|--------|-----------|--------|---|--------|---|

| Cash received forsubscriptionreceivable | - |   | - |   | - |   | - |   | - |   | 96,400 |   | - |   | 96,400 |
|-----------------------------------------|---|--------|---|--------|---|--------|---|--------|---|--------|--------|--------|---|--------|--------|

| Issuance ofwarrants for patents | - |   | - |   | - |   | - |   | 485,133 |   | - |   | - |   | 485,133 |
|---------------------------------|---|--------|---|--------|---|--------|---|--------|---------|--------|---|--------|---|--------|---------|

| Warrants issued forservices | - |   | - |   | - |   | - |   | 127,786 |   | - |   | - |   | 127,786 |
|-----------------------------|---|--------|---|--------|---|--------|---|--------|---------|--------|---|--------|---|--------|---------|

| Stock issued forcash | - |   | - |   | 1,200,000 |   | 1,200 |   | 16,800 |   | - |   | - |   | 18,000 |
|----------------------|---|--------|---|--------|-----------|--------|-------|--------|--------|--------|---|--------|---|--------|--------|

| Stock issued forsoftware | - |   | - |   | 8,000,000 |   | 8,000 |   | 368,000 |   | - |   | - |   | 376,000 |
|--------------------------|---|--------|---|--------|-----------|--------|-------|--------|---------|--------|---|--------|---|--------|---------|

| Stock issued forloan payment | - |   | - |   | 2,000,000 |   | 2,000 |   | 46,000 |   | - |   | - |   | 48,000 |
|------------------------------|---|--------|---|--------|-----------|--------|-------|--------|--------|--------|---|--------|---|--------|--------|

| Dividend payableon preferred stock | - |   | - |   | - |   | - |   | (30,000) |   | - |   | - |   | (30,000) |
|------------------------------------|---|--------|---|--------|---|--------|---|--------|----------|--------|---|--------|---|--------|----------|

| Net loss | - |   | - |   | - |   | - |   | - |   | - |   | (1,702,055) |   | (1,702,055) |
|----------|---|--------|---|--------|---|--------|---|--------|---|--------|---|--------|-------------|--------|-------------|

| Balance, December31, 2006 | 500,000 |   | $500 |   | 288,513,756 |   | $288,514 |   | $29,219,021 |   | $(128,000) |   | $(29,066,327) |   | $313,708 |
|---------------------------|---------|--------|------|--------|-------------|--------|----------|--------|-------------|--------|------------|--------|---------------|--------|----------|

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

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

|   | Preferred Stock |   | Common Stock |   |
|--------|-----------------|--------|--------------|--------|

|   | Shares |   | Amount |   | Shares |   | Amount |   | Additional Paid-inCapital |   | SubscriptionReceivable |   | DeficitAccumulated DuringtheDevelopment Stage |   | Total |
|--------|--------|--------|--------|--------|--------|--------|--------|--------|---------------------------|--------|------------------------|--------|-----------------------------------------------|--------|-------|

| Stock issuedfor services: |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|---------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|

| February2007 | --- |   | --- |   | 2,040,000 |   | 2,040 |   | 35,658 |   | --- |   | --- |   | 37,698 |   |   |
|--------------|-----|--------|-----|--------|-----------|--------|-------|--------|--------|--------|-----|--------|-----|--------|--------|--------|--------|

| March 2007 | --- |   | --- |   | 7,600,000 |   | 7,600 |   | 163,400 |   | --- |   | --- |   | 171,000 |   |   |
|------------|-----|--------|-----|--------|-----------|--------|-------|--------|---------|--------|-----|--------|-----|--------|---------|--------|--------|

| May 2007 | --- |   | --- |   | 8,000,000 |   | 8,000 |   | 32,000 |   | --- |   | --- |   | 40,000 |   |   |
|----------|-----|--------|-----|--------|-----------|--------|-------|--------|--------|--------|-----|--------|-----|--------|--------|--------|--------|

| August 2007 | --- |   | --- |   | 1,000,000 |   | 1,000 |   | 3,500 |   | --- |   | --- |   | 4,500 |   |   |
|-------------|-----|--------|-----|--------|-----------|--------|-------|--------|-------|--------|-----|--------|-----|--------|-------|--------|--------|

| September2007 | --- |   | --- |   | 4,000,000 |   | 4,000 |   | 27,600 |   | --- |   | --- |   | 31,600 |   |   |
|---------------|-----|--------|-----|--------|-----------|--------|-------|--------|--------|--------|-----|--------|-----|--------|--------|--------|--------|

| November2007 | --- |   | --- |   | 13,000,000 |   | 13,000 |   | 78,000 |   | --- |   | --- |   | 91,000 |   |   |
|--------------|-----|--------|-----|--------|------------|--------|--------|--------|--------|--------|-----|--------|-----|--------|--------|--------|--------|

| December2007 | --- |   | --- |   | 500,000 |   | 500 |   | 2,500 |   | --- |   | --- |   | 3,000 |   |   |
|--------------|-----|--------|-----|--------|---------|--------|-----|--------|-------|--------|-----|--------|-----|--------|-------|--------|--------|

| Contributionto capitalfromshareholder | --- |   | --- |   | --- |   | --- |   | 5,220 |   | --- |   | --- |   | 5,220 |   |   |
|---------------------------------------|-----|--------|-----|--------|-----|--------|-----|--------|-------|--------|-----|--------|-----|--------|-------|--------|--------|

| Contributionto capitalfrom contractparty | --- |   | --- |   | --- |   | --- |   | 25,200 |   | --- |   | --- |   | 25,200 |   |   |
|------------------------------------------|-----|--------|-----|--------|-----|--------|-----|--------|--------|--------|-----|--------|-----|--------|--------|--------|--------|

| Stock issuedfor accruedsalary | --- |   | --- |   | 16,162,951 |   | 16,163 |   | 323,259 |   | --- |   | --- |   | 339,422 |   |   |
|-------------------------------|-----|--------|-----|--------|------------|--------|--------|--------|---------|--------|-----|--------|-----|--------|---------|--------|--------|

| Stock issuedfor bonuses | --- |   | --- |   | 200,000 |   | 200 |   | 4,000 |   | --- |   | --- |   | 4,200 |   |   |
|-------------------------|-----|--------|-----|--------|---------|--------|-----|--------|-------|--------|-----|--------|-----|--------|-------|--------|--------|

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

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

|   | Preferred Stock |   | Common Stock |   |
|--------|-----------------|--------|--------------|--------|

|   | Shares |   | Amount |   | Shares |   | Amount |   | Additional Paid-inCapital |   | SubscriptionReceivable |   | DeficitAccumulated DuringtheDevelopment Stage |   | Total |
|--------|--------|--------|--------|--------|--------|--------|--------|--------|---------------------------|--------|------------------------|--------|-----------------------------------------------|--------|-------|

| Contributionto capitalfrom contractparty | --- |   | --- |   | --- |   | --- |   | 5,200 |   | --- |   | --- |   | 5,200 |   |   |
|------------------------------------------|-----|--------|-----|--------|-----|--------|-----|--------|-------|--------|-----|--------|-----|--------|-------|--------|--------|

| Conversion ofcontributionto capitalfrom contractparty to loanproceeds | --- |   | --- |   | --- |   | --- |   | (30,400) |   | --- |   | --- |   | (30,400) |   |   |
|-----------------------------------------------------------------------|-----|--------|-----|--------|-----|--------|-----|--------|----------|--------|-----|--------|-----|--------|----------|--------|--------|

| Stock issuedfor cash | --- |   | --- |   | 1,000,000 |   | 1,000 |   | 9,000 |   | --- |   | --- |   | 10,000 |   |   |
|----------------------|-----|--------|-----|--------|-----------|--------|-------|--------|-------|--------|-----|--------|-----|--------|--------|--------|--------|

| Dividendpayable onpreferredstock | --- |   | --- |   | --- |   | --- |   | (30,000) |   | --- |   | --- |   | (30,000) |   |   |
|----------------------------------|-----|--------|-----|--------|-----|--------|-----|--------|----------|--------|-----|--------|-----|--------|----------|--------|--------|

| Net loss | --- |   | --- |   | --- |   | --- |   | --- |   | --- |   | (1,509,504) |   | (1,509,504) |   |   |
|----------|-----|--------|-----|--------|-----|--------|-----|--------|-----|--------|-----|--------|-------------|--------|-------------|--------|--------|

| Balance,December 31,2007 | 500,000 |   | $500 |   | 342,016,707 |   | 342,017 |   | $29,873,158 |   | $(128,000) |   | $(30,575,831) |   | $(488,156) |   |   |
|--------------------------|---------|--------|------|--------|-------------|--------|---------|--------|-------------|--------|------------|--------|---------------|--------|------------|--------|--------|

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

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

|   | DIAMOND I, INC. |   |
|--------|-----------------|--------|

|   | (a development stage company) |   |
|--------|-------------------------------|--------|

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

|   | STATEMENTS OF CASH FLOWS |   |
|--------|--------------------------|--------|

|   | For the Years Ended December 31, 2007 and 2006, and the Period from June 17, 2003 (Inception), Through December 31, 2007 |   |
|--------|--------------------------------------------------------------------------------------------------------------------------|--------|

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

|   | Year Ended December 31, |   |   |
|--------|-------------------------|--------|--------|

|   | 2007 |   | 2006 |   | Inceptionthrough12/31/2007 |
|--------|------|--------|------|--------|----------------------------|

| CASH FLOWS FROM OPERATINGACTIVITIES |   |   |   |   |   |
|-------------------------------------|--------|--------|--------|--------|--------|

| Net loss | $(1,509,504) |   | $(1,702,055) |   | $(30,575,831) |
|----------|--------------|--------|--------------|--------|---------------|

|   | Adjustments to reconcile net loss tocash used in operating activities: |   |   |   |   |   |
|--------|------------------------------------------------------------------------|--------|--------|--------|--------|--------|

|   | Depreciation | 110,126 |   | 111,910 |   | 297,476 |
|--------|--------------|---------|--------|---------|--------|---------|

|   | Stock issued for services andbonuses | 722,420 |   | 978,426 |   | 8,276,698 |
|--------|--------------------------------------|---------|--------|---------|--------|-----------|

|   | Impairment loss and write-down ofassets | 664,569 |   | --- |   | 17,473,096 |
|--------|-----------------------------------------|---------|--------|-----|--------|------------|

|   | Warrant expense | --- |   | 127,786 |   | 2,200,389 |
|--------|-----------------|-----|--------|---------|--------|-----------|

|   | Donated capital, officers’ salaries | --- |   | --- |   | 279,808 |
|--------|-------------------------------------------|-----|--------|-----|--------|---------|

|   | Loss on debt extinguishment | --- |   | 23,000 |   | 23,000 |
|--------|-----------------------------|-----|--------|--------|--------|--------|

|   | Changes in assets and liabilities: |   |   |   |   |   |
|--------|------------------------------------|--------|--------|--------|--------|--------|

|   | Accrued expenses | (43,554) |   | 326,381 |   | 293,032 |
|--------|------------------|----------|--------|---------|--------|---------|

|   | Accrued interest | 7,582 |   | --- |   | 7,582 |
|--------|------------------|-------|--------|-----|--------|-------|

|   | Accounts payable | 3,000 |   | (10,954) |   | 4,500 |
|--------|------------------|-------|--------|----------|--------|-------|

| CASH FLOWS USED IN OPERATINGACTIVITIES | (45,361) |   | (145,505) |   | (1,720,250) |
|----------------------------------------|----------|--------|-----------|--------|-------------|

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

| CASH FLOWS FROM INVESTINGACTIVITIES |   |   |   |   |   |
|-------------------------------------|--------|--------|--------|--------|--------|

|   | Purchase of equipment | --- |   | --- |   | (102,116) |
|--------|-----------------------|-----|--------|-----|--------|-----------|

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

| CASH FLOWS FROM FINANCINGACTIVITIES |   |   |   |   |   |
|-------------------------------------|--------|--------|--------|--------|--------|

|   | Repayment of related partyadvances | --- |   | (4,000) |   | (59,000) |
|--------|------------------------------------|-----|--------|---------|--------|----------|

|   | Proceeds from related partyadvances | --- |   | 10,140 |   | 100,640 |
|--------|-------------------------------------|-----|--------|--------|--------|---------|

|   | Sale of preferred stock withwarrants | --- |   | - |   | 500,000 |
|--------|--------------------------------------|-----|--------|---|--------|---------|

|   | Proceeds from exercise of warrants | --- |   | 96,400 |   | 742,400 |
|--------|------------------------------------|-----|--------|--------|--------|---------|

|   | Shareholder contributions to capital | 5,220 |   | --- |   | 5,220 |
|--------|--------------------------------------|-------|--------|-----|--------|-------|

|   | Proceeds from short term payable | 30,400 |   | 25,000 |   | 55,400 |
|--------|----------------------------------|--------|--------|--------|--------|--------|

|   | Sale of common stock, net | 10,000 |   | 18,000 |   | 478,000 |
|--------|---------------------------|--------|--------|--------|--------|---------|

| CASH FLOWS PROVIDED BYFINANCING ACTIVITIES | 45,620 |   | 145,540 |   | 1,822,660 |
|--------------------------------------------|--------|--------|---------|--------|-----------|

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

| NET INCREASE (DECREASE) IN CASH | 259 |   | 35 |   | 294 |
|---------------------------------|-----|--------|----|--------|-----|

| Cash, beginning of period | 35 |   | --- |   | --- |
|---------------------------|----|--------|-----|--------|-----|

| Cash, end of period | $294 |   | $35 |   | $294 |
|---------------------|------|--------|-----|--------|------|

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

| Supplemental information: |   |   |   |   |   |
|---------------------------|--------|--------|--------|--------|--------|

|   | Income taxes paid | $--- |   | $--- |   | $--- |
|--------|-------------------|------|--------|------|--------|------|

|   | Interest paid | $--- |   | $--- |   | $--- |
|--------|---------------|------|--------|------|--------|------|

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

| Non-cash Investing and FinancingActivities: |   |   |   |   |   |
|---------------------------------------------|--------|--------|--------|--------|--------|

|   | Cumulative dividends on preferredstock | $30,000 |   | $30,000 |   | $112,500 |
|--------|----------------------------------------|---------|--------|---------|--------|----------|

|   | Stock issued in acquisition | $--- |   | $--- |   | $16,687,627 |
|--------|-----------------------------|------|--------|------|--------|-------------|

|   | Stock issued for wi-fi hotspots | $--- |   | $--- |   | $120,900 |
|--------|---------------------------------|------|--------|------|--------|----------|

|   | Warrants issued for patent | $--- |   | $485,133 |   | $485,133 |
|--------|----------------------------|------|--------|----------|--------|----------|

|   | Stock issued for software | $--- |   | $376,000 |   | $376,000 |
|--------|---------------------------|------|--------|----------|--------|----------|

|   | Stock issued for payment of notepayable | $--- |   | $25,000 |   | $25,000 |
|--------|-----------------------------------------|------|--------|---------|--------|---------|

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

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

|   | DIAMOND I, INC. |   |
|--------|-----------------|--------|

|   | (a development stage company) |   |
|--------|-------------------------------|--------|

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

|   | NOTES TO CONSOLIDATED FINANCIALSTATEMENTS |   |
|--------|-------------------------------------------|--------|

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

| Note 1 | Basis of Presentation |
|--------|-----------------------|

| Nature of Company |
|-------------------|

| On June 20, 2003, Diamond I, Inc. (“Diamond I”), formerly AirRover Wi-Fi Corp., formerlyAir-Q Wi-Fi Corporation, formerly Covenant Financial Corporation ("Covenant"), a U.S. publiccompany, issued 11,000,000 shares of common stock for 100% of the outstanding common stockof Air-Q Corp., a privately held corporation (“Air-Q”). After the merger, the stockholders ofAir-Q owned approximately 95% of the outstanding common stock of Covenant and Covenantchanged its corporate name. |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| On June 17, 2003, Air-Q was incorporated in Nevada.  At the time of the merger, Air-Q was adevelopment-stage company with a plan to establish wireless internet access systems in variouscities.  Following the merger, Diamond I pursued the business plan of Air-Q and now operatesWi-Fi hotspots in five states and the District of Columbia.  The term Wi-Fi refers to an industrystandard for wireless equipment that meets published 802.11(x) standards. Wi-Fi equipmentoperates in unlicensed spectra, such as 2.4 and 5.8 Ghz. |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| On May 24, 2004, Diamond I acquired all of the outstanding common stock of AirRoverNetworks, Inc., a privately-held Maryland corporation (“AirRover Networks”).  At the time ofacquisition, AirRover Networks was operating Wi-Fi hotspots in three states. |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| On January 18, 2005, Diamond I acquired all of the outstanding capital stock of Diamond ITechnologies, Inc., a privately-held Nevada corporation (“DITech”).  At the time of acquisition,DiTech was a development-stage company that had developed a hand-held Wi-Fi-based gamingsystem designed for use in casinos. |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Hereinafter, all references to Diamond I include the operations and financial condition of Air-Qfor the period from inception, June 17, 2003, through December 31, 2003, and for the year endedDecember 31, 2004, the operations of AirRover Networks from the date of acquisition throughDecember 31, 2006, and the operations of DiTech from the date of acquisition through December31, 2006. |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Consolidation |
|---------------|

| As of December 31, 2007, Diamond I had three wholly owned subsidiaries, Diamond ITechnologies, Inc. (formerly Air-Q Corp.), AirRover Networks, Inc. and Touchdev Limited.  Allmaterial inter-company balances and inter-company transactions have been eliminated for thepurpose of presenting the accompanying consolidated financial statements. |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Use of Estimates |
|------------------|

| The preparation of financial statements in conformity with accounting principles generallyaccepted in the United States of America requires management to make estimates and assumptionsthat affect the reported amounts of assets and liabilities at the date of the balance sheet.  Actualresults could differ from those estimates. |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Cash and Cash Equivalents |
|---------------------------|

| Cash and cash equivalents include cash and all highly liquid financial instruments with purchasedmaturities of three months or less. |
|--------------------------------------------------------------------------------------------------------------------------------------|

| Fair Value of Financial Instruments |
|-------------------------------------|

| Diamond I’s financial instruments consist of cash and debt. The carrying amount of these financialinstruments approximates fair value due either to length of maturity or interest rates thatapproximate prevailing market rates unless otherwise disclosed in these consolidated financialstatements. |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Equipment |
|-----------|

| Equipment consists of computer equipment stated at cost.  Depreciation is computed using thestraight-line method over the estimated economic lives of three years.  Impairment losses arerecorded on long-lived assets used in operations when indicators of impairment are present andthe undiscounted cash flows estimated to be generated by those assets are less than the assets'carrying amount.  Impairment losses of $17,473,096 have been recognized since inception. |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Income Taxes |
|--------------|

| Income taxes are computed using the asset and liability method.  Under the asset and liabilitymethod, deferred income tax assets and liabilities are determined based on the differences betweenthe financial reporting and tax bases of assets and liabilities and are measured using the currentlyenacted tax rates and laws.  A valuation allowance is provided for the amount of deferred taxassets that, based on available evidence, are not expected to be realized. |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Loss Per Share |
|----------------|

| Diamond I is required to provide basic and dilutive earnings (loss) per common share information.The basic net loss per common share is computed by dividing the net loss applicable to commonstockholders by the weighted average number of common shares outstanding. |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Diluted net loss per common share is computed by dividing the net loss applicable to commonstockholders, adjusted on an "as if converted" basis, by the weighted average number of commonshares outstanding plus potential dilutive securities.  For 2006 and 2007, potential dilutivesecurities had an anti-dilutive effect and were not included in the calculation of diluted net lossper common share.  The number of securities that were excluded because the effect was anti-dilutive were 19,000,000. |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Basic loss per share has been calculated based on the weighted average number of shares ofcommon stock outstanding during the period. |
|---------------------------------------------------------------------------------------------------------------------------------------|

| Stock Based Compensation |
|--------------------------|

| Prior to December 31, 2005, Diamond I accounted for stock based compensation under Statementof Financial Accounting Standards No. 123 Accounting for Stock-Based Compensation (123). Aspermitted under this standard, compensation cost was recognized using the intrinsic value methoddescribed in Accounting Principles Board Opinion No. 25, Accounting for Stock Issued toEmployees (APB 25). Effective December 15, 2005, the Company adopted Statement of FinancialAccounting Standards No. 123 (Revised 2004), Share-Based Payment (FAS 123R) and appliedthe provisions of the Securities and Exchange Commission Staff Accounting Bulletin No. 107using the modified-prospective transition method. The Company had not issued any options toemployees in the prior periods thus; there was no impact of adopting the new standard. |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Recent Accounting Pronouncements |
|----------------------------------|

| In June 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty inIncome Taxes, an interpretation of FASB Statement 109” (“FIN 48”), which clarifies theaccounting for uncertainty in income tax positions. This interpretation prescribes that theCompany recognize in its financial statements the impact of a tax position that is more likely thannot to be sustained upon examination based upon the technical merits of the position, includingresolution of any appeals. The interpretation provides guidance on derecognition, classification,interest and penalties, accounting in interim periods, disclosure and transition. FIN No. 48 waseffective for fiscal years beginning after December 15, 2006. FIN No. 48, which was adopted bythe Company effective January 1, 2007, did not have a material impact on the Company’s cashflows, results of operations, financial position or liquidity. |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| In September 2006, the FASB issued FASB Statement 157 “Fair Value Measurements” (“SFASNo. 157”) which defines and measures fair value and expands disclosures about fair valuemeasurements. The statement emphasizes that fair value is a market-based measurement and notan entity-specific measurement. The provisions of SFAS No. 157 are effective for fiscal yearsbeginning after November 15, 2007. |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assetsand Financial Liabilities, which permits entities to choose to measure many financial instrumentsand certain other items at fair value.  The objective is to improve financial reporting by providingentities with the opportunity to mitigate volatility in reported earnings caused by measuring relatedassets and liabilities differently without having to apply complex hedge accounting provisions. SFAS No. 159 applies to all entities and is effective for fiscal years beginning after November15, 2007. |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| In December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business Combinations”(“SFAS No. 141(R)”), which establishes principles and requirements for how the acquirer shallrecognize and measure in its financial statements the identifiable assets acquired, liabilitiesassumed, any noncontrolling interest in the acquiree and goodwill acquired in a businesscombination. SFAS No. 141(R) is effective for business combinations for which the acquisitiondate is on or after the beginning of the first annual reporting period beginning on or afterDecember 15, 2008. The Company is currently assessing the potential impact that the adoptionof SFAS No. 141(R) will have on its financial position and results of operations. |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| The Company does not expect the adoption of any other recently issued accountingpronouncements to have a significant impact on its consolidated financial position. |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Note 2 | Going Concern |
|--------|---------------|

| Diamond I has incurred losses totaling $30,575,831 through December 31, 2007, and has aworking capital deficit of $489,360.  Because of these conditions, Diamond I will requireadditional working capital to continue operations and develop the business.  Diamond I intendsto raise additional working capital either through private placements, public offerings and/or bankfinancing. |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| There are no assurances that Diamond I will be able to achieve a level of revenues adequate togenerate sufficient cash flow from operations or obtain additional financing through privateplacements, public offerings and/or bank financing necessary to support Diamond I’s workingcapital requirements.  To the extent that funds generated from any private placements, publicofferings and/or bank financing are insufficient, Diamond I will have to raise additional workingcapital.  No assurance can be given that additional financing will be available, or if available, willbe on terms acceptable to Diamond I.  If adequate working capital is not available Diamond I maynot continue its operations or execute its business plan. |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| These conditions raise substantial doubt about Diamond I's ability to continue as a going concern.The financial statements do not include any adjustments relating to the recoverability andclassification of asset carrying amounts or the amount and classification of liabilities that mightbe necessary should Diamond I be unable to continue as a going concern. |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Note 3 | Acquisitions |
|--------|--------------|

| Touchdev Limited |
|------------------|

| In May 2006, Diamond I acquired all of the capital stock of Touchdev Limited for 8,000,000shares of Diamond I common stock.  Diamond I analyzed the accounting treatment of thistransaction under SFAS 141, “Business Combinations and EITF 98-3, “Determining WhetherNonmonetary Transaction Involves Receipt of Productive Assets or of a Business”.  Thistransaction was accounted for as an asset purchase and not a business combination based onTouchdev Limited’s never having engaged in active business operations.  The only material assetheld by Touchdev Limited at the date of the agreement was proprietary software and thecopyrights, documentation and internet domains related to this software. The software wasrecorded at $376,000, which was estimated to be equal to the fair value of the stock issued to theoriginal shareholders of Touchdev Limited based on the market price at the date of the agreementand will be amortized over 3 years. |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| At December 31, 2007, the entire value of associated with the acquisition of Touchdev Limitedwas written-down in the amount of $452,789, after Diamond I’s determination that there existedno tangible value underlying the acquisition of Touchdev Limited.  This write-down is reflectedin Diamond I’s statements of revenues and expenses. |
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| Note 4 | Intangible Assets and Software |
|--------|--------------------------------|

| In March 2006, Diamond I purchased pending patent rights from Larson Tech Ventures, LLC andLarry Shultz related to: |
|---------------------------------------------------------------------------------------------------------------------|

| 1. | Methods and apparatus for pari-mutuel, sports book and electronic casino gaming usingspeech recognition and concomitant video. |
|----|--------------------------------------------------------------------------------------------------------------------------------|

| 2. | Biometrically-secured portable wireless entertainment, shopping and gaming system. |
|----|------------------------------------------------------------------------------------|

| As consideration, Diamond I issued 6,500,000 warrants to purchase common stock exercisableat $0.35 per share and expiring March 31, 2011.  The fair value of these warrants was calculatedusing the Black-Scholes Model and used as the value of the patent at $485,133.  The model wasbased on a term of five years, a volatility rate of 236.74% and a discount rate of 4.83% andexpected dividends of zero. |
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| At December 31, 2007, the entire value of associated with the purchase of these pending patentrights was written-down in the amount of $211,780, after Diamond I’s determination that thereexisted no tangible value underlying such pending patent rights.  This write-down is reflected inDiamond I’s statements of revenues and expenses. |
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| Note 5 | Notes Payable |
|--------|---------------|

| During the third quarter of 2006, Diamond I was loaned $25,000 from a third party bearinginterest at 10% per annum, due on February 4, 2007, and unsecured.  Diamond I issued 2,000,000shares of common stock valued at $48,000 for repayment of this loan in August 2006 andrecognized a loss of $23,000 on debt extinguishment. |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Diamond I was advanced various amounts throughout the year from its CEO, David Loflinbearing interest at 8% and due on demand.  The amount due as of December 31, 2007, was$41,640.  Interest of $7,582 was accrued related to these advances. |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Note 6 | Income Taxes |
|--------|--------------|

| Diamond I follows Statement of Financial Accounting Standards Number 109 (SFAS 109),“Accounting for Income Taxes.” Deferred income taxes reflect the net effect of (a) temporarydifference between carrying amounts of assets and liabilities for financial purposes and theamounts used for income tax reporting purposes, and (b) cumulative net operating losscarryforwards of approximately $4,400,000. No net provision for refundable Federal income taxhas been made in the accompanying statement of loss because no recoverable taxes were paidpreviously. Similarly, no deferred tax asset attributable to the net operating loss carryforward hasbeen recognized, as it is not deemed likely to be realized.  The deferred tax asset related to the netloss carryforward in the amount of $1,475,000 has been fully reserved.  The net loss carryforwardsexpire between 2023 and 2026. |
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| Note 7 | Capital Stock |
|--------|---------------|

| Amended and Restated Certificate of Incorporation |
|---------------------------------------------------|

| In January 2005, Diamond I amended its Amended and Restated Certificate of Incorporation toincrease the authorized number of shares of common stock to 700,000,000. |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Series A Preferred Stock |
|--------------------------|

| In March 2004, Diamond I issued 500,000 shares of a newly created Series A convertiblepreferred stock and warrants for cash proceeds of $500,000.  The shares of Series A preferredstock are convertible at any time into 100,000 shares of Diamond I common stock. The shares ofcommon stock underlying the Series A preferred stock and the warrants possesses certain demandregistration rights.  In addition, the Series A preferred stock bears a cash dividend at the rate of6% per annum, with cumulative rights.  At December 31, 2006 and 2007, Diamond I recorded adividend payable of $30,000 and $30,000, respectively, in connection with its shares of Series Apreferred stock. |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Each holder of outstanding shares of Series A preferred stock is entitled to the number of votesequal to the number of whole shares of common stock into which the shares of Series A preferredstock held by such holder are then convertible at each meeting of shareholders with respect to anyand all matters presented to the shareholders for their action or consideration. |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Stock for Cash |
|----------------|

| During 2007, Diamond I issued 1,000,000 shares for $10,000. During 2006, Diamond I issued1,200,000 shares for $18,000. |
|------------------------------------------------------------------------------------------------------------------------|

| Stock for Services, Salary and Bonuses |
|----------------------------------------|

| During 2006, Diamond I issued 25,999,914 shares of common stock to third-party consultants forservices valued at $564,827. |
|----------------------------------------------------------------------------------------------------------------------------|

| During 2007, Diamond I issued 24,523,314 shares of common stock to third-party consultants forservices valued at $378,798. |
|----------------------------------------------------------------------------------------------------------------------------|

| During 2006, Diamond I issued  18,100,000 shares of common stock as bonuses to its officers anddirectors  valued at $413,400. |
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| During 2007, Diamond I issued a total of 16,162,951 shares of common stock in payment of$339,422 in accrued and unpaid salaries of two of its officers and a total of 200,000 shares ofcommon stock valued at $4,200 as bonuses to certain of its directors |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Diamond I measured the transactions at the respective dates of issuance at the then-quoted marketprice.  There are no performance commitments or penalties for non-performance, thereforeDiamond I recorded the expense at the date of issuance. |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Note 8 | Warrants |
|--------|----------|

| During 2006, Diamond I granted 6,500,000 warrants at an exercise price of $.035 per share inexchange for a patent. |
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| The following sets forth the warrants outstanding as of December 31, 2007. |
|----------------------------------------------------------------------------|

|   | ExercisePrice |   | Number ofShares |   | Remaining Life |   | ExercisableNumber ofShares |   |
|--------|---------------|--------|-----------------|--------|----------------|--------|----------------------------|--------|

|   | 1.00 |   | 5,000,000 |   | April 2009 |   | 5,000,000 |   |
|--------|------|--------|-----------|--------|------------|--------|-----------|--------|

|   | 0.20 |   | 1,000,000 |   | September2008 |   | 1,000,000 |   |
|--------|------|--------|-----------|--------|---------------|--------|-----------|--------|

|   | 0.30 |   | 1,000,000 |   | September2008 |   | 1,000,000 |   |
|--------|------|--------|-----------|--------|---------------|--------|-----------|--------|

|   | 0.40 |   | 1,000,000 |   | September2008 |   | 1,000,000 |   |
|--------|------|--------|-----------|--------|---------------|--------|-----------|--------|

|   | 0.50 |   | 1,000,000 |   | September2008 |   | 1,000,000 |   |
|--------|------|--------|-----------|--------|---------------|--------|-----------|--------|

|   | 0.04 |   | 3,500,000 |   | November 2010 |   | 3,500,000 |   |
|--------|------|--------|-----------|--------|---------------|--------|-----------|--------|

|   | .035 |   | 6,500,000 |   | March 2011 |   | 6,500,000 |   |
|--------|------|--------|-----------|--------|------------|--------|-----------|--------|

|   | At 12/31/07 |   | 19,000,000 |   |   |   | 19,000,000 |   |
|--------|-------------|--------|------------|--------|--------|--------|------------|--------|

| During 2006, Diamond I entered into various consulting agreements whereby third parties weregranted warrants to purchase common stock.  The value of these warrants was estimated using theBlack-Scholes method of approximating fair value using an exercise price of $0.034, term of oneyear, volatility of 196%, discount rate of 3.89% and no expected dividends.  Warrant expense of$127,786 is recorded in 2006.  During 2006, 7,493,354 warrants were exercised for cash of$200,000.  The balance sheet reflects a subscription receivable of $128,000 as of December 31,2007, related to these warrants. |
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| Note 9 | Commitments |
|--------|-------------|

| Employment Agreements |
|-----------------------|

| Diamond I has entered into employment agreements with each of its officers, with terms of threeyears and salaries ranging from $100,000 to $180,000 per year.  As of December 31, 2007,Diamond I had accrued $293,032 of unpaid officer salaries. |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Note 10 | Expired Agreement |
|---------|-------------------|

| In March 2007, Diamond I entered into a securities purchase agreement (the “PurchaseAgreement”) with Diamond I Technologies, Inc., a Nevada corporation wholly owned byDiamond I, NewMarket Technology, Inc., a Nevada corporation (“NMKT”), and NewMarketTechnology Acquisition Subsidiary, a Nevada corporation, pursuant to which NewMarketTechnology Acquisition Subsidiary was to purchase 2,000,000 shares of a new series of DiamondI’s preferred stock, to be designated “Series B”.  The closing under the Purchase Agreement wasto occur on or before June 7, 2007.  Following an extensive period of good faith negotiationsbetween Diamond I and NMKT, the following conditions remained unresolved: |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| - | the terms relating to an investment commitment for an additional $750,000 for DiamondI’s gaming subsidiary, Diamond I Technologies, Inc.; and |
|---|-----------------------------------------------------------------------------------------------------------------------------------------------------|

| - | the terms relating to an investment commitment for an additional $1,000,000 for DiamondI’s revived WIFI division. |
|---|-------------------------------------------------------------------------------------------------------------------------|

| Because the closing under the Purchase Agreement did not occur on or prior to June 7, 2007, thePurchase Agreement expired. |
|----------------------------------------------------------------------------------------------------------------------------|

| Due to the expiration of the Purchase Agreement, the $30,400 in cash received by Diamond I fromNMKT under the Purchase Agreement previously accounted for as a contribution to capital by acontract party has been reclassified as a short-term payable - third party in the accompanyingfinancial statements. |
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