UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   Form 10-KSB

(Mark One)

[x]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

                     For the fiscal year ended July 31, 2006

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

                   For the transition period from to ________

                        Commission file number 333-48746

                            Interactive Games, Inc.
                 (Name of small business issuer in its charter)

             Nevada                                    87-0567853
  ------------------------------           ------------------------------
  (State or other jurisdiction             (I.R.S. Employer Identification No.)
 of incorporation or organization)

  319 Clematis Street, Suite 803
     West Palm Beach, Florida                                     33401
------------------------------------------                 -----------------
(Address of principal executive offices)                       (Zip Code)

                     Issuer's telephone number 561-515-6030
                                               ------------

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

     Title of each class             Name of each exchange on which registered

               None                                  not applicable
      --------------------                  -------------------------------
      (Title of each class)

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

                                      none
                                   ---------
                                (Title of class)

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

Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation  S-B is not  contained  in  this  form,  and no  disclosure  will  be
contained,  to the best of the  registrant's  knowledge,  in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]

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

State issuer's revenues for its most recent fiscal year.  $53,423 for the fiscal
year ended July 31, 2006.

State the aggregate market value of the voting and non-voting common equity held
by non-affiliates  computed by reference to the price at which the common equity
was sold,  or the average bid and asked  prices of such common  equity,  as of a
specified date within the past 60 days. The aggregate market value of the common
equity held by non-affiliates  computed at the closing price of the registrant's
common stock on November 13, 2006 ($0.085 per share) is approximately $2,711,000

November 6, 2006 52,782,100 shares of common stock are issued and outstanding.


<PAGE>

                       DOCUMENTS INCORPORATED BY REFERENCE

 If the following documents are incorporated by reference, briefly describe them
and  identify  the part of the Form 10-KSB  (e.g.,  Part I, Part II,  etc.) into
which the document is incorporated:  (1) any annual report to security  holders;
(2) any proxy or information statement; and (3) any prospectus filed pursuant to
Rule 424(b) of the Securities Act of 1933 ("Securities Act"). Not Applicable.

        Transitional Small Business Disclosure Form (check one): Yes     No X
                                                                 ----   -----

       CERTAIN CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING INFORMATION

Certain  statements in this annual report on Form 10-KSB  contain or may contain
forward-looking  statements  that  are  subject  to  known  and  unknown  risks,
uncertainties  and other factors which may cause actual results,  performance or
achievements to be materially different from any future results,  performance or
achievements  expressed  or implied by such  forward-looking  statements.  These
forward-looking  statements  were  based on  various  factors  and were  derived
utilizing  numerous  assumptions  and other  factors that could cause our actual
results to differ materially from those in the forward-looking statements. These
factors  include,  but are not  limited  to, our ability to our ability to raise
capital,  obtain and retain  customers,  to provide our products and services at
competitive  rates,   execute  our  business  strategy  in  a  very  competitive
environment,  our  degree  of  financial  leverage,  risks  associated  with our
acquiring  and  integrating  companies  into our own,  risks  related  to market
acceptance and demand for our services, and other factors. Most of these factors
are difficult to predict  accurately and are generally  beyond our control.  You
should   consider  the  areas  of  risk   described  in   connection   with  any
forward-looking statements that may be made herein. Readers are cautioned not to
place  undue  reliance  on  these  forward-looking  statements.  Readers  should
carefully review this Form 10-KSB in its entirety,  including but not limited to
our financial  statements and the notes thereto and the risks described in "Item
1.  Business--Risk  Factors."  Except for our  ongoing  obligations  to disclose
material  information  under  the  Federal  securities  laws,  we  undertake  no
obligation to release publicly any revisions to any forward-looking  statements,
to report events or to report the occurrence of unanticipated events.

When used in this annual report,  the terms the "Company," "we", "our", and "us"
refers to Interactive  Games, Inc., a Nevada  corporation,  and our subsidiaries
Torpedo  Sports USA,  Inc.,  a Delaware  corporation  ("Torpedo  USA"),  Torpedo
Sports,  Inc., a Canadian  corporation  ("Torpedo Canada"),  JamDirect,  Inc., a
Florida  corporation  ("JamDirect")  and  Interactive  Games,  Inc.,  a  Florida
corporation  ("Interactive").  The information which appears on our web sites at
www.interactivegamesinc.com  or  www.jamdirect.com  is not  part of this  annual
report.

<PAGE>

                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS.

OVERVIEW

Interactive Games, Inc. was formed to develop, license and market specialty slot
machine and mobile entertainment  software.  Our product line seeks to provide a
unique game experience by combining  advanced  technology with engaging content,
celebrity  licensing,  vivid graphics and rich sound. Our primary focus has been
to build a strong base of clients for our gaming and other applications, provide
value added  consulting  services and continue the development of our gaming and
mobile entertainment  products. Our products include licensed slot machine tiles
and gaming  software,  mobile games and  wireless  entertainment  products  with
vertical  markets and services  for event  tickets,  music,  ring tones and real
tones  from  popular   artists.   Our  products  are   developed   and  marketed
internationally  in the  regulated  gaming  and  wireless  industry.  Our target
markets include Class III specialty licensing and mobile gaming applications.

Company  management has held discussions with a few private  companies whom have
indicated  an  interest in  developing  a strategic  alliance,  merger,  reverse
merger,  or  other  form of  corporate  consolidation  or  combination  with the
Company.  Management  is  currently in  discussions  with a number of firms that
initially appear to be good matches for such a combination with the Company.  No
definitive or binding  agreements  have been reached or entered into. If such an
undertaking  is  completed  with any one of these  firms,  it could  result in a
significant  restructuring,  as well as a  change  in  control  of the  Company,
including the possibility  that the Company would no longer exist in its present
form or organization. There is no assurance that a transaction will be completed
nor if  shareholder's  long-term  value would be maximized if a  transaction  is
completed. However, given the current circumstances of the Company, our business
sector outlook, and the competing factors we face, such a transaction may be the
best  option  available  to  management  for the  long-term  enhancement  of our
shareholder value.

WIRELESS ENTERTAINMENT PRODUCTS

We have licensed the rights to mobile cell phone and wireless applications.  Our
partnership  with 9 Squared Inc.  provides us with licensing rights to worldwide
distribution  through most major wireless carriers of ringtones,  wallpapers and
wireless   multimedia   content  of  over  10,000   popular  music  artists  and
celebrities. We allow for download of all mobile games and ringtones via our web
site at  www.Jamdirect.com.  Our  application  portfolio  includes  single-  and
multi-player games, ring tones, images and other entertainment content. Sales of
the applications are tied, in part, to the commercial introduction of new mobile
phone models. Many new mobile phone models are released in the fourth quarter to
coincide with the holiday shopping season.

Our delivery system distributes today's most popular content through the
combined use of wireless technology's most innovative platforms, including.

    o SMS -  Delivery of ring tones, operator logos, group graphics, message
             based games,

    o MMS -  Delivery of multi media messages
             (graphics and sounds bundled within message),

    o WAP -  WAP enabled user interfaces that allow customers to download mobile
             applications,

    o GPRS - Use of GPRS networks to connect and facilitate downloading and
             WAP protocols, and

    o J2ME - Delivery of games to java enabled phones.

                                      -3-
<PAGE>

The fees for wireless games  generally  range from $4.99 to $1.99 for a one time
purchase and from $5.00 to $10.00 for a monthly subscription.  The fees for ring
tones  generally  range  from  $0.99  for a  single  ring  tone to  $9.99  for a
collection of ring tones. We operate a mobile content delivery system capable of
content  delivery to more than 220 phone models,  across 255 carrier networks in
60 countries  worldwide.  We are supported by service  providers  such as Sprint
PCS, AT&T, Cingular,  T-Mobile and top handset manufacturers  including Samsung,
Nokia, Sony Ericsson, Motorola, LG, Sanyo, Hitachi, and AT&T.

Although we intend to continue  distributing our applications  primarily through
wireless  carriers,  we are also developing  alternative  means of marketing and
selling our applications directly to wireless  subscribers,  including marketing
our applications through Internet portal sites,  including the Yahoo! and Jamba!
sites,  and our own  website,  through  mobile  phone  manufacturers  and retail
stores.  When using  these  alternative  channels  to  distribute  our  wireless
applications, the wireless carrier generally provides the billing and collection
service and  continues  to retain a percentage  of the purchase  price for those
services. In addition, the third-party provider,  such as a retailer or Internet
portal,  also  generally  retains a percentage  of the  purchase  price of sales
taking place  through  these  alternative  sales and  marketing  channels.  As a
result,  we  typically  will earn  less from  sales  through  these  third-party
providers than we would from sales directly through wireless carriers.

We are also seeking to expand our revenue base by developing  propriety software
applications  which we can  market  in  addition  to the  licensed  products  we
currently  market.  We will seek to develop  original  products both internally,
using our in-house development staff, and externally, using third party software
developers  working under contract with our company.  Management of our internal
staff will  monitor the work of both inside and third  party  development  teams
through  design  review,  progress  evaluation,  milestone  review  and  quality
assurance.

MARKETING AND SALES

Our marketing  activities  will vary depending upon whether a wireless or mobile
game title is based upon a licensed or an original property. A licensed property
has pre-existing brand popularity and thus often requires less initial effort by
us to promote.  Our marketing efforts for titles based upon original  properties
will  begin in  advance  of a title's  release  and focus on  building  positive
awareness of our game concepts with  consumers and retailers  alike.  Our public
relations  promotional  activities  for original  titles in fiscal 2006 and 2005
included  coverage in broadcast,  print and online media  targeting  enthusiast,
lifestyle and major mainstream  outlets.  Additionally,  we continue to increase
our  corporate  public  relations  efforts by  establishing  relationships  with
leading technology, retail outlets and strategic business alliances.

Our marketing  strategy is also  establishing an identity within the proprietary
Class III specialty slot machine celebrity licenses,  and wireless  applications
for both the regulated gaming and wireless industry.  By trying to capitalize on
the relationships and industry contacts we have established in the past. We will
work with licensed  distributors and wireless carriers leveraging  relationships
in various jurisdictions for product placement.

COMPETITION

The markets for our products are highly competitive. We will be competing with a
number of developers,  manufacturers  and  distributors  of products  similar to
those that we license and market.  The majority of these  competitors are larger
and have greater access to capital resources than we do. Our future  performance
may be affected by numerous factors,  including the continued  popularity of our
products  as well as the  ability of our  technology  partners  to  develop  and
introduce  new  products  that  gain  market  acceptance  and  satisfy  consumer
preferences.

                                      -4-

<PAGE>

The current  competitive  environment is placing increasing demands on equipment
makers,  requiring  a strong  pipeline  of new games and the  ability  to secure
rights to popular brand names and other entertainment-oriented  content suitable
for adaptation for casino and pay-for-play games. Future growth opportunities in
the gaming  equipment  industry  will result not only from a strong  pipeline of
well-defined   branded  games,  but  also  from  new  product  developments  and
technological advancements.

Our major competitors  include  International Game Technology,  Alliance Gaming,
Aristocrat,  Atro, JamDat Mobile, Sigma Game, Shuffle Master, Inc.,  Multi-Media
Games and THQ Wireless.

We may be able to compete favorably in the principal  competitive factors in our
market, which will consist of the following:

o   We will seek to build broad and deep distribution channels and third
    party content providers with strong carrier relationships;

o   We will seek to build of a diverse portfolio of high-quality applications;
    and

o   We will seek to establish technical capability and management experience and
    expertise.

We have limited  revenues and limited working  capital,  there are no assurances
whatsoever  that we will  ever be able  to  effectively  compete  in our  target
market. Many of our current and potential  competitors have significantly longer
operating histories and significantly greater managerial,  financial, marketing,
technical and other competitive resources,  as well as greater name recognition,
than we do. As a result,  these  companies  may be able to adapt more quickly to
changes in customer  preferences and may be able to devote greater  resources to
the promotion and sale of their competing products.

GOVERNMENT REGULATION

A portion of our  business  involves the  licensing of software  used to conduct
games for pay, or gambling.  We do not,  however,  manufacture or own any gaming
hardware, operate any casinos or otherwise directly engage in this business. The
regulation  of the  gambling  industry  is  complex,  intensive  and  constantly
changing. We are not presently subject to any rules or regulations which require
us to obtain any licenses or governmental  approvals to develop software used in
gaming   applications.   However,  the  adoption  or  modification  of  laws  or
regulations  relating to gambling could adversely  affect the manner in which we
currently conduct this portion of our business.

INTELLECTUAL PROPERTY

Our  intellectual  property is an essential  element of our  business.  We use a
combination  of  trademark,  copyright,  trade  secret  and  other  intellectual
property laws,  confidentiality agreements and license agreements to protect our
intellectual property. Our employees and independent contractors are required to
sign  agreements  acknowledging  that all  inventions,  trade secrets,  works of
authorship, developments and other processes generated by them on our behalf are
our property,  and  assigning to us any  ownership  that they may claim in those
works.  Despite our precautions,  it may be possible for third parties to obtain
and  use  without  consent  intellectual   property  that  we  own  or  license.
Unauthorized use of our intellectual property by third parties, and the expenses
incurred in protecting our intellectual  property  rights,  may adversely affect
our business.

EMPLOYEES

As of October 15, 2006, we have no full-time employees.

                                      -5-

<PAGE>

OUR HISTORY

We were  originally  organized  under the laws of the State of Nevada in 1996 as
Zacman Enterprises,  Inc. and subsequently changed its name to eNutrition,  Inc.
eNutrition was a direct mail marketing  company  engaged in the  development and
marketing  of  nutritional  supplements.  Operation  commenced  in June  2000 by
securing the exclusive  rights to market the  nutritional  supplement,  HI-Q. In
September 2001, eNutrition entered into a License Agreement with HI-Q Nutrition,
Inc., a Nevada  corporation,  granting them the exclusive right to engage in the
business of marketing and distributing nutritional products under the trade name
HI-Q.

On April 30, 2002, we entered into an agreement  with HI-Q  Nutrition,  Inc. for
the  sale  of all of our  assets  relating  to our  HI-Q  brand  of  nutritional
supplements, including the brand name, trademark, product formulations, customer
base and marketing ideas,  which comprised all of the assets and business of our
company. The agreement closed and became effective on May 20, 2002,  immediately
prior to our acquisition of the Torpedo  business  described  below. We received
cash  consideration of $10,000,  plus  forgiveness of any uncollected  royalties
owed to HI-Q  Nutrition,  Inc. In addition,  HI-Q  Nutrition,  Inc.  assumed all
liabilities  relating  to the HI-Q brand  products.  At a special  shareholders'
meeting  held on May 17,  2002,  our  stockholders  approved  the sale of all of
eNutrition's  assets, and the assumption of all liabilities,  to HI-Q Nutrition,
Inc. Our  stockholders  also  approved a one share for  1.8870314  share reverse
stock split and the purchase  and  retirement  of  4,478,430  post-reverse-split
shares.

On May 17, 2002, our  stockholders  also approved our  acquisition of all of the
issued and outstanding  securities of Torpedo Delaware in exchange for 8,000,000
shares of our common  stock issued to the Torpedo USA  stockholders.  On May 20,
2002 we changed our name to Torpedo  Sports USA, Inc.  Torpedo USA,  through its
wholly-owned  subsidiary  Torpedo Canada,  was a manufacturer and distributor of
outdoor  recreational  products for children,  such as,  toboggans,  baby sleds,
snowboards, tricycles, scooters and skateboards. The transaction was recorded as
a  reverse   acquisition  based  on  factors   demonstrating  that  Torpedo  USA
constituted the accounting acquirer.

In January 2004,  Torpedo  Canada filed in Canada,  a notice of its intention to
make a  proposal  to its  creditors  for the  restructuring  of its  debts.  The
proposal  procedure  allowed  Torpedo Canada to continue to operate its business
subject to  protection  of the secured  interests  of its lenders and  suspended
efforts by creditors to collect  their debts while Torpedo  Canada  reviewed and
analyzed  its  financial  condition.  On May 6, 2004,  Torpedo  Canada filed for
protection  under the Bankruptcy and Insolvency Act of Canada with the intention
to liquidate its assets.  Torpedo Canada ceased its operating  activities in May
2004.

On February 1, 2005, we acquired all of the issued and outstanding  common stock
of Interactive.  Pursuant to terms of the merger agreement,  in exchange for all
of the issued and outstanding  common shares of Interactive we issued 27,037,282
shares of our common stock to the former  Interactive  shareholders in order for
them to own 51% of our  outstanding  common  stock  on the  closing  date of the
merger,  on a fully  diluted  basis.  We  agreed to issue  additional  shares if
certain  agreed upon criteria,  to be determined,  are met in order to allow the
former Interactive  security holders to hold 54% of our outstanding common stock
(based on the shares outstanding at the time of closing).  Accordingly, we could
issue  up  to  an  additional   3,457,453  shares  to  the  former   Interactive
shareholders. As of October 30, 2006, we have not issued any of these additional
shares.  In  connection  with  the  merger  agreement,  the  former  Interactive
shareholders agreed to use their best efforts  post-closing to cause our company
to raise sufficient  funds to pay-off or otherwise  dispose of up to $250,000 of
our liabilities.  As of October 31, 2006,  $100,000 has been paid.  Finally,  if
Torpedo USA did not dispose of all of assets and liabilities within three months
following the acquisition  closing date, we were required to issue an additional
500,000  shares  to  the  former  Interactive  shareholders.   The  Company  has
determined that it will issue such shares once Torpedo USA has raised sufficient
shares to satisfy up to $250,000 of its liabilities.  As described below, we are
currently in discussions for the sale of Torpedo Canada

                                      -6-

<PAGE>

In  conjunction  with the merger  agreement,  we changed our name to Interactive
Games,  Inc.  and  approved  an  increase in our  authorized  common  stock from
50,000,000 shares to 100,000,000 shares.

The  acquisition  of  Interactive  by us was accounted  for as a reverse  merger
because on a  post-merger  basis,  the former  Interactive  shareholders  hold a
majority of the  outstanding  common  stock of our company on a voting and fully
diluted  basis.  As a result,  Interactive  was  deemed to be the  acquirer  for
accounting purposes.  Accordingly,  the financial statements presented are those
of  Interactive  for all periods  prior to the  acquisition,  and the  financial
statements of the consolidated  companies from the acquisition date forward. The
historical  stockholders'  deficit of Interactive  prior to the acquisition have
been retroactively  restated (a  recapitalization)  for the equivalent number of
shares received in the acquisition after giving effect to any differences in the
par value of our common stock and Interactive's  common stock, with an offset to
additional paid-in capital. The restated consolidated accumulated deficit of the
accounting acquirer (Interactive) is carried forward after the acquisition.

There were no changes in  management  or the Board of  Directors  of our company
following the transaction with Interactive,  and current  management  intends to
serve in office at least until  certain  liabilities  of our  company  have been
disposed of as contemplated by the agreement.  Thereafter,  the  shareholders of
Interactive prior to the transaction intend to appoint their designees to fill a
majority of the positions on the Board of Directors.

PENDING BANKRUPTCY AND SALE OF TORPEDO CANADA

As described  above, in May 2004 Torpedo Canada filed for bankruptcy  protection
in Canada.  In  conjunction  with the  bankruptcy,  a trustee was  appointed  to
oversee the Torpedo  Canada estate.  The trustee's  functions are to recover the
maximum value of Torpedo Canada's assets and discharge  bankruptcy  claims based
upon priority and pursuant to Canadian  bankruptcy  laws. As a result of Torpedo
Canada's  inability to meet its obligations which led to the bankruptcy  filing,
certain  creditors  initiated  legal action  against  Torpedo Canada and some of
these  creditors have received  judgments  against that company.  The assets and
liabilities related to Torpedo Canada are reflected on our balance sheet at July
31, 2005 as Assets of  discontinued  operations and  Liabilities of discontinued
operations, respectively. The liabilities of Torpedo Canada exceed the estimated
net realizable  values of Torpedo  Canada's assets and will not be sufficient to
pay  all of the  obligations  of  Torpedo  Canada.  We are  uncertain  as to the
ultimate  disposition  of these  liabilities,  but we  believe  that there is no
significant exposure to our company.

We are in negotiations with VP Sports, Inc., an affiliate through common control
by our CEO, to sell 100% of our ownership  interest in Torpedo  Canada.  If this
happens,  VP Sports would assume the  responsibility to liquidate Torpedo Canada
and relieve our company of any further obligations of Torpedo Canada.

RISK FACTORS

Before you invest in our securities,  you should be aware that there are various
risks.  You should consider  carefully these risk factors,  together with all of
the other  information  included  in this  annual  report  before  you decide to
purchase  our  securities.  If any  of the  following  risks  and  uncertainties
develops into actual  events,  our business,  financial  condition or results of
operations could be materially adversely affected.

Our auditors have raised substantial doubts as to our ability to continue as a
going concern.

Our  consolidated  financial  statements  have been  prepared  assuming  we will
continue as a going  concern.  Since  inception  we have  experienced  recurring
losses from  operations,  which  losses have  caused an  accumulated  deficit of
approximately  $1,857,000 as of July 31, 2006. In addition,  for the years ended
July 31,  2006 and 2005 we  incurred  a  comprehensive  loss of  $1,301,412  and
$459,240,  respectively.  We have a working  capital  deficit  of  approximately
$5,138,000  at July 31, 2006 and cash on hand of  approximately  $10,900.  These
factors,  among others, raise substantial doubt about our ability to continue as
a going concern.  Our financial  statements do not include any adjustments  that
might result from the

                                      -7-

<PAGE>

outcome of this uncertainty. We anticipate that we will continue to incur losses
in future  periods and we will need to raise  substantial  amounts of capital to
pay our current  obligations and implement our business model. No assurances can
be given that adequate  financing can be obtained to meet our capital needs.  If
we are unable to generate profits and unable to continue obtaining  financing to
meet our  working  capital  requirements  we may have to  curtail  our  business
sharply, or cease operations altogether.  Our continuation as a going concern is
dependent  upon  our  ability  to  generate  sufficient  cash  flow to meet  our
obligations on a timely basis, to obtain additional financing,  and, ultimately,
to attain profitability.  Should any of these events not occur, the accompanying
financial  statements  will be  adversely  effected  and we may  have  to  cease
operations.

All of our assets serve as collateral  under debt obligations to a related party
which  are due upon  demand.  In  addition,  we are in  default  under a $75,000
promissory note.

At July 31,  2006 we owe parties  which are  affiliated  to our company  through
common  control an  aggregate  of  $1,783,760.  All of these  amounts are due on
demand. In addition, we have granted E2000, Inc., Gulfstream Financial Partners,
Ltd and USA Skate  Corporation,  affiliates  (the  "Affiliates")  through common
control by Henry Fong, our CEO, a security  interest in all of our assets. We do
not  presently  have  sufficient  capital to satisfy  these  obligations  if the
Affiliates  should  demand  payment  of  the  amounts  due  them.  If any of the
Affiliates  should  demand  payment of the  amounts due it, upon our default the
Affiliates  would be entitled to foreclose on our assets which would  prevent us
from continuing our operations. Finally, we owe an unrelated third party $75,000
under an unsecured note which matured in April 2005 and is currently in default.

Without the addition of qualified personnel,  for which we do not currently have
adequate financial  capacity,  we may not be able to manage growth and expansion
and may not be able to grow our company to profitability.

In order to grow our Company,  we will require additional  personnel,  and would
incur the associated  higher levels of operating  expenses.  We currently do not
have the resources available for this requirement. In order to manage operations
effectively, we will need to continuously implement and improve our operational,
financial,  and  management  information  systems,  as well as  manage  customer
service,  personnel and business systems.  Our ultimate success may be dependent
in part upon our  ability to attract  and retain  additional  personnel  in such
areas as product development,  operations, management,  manufacturing,  customer
service and marketing.  There can be no assurance that suitable persons for such
areas can be located or retained,  or that we will  successfully  meet the other
challenges imposed by a highly competitive market and rapid growth.

We have a large number of financially  strong  competitors  that may preclude us
from penetrating the market adequately to meet our business plan.

Our target markets are, in general,  intensely  competitive and subject to rapid
change.  Competitors  vary in size and in the scope and breadth of the  products
offered.  We  compete  against a number of  companies,  almost all of which have
greater financial resources, brand recognition and operating history than we do.
We  will  require  additional  capital  to  establish  a  competitive  position.
Increased competition may result in price reductions,  reduced gross margins and
failure to attain or increase market share.

We will require  additional  capital to pay our operating expenses and otherwise
implement our business plan.

We have had limited  success in  generating  revenues from  operations,  and our
revenues  are not  sufficient  to enable us to meet our  operating  expenses and
otherwise  implement our business plan. We will need to raise additional capital
to continue to implement  our business plan and to pay our  obligations  as they
become due. We do not have any commitments from any third parties for additional
capital and there can be no  assurances  that we will be  successful  in raising
additional  working  capital.  If we cannot raise  capital as needed,  we may be
unable to continue our operations.

                                      -8-

<PAGE>

We have not voluntarily  implemented various corporate governance  measures,  in
the  absence  of  which,  stockholders  may  have  reduced  protections  against
interested director transactions, conflicts of interest and other matters.

We are not subject to any law, rule or regulation requiring that we adopt any of
the  corporate  governance  measures  that are required by the rules of national
securities exchanges or Nasdaq such as independent  directors,  audit committees
and codes of ethics.  It is possible that if we were to adopt some or all of the
corporate governance measures,  stockholders would benefit from somewhat greater
assurances that internal  corporate  decisions were being made by  disinterested
directors and that policies had been implemented to define responsible  conduct.
Prospective  investors  should  bear  in mind  our  current  lack  of  corporate
governance measures in formulating their investment decisions

Because our stock currently  trades below $5.00 per share,  and is quoted on the
OTC Bulletin Board,  our stock is considered a "penny stock" which can adversely
affect its liquidity.

For so long as the  trading  price of our  common  stock is less than  $5.00 per
share, our common stock is considered a "penny stock," and trading in our common
stock is subject to the requirements of Rule 15g-9 under the Securities Exchange
Act of 1934. Under this rule, broker/dealers who recommend low-priced securities
to persons  other than  established  customers  and  accredited  investors  must
satisfy  special sales practice  requirements.  The  broker/dealer  must make an
individualized  written suitability  determination for the purchaser and receive
the purchaser's written consent prior to the transaction.

SEC regulations also require additional disclosure in connection with any trades
involving a "penny  stock,"  including  the  delivery,  prior to any penny stock
transaction,  of a disclosure schedule explaining the penny stock market and its
associated risks. These requirements  severely limit the liquidity of securities
in the  secondary  market  because few broker or dealers are likely to undertake
these compliance activities. In addition to the applicability of the penny stock
rules,  other risks  associated with trading in penny stocks could also be price
fluctuations and the lack of a liquid market.  Finally,  as a penny stock we may
not be entitled to the protections provided by the Private Securities Litigation
Reform Act of 1995.

We may be exposed to  potential  risks  relating to our internal  controls  over
financial  reporting and our ability to have those  controls  attested to by our
independent auditors.

As directed by Section 404 of the  Sarbanes-Oxley  Act of 2002 ("SOX 404"),  the
Securities and Exchange  Commission  adopted rules requiring public companies to
include a report of management on the company's internal controls over financial
reporting in their annual  reports,  including  Form  10-KSB.  In addition,  the
independent  registered  public  accounting firm auditing a company's  financial
statements  must also  attest to and report on  management's  assessment  of the
effectiveness  of the company's  internal  controls over financial  reporting as
well as the operating  effectiveness of the company's internal controls. We were
not subject to these  requirements  for the fiscal year ended July 31, 2006.  We
are evaluating our internal  control systems in order to allow our management to
report on, and our independent  auditors attest to, our internal controls,  as a
required part of our annual report on Form 10-KSB  beginning with our report for
the fiscal year ended July 31, 2007.

While we would like to expend significant  resources in developing the necessary
documentation  and  testing  procedures  required by SOX 404, we do not have the
resources  available  and  accordingly,  there is a risk that we will not comply
with all of the requirements imposed thereby. At present,  there is no precedent
available with which to measure compliance adequacy.  Accordingly,  there can be
no  positive  assurance  that we will  receive a positive  attestation  from our
independent auditors.

In the event we identify significant  deficiencies or material weaknesses in our
internal  controls that we cannot  remediate in a timely manner or we are unable
to receive a positive  attestation from our independent auditors with respect to
our  internal  controls,  investors  and  others  may  lose  confidence  in  the
reliability of our financial statements and our ability to obtain equity or debt
financing could suffer.

                                      -9-

<PAGE>

Provisions  of our articles of  incorporation  and bylaws may delay or prevent a
take-over which may not be in the best interests of our stockholders.

Provisions  of our  articles of  incorporation  and bylaws may be deemed to have
anti-takeover  effects,  which include when and by whom special  meetings of our
stockholders may be called,  and may delay, defer or prevent a takeover attempt.
In addition,  certain  provisions  of the Nevada  Revised  Statutes  also may be
deemed to have  certain  anti-takeover  effects  which  include  that control of
shares acquired in excess of certain  specified  thresholds will not possess any
voting  rights  unless  these  voting  rights are  approved  by a majority  of a
corporation's disinterested stockholders.

In  addition,  our  articles of  incorporation  authorize  the issuance of up to
5,000,000  shares of preferred  stock with such rights and preferences as may be
determined  from time to time by our board of directors,  of which no shares are
presently  issued  and   outstanding.   Our  board  of  directors  may,  without
stockholder  approval,  issue  preferred  stock  with  dividends,   liquidation,
conversion,  voting or other rights that could adversely affect the voting power
or other rights of the holders of our common stock.

ITEM 2. DESCRIPTION OF PROPERTY.

Our  corporate  headquarters  is located in West Palm Beach,  Florida,  where we
sublease  approximately 1700 square feet from an affiliated party, under a lease
that expires in April 2007.  We also  sublease  additional  office space from an
affiliated  company for $3,500 per month that expires  September  2007. We lease
other  executive  office  facilities  in Las  Vegas,  Nevada on a month to month
basis.  We believe our space is adequate for our current needs and that suitable
additional or substitute  space will be available to accommodate the foreseeable
expansion of our business and operations.

ITEM 3.   LEGAL PROCEEDINGS.

Due to Torpedo's  inability to meet its obligations  timely,  certain  creditors
have  initiated  legal action  against the Company,  some of which have received
judgments for payment. The Company is involved in other claims and legal actions
arising out of the ordinary  course of business.  In the opinion of  management,
the  ultimate  disposition  of these  matters  will not have a material  adverse
impact  either  individually  or in the  aggregate  or  consolidated  results of
operations, financial positions or cash flows of the company.

In  addition  to the  foregoing,  from time to time we may be  involved in other
litigation   relating   to   claims   of   alleged   infringement,   misuse   or
misappropriation  of intellectual  property rights of third parties. We may also
be subject  to claims  arising  out of our  operations  in the normal  course of
business. As of the date of this Form 10-K, we are not a party to any such other
litigation that would have a material adverse effect on us or our business

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

None.

                                     PART II

ITEM 5.   MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

Our common  stock is quoted on the OTC Bulletin  Board under the symbol  "IGAM."
The  following  table sets forth the high and low  closing  sale  prices for our
common  stock as reported on the OTCBB and for the last two fiscal years and the
subsequent  interim  period.  These  prices  do  not  include  retail  mark-ups,
markdowns or commissions, and may not necessarily represent actual transactions.

                                      -10-

<PAGE>

      Fiscal 2005                   High                       Low

      October 31, 2004             $ 0.35                     $ 0.20
      January 31, 2005               0.33                       0.18
      April 30, 2005                 0.26                       0.18
      July 31, 2005                  0.22                       0.07

      Fiscal 2006                   High                       Low

      October 31, 2005             $ 0.25                     $ 0.09
      January 31, 2006               0.39                       0.18
      April 30, 2006                 0.40                       0.06
      July 31, 2006                  0.09                       0.06

On November 3, 2006 the last  reported  sale prices of the common stock on OTCBB
was $0.06 per share.  As of October 3, 2006 there were 63 stockholders of record
of the common stock  according to our transfer  agent.  This amount  excludes an
indeterminate  number of  stockholders  whose  shares  are held in  "street"  or
"nominee" name.

Dividend Policy

We have  never  declared  or paid any cash  dividends  on our common  stock.  We
currently  expect to retain future  earnings,  if any, to finance the growth and
development  of our business.  Under Nevada law, we are  prohibited  from paying
dividends if the distribution would result in our company not be able to pay its
debts as they become due in the usual  course of business or if our total assets
would be less than the sum of our total  liabilities  plus the amount that would
be needed,  we were to be dissolved at the time of distribution,  to satisfy the
preferential  rights upon dissolution of stockholders whose preferential  rights
are superior to those receiving the distribution.

Recent Sales of Unregistered Securities

For each of the  following  transactions,  we  relied  upon the  exemption  from
registration provided by Section 4(6) or 4(2) of the Securities Act and Rule 506
promulgated thereunder based upon (i) representations from each investor that it
is an  accredited  or  sophisticated  investor  with  experience in investing in
securities  such  that  it  could  evaluate  merits  and  risks  related  to our
securities;  (ii) that no general solicitation of the securities was made by us;
(iii) each investor  represented  to us that it was acquiring the securities for
its own  account  and not with a view  towards  further  distribution;  (iv) the
securities  issued were  "restricted  securities"  as that term is defined under
Rule 144  promulgated  under the Securities  Act; and (v) we placed  appropriate
restrictive  legends on the certificates  representing the securities  regarding
the restrictive nature of these securities;  and (vi) prior to the completion of
the transaction,  each investor was informed in writing of the restricted nature
of the  securities,  provided with all information  regarding  Torpedo Sports as
required  under Rule 502 of Regulation D and were given the  opportunity  to ask
questions of and receive additional  information from us regarding our financial
condition and operations.

Prior to the reverse  merger,  Torpedo USA issued  715,000  shares of its common
stock in a private  placement  for $0.15 per  share  and  received  proceeds  of
$107,250.

During the same period  Torpedo USA issued 125,000 shares of its common stock to
an  officer  of  the  Company  in  exchange  for  consulting  fees  of  $18,750;
accordingly,  the shares were valued at $0.15 per share and also issued  375,000
shares of its common stock to a  consultant  for  services  performed  valued at
$75,000.  In  connection  with the  issuance,  the  consultant  agreed to cancel
remaining warrants to purchase 750,000 shares of common stock.

                                      -11-

<PAGE>

In February  2005,  the Company  issued  41,333  shares of its common stock in a
private  placement  for $0.15 per share and  received  proceeds  of $6,200.  The
shares were issues to a Company affiliated through common ownership.

In April 2006,  the Company  issued  1,500,000  shares of its common  stock to a
placement agent as fees related to a debenture offering.

Securities Authorized for Issuance Under Equity Compensation Plans

The following table sets forth  securities  authorized for issuance under equity
compensation plans, including individual compensation arrangements,  by us under
our 2002 and 2003 Stock Option Plans.

<TABLE>
<CAPTION>
                      Equity Compensation Plan Information
                                                                              Number of securities
                                                                              remaining available
                                                                              for future issuance
                          Number of securities        Weighted-average            under equity
                            to be issued upon        exercise price of         compensation plans
                               exercise of              outstanding          (excluding securities
                          outstanding options,       options, warrants        reflected in column
     Plan category         warrants and rights           and rights                   (a)
------------------------- ---------------------- -- --------------------- -- -----------------------
                                   (a)                      (b)                       (c)
------------------------- ---------------------- -- --------------------- -- -----------------------
<S>                             <C>                       <C>                      <C>
Equity compensation             2,527,000                 $0.22                    800,000
plans not approved by
security holders
</TABLE>
ITEM 6.   MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

The  following  analysis of our results of operations  and  financial  condition
should  be read in  conjunction  with the  accompanying  consolidated  financial
statements for the year ended July 31, 2006 and 2005 and notes thereto appearing
elsewhere in this annual report.

Overview

On February 1, 2005, we acquired all of the issued and outstanding  common stock
of Interactive pursuant to a definitive merger agreement. Interactive was formed
in December  2003.  Interactive's  plan is to deliver to its  customers,  gaming
technology  that produces a high return on investment by providing both software
and  gaming   hardware.   However,   Interactive   has  minimal  assets  and  no
revenue-generating  operations.  In  addition,  the  report  of the  independent
registered  public  accounting  firm on  Interactive's  July 31, 2004  financial
statements  included an explanatory  paragraph that describes  substantial doubt
about Interactive's ability to continue as a going concern.  Interactive is also
engaged in developing and marketing  interactive  casino  technologies  and slot
machine games to the Native  American Class II, Class III and charitable  gaming
markets.

The  acquisition  of  Interactive  by our company was accounted for as a reverse
merger because on a post-merger basis, the former Interactive  stockholders hold
a majority of our outstanding  common stock on a voting and fully diluted basis.
As a result,  Interactive was deemed to be the acquirer for accounting purposes,
although our company  remained the legal  survivor.  Accordingly,  the financial
statements presented, beginning with the period ending April 30, 2005, are those
of  Interactive  for all periods  prior to the  acquisition,  and the  financial
statements of the consolidated companies from the acquisition date

                                      -12-

<PAGE>

forward.  The  historical  stockholders'  deficit  of  Interactive  prior to the
acquisition  will  be  retroactively   restated  (a  recapitalization)  for  the
equivalent  number of shares received in the acquisition  after giving effect to
any differences in the par value of each company's common stock,  with an offset
to additional paid-in capital. The restated consolidated  accumulated deficit of
the  accounting  acquirer  (Interactive)  will  be  carried  forward  after  the
acquisition.

Results of Operations

For the year ended July 31, 2006 compared to the year ended July 31, 2005.
<TABLE>
<CAPTION>
                                                    For the year ended                  Increase/
                                                         July 31,                      (decrease)
                                            -----------------------------------
                                                 2006                2005            2006 vs 2005
                                            ---------------   -----------------    ---------------
<S>                                              <C>                 <C>               <C>
Revenues                                         $  53,423           $  76,920         $  (23,497)
Cost of revenues                                    43,887                   -             43,887
                                            ---------------   -----------------    ---------------
Gross profit                                         9,536              76,920            (67,384)

Operating expenses:
  Selling, general and administrative              974,473             636,166            338,807
                                            ---------------   -----------------    ---------------

Operating loss                                    (964,937)           (559,246)          (405,691)
                                            ---------------   -----------------    ---------------
Other income (expenses):
  Gain on settlement                                     -             254,900           (254,900)
  Interest expense, related party                 (142,516)            (72,035)            70,481
  Interest expense                                 (46,866)             (8,776)            38,090
                                            ---------------   -----------------    ---------------

     Total other income (expenses)                (189,382)            174,089            363,471
                                            ---------------   -----------------    ---------------

Loss before discontinued operations             (1,154,319)           (385,157)          (769,162)
Loss from discontinued operations                      (48)            (43,435)           (43,483)
                                            ---------------   -----------------    ---------------

Net loss                                     $  (1,154,367)         $ (428,592)        $ (725,775)
                                            ===============   =================    ===============
</TABLE>

Revenues

Revenues  consist  primarily  of  commissions  earned  pursuant  to the  sale of
gambling products and ticket sales. The decrease in revenues is primarily due to
fewer commissions earned on sales of gambling products.

Sales, general and administrative expenses

Sales,  general and  administrative  expenses  primarily  consist of stock-based
compensation to consultants as well as professional fees incurred to support our
operations.  The increase in sales,  general and administrative  expenses during
fiscal  2006  is  primarily  due to an  increase  in  professional  fees,  stock
compensation costs, rent and accrued salaries.  These increases were offset by a
reduction in the amortization of deferred  compensation which was amortized over
a full year during  fiscal 2005 while it was  amortized  over a lesser number of
months during fiscal 2006.

                                      -13-

<PAGE>

Gain on settlement

Gain on settlement consists of monies received pursuant to a one-time settlement
with Inhibiton Therapeutics,  Inc. which occurred during fiscal 2005. No similar
settlement occurred during fiscal 2006.

Interest expense and interest expense-related parties

Interest  expense  and  interest  expense-related  parties  consist of  interest
payable on various  note  payable and due to related  parties.  The  increase in
interest  expense  during  fiscal 2006 when compared to fiscal 2005 is primarily
due to higher debt in the current fiscal year.

Loss from discontinued operations

Loss from discontinued  operations primarily consists of trustee fees associated
with the  bankruptcy  proceedings of Torpedo  Canada.  The increase in loss from
discontinued  operations in fiscal 2005 compared to fiscal 2004 is  attributable
to our assumption of the discontinued  operations upon the merger of Interactive
with our company.

Liquidity and Capital Resources

We have used  approximately  $192,000 in cash from operating  activities  during
fiscal 2006, primarily resulting from:

     o   Our net loss of approximately $1,154,000 adjusted for amortization of
         deferred compensation of approximately $103,000, stock-based
         compensation of $120,000, software impairment expense of $55,000, other
         amortization and depreciation of approximately $40,000;

     o   Increase in unpaid accrued  interest and accounts  payable and amounts
         due to related  parties of  approximately  $227,000 and  $131,000,
         respectively; and

     o   Increase in liabilities of discontinued operations amounting to
         approximately $175,000.

During fiscal 2006, we have also incurred capital  expenditures of approximately
$60,000 and repaid approximately  $144,000 of notes payable.  These amounts were
funded from net proceeds of $324,950 from the sale of  debentures,  and advances
from related parties of approximately $193,000.

At July 31, 2006 we had cash on hand of $10,888 and a working capital deficit of
$5,138,111. Included in our liabilities at July 31, 2006 are $1,783,760 which is
due to related  parties,  $75,000  due to an  unaffiliated  third  party under a
promissory  note which is presently  in default and  $2,324,987  of  liabilities
related to Torpedo Canada.

                                      -14-

<PAGE>

Results of Operations

For the year ended July 31, 2005  compared  to the period from  December 4, 2003
(Inception) to July 31, 2004.
<TABLE>
<CAPTION>
                                                 For the year ended                 Increase
                                                      July 31,                     (decrease)
                                         -----------------------------------
                                              2005               2004            2005 vs 2004
                                         ---------------   -----------------   ----------------
<S>                                            <C>               <C>                  <C>
Revenues                                      $ 76,920                   -           $ 76,920

Operating expenses:
  Selling, general and administrative          636,166           $ 272,530            363,636
                                         ---------------   -----------------   ----------------

Operating loss                                (559,246)           (272,530)           286,716
                                         ---------------   -----------------   ----------------

Other income (expenses):
  Gain on settlement                           254,900                   -            254,900
  Interest expense, related party              (72,035)                  -             72,035
  Interest expense                              (8,776)             (1,475)             7,301
                                         ---------------   -----------------   ----------------

     Total other income (expenses)             174,089              (1,475)          (175,564)
                                         ---------------   -----------------   ----------------

Loss before discontinued operations           (385,157)           (274,005)           111,152
Loss from discontinued operations               43,435                   -             43,483
                                         ---------------   -----------------   ----------------

Net loss                                    $ (428,592)         $ (274,005)         $ 154,587
                                         ===============   =================   ================
</TABLE>

Revenues

Revenues  consist  primarily  of  commissions  earned  pursuant  to the  sale of
gambling products.  The increase in revenues is primarily due to the first sales
we generated during fiscal year 2005 while no such sales occurred during 2004.

Sales, general and administrative expenses

Sales,  general and  administrative  expenses  primarily  consist of stock-based
compensation to consultants as well as professional fees incurred to support our
operations.  The increase in sales,  general and administrative  expenses during
fiscal 2005 is primarily due to the amortization of deferred  compensation which
was amortized  over a full year during fiscal 2005 while it was amortized over a
lesser  number of months during fiscal 2004.  Additionally,  we incurred  higher
consulting  expenses  during fiscal 2005 when compared to fiscal 2004 due to the
expansion of its operations  during fiscal 2005 as well as those associated with
Torpedo Canada's operations subsequent to February 1, 2005.

Gain on settlement

Gain on settlement consists of monies received pursuant to a one-time settlement
with Inhibiton Therapeutics,  Inc. which occurred during fiscal 2005. No similar
settlement occurred during fiscal 2004.

Interest expense and interest expense-related parties

Interest  expense  and  interest  expense-related  parties  consist of  interest
payable on various  note  payable and due to related  parties.  The  increase in
interest  expense  during  fiscal 2005 when compared to fiscal 2004 is primarily
due to higher debt assumed by us upon the merger with our company.

                                      -15-

<PAGE>

Loss from discontinued operations

Loss from discontinued  operations primarily consists of trustee fees associated
with the  bankruptcy  proceedings of Torpedo  Canada.  The increase in loss from
discontinued  operations in fiscal 2005 compared to fiscal 2004 is  attributable
to our assumption of the discontinued  operations upon the merger of Interactive
with our company.

Liquidity and Capital Resources

We have generated approximately $36,000 in cash from operating activities during
fiscal 2005, primarily resulting from:

     o  Our net loss of approximately $385,000 adjusted for amortization of
        deferred compensation of approximately $404,000;

     o  Increase in prepaid expenses and other current assets of approximately
        $25,000;

     o  Increased in unpaid accrued interest and accounts payable and accrued
        expenses of approximately $60,000 and $34,000, respectively; and

     o  Decrease in assets of discontinued operations amounting to
        approximately $250,000 following their disposition by the bankruptcy
        trustee which funded the payment of liabilities of discontinued
        operations of approximately $310,000.

During fiscal 2005, we have also incurred capital  expenditures of approximately
$5,000 which were funded from  advances  from related  parties of  approximately
$18,000 and issuance of shares of our common stock which  generated  proceeds of
$6,200.

We have used  approximately  $130,000 in cash from operating  activities  during
fiscal 2004, primarily resulting from:

   o  Our net loss of approximately $274,000 adjusted for amortization of
      deferred compensation of approximately $170,000; and,

   o  Increase in prepaid expenses and other current assets of approximately
      $34,000.

During fiscal 2004, we have also incurred capital  expenditures of approximately
$1,000.  Our operating and investing  activities  were funded from advances from
related  parties of  approximately  $59,000 and issuance of shares of our common
stock which generated proceeds of $78,000.

At July 31, 2005 we had cash on hand of $28,114 and a working capital deficit of
$4,047,798. Included in our liabilities at July 31, 2005 are $1,600,426 which is
due to related  parties,  $75,000  due to an  unaffiliated  third  party under a
promissory  note which is presently  in default and  $2,150,352  of  liabilities
related to Torpedo Canada.

Going Concern

The  report  of  our  independent  registered  public  accounting  firm  on  our
consolidated  financial  statements as of July 31, 2005, and for the period from
inception  (December  3,  2003)  to July 31,  2004  includes  a "going  concern"
explanatory  paragraph,  that describes  substantial  doubt about our ability to
continue as a going concern.

                                      -16-

<PAGE>

We incurred a net loss of $1,096,667  during fiscal 2006.  Additionally,  one of
our subsidiaries, Torpedo Canada, is in bankruptcy proceedings, and we generated
minimal revenues; accordingly, we have no ready source of working capital. These
factors  raise  substantial  doubt  about our  ability  to  continue  as a going
concern.  The consolidated  financial  statements do not include any adjustments
relating to the  recoverability  and classification of assets or the amounts and
classification  of  liabilities  that might be necessary  should we be unable to
continue as a going  concern.  While we may be able to raise  funds  through the
issuance of debt or equity instruments, there is no assurance that we will raise
sufficient funds to operate in the future.

Critical Accounting Policies

Our financial  statements and accompanying notes are prepared in accordance with
generally  accepted  accounting  principles  in  the  United  States.  Preparing
financial  statements requires management to make estimates and assumptions that
affect the reported amounts of assets, liabilities,  revenue and expenses. These
estimates  and  assumptions   are  affected  by  management's   applications  of
accounting  policies.  Critical  accounting policies for our company include the
following:

Accounting   for  Stock  Based   Compensation  -  We  account  for  stock  based
compensation  utilizing  Statement of Financial  Accounting  Standards  No. 123,
"Accounting for Stock-Based  Compensation"  ("SFAS 123"), which encourages,  but
does not require, companies to record compensation cost for stock-based employee
compensation  plans at fair value.  We have  chosen to account  for  stock-based
compensation   using  the  intrinsic  value  method   prescribed  in  Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees", and
related  interpretations.  Accordingly,  compensation  cost for stock options is
measured as the excess,  if any, of the estimated fair market value of our stock
at the date of the grant over the  amount an  employee  must pay to acquire  the
stock. We have adopted the "disclosure only"  alternative  described in SFAS 123
and SFAS 148 (See Recent  Accounting  Pronouncements),  which  require pro forma
disclosures  of net income and earnings per share as if the fair value method of
accounting had been applied.

Recent Accounting Pronouncements

In February 2006, the FASB issued  Statement of Financial  Accounting  Standards
No. 155 (SFAS 155),  "Accounting for Certain Hybrid  Financial  Instruments - an
amendment  of FASB  Statements  No.  133 and  140."  SFAS 155  allows  financial
instruments  that have  embedded  derivatives  to be  accounted  for as a whole,
eliminating  the need to separate the  derivative  from its host,  if the holder
elects to  account  for the whole  instrument  on a fair value  basis.  This new
accounting  standard is effective  January 1, 2007.  The adoption of SFAS 155 is
not expected to have an impact on the Company's financial statements.

In July 2006, the FASB issued FASB Interpretation 48, "Accounting for Income Tax
Uncertainties"  (FIN 48).  FIN 48 defines  the  threshold  for  recognizing  the
benefits   of  tax   return   positions   in   the   financial   statements   as
"more-likely-than-not"  to be  sustained by the taxing  authority.  The recently
issued literature also provides guidance on the de-recognition,  measurement and
classification of income tax uncertainties,  along with any related interest and
penalties.  FIN 48 also includes guidance  concerning  accounting for income tax
uncertainties  in  interim  periods  and  increases  the  level  of  disclosures
associated with any recorded income tax uncertainties.

FIN 48 is effective  for fiscal years  beginning  after  December 15, 2006.  The
differences  between the  amounts  recognized  in the  statements  of  financial
position prior to the adoption of FIN 48 and the amounts reported after adoption
will  be  accounted  for  as a  cumulative-effect  adjustment  recorded  to  the
beginning balance of retained  earnings.  The Company has not yet determined the
impact,  if  any,  of  adopting  the  provisions  of  FIN  48 on  its  financial
statements.

                                      -17-

<PAGE>

In September 2006, FASB issued Statement of Financial  Accounting  Standards No.
157 (SFAS 157) "Fair Value  Measurements."  This  Statement  defines fair value,
establishes  a  framework  for  measuring  fair  value  in  generally   accepted
accounting   principles  (GAAP),  and  expands   disclosures  about  fair  value
measurements.  This Statement  applies in those instances where other accounting
pronouncements that require or permit fair value measurements,  the Board having
previously  concluded in those accounting  pronouncements that fair value is the
relevant measurement attribute. Accordingly, this Statement does not require any
new fair value measurements. However, for some entities, the application of this
Statement will change current  practice.  This Statement is effective on January
1, 2008. The Company is currently evaluating the impact of this pronouncement on
the consolidated financial statements.

In September 2006, the FASB issued Statement of Financial  Accounting  Standards
No. 158 (SFAS No. 158),  "Employers'  Accounting for Defined Benefit Pension and
Other Postretirement Plans--an amendment of FASB Statements No. 87, 88, 106, and
132(R)".  SFAS No. 158  requires an employer to  recognize  the  over-funded  or
under-funded  status of a defined  benefit  postretirement  plan  (other  than a
multiemployer  plan) as an asset or  liability  in its  statement  of  financial
position and to recognize changes in that funded status in the year in which the
changes occur through other comprehensive income of a business entity or changes
in unrestricted net assets of a not-for-profit organization. This Statement also
requires an  employer  to measure the funded  status of a plan as of the date of
its year-end  statement of financial  position.  The adoption of SFAS 158 is not
expected to have a material effect on the Company's financial statements.

In  September  2006,  the  Securities  and  Exchange   Commission  issued  Staff
Accounting  Bulletin  (SAB) No.  108,  Considering  the  Effects  of Prior  Year
Misstatements   when   Quantifying   Misstatements  in  Current  Year  Financial
Statements , which provides  interpretive  guidance on the  consideration of the
effects of prior year  misstatements in quantifying  current year  misstatements
for the purpose of a  materiality  assessment.  The Company is required to adopt
SAB 108 for the year ending  December 31,  2006.  The adoption of SAB 108 is not
expected to have a material effect on the Company's financial statements.

ITEM 7.   FINANCIAL STATEMENTS.

Our financial  statements beginning on Page F-1 appear at the end of this annual
report.

ITEM 8A. CONTROLS AND PROCEDURES.

The Company, under the supervision and with the participation of its management,
including its Chief  Executive  Officer (the  principal  executive  officer) and
Director of Finance and Controller (the principal financial officer),  evaluated
the  effectiveness  of the design and operation of its  disclosure  controls and
procedures  as of the end of the period  covered by this  report.  Based on that
evaluation,   and  taking  into   consideration  the  significant   deficiencies
identified  in the letter from the  Company's  auditor as discussed  below,  the
Chief Executive  Officer and Director of Finance and Controller  concluded that,
as of the end of the period  covered by this report,  the  Company's  disclosure
controls  and  procedures  were not  effective  for the  purposes of  recording,
processing, summarizing and timely reporting of material information relating to
the  Company  required to be included in its  periodic  reports.  The  Company's
management received a letter dated November 13, 2006 (the "Letter") from Sherb &
Co., LLP, our independent  auditors,  addressed to the Chairman of the Company's
Board of Directors in connection  with the audit of our financial  statements as
of July 31, 2006 which identified certain matters involving internal control and
its operation  that they  consider to be  significant  deficiencies  or material
weaknesses under the standards of the Public Company Accounting Oversight Board.
This material weakness was related to: (1) ineffective controls for identifying,
recording  and  accounting  for expenses  incurred on behalf of the Company by a
consultant.  Subsequent to July 31, 2006,  the Company  added  resources and has
made improvements in its controls for the weakness stated above.

                                      -18-
<PAGE>

In addition, the Company will continue to monitor and evaluate the effectiveness
of its disclosure  controls and procedures on an ongoing basis and are committed
to taking further  action and  implementing  enhancements  or  improvements,  as
necessary, and as funds allow.

ITEM 8B. OTHER INFORMATION.

None.

                                    PART III

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

Executive Officers and Directors

  Name                     Age    Offices held

  Henry Fong               71     Director, Chief Executive Officer and
                                  President

  Barry Hollander          49     Chief Financial Officer

  Thomas Olson             40     Secretary/Treasurer

HENRY FONG
Mr.  Fong has  served  as our  President,  CEO and sole  member  of our Board of
Directors since 2002. Mr. Fong has been the president,  treasurer and a director
of Equitex, Inc. since its inception. Since 1999 Mr. Fong has been a director of
iGenisys,  Inc., a business project management  software company.  From December
2000 to January 2002, Mr. Fong was a director of  PopMail.com,  Inc., a publicly
traded Internet marketing company.  From July 1996 to October 1997, Mr. Fong was
a director of Stellant,  Inc. (f/k/a Intranet Solutions,  Inc.), a publicly-held
investee  company  which  provided  internet/intranet  solutions to Fortune 1000
companies  and was the chairman of the board and  treasurer  of its  predecessor
company,  MacGregor  Sports and Fitness,  Inc.  from February 1991 until the two
companies  merged in July 1996.  From January 1993 to January 1999, Mr. Fong was
chairman  of the board and chief  executive  officer of  California  Pro Sports,
Inc., a publicly traded  manufacturer and distributor of in-line skates,  hockey
equipment and related accessories. From 1959 to 1982, Mr. Fong served in various
accounting,  finance and  budgeting  positions  with the  Department  of the Air
Force.  During  the  period  from  1972  to  1981,  he was  assigned  to  senior
supervisory  positions  at the  Department  of  Air  Force  headquarters  in the
Pentagon.  In 1978,  he was  selected to  participate  in the Federal  Executive
Service.  In 1970 and 1971,  he attended the Woodrow  Wilson  School,  Princeton
University and was a Princeton Fellow in Public Affairs. Mr. Fong has passed the
uniform  certified  public  accountant  exam. In March 1994, Mr. Fong was one of
twelve CEOs  selected as Silver  Award  winners in  FINANCIAL  WORLD  magazine's
corporate American "Dream Team."

BARRY HOLLANDER
Mr. Hollander has our Chief Financial Officer since 2002. Mr. Hollander has been
the chief  financial  officer of VP Sports since March 1999.  From 1994 to 1999,
Mr. Hollander was the chief financial officer of California Pro Sports, Inc., an
in-line skate importer,  marketer and distributor. In 1999 California Pro merged
with Imaginon,  Inc. Mr. Hollander has been in the sporting goods industry since
1980 in various  accounting,  senior  management  and executive  positions.  Mr.
Hollander has a BS degree from  Fairleigh  Dickinson  University  and passed the
uniform certified public accountant exam.

                                      -19-

<PAGE>

THOMAS OLSON
Mr.  Olson has served as our  Secretary  since  April 2002.  Mr.  Olson has been
secretary of Equitex,  Inc.  since January 1988.  From February 1990 to February
2000, Mr. Olson was a director, and from May 1994 to February 2000, secretary of
Immune  Response,  Inc., a publicly  held  investee of Equitex which merged with
Opticon Medical,  Inc., in February 2000. Since March 2003, Mr. Olson has been a
director of Chex Services,  Inc., a wholly owned subsidiary of Equitex, Inc. Mr.
Olson has attended  Arizona State  University  and the University of Colorado at
Denver.

There are no family relationships between our directors and executive officers.

Pending Changes in Management and Board of Directors

There were no changes in  management  or the Board of  Directors  of our company
following the transaction with Interactive,  and current  management  intends to
serve in office at least until  certain  liabilities  of our  company  have been
disposed of as contemplated by the agreement.  Thereafter,  the  shareholders of
Interactive prior to the transaction intend to appoint their designees to fill a
majority of the positions on the Board of Directors.

Directors' Compensation

We do not pay fees to directors for their attendance at meetings of the Board of
Directors  or of  committees;  however,  we may adopt a policy  of  making  such
payments in the future.  We will reimburse  out-of-pocket  expenses  incurred by
directors in attending board and committee meetings.

Director  independence,  Audit  Committee  of the Board of  Directors  and Audit
Committee financial expert

As our Board of  Directors  is  comprised  of only one  individual,  none of the
members  of our Board of  Directors  are  "independent"  within  the  meaning of
definitions  established by the Securities and Exchange Commission.  As a result
of our limited operating history and minimal resources,  small companies such as
ours generally have difficulty in attracting independent directors. In addition,
we will require additional  resources to obtain directors and officers insurance
coverage  which  is  generally  necessary  to  attract  and  retain  independent
directors.  As we grow,  in the  future our Board of  Directors  intends to seek
additional  members  who are  independent,  have a variety  of  experiences  and
backgrounds,  who will  represent  the  balanced,  best  interests of all of our
stockholders  and at least  one of which who is an  "audit  committee  financial
expert" described below.

Our Board of Directors has also not yet established an Audit Committee,  and the
functions of the Audit Committee are currently  performed by the entire Board of
Directors.  At such  time  as we  expand  our  Board  of  Directors  to  include
independent directors, we intend to establish an Audit Committee of our Board of
Directors. We are not currently subject to any law, rule or regulation, however,
requiring   that  all  or  any  portion  of  our  Board  of  Directors   include
"independent"  directors,  nor are we required to establish or maintain an Audit
Committee of our Board of Directors.

Our sole  directors  is not an "audit  committee  financial  expert"  within the
meaning of Item  401(e) of  Regulation  S-B.  In  general,  an "audit  committee
financial  expert" is an  individual  member of the audit  committee or Board of
Directors who:

     o   understands generally accepted accounting principles and financial
         statements,

     o   is able to assess the general  application  of such  principles in
         connection  with  accounting  for  estimates,  accruals and reserves,

     o   has experience preparing,  auditing,  analyzing or evaluating financial
         statements comparable to the breadth and complexity to our financial
         statements,

     o   understands internal controls over financial reporting, and

     o   understands audit committee functions.

                                      -20-

<PAGE>

Code of Ethics

In 2003 we adopted a Code of Ethics for Senior  Financial  Management to promote
honest and ethical  conduct and to deter  wrongdoing.  This Code  applies to our
Chief  Executive  Officer,  Chief  Financial  Officer,   controller,   principal
accounting  officer  and  other  employees  performing  similar  functions.  The
obligations of the Code of Ethics supplement, but do not replace, any other code
of conduct or ethics policy applicable to our employees generally.

Under the Code of Ethics, all members of the senior financial management shall:

     o  Act honestly and ethically in the performance of their duties at our
        company,

     o  Avoid actual or apparent conflicts of interest between personal
        and professional relationships,

     o  Provide full, fair, accurate, timely and understandable disclosure in
        reports and documents that we file with, or submits to, the SEC and in
        other public communications by our company,

     o  Comply with rules and regulations of federal, state and local
        governments and other private and public regulatory agencies that affect
        the conduct of our business and our financial reporting,

     o  Act in good faith, responsibly, with due care, competence and diligence,
        without misrepresenting material facts or allowing the member's
        independent judgment to be subordinated,

     o  Respect the confidentiality of information acquired in the course of
        work, except when authorized or legally obtained to disclosure such
        information,

     o  Share knowledge and maintain skills relevant to carrying out the
        member's duties within our company,

     o  Proactively promote ethical behavior as a responsible partner among
        peers and colleagues in the work environment and community,

     o  Achieve responsible use of and control over all assets and resources of
        our company entrusted to the member, and

     o  Promptly bring to the attention of the Chief Executive Officer any
        information concerning (a) significant deficiencies in the design or
        operating of internal controls which could adversely affect our ability
        to record, process, summarize and report financial date or (b) any
        fraud, whether or not material, that involves management or other
        employees who have a significant role in our financial reporting or
        internal controls.

We  will  provide  a copy of the  Code of to any  person  without  charge,  upon
request.  Requests can be sent to Interactive  Games, Inc., 319 Clematis Street,
Suite 803, West Palm Beach, Florida 33401.

Compliance With Section 16(a) of the Exchange Act

We have no equity  securities  registered  under Section 12(g) of the Securities
Exchange Act of 1934,  and  accordingly,  our officers,  directors and principal
stockholders  are not  required  to file  reports  under  Section  16(a)  of the
Exchange Act.

                                      -21-

<PAGE>

ITEM 10. EXECUTIVE COMPENSATION .

The following table summarizes all compensation recorded by us in each of the
last three fiscal years for our Chief Executive Officer and each other executive
officers serving as such (the "Named Executive Officers") whose annual
compensation exceeded $100,000.

Summary Compensation Table
<TABLE>
<CAPTION>
                                                                                    Long-Term
                                                                                   Compensation
                           Annual Compensation                                        Awards
                       --------------------------                                  -----------
Name &                                                          Other Annual                           All Other
Principal                          Salary         Bonus         Compensation         Options          Compensation
Position                  Year      ($)            ($)               ($)            & SARs(#)             ($)
--------                  ----      ---            ---               ---            ---------             ---

<S>                       <C>      <C>              <C>               <C>               <C>                <C>
Henry Fong                2006     80,000          -0-               -0-               -0-                -0-
Director, Chief           2005     30,000          -0-               -0-               -0-                -0-
Executive Officer         2004     30,000          -0-               -0-               -0-                -0-
and President

Barry Hollander,          2006     10,000          -0-               -0-               -0-                -0-
Chief Financial           2005      -0-            -0-               -0-               -0-                -0-
Officer                   2004     45,000          -0-               -0-               -0-                -0-

Tom Olson,                2006     30,000          -0-               -0-               -0-                -0-
Secretary and             2005     30,000          -0-               -0-               -0-                -0-
Treasurer                 2004     30,000          -0-               -0-               -0-                -0-
</TABLE>

Stock Option Information

There were no stock  options  granted in fiscal  years  ending July 31, 2006 and
2005.

The following table sets forth certain information  regarding stock options held
as of July 31, 2006 by the Named Executive Officers.

Aggregate  Option  Exercises  in Year Ended July 31,  2006 and  Year-End  Option
Values
<TABLE>
<CAPTION>
                                                           Number of
                                                          Securities              Value of
                                                          Underlying             Unexercised
                                                          Unexercised           In-the-Money
                                                            Options            Options at July
                         Shares                      at July 31, 2006 (#)       31, 2006 (#)
                       Acquired on       Value           Exercisable/           Exercisable/
        Name          Exercise (#)   Realized ($)        Unexercisable          Unexercisable
        ----          ------------   ------------        -------------          -------------

<S>                         <C>            <C>            <C>                     <C>
Henry Fong                 -0-            -0-             900,000/-0-            -0-/-0- (1)
Barry Hollander            -0-            -0-             500,000/-0-            -0-/-0- (1)
Thomas Olson               -0-            -0-             250,000/-0-            -0-/-0- (1)

</TABLE>

(1)  The dollar  value of the  unexercised  in-the-money  options is  calculated
     based upon the difference  between the option  exercise price and $0.09 per
     share,  being the last sale price of our common  stock on August 3, 2005 as
     reported  by  the  OTC  Bulletin  Board.  As  the  exercise  price  of  the
     outstanding  options  range from  $0.20 to $0.26 per share,  based upon the
     trading  price  of our  common  stock  on  August  3,  2005  none of  these
     outstanding options are in the money at July 31, 2005.

                                      -22-

<PAGE>

In March 2002, the Company  granted  1,000,000  options to purchase common stock
under the 2002 Stock Option Plan (the "2002 Plan").  Of these 1 million options,
113,000 have been  exercised,  60,000 have been  cancelled,  and 827,000 expired
during fiscal year ending July 31, 2006.  There are no outstanding  options FROM
the 2002 Plan.

In January 2004, the Company granted  1,700,000 options to purchase common stock
under the 2003 Stock Option Plan to officers and directors, exercisable at $0.20
per share. These options are all currently outstanding.

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

At October 20, 2006, there were 52,782,100 shares of our common stock issued and
outstanding.  The following table sets forth, as of that date information  known
to us relating to the beneficial ownership of these shares by:

     -   each person who is the beneficial owner of more than 5% of the
         outstanding shares of the class of stock;

     -   each director;

     -   each executive officer; and

     -   all executive officers and directors as a group.

We believe that all persons  named in the table have sole voting and  investment
power with respect to all shares  beneficially  owned by them.  Under securities
laws, a person is  considered to be the  beneficial  owner of securities he owns
and that can be acquired by him within 60 days from  November  30, 2005 upon the
exercise of options,  warrants,  convertible securities or other understandings.
We determine a beneficial owner's percentage ownership by assuming that options,
warrants or convertible  securities  that are held by him, but not those held by
any other person and which are exercisable within 60 days of that date have been
exercised or converted.

(a) (b) Security  Ownership of Certain  Beneficial Owners and Security Ownership
of Management

The following  table  contains  information as of July 31, 2006, for any person,
known to us, to be the beneficial owner of more than five (5) percent or more of
the outstanding  shares of the class, each person who is a director or executive
officer  of us and all  persons  as a  group  who are  directors  and  executive
officers and as to the  percentage of  outstanding  shares so held by them as of
July 31, 2006.

                                          Shares of      Percentage of
                                        Common Stock      Common Stock
Name and Address of Beneficial Owner      Owned (1)          Owned
-------------------------------------- ---------------- -----------------
Henry Fong                               4,592,738 (2)          8.6%
7315 E Peakview Avenue
Englewood, CO 80111

Michele Friedman                            16,675,713         31.6%
777 Flagler Dr S., 8th Floor
West Palm Beach, FL 33401

Barry Hollander                            663,357 (4)          1.2%
319 Clematis St., Suite 803
West Palm Beach, FL 33401

Thomas Olson                               601,277 (3)          1.1%
7315 E Peakview Avenue
Englewood, CO 80111

All officers and directors as a
group (three persons)                    5,897,372 (5)         10.8%

                                      -23-

<PAGE>

(1)  As of July 31, 2006, 52,782,100 shares of our common stock were
     outstanding.

(2)  Includes 900,000 shares underlying options granted under our 2003 Stock
     Option Plan; includes 1,794,465 shares of common stock owned by a
     partnership in which Mr. Fong is a partner; includes 1,060,673 shares owned
     by a corporation in which Mr. Fong is an 80% shareholder.

(3)  Includes 250,000 shares underlying options granted under our 2003 Stock
     Option Plan.

(4)  Includes 500,000 shares underlying options granted under our 2003 Stock
     Option Plan.

(5)  Includes 1,650,000 shares underlying options granted under our 2003 Stock
     Option Plan.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

In July 2003, an employee  loaned us $50,000 CAD ($35,695  U.S.).  In July 2003,
$13,000 CAD  ($9,281U.S.)  of this loan was  repaid.  As of July 31, 2006 we owe
$32,708 (U.S.), which is included in liabilities from discontinued operations at
July 31, 2006.

During the year  ended July 31,  2004,  we issued  638,560  shares of our common
stock in exchange for  subscription  and related party  receivable from officers
and affiliates of our company for $60,133 and $3,723,  respectively.  During the
year ended July 31, 2003 the amount due from  officers was reduced by $40,000 in
exchange  for a reduction in accounts  payable to this  person.  During the year
ended  July 31,  2004 the  amount due from  officers  was  reduced by $19,200 in
exchange for a reduction in accounts payable to this person.  In January 2005 we
issued  125,000  shares of our  common  stock to an  officer  of the  Company in
exchange for $18,750 of consulting fees due the officer.

In  February  2005 we sold  41,333  shares  of our  common  stock to  Gulfstream
Financial Partners, a company affiliated with us through common control by Henry
Fong, an officer of our company,  in a private  transaction.  We received  gross
proceeds of $6,200 which we used for general working capital.

At July 31, 2006 we owe VP Sports,  Inc., a related party through common control
by Mr. Fong, our CEO, an aggregate of $568,230 for advances  substantially  made
in 2000. The balance bears interest at 9% per annum and is due upon demand.

At July 31, 2006 we owe three  affiliated  companies  through  common control by
Henry Fong, our CEO, $651,553.  This amount was substantially  advanced to us in
2000 and is secured by a security interest in all of our assets. The outstanding
amount bears interest at ranges from 8% to 10% and is payable upon demand.

Finally, at July 31, 2006 we owe Michael Friedman, a stockholder of our company,
$100,059  which was  advanced to us during the year ended July 31, 2006 and 2005
and used by us for working capital. This amount bears interest at rate of 6% per
annum and is due upon demand.

                                      -24-

<PAGE>
                                     PART IV

ITEM 13. EXHIBITS

The following documents are filed as a part of this report or are incorporated
by reference to previous filings, if so indicated:

EXHIBIT NO.         DESCRIPTION

2.1        Agreement  Concerning  the Exchange of Securities by and among
           Torpedo  Sports USA,  Inc.,  Torpedo  Newco,  Inc. and Interactive
           Grams, Inc. and the security holders of Interactive Games, Inc. (1)

2.2        Merger document as filed with Nevada

3.1        Certificate of Amendment increasing authorized common and changing
           name

14.1       Code of Ethics (2)

16.1       Letter from GHP Horwath, P.C. to the Securities and Exchange
           Commission dated June 16, 2005 (3)

31.1       Section 302 Certificate of Chief Executive Officer *

31.2       Section 302 Certificate of Chief Financial Officer *

32.1       Section 906 Certificate of Chief Executive Officer *

32.2       Section 906 Certificate of Chief Financial Officer *

*        filed herewith

(1)      Incorporated by reference to the Report on Form 8-K as filed on
         February 7, 2005.
(2)      Incorporated  by  reference  to the Annual  Report on Form 10-KSB for
         the fiscal year ended July 31, 2003 as filed on December 29, 2003.
(3)      Incorporated by reference to the Report on Form 8-K as filed on June
         17, 2005.

ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES.

Sherb & Co., LLP served as our independent registered public accounting firm for
fiscal 2006 and 2005.  The  following  table shows the fees that were billed for
the audit and other  services  provided by Sherb & Co.,  LLP for the years ended
July 31, 2006 and 2005, respectively.

                                      2006              2005
                                --------------    --------------

Audit fees                           $ 20,625          $ 17,500
Audit-related fees                     10,500             8,500
Tax fees                                                      -
All other fees                                                -

                                --------------    --------------
   Total                             $ 31,165          $ 26,000
                                ==============    ==============

Audit  Fees  --  This  category  includes  the  audit  of our  annual  financial
statements, review of financial statements included in our Form 10-QSB Quarterly
Reports and services that are normally  provided by the independent  auditors in
connection with engagements for those fiscal years.  This category also includes
advice on audit and accounting matters that arose during, or as a result of, the
audit or the review of interim financial statements.

                                      -25-

<PAGE>

Audit-Related  Fees -- This category  consists of assurance and related services
by the  independent  auditors that are reasonably  related to the performance of
the audit or review of our financial statements and are not reported above under
"Audit Fees." The services for the fees  disclosed  under this category  include
consultation  regarding  our  correspondence  with the SEC and other  accounting
consulting.

Tax Fees -- This  category  consists of  professional  services  rendered by our
independent  auditors for tax  compliance  and tax advice.  The services for the
fees disclosed under this category include tax return  preparation and technical
tax advice.

All Other Fees -- This category consists of fees for other miscellaneous items.

Our Board of  Directors  has adopted a procedure  for  pre-approval  of all fees
charged by our independent auditors. Under the procedure, the Board approves the
engagement letter with respect to audit, tax and review services. Other fees are
subject to pre-approval by the Board, or, in the period between  meetings,  by a
designated  member of  Board.  Any such  approval  by the  designated  member is
disclosed to the entire Board at the next  meeting.  The audit and tax fees paid
to the  auditors  with  respect  to the  years  ended  July 31,  2006 and  2005,
respectively, were pre-approved by the entire Board of Directors.

                                      -26-

<PAGE>

                                   SIGNATURES

 Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934,  the  Registrant  has duly  caused  this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

Date: November 14, 2006                     INTERACTIVE GAMES, INC.

                                                     (Registrant)

                                   By /S/ Henry Fong
                                      -------------------
                                      Henry Fong, Chief Executive Officer and
                                      Principal Executive Officer


                                   By /S/ Barry Hollander
                                      ---------------------
                                      Barry Hollander, Chief Financial Officer

 Pursuant to the requirement of the Securities Exchange Act of 1934, this report
has been signed below by the following  persons on behalf of the  Registrant and
in the capacities and on the dates indicated.

Date: November 14, 2006            By /S/ Henry Fong
                                      -------------------
                                      Henry Fong, Chief Executive Officer and
                                      Principal Executive Officer

                                      -27-

<PAGE>
                    INTERACTIVE GAMES, INC. AND SUBSIDIARIES

                       YEARS ENDED JULY 31, 2006 AND 2005

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


Report of Independent Registered Public Accounting Firm                    F-2

Consolidated financial statements:

Consolidated balance sheet                                                 F-3

Consolidated statements of operations                                      F-4

Consolidated statement of changes in stockholders' deficit and other
comprehensive income                                                       F-5

Consolidated statements of cash flows                                      F-7

Notes to consolidated financial statements                                 F-8


<PAGE>

To the Board of Directors
Interactive Games, Inc. and Subsidiaries

We have  audited the  accompanying  consolidated  balance  sheet of  Interactive
Games,  Inc. and  Subsidiaries as of July 31, 2006 and the related  consolidated
statements of operations, changes in stockholders' equity and cash flows for the
years ended July 31, 2006 and 2005. These consolidated  financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all  material  respects,  the  consolidated  financial  position  of
Interactive  Games,  Inc.  and  Subsidiaries,  as  of  July  31,  2006  and  the
consolidated  results  of their  operations  and their  cash flows for the years
ended July 31, 2006 and 2005, in conformity with accounting principles generally
accepted in the United States of America.

The accompanying  consolidated  financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1 to the
consolidated financial statements, the Company had net losses from operations of
$1,154,367  and  $428,592  respectively,  for the years  ended July 31, 2006 and
2005.  These matters  raise  substantial  doubt about the  company's  ability to
continue as a going concern.  Management's plans in regards to these matters are
also described in Note 1. The consolidated  financial  statements do not include
any adjustments that might result from the outcome of this uncertainty.


                                            /s/ Sherb & Co., LLP
                                                Certified Public Accountants
Boca Raton, Florida
November 14, 2006

                                       F-2

<PAGE>

                  INTERACTIVE GAMES, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEET

                                  JULY 31, 2006

                                     ASSETS

Current assets:
    Cash                                                        $     10,888
    Prepaid expenses and other current assets                         12,917
    Assets of discontinued operations                                  7,549
                                                                -------------

          Total current assets                                        31,354

Property and equipment, net of accumulated depreciation
 of $5,575                                                             4,270
Debt issuance costs                                                   55,141
                                                                -------------

          Total assets                                          $     90,765
                                                                =============

                      LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:
    Accounts payable and accrued expenses                       $    494,018
    Accrued registration rights penalty                              161,700
    Derivative liability convertible debentures                      330,000
    Note payable                                                      75,000
    Due to related parties                                         1,783,760
    Liabilities of discontinued operations                         2,324,987
                                                                -------------

          Total current liabilities                                5,169,465

Long-term liabilities:
    Convertible debentures payable, net                               32,032
                                                                -------------

          Total liabilities                                        5,201,497
                                                                -------------

Stockholders' deficit:
    Preferred stock, par value $.001 per share,
     5,000,000 shares authorized, no shares issued and
     outstanding
    Common stock, $.001 par value, 100,000,000
     shares authorized; 52,782,100 issued and
     outstanding                                                      52,782
    Additional paid-in capital                                    (3,128,677)
    Accumulated other comprehensive loss                            (177,873)
    Accumulated deficit                                           (1,856,964)
                                                                -------------

          Total stockholders' deficit                             (5,110,732)
                                                                -------------

          Total liabilities and stockholders' deficit           $     90,765
                                                                =============

                See notes to consolidated financial statements.

                                       F-3

<PAGE>

                             INTERACTIVE GAMES, INC.

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                   FOR THE YEARS ENDED JULY 31, 2006 AND 2005

<TABLE>
<CAPTION>

                                                             2006             2005
                                                       ---------------   --------------
Revenues:
<S>                                                    <C>               <C>
     Revenues                                          $       53,423    $      76,920
     Cost of revenues                                          43,887                -
                                                       ---------------   --------------

           Gross profit                                         9,536           76,920

Operating expenses:
     Selling, general and administrative                      974,473          636,166
                                                       ---------------   --------------

           Loss from operations                              (964,937)        (559,246)
                                                       ---------------   --------------

Other income (expenses)
     Settlement income                                              -          254,900
     Interest expense, related parties                       (142,516)         (72,035)
     Interest expense                                         (46,866)          (8,776)
                                                       ---------------   --------------

           Total other income (expenses)                     (189,382)         174,089
                                                       ---------------   --------------

Loss before discontinued operations                        (1,154,319)        (385,157)

Loss from discontinued operations                                 (48)         (43,435)
                                                       ---------------   --------------

           Net loss                                        (1,154,367)        (428,592)

Other comprehensive loss:
     Foreign currency translation adjustment                 (147,045)         (30,828)
                                                       ---------------   --------------

           Comprehensive loss                          $   (1,301,412)    $   (459,420)
                                                       ===============   ==============

Basic and diluted net loss from continuing
     operations per common share                       $        (0.02)    $      (0.01)
                                                       ===============   ==============
Basic and diluted net loss from discontinued
     operations per common share                                   **               **
                                                       ===============   ==============

Basic and diluted weighted average common shares
     outstanding                                           49,798,739       46,037,095
                                                       ===============   ==============

**Less than $.01
</TABLE>

                See notes to consolidated financial statements.

                                       F-4

<PAGE>
                    INTERACTIVE GAMES, INC. AND SUBSIDIARIES

 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT AND OTHER COMPREHENSIVE INCOME

                   FOR THE YEARS ENDED JULY 31, 2006 AND 2005
<TABLE>
<CAPTION>

                                                                      Common stock       Additional      Stock
                                                                 -----------------------   paid-in    subscription  Deferred
                                                                   Shares      Amount      capital     receivable  compensation
                                                                 ----------- ----------- ------------  ------------------------

<S>                                                              <C>             <C>      <C>             <C>        <C>
Balance, July 31, 2004                                           44,798,767      44,799   $ 3,081,855     $(4,856)   $(359,896)

Recapitalization, February 1, 2005                                        -      (1,200)   (6,805,831)

Issuance of shares pursuant to the merger agreement               1,215,000       1,215      320,485

Fair value of shares issued pre-merger, Interactive                               1,200       147,916                 (147,914)

Issuance of shares of common stock for cash consideration            41,333          41        6,159

Amortization of deferred compensation                                                                                 404,411

Net loss

Foreign currency translation adjustment
                                                                 ----------- ----------- ------------  -----------  -----------

Balance at July 31, 2005                                         46,055,100      46,055    (3,249,416)     (4,856)    (103,399)

Amortization of deferred compensation                                                                                  103,399

Fair value of issuance of options and warrants                                                 7,466

Issuance of shares pursuant to the merger agreement               5,227,000       5,227        (5,227)

Issuance of shares in connection with convertible debentures      1,500,000       1,500       118,500

Reversal of previously recorded subscription receivable                                                     4,856

Net loss

Foreign currency translation adjustment
                                                                 ----------- ----------- -------------  -----------  -----------

Balances, July 31, 2006                                          52,782,100  $   52,782  $ (3,128,677) $         -   $       -
                                                                 =========== =========== =============  ===========  ===========

                                                              F-5
                                                           continued
</TABLE>

<PAGE>

                  INTERACTIVE GAMES, INC. AND SUBSIDIARIES

 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT AND OTHER COMPREHENSIVE INCOME
                                  (CONTINUED)

                   FOR THE YEARS ENDED JULY 31, 2006 AND 2005

<TABLE>
<CAPTION>

                                                           Accumulated
                                                              other                        Total
                                                           comprehensive  Accumulated  stockholders'
                                                             income        deficit    (deficit) equity
                                                           ------------ ------------  ----------------
<S>                                                            <C>         <C>         <C>
Balance, July 31, 2004                                        $      -    $ (274,005) $ 2,487,897

Recapitalization, February 1, 2005                                                     (6,807,031)

Issuance of shares pursuant to the merger agreement                                       321,700

Fair value of shares issued pre-merger, Interactive                                         1,202

Issuance of shares of common stock for cash consideration                                   6,200

Amortization of deferred compensation                                                     404,411

Net loss                                                                   (428,592)     (428,592)

Foreign currency translation adjustment                        (30,828)                   (30,828)
                                                           ------------ ------------ -------------

Balance at July 31, 2005                                       (30,828)    (702,597)   (4,045,041)

Amortization of deferred compensation                                                     103,399

Fair value of issuance of options and warrants                                              7,466

Issuance of shares pursuant to the merger agreement                                             -

Issuance of shares in connection with convertible debenture                               120,000

Reversal of previously recorded subscription receivable                                     4,856

Net loss                                                                  (1,154,367)  (1,154,367)

Foreign currency translation adjustment                       (147,045)                  (147,045)
                                                           ------------ ------------ -------------

Balances, July 31, 2006                                    $  (177,873) $ (1,856,964) $(5,110,732)
                                                           ============ ============= =============

                          See notes to consolidated financial statements.

                                                  F-6
</TABLE>

<PAGE>
                    INTERACTIVE GAMES, INC. AND SUBSIDIARIES

                            STATEMENTS OF CASH FLOWS

                   FOR THE YEARS ENDED JULY 31, 2006 AND 2005

<TABLE>
<CAPTION>
                                                                           2006               2005
                                                                    -----------------   ----------------
Cash flows from operating activities:
<S>                                                                 <C>                  <C>
    Net (loss) before discontinued operations                       $     (1,154,319)    $     (385,157)
Adjustments to reconcile net (loss) before discontinued operations
    to net cash
    (used in) provided by operating activities:
       Software impairment                                                    55,000
       Bad debt expense                                                        4,856                  -
       Amortization of deferred compensation                                 103,399            404,411
       Amortization of discount on debentures payable                         32,032                  -
       Amortization of debt issuance costs                                     4,909                  -
       Stock based compensation                                              120,000                  -
       Depreciation                                                            3,237              3,317
Change in operating assets and liabilities:
    Decrease in prepaid expenses and other current assets                          -             24,832
    Increase in accounts payable and accrued expenses                        227,148             93,629
    Increase in amounts due to related parties                               131,236                  -
    (Decrease) in derivative liability                                       (55,000)                 -
    Increase in registration rights penalty                                  161,700                  -
                                                                    -----------------   ----------------
Net cash (used in) provided by continuing operating activities              (365,802)           141,032
                                                                    -----------------   ----------------
Loss from discontinued operations                                                (48)           (43,435)
(Increase) decrease in assets of discontinued operations                        (813)           251,611
Increase (decrease) in liabilities of discontinued operations                174,635           (312,871)
                                                                    -----------------   ----------------
Net cash provided by (used in) discontinued operations                       173,774           (104,695)
                                                                    -----------------   ----------------

Net cash (used in) provided by operating activities:                        (192,028)            36,337
                                                                    -----------------   ----------------

Cash flows from investing activities:
    Purchase of property and equipment                                       (59,750)            (4,735)
    Cash received in recapitalization                                              -                329
                                                                    -----------------   ----------------

Net cash used in investing activities                                        (59,750)            (4,406)
                                                                    -----------------   ----------------

Cash flows from financing activities:
    Proceeds from issuance of common stock                                         -              6,200
    Proceeds from debentures payable                                         385,000                  -
    Placement fees paid                                                      (60,050)                 -
    Repayments of note payable                                              (144,025)           (17,786)
    Proceeds from advances and loans from related parties                    193,206                  -
    Increase in additional paid-in capital                                     7,466                  -
                                                                    -----------------   ----------------

Net cash provided by (used in) financing activities                          381,597            (11,586)

Effect of exchange rate on cash                                             (147,045)                97
                                                                    -----------------   ----------------

Net (decrease) increase in cash and cash equivalents                         (17,226)            20,442

Cash and cash equivalents, beginning of period                                28,114              7,672
                                                                    -----------------   ----------------
Cash and cash equivalents, end of period                            $         10,888     $       28,114
                                                                    =================   ================
Supplemental disclosures of cash flow information:
    Cash paid during the year for interest                          $          3,984     $            -
                                                                    =================   ================
    Cash paid during the year for taxes                             $              -     $            -
                                                                    =================   ================
Non-cash investing and financial activities:
    Nonmonetary assets acquired upon merger                         $              -     $      251,611
                                                                    =================   ================
    Nonmonetary liabilities acquired upon merger                    $              -     $    4,374,787
                                                                    =================   ================
    Fair value of options and shares issued for notes payable and
       services                                                     $          7,466     $      120,000
                                                                    =================   ================
    Common stock issued in connection with merger                   $          5,227     $            -
                                                                    =================   ================

                           See notes to consolidated financial statements.

                                                   F-7
</TABLE>
<PAGE>

                    INTERACTIVE GAMES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                   FOR THE YEARS ENDING JULY 31, 2006 AND 2005

1. Organization, basis of presentation and summary of significant accounting
policies:

     Organization

     Interactive  Games, Inc. (the "Company"),  formerly known as Torpedo Sports
     USA, Inc.  ("Torpedo USA"),  through its wholly-owned  Canadian  subsidiary
     Torpedo  Sports  Inc.  ("Torpedo")  manufactured  and  distributed  outdoor
     recreational products for children for sale in the United States and Canada
     through May 6, 2004.

     On May 6, 2004,  Torpedo  filed for  protection  under the  Bankruptcy  and
     Insolvency Act of Canada (the "Torpedo  Bankruptcy")  with the intention to
     liquidate its assets.  Torpedo ceased its operating activities in May 2004,
     and is presented as  discontinued  operations in the  accompanying  interim
     consolidated financial statements (Note 2).

     On February 1, 2005, Torpedo USA acquired all of the issued and outstanding
     common stock of  Interactive  Games,  Inc.  ("Interactive"),  pursuant to a
     definitive  merger  agreement  (the  "Merger   Agreement").   Interactive's
     original  plan  was to  deliver  to its  customers,  gaming  technology  by
     providing both software and gaming hardware.  However,  Interactive has few
     assets and minimal revenue-generating  operations.  Interactive attempts to
     develop and market interactive  casino  technologies and slot machine games
     to the Native  American Class II, Class III and charitable  gaming markets.
     Interactive  has  access  to a 20,000  square  foot  corporate  office  and
     showroom for shipment and storage of its products,  both  domestically  and
     internationally in Fort Lauderdale, Florida. Interactive also leases office
     space in West Palm Beach, Florida and Las Vegas, Nevada.

     Pursuant to terms of the Merger Agreement, Torpedo USA, in exchange for all
     of  the  issued  and  outstanding  common  shares  of  Interactive,  issued
     27,037,282  shares of Torpedo USA's common stock to the former  Interactive
     shareholders in order for them to own 51% of the  outstanding  common stock
     of the Company on the closing date of the merger, on a fully diluted basis.
     The Company may issue additional shares if certain agreed upon criteria, to
     be determined,  are met in order to allow the former  Interactive  security
     holders to hold 54% of the  outstanding  common stock of the Company (based
     on the shares  outstanding  at the time of closing).  Accordingly,  Torpedo
     could issue up to an additional  3,457,453 shares to the former Interactive
     shareholders.   In  connection  with  the  Merger  Agreement,   the  former
     Interactive  shareholders agreed to use their best efforts  post-closing to
     cause Torpedo USA to raise sufficient funds to pay-off or otherwise dispose
     of up to $250,000 of Torpedo USA's liabilities. Although $100,000 was paid,
     such  pay-off or disposal  has not been  completed  as of October 31, 2006.
     Finally,  should  Torpedo  USA  not  dispose  of  all  of  its  assets  and
     liabilities within three months following the acquisition closing date, the
     Company  will be  required  to issue an  additional  500,000  shares to the
     former  Interactive  shareholders.  The Company has determined that it will
     issue such shares once Torpedo USA raises sufficient funds to satisfy up to
     $250,000 of its liabilities.

     In conjunction with the Merger  Agreement,  Torpedo USA changed its name to
     Interactive  Games,  Inc. and approved an increase in its authorized common
     stock ($0.001 par value) from 50,000,000 shares to 100,000,000 shares.

                                       F-8

<PAGE>

                    INTERACTIVE GAMES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                   FOR THE YEARS ENDING JULY 31, 2006 AND 2005

1. Organization, basis of presentation and summary of significant accounting
policies:

     Organization (continued)

     The  acquisition  of  Interactive  by Torpedo  USA was  accounted  for as a
     reverse  merger  because on a  post-merger  basis,  the former  Interactive
     shareholders hold a majority of the outstanding common stock of Torpedo USA
     on a voting and fully diluted basis. As a result, Interactive was deemed to
     be  the  acquirer  for  accounting  purposes.  Accordingly,  the  financial
     statements  presented,  from  inception,  are those of Interactive  for all
     periods  prior to the  acquisition,  and the  financial  statements  of the
     consolidated  companies from the acquisition  date forward.  The historical
     stockholders'  deficit of Interactive  prior to the  acquisition  have been
     retroactively  restated (a  recapitalization)  for the equivalent number of
     shares received in the  acquisition  after giving effect to any differences
     in the par value of Torpedo USA's and  Interactive's  common stock, with an
     offset to additional paid-in capital. The restated consolidated accumulated
     deficit of the accounting  acquirer  (Interactive) is carried forward after
     the acquisition.

     Going concern and management's plans

     The Company  incurred net losses of $1,154,367  and $428,592  during fiscal
     years ending July 31, 2006 and 2005, respectively. Additionally, one of its
     subsidiaries,  Torpedo,  is in bankruptcy  proceedings,  and the Company to
     date has generated minimal revenues.  Accordingly, the Company has no ready
     source of working capital.  These factors raise substantial doubt about the
     Company's  ability  to  continue  as  a  going  concern.  The  consolidated
     financial  statements  do  not  include  any  adjustments  relating  to the
     recoverability   and   classification   of  assets  or  the   amounts   and
     classification of liabilities that might be necessary should the Company be
     unable to  continue  as a going  concern.  While  management  believes  the
     Company may be able to raise funds  through the  issuance of debt or equity
     instruments,  there  is no  assurance  the  Company  will be able to  raise
     sufficient funds to operate in the future.

     The  Company is in  negotiations  with VP Sports,  Inc.  ("VP  Sports"),  a
     company  affiliated  through common control,  to sell 100% of its ownership
     interest in Torpedo to VP Sports.  Of the $324,950  proceeds  received from
     the Debentures,  $100,000 was paid to VP Sports.  Upon VP Sports  receiving
     and  additional  $150,000,  VP Sports  could assume the  responsibility  to
     liquidate  Torpedo and relieve  the Company of any further  obligations  of
     Torpedo.  Presently,  there is no  assurance  the  Company  will be able to
     satisfy the additional amount owed.

     Company  management has held discussions with a few private  companies whom
     have  indicated  an interest in  developing a strategic  alliance,  merger,
     reverse  merger,  or other form of corporate  consolidation  or combination
     with the Company.  Management is currently in discussions  with a number of
     firms that initially  appear to be good matches for such a combination with
     the  Company.  No  definitive  or binding  agreements  have been reached or
     entered into.  If such an  undertaking  is completed  with any one of these
     firms, it could result in a significant restructuring,  as well as a change
     in control of the Company, including the possibility that the Company would
     no longer exist in its present form or organization.  There is no assurance
     that a transaction with be completed nor if  shareholder's  long-term value
     would be  maximized  if a  transaction  is  completed.  However,  given the
     current  circumstances of the Company, our business sector outlook, and the
     competing  factors  we face,  such a  transaction  may be the  best  option
     available to management for the long-term  enhancement  of our  shareholder
     value.

                                       F-9

<PAGE>

                    INTERACTIVE GAMES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                   FOR THE YEARS ENDING JULY 31, 2006 AND 2005


1. Organization, basis of presentation and summary of significant accounting
policies:

     Basis of presentation

     The consolidated  financial  statements include the accounts of the Company
     and its  subsidiaries.  All of the Company accounts have been eliminated in
     consolidation.

     Significant accounting policies:

     Use of estimates

     The  preparation  of financial  statements  in  conformity  with  generally
     accepted  accounting  principles  requires management to make estimates and
     assumptions   that  affect  certain   reported   amounts  and  disclosures.
     Accordingly, actual results will differ from those estimates.

     Revenue recognition

     The Company recognizes revenue in accordance with Staff Accounting Bulletin
     No. 104,  "Revenue  Recognition  in Financial  Statements".  This statement
     established  that revenue can be recognized when persuasive  evidence of an
     arrangement  exists,  the services  have been  delivered,  all  significant
     contractual   obligations  have  been  satisfied,   the  fee  is  fixed  or
     determinable  and  collection is reasonably  assured.  Fees earned from the
     sales of  gambling  machines  and  tickets  for  entertainment  events  are
     generally  recognized upon receipt of cash from customers,  which indicates
     that such customers have accepted the terms of the sale.

     Cash and cash equivalents

     The  Company   considers  all  highly  liquid   investments  with  original
     maturities of three months or less to be cash equivalents.

     Concentration on credit risks

     The Company is subject to concentrations of credit risk primarily from cash
     and assets from discontinued operations.

     The Company minimizes its credit risks associated with cash, including cash
     classified  as  assets  from  discontinued   operations,   by  periodically
     evaluating the credit quality of its primary financial institutions.

     Services concentration

     All of the Company's  revenues  during fiscal years ended 2006 and 2005 are
     derived from commissions earned on the sale of tickets or slot machines.

                                      F-10

<PAGE>

                    INTERACTIVE GAMES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                   FOR THE YEARS ENDING JULY 31, 2006 AND 2005


1. Organization, basis of presentation and summary of significant accounting
policies:

     Stock-based compensation

     Effective  January 1, 2006,  the Company  adopted  Statement  of  Financial
     Accounting Standards No. 123 (revised 2004), Share Based Payment ("SFAS No,
     123R").  SFAS No. 123R  establishes the financial  accounting and reporting
     standards for stock-based compensation plans. As required by SFAS No. 123R,
     the Company will recognize the cost  resulting from al stock-based  payment
     transactions  including  shares  issued under its stock option plans in the
     financial  statements.  There were no stock options  outstanding as of July
     31, 2006.

     Prior to January 1, 2006, the Company  accounted for  stock-based  employee
     compensation  plans (including  shares issued under its stock option plans)
     in  accordance  with APB  Opinion  No.  25 and  followed  the pro forma net
     income,  pro forma  income per share,  and  stock-based  compensation  plan
     disclosure  requirements set forth in the Statement of Financial Accounting
     Standards  No. 123,  Accounting  for  Stock-Based  Compensation  ("SFAS No.
     123").  The Company did not issue any stock options  during the years ended
     July 31, 2006 and 2005.

     Fair value of financial instruments

     The carrying value of cash,  assets of  discontinued  operations,  accounts
     payable  and  accrued  expenses  approximate  their fair value due to their
     short-term  maturities.  The carrying amount of the note payable and due to
     related  parties  approximate  their  fair  value  based  on the  Company's
     incremental   borrowing   rate.  The  fair  value  of  the  liabilities  of
     discontinued  operations is $0 at July 31, 2006  considering that there are
     substantially  insufficient recoverable assets at the balance sheet date to
     repay such liabilities.

     Comprehensive income or loss

     The financial statements of the Company's  discontinued foreign subsidiary,
     Torpedo,  are measured using the local currency (the Canadian Dollar "CAD")
     as  the  functional  currency.   Assets  and  liabilities  of  Torpedo  are
     translated  at exchange  rates as of the balance  sheet date.  Revenues and
     expenses are  translated  at average rates of exchange in effect during the
     period. The resulting cumulative translation adjustments have been recorded
     as a  component  of  comprehensive  loss,  included  as a separate  item in
     shareholders'  deficit. Gains and losses from foreign currency transactions
     are included in loss from discontinued operations.

     Included in this  category is the change  resulting  from foreign  currency
     translation   adjustments  from  the  Company's  foreign  subsidiary  which
     amounted to  approximately  $147,000  and for the year ended July 31, 2006,
     and $30,000 from the date of the reverse merger  (January 31, 2005) to July
     31, 2005.

     Income taxes

     Income taxes are accounted for in accordance with SFAS No. 109,  Accounting
     for Income  Taxes.  SFAS No. 109 requires the  recognition  of deferred tax
     assets and  liabilities  to reflect the future tax  consequences  of events
     that have been  recognized  in the  Company's  financial  statements or tax
     returns. Measurement of the deferred items is based on enacted

                                      F-11

<PAGE>

                    INTERACTIVE GAMES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                   FOR THE YEARS ENDING JULY 31, 2006 AND 2005


1. Organization, basis of presentation and summary of significant accounting
policies:

     Income taxes (continued)

     tax laws.  In the event the  future  consequences  of  differences  between
     financial  reporting  bases  and tax  bases  of the  Company's  assets  and
     liabilities  result in a deferred  tax  asset,  SFAS No.  109  requires  an
     evaluation of the  probability of being able to realize the future benefits
     indicated by such assets. A valuation  allowance  related to a deferred tax
     asset is  recorded  when it is more likely than not that some or all of the
     deferred tax asset will not be realized.

     Recent accounting pronouncements

     On June 29,  2005,  the EITF  ratified  Issue No.  05-2,  "The  Meaning  of
     Conventional   Convertible  Debt  Instrument'  in  EITF  Issue  No.  00-19,
     `Accounting   for  Derivative   Financial   Instruments   Indexed  to,  and
     Potentially  Settled in, a Company's Own Stock'".  EITF Issue 05-2 provides
     guidance  on  determining   whether  a  convertible   debt   instrument  is
     "conventional" for the purpose of determining when an issuer is required to
     bifurcate a  conversion  option that is  embedded  in  convertible  debt in
     accordance  with SFAS 133. Issue No. 05-2 is effective for new  instruments
     entered into and instruments  modified in reporting periods beginning after
     June 29, 2005. The adoption of this  pronouncement  did not have a material
     effect on the Company's financial statements.

     In  September  2005,  Issue No. 05-4,  "The Effect of a Liquidated  Damages
     Clause on a  Freestanding  Financial  Instrument  Subject to EITF Issue No.
     00-19,  `Accounting for Derivative  Financial  Instruments  Indexed to, and
     Potentially  Settled  in, a  Company's  Own  Stock'".  EITF  05-4  provides
     guidance to issuers as to how to account for registration rights agreements
     that  require and issuer to use its "best  efforts" to file a  registration
     statement  for the  resale  of  equity  instruments  and  have it  declared
     effective  by the end of a specified  grace  period,  and,  if  applicable,
     maintain the  effectiveness of the  registration  statement for a period of
     time or pay a liquidated  damage  penalty to the investor.  The Company has
     adopted  View  C  of  this  pronouncement.  Accordingly,  the  Company  has
     bifurcated  registration  rights from their related free standing financial
     instruments and recorded them at fair value. The Company has adopted View C
     of this pronouncement,  which has resulted in the registration rights being
     bifurcated and accounted for a fair value.

     In  February  2006,  the FASB  issued  Statement  of  Financial  Accounting
     Standards  No. 155 (SFAS 155),  "Accounting  for Certain  Hybrid  Financial
     Instruments  - an amendment of FASB  Statements  No. 133 and 140." SFAS 155
     allows financial instruments that have embedded derivatives to be accounted
     for as a whole,  eliminating  the need to separate the derivative  from its
     host,  if the holder  elects to account for the whole  instrument on a fair
     value basis. This new accounting standard is effective January 1, 2007. The
     adoption  of SFAS 155 is not  expected  to have an impact on the  Company's
     financial statements.

     In July 2006,  the FASB  issued FASB  Interpretation  48,  "Accounting  for
     Income Tax  Uncertainties"  (FIN 48).  FIN 48  defines  the  threshold  for
     recognizing  the  benefits  of  tax  return   positions  in  the  financial
     statements  as   "more-likely-than-not"  to  be  sustained  by  the  taxing
     authority.  The recently issued  literature  also provides  guidance on the
     de-recognition, measurement and classification of income tax uncertainties,
     along  with  any  related  interest  and  penalties.  FIN 48 also  includes
     guidance  concerning  accounting  for income tax  uncertainties  in interim
     periods and increases the level of disclosures associated with any recorded
     income tax uncertainties.

                                      F-12

<PAGE>

                    INTERACTIVE GAMES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                   FOR THE YEARS ENDING JULY 31, 2006 AND 2005


1. Organization, basis of presentation and summary of significant accounting
policies:

     Recent accounting pronouncements (continued)

     FIN 48 is effective for fiscal years beginning after December 15, 2006. The
     differences  between the amounts  recognized in the statements of financial
     position  prior to the  adoption of FIN 48 and the amounts  reported  after
     adoption will be accounted for as a  cumulative-effect  adjustment recorded
     to the  beginning  balance of  retained  earnings.  The Company has not yet
     determined the impact,  if any, of adopting the provisions of FIN 48 on its
     financial statements.

     In September 2006, FASB issued Statement of Financial  Accounting Standards
     No. 157 (SFAS 157) "Fair Value  Measurements."  This Statement defines fair
     value,  establishes  a  framework  for  measuring  fair value in  generally
     accepted  accounting  principles (GAAP), and expands disclosures about fair
     value  measurements.  This Statement applies in those instances where other
     accounting  pronouncements  that require or permit fair value measurements,
     the Board having  previously  concluded in those accounting  pronouncements
     that fair value is the relevant measurement  attribute.  Accordingly,  this
     Statement does not require any new fair value  measurements.  However,  for
     some  entities,  the  application  of this  Statement  will change  current
     practice.  This  Statement is effective on January 1, 2008.  The Company is
     currently  evaluating the impact of this  pronouncement on the consolidated
     financial statements.

     In  September  2006,  the FASB issued  Statement  of  Financial  Accounting
     Standards  No.  158 (SFAS No.  158),  "Employers'  Accounting  for  Defined
     Benefit  Pension  and  Other  Postretirement  Plans--an  amendment  of FASB
     Statements No. 87, 88, 106, and 132(R)".  SFAS No. 158 requires an employer
     to recognize the  over-funded or  under-funded  status of a defined benefit
     postretirement  plan  (other  than a  multiemployer  plan)  as an  asset or
     liability in its statement of financial  position and to recognize  changes
     in that funded  status in the year in which the changes occur through other
     comprehensive  income of a business entity or changes in  unrestricted  net
     assets of a  not-for-profit  organization.  This Statement also requires an
     employer  to  measure  the  funded  status  of a plan as of the date of its
     year-end statement of financial  position.  The adoption of SFAS 158 is not
     expected to have a material effect on the Company's financial statements.

     In September  2006,  the Securities  and Exchange  Commission  issued Staff
     Accounting  Bulletin (SAB) No. 108,  Considering  the Effects of Prior Year
     Misstatements  when  Quantifying  Misstatements  in Current Year  Financial
     Statements , which provides  interpretive  guidance on the consideration of
     the  effects  of prior  year  misstatements  in  quantifying  current  year
     misstatements for the purpose of a materiality  assessment.  The Company is
     required  to adopt  SAB 108 for the year  ending  December  31,  2006.  The
     adoption  of SAB 108 is not  expected  to  have a  material  effect  on the
     Company's financial statements.

     Loss per common share

     Basic loss per share is computed by dividing  net loss by weighted  average
     number of shares of common stock  outstanding  during each period.  Diluted
     loss per share is  computed by dividing  net loss by the  weighted  average
     number of shares of common stock,  common stock equivalents and potentially
     dilutive securities outstanding during each period. Diluted

                                      F-13

<PAGE>

                    INTERACTIVE GAMES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                   FOR THE YEARS ENDING JULY 31, 2006 AND 2005


1. Organization, basis of presentation and summary of significant accounting
policies:

     Loss per common share (continued)

     loss  per  common  share  is not  presented  because  it is  anti-dilutive.
     Outstanding  warrants of 3,600,000 and 5,227,000 at July 31, 2006 and 2005,
     respectively,  were excluded from the  computation  of the diluted loss per
     share due their antidilutive effect.

2.   Discontinued operations:

     Torpedo's  operations  were  primarily  located  in  Montreal,  Canada.  In
     conjunction  with  the  Torpedo  bankruptcy  proceedings,   a  trustee  was
     appointed to oversee the Torpedo  estate.  The  Trustee's  functions are to
     recover the maximum  value of  Torpedo's  assets and  discharge  bankruptcy
     claims  based on priority  and pursuant to Canadian  bankruptcy  laws.  The
     carrying amounts of Torpedo's assets and liabilities  subject to compromise
     at July 31, 2006, are as follows:

     Assets :
       Cash, held in trust
                                                      $      7,549
                                                 ==================
     Liabilities subject to compromise: (1)
       Notes payable                                  $    415,676

       Due to related party                                138,353
       Accounts payable and accrued expenses             1,770,958
                                                 ------------------
                                                      $  2,324,987
                                                 ==================

     Liabilities  subject  to  compromise  above  do  not  include  intercompany
     payables  which  have  been  eliminated  in the  accompanying  consolidated
     financial statements.

     The notes payable  consist of three notes with carrying values ranging from
     approximately  $30,000 to $225,000 and bearing  interest ranging from 8% to
     10%. The notes are unsecured and are in default.

     Due to  related  party  consists  of  amounts  owed  to VP  Sports  and are
     comprised of management fees and accrued interest payable.

     The  liabilities of Torpedo  exceed the estimated net realizable  values of
     Torpedo's  assets  and will not be  sufficient  to pay all  obligations  of
     Torpedo.  Management is uncertain as to the ultimate  disposition  of these
     liabilities, but believes there is no significant exposure to the Company.

3.   Convertible debentures payable:

     In April 2006, the Company  executed a Securities  Purchase  Agreement (the
     "Purchase  Agreement") with various  accredited  investors (the "Holder" or
     "Holders")  for the  issuance  and sale of up to $700,000  of 6%  unsecured
     convertible  debentures in private  transactions.  As of July 31, 2006, the
     Company  completed the sale of the aggregate  $385,000 in Debentures  under
     the Purchase Agreement. We received $324,950 from these transactions net of
     $60,050 of debt issuance costs paid to our placement agents, Divine Capital
     Markets, LLC (included in the accompanying balance sheet), which will be

                                      F-14

<PAGE>

                    INTERACTIVE GAMES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                   FOR THE YEARS ENDING JULY 31, 2006 AND 2005

3.   Convertible debentures payable:

     amortized  as  debt  issuance  costs  over  the  three  year  term  of  the
     convertible  notes.  For the year ended July 31, 2006,  debt issuance costs
     were $4,909. At July 31, 2006,  accrued interest payable on these notes was
     $5,589.

     The  Debentures  are due three years from the final  Closing Date under the
     Purchase  Agreement  (the  "Maturity  Date"),   unless  prepayment  of  the
     Debentures  is  required  in  certain  events,   as  described  below.  The
     Debentures are convertible at a conversion price (the  "Conversion  Price")
     for each share of common stock equal to 75% of the lowest closing bid price
     per share (as reported by Bloomberg,  LP) of the Corporation's common stock
     for  the  twenty  (20)  trading  days  immediately  preceding  the  date of
     conversion.  In  addition,  the  Debentures  provide  for  adjustments  for
     dividends   payable   other   than  in   shares  of   common   stock,   for
     reclassification,  exchange or substitution of the common stock for another
     security or securities of the Corporation or pursuant to a  reorganization,
     merger,  consolidation,  or sale of  assets,  where  there is a  change  in
     control of the Corporation.

     The outstanding  principal  balance of each Debenture  bears  interest,  in
     arrears,  at six percent (6%) per annum,  payable (i) upon  conversion,  or
     (ii) on the Maturity  Date, in shares of our common stock at the Conversion
     Price.  Upon the  occurrence  of an Event of  Default  (as  defined  in the
     Purchase  Agreement),  then the  Corporation is required to pay interest to
     the Holder of each outstanding Debenture,  at the option of the Holders (i)
     at the rate of lesser of eighteen  percent  (18%) per annum and the maximum
     interest rate allowance  under  applicable law, and (ii) the Holders may at
     their option declare the  Debentures,  together with all accrued and unpaid
     interest (the "Acceleration Amount"), to be immediately due and payable.

     The  Corporation  may at its option call for  redemption all or part of the
     Debentures prior to the Maturity Date, as follows:

          The Debentures called for redemption shall be redeemable for an amount
          (the  "Redemption  Price") equal to (x) if called for redemption prior
          to the date  which is nine  months  from  the  date of  issuance  (the
          "Issuance Date"),  115%, if called for redemption on or after the date
          that is nine  months  after the  Issuance  Date but prior to the first
          anniversary  of  the  Issuance  Date,  131%,  in  either  case  of the
          principal  amount  called for  redemption,  plus (y) interest  accrued
          through the day immediately preceding the date of redemption.

          (i) If fewer than all outstanding Debentures are to be redeemed,  then
          all Debentures shall be partially redeemed on a pro rata basis.

     In  connection  with the  Purchase  Agreement,  the Company  entered into a
     Registration  Rights Agreement,  dated as of April 24, 2006  ("Registration
     Rights  Agreement"),  with the Holders of the Debentures to provide certain
     registration  rights  under the  Securities  Act of 1933,  as amended  (the
     "Securities  Act"), and the rules and regulations  thereunder.  Pursuant to
     the  Registration  Rights  Agreement,  the Company  contemplates  making an
     offering of common stock (or other equity  securities  convertible  into or
     exchangeable for common stock) registered for sale under the Securities Act
     or proposes to file a Registration Statement covering any of its securities
     other  than (i) a  registration  of Form S-8 or S-4,  or any  successor  or
     similar forms;  and (ii) a shelf  registration  under Rule 415 for the sole
     purpose  of  registering  shares  to  be  issued  in  connection  with  the
     acquisition  of  assets,  the  Company  will at each such time give  prompt
     written notice to the Holders' representative and the

                                      F-15

<PAGE>

                    INTERACTIVE GAMES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                   FOR THE YEARS ENDING JULY 31, 2006 AND 2005


3.     Convertible debentures payable:

     Holders of its  intention to do so. Upon the written  request of any Holder
     made  within  thirty (30) days after the  receipt of any such  notice,  the
     Company has agreed to use its best  efforts to effect the  registration  of
     all such registrable  securities which the Company has been so requested to
     register by the Holders,  to the extent requisite to permit the disposition
     by the requesting Holders of their registrable  securities  pursuant to the
     Registration  Statement.  Accordingly,  in connection with the Registration
     Rights  Agreement,  the Company  recorded an expense and accrued  estimated
     registration  rights  penalties  of  $161,700,  which are  included  in the
     accompanying financial statements.

     The Debentures cannot be converted until nine (9) months after the issuance
     date of each Debenture.

     The  Company  determined  that the  conversion  feature of the  convertible
     Debentures  represents  an embedded  derivative  since the  Debentures  are
     convertible into a variable number of shares upon conversion.  Accordingly,
     the convertible  Debentures are not considered to be conventional  debt und
     EITF 00-19 and the embedded  conversion feature must be bifurcated from the
     debt host and accounted for as a derivative liability. The Company believes
     that the aforementioned embedded derivatives and freestanding warrants meet
     the criteria of SFAS 133 and EITF 00-19, and should be accounted separately
     as  derivatives   with  a   corresponding   value  recorded  as  liability.
     Accordingly,  the fair  value if these  derivative  instruments  have  been
     recorded  as a  liability  on  the  consolidated  balance  sheet  with  the
     corresponding  amount recorded as a liability on the  consolidated  balance
     sheet  with  the  corresponding  amount  recorded  as  a  discount  to  the
     Debentures. Such discount will be accreted from the date of issuance to the
     maturity  date of the  Debentures.  The  change  in the  fair  value of the
     liability  for  derivative  contracts  will be  credited  to  other  income
     (expense) in the consolidated  statements of operations.  The $385,000 face
     amount of the Debentures were stripped of their  conversion  feature due to
     the  accounting  for the  conversion  feature  as a  derivative,  which was
     recorded  using the  residual  proceeds to the  conversion  option would be
     attributed  to the debt.  The  beneficial  conversion  feature (an embedded
     derivative) included in this Debenture resulted in an initial debt discount
     on April 24 and May 31, 2006 of $305,000 and $80,000,  respectively, and an
     initial loss on the  valuation  of  derivative  liabilities  of $74,096 and
     $1,778, respectively.

     At July 31, 2006, the Company revalued this derivative  liability.  For the
     period  from April 24,  2006 to July 31,  2006,  the  Company  reduced  the
     initial  recorded  losses (of  $75,874)  and the accrued  liability  on the
     valuation by $130,874.

     The Company issued  1,500,000  shares of its common stock to Divine Capital
     Markets,  LLC and/or its designees as consideration for its services as the
     placement  agent in  connection  with the financing  transaction  described
     above. The Company recorded a stock compensation expense of $120,000 (based
     upon  the  market  value  of the  Company's  common  stock  on the  date of
     issuance), which is included in general and administrative expenses for the
     year ended July 31, 2006.

4.   Note payable:

     At July 31,  2006,  the Company had an  unsecured  note payable of $75,000,
     bearing interest at 8%, which matured in April 2005. The note payable is in
     default at July 31, 2006.

                                      F-16

<PAGE>

                    INTERACTIVE GAMES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                   FOR THE YEARS ENDING JULY 31, 2006 AND 2005

5. Due to related parties:

     Due to related parties at July 31, 2006, consist of the following:

o        Due to related parties affiliated through common control of the
         Company's chief executive officer, unsecured, bearing interest at 9%,
         payable on demand, amounting to $568,230;

o        Due to related parties affiliated through common control of one the
         Company's stockholders, secured by substantially all assets of the
         Company, bearing interest at ranges from 8% to 10%, payable on demand,
         amounting to $818,491; This amount includes a $115,682 amount under a
         $150,000 revolving credit note, payable on demand after February 15,
         2006. In connection with this revolving credit note, as amended, the
         Company issued 150,000 options exercisable at a price of $0.10 per
         share. The options expire on August 15, 2007.

o        Due to stockholder, unsecured, bearing interest at 6%, payable on
         demand, amounting to $85,053;

o        Accrued interest on the aforementioned payables, amounting to $311,986.

     The  Company  recognized  approximately  $142,500  and  $72,000 as interest
     expense  in  connection  with the due to related  parties  during the years
     ended July 31, 2006 and 2005, respectively.

6.   Commitments and contingencies:

     Litigation:

     Due  to  Torpedo's  inability  to  meet  its  obligations  timely,  certain
     creditors have initiated legal action against  Torpedo,  some of which have
     received judgments for payment.

     The Company is involved in other  claims and legal  actions  arising in the
     ordinary  course of business.  In the opinion of  management,  the ultimate
     disposition of these matters will not have a material adverse impact either
     individually  or in the aggregate on  consolidated  results of  operations,
     financial position or cash flows of the Company.

7.   Stockholders' deficit:

     Common stock

     In December 2005, the Company issued 5,227,000 shares of common stock to VP
     Sports,  Inc., an affiliate  through common control of our Chief  Executive
     Office and Chief Financial Officer, pursuant to the Merger Agreement.

     During the year ended July 31, 2006, the Company issued 1,500,000 shares of
     its common  stock to a  placement  agent as fees  related to the  debenture
     offering. The Company valued the shares at $120,000 or $0.08 per share (the
     market price of the common  stock on the date of issuance)  and is included
     in selling, general and administrative expenses for the year ended July 31,
     2006.

                                      F-17

<PAGE>

                    INTERACTIVE GAMES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                   FOR THE YEARS ENDING JULY 31, 2006 AND 2005

7.   Stockholders' deficit:

     Stock options and warrants

     In March 2002, one of the Company's subsidiaries,  Torpedo USA, adopted the
     2002 Stock Option Plan,  covering up to 1,000,000  shares of the  Company's
     common stock,  and in July 2003, the Company  adopted the 2003 Stock Option
     Plan covering up to 2,500,000 shares of the Company's common stock.

     Torpedo USA issued  options  and  warrants  prior to its merger,  which was
     assumed  by the  Company.  A  summary  of  the  activity  of the  Company's
     outstanding options and warrants during fiscal 2006 and 2005 is as follows:

                                                                 Weighted
                                           Options and            average
                                             warrants         exercise price
                                          ---------------    -----------------

Outstanding, August 1, 2004
Granted                                        5,227,000               $ 0.18
Exercised                                              -                    -
Expired                                                -                    -
                                          ---------------    -----------------
Outstanding and exercisable at
July 31, 2005                                  5,227,000               $ 0.18

Granted
Exercised                                      (364,246)                 0.08
Expired                                      (1,262,754)                 0.20
                                          ---------------    -----------------
Outstanding and exercisable at
July 31, 2006                                  3,600,000               $ 0.18
                                           ===============    =================

<TABLE>
<CAPTION>

 Range of exercise prices    Warrants outstanding and       Weighted average           Weighted average
                                    exercisable           remaining contractual         exercise price
                                                                  life

<S>        <C>                        <C>                         <C>                        <C>
           $ 0.05                     100,000                     1.03                       $ 0.05
             0.10                     450,000                     1.85                         0.10
             0.15                     300,000                     0.93                         0.15
             0.20                   2,750,000                     1.26                         0.20
</TABLE>
     The  weighted  average  remaining  contractual  life  of the  terms  of the
     warrants and options is 1.3 years.

     All options  and  warrants  issued by Torpedo USA were issued  prior to the
     merger  on  February  1, 2005 and have been  expensed  prior to such  date.
     Accordingly,  no expense associated with the assumption of the warrants and
     options by the Company has been included in the  accompanying  consolidated
     statement of operations.

                                      F-18

<PAGE>

                    INTERACTIVE GAMES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                   FOR THE YEARS ENDING JULY 31, 2006 AND 2005


8.   Gain on settlement:

     During fiscal 2005,  the Company  entered into a settlement  agreement with
     Inhibiton Therapeutics,  Inc., ("Inhibiton") whereby the Company accepted a
     sum of $250,000 as full and final payment for relinquishing our rights to a
     Cooperative  Research and  Development  Agreement and discharged  Inhibiton
     from any and all  liabilities  to the  Company.  The  amount  due from this
     settlement  has been applied to amounts owed by the Company to Inhibiton of
     $250,000  and  Inhibiton  agreed to waive any and all interest due or other
     fees associated with this payment.

9.   Income taxes:

     Deferred  income taxes reflect the net tax effect of temporary  differences
     between  the  carrying  amounts of assets  and  liabilities  for  financial
     reporting   purposes  and  the  amounts  used  for  income  tax   purposes.
     Significant  components of the net deferred taxes, as of July 31, 2006, are
     as follows:

     Deferred tax assets:
       Net operating loss carryforward             $ 336,000
       Less valuation allowance                     (336,000)
                                              ----------------
     Total net deferred tax assets                          -
                                              ================

     SFAS No. 109  requires a valuation  allowance  to reduce the  deferred  tax
     assets  reported,  if any, based on the weight of the evidence,  it is more
     likely than not that some  portion or all of the  deferred  tax assets will
     not be realized.  Management has determined  that a valuation  allowance of
     $336,000 at July 31, 2006 is necessary to reduce the deferred tax assets to
     the amount that will more likely  than not be  realized.  The change in the
     valuation  allowance  during  fiscal  2006  and  2005  was an  increase  of
     approximately $288,000 and $8,000, respectively.

     The Company had net operating loss carryforward  amounting to approximately
     $879,000 at July 31,  2006.  The Company may have had a change of ownership
     as defined  by the  Internal  Revenue  Code  Section  382.  As a result,  a
     substantial annual limitation may be imposed upon the future utilization of
     its net operating loss  carryforwards.  At this point,  the Company has not
     completed  a  change  in  ownership  study  and the  exact  impact  of such
     limitations is unknown.

The federal  statutory  tax rate  reconciled  to the  effective  tax rate during
fiscal 2006 and 2005, respectively, is as follows:

                                               2006        2005
                                            ----------- ----------

Tax at U.S. Statutory Rate                      35.0%       35.0%
State tax rate, net of federal benefits          5.0$        5.0%
Change in valutation allowance                 (40.0)      (40.0)
                                            ----------- ----------
                                                 0.0%        0.0%
                                            =========== ==========

10.  Subsequent events:

     During October and through November 9, 2006, the Company received  $175,000
     under three loan agreements with an affiliated  company.  The loans are due
     on demand and carry a per annum  interest  rate of 10%. The  proceeds  were
     utilized to reduce liabilities and for general working capital purposes.


                                      F-19