UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

______________

FORM 10-KSB

______________

þANNUAL REPORT UNDER OR OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2006

 ̈TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE 
ACT OF 1934

For the transition period from __________ to __________

Commission file number 000-25003



Real Logic, Inc.

(Name of small business issuer in its charter)

|                                  |                                  
|--------------------------------- | ---------------------------------
|Florida                           | 64-1045849                       
|(State or other jurisdiction      | (IRS Employer Identification No.)
|of incorporation or organization) |                                  

340 Royal Poinciana Way, Suite 326 B 33480

(Address of principal executive offices) (Zip Code)

Issuers telephone number, including area code: (561) 833- 9808

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

None

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

Common Stock, par value $.001 per share

(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 þ  N0  ̈

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

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange act). Yes  ̈  No þ

Our revenues for the most recent fiscal year were $0.

The aggregate market value of our common stock held by non-affiliates was $3,465,215 as of March 31, 2007, based on the most recent price at which the common stock was sold in an arms length transaction.

The number of outstanding shares of our common stock on May 23, 2007 was 25,890,580.

Transitional Small Business Disclosure Format: Yes  ̈  No þ









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PART I

Special Note Regarding Forward-Looking Statements

This annual report on Form 10-KSB and the documents incorporated by reference herein contain forward looking statements that are not statements of historical fact and may involve a number of risks and uncertainties. These statements relate to managements analysis and other information that is based on forecasts of future results and estimates of time lines, etc., that are not yet determinable. These statements may also include references to our future plans, prospects, and business strategies.

These statements can be identified by the use of forward-looking terminology such as believes, expects, may, will, intends, should, or anticipates or the negative thereof or other variations thereon or comparable terminology, or by discussions of strategy that involve risks and uncertainties. The safe harbor provisions of Section 21E of the Securities Exchange Act or 1934, as amended, and Section 27A of the Securities Act of 1933, as amended, apply to forward-looking statements made in this report. You should not place undue reliance on forward-looking statements. Forward-looking statements involve risks and uncertainties. The actual results that we achieve may differ materially from any forward-looking statements due to such risks and uncertainties. These forward-looking statements are based on current expectations, and we assume no obligation to update this information. Readers are urged to carefully review and consider the various disclosures made by us in our reports filed with the Securities and Exchange Commission, including the following factors that may cause actual results to differ materially from our forward looking statements:

1.

The general global economy and industry conditions

2.

Our limited operating history

3.

Industry competition

4.

Environmental and government regulation

5.

Whether the alternative transportation vehicle industry will continue to grow

6.

Our ability to obtain approval, if required, from government authorities for our vehicles

7.

Our ability to fund short term and long term capital financing

Note that forward looking statements made by management in this annual report speaks only as of the date on which the report references.

Item 1. The Business

Real Logic, Inc. was incorporated in the state of Florida on June 28, 1999. Our primary activity was to locate and acquire an operating company in an industry that had potential for development while making contributions to society. In order to increase our attractiveness to potential acquisition targets, on December 4, 2000, we voluntarily filed a Form 10-SB with the Securities and Exchange Commission, thereby becoming a publicly reporting company. On October 29, 2001, we changed our name from Xelos, Inc., to Real Logic, Inc. In mid 2005, along with government and various industries, we debated how best to alleviate the growing transportation problems and concurrently assist clean air environment efforts. We began to target potential acquisition company candidates that had already been involved in research and development for what was fast becoming known as alternative transportation vehicles. We were looking for something that was close or ready to be brought to market. These vehicles included off-road vehicles for areas of the world in which paved roads are scarce, and vehicles powered by alternative energy sources, such as electric and solar power.

After extensive searching, due diligence, discussions and negotiations, in June 2006 we reached an agreement with two individuals to collaborate in the development, manufacture and marketing of a design for an off road vehicle, an alternative transportation vehicle, that was capable of providing transportation in many parts of the world, at cost effective pricing. The vehicle was designed to be a lightweight vehicle with minimal fuel consumption, while carrying multiple persons and capable of achieving speeds of up to 70 miles per hour. The company acquired a



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60% percent interest in a new development company that was incorporated in the State of Florida, Duncan Motor Company.

During the remaining months of 2006, we further refined our Business Plan Mission to seek out, develop and acquire other alternative transportation vehicles and technology, low emission vehicles, ethanol and other fuel efficient vehicles. We believe these vehicles will replace the majority of existing automobile transportation and offer cost effective bonuses, as well. We identified and evaluated several other potential acquisition candidates which already had completed prototypes. We look to acquire advanced technology vehicles and evaluate the feasibility of integrating these new prototypes into our existing product line. We believe the Company is one of the first to pioneer a growing niche for alternative transportation, and our goal is to become known as a source for new technology vehicles for transportation.

Subsidiary:  Duncan Motor Company

In June, 2006, we formed a subsidiary, Duncan Motor Company, a Florida Corporation, which is managed by Richard Duncan, the creator of the prototype, who owns 35% of Duncan Motor Company. Joining the Duncan management team is Dr. Robert Wright, an engineer and expert witness for automobile impact who designed the safety features for the prototype. He owns 5% of Duncan Motor Company. During the last quarter, 2006, we were fortunate to attract Elena Golovanova, a highly qualified international business woman, who has assumed the position of Director of Marketing and Sales for Duncan Motor Company. Ms. Golovanova has already made significant progress in developing relationships and interested parties for International vehicle sales.

Duncan Business Development

Our focus during the last half of 2006 was to test market the design and features of the original Duncan prototype. We did this by contacting a number of automobile dealers which had previously expressed interest in representing the Duncan vehicle. We also exposed the prototype to a number of consumers for direct sales evaluations. The test marketing was laborious and time consuming. However, the marketing efforts proved beneficial in that we concluded that it would be prudent to offer several other different model designs and features depending upon the region of the world where the vehicles would be offered for sale. For example, third world countries are less interested in features such as radio, CD, air conditioning, fast speed capability, etc. They would rather have the opportunity to purchase a basic vehicle at a lower price.

We were able to verify the large market segment for personal transportation, wherein the majority of automobiles on the road today have only one person in the vehicle. This reaffirms that the 2-3 passenger size of the Duncan vehicle is on target with market acceptance.

Distribution

We intend to employ both the traditional methods for product distributions and sales such as auto distributors, company show room, etc., as well as utilize direct Internet Sales to Consumers from the Duncan web site.

Manufacturing

Management has been evaluating our options for start up of vehicle manufacturing. Currently, management is favoring a combination of a US facility that can be utilized as a testing facility for all of our new vehicle prototypes, as well as for smaller batch manufacturing. In addition, management is seeking a cost favorable agreement for mass manufacturing outside the US, where shipping and delivery could be in proximity to production.

We recognize that we will compete with larger established manufactures such as Toyota, Daimler Chrysler, and Honda. However, we believe that there is room for a company with talented management who are passionate about the alternative transportation industry and a clean air environment.



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RISK FACTORS

We have limited operating history or revenue and minimal assets.We have limited operating history, nor any revenues or earnings from operations. We have no significant assets or financial resources. We will, in all likelihood, sustain operating expenses without corresponding revenues, at least until manufacturing and sales initiate. This may result in the Company incurring net operating losses which will increase continuously until we can generate revenues.

Our proposed operations are speculative.The success of our plan of operation will depend to a great extent on the companys ability to raise capital for manufacturing of products and establish an effective distribution plan.

We face intense competition.We compete with larger, better capitalized companies that have had working relationships with vendors, distributors, financial establishments and other resources that we do not have

Changes in the marketplace.Changes in the market for Alternative Transportation Vehicles may overtake our progress and cause our product line to become obsolete or loose market share.

Failure of parts suppliers.We intend to rely on certain key suppliers to provide parts for vehicle assembly of our prototype. The company could experience a negative impact upon achieving sales goals if suppliers were to default on deliveries.

Regulatory requirements impact. Currently, Regulatory requirements do not negatively impact our products. However, it is possible that substantial regulation under federal, state, and local laws may be imposed at some future date on alternative transportation vehicles. Compliance may prove to be burdensome and expensive.

International product sales. It is the Companys belief that international sales of our Duncan Models will represent a significant percentage of our annual sales. A failure to address the risks associated with international business issues, i.e. fluctuations in currency exchange rates, political and economical instability, regulatory compliance, contract enforcement, etc. could greatly impact revenues.

Our Securities and Exchange Commission reporting requirements may delay or preclude future acquisitions.Section 13 of the Securities Exchange Act of 1934 (the Exchange Act) requires companies subject thereto to provide certain information about significant acquisitions including certified statements for the company acquired covering one or two years, depending on the relative size of the acquisition.

Our success depends in large part upon the efforts of a small number of persons who serve on our board and as management.We have only a limited number of persons fulfilling our management responsibilities. The loss of the services of any of our directors or officers could hurt our ability to execute our business plan. We have not obtained key man life insurance on any of our officers or directors.

Concentration of ownership may reduce the control by other shareholders.Our President owns approximately 62% of our outstanding stock. As a result, other investors in our common stock will not have a significant influence on corporate decision-making.

Potential regulation as a penny stock.If and when our stock becomes publicly traded, the trading price of our stock may result in our stock being classified as a penny stock. The Securities and Exchange Commission has adopted a number of rules to regulate penny stocks. A penny stock is any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. Such rules include Rules 3a51-1, 15g-1, 15g-2, 15g-3, 15g-4, 15g-5, 15g-6 and 15g-7 under the Securities and Exchange Act of 1934, as amended.

No public market exists for our stock.There is no public market for our Common Stock, and no assurance can be given that a market will develop or that a shareholder ever will be able to liquidate his investment without considerable delay, if at all. If a market should develop, the price may be highly volatile. Factors such as those discussed in this Risk Factors section may have a significant impact upon the market price of our Common Stock.

Rule 144 sales could affect the Companys stock price.All of the outstanding shares of the Companys Common Stock are restricted securities within the meaning of Rule 144 under the Securities Act of 1933, as amended. As restricted shares, these shares may be resold only pursuant to an effective registration statement or under the requirements of Rule 144 or other applicable exemptions from registration under the Act and as required under



3



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applicable state securities laws. Rule 144 provides in essence that a person who has held restricted securities for one year may, under certain conditions, sell during any three month period, in brokerage transactions, a number of shares that does not exceed the greater of 1.0% of companys outstanding common stock or the average weekly trading volume during the four calendar weeks prior to the sale. There is no limit on the amount of restricted securities that may be sold by nonaffiliated persons after the restricted securities have been held by the owner for a period of two years. A sale under Rule 144 or under any other exemption from the Act, if available, or pursuant to subsequent registration of shares of Common Stock of present stockholders, may have a depressive effect upon the price of the Common Stock in any market that may develop.

Item 2. Property

We own no real estate. Our offices are located at 340 Royal Poinciana Way, Suite 326 B, Palm Beach, FL., 33480. We pay rent of approximately $2,300 per month for our offices. We believe this space will be adequate for our needs for the foreseeable future. We are in process of searching for a commercial space wherein we could enter into lease for the Duncan Motor Company that would provide a showroom for our prototypes.

Item 3. Legal Proceedings

We are not a party to any legal proceedings.

Item 4. Submission of Matters to a Vote of Security Holders.

During the period covered by this report, there were no matters submitted to our shareholders for a vote.



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PART II

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

There is currently no trading market for our stock and there can be no assurance that any trading market will ever develop or, if such a market does develop, that it will continue.

Holders of Record

As of March 31, 2007, we had approximately 1,120 shareholders of our common stock, which is the only class of stock which we have outstanding, according to a shareholder list provided by our transfer agent as of that date. The transfer agent and registrar for our common stock is Florida Atlantic Stock Transfer.

Recent Sales of Unregistered Securities

In October 2006, we issued 6,000 shares of our common stock to an individual investor for $3,000. The investor was a sophisticated investor with whom our principal, Bradford L. Tolley, had a pre-existing business relationship. The investor was provided with all material information pertaining to the Company, and a restrictive legend was placed on the share certificates. The issuance of the shares was exempt from registration under Regulation D and Section 4(2) of the Securities Act of 1933.

In November 2006, we issued a total of 255,000 shares of our common stock to four individual investors for a total of $127,500. The investors were sophisticated investors with whom our principal, Bradford L. Tolley, had a pre-existing business and/or personal relationship. The investors were provided with all material information pertaining to the Company, and a restrictive legend was placed on the share certificates. The issuances of the shares were exempt from registration under Regulation D and Section 4(2) of the Securities Act of 1933.

Dividend Policy

We have never paid cash dividends on our Common Stock. Payment of dividends will be within the sole discretion of our Board of Directors and will depend, among other factors, upon earnings, capital requirements and the operating and financial condition of the Company.

Item 6. Managements Plan of Operation.

We are a development stage company as defined in the Statement of Financial Accounting Standards No. 7, with limited operations. We have had no Revenues since inception. In June 2006 we entered into an Asset Purchase Agreement in order to collaborate in the development, manufacture and marketing of a superior design for an off road vehicle, an alternative transportation vehicle, that was capable of providing transportation in many parts of the world, at cost effective pricing. The vehicle was designed to be a lightweight vehicle with minimal fuel consumption, while carrying multiple persons and capable of achieving speeds of up to 70 miles per hour.

Duncan management is currently conducting final testing of our vehicle prototype in order to finalize production engineering and reconfirming manufacturing and assembly costs.

We look to acquire other advanced technology vehicles and evaluate the feasibility of integrating these new prototypes into our planned product line.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with and are qualified by reference to, our Financial Statements and the related Footnotes of this report. Certain statements and forth below under this caption constitute forward looking statements within the meaning of the Private Securities Litigation Reform of 1995. Also, for a discussion of certain Risk Factors applicable to our business and operations see Risk Factors in Item 1 of this report.

As of December 31, 2006, the Company's accumulated deficit was $967,397 and we had a working capital deficit of $347,801. Until, we initiate sales of our Duncan vehicle prototypes and achieve profitable operation, we will be dependant upon funding from our principal shareholder, Bradford L. Tolley. In order to begin production of the Duncan vehicle, we will need significant additional capital which we will seek to raise in one or more offerings of



5



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our common stock.  We do not currently plan any significant increase in our number of employees, because we currently expect to outsource production.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements

Item 7. Financial Statements

Financial statements and supplementary data are set forth on Pages F1 through F10.

Item 8. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure

There have been no disagreements with Accountants on Accounting and Financial Disclosure during the period covered by this report.

Item 8A. Controls and Procedures.

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Companys Exchange Act reports is recorded, processed, summarized and reported within the time frames specified in the SECs rules and forms, and that such information is accumulated and communicated to the Companys management, including its Chief Executive Officer and its principal financial officer, to allow timely decisions regarding required disclosure based closely on the definition of disclosure controls and procedures in Rule 13a-15(f). In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control, objectives and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As of the end of the period covered by this report, based on an evaluation of the Companys controls and procedures, the Companys Chief Executive Officer and principal financial officer concluded that the Companys disclosure controls and procedures were effective.

There have been no significant changes in the Companys internal controls, or in other factors that could significantly affect the internal controls, during the last fiscal quarter.



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PART III

Item 9. Directors, Executive Officers, Promoters and Control Persons

The executive officers and directors of the Company are listed below. Each director was appointed for a term of one year and until their successor is duly elected.

|                     |  |     |  |                               
|-------------------- |  | --- |  | ------------------------------
|Name                 |  | Age |  | Position                      
|                     |  |     |  |                               
|Michael Posner       |  | 46  |  | President, Director           
|Bradford L. Tolley   |  | 42  |  | Chief Executive Officer,      
|                     |  |     |  | Secretary, Treasurer, Director
|William Meade        |  | 35  |  | Vice President                
|Dr. Gerfried Mueller |  | 61  |  | Director                      



Michael Posnerhas been President of the Company since August 2001. Mr. Posner is a practicing attorney, Florida Bar Board Certified in Real Estate Law, and has been a shareholder in the law firm of Ward, Damon, & Posner since 1989.

Bradford L. Tolleyhas been Chief Executive Officer, Director, Secretary and Treasurer of the Company since August 2001. For the past 10 years, Mr. Tolley has been founder and President of Tolley Investments, Inc., a private investment company.

Dr. Gerfried Muelleris a Director. For the past five years, Dr. Mueller has been a private investor in various opportunities. Dr. Mueller is a graduate of the University of Munich and received a doctorate degree from the University of Zurich. He was a professor for the University of Vienna from 1979 to 1980. Dr. Mueller was Managing Director for his own company specializing in developing and manufacturing of high-tech medical equipment, until sale of his company.

William Meadehas been Vice President of the Company since June 30, 2006. Mr. Meade is a licensed attorney, and also holds an MBA in international finance. Mr. Meade has previous experience as a senior equity and convertible bond analyst for a leading money management/hedge fund firm, and has also worked as a Senior Quantitative Analyst for an independent equity research firm.

Audit Committee and Code of Ethics

We have not formally appointed an audit committee, and the entire Board of Directors currently serves the function of an audit committee. Because of the small number of persons involved in management of the Company, we do not have an audit committee financial expert serving on our Board. We have not yet adopted a code of ethics applicable to our chief executive officer and chief financial officer, or persons performing those functions, because of the small number of persons involved in management of the Company.

Item 10. Executive Compensation

None of our officers or directors has received any compensation from the Company during the past three years, other than a portion of the monthly payment made to Tolley Investments, Inc., that may be paid to Bradford L. Tolley as the owner of Tolley Investments.



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Item 11. Security Ownership of Certain Beneficial Owners and Management



The following table sets forth information with respect to the number of shares of the Company's Common Stock that were beneficially owned by (i) each executive officer of the Company, (ii) each director of the Company and (iii) each shareholder of the Company who owns more than 5% of the Company's Common Stock, all as of March 31, 2007. Each of the shareholders listed below has voting and investment power over the shares beneficially owned. As of May 23, 2007, there were issued and outstanding 25,890,580 shares of the Company's common stock.



|                                     |  |                            |  |                 
|------------------------------------ |  | -------------------------- |  | ----------------
|Name and address of Beneficial Owner |  | Shares
Beneficially 
Owned |  | Percent
of Class
|                                     |  |                            |  |                 
|Bradford L. Tolley                   |  | 15,835,150                 |  | 61.2%           
|326 B Royal Poinciana Way            |  |                            |  |                 
|Palm Beach, FL 33480                 |  |                            |  |                 
|                                     |  |                            |  |                 
|Michael Posner                       |  | 250,000                    |  | 1.0%            
|4420 Beacon Circle                   |  |                            |  |                 
|West Palm Beach, FL 33407            |  |                            |  |                 
|                                     |  |                            |  |                 
|Gerfried Mueller                     |  | 300,000                    |  | 1.2%            
|326 B Royal Poinciana Way            |  |                            |  |                 
|Palm Beach, FL 33480                 |  |                            |  |                 
|                                     |  |                            |  |                 
|William Meade                        |  | 100,000                    |  | .4%             
|326 B Royal Poinciana Way            |  |                            |  |                 
|Palm Beach, FL 33480                 |  |                            |  |                 
|                                     |  |                            |  |                 
|The Lang Family Trust                |  | 2,900,000                  |  | 11.2%           
|326 B Royal Poinciana Way            |  |                            |  |                 
|Palm Beach, FL 33480                 |  |                            |  |                 
|                                     |  |                            |  |                 
|Elena Golovanova                     |  | 2,850,000                  |  | 11.0%           
|326 B Royal Poinciana Way            |  |                            |  |                 
|Palm Beach, FL., 33480               |  |                            |  |                 
|                                     |  |                            |  |                 
|All Executive Officers and Directors |  | 16,485,150                 |  | 63.7%           
|as a group (4 persons)               |  |                            |  |                 

Equity Compensation Plans

We have not adopted any equity compensation plans, and have no securities authorized for issuance under any such plan.

Item 12. Certain Relationships and Related Party Transactions

Bradford L. Tolley and/or entities controlled by him have lent us money from time to time in order to fund our operations. The total amount owed to Mr. Tolley and/or his affiliates was $148,185 as of December 31, 2006.  Beginning in January, 2007, we pay or accrue $15,000 per month to Tolley Investments, Inc., an affiliate, for professional investment banking services, office equipment, utilities, telephone, storage files, computers, and a three person office staff that is provided by Tolley Investments.



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Item 13. Exhibits.

Exhibit Index

3.1

Certificate of Incorporation and Amendment to the Companys Certificate of Incorporation (filed as an Exhibit to the Companys Registration Statement on Form 10-SB filed December 5, 2000 and incorporated herein by this reference).

3.2

Amendment to the Companys Certificate of Incorporation filed with the Florida Secretary of State on October 29, 2001 (filed as an Exhibit to Form 8-K filed November 20, 2001 and incorporated herein by this reference).

3.3

Bylaws (filed as an Exhibit to Companys registration statement on Form 10-SB filed December 5, 2000 and incorporated herein by this reference).

31.1

Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer

31.2

Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer

32

Section 1350 Certifications

Item 14. Principal Accountant Fees and Services.

Audit Fees

The aggregate fees billed to the Company for professional services rendered for the audit of the Companys annual financial statements, review of the Companys quarterly financial statements, and other services normally provided in connection with statutory and regulatory filings or engagements was $10,665 for the fiscal year ended December 31, 2005 and $14,500 for the fiscal year ended December 31, 2006.



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SIGNATURES

Pursuant to the requirements 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.

| |                  |                                        
| | ---------------- | ---------------------------------------
| | Real Logic, Inc.
| |                  |                                        
| | By:              | /s/ BRADFORDL. TOLLEY                  
| |                  | Bradford L. Tolley,                    
| |                  | Director, Chief Executive Officer and  
| |                  | Treasurer (principal financial officer)
| |                  | Date: May 24, 2007                     
| |                  |                                        
| | By:              | /s/MICHAELPOSNER                       
| |                  | Michael Posner, Director               
| |                  | Date: May 24, 2007                     



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Baum & Company,  P.A.

1515 University Dr. Suite 226

Coral Springs FL 33071



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM





To the Board of Directors

Real Logic Inc.

(A Development Stage Company)

Palm Beach, Florida



We have audited the accompanying balance sheet of Real Logic Inc. (a development stage company) as of December 31, 2006 and 2005 and the related statements of operations, stockholders' deficiency and cash flows for the years ended December 31, 2006 and 2005, and cumulatively from inception, June 28, 1999 to December 31, 2006. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the financial statements based on our audit.



We conducted our audit 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 financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.



In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Real Logic Inc (a development stage company) as of December 31, 2006 and the results of its operations and its cash flows for the years ended December 31, 2006 and 2005 and cumulatively from inception, June 28, 1999 to December 31, 2006 in conformity with United States generally accepted accounting principles.



The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements the Company has experience a loss since inception in 1999. The Company=s financial position and operating results raise substantial doubts about its ability to continue a going concern. Management=s plans concerning these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.



/s/ Baum & Company,  P.A.



Coral Springs, Florida

May 25, 2007







F-1



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REAL LOGIC, INC.

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED BALANCE SHEET

December 31, 2006



|                                                                                                       |  |   |           | 
|------------------------------------------------------------------------------------------------------ |  | - | --------- | 
|ASSETS                                                                                                 |  |   |           | 
|                                                                                                       |  |   |           | 
|Current Assets                                                                                         |  |   |           | 
|Cash                                                                                                   |  | $ | 2,172     | 
|Total current assets                                                                                   |  |   | 2,172     | 
|                                                                                                       |  |   |           | 
|Fixed Assets-net                                                                                       |  |   | 2,837     | 
|                                                                                                       |  |   |           | 
|Other Assets-Security Deposit                                                                          |  |   | 1,900     | 
|                                                                                                       |  |   |           | 
|Total Assets                                                                                           |  | $ | 6,909     | 
|                                                                                                       |  |   |           | 
|LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)                                                         |  |   |           | 
|                                                                                                       |  |   |           | 
|CURRENT LIABILITIES                                                                                    |  |   |           | 
|Bank Credit Line                                                                                       |  | $ | 24,801    | 
|Note Payable                                                                                           |  |   | 130,000   | 
|Accounts Payable & Accruals                                                                            |  |   | 46,987    | 
|Loans and accrued expenses payable - related parties                                                   |  |   | 148,185   | 
|Total Current Liabilities                                                                              |  |   | 349,973   | 
|                                                                                                       |  |   |           | 
|Total Liabilities                                                                                      |  |   | 349,973   | 
|                                                                                                       |  |   |           | 
|STOCKHOLDERS' EQUITY (DEFICIT)                                                                         |  |   |           | 
|Preferred stock, $0.001 par value,
20,000,000 shares authorized;
none issued and outstanding           |  |   |           | 
|                                                                                                       |  |   |          
|                                                                                                       |  | 0 |          
|Common stock, $0.001 par value, 50,000,000 shares
authorized; 23,765,580 shares issued and outstanding |  |   | 23,766    | 
|                                                                                                       |  |   |          
|Additional paid in capital                                                                             |  |   | 600,567   | 
|Deficit accumulated during the development stage                                                       |  |   | (967,397) | 
|                                                                                                       |  |   |           | 
|Total stockholders' equity (deficit)                                                                   |  |   | (343,064) | 
|                                                                                                       |  |   |           | 
|Total Liabilities and Stockholders' Equity (Deficit)                                                   |  | $ | 6,909     | 



The accompanying notes are an integral part of the financial statements





F-2



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REAL LOGIC, INC.

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENTS OF OPERATIONS



|                                                |  |                                                                        |          |                              |   |                              |   |   |            |  
|----------------------------------------------- |  | ---------------------------------------------------------------------- | -------- | ---------------------------- | - | ---------------------------- | - | - | ---------- | -
|                                                |  | Cumulative from
Date of Inception
(JUNE 28, 1999)
To December 31,
2006 |          | Year Ended
December 31,
2006 |   | Year Ended
December 31,
2005 |  
|                                                |  |                                                                        |          |                             
|                                                |  |                                                                        |          |                             
|                                                |  |                                                                        |          |                             
|                                                |  |                                                                        |          |                             
|                                                |  |                                                                        |          |                              |   |                              |   |   |            |  
|REVENUES                                        |  | $                                                                      |         |                              | $ |                             |   | $ |           |  
|                                                |  |                                                                        |          |                              |   |                              |   |   |            |  
|OPERATING EXPENSES                              |  |                                                                        | 953,354  |                              |   | 600,361                      |   |   | 206,175    |  
|                                                |  |                                                                        |          |                              |   |                              |   |   |            |  
|Operating income (loss) before interest expense |  |                                                                        | (953,354 | )                            |   | (600,361                     | ) |   | (206,175   | )
|                                                |  |                                                                        |          |                              |   |                              |   |   |            |  
|OTHER EXPENSES-INTEREST EXPENSE                 |  |                                                                        | 14,043   |                              |   | 8,016                        |   |   | 6,027      |  
|                                                |  |                                                                        |          |                              |   |                              |   |   |            |  
|Income (Loss) before provision for income taxes |  |                                                                        | (967,397 | )                            |   | (608,377                     | ) |   | (212,202   | )
|Income taxes                                    |  |                                                                        | 0        |                              |   | 0                            |   |   | 0          |  
|                                                |  |                                                                        |          |                              |   |                              |   |   |            |  
|Net income (loss)                               |  | $                                                                      | (967,397 | )                            | $ | (608,377                     | ) | $ | (212,202   | )
|                                                |  |                                                                        |          |                              |   |                              |   |   |            |  
|Net income (loss) per common share, basic       |  |                                                                        |          |                              | $ | (0.03                        | ) | $ | (0.01      | )
|and diluted                                     |  |                                                                        |          |                              |   |                              |   |   |            |  
|                                                |  |                                                                        |          |                              |   |                              |   |   |            |  
|Weighted average shares of common stock         |  |                                                                        |          |                              |   | 23,077,778                   |   |   | 19,834,300 |  
|outstanding-basic and diluted                   |  |                                                                        |          |                              |   |                              |   |   |            |  
|                                                |  |                                                                        |          |                              |   |                              |   |   |            |  
|                                                |  |                                                                        |          |                              |   |                              |   |   |            |  



The accompanying notes are an integral part of the financial statements



F-3



---

REAL LOGIC, INC.

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)



|                                    |  |              |            |                         |   |                     |  |                               |         |   |   |          |   |   |          |  
|----------------------------------- |  | ------------ | ---------- | ----------------------- | - | ------------------- |  | ----------------------------- | ------- | - | - | -------- | - | - | -------- | -
|                                    |  | Common Stock |            | Additional
Paid
Capital |   | Accumulated
Deficit |  | Total
Stkhldrs
Equity/Deficit |        
|Number of
Shares                    |  | Amount      
|                                    |  |              |            |                         |   |                     |  |                               |         |   |   |          |   |   |          |  
|                                    |  |              |            |                         |   |                     |  |                               |         |   |   |          |   |   |          |  
|BEGINNING BALANCE Feb. 18, 1999     |  |              |           |                         | $ |                    |  | $                             |        |   | $ |         |   | $ |         |  
|                                    |  |              |            |                         |   |                     |  |                               |         |   |   |          |   |   |          |  
|Issuance of common stock            |  |              | 2,000,000  |                         |   | 200                 |  |                               | 0       |   |   | 0        |   |   | 200      |  
|Net loss-November 30, 1999          |  |              | 0          |                         |   | 0                   |  |                               | 0       |   |   | 0        |   |   | 0        |  
|BALANCE,  November 30, 1999         |  |              | 2,000,000  |                         |   | 200                 |  |                               | 0       |   |   | 0        |   |   | 200      |  
|                                    |  |              |            |                         |   |                     |  |                               |         |   |   |          |   |   |          |  
|Net loss-November 30, 2000          |  |              | 0          |                         |   | 0                   |  |                               | 0       |   |   | 0        |   |   | 0        |  
|BALANCE,  November 30, 2000         |  |              | 2,000,000  |                         |   | 200                 |  |                               | 0       |   |   | 0        |   |   | 200      |  
|                                    |  |              |            |                         |   |                     |  |                               |         |   |   |          |   |   |          |  
|Revise common stock par value       |  |              | 0          |                         |   | 1,800               |  |                               | (1,800  | ) |   | 0        |   |   | 0        |  
|Net loss-November 30, 2001          |  |              |            |                         |   |                     |  |                               |         |   |   | (200     | ) |   | (200     | )
|BALANCE,  November 30, 2001         |  |              | 2,000,000  |                         |   | 2,000               |  |                               | (1,800  | ) |   | (200     | ) |   | 0        |  
|                                    |  |              |            |                         |   |                     |  |                               |         |   |   |          |   |   |          |  
|Common stock sold                   |  |              | 9,446,000  |                         |   | 9,446               |  |                               | 31,900  |   |   | 0        |   |   | 41,346   |  
|Common stock issued for services    |  |              | 300,000    |                         |   | 300                 |  |                               |         |   |   | 0        |   |   | 300      |  
|Net loss-November 30, 2002          |  |              | 0          |                         |   | 0                   |  |                               | 0       |   |   | (107,548 | ) |   | (107,548 | )
|BALANCE,  November 30, 2002         |  |              | 11,746,000 |                         |   | 11,746              |  |                               | 30,100  |   |   | (107,748 | ) |   | (65,902  | )
|                                    |  |              |            |                         |   |                     |  |                               |         |   |   |          |   |   |          |  
|Common stock sold                   |  |              | 6,525,000  |                         |   | 6,525               |  |                               | 0       |   |   | 0        |   |   | 6,525    |  
|Net loss-November 30, 2003          |  |              | 0          |                         |   | 0                   |  |                               | 0       |   |   | (30,359) |   |   | (30,359) |  
|BALANCE,  November 30, 2003         |  |              | 18,271,000 |                         |   | 18,271              |  |                               | 30,100  |   |   | (138,107 | ) |   | (89,736  | )
|                                    |  |              |            |                         |   |                     |  |                               |         |   |   |          |   |   |          |  
|Common stock sold                   |  |              | 0          |                         |   | 0                   |  |                               | 0       |   |   | 0        |   |   | 0        |  
|Net loss-November 30, 2004          |  |              | 0          |                         |   | 0                   |  |                               | 0       |   |   | 0        |   |   | 0        |  
|BALANCE,  November 30, 2004         |  |              | 18,271,000 |                         |   | 18,271              |  |                               | 30,100  |   |   | (138,107 | ) |   | (89,736  | )
|                                    |  |              |            |                         |   |                     |  |                               |         |   |   |          |   |   |          |  
|Net Loss-December 31, 2004          |  |              | 0          |                         |   | 0                   |  |                               | 0       |   |   | 0        |   |   | 0        |  
|BALANCE,  December 31, 2004         |  |              | 18,271,000 |                         |   | 18,271              |  |                               | 30,100  |   |   | (138,107 | ) |   | (89,736  | )
|                                    |  |              |            |                         |   |                     |  |                               |         |   |   |          |   |   |          |  
|Common Stock Sold for Cash          |  |              | 3,752,500  |                         |   | 3,753               |  |                               | 213,748 |   |   |          |   |   | 217,501  |  
|Common Stock Issued for Services    |  |              | 50,000     |                         |   | 50                  |  |                               | 2,950   |   |   |          |   |   | 3,000    |  
|Common Stock Issued for Acquisition |  |              | 871,080    |                         |   | 871                 |  |                               | 7,840   |   |   | (8,711   | ) |   | 0        |  
|Net loss-December 31, 2005          |  |              |            |                         |   |                     |  |                               |         |   |   | (212,202 | ) |   | (212,202 | )
|BALANCE,  December 31, 2005         |  |              | 22,944,580 |                         |   | 22,945              |  |                               | 254,638 |   |   | (359,020 | ) |   | (81,437  | )
|                                    |  |              |            |                         |   |                     |  |                               |         |   |   |          |   |   |          |  
|Common Stock Sold for Cash          |  |              | 421,000    |                         |   | 421                 |  |                               | 185,079 |   |   |          |   |   | 185,500  |  
|Common Stock Issued for Services    |  |              | 275,000    |                         |   | 275                 |  |                               | 129,725 |   |   |          |   |   | 130,000  |  
|Common Stock Issued for R&D         |  |              | 125,000    |                         |   | 125                 |  |                               | 31,125  |   |   |          |   |   | 31,250   |  
|Net loss-December 31, 2006          |  |              |            |                         |   |                     |  |                               |         |   |   | (608,377 | ) |   | (608,377 | )
|BALANCE,  December 31, 2006         |  |              | 23,765,580 |                         | $ | 23,766              |  | $                             | 600,567 |   | $ | (967,397 | ) | $ | (343,064 | )



The accompanying notes are an integral part of the financial statements





F-4



---

REAL LOGIC, INC.

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENTS OF CASH FLOWS



|                                                      |  |                                                                        |          |                              |   |                              |   |   |          |  
|----------------------------------------------------- |  | ---------------------------------------------------------------------- | -------- | ---------------------------- | - | ---------------------------- | - | - | -------- | -
|                                                      |  | Cumulative from
Date of Inception
(June 28, 1999)
To December 31,
2006 |          | Year Ended
December 31,
2006 |   | Year Ended
December 31,
2005 |  
|                                                      |  |                                                                        |          |                              |   |                              |   |   |          |  
|CASH FLOWS FROM OPERATING ACTIVITIES:                 |  |                                                                        |          |                              |   |                              |   |   |          |  
|Net income (loss)                                     |  | $                                                                      | (967,397 | )                            | $ | (608,377                     | ) | $ | (212,202 | )
|Adjustments to reconcile net income to                |  |                                                                        |          |                              |   |                              |   |   |          |  
|net cash provided by operating activities:            |  |                                                                        |          |                              |   |                              |   |   |          |  
|Depreciation                                          |  |                                                                        | 48       |                              |   | 48                           |   |   |          |  
|Stock issued for services                             |  |                                                                        | 133,300  |                              |   | 130,000                      |   |   | 3,000    |  
|Stock and note issued for purchased R&D               |  |                                                                        | 161,250  |                              |   | 161,250                      |   |   |          |  
|Accumulated loss of acquisition                       |  |                                                                        | 8,711    |                              |   |                              |   |   |         |  
|Changes in operating assets and liabilities:          |  |                                                                        |          |                              |   |                              |   |   |          |  
|(Increase)  in rent deposits                          |  |                                                                        | (1,900   | )                            |   |                              |   |   | (1,900   | )
|Increase (decrease) in accounts payable and accruals  |  |                                                                        | 46,987   |                              |   | 14,625                       |   |   | 27,862   |  
|Increase (decrease) in accrued expenses-related party |  |                                                                        | 79,282   |                              |   | 73,255                       |   |   | 6,027    |  
|Net cash provided (used) by operating activities      |  |                                                                        | (539,719 | )                            |   | (229,199                     | ) |   | (177,213 | )
|                                                      |  |                                                                        |          |                              |   |                              |   |   |          |  
|CASH FLOWS FROM INVESTING ACTIVITIES:                 |  |                                                                        |          |                              |   |                              |   |   |          |  
|Fixed Assets                                          |  |                                                                        | (2,885   | )                            |   | (2,885                       | ) |   |          |  
|Net cash provided (used) by investing activities      |  |                                                                        | (2,885   | )                            |   | (2,885                       | ) |   |         |  
|                                                      |  |                                                                        |          |                              |   |                              |   |   |          |  
|CASH FLOWS FROM FINANCING ACTIVITIES:                 |  |                                                                        |          |                              |   |                              |   |   |          |  
|Loans Payable Proceeds- related parties               |  |                                                                        | 130,200  |                              |   | 26,940                       |   |   | 11,500   |  
|Loans Payable Repayments- related parties             |  |                                                                        | (54,773  | )                            |   | (8,000                       | ) |   | (46,773  | )
|Bank Line of Credit                                   |  |                                                                        | 24,801   |                              |   | 24,801                       |   |   |          |  
|Proceeds from sale of common stock                    |  |                                                                        | 444,548  |                              |   | 185,500                      |   |   | 217,501  |  
|Net cash provided (used) by financing activities      |  |                                                                        | 544,776  |                              |   | 229,241                      |   |   | 182,228  |  
|                                                      |  |                                                                        |          |                              |   |                              |   |   |          |  
|Net increase (decrease) in cash                       |  |                                                                        | 2,172    |                              |   | (2,843                       | ) |   | 5,015    |  
|                                                      |  |                                                                        |          |                              |   |                              |   |   |          |  
|CASH and equivalents, beginning of period             |  | $                                                                      |         |                              | $ | 5,015                        |   | $ |         |  
|                                                      |  |                                                                        |          |                              |   |                              |   |   |          |  
|CASH and equivalents, end of period                   |  | $                                                                      | 2,172    |                              | $ | 2,172                        |   | $ | 5,015    |  
|                                                      |  |                                                                        |          |                              |   |                              |   |   |          |  
|SUPPLEMENTAL DISCLOSURE OF CASH FLOW 
INFORMATION:    |  |                                                                        |          |                              |   |                              |   |   |          |  
|Payment of taxes                                      |  |                                                                        |         |                              |   |                             |   |   |         |  
|Payment of interest in cash                           |  |                                                                        |         |                              |   | 1,521                        |   |   |         |  
|                                                      |  |                                                                        |          |                              |   |                              |   |   |          |  
|                                                      |  |                                                                        |          |                              |   |                              |   |   |          |  
|SUPPLEMENTAL DISCLOSURE OF NON-CASH                   |  |                                                                        |          |                              |   |                              |   |   |          |  
|INVESTING AND FINANCING ACTIVITIES:                   |  |                                                                        |          |                              |   |                              |   |   |          |  
|Stock Issued for Services                             |  | $                                                                      | 133,300  |                              | $ | 130,000                      |   | $ | 3,000.00 |  
|Stock Issued for Acquisition of Timber Property, Inc. |  | $                                                                      | 8,711    |                              | $ |                             |   | $ | 8,711.00 |  
|Stock Issued for Purchased R&D                        |  | $                                                                      | 31,250   |                              | $ | 31,250                       |   | $ |         |  







F-5



---

REAL LOGIC, INC.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2006



NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES



Organization and Operations



The Company was organized under the laws of the State of Florida on June 28, 1999. The Company is in the development stage.  The Companys has one subsidiary, Duncan Motor Company, Inc., a Florida corporation. All inter-company transactions have been eliminated. On October 29, 2002, the Company had changed its corporate name from Xelos, Inc. to Real Logic Inc.



Basis of Accounting



The Company's policy is to prepare its Consolidated financial statements using the accrual basis of accounting in accordance with generally accepted accounting principles.  The Company has elected December 31 as it's annual year-end.



Use of Estimates



The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of expenses during the reporting periods. Actual results could differ from those estimates.



Cash and Equivalent



Cash and cash equivalents include cash and cash in banks. The Company maintains cash and cash equivalent balances at a financial institution that is insured by the Federal Deposit Insurance Corporation up to $100,000.



Organization Costs



The Company has incurred various expenditures in the formation of its corporate and organizational structure. In accordance with SOP98-5 these costs were expensed as incurred.



Revenue Recognition



The Company will recognize revenue upon completion of its services to be rendered or delivery of products to its customers. The Company has not generated revenues since inception



Development Stage



The Company is in its development stage. Business operations are limited to daily office operations, staffs completion of final stage testing for the launch of our prototype Alternative Transportation Vehicle, and completion of our marketing plan in order to initiate sales of our existing Duncan XTV.   The accumulated deficit during its development stage is approximately $ 967,397.



Net Earnings (Loss) Per Share



The Company reports its net earnings (losses) per share in accordance with SFAS No. 128 "Earnings Per Share". Basic net earnings (losses) per share is computed by dividing net income (loss) available to common stockholders by the weighted averaged number of common shares outstanding. Diluted earnings (losses) per share is computed similar to basic earnings (losses) per share except that the denominator is increased to include the number of additional common shares that



F-6



---

would have been outstanding. As of December 31, 2006, and 2005 there are no outstanding stock options or stock warrants that would have affected the computation.



Fair Value of Financial Instruments



Statement of Financial Accounting Standards No. 107, "Disclosures about Fair Value of Financial Instruments", requires disclosures of information about the fair value of certain financial instruments for which it is practicable to estimate the value. For purpose of this disclosure, the fair value of a financial instrument is the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced sale or liquidation. The carrying amounts reported in the balance sheet for cash, accounts payable and accrued expenses, and loans payable approximate their fair market value based on the short-term maturity of these instruments.



Property and Equipment



Property and equipment is stated at cost. Depreciation and amortization will be provided using the straight-line method over the estimated economic lives of the assets. Expenditures for major renewals and betterments that extend the useful lives of property and equipment are capitalized. Expenditures for maintenance and repairs are charged to expense as incurred. In accordance with Statement of Financial Accounting Standards (SFAS) No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets", the Company examines the possibility of decreases in the value of property and equipment when events or changes in circumstances reflect the fact that their recorded value may not be recoverable.



NOTE 2 - GOING CONCERN



As shown in the accompanying financial statements, the Company incurred net losses for the year ending December 31, 2006 of approximately $608,000 and cumulatively since inception, for the period February 3, 1999 to December 31, 2006 of approximately $967,000 and negative working capital of $347,801 at December 31, 2006. There is no guarantee whether the Company will be able to generate enough revenue and/or raise capital to support these operations. This raises substantial doubt about the Company's ability to continue as a going concern.



The Company is currently raising working capital to fund its operations via a private placement of common stock.  The company has raised $ 112,500 through April 2007



NOTE 3 - INCOME TAX



In February 1992, the Financial Standards Board issued Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." Under SFAS No. 109,deferred assets and liabilities are recognized for the estimated future tax consequences between the financial statement carrying amounts of the existing assets and their respective basis.



Deferred assets and liabilities are measured using enacted tax rates in effect for the year in which temporary differences are expected to be recovered or settled. Under SFAS No. 109, the effect on deferred assets and liabilities of a change in tax rates is recognized in the period that includes the enactment date.



|                                  |  |  |                          |  |  |      | 
|--------------------------------- |  |  | ------------------------ |  |  | ---- | 
|                                  |  |  | Year ending
December 31, | 
|                                  |  |  | 2006                     |  |  | 2005 | 
|Statutory federal income tax rate |  |  | 34%                      |  |  | 34%  | 
|Valuation allowance               |  |  | (34)                     |  |  | (34) | 
|Effective tax rate                |  |  | %                       |  |  | %   | 



The Company has a net operating loss carry forward as of December 31, 2006 of approximately $ 967,000 which is offset by a 100% valuation allowance due to the uncertainty surrounding the ultimate realization of these assets. The loss carry-forward expires progressively in 15 years from 2001.



F-7



---



NOTE 4 - RELATED PARTY TRANSACTIONS



A related party has been paid $ 99,000 for professional services made on behalf of the company during the year ended December 31, 2006.



NOTE 5 - LOANS PAYABLE RELATED PARTIES



Various advances from major stockholders, no due date, and unsecured. Interest will accrue commencing at January 1, 2005 at 7% on the unpaid balance.



NOTE 6 - CAPITAL TRANSACTIONS



On August 29, 2002, the par value of common stock was changed to $.001. During the year the company sold 8,846,000 shares of common stock at par value for $8,846 and 600,000 shares of common stock for $32,700. The company issued 300,000 shares for services valued at $300.



In February 2003, the company issued 6,525,000 shares of common stock at par value for $6,525 of prior advances.



In Year 2004, there were no capital transactions.



In 2005, the company sold, to various investors, 3,752,500 shares of common stock for $217,500. The company issued 50,000 shares for services valued at $3,000. On September 9, 2005, the company issued 871,080 shares to the Timber Property Shareholders upon the merger of Timber Property, Inc., into Real Logic, Inc.



In January, 2006, we issued 100,000 shares of our common stock to a private investor for $25,000 in cash, and 20,000 shares of our common stock to a private investor for $5,000.  In April, 2006, we issued 25,000 shares of our common stock for consulting services valued at $5,000, and 40,000 shares of our common stock for $20,000 in cash.  In June, we issued 125,000 shares of our common stock (valued at $31,250) for purchased R&D.  In September, 2006, we issued 20,000 shares of our common stock to a private investor for $10,000 in cash. In October and November 2006, the company issued 261,000 shares of our common stock to  private investors for $130,500 in cash. In December, 2006, the company issued 250,000 shares for consulting services valued at $125,000.



NOTE 7  ACQUISITION & PURCHASED R&D



In June 7, 2006, the Company acquired a sixty percentage equity position in a new alternative transportation vehicle with an Asset Purchase Agreement pursuant to which the Company acquired certain in-process research and development. The Agreement called for the formation of a new entity in which the Company would hold a 60% ownership interest, with the remaining 40% owned by two individuals. One of these individuals assigned certain research and development with a value of $130,000 in exchange for a promissory note of $130,000. Additionally, the Company issued 125,000 shares of its common stock to the two individuals.



The research and development was expensed in accordance with SFAS # 2, Accounting for Research and Development Costs. The value of the stock issued by the Company was determined by management to be $0.25 per share ($31,250) based upon the most recent sale of unregistered common stock, at that time.



The Company has not booked any goodwill for the research and development, and as such treated the goodwill as having been impaired in accordance with SFAS #142, Goodwill and Other Intangible Assets while, not conceding to future valuation for the vehicles, once market sales initiate.





F-8



---

NOTE 8 - LEASE COMMITMENTS



The company rents office space in Palm Beach Florida, under a lease that commenced in March 2005 and expires in March 2007. The rent and CAM expenses for 2006 was $25,880 and $20,335 in 2005.   A new lease was entered into for a three year term, effective April 1, 2007. Estimated annual lease payments are: 2007-$28,180, 2008-$ 29,589,  2009 $ 31,068 and 2010 $ 8,155.



NOTE 9 - PROPERTY AND EQUIPMENT



At December 31, 2006, property and equipment consist of the following:



|                              |  |  |             |  |   |       |  
|----------------------------- |  |  | ----------- |  | - | ----- | -
|                              |  |  | Useful Life |  |   |       |  
|                              |  |  | (Years)     |  |   |       |  
|Computer equipment            |  |  | 5           |  | $ | 2,885 |  
|Less accumulated depreciation |  |  |             |  |   | (48   | )
|                              |  |  |             |  | $ | 2,837 |  



For the years ended December 31, 2006 and 2005, depreciation expense amounted to $48 and $0, respectively.



NOTE 10 - NOTES AND LOANS PAYABLE



The company has a $130,000 promissory note outstanding pursuant to its purchase of research and development. This note has no maturity date or stated interest rate and is to be repaid as funds become available.



At December 31, 2006, the company has an outstanding balance due of $ 24,801 against a revolving credit with a bank at an annual interest rate of 29.99%. This line was guaranteed by the Chief Executive Officer and related parties.



NOTE 11 - OPERATING EXPENSES



Operating expenses for the years Ending December 31, 2006 and 2005 were



|                                 |  |      |         |      |   |         | 
|-------------------------------- |  | ---- | ------- | ---- | - | ------- | 
|                                 |  | 2006 |         | 2005 |  
|Management Fee                   |  | $    | 120,000 |      | $ | 79,819  | 
|Professional fees                |  |      | 50,652  |      |   | 39,076  | 
|Purchased R&D                    |  |      | 161,250 |      |   |        | 
|Other general and administrative |  |      | 268,459 |      |   | 87,280  | 
|Total operating expenses         |  |      | 600,361 |      |   | 206,175 | 



NOTE 12 - NEW ACCOUNTING PRONOUNCEMENTS



In June 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes: An Interpretation of FASB Statement No. 109 (FIN No. 48). This interpretation clarifies the accounting for uncertainty in income taxes recognized in an entitys financial statements in accordance with SFAS No. 109. FIN No. 48 prescribes a recognition threshold and measurement principles for the financial statement recognition and measurement of tax positions taken or expected to be taken on a tax return. This interpretation is effective for fiscal years beginning after December 15, 2006 and as such, the Company will adopt FIN No. 48 on January 1, 2007. The Company does not expect the adoption of FIN No. 48 to have a material effect on its consolidated financial position and results of operations.



In February 2007, the FASB issued SFAS No., 159, The Fair Value Option for Financial Assets and Financial Liabilities, including an amendment to FASB Statements No. 115 (SFAS No. 159). SFAS No. 159 permits entities to choose to measure many financial instruments, and certain other items, at fair value that are not currently required to be measured at fair value. SFAS No. 159 is effective as of the



F-9



---

beginning of an entitys first fiscal year that begins after November 15, 2007; however early adoption is permitted. The Company is currently assessing the impact the adoption of SFAS No. 159 will have on its consolidated financial position and results of operations.



NOTE 13 - SUBSEQUENT EVENTS



In January 2007, the company issued to a director 300,000 shares of restricted common stock, valued at $ 150,000 for future services, and 400,000 shares of  restricted common stock, valued at $ 200,000 for future services to private individuals.



In March 2007, the company issued to the Company Chief Executive Officer 600,000 shares of restricted common stock and 400,000 shares of restricted common stock to a related party, with a combined value of $ 500,000 for services. Additionally, the company issued  to private individuals 200,000 shares of  restricted common stock, valued at $ 100,000 for future services.



In April 2007, the company sold 225,000 shares of restricted common stock for $112,500.







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