**U.      S. Securities and Exchange Commission**

**FORM      10-QSB**

**[X]      QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF      1934**

**June      30, 2006**

**[      ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE      ACT**

*Commission      File No.*
***000-26913***

**CYBERTEL      CAPITAL CORP.**

| **NEVADA**                                     | **86-0862532**                     |
|------------------------------------------------|------------------------------------|
| (State                or Other Jurisdiction of | (I.R.S.                Employer    |
| incorporation                or organization)  | Identification                No.) |

**9444      Waples St., Ste 290**

**San      Diego, California 92121**

**233,946,090      shares at August 17, 2006**

----

|                                                       | **TABLE                OF CONTENTS**                                                          |   **Page** |
|------------------------------------------------------------|-----------------------------------------------------------------------------------------------|----------------------|
| **PART                I - FINANCIAL INFORMATION**     |
| Item                1.                                     | Financial                Statements                                                           | 3               |
| Item                2.                                     | Management’s                Discussion and Analysis or Plan of                Operation | 10              |
| Item                3.                                     | Controls                and Procedures                                                        | 11              |
|  **PART                II - OTHER INFORMATION**  |
| Item                1.                                     | Legal                Proceedings                                                              | 12              |
| Item                2.                                     | Unregistered                Sales of Equity Securities and Use of                Proceeds     | 12              |
| Item                3.                                     | Defaults                Upon Senior Securities                                                | 12              |
| Item                4.                                     | Submission                of Matters to a Vote of Security                Holders             | 12              |
| Item                5.                                     | Other                Information                                                              | 12              |
| Item                6.                                     | Exhibits                                                                                      | 12              |

----

NCI

**Item      1. Financial Statements.**

| CYBERTEL                  CAPITAL CORPORATION |
|-----------------------------------------------|
| CONSOLIDATED                  BALANCE SHEET   |
| (Unaudited)                                   |

| Assets                                                                                 |   |   |                               |       |       |                                   |   |
|----------------------------------------------------------------------------------------|--------|--------|------------------------------------|------------|------------|----------------------------------------|--------|
|                                                                                   |   |   | **June                  30, 2006** | ** ** | ** ** | **December                  31, 2005** |   |
| CURRENT                  ASSETS                                                        |   |   |                               |       |       |                                   |   |
| Cash                                                                                   |   | $      | 7,945                              |       | $          | 1,186                                  |   |
| Accounts                  Receivable, net                                              |   |   | 26,943                             |       |       | 8,996                                  |   |
| Other                  Current Assets                                                  |   |   | 1,000                              |       |       | -                                      |   |
| TOTAL                  CURRENT ASSETS                                                  |   |   | 35,888                             |       |       | 10,182                                 |   |
|                                                                                   |   |   |                               |       |       |                                   |   |
| Fixed                  Assets                                                          |   |   | 84,558                        |       |       | -                                      |   |
| Accumulated                  Depreciation                                              |   |   | (58,724                            | )          |       | -                                      |   |
| NET                  FIXED ASSETS                                                      |   |   | 25,834                             |       |       | -                                      |   |
|                                                                                   |   |   |                               |       |       |                                   |   |
| Customer                  List                                                         |   |   | 194,399                            |       |       | -                                      |   |
| Goodwill                                                                               |   |   | 375,081                            |       |       | -                                      |   |
| Deposits                                                                               |   |   | 5,087                              |       |       | 5,087                                  |   |
|                                                                                   |   |   |                               |       |       |                                   |   |
| TOTAL                  ASSETS                                                          |   | $      | 636,289                            |       | $          | 15,269                                 |   |
|                                                                                   |   |   |                               |       |       |                                   |   |
|                                                                                   |   |   |                               |       |       |                                   |   |
| Liabilities                  and Stockholders' Deficit                                 |   |   |                               |       |       |                                   |   |
|                                                                                   |   |   |                               |       |       |                                   |   |
| CURRENT                  LABILITIES                                                    |   |   |                               |       |       |                                   |   |
| Accounts                  Payable                                                      |   | $      | 411,379                            |       | $          | 384,038                                |   |
| Accrued                  Liabilities                                                   |   |   | 746,957                            |       |       | 611,949                                |   |
| Notes                  Payable to Related Parties, Current Portion                     |   |   | 5,317                              |       |       | 170,428                                |   |
| TOTAL                  CURRENT LIABILITIES                                             |   |   | 1,163,653                          |       |       | 1,166,415                              |   |
|                                                                                   |   |   |                               |       |       |                                   |   |
| Notes                  Payable to Related Parties                                      |   |   | 291,580                            |       |       | -                                      |   |
|                                                                                   |   |   |                               |       |       |                                   |   |
| TOTAL                  LIABILITIESS                                                    |   |   | 1,455,233                          |       |       | 1,166,415                              |   |
|                                                                                   |   |   |                               |       |       |                                   |   |
| STOCKHOLDERS'                  DEFICIT:                                                |   |   |                               |       |       |                                   |   |
| Series                  A Convertible Preferred Stock, $.001 par;                      |   |   |                               |       |       |                                   |   |
| 5,000                  shares authorized; 353 and 429 shares                           |   |   |                               |       |       |                                   |   |
| issued                  and outstanding                                                |   |   | -                                  |       |       | -                                      |   |
| Series                  B Voting Preferred Stock, $.001 par;                           |   |   |                               |       |       |                                   |   |
| 50,000,000                  shares authorized; 50,000,000                              |   |   |                               |       |       |                                   |   |
| shares                  issued and outstanding                                         |   |   | 50,000                             |       |       | 50,000                                 |   |
| Series                  C Preferred Stock $2.00 par value; 1,000,000 share authorized, |   |   |                               |       |       |                                   |   |
| 500,000                  shares issued and outstanding                                 |   |   | 1,000,000                          |       |       | -                                      |   |
| Common                  Stock, $.001 par value, 10,000,000,000                         |   |   |                               |       |       |                                   |   |
| shares                  authorized, 67,576,334 and 6,205,184                           |   |   |                               |       |       |                                   |   |
| issued                  and outstanding                                                |   |   | 67,576                             |       |       | 6,205                                  |   |
| Additional                  Paid In Capital                                            |   |   | 20,866,685                         |       |       | 20,758,362                             |   |
| Accumulated Deficit                                                               |   |   | (22,803,205                        | )          |       | (21,965,713                            | )      |
| TOTAL                  STOCKHOLDERS' DEFICIT                                           |   |   | (818,944                           | )          |       | (1,151,146                             | )      |
|                                                                                   |   |   |                               |       |       |                                   |   |
| TOTAL                  LIABILITIES AND STOCKHOLDERS' DEFICIT                           |   | $      | 636,289                            |       | $          | 15,269                                 |   |
|                                                                                   |   |   |                               |       |       |                                   |   |
|                                                                                   |   |   |                               |       |       |                                   |   |
| See                  accompanying notes to consolidated financial statements           |   |

----

| CYBERTEL                  CAPITAL CORPORATION         |
|-------------------------------------------------------|
| CONSOLIDATED                  STATEMENT OF OPERATIONS |
| (Unaudited)                                           |
|                                                  |

|                                                                             |   | **For                  the three months** |       | **For                  the six months** |   |
|----------------------------------------------------------------------------------|--------|-------------------------------------------|------------|-----------------------------------------|--------|
|                                                                             |   | **ended                  June 30,**       |       | **ended                  June 30,**     |   |
|                                                                             |   | **2006**                                  |       | **2005**                                |   | **2006** |   | **2005** |   |
|                                                                             |   |                                      |       |                                    |   |   |   |   |   |
| REVENUES                                                                         |   | $                                         | 10,623     |                                    | $      | 17,528 |   | $ | 18,486 |   | $ | 35,748 |   |
| COST                  OF GOODS SOLD                                              |   |                                      | -          |                                    |   | 250 |   |   | - |   |   | 27,876 |   |
|  Gross                  Profit                                              |   |                                      | 10,623     |                                    |   | 17,278 |   |   | 18,486 |   |   | 7,872 |   |
|                                                                             |   |                                      |       |                                    |   |   |   |   |   |   |   |   |   |
| EXPENSES                                                                         |   |                                      |       |                                    |   |   |   |   |   |   |   |   |   |
| Selling,                  General and Administrative                        |   |                                      | 642,450    |                                    |   | 542,015 |   |   | 852,031 |   |   | 1,093,829 |   |
|  TOTAL                  OPERATING EXPENSES                                  |   |                                      | 642,450    |                                    |   | 542,015 |   |   | 852,031 |   |   | 1,093,829 |   |
| OPERATING                  LOSS                                                  |   |                                      | (631,827   | )                                       |   | (524,737 | ) |   | (833,545 | ) |   | (1,085,957 | ) |
|                                                                             |   |                                      |       |                                    |   |   |   |   |   |   |   |   |   |
| OTHER                  INCOME (EXPENSE)                                          |   |                                      |       |                                    |   |   |   |   |   |   |   |   |   |
| Other                  Income                                               |   |                                      | 1,900      |                                    |   | 2,460 |   |   | 4,750 |   |   | 8,452 |   |
| Interest                  Expense                                           |   |                                      | (4,984     | )                                       |   | (10,580 | ) |   | (8,696 | ) |   | (22,598 | ) |
| Forgiveness                  of Debt                                        |   |                                      | -          |                                    |   | 330,686 |   |   | - |   |   | 330,686 |   |
|  TOTAL                  OTHER INCOME/(EXPENSE)                              |   |                                      | (3,084     | )                                       |   | 322,566 |   |   | (3,946 | ) |   | 316,540 |   |
|                                                                             |   |                                      |       |                                    |   |   |   |   |   |   |   |   |   |
| NET                  LOSS FROM CONTINUED OPERATIONS                              |   |                                      | (634,911   | )                                       |   | (202,171 | ) |   | (837,491 | ) |   | (769,417 | ) |
|                                                                             |   |                                      |       |                                    |   |   |   |   |   |   |   |   |   |
| Loss                  from discontinued operation                           |   |                                      |       |                                    |   |   |   |   |   |   |   | (129,111 | ) |
|                                                                             |   |                                      |       |                                    |   |   |   |   |   |   |   |   |   |
| NET                  LOSS                                                        |   |                                      | (634,911   | )                                       |   | (202,171 | ) |   | (837,491 | ) |   | (898,528 | ) |
|                                                                             |   |                                      |       |                                    |   |   |   |   |   |   |   |   |   |
| Preferred                  Stock Dividends                                  |   |                                      | (5,632     | )                                       |   | (6,881 | ) |   | (11,830 | ) |   | (15,290 | ) |
|                                                                             |   |                                      |       |                                    |   |   |   |   |   |   |   |   |   |
| NET                  LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS                    |   | $                                         | (640,543   | )                                       | $      | (209,052 | ) | $ | (849,321 | ) | $ | (913,818 | ) |
|                                                                             |   |                                      |       |                                    |   |   |   |   |   |   |   |   |   |
| Earnings                  (loss) per share, basic and diluted                    |   | $                                         | (0.02      | )                                       | $      | (0.04 | ) | $ | (0.04 | ) | $ | (0.23 | ) |
|                                                                             |   |                                      |       |                                    |   |   |   |   |   |   |   |   |   |
| Weighted                  average number of shares outstanding basic and diluted |   |                                      | 26,868,390 |                                    |   | 5,109,140 |   |   | 19,821,216 |   |   | 3,894,509 |   |
|                                                                             |   |                                      |       |                                    |   |   |   |   |   |   |   |   |   |
|                                                                             |   |                                      |       |                                    |   |   |   |   |   |   |   |   |   |
| See                  accompanying notes to consolidated financial                |

----

| CYBERTEL                  CAPITAL CORPORATION         |
|-------------------------------------------------------|
| CONSOLIDATED                  STATEMENT OF CASH FLOWS |
| (unaudited)                                           |

|                                                                           |       | **For                    the six months** |
|--------------------------------------------------------------------------------|------------|-------------------------------------------|
| ** **                                                                     | ** ** | **ended                    June 30,**     | ** ** |
| ** **                                                                     | ** ** | **2006**                                  | ** ** | **2005** |   |
| **CASH                    FLOWS FROM OPERATING ACTIVITIES**                    |       |                                      |   |   |   |   |   |
| Net                    loss                                               |       | $                                         | (837,491 | ) | $ | (898,528 | ) |
| Less:                    Net loss from discontinued operations            |       |                                      | - |   |   | (129,111 | ) |
|  Net                    loss from continuing operations                   |       |                                      | (837,491 | ) |   | (769,417 | ) |
|                                                                           |       |                                      |   |   |   |   |   |
| Adjustments                    to reconcile net loss to net cash          |       |                                      |   |   |   |   |   |
|  used                    in operating activities:                         |       |                                      |   |   |   |   |   |
|  Depreciation                                                             |       |                                      | - |   |   | 2,215 |   |
|  Stock                    issued for services                             |       |                                      | 614,135 |   |   | 3,000 |   |
|  Stock                    option expense reduction adjustment             |       |                                      | (5,322 | ) |   | 287,356 |   |
|  Bad                    debt expense                                      |       |                                      | - |   |   | 10,000 |   |
|  Amortization                    of discount on note                      |       |                                      | - |   |   | 15,411 |   |
|  Forgiveness                    of debt                                   |       |                                      | - |   |   | (330,686 | ) |
| Changes                    in assets and liabilities:                     |       |                                      |   |   |   |   |   |
|  Accounts                    receivable                                   |       |                                      | 3,582 |   |   | (10,074 | ) |
|  Prepaid                    expenses                                      |       |                                      | - |   |   | (12,214 | ) |
|  Accounts                    payable and accrued expenses                 |       |                                      | 130,464 |   |   | 44,505 |   |
|                                                                           |       |                                      |   |   |   |   |   |
| Net                    cash used in continuing operations                      |       |                                      | (94,632 | ) |   | (759,904 | ) |
| Net                    cash used in discontinued operations                    |       |                                      | - |   |   | (35,000 | ) |
|                                                                           |       |                                      |   |   |   |   |   |
| Net                    cash used in operating activities                       |       |                                      | (94,632 | ) |   | (794,904 | ) |
|                                                                           |       |                                      |   |   |   |   |   |
| **CASH                    FLOW FROM INVESTING ACTIVITIES**                     |       |                                      |   |   |   |   |   |
| Cash                    from acquisition of HBLN                               |       |                                      | 2,733 |   |   | - |   |
| Loan                    to third party                                         |       |                                      | - |   |   | (75,000 | ) |
| Net                    cash used in investing activities                       |       |                                      | 2,733 |   |   | (75,000 | ) |
|                                                                           |       |                                      |   |   |   |   |   |
| **CASH                    FLOW FROM FINANCING ACTIVITIES**                     |       |                                      |   |   |   |   |   |
| Proceeds                    from note payable to related party                 |       |                                      | 123,419 |   |   | 25,000 |   |
| Payment                    of loan                                             |       |                                      | (12,931 | ) |   | - |   |
| Payment                    of dividends                                        |       |                                      | (11,830 | ) |   | - |   |
| Proceeds                    from exercise of common stock options              |       |                                      | - |   |   | 676,794 |   |
| Net                    cash provided by continuing operations                  |       |                                      | 98,658 |   |   | 701,794 |   |
| Net                    cash provided by discontinued operations                |       |                                      | - |   |   | 35,000 |   |
| Net                    cash provided by financing activities                   |       |                                      | 98,658 |   |   | 736,794 |   |
|                                                                           |       |                                      |   |   |   |   |   |
| NET                    CHANGE IN CASH                                          |       |                                      | 6,759 |   |   | (133,110 | ) |
|                                                                           |       |                                      |   |   |   |   |   |
| Cash,                    beginning of period                                   |       |                                      | 1,186 |   |   | 140,304 |   |
|                                                                           |       |                                      |   |   |   |   |   |
| Cash,                    end of period                                         |       | $                                         | 7,945 |   | $ | 7,194 |   |
|                                                                           |       |                                      |   |   |   |   |   |
| Supplemental                    disclosures of cash flow information           |       |                                      |   |   |   |   |   |
| Cash                    paid for income taxes                                  |       | $                                         | - |   | $ | - |   |
| Cash                    paid for interest                                      |       | $                                         | 8,727 |   | $ | 22,598 |   |
| Non-cash                    financing activities:                              |       |                                      |   |   |   |   |   |
| Conversion                    of accrued dividends to common stock             |       | $                                         | - |   | $ | 9,600 |   |
|                                                                           |       |                                      |   |   |   |   |   |
|                                                                           |       |                                      |   |   |   |   |   |
| See                    accompanying notes to consolidated financial statements |       |                                      |   |   |   |   |   |

----

**CYBERTEL      CAPITAL CORPORATION **

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS **

**NOTE      1 - BASIS OF PRESENTATION **

**NOTE      2 - ACQUISITION OF HBLN**

| Current                  assets         |   | $      | 25,262  |   |
|-----------------------------------------|--------|--------|---------|--------|
| Property                  and equipment |   |   | 25,834  |   |
| Customer                  list          |   |   | 194,399 |   |
| Goodwill                                |   |   | 375,081 |   |
| Total                  assets           |   |   | 620,576 |   |
|                                    |   |   |    |   |
| Less:                                   |   |   |    |   |
| Total                  liabilities      |   |   | 47,865  |   |
| Total                  purchase price   |   | $      | 572,711 |   |

----

| CYBERTEL                  CAPITAL CORPORATION         |
|-------------------------------------------------------|
| CONSOLIDATED                  STATEMENT OF OPERATIONS |
| (Unaudited)                                           |
|                                                  |

|                                                                   |   | **Three                  months ended,** |
|------------------------------------------------------------------------|--------|------------------------------------------|
|                                                                   |   | **June                  30, 2006**       |   | **June                  30, 2005** |   |
|                                                                   |   | **Cybertel**                             |   | **HBLN** |   | **Consolidated** |   | **Cybertel** |   | **HBLN** |   | **Consolidated** |   |
| **REVENUES**                                                           |   |                                     | 10,623 |   |   | 54,457 |   |   | 65,080 |   |   | 17,528 |   |   | 72,690 |   |   | 90,218 |   |
| **COST                  OF GOODS SOLD**                                |   |                                     | - |   |   | 46,319 |   |   | 46,319 |   |   | 250 |   |   | 66,752 |   |   | 67,002 |   |
| **Gross                  Profit**                                      |   |                                     | 10,623 |   |   | 8,138 |   |   | 18,761 |   |   | 17,278 |   |   | 5,938 |   |   | 23,216 |   |
|                                                                   |   |                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **EXPENSES**                                                           |   |                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Selling,                  General and Administrative**               |   |                                     | 642,450 |   |   | 35,209 |   |   | 677,659 |   |   | 542,015 |   |   | 8,264 |   |   | 550,279 |   |
| **Depreciation                  and Amortization**                     |   |                                     |   |   |   | 2,229 |   |   | 2,229 |   |   |   |   |   | 2,229 |   |   | 2,229 |   |
| **TOTAL                  OPERATING EXPENSES**                     |   |                                     | 642,450 |   |   | 37,438 |   |   | 679,888 |   |   | 542,015 |   |   | 10,493 |   |   | 552,508 |   |
|  **OPERATING                  LOSS**                              |   |                                     | (631,827 | ) |   | (29,300 | ) |   | (661,127 | ) |   | (524,737 | ) |   | (4,555 | ) |   | (529,292 | ) |
|                                                                   |   |                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **OTHER                  INCOME (EXPENSE)**                            |   |                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Other                  Income**                                      |   |                                     | 1,900 |   |   |   |   |   | 1,900 |   |   | 2,460 |   |   |   |   |   | 2,460 |   |
| **Interest                  Expense**                                  |   |                                     | (4,984 | ) |   | (554 | ) |   | (5,538 | ) |   | (10,580 | ) |   | (193 | ) |   | (10,773 | ) |
| **Forgiveness                  of Debt**                               |   |                                     |   |   |   |   |   |   | - |   |   | 330,686 |   |   |   |   |   | 330,686 |   |
| **TOTAL                  OTHER INCOME (EXPENSE)**                      |   |                                     | (3,084 | ) |   | (554 | ) |   | (3,638 | ) |   | 322,566 |   |   | (193 | ) |   | 322,373 |   |
|                                                                   |   |                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **NET                  LOSS**                                          |   |                                     | (634,911 | ) |   | (29,854 | ) |   | (664,765 | ) |   | (202,171 | ) |   | (4,748 | ) |   | (206,919 | ) |
|                                                                   |   |                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Preferred                  Stock Dividends**                         |   |                                     | (5,632 | ) |   |   |   |   | (5,632 | ) |   | (6,881 | ) |   |   |   |   | (6,881 | ) |
|                                                                   |   |                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **NET                  LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS**      |   | $                                        | (640,543 | ) | $ | (29,854 | ) | $ | (670,397 | ) | $ | (209,052 | ) | $ | (4,748 | ) | $ | (213,800 | ) |
|                                                                   |   |                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                   |   |                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                  and diluted net loss per share                  |   |                                     |   |   |   |   |   | $ | (0.02 | ) |   |   |   |   |   |   | $ | (0.04 | ) |
| Basic                  and diluted weighted average shares Outstanding |   |                                     |   |   |   |   |   |   | 26,868,390 |   |   |   |   |   |   |   |   | 5,109,140 |   |

----

| CYBERTEL                  CAPITAL CORPORATION         |
|-------------------------------------------------------|
| CONSOLIDATED                  STATEMENT OF OPERATIONS |
| (Unaudited)                                           |
|                                                  |

|                                                                   |   | **Six                  months ended,** |     |
|------------------------------------------------------------------------|--------|----------------------------------------|----------|
|                                                                   |   | **June                  30, 2006**     |     | **June                  30, 2005** |   |
|                                                                   |   | **Cybertel**                           |     | **HBLN** |   | **Consolidated** |   | **Cybertel** |   | **HBLN** |   | **Consolidated** |   |
| **REVENUES**                                                           |   |                                   | 18,486   |   |   | 114,939 |   |   | 133,425 |   |   | 35,748 |   |   | 208,489 |   |   | 244,237 |   |
| **COST                  OF GOODS SOLD**                                |   |                                   | -        |   |   | 66,452 |   |   | 66,452 |   |   | 27,876 |   |   | 124,576 |   |   | 152,452 |   |
| **Gross                  Profit**                                      |   |                                   | 18,486   |   |   | 48,487 |   |   | 66,973 |   |   | 7,872 |   |   | 83,913 |   |   | 91,785 |   |
|                                                                   |   |                                   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **EXPENSES**                                                           |   |                                   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Selling,                  General and Administrative**               |   |                                   | 852,031  |   |   | 60,712 |   |   | 912,744 |   |   | 1,093,829 |   |   | 15,314 |   |   | 1,109,143 |   |
| **Depreciation                  and Amortization**                     |   |                                   |     |   |   | 4,458 |   |   | 4,458 |   |   |   |   |   | 4,458 |   |   | 4,458 |   |
| **TOTAL                  OPERATING EXPENSES**                     |   |                                   | 852,031  |   |   | 65,170 |   |   | 917,201 |   |   | 1,093,829 |   |   | 19,772 |   |   | 1,113,601 |   |
|  **OPERATING                  INCOME / (LOSS)**                   |   |                                   | (833,545 | ) |   | (16,683 | ) |   | (850,228 | ) |   | (1,085,957 | ) |   | 64,141 |   |   | (1,021,816 | ) |
|                                                                   |   |                                   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **OTHER                  INCOME (EXPENSE)**                            |   |                                   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Other                  Income**                                      |   |                                   | 4,750    |   |   |   |   |   | 4,750 |   |   | 8,452 |   |   |   |   |   | 8,452 |   |
| **Interest                  Expense**                                  |   |                                   | (8,696   | ) |   | (614 | ) |   | (9,310 | ) |   | (22,598 | ) |   | (307 | ) |   | (22,905 | ) |
| **Forgiveness                  of Debt**                               |   |                                   |     |   |   |   |   |   | - |   |   | 330,686 |   |   |   |   |   | 330,686 |   |
| **TOTAL                  OTHER INCOME (EXPENSE)**                      |   |                                   | (3,946   | ) |   | (614 | ) |   | (4,560 | ) |   | 316,540 |   |   | (307 | ) |   | 316,233 |   |
|                                                                   |   |                                   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **NET                  LOSS FROM CONTINUED OPERATIONS**                |   |                                   | (837,491 | ) |   | (17,297 | ) |   | (854,788 | ) |   | (769,417 | ) |   | 63,834 |   |   | (705,583 | ) |
|                                                                   |   |                                   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Loss                  from discontinued operations**                 |   |                                   | -        |   |   | - |   |   | - |   |   | (129,111 | ) |   | - |   |   | (129,111 | ) |
|                                                                   |   |                                   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **NET                  LOSS**                                          |   |                                   | (837,491 | ) |   | (17,297 | ) |   | (854,788 | ) |   | (898,528 | ) |   | 63,834 |   |   | (834,694 | ) |
|                                                                   |   |                                   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Preferred                  Stock Dividends**                         |   |                                   | (11,830  | ) |   |   |   |   | (11,830 | ) |   | (15,290 | ) |   |   |   |   | (15,290 | ) |
|                                                                   |   |                                   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **NET                  LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS**      |   |                                   | (849,321 | ) |   | (17,297 | ) |   | (866,618 | ) |   | (913,818 | ) |   | 63,834 |   |   | (849,984 | ) |
|                                                                   |   |                                   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                   |   |                                   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                  and diluted net loss per share                  |   |                                   |     |   |   |   |   | $ | (0.04 | ) |   |   |   |   |   |   | $ | (0.23 | ) |
| Basic                  and diluted weighted average shares Outstanding |   |                                   |     |   |   |   |   |   | 19,821,216 |   |   |   |   |   |   |   |   | 3,894,509 |   |

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**NOTE      3- STOCK BASED COMPENSATION **

*Share-Based      Payment, *
*Accounting      for Stock Issued to Employees, *

|                                                                                  |   | **Three                  months ended** |     | **Six                  months ended** |   |
|---------------------------------------------------------------------------------------|--------|-----------------------------------------|----------|---------------------------------------|--------|
|                                                                                  |   | **June                  30, 2005**      |     | **June                  30, 2005**    |   |
| Net                  loss attributable to common stockholders, as reported            |   | $                                       | (209,052 | )                                     | $      | (913,818 | ) |
|                                                                                  |   |                                    |     |                                  |   |   |   |
| Add:                   stock based compensation determined under intrinsic value |   |                                    | 178,231  |                                  |   | 287,356 |   |
| Less:                  stock based compensation determined under fair value           |   |                                    | (142,319 | )                                     |   | (907,315 | ) |
| Pro                  forma net loss available to common shareholders                  |   | $                                       | (173,140 | )                                     | $      | (1,533,777 | ) |
|                                                                                  |   |                                    |     |                                  |   |   |   |
| Basic                  and diluted net loss per share as reported                     |   | $                                       | (0.04    | )                                     | $      | (0.23 | ) |
| Pro                  forma                                                            |   | $                                       | (0.03    | )                                     | $      | (0.39 | ) |

**NOTE        4 - NOTES PAYABLE - RELATED PARTIES**

**NOTE 5      - COMMON STOCK **

**NOTE        6 - SUBSEQUENT EVENTS **

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**ITEM      2. MANAGEMENT DISCUSSION AND ANALYSIS OR PLAN OF      OPERATION**

**Overview**

**General      **

**Recent      Developments**

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**Results      of Operations**

**Liquidity**

**ITEM      3. CONTROLS AND PROCEDURES. **

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**PART      II - OTHER INFORMATION**

**ITEM      1. LEGAL PROCEEDINGS.**

**ITEM      2. UNREGISTERED SALE OF SECURITIES**

**ITEM      3. DEFAULT OF SENIOR SECURITIES**

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

**ITEM      5. OTHER INFORMATIONS**

**ITEM      6. EXHIBITS**

| 31.1             | Certification                Pursuant to Section 301 of the Sarbanes                Oxley Act                   |
|----------------------------|-----------------------------------------------------------------------------------------------------------------|
| 32.1                  | Certification                Pursuant to Section 906 of the                Sarbanes-Oxley Act    |

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NA

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