U.S. 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 December 31, 2006

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

Commission file number 002-41703

                            THE X-CHANGE CORPORATION
                 (Name of Small Business Issuer in Its Charter)

               Nevada                                    90-0156146
---------------------------------------      -----------------------------------
(State of Incorporation or Organization)    (I.R.S. Employer Identification No.)

                               710 Century Parkway
                                 Allen, TX 75013
               (Address of principal executive offices)(Zip Code)


                                 (972) 747-0051
                (Issuer's telephone number, including area code)

       Securities registered under Section 12(b) of the Exchange Act: None

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

                          COMMON STOCK, $.001 PAR VALUE
                                 Title of Class

Check whether the issuer:  (1) filed all reports required to be filed by Section
13 or 15(d) of the  Securities  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.
[X] YES [ ] NO

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

State issuer's revenues for its most recent fiscal year:  $ 1,154,573

As of March 30, 2007, there were  approximately  28,534,500 shares of our common
stock  outstanding,  of  which  21,634,500  were  held  by  non-affiliates.  The
aggregate  market  value of our common  stock  (based upon the closing  price on
March 30, 2007) held by non-affiliates was approximately $11,898,975.

Documents incorporated by reference:  None.

Transitional Small Business Disclosure Format (check one): [ ] YES [X] NO


<PAGE>





                            THE X-CHANGE CORPORATION
                                   FORM 10-KSB
                                TABLE OF CONTENTS
                              [NEEDS TO BE UPDATED]

                                                                            PAGE
                                     PART I

ITEM 1.  Description of Business............................................   3

ITEM 1A  Risk Factors.......................................................   8

ITEM 2.  Description of Property............................................  18

ITEM 3.  Legal Proceedings..................................................  19

ITEM 4.  Submission of Matters to a Vote of Security Holders................  19

                                     PART II

ITEM 5.  Market for Common Equity and Related Stockholder Matters...........  19

ITEM 6.  Management's Discussion and Analysis or Plan of Operation..........  21

ITEM 7.  Financial Statements...............................................  24

ITEM 8.  Changes in and Disagreements with Accountants on Accounting
                   and Financial Disclosure.................................  24

ITEM 8a. Controls and Procedures............................................  24

ITEM 8b. Other Information..................................................  25

                                    PART III

ITEM 9.  Directors, Executive Officers, Promoters and Control Persons;
                  Compliance with Section 16 (a) of the Exchange Act........  25

ITEM 10. Executive Compensation.............................................  27

ITEM 11. Security Ownership of Certain Beneficial Owners and Management.....  28

ITEM 12. Certain Relationships and Related Transactions.....................  29

ITEM 13. Exhibits and Reports on Form 8-K...................................  24

ITEM 14. Principal Accountant Fees and Services ............................  30

In  this  report,  the  terms  "we,"  "our"  and  "us,"  refer  to The  X-Change
Corporation  and its direct and indirect  wholly owned  subsidiaries,  including
AirGATE Technologies, Inc., which we refer to as "AirGATE."

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<PAGE>



CAUTIONARY STATEMENTS

Forward-looking statements in this report are made pursuant to the "safe harbor"
provisions of the Private Securities  Litigation Reform Act of 1933, as amended.
Actual results may differ  substantially from such  forward-looking  statements.
Forward-looking  statements include statements concerning underlying assumptions
and other  statements  that are other than  statements of historical  fact.  For
example,  words  such  as  "may,"  "will,"  "should,"  "estimates,"  "predicts,"
"potential,"   "continue,"  "strategy,"   "believes,"   "anticipates,"  "plans,"
"expects,"   "intends"   and  similar   expressions   identify   forward-looking
statements.

Forward-looking statements in this report include statements regarding:

o        our belief that our revenues will increase significantly in 2007;
o        our expectations  related to our strategic  relationships with Hitachi,
         Hexion Specialty  Chemicals,  Inc.,  Carinthian Tech Research,  SECURUS
         Technologies, Inc. and Graco Children's Products, Inc.;
o        our expectations regarding the capabilities of our products such as our
         GenuDot(TM)  System  and  the  down-hole  tool we are  developing  with
         Hexion;
o        our expectations regarding our cash needs;
o        our expectations regarding the completion of our private offering;
o        expected trends in our cost of operations, consulting expenses, general
         and administrative expenses;

Forward-looking  statements  involve  risks and  uncertainties  that could cause
actual  results  to differ  materially  from those  expressed  or implied by the
statements,  including  the risks  described  elsewhere in this report under the
heading "Risk Factors."

ITEM 1   DESCRIPTION OF BUSINESS

ORGANIZATION AND HISTORY:

The  X-Change  Corporation  was  incorporated  under  the  laws of the  State of
Delaware on February 5, 1969, and changed its domicile to the State of Nevada on
October 4, 2000. We were originally  organized to seek merger and/or acquisition
candidates.  In this respect, we have engaged in numerous transactions since our
inception.  As of June 30,  2006,  we have  disposed  of all of the  assets  and
liabilities  of  all  of  our   subsidiaries   with  the  exception  of  AirGATE
Technologies, Inc.

X-Change  Corporation  acquired  AirGATE  Technologies,  Inc, now a wholly owned
subsidiary of the X-Change  Corporation,  on July 20, 2005 for 10,000,000 shares
of the our common stock.

BUSINESS MODEL:

Our  business  model is focused on  furthering  the success of its wholly  owned
subsidiary  AirGATE   Technologies,   Inc.  AirGATE  is  a  leading  end-to-end,
solution-based company specializing in radio frequency identification (RFID) and
related wireless technologies for the  business-to-business  customer worldwide.
We are focused on RFID  products  and  services in vertical  markets that differ
from the  traditional  RFID supply  chain model.  We intend to deliver  wireless
solutions  in  selected  vertical  markets  built  around a strategy  focused on
high-value,  high-return,  recurring revenue opportunities. We believe that this
strategy will  facilitate  rapid market  penetration  and maximum  return on our
investment.

MARKET OVERVIEW:

The RFID  industry  received a significant  amount of attention  during the last
four years, partially as a result of mandates from the retail giant Wal-Mart and


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<PAGE>

the Department of Defense and the attempts of EPCglobal to develop a common RFID
standard for supply chain management.  However,  to-date businesses operating in
this sector of the RFID market have been, for the most part,  disappointing,  in
part because of technical  difficulties with the EPCglobal standard and the slow
pace of supply chain adoption of RFID from pilot to full deployment.

AirGATE is focused on RFID  applications in vertical  markets that do not depend
on RFID standards bodies, such as EPCglobal,  Wal-Mart mandates or other factors
outside our control.  We believe that the following  industries  that will drive
RFID expenditure over the next three years are:

o        healthcare and pharmaceutical;
o        retail and consumer packaged goods;
o        oil and gas;
o        automotive;
o        technology manufacturing/production.

Within these  industries,  we believe  there are four RFID  tagging  application
categories:

o        product authentication;
o        anti-counterfeiting;
o        work-in-process in the manufacturing sector;
o        high value inventory management and asset tracking;
o        real-time location systems; and
o        remote sensors

REVENUE OPPORTUNITIES:

In order to exploit the various  markets,  AirGATE  explores and  researches new
technologies  for  inclusion  into our product  offerings.  The products that we
choose  will be in line  with our  vision  of total  solutions  generating  good
customer ROI and recurring revenue.

AirGATE has derived  its  historical  revenue  primarily  from RFID  application
development contracts with companies such as SECURUS  Technologies,  Inc., Graco
Children's  Products,  Inc. and Hexion Specialty  Chemicals,  Inc.  However,  we
believe  the key to our  success  is  generating  long term,  stable,  recurring
revenues.  We expect our revenue to increase  significantly during 2007 compared
to 2006 as a result of additional  development  contract-related  revenue, pilot
project revenue from potential  customers and recurring revenue from royalty and
other agreements. We expect that, during 2007, we will generate pilot project or
recurring revenue from the following opportunities:

o        a  product-authentication  system  we are  developing  using  Hitachi's
         u-Chip (pronounced mu-chip) RFID tag;
o        a down-hole tool we are developing for Hexion Specialty Chemicals, Inc.
         for use in the oil and gas exploration and development;
o        reselling  SAW-based RFID systems developed by Carinthian Tech Research
         of Austria that utilize AirGATE software and application systems;
o        a RFID-enabled system we are developing for SECURUS Technologies,  Inc.
         that  enables  SECURUS  and  correctional  facilities  to keep track of
         prisoners' collect telephone calls; and
o        a child safety seat we are  developing for Graco  Children's  Products,
         Inc., a Newell Rubbermaid company.

PRODUCT  AUTHENTICATION  -  HITACHI  U-CHIPS  AND OUR  GENUDOT(TM)  SYSTEMS.  In
February  2007,  we  announced  our new GenuDot  System,  a  RFID-based  product
authentication  system that  utilizes  the u-chip  provided by Hitachi  America,
Ltd., a subsidiary of Hitachi, Ltd., as well as high frequency,  standards-based


                                       4
<PAGE>

RFID tags.  This system  will  provide  authentication  and chain of custody for
branded items,  critical parts,  consumer goods and  pharmaceuticals  subject to
counterfeiting and diversion,  and high-value  documents,  such as premier event
tickets,  using  Hitachi's  u-chip  RFID tag and  AirGATE-developed  readers and
database. We currently have a prototype of the GenuDot System and expect initial
commercialization in June 2007.

The GenuDot System is targeted at businesses and  organizations  in a variety of
industries subject to counterfeiting  and product diversion,  including casinos,
pharmaceutical  companies,  companies  that rent and sell DVDs, CDs and computer
games, collectors of antiques and memorabilia, companies that use loyalty cards,
companies  involved in event  ticketing and other  industries.  Based on reports
from IBM and Texas Instruments, the addressable product authentication market is
estimated  to  exceed  $650  billion   worldwide   and  is  estimated  to  be  a
multi-billion dollar market in the United States alone.

The GenuDot system is based on secure  technology and the Hitachi  mu-chip,  the
world's  smallest  RFID tag.  Unlike  other RFID  tags,  it cannot be cloned and
operates at 2.45 GHz., a worldwide frequency. Each tag carries its own ID unique
to the GenuDot solution. We expect that:

o        GenuDot will also  support ISO 14443 tags at 13.56 MHz. for  additional
         flexibility  and  application;
o        the GenuDot  system will provide an  end-to-end,  highly secure product
         authentication solution that includes readers, software and a database;
o        the GenuDot System  readers will be intelligent  and able to operate in
         standalone  or  network  ready  mode with  automatic  provisioning  and
         recovery after power or network failure;
o        that all readers will include an integrated two line display for visual
         authentication.

The  ScanCheck(TM)  100 is the basic standalone  reader;  the ScanCheck 200 is a
desktop reader that can operate standalone or as a member of a network without a
controller; and the ScanCheck 500 is a battery-operated handheld with all of the
features of the intelligent desktop unit. The feature-rich  ScanCheck Server can
manage up to 2,500 ScanCheck  readers with complete  configuration  and database
support. All units feature user-friendly  drag-and-drop interfaces and AirGATE's
Global Authentication Protocol(TM).

We  anticipate  that a  significant  portion of our 2007 revenue will be derived
from our relationship  with Hitachi through our GenuDot System. We are currently
discussing this opportunity with several potential customers.

OIL  AND  GAS  APPLICATIONS-  HEXION.  We  are  working  with  Hexion  Specialty
Chemicals,  Inc. to develop a unique  down-hole  tool designed to operate in the
extreme temperature of the well borehole  environment.  We expect the tool to be
used to evaluate and improve production in oil and gas wells, including both new
and  previously  drilled  wells.  We have a prototype of this product and expect
initial  commercialization in July 2007. When the product is complete, we expect
Hexion to market  and sell the  product to its  customers.  Our  agreement  with
Hexion  provides  that  we  will  receive  a 7.5%  royalty  on  each  use of the
technology  by  Hexion  customers  for a period  of  seven  years  from  date of
commercialization,  and we also expect to receive compensation for analyzing the
data produced.  In addition to development  revenue  related to the  arrangement
described  above,  we expect to generate  royalty income revenue from our Hexion
relationship during 2007.

SURFACE ACOUSTIC WAVE (SAW) TECHNOLOGY - CARINTHIAN TECH RESEARCH OF AUSTRIA. We
are the  exclusive  North  American  SAW system  reseller  for  Carinthian  Tech
Research  of  Austria.  The basic  SAW  device is a thin  metal  film  structure
deposited on top of a piezoelectric crystal substrate with no power supplies. It
reflects  radio  signal  based on the  pattern  etched onto its  surface.  These
reflections  can be de-coded  into data.  In addition to RFID,  SAW devices make
very accurate  temperature  sensors. The devices work well in harsh environments
as well as in the  presence  of liquid  and  metals.  We are one of a handful of
companies  delivering SAW RFID systems for harsh  environments,  long read range
and temperature  sensing.  We have delivered  development  systems to Intel, 3M,
NASA-Johnson  Space Center,  Weatherford  International and the U.S. Navy, among
others.  We expect to  generate  revenue  from  resale of these SAW  development
systems and commercialization of some of these development  opportunities during
2007.



                                       5
<PAGE>

LAW ENFORCEMENT - SECURUS  TECHNOLOGIES,  INC. We have an agreement with SECURUS
Technologies,  Inc.  under which we will  provide  RFID-enabled  wrist bands for
inmates and a RFID scanner for installation  within SECURUS'  telephone systems.
The scanner reads the inmate  identification  from the inmate  wristband  when a
collect  phone call is made and  positively  identifies  the inmate  caller.  We
believe this  technology will help SECURUS  minimize  write-offs of collect call
charges. We expect to average 3(cent) to 5(cent), but not less than 1(cent), per
phone call for SECURUS' use of this technology. SECURUS has contracts with 3,100
correctional  institutions;  managing over 120,000 phones and 20,000,000 collect
calls per month. We expect to generate royalty revenue from this relationship in
2007.

SAFETY  APPLICATIONS - GRACO CHILDREN'S  PRODUCTS,  INC. We are developing,  for
Graco Children's  Products,  Inc., a patent-pending  child safety seat that uses
RFID and other  wireless  technologies  in to  determine  the status of the seat
buckle - buckled or  unbuckled  -- on a child safety seat or booster seat when a
child is in the seat.  We have  completed  a  prototype  of the  system and have
signed an agreement  with Graco  pursuant to which we will receive a royalty for
each seat shipped with this technology.  We expect to generate revenue from this
arrangement in 2007.

STRATEGIC RELATIONSHIPS:

We primarily  sell and market our products  through and in  connection  with our
strategic  relationships.  AirGATE has dedicated  significant time and resources
during the last two years to developing and establishing strategic relationships
with  participants  in the oil and gas,  retail,  government  and  manufacturing
industries. Our marketing strategy with these potential relationships focuses on
our ability to offer customized  closed loop solutions that are not as dependent
on global industry  trends,  such as the Wal-Mart RFID  initiative.  Also, these
closed-loop  applications frequently involve complementary  technologies in SAW,
mu-chip,  and wireless 802.15.4 (Zigbee) sensor networks in addition to RFID. We
believe that these additional  technologies  reduce AirGATE's sole dependence on
RFID and expand AirGATE's  application solution base and intellectual  property.
Our strategic partners benefit from the extensive capital,  time and effort that
we have invested to develop the technical expertise,  industry relationships and
operational  infrastructure to deliver these solutions to our customers' base of
potential  users. Key strategic  relationships  include our  relationships  with
Hexion, Hitachi,  Carinthian Tech Research,  SECURUS and Graco. AirGATE attempts
to  obtain  the  most  preferential  contract  and be the  preferred  technology
provider with each of its strategic relationships.

The sales  cycle to initial  revenues  from  these  strategic  relationships  is
typically  three to six months.  AirGATE's  business  development  personnel and
senior  executives  are involved in the  solicitation  and  development of these
relationships  and the sales and  promotion  of AirGATE's  solutions  within the
targeted vertical markets. The sales process ranges from an initial introduction
to our products and solutions,  to execution of a master contract  governing our
relationships  to  continued  growth of the  relationship  leading to  recurring
revenue streams for AirGATE.

SALES AND MARKETING:

We expect to work closely with Hitachi on the sales and marketing of the GenuDot
system. We believe that Hitachi's reputation and relationships will increase our
visibility and  credibility.  Eventually,  we plan to use channel  relationships
such as IBM Global  Services,  EDS and  Accenture to handle sales of the GenuDot
system to large  organizations,  although we do not currently  have any of these
relationships.  We expect  that these  channel  relationships  would also manage
deployment of our GenuDot  system to large  organizations.  We also are directly
marketing  the  Carinthian  Tech  Research  SAW systems  that we resell.  We are
currently  "seeding" the market with development  systems,  and we have provided
these systems to potential clients such as NASA-Johnson  Space Center,  the U.S.
Navy and  Weatherford  International.  We believe  that any one of these  seeded
development  systems,   when  commercialized,   could  represent  a  significant
opportunity.  We expect that Hexion, SECURUS and Graco will manage the sales and
marketing of our oil and gas applications, law enforcement technology and safety
applications, although there are no contractual obligations requiring them to do
so.



                                       6
<PAGE>

INTELLECTUAL PROPERTY:

We are currently involved in several research and development  projects with our
strategic  relationships  that we believe  will result in  patented  technology.
Because of our  strategic  partners,  we generally  expect that we will transfer
ownership of these patents and the related  technology to the strategic partner,
as we have done in  connection  with our  relationships  with  Hexion and Graco.
However,  we  typically  expect  to  retain a royalty  free  license  to use the
co-developed technology outside of each partners' exclusive market.

We have also  invested in building the  "AirGATE"  trade name and product  trade
name,  which  we  expect  to  use  as a  co-branding  tool  with  our  strategic
relationships.

EMPLOYEES:

As of March  30,  2007  AirGATE  has 12  employees.  None of the  employees  are
represented  by a labor union,  and we consider our relations with our employees
to be good.  Our ability to achieve our  financial  and  operational  objectives
depends,  in large part, upon the continued service of its senior management and
key  technical  personnel  and  continuing  ability to attract and retain highly
qualified technical and managerial personnel.

COMPETITION AND COMPETITIVE ADVANTAGE:

We have a number of  competitors.  In the  wireless  authentication  market,  we
compete with Texas Instruments'  Authentication Products,  Authentix and others.
In the down-hole tool market,  we compete with other  providers of solutions for
improving production techniques,  including Pinnacle, Schlumberger and providers
of micro-seismic technology. In the SAW technology market, we compete with other
providers of SAW technology,  including RFSaw,  Inc. and Siemens.  Some of these
competitors have longer operating histories and significantly greater financial,
technical,  marketing and other  resources  than we have.  As a result,  some of
these  competitors  are able to devote  greater  resources  to the  development,
promotion, sale and support of their products. In addition, consolidation in the
RFID industry could intensify the competitive pressures that we face by creating
more formidable competitors.  Many of our existing and potential competitors may
be better positioned to acquire other companies, technologies or products.

AirGATE's major competitive advantage is its technical expertise in RF, wireless
and RFID  application  development and  integration.  We believe we have built a
solid reputation  within vertical  industries.  AirGATE has assembled a superior
management  and  development  team with  decades  of  business  and  engineering
experience in the telecom,  wireless and database industries. We have a "can do"
corporate   philosophy  that  attracts  clients  seeking   difficult   technical
solutions.  This is validated by the strategic  relationships we have developed,
such  as our  relationships  with  Hexion  Specialty  Chemicals,  Inc.,  SECURUS
technologies, Inc., Graco Children's Products, Inc. and Hitachi America, Ltd.

MANUFACTURING:

AirGATE's expertise is in proof of concept, prototype and commercialization.  We
expect to rely on third parties for virtually all manufacturing and sub-assembly
related to our solutions.

REGULATORY

Our RFID technology is subject to governmental  regulatory  agency approval from
agencies  such as the  Federal  Communications  Commission,  the  Transportation
Security  Administration and the Food and Drug  Administration.  The reliance on
certain  regulatory  approvals  may affect the adoption  rate of our products or
require  design  changes,   and  could  adversely  affect  our  product  release
schedules.  For  example,  before we sell our  GenuDot  System,  we will need to
obtain  clearance  of the  readers  included  in this  system  from the  Federal
Communications  Commission, a process that we think will take less than a month.
When we begin  marketing and selling our products  overseas,  such as in Europe,
the related foreign requirement may be even more onerous.




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<PAGE>

ITEM 1A  RISK FACTORS

An investment in our common stock is highly speculative,  involves a high degree
of risk,  and should be made only by investors  who can afford a complete  loss.
You should  carefully  consider the following  risk  factors,  together with the
other  information  in this report,  including our financial  statements and the
related  notes,  before you decide to buy or continue to hold our common  stock.
Our most significant risks and uncertainties are described below;  however, they
are not the only risks we face. If any of the following  risks  actually  occur,
our business,  financial condition, or results of operations could be materially
adversely affected,  the trading of our common stock could decline,  and you may
lose all or part of your investment therein.

WE NEED  CAPITAL  TO  AVOID  INSOLVENCY,  SUSTAIN  OUR  OPERATIONS  AND GROW OUR
BUSINESS.

We currently do not have much  liquidity,  we need capital to avoid  insolvency,
sustain our  operations  and grow our business.  In the first quarter of 2007 we
started the process to raise up to $6 million  under a private  placement of our
common stock.  As of March 30, 2007, we had raised  approximately  $550,000.  We
have  extended our initial  deadline for closing of the offering  from March 31,
2007 to June 20, 2007 to coincide with the  registration  deadline for the stock
If we raise the full  amount,  we expect that we will have enough  liquidity  to
meet our working capital and capital  expenditure needs for at least the next 36
months.  However, this belief depends in part on our ability to meet our revenue
projections,   including  our   projection   that  our  2007  revenues  will  be
significantly  higher than our 2006 revenue.  If we do not raise the full amount
of the offering,  if we are not able to meet our revenue projections,  or if our
capital needs change, we may need to raise additional  capital.  Funding may not
be available on favorable terms, if at all. If we run out of capital, there is a
chance that we could become  insolvent  and our financial  obligations  could be
accelerated.  Alternatively,  even if we do not become insolvent,  we may not be
able to obtain  capital  necessary to grow our business,  which could  adversely
affect our ability to meet our financial objectives.

OUR  NEAR-TERM  FINANCIAL  PERFORMANCE  DEPENDS ON THE SUCCESS OF OUR  STRATEGIC
RELATIONSHIPS  WITH HITACHI AMERICA,  LTD.;  HEXION SPECIALTY  CHEMICALS,  INC.;
CARINTHIAN  TECH RESEARCH;  SECURUS  TECHNOLOGIES,  INC.;  AND GRACO  CHILDREN'S
PRODUCTS, INC.

We expect our revenue to increase  significantly  during 2007  compared to 2006.
However,  this expectation depends, in large part, on the success of our various
strategic relationships during 2007.

OUR  DEPENDENCE  ON HITACHI  AMERICA,  LTD. In February  2007 we  announced  our
GenuDot System, an authentication system that incorporates  Hitachi's u-chip. We
expect to generate a  significant  portion of our 2007 revenue  through sales of
these  GenuDot  Systems.  However,  although we have a prototype  of the GenuDot
System  completed,  we do not expect initial  commercialization  of this project
until June 2007.  Furthermore,  we  currently  do not have any  agreements  with
customers to purchase any of these GenuDot Systems,  although we are involved in
several high-level discussions with potential customers.  If and when we do sign
up customers,  even potentially large customers will probably start with smaller
purchases  and  pilot  programs  before  ramping  to more  significant  volumes.
Furthermore,  our success  depends in large part on  Hitachi's  willingness  and
ability to support its u-chip and, in particular,  our GenuDot System. If we are
unable to  generate  significant  revenue  from our GenuDot  System in 2007,  we
likely will not meet our revenue projections for 2007.  Furthermore,  increasing
revenue from our GenuDot System requires  Hitachi's support and cooperation.  If
Hitachi is unable or unwilling to scale u-chip  production to meet the projected
increased demand, our ability to meet our revenue  projections will be adversely
affected.

OUR  DEPENDENCE ON HEXION  SPECIALTY  CHEMICALS,  INC. We also have an agreement
with  Hexion  Specialty   Chemicals,   Inc.  related  to  an  underground  radar
transceiver  tool for the oil and gas  drilling  industry.  We expect  Hexion to
market  and sell  the tool to its  customers  and that we will  receive  royalty
payments in connection with these sales.  However,  although we have a prototype
of this tool, we do not expect initial  commercialization of the unit until June
2007. Any delays in initial  commercialization could adversely affect the amount
of 2007 revenue we generate  from this  relationship.  Furthermore,  there is no
assurance that Hexion will aggressively  market and sell our transceiver tool or


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<PAGE>

that it will allocate sufficient  resources to the product that will include our
transceiver  tool. Also,  Hexion may terminate its agreement with us at any time
upon  six  months  notice.   If  revenue   generated  royalty  from  our  Hexion
relationship  does not  meet  our  expectations,  our  ability  to meet our 2007
revenue projections will be adversely affected.

OUR  DEPENDENCE  ON CARINTHIAN  TECH RESEARCH OF AUSTRIA.  We expect to generate
revenue  in 2007 by  reselling  SAW-based  RFID  systems  in North  America  for
Carinthian Tech Research, an Austria-based  company.  Although we have delivered
deployment  systems to several  potential  customers,  we have not yet generated
significant  revenue from this relationship.  There is no assurance that we will
be able to  effectively  market  and sell  Carinthian's  systems  in the  United
States. If revenue generated from our relationship with Carinthian does not meet
our  expectations,  our  ability to meet our 2007  revenue  projections  will be
adversely  affected.   Furthermore,  even  if  demand  for  SAW-based  solutions
increases  rapidly,  we rely on Carinthian to provide these  solutions to us. If
Carinthian  is unable to scale its  production  to meet  increased  demand,  our
ability to meet our revenue projections may be harmed.

OUR DEPENDENCE ON SECURUS  TECHNOLOGIES,  INC. We expect to generate  revenue in
2007 from our agreement with SECURUS Technologies, Inc. Under this agreement, we
are to provide  RFID-enabled wrist bands for inmates and related scanners to use
within SECURUS' telephone  systems,  and we expect to generate recurring revenue
from use of the wrist bands and scanners by SECURUS customers.  However,  we are
still  developing  this  product,  and there is no  assurance  that SECURUS will
deploy this system within their  telephone  network in 2007 and  thereafter.  If
revenue  generated  from  our  relationship  with  SECURUS  does  not  meet  our
expectations, our ability to meet our 2007 revenue projections will be adversely
affected.

OUR DEPENDENCE ON GRACO CHILDREN'S PRODUCTS,  INC. We expect to generate revenue
in 2007 from the child safety seat  technology that we are developing for Graco.
However, the magnitude of this revenue depends on the number of child seats that
Graco sells that include the technology we are developing. Graco is not required
to include our  technology in its seats and, if it does include the  technology,
there are no  assurances  that the safety  seats  will sell in volumes  that are
sufficient to generate  meaningful revenue for us. If revenue generated from our
relationship with Graco does not meet our expectations,  our ability to meet our
2007 revenue projections will be adversely affected.

WE WILL NOT BE  SUCCESSFUL  UNLESS THERE IS  WIDESPREAD  ACCEPTANCE  OF RFID AND
OTHER WIRELESS TECHNOLOGIES IN THE VERTICAL MARKETS WE ARE TARGETING.

We are  targeting  several  markets  where  the use of RFID and  other  wireless
technologies  is  relatively  new.  If these  markets do not  embrace  these new
technologies  as  rapidly  as we  expect,  our  ability  to meet  our  financial
objectives, both in 2007 and beyond, will be adversely affected.

AUTHENTICATION  APPLICATIONS.  We  believe  we have a  significant  opportunity,
through our GenuDot  System,  to  capitalize on the market's need for secure and
reliable  authentication  technology.   However,  there  is  no  assurance  that
potential  customers,  such as casinos,  pharmaceutical  companies and companies
that rent or sell DVDs, CDs and computer  games,  will pursue RFID strategies to
meet  their  authentication   needs.  These  customers  may  believe  that  RFID
technology is either too complex or too expensive to meet their  objectives  and
may  decide  that  the  status  quo  or   alternative   technologies   are  more
cost-effective.  If  potential  customers  do not  embrace  RFID  authentication
strategies  as rapidly or to the extent that we expect,  our ability to meet our
financial objectives will be harmed.

OIL AND GAS INDUSTRY.  Through our relationship with Hexion Specialty Chemicals,
Inc., and through our efforts to resell the SAW-based systems of Carinthian Tech
Research, we depend on acceptance of RFID technology in some segments of the oil
and gas industry.  For instance,  through our relationship  with Hexion,  we are
developing an oil and gas exploration  and production  product that will be used
by oil and gas operators  attempting to assess the feasibility of their drilling
activity.  However,  there is no  assurance  that our  technology  will  produce
benefits  to these  operators  that  are  significant  enough  to  generate  the
attention we expect.  Even if our technology does produce the expected benefits,


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<PAGE>

there is no assurance that cheaper or more effective alternate technologies will
not be developed.  If the oil and gas industry does not adopt our  technology as
quickly  or to the  extent  that we expect,  our  ability to meet our  financial
objectives will be harmed.

SAW  TECHNOLOGIES.  We expect to generate  revenue by reselling  Carinthian Tech
Research's  SAW-based  RFID  systems  in  North  America.  We  believe  that SAW
technology has several advantages  compared to chip-based RFID systems,  such as
longer read ranges and the ability to function in proximity to metal and liquid.
However,  there is no assurance  that potential  customers will adopt  SAW-based
solutions  on a  widespread  basis  or  that,  if  they  do,  they  will  choose
Carinthian's  solutions.  In  this  case,  our  ability  to meet  our  financial
objectives will be harmed.

LAW  ENFORCEMENT.   We  are  developing  a  system  that  includes  RFID-enabled
wristbands and third party manufactured scanners for SECURUS Technologies,  Inc.
to help track collect phone calls made by  prisoners.  To generate  revenue from
this arrangement,  we need SECURUS to include our technology in their network of
prison-based telephones. However, there is no assurance that SECURUS' customers,
which are primarily prisons and similar institutions, will demand our technology
or that SECURUS will effectively  market our technology to its customer base. As
a result, our revenues from this arrangement could be less than we expect, which
would adversely affect our ability to meet our financial objectives.

SAFETY  APPLICATIONS.  We are developing  wireless technology for a child safety
seat for Graco Children's Products,  Inc. that indicates whether a safety buckle
is fastened. The success of this product depends on both Graco's willingness and
ability to market and sell it as well as customers'  willingness  to pay for the
additional  safety we believe  this  feature  provides.  If this  feature is not
adopted as quickly as we expect,  our ability to meet our  financial  objectives
will be harmed.

WE EXPECT THAT ALMOST ALL OF OUR PROJECTED 2007 RECURRING REVENUE WILL RELATE TO
PRODUCTS UNDER DEVELOPMENT THAT WE HAVE NOT YET SOLD IN VOLUME TO CUSTOMERS.  AS
A RESULT,  WE HAVE LIMITED  VISIBILITY  REGARDING THE LENGTH OF OUR SALES CYCLE,
WHICH MAKES PROJECTING  REVENUE  DIFFICULT AND COULD OTHERWISE  ADVERSELY AFFECT
OUR BUSINESS.

Based on the limited sales history for our products, we are not certain what the
length of the sales cycle will be for our  products.  For  instance,  we believe
there will be significant demand for our RFID  authentication  system,  GenuDot,
with casinos,  pharmaceutical  companies,  high value consumer goods  companies,
ticketing  operations  and  companies  that rent or sell DVDs,  CDs and computer
games, and we have begun  conversations with several of them. However, we do not
expect initial commercialization of this product until June 2007, and we are not
certain how long it will take to convert  these  conversations  in to meaningful
orders of the  magnitude  that will drive the kind of  revenue we expect.  It is
especially difficult to forecast sales cycle durations for new products, such as
our GenuDot System.  Because so much of our projected recurring revenue for 2007
relates to new products, many of which we are still developing,  forecasting our
2007  revenues  is  especially  difficult.  A number of  factors  can make these
decisions  take longer than we expect,  including  technical  evaluations of the
products by our  customers  and efforts to educate our customers on the uses and
benefits of RFID  technology.  In anticipation  of product orders,  we may incur
substantial  costs  before the sales cycle is complete  and before any  customer
orders or payments are received.  Our uncertainty  about the sales cycle for our
products,  particularly  our GenuDot System,  makes projecting our 2007 revenues
difficult and could otherwise adversely affect our business.

OUR SUCCESS DEPENDS ON OUR ABILITY TO GENERATE RECURRING REVENUE STREAMS,  WHICH
DEPENDS IN LARGE PART ON OUR ABILITY TO SCALE OUR SALES AND MARKETING EFFORTS.

We believe  our long term  success  depends on our  ability to begin  generating
significant  recurring  revenue from our  strategic  relationships  with Hitachi
America,  Ltd., Hexion Specialty Chemicals,  Inc.,  Carinthian Tech Research and
others.  Historically,  we have derived most of our revenue from  development of
vertical  market RFID systems.  In order to grow the  business,  we must add new
customers  for  our  RFID  products,  in  particular  for  our  GenuDot  product
authentication system. The ability to attract new customers will depend in large
part on the  success  of our  sales  and  marketing  efforts  and the  sales and
marketing  efforts of our strategic  relationships.  To be  successful,  we must


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<PAGE>

market  and sell  our  GenuDot  System  to a  variety  of  potential  customers,
including casinos and  pharmaceutical  companies.  If we are unable to scale our
sales and  marketing  efforts  quickly,  or if our strategic  relationships  are
unable or unwilling to scale their sales and  marketing  efforts  related to our
products, we may not be able to sell our products in significant volumes and our
ability to meet our financial goals could be adversely affected.

YOU MAY NOT BE ABLE TO RESELL YOUR COMMON  STOCK AT A PRICE YOU WOULD LIKE OR AT
ALL.

The  trading  volume of our common  stock is  relatively  light,  which may make
reselling  significant  blocks of our stock without driving down our stock price
difficult.   In  addition,   our  stock  price  has  been   extremely   volatile
historically, and we expect this volatility to continue, which could affect your
ability to sell your shares at the price you expect.

THE  VOLATILITY  OF OUR STOCK PRICE  COULD  SUBJECT US TO AN  INCREASED  RISK OF
SECURITIES LITIGATION.

In the past,  following  periods of  volatility  in the  overall  market and the
market  price of a  particular  company's  securities,  securities  class action
litigation has often been instituted  against these companies.  This litigation,
if  instituted,  could  result  in  substantial  costs  and a  diversion  of the
management's attention and resources.

THE MARKET IN WHICH WE  OPERATE IS HIGHLY  COMPETITIVE,  WHICH  COULD  ADVERSELY
AFFECT OUR ABILITY TO MEET OUR FINANCIAL OBJECTIVES.

We have a number of  competitors.  In the  wireless  authentication  market,  we
compete with Texas Instruments,  Authentication Products,  Authentix and others.
In the down-hole tool market,  we compete with other  providers of solutions for
improving production techniques,  including Pinnacle, Schlumberger and providers
of micro-seismic technology. In the SAW technology market, we compete with other
providers of SAW technology,  including RFSaw,  Inc. and Siemens.  Some of these
competitors have longer operating histories and significantly greater financial,
technical,  marketing and other  resources  than we have.  As a result,  some of
these  competitors  are able to devote  greater  resources  to the  development,
promotion, sale and support of their products. In addition, consolidation in the
RFID industry could intensify the competitive pressures that we face by creating
more formidable competitors.  Many of our existing and potential competitors may
be better positioned to acquire other companies, technologies or products.

OUR CURRENT  FINANCIAL  POSITION MAY DETER  POTENTIAL  CUSTOMERS  AND  STRATEGIC
RELATIONSHIPS.

We  currently  do not have much  liquidity.  This  problem may be  minimized  by
current efforts to raise additional funding in our private placement. Even if we
are able to raise  additional  funding,  however,  the  large  corporations  and
organizations  that we view as potential  customers and partners,  such as large
casinos and pharmaceutical  companies,  may be hesitant to enter into agreements
with us because of our financial  position.  If these large potential  customers
and  partners  avoid  us,  our  ability  to meet  our  financial  goals  will be
significantly and adversely affected.

WE HAVE A HISTORY OF LOSSES, EXPECT TO INCUR ADDITIONAL LOSSES IN THE FUTURE AND
MAY NOT BE ABLE TO ACHIEVE OR SUSTAIN PROFITABILITY.

We have experienced operating losses in the past and expect to continue to incur
additional  operating  losses in the near  future.  We  incurred  net  losses of
$73,823  in  2004,  $363,511  in  2005  and  $941,027  in  2006,  and  we had an
accumulated  deficit of $1.974  million at  December  31,  2006.  Our ability to
achieve or sustain  profitability is based on a number of factors, many of which
are discussed in these risk factors. We may never be able to generate sufficient
revenues to achieve or sustain  profitability on a quarterly or annual basis. We
continue to have significant  operating expenses and expect to continue to incur
sales and  marketing,  product  development  and  administrative  expenses as we
attempt  to grow our  business.  This  continued  spending  will have an adverse
impact on the operating  results if the net revenues do not grow sufficiently to


                                       11
<PAGE>

cover  the  expenditures.  If  demand  for  our  products  and  systems  do  not
materialize or if we fail to manage our cost  structure,  our ability to achieve
profitability will be adversely affected.

WE WILL LIKELY NEED TO ENTER INTO ADDITIONAL STRATEGIC RELATIONSHIPS TO MEET OUR
CUSTOMER NEEDS.

We believe  that, if demand for our GenuDot  Systems  increases as quickly as we
expect,  at  some  time  during  2008  we may  need to  enter  into a  strategic
relationship with a company such as IBM Global Inc., Accenture, Bearing Point or
Unisys to help us provide GenuDot  Systems to our customers,  although we do not
anticipate that any such  relationship will be necessary for 2007. There are not
assurances that we will be able to locate a strategic relationship on acceptable
terms, or at all. Furthermore,  we will rely on any such third party to meet our
customers'  needs,  and the third party's  performance  will be, to some extent,
outside  of our  control.  If we are  unable to locate  an  effective  strategic
relationship on acceptable  terms, we may not be able to scale growth of revenue
related to our GenuDot Systems as quickly as we expect.

TO MEET OUR FINANCIAL OBJECTIVES, WE MUST GROW RAPIDLY.

Meeting  our 2007  revenue  objectives  will place a  significant  strain on our
internal resources.  For instance, we are forecasting  significant growth in the
sales of our recently introduced GenuDot Systems for authentication. Meeting our
revenue  objectives for these systems will require a significant amount of sales
and  marketing  effort.  We have  recently  hired  personnel  to help drive this
business growth, and we believe we will need to hire additional  personnel.  Our
projected growth will require  significant  additional  resources.  There are no
assurances  that  resources  will be available when we need them or that we will
have sufficient  capital to fund potential resource needs. If we do not grow our
internal  resources,  we will not be able to drive  demand for our  products and
systems, develop new products and strategic relationships or meet the demands of
our customers.

IF WE ARE  UNABLE TO  MANAGE  THIS  GROWTH,  WE COULD  INCUR  COSTS  THAT  COULD
ADVERSELY AFFECT OUR OPERATING RESULTS AND FINANCIAL CONDITION.

To  manage  growth   effectively,   we  must  continue  to  improve  and  expand
infrastructure,  including  information  technology and financial  operating and
administrative  systems and controls,  and continue managing headcount,  capital
and processes in an efficient manner.  Our headcount  increased from 2 employees
at December  31,  2004,  to 7 employees at December 31, 2005 and to 14 employees
December 31, 2006. The additions  include members of senior  management,  who we
must  integrate  quickly.  Productivity  and the quality of the  products may be
adversely  affected if we do not integrate  and train new employees  quickly and
effectively and coordinate among the executive, engineering, finance, marketing,
sales,  operations and customer support  organizations,  all of which add to the
complexity of the organization and increase operating expenses. Also, we may not
be able to grow our information  technology systems at a sufficient rate to keep
up with the  processing  and  information  demands  from larger  companies.  The
efforts to continue to expand information technology systems or the inability to
do so could harm the business.

IF  WE  OVERESTIMATE  CUSTOMER  DEMAND,  WE  MAY  INCREASE  OUR  COST  STRUCTURE
UNNECESSARILY.

We expect demand for our products to grow quickly  during 2007, and we intend to
scale  our  internal  resources  and our  strategic  relationships  to meet this
projected increased demand. If the increased demand does not materialize, we may
have a cost structure that future  revenues do not support.  In this event,  our
financial results will be adversely affected.  Furthermore,  lower-than-expected
demand can result  excess  inventory  that cannot be sold,  which could harm our
financial results.



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<PAGE>

ALTHOUGH WE ARE NOT TARGETING THE SUPPLY CHAIN RFID MARKET,  PUBLIC  PERCEPTIONS
OF THE VIABILITY OF RFID APPLICATIONS IN THE SUPPLY CHAIN COULD ADVERSELY AFFECT
ACCEPTANCE OF RFID IN THE VERTICAL MARKETS WE ARE TARGETING.

The market for RFID products in the  application  areas that we are targeting is
relatively  new and, to a large  extent,  unproven.  Near-term  adoption of RFID
technology  depends in large part on large  organizations with market influence,
such as Wal-Mart and the U.S. Department of Defense, encouraging the use of RFID
technology in their supply chains.  However,  the general  perception  regarding
these  programs  is that they have not  resulted in  benefits  for supply  chain
management as quickly as the market expected when the programs where announced a
few years ago. This perception  could  adversely  affect the adoption of RFID in
the vertical  markets we are targeting,  even if those  vertical  markets do not
relate to supply chain management.  Furthermore,  if the supply chain management
objectives ultimately prove to be unworkable, this could adversely affect market
acceptance  of RFID  generally,  which would affect our  financial  performance.
Furthermore,  if a vibrant and workable supply chain  management RFID model does
not emerge,  this could have consequences for our business model.  Although,  in
the near term, we do not depend on the success of RFID in the supply  chain,  we
believe that in the long term our solutions will find more widespread acceptance
if RFID has become generally accepted in a variety of settings, including supply
chain  management.  If efforts to implement RFID  technology in the supply chain
continue to falter, the related bad publicity could adversely affect our ability
to market and sell our products.

WIDESPREAD  ADOPTION OF OUR RFID SOLUTIONS DEPENDS ON DECLINES IN SELLING PRICES
FOR RFID TAGS SUCH AS HITACHI'S U-CHIP TAG.

In many of our target markets,  adoption of RFID technology means purchasing and
deploying vast amounts of RFID tags. For instance, a casino that chose to deploy
our  GenuDot  System to combat  counterfeiting  would  likely  need to include a
Hitachi  u-Chip tag in every casino chip.  To make  economic  sense,  then,  the
per-chip price will need to be very low. Average selling prices for passive RFID
tags have  declined  rapidly in recent  years,  and we expect these  declines to
continue. For our customers to adopt our RFID solutions, we need these tag price
declines to continue.

OUR PRODUCTS ARE NEW AND  EVOLVING  AND OUR  BUSINESS  MODEL IS UNPROVEN,  WHICH
MAKES IT DIFFICULT TO EVALUATE OUR CURRENT BUSINESS AND FUTURE PROSPECTS.

We expect our 2007 revenue to grow rapidly  compared to 2006.  However,  because
the  markets we target  are new and  evolving,  it is  especially  difficult  to
predict our  revenue  growth  rate.  For  instance,  our ability to hit our 2007
revenue  target  depends  significantly  on the  development of a market for our
GenuDot  System,  on the development of the market for the down-hole tool we are
developing for Hexion and on resale of Carinthian's SAW-based products. However,
evaluating the  development  of markets for these products is difficult  because
they  are so  new.  In  the  past,  we  and  other  industry  participants  have
overestimated  the RFID market size and overall growth rates, and it is possible
that we are incorrectly  evaluating the  authentication  market,  the market for
wireless-based  down-hole tools and the market for SAW-based products. We expect
that these visibility problems will continue for the foreseeable  future.  These
factors make evaluating our prospects  difficult,  both with respect to our 2007
revenue opportunities and with respect to our prospects generally.

MOST OF OUR  PRODUCTS  ARE PART OF  LARGER  SOLUTIONS  THAT ARE  OFFERED  TO END
CUSTOMERS,  AND WE MUST WORK WITH  THIRD  PARTIES  TO ENSURE  THAT OUR  PRODUCTS
INTER-OPERATE CORRECTLY.

Almost all of our products are  components  of solutions  offered by us or third
parties  to end  customers.  For  instance,  Graco  is  incorporating  our  RFID
technology into its child safety seat, and we are incorporating Hitachi's u-Chip
into our GenuDot System.  If we are unable to work with these parties to produce
a product  that works  properly  for the end customer and to market and sell the
products effectively, our business model will not work.

IF OUR  PRODUCTS  AND  SYSTEMS  DO NOT MEET OUR  CUSTOMERS'  NEEDS OR  OTHERWISE
MALFUNCTION, OUR BUSINESS WILL BE ADVERSELY AFFECTED.

Many of our customers have demanding specifications for quality, performance and
reliability that must be met. This is particularly true in the case of the child
safety seat we are developing for Graco Children's Products,  Inc. Our customers


                                       13
<PAGE>

may discover errors,  defects, or  incompatibilities  in our products only after
they have been fully deployed and are operating under peak stress conditions. We
may also experience quality control problems with respect to these products that
are combined with or  incorporated  into products  from other  vendors,  such as
Hitachi's  u-Chip,  or that are assembled by third-party  subcontractors.  These
types of problems could adversely affect our business.  In particular,  a defect
in the  technology  related to our child safety seat could result in substantial
monetary damages,  management  distraction and bad publicity for us. Many of our
agreements  also include  obligations to indemnify our customers and vendors for
damages they incur related to flaws in our products.  Furthermore, even if we do
not have a technical indemnification  obligation, we may decide to indemnify our
customers for client relationship  reasons. The costs we incur in correcting any
product  defects or errors may be  substantial  and could  adversely  affect our
operating results.

FLUCTUATIONS IN QUARTERLY AND ANNUAL OPERATING  RESULTS MAY ADVERSELY AFFECT OUR
BUSINESS, AND THESE FLUCTUATIONS MAKE EVALUATING OUR BUSINESS DIFFICULT.

A number of factors,  some of which are described in these risk factors and many
of which are outside of our  control,  may cause or  contribute  to  significant
fluctuations  in quarterly  and annual  revenues and  operating  results.  These
fluctuations  may make financial  planning and forecasting  more  difficult.  In
addition,  these fluctuations may result in unanticipated decreases in available
cash,  which could  negatively  affect our capital  planning or cause us to miss
business  opportunities.  Also,  these  fluctuations  make  comparing  operating
results on a period-to-period basis difficult.

IF  WE  ARE   UNSUCCESSFUL  IN  DEVELOPING  AND  INTRODUCING  NEW  PRODUCTS  AND
ENHANCEMENTS, WE MAY BE UNABLE TO MEET OUR FINANCIAL GOALS.

To keep pace with technological developments, satisfy increasingly sophisticated
customer  requirements  and achieve  market  acceptance,  we have to continue to
introduce  new RFID products and services.  We commit  significant  resources to
developing  new  products  for  targeted  markets,   improving  performance  and
reliability,  and reducing  costs.  We may not be able to develop the underlying
core  technologies or processes  necessary to create new or enhanced products or
to license or otherwise  acquire  these  technologies  from third  parties.  The
success of a new or enhanced product depends on accurate  forecasts of long-term
market demand and future technological developments,  as well as on a variety of
specific  implementation factors. If we do not continue to innovate, we will not
be able to meet our financial goals.

OUR GENUDOT SYSTEM IS A CLOSED LOOP APPLICATION, MEANING IT DOES NOT COMPLY WITH
THE EPCGLOBAL  STANDARDS  AND IS NOT INTENDED TO WORK WITH THIRD PARTY  READERS.
THIS COULD ADVERSELY AFFECT MARKET ACCEPTANCE OF THE GENUDOT SYSTEM.

Our  GenuDot  System for  authentication  is a closed loop  system,  meaning the
Hitachi  u-Chip tags and the AirGATE  readers and  database  that  comprise  the
GenuDot System will not inter-operate with third party systems.  We believe that
this approach is necessary given the needs of the  authentication  market, as we
believe open systems are easier to counterfeit, undercutting the entire rational
of using RFID for authentication.  Nevertheless,  potential customers may not be
willing to invest in our GenuDot System, which will not inter-operate with third
party  solutions,  as it will entail a commitment  to our solution  that will be
difficult to reverse.  If this concern  prevents  customers from  purchasing our
GenuDot  System,  our  ability to meet our  financial  goals  will be  adversely
affected.

WE RELY ON  PATENTS,  TRADEMARKS,  COPYRIGHTS  AND TRADE  SECRETS TO PROTECT OUR
PROPRIETARY  RIGHTS,  WHICH  MAY  NOT  BE  SUFFICIENT  TO  PROTECT  ALL  OF  OUR
INTELLECTUAL PROPERTY.

Our success depends in part on protecting our intellectual  property. We rely on
a  combination  of  patent,  copyright,  trademark  and  trade  secret  laws and
confidentiality  procedures to protect our proprietary rights. We provide access
to trade secrets and other  intellectual  property to  suppliers,  customers and


                                       14
<PAGE>

contractors and otherwise as part of our business,  and may permit disclosure of
our intellectual property in some circumstances. We cannot assure that any trade
secret,  patent or registered trademark or other intellectual property we own or
license will be enforceable or will not be disclosed, invalidated,  circumvented
or otherwise  challenged in the United  States or foreign  countries or that the
related rights will provide competitive advantages or that any of its pending or
future patent  applications will be issued with the scope of the claims we seek,
if at all.  Furthermore,  others may develop  similar  products,  duplicate  our
products  or design  around  our  patents.  In  addition,  foreign  intellectual
property  laws may not  protect  our  intellectual  property  rights to the same
extent U.S.  laws do.  Litigation  may be  necessary  to enforce the patents and
other  intellectual  property rights,  protect our trade secrets,  determine the
validity of and scope of the  proprietary  rights of others,  or defend  against
claims of  infringement  or invalidity.  Litigation  could result in substantial
costs and diversion of resources that could harm our business,  could ultimately
be unsuccessful in protecting our intellectual  property rights,  and may result
in the intellectual property rights being held invalid or unenforceable.

WE DO NOT OWN SEVERAL KEY TECHNOLOGIES  THAT WE ARE DEVELOPING FOR THIRD PARTIES
SUCH AS HEXION  SPECIALTY  CHEMICALS,  INC., WHICH MAY MAKE US A LESS ATTRACTIVE
ACQUISITION CANDIDATE.

On  several  of our  development  projects,  such as the  down-hole  tool we are
developing for Hexion  Specialty  Chemicals,  Inc., we do not own the underlying
technology,  and have transferred the intellectual property to Hexion.  However,
we have a license to use it outside of Hexion's intended use.. We do not believe
this will adversely affect our business model, but it is conceivable that we may
be  considered  a  less  attractive   acquisition   candidate  because  we  have
transferred ownership of some of the technologies we are developing.

WE MAY NEED TO LICENSE  RFID-RELATED  PATENTS FROM THIRD PARTIES, AND WE MAY NOT
BE ABLE TO OBTAIN THESE LICENSES ON ACCEPTABLE TERMS, OR AT ALL.

Our business may require us to license technology,  such as patents,  from third
parties.  There are a large  number of other  companies  who hold a  significant
number of patents  related to RFID  technologies.  Although we do not  currently
believe we will need to license any of these  patents,  our  business  model may
change or our beliefs  regarding  the proper  construction  of these third party
patents may change.  If so, there is no assurance that owners of patents related
to these  technologies  will be made  available  to us in licenses  that include
reasonable  terms or at all.  Failure to obtain  licenses from owners of patents
related to RFID  technologies  on  commercially  reasonable  terms  could have a
material adverse impact on our business model.

WE MAY BECOME SUBJECT TO  INTELLECTUAL  PROPERTY  INFRINGEMENT  CLAIMS AND OTHER
LITIGATION THAT MIGHT BE COSTLY TO RESOLVE AND, IF RESOLVED ADVERSELY,  MAY HARM
OUR BUSINESS.

We are not currently a party to any litigation.  However,  we may become a party
to litigation,  patent-related and otherwise,  in the normal course of business.
Also,  we may be required to defend and  indemnify our customers and other third
parties  for  claims  of  intellectual  property  infringement  relating  to the
products  under  the  agreements  with our  distributors,  customers  and  other
partners. For instance,  provisions in agreements with Graco and SECURUS require
indemnification  if the validity of  intellectual  property  developed for these
companies is  challenged.  Even if not  technically  required to  indemnify  our
customers or other third parties,  we may decide to do so for reasons related to
the importance of the  relationship  with these customers or third parties.  The
likelihood of these claims will increase as our business  expands.  Also, as the
number of products and  competitors in the industry grows and the  functionality
of products overlaps,  the likelihood of these claims increases.  Litigation can
be expensive,  lengthy and disruptive to normal business operations. The results
of complex  litigation  matters are  difficult to predict,  and the  uncertainty
associated  with  substantial  unresolved  lawsuits  could  harm  our  business.
Negative  developments  with respect to lawsuits  could cause our stock price to
decline.  Any  claims or  proceedings  against  us or our  indemnitees,  whether
meritorious  or not,  could be time  consuming,  result  in  costly  litigation,
require a significant  amount of management  time and result in the diversion of
significant operational resources. Furthermore, any claim of patent infringement
could result in significant monetary damages, which could include treble damages
for willful  infringement,  and could result in an  injunction  that prevents us
from  manufacturing  or  distributing  certain  products or  performing  certain
services.  Further, any settlement we enter into may expose us to further claims
against us by third parties  seeking  monetary or other damages  which,  even if
unsuccessful,  would divert management  attention from the business and cause us
to incur costs, possibly material, to defend such matters.



                                       15
<PAGE>

COMPLYING WITH APPLICABLE  GOVERNMENTAL  REGULATIONS  COULD ADVERSELY AFFECT OUR
ABILITY TO SELL OUR PRODUCTS AND IMPAIR OPERATING RESULTS.

Regulation  of the use of RFID  technology  in certain  markets by  governmental
agencies like the Federal Communications Commission, the Transportation Security
Administration or the Food and Drug  Administration may affect the adoption rate
of our products or require design  changes,  and the need to obtain the approval
of these agencies could  adversely  affect our product  release  schedules.  For
example,  before we sell our GenuDot System,  we may need to obtain clearance of
the readers included in this system from the Federal Communications  Commission,
a process that we think will take less than a month. When we begin marketing and
selling  our  products  overseas,   such  as  in  Europe,  the  related  foreign
requirement may be even more onerous.

WE  EXPECT TO DEPEND ON A LIMITED  NUMBER OF  SUPPLIERS  AND  ASSEMBLERS  OF OUR
PRODUCTS.

In addition to our major strategic relationships, such as our relationships with
Hitachi,  Hexion and Carinthian,  we expect to rely on other third parties.  For
instance,  we are incorporating  third  party-developed  scanners in to our RFID
systems for SECURUS,  and we will rely on third parties to provide components of
the down-hole tool we are developing with Hexion.  This reliance involves risks,
including  limited  control over the price,  timely delivery and quality of such
components.  Our suppliers and  manufacturers  may become unable or unwilling to
deliver these  components at an acceptable cost or at all. If they are unable to
fulfill their obligations properly, our ability to meet our customers' needs may
suffer.  Manufacturing  related issues of our  subcontractors may also delay the
beginning of our recurring revenue.  To date, we have experienced  manufacturing
setbacks with our SECURUS and Hexion  products that have delayed our anticipated
launch date by a few months for each of these products.

WE EXPECT TO RELY ON THIRD PARTY MANUFACTURERS.

Our business model requires that we locate quality third party  manufacturers to
construct  and  assemble  our  products.   We  have  identified  some  of  these
relationships,  such  as the  manufacturer  of  some  of the  components  of the
down-hole tool we are developing with Hexion. In late 2006, we expected to begin
installation  and receive  recurring  revenues  from  SECURUS  Technologies  for
collect phone calls made using our  RFID-enabled  prison phone system.  However,
our manufacturing subcontractor encountered problems that resulted in a delay in
delivery  of our RFID  phone  modules.  In  addition,  to  resolve  the  problem
satisfactorily required a re-design of a small part of the component. We believe
our  subcontractor  has  resolved  this  problem and we expect  SECURUS to begin
installation  in  correctional  facilities  in the  second  quarter  of 2007 and
recurring revenues to begin shortly thereafter. In addition, in 2006 we expected
to  deliver  the  first  downhole  tool to  Hexion  by April  2007.  Many of the
components of the tool are  custom-made,  and are subject to potential delays in
delivery. We will need to manage these relationships  effectively to avoid these
kinds of  problems in the future.  Although we are unable to  determine  at this
time, until our business develops further,  which of these relationships will be
material,  we do believe that, in the  aggregate,  they will be important to our
business.

IF  UNAUTHORIZED  ACCESS IS OBTAINED TO OUR  CUSTOMERS'  DATA AS A RESULT OF OUR
PRODUCTS, INCLUDING THROUGH BREACH OF SECURITY MEASURES OR UNAUTHORIZED ENCODING
OF RFID TAGS,  WE COULD BE SUBJECT TO RELATED  LEGAL  CLAIMS,  AND CUSTOMERS MAY
CURTAIL  OR STOP  THEIR USE OF OUR  PRODUCTS,  WHICH  WOULD  HARM THE  BUSINESS,
OPERATING RESULTS AND FINANCIAL CONDITION.

Security breaches, particularly security breaches related to our GenuDot System,
could expose us to  litigation  and possible  liability,  regardless  of whether
these breaches relate to products with our systems.  If the customers'  security
measures  are  breached  as a result  of  third-party  action,  employee  error,
criminal  acts by an  employee,  malfeasance  or  otherwise,  and,  as a result,
someone obtains  unauthorized  access to customer data, our reputation  could be
damaged, the business and prospects may suffer incurring significant liability.



                                       16
<PAGE>

PRIVACY  CONCERNS  RELATING  TO  ELEMENTS OF RFID  TECHNOLOGY  COULD  DAMAGE OUR
REPUTATION AND DETER CURRENT AND POTENTIAL CUSTOMERS FROM USING OUR PRODUCTS AND
SYSTEMS.

From  time to time,  concerns  have  been and are  expected  to  continue  to be
expressed about whether RFID products compromise privacy rights.  Concerns about
the collection of information,  identity theft or other privacy-related matters,
even if unfounded,  could damage our reputation and operating results, and could
delay the development of the overall RFID industry.  For example,  California is
currently considering legislation that would prohibit California public agencies
from issuing  identification  cards  containing  RFID tags.  In addition,  other
states have  considered  RFID  regulation.  As the RFID  industry  continues  to
evolve,  federal,  state,  foreign  or other  governmental  agencies  may  adopt
increased RFID regulations.  For example, the Federal Trade Commission,  or FTC,
held a workshop in June 2004 regarding the privacy issues  involved with the use
of RFID  technology,  and future  regulation  by the FTC is a  possibility.  The
European Union is also  considering  the  implications  of RFID  technology with
regard to personal data collection. We believe increased regulation is likely in
the area of  privacy,  and  laws and  regulations  applying  to the  collection,
processing  or  use  of  personal  or  consumer  information  could  affect  its
customers' ability to collect and use data,  potentially reducing demand for our
products.

WE DEPEND ON KEY PERSONNEL, INCLUDING OUR CHIEF EXECUTIVE OFFICER, TO MANAGE OUR
BUSINESS  EFFECTIVELY.  IF WE ARE UNABLE TO HIRE,  RETAIN OR MOTIVATE  QUALIFIED
PERSONNEL, WE WILL HAVE TROUBLE MEETING OUR FINANCIAL GOALS.

Our success depends on our key employees,  including our chief executive officer
and key  technical  personnel,  and the  ability  to attract  and retain  highly
skilled  personnel.  The loss of the services of any of our key  personnel,  the
inability to attract or retain qualified personnel, or delays in hiring required
personnel,  particularly finance, engineering, sales or marketing personnel, may
seriously harm our business,  financial condition and results of operations. Our
chief executive  officer,  Michael Sheriff,  recently took a three-week leave of
absence for medical reasons, although he has since returned. Any future extended
absence by Mr.  Sheriff could cause  problems for our  business.  All of our key
employees may terminate their  employment at any time. We do not have key person
life insurance  policies covering any of our employees at this time. The ability
to continue to attract and retain highly  skilled  personnel  will be a critical
factor in determining whether we will be successful in the future. We may not be
successful  in  attracting,  assimilating  or retaining  qualified  personnel to
fulfill current or future needs.

COMPLYING  WITH  SECTION  404 OF THE  SARBANES-OXLEY  ACT,  WHICH  WE MUST DO IN
CONNECTION WITH OUR FINANCIAL  STATEMENTS FOR THE YEAR ENDING DECEMBER 31, 2007,
WILL ENTAIL SUBSTANTIAL COST, EXPENSE, EFFORT AND MANAGEMENT DISTRACTION.

In addition,  there is a possibility that we may identify a material weakness in
our review of our internal  controls and  procedures,  the  disclosure  of which
could affect our stock price.

IF WE FAIL TO MAINTAIN PROPER AND EFFECTIVE  INTERNAL  CONTROLS,  OUR ABILITY TO
PRODUCE ACCURATE FINANCIAL STATEMENTS COULD BE IMPAIRED.

Ensuring that we have adequate  internal  financial and accounting  controls and
procedures  in place  to help  ensure  that we can  produce  accurate  financial
statements on a timely basis is a costly and time-consuming effort that needs to
be re-evaluated  frequently.  We have in the past and may in the future discover
areas of internal  financial and accounting  controls and  procedures  that need
improvement.  We expect  significant  growth in our revenue and  expenses in the
near term. As a result, we expect to hire additional  finance personnel in order
to implement  and track our internal  controls  related to tracking this growth.
There is no  assurance  that we will be able to find  qualified  people  to fill
these positions.  Any failure to maintain that adequacy, or consequent inability
to produce accurate  financial  statements on a timely basis, could increase the
operating costs and could materially impair its ability to operate the business.
In addition,  investors'  perceptions  that internal  controls are inadequate or
that we are unable to  produce  accurate  financial  statements  may  materially
adversely affect the stock price.



                                       17
<PAGE>

UNTIL RECENTLY, NO MEMBERS OF OUR BOARD OF DIRECTORS WERE INDEPENDENT WITHIN THE
MEANING OF FEDERAL SECURITIES LAWS.

Our board of directors is comprised of our two executive officers,  Mike Sheriff
and Scott  Thompson,  neither  of which is an  independent  director  within the
meaning of federal securities laws, and David Freidman,  who joined our board of
directors in February 2007. We are currently  assessing  whether Mr. Freidman is
an independent  director,  as defined under  applicable  securities laws, and we
have not yet appointed him to, or otherwise formed, an audit committee.

THE COSTS BEING A PUBLIC COMPANY CAN BE SIGNIFICANT.

As a public company, we incur significant legal,  accounting and other expenses,
including costs associated with our public company reporting requirements.

OUR STOCK IS NOT LISTED ON A MAJOR STOCK MARKET.

Our common stock is currently  quoted on the OTC  Bulletin  Board,  as we do not
meet the listing  requirements  for the NASDAQ  Global Market or any other major
stock market in the United  States.  The listing of our stock may have an effect
on the  perception  of us  among  potential  investors,  vendors,  customers  or
acquirers and most likely adversely affects the liquidity of our shares.

IF SECURITIES OR INDUSTRY  ANALYSTS DO NOT PUBLISH RESEARCH OR REPORTS ABOUT US,
WE MAY NOT BE ABLE TO GENERATE SIGNIFICANT TRADING VOLUME IN OUR STOCK.

We do not  believe  our stock is  currently  being  followed  by any  securities
analysts.  If  analysts  do  not  in the  future  decide  to  track  our  stock,
significant trading volume may not develop.

FUTURE SALES OF SHARES BY EXISTING STOCKHOLDERS,  OR PERCEPTIONS OF THESE SALES,
COULD CAUSE THE STOCK PRICE TO DECLINE.

If existing  stockholders  sell,  or indicate an intention to sell,  substantial
amounts  of the common  stock in the public  market,  the  trading  price of the
common stock could decline.  If any of the additional shares we may sell through
our efforts to raise additional  capital or if it is perceived that they will be
sold, in the public market, the trading price of the common stock could decline.
For  example,   when  we  issued  a  press  release   announcing  that  we  were
contemplating  an offering of our shares through a private  offering,  our stock
price declined. Furthermore, as part of our private placement, we have agreed to
use  commercially  reasonable  efforts to  register  the resale of our shares of
common stock with the Securities and Exchange Commission. When this registration
is effective,  there may be additional downward pressure on our stock price from
sales by the participants in our private placement.

AVAILABLE INFORMATION

All reports we file electronically with the Securities and Exchange  Commission,
including  this annual  report on Form  10-KSB,  our  quarterly  reports on Form
10-QSB,  our current reports on Form 8-K, our proxy and  information  statements
and other  information and amendments to those reports filed,  are accessible at
no cost by contacting us. These filings are also accessible on the SEC's website
at www.sec.gov.  The public may read and copy any materials filed by us with the
SEC at the SEC's Public Reference Room at 450 Fifth Street, NW,  Washington,  DC
20549.  The public may also obtain  information for the Public Reference Room by
calling the SEC at 1-800-SEC-0330.

ITEM 2   DESCRIPTION OF PROPERTY

Our  headquarters  are  located at 710 Century  Parkway,  Allen,  TX 75013.  The
facility  encompasses  approximately  12,000 square feet and houses  development


                                       18
<PAGE>

labs, a small warehouse, sales and marketing staff, engineering staff as well as
the  administrative  staff and  executive  offices.  We entered into a long-term
lease  arrangement  for this space on November 1, 2005. We  anticipate  that our
current  location  will  be  adequate  as the  corporate  headquarters  for  the
foreseeable future.

ITEM 3   LEGAL PROCEEDINGS

On January 11, 2006, we commenced a legal action against  former  employee James
E.  Flowers,  Logix  Consulting,  Inc.  and  WaveTrac,  Inc.  in which we sought
temporary and permanent  injunctive relief and damages against the defendants as
a result of their  unlawful and malicious  breach of contract  (violation of non
disclosure  provisions);  breach of fiduciary  duty,  misappropriation  of trade
secrets  and  other   proprietary   information;   tortuous   interference  with
prospective business relationships; and conversion. As part of the legal action,
we demanded the return of 4,250,000  shares of common stock held by Mr. Flowers.
On November 15, 2006,  we reached an agreement  and mutual  general  release for
this lawsuit  pursuant to which Mr. Flowers was allowed to retain 950,000 shares
of our common  stock of  X-Change  Corporation,  and agreed to return  3,300,000
shares of our common stock to Michael Sheriff,  our Chief Executive  Officer and
President  and  Chairman of our Board of  Directors.  In addition,  Mr.  Flowers
agreed  to  indemnify  AirGATE   Technologies  and  Mr.  Sheriff  from  any  tax
consequences  as a result of this  settlement and agreed to a lock-up  agreement
relating to his shares,  which shall also remain  subject to  applicable  resale
restrictions under applicable  securities laws. The lock-up agreement limits his
sales of our common  stock on any given day to the greater of: (i) a daily total
of ten  percent  (10%) of the  average  daily  trading  volume  for the ten (10)
trading days immediately preceding the date of sale of our common stock, or (ii)
100,000 shares, per month.

ITEM 4    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters  were  subject to a vote of  security  holders  during the year ended
December 31, 2006.

                                     PART II

ITEM 5    MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Principal  Market and Sales Prices for Common Stock: As of March 30, 2007, there
were  28,534,500  shares of our  common  stock  issued  and  outstanding.  As of
December  31,  2006,  the  outstanding  shares were held of record by 164 active
shareholders.  Because  brokerage  firms hold a substantial  number of shares in
"street name" on behalf of their customers,  we are unable to estimate the total
number of  stockholders  represented  by these record  holders.  As of March 26,
2007, there were no shares of our preferred stock issued or outstanding.

Our common  stock is  currently  quoted on the OTCBB,  under the trading  symbol
"XCHC." The following  table sets forth the range of the high and low bid prices
per  share of our  common  stock as  reported  by the NASD  during  the last two
calendar years for the period indicated. Prices reported are based on quotations
between  dealers,  and do not reflect retail mark-up,  mark-down or commissions,
and may not necessarily represent actual transactions.

-------------------------------------------------------------------
                          FISCAL YEAR            FISCAL YEAR

                             2005                    2006
                             ----                    ----
-------------------------------------------------------------------
                       High         Low        High        Low
-------------------------------------------------------------------
First Quarter          $2.35       $1.26      $0.705      $0.40
-------------------------------------------------------------------
Second Quarter         $2.25       $0.48      $1.84       $0.34
-------------------------------------------------------------------
Third Quarter          $0.88       $0.25      $2.76       $1.55
-------------------------------------------------------------------
Fourth Quarter         $0.85       $0.30      $2.40       $0.71
-------------------------------------------------------------------



                                       19
<PAGE>

DIVIDENDS:  We have never paid any cash dividends on our common stock. We intend
to retain and use any future  earnings  for the  development  and  expansion  of
business and do not  anticipate  paying any cash  dividends  in the  foreseeable
future.

RECENT SALES OF UNREGISTERED SECURITIES:


         We believe that all of the  following  offerings  and sales were exempt
from the  registration  requirements of the Securities Act of 1933 under Section
4(2) thereunder.

o        In July of 2005,  we issued  10,000,000  shares of our common  stock to
         Michael Sheriff, our chief executive officer and director,  in exchange
         for the  outstanding  stock  of our  wholly  owned  subsidiary  AirGATE
         Technologies, Inc.
o        On of March 31, 2005,  we issued  100,000  shares of common stock to an
         outside investor for $1.00 per share.
o        On January 5, 2006, we issued  500,000 shares of common stock to Hexion
         Specialty  Chemical,  Inc.  in  connection  with  and  as  part  of our
         development contract with Hexion.
o        During  the first  quarter  of 2007 (up to March 30,  2007),  we issued
         770,000 shares of common stock,  770,000 warrants to purchase one share
         of common stock at $1.50 per share and 770,000 warrants to purchase one
         share of common stock at $2.00 per share to outside  investors  under a
         private placement memorandum for proceeds in the amount of $550,000.
o        The  following  shares  were  issued to  consultants  of the Company in
         consideration  of services  rendered:
         o        On January  11,  2005,  we issued  1,120,000  shares of common
                  stock;
         o        On March 31, 2005, we issued 70,000 shares of common stock;
         o        On November 11, 2005, we issued 20,000 shares of common stock;
         o        After the AirGATE  acquisition,  we issued  650,000  shares of
                  common stock to consultants of AirGATE Technologies, Inc.
         o        On January 5, 2006, we issued 10,000 shares of common stock;
         o        On May 1, 2006, we issued 30,000 shares of common stock;
         o        On June 1, 2006, we issued 40,000 shares of common stock;
         o        On June 14, 2006, we issued 12,500 shares of common stock;
         o        On June 16, 2006, we issued 100,000 shares of common stock;
         o        On July 10, 2006, we issued 30,000 shares of common stock;
         o        On August 16, 2006, we issued 30,000 shares of common stock;
         o        On September 1, 2006, we issued 30,000 shares of common stock;
         o        On October 1, 2006, we issued 30,000 shares of common stock;
         o        On October 26, 2006, we issued 200,000 shares of common stock;
         o        On November 1, 2006, we issued 30,000 shares of common stock;
         o        On December 1, 2006,  we issued 30,000 shares of common stock,
                  and
         o        On December 31, 2006, we issued 80,000 shares of common stock.

REPURCHASES OF EQUITY SECURITIES

We did not purchase any of our equity securities during 2006.

EQUITY COMPENSATION PLANS

During 2006, we issued 652,500 shares of our common stock to consultants, in the
aggregate.  These  issuances were all in exchange for services  rendered.  These


                                       20
<PAGE>

issuances were not approved by a vote of our security holders.  We may from time
to time issue additional  shares to our  consultants,  employees or directors at
the discretion of our board of directors.

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

As is common with development stage companies, we have had recurring losses from
operations  since  inception  and had a deficit at year-end.  Through  operating
revenues,  primarily from development contracts,  stockholder loans and proceeds
from the private placement of stock, we had sufficient operating capital in 2006
and through the date of filing of this report.

PLAN OF OPERATION:

Our business model is primarily  focused on furthering the success of its wholly
owned subsidiary  AirGATE  Technologies,  Inc.  AirGATE is a leading  end-to-end
solution-based company specializing in radio frequency identification (RFID) and
related wireless technologies for the  business-to-business  customer worldwide.
We are focused on RFID  products  and  services in vertical  markets that differ
from the  traditional  RFID supply  chain model.  We intend to deliver  wireless
solutions in these selected  vertical markets built around a strategy focused on
high-value,  high-return,  recurring revenue opportunities. We believe that this
strategy will  facilitate  rapid market  penetration  and maximum  return on our
investment.

We  anticipate  that  recurring  revenue  streams will begin for our SECURUS and
Hexion  products in the middle part of 2007.  Because of  manufacturing  related
issues,  this target date is later than we had originally  anticipated.  In late
2006,  we expected to begin  installation  and receive  recurring  revenues from
SECURUS  Technologies for collect phone calls made using our RFID-enabled prison
phone system. However, our manufacturing subcontractor encountered problems that
resulted in a delay in  delivery  of our RFID phone  modules.  In  addition,  to
resolve the problem  satisfactorily  required a re-design of a small part of the
component.  We believe our subcontractor has resolved this problem and we expect
SECURUS to begin  installation in correctional  facilities in the second quarter
of 2007 and recurring revenues to begin shortly thereafter. In addition, in 2006
we expected to deliver the first downhole tool to Hexion by April 2007.  Many of
the components of the tool are custom-made,  and are subject to potential delays
in delivery.  The first  commercial tool for Hexion  deployment is now scheduled
for  delivery in June or July 2007,  and we expect to deliver the second tool in
November  2007.  Recurring  revenues for our Hexion product should begin shortly
thereafter.

RESULTS OF OPERATIONS:

We had revenues of $414,203 in 2005 and  $1,154,573 in 2006. The increase in the
revenue is principally due to the growth of the  development  contracts with key
customers.  We expect revenues to increase  significantly in 2007 as a result of
additional  development  contract-related  revenue,  pilot project  revenue from
potential customers and recurring revenue from royalty and other agreements.

The cost of  operations  grew  from  $158,866,  or 38% of  revenues,  in 2005 to
$333,953 or  approximately  29% of  revenues,  in 2006 in support of the revenue
growth.  We expect our cost of operations to grow  significantly as a percentage
of our  increased  revenue  in 2007 in  support  of our  pursuit  of  additional
contract development. As the recurring revenue streams increase our margins will
increase accordingly.

Consulting  expenses  decreased slightly from $216,500,  or 52% of revenues,  in
2005 to  $199,486,  or 17% of  revenues,  in 2006.  The  decrease in  consulting
expenses  is a result of some of the  exterior  help being  brought  in-house in
2006. We expect our consulting  expenses to decrease as we continue to bring the
expertise from some of those consultants in-house.



                                       21
<PAGE>

General  and  administrative  (G&A)  expenses  grew  from  $206,016,  or  50% of
revenues,  in 2005  compared to $672,377,  or 58% of revenue,  in 2006.  The G&A
increases,  in part,  was as a result of the  added  overhead  burden  and costs
related to a full year of lease  payments  on the 12,000  square  foot  facility
which  commenced  in November,  2005.  In  addition,  we incurred  approximately
$160,000  in  legal  fees in 2006  as  compared  to only  $3,502  in  2005.  Our
professional   fees,   including   accounting   and  legal  fees,  may  increase
significantly in the future as a result of additional  development contracts and
relationships  with our customers.  In general,  we expect our G&A expenses,  in
total,  to increase in 2007.  However,  as a percentage of overall  revenue,  we
expect a significant  decrease.  Our salary expenses  increased from $347,493 in
2005 to $877,181 in 2006. As a percentage of revenue,  the percentage  decreased
from 84% in 2005 to 76% in 2006.  We  expect  that the  trend  for  salaries  to
decrease,  as  percentage  of revenue,  to continue.  In general,  we expect our
overall  expenses  to  increase  in 2007 in total.  As a  percentage  of overall
revenue, we expect a significant decrease.

Our net loss was $364,098 in 2005 and $1,035,900 in 2006.  These amounts include
the effect of discontinued operations of Curado Energy Resources,  substantially
all of the  assets of which  were sold in  November  of 2005.  Our 2005 net loss
includes a gain from  discontinued  operations  of  $207,192.  Our 2006 net loss
includes a loss on the discontinued  operations of $10,221. The remaining assets
which were included in this loss were disposed of on June 30, 2006.

LIQUIDITY AND CAPITAL RESOURCES:

During  2006 we  generated  and  used  cash  through  operating  activities  and
stockholder  loans.  As of December 31, 2006,  we continue to have a net working
capital deficit. As of December 31, 2006 we owed approximately  $809,000 against
this note which requires quarterly interest only payments.  The principle amount
of this note is due in August of 2008.

As of November 22, 2006, South Beach Live, a company owned by a shareholder, had
loaned the  Company  $60,000.  This loan is  payable  on demand  and  carries an
interest rate of 10%.

As of December 18,  2006,  Melissa CR 364 Ltd,  and a current  shareholder,  had
loaned the  Company  $60,000.  This loan is  payable  in 90 days and  carries an
interest rate of 10%.

As of  December  31,  2006 and 2005 the  balance  on  short-term  related  party
payables was $120,500 and $0 respectively. These notes were both paid in the 1st
quarter of 2007.

On February 20, 2007, we sold 22 units of our securities at an offering price of
$25,000 per unit to certain  accredited  investors  in the initial  closing of a
private  placement.  Each unit consists of 35,000 shares of our common stock,  a
warrant  to  purchase  35,000  shares  of our  common  stock at $1.50  per share
exercisable for five years and a warrant to purchase 35,000 shares of our common
stock at $2.00 per share  exercisable  for five  years.  Subject  to  subscriber
demand,  there may be one or more additional  closings before June 20, 2007. The
maximum amount that will be raised from this offering is $6,000,000. The Company
intends to use the net proceeds  from the  offering,  after  deducting the costs
associated  with the Offering,  for debt  reduction,  sales expenses and general
working  capital.  We have  agreed  to file  registration  statements  with  the
Securities  and  Exchange  Commission  by June 20, 2007  covering  the shares of
common stock and, when  exercised,  the  warrants.  We have extended our initial
deadline  for  closing of the  offering  from March 31, 2007 to June 20, 2007 to
coincide  with the  registration  deadline  for the stock.  If we raise the full
amount, we expect that we will have enough liquidity to meet our working capital
and capital  expenditure  needs for at least the next 36 months.  However,  this
belief depends in part on our ability to meet our revenue projections, including
our projection that our 2007 revenues will be significantly higher than our 2006
revenue.  If  AirGATE  does not raise the full  amount  and only  raises a small
portion,  the Company will not be able to meet its sales projections and may not
be able to fulfill existing contracts. In addition, AirGATE would be required to
severely curtail existing operations.


                                       22
<PAGE>

OFF-BALANCE SHEET ARRANGEMENTS:

The Company has no off-balance sheet arrangements.

RECENTLY ISSUED ACCOUNTING STANDARDS:

In February  2006, The FASB issued SFAS No. 155  "Accounting  for Certain Hybrid
Financial  Instruments - an amendment of FASB  Statements No. 133 and 140." This
statement  amends FASB 133,  Accounting  for  DerivativeInstruments  and Hedging
Activities and Statement and No. 140,  Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities.  The statement permits fair
value  remeasurement  for any  hybrid  financial  instrument  that  contains  an
embedded  derivative that would otherwise require  bifurcation,  clarifies which
interest  only  strips and  principal  are not  subject to the  requirements  of
Statement  133,  establishes a requirement  to evaluate  interest in securitized
financial  assets,  clarifies that  concentrations of credit risk in the form of
subordination are not embedded derivatives and amends statement 140 to eliminate
the prohibition on a qualifying special-purpose entity from holding a derivative
financial  instrument  to a beneficial  interest  other than another  derivative
financial  instrument.  The  statement is effective  for fiscal years  beginning
after September 15, 2006.  Management does not expect this statement to have any
material effect on its financial statements.

In March  2006 the FASB  issued  SFAS No.  156 "  Accounting  for  Servicing  of
Financial  Instruments - an amendment of FASB No.140,  Accounting  for Transfers
and Servicing of Financial  Instruments and Extinguishments of Liabilities.  The
statement  requires  an entity  to  recognize  a  servicing  asset or  servicing
liability  each time it undertakes an obligation to service an asset by entering
into a servicing contract,  requires all separately  recognized servicing assets
and servicing liabilities to be initially measured at fair market value, permits
an  entity  to choose  either  the  amortization  method  or fair  market  value
measurement  method  for  subsequent  measurement  periods  for  each  class  of
separately  recognized  servicing  assets and servicing  liabilities,  permits a
one-time reclassification of available-for-sale securities to trading securities
by  entities  with  recognized  servicing  rights at its initial  adoption,  and
requires  separate  presentation of servicing  assets and servicing  liabilities
subsequently measured at fair value. The statement is effective for fiscal years
beginning after September 15, 2006. Management does not expect this statement to
have any material effect on its financial statements

         In June,  2006 the FASB issued FIN 48,  "Accounting  for Uncertainty in
Income Taxes--an  interpretation of FASB Statement No. 109". This Interpretation
clarifies,  among other things,  the accounting for  uncertainty in income taxes
recognized in an  enterprise's  financial  statements  in  accordance  with FASB
Statement No. 109, Accounting for Income Taxes. This Interpretation prescribes a
recognition  threshold and  measurement  attribute  for the financial  statement
recognition and measurement of a tax position taken or expected to be taken in a
tax  return.  This  Interpretation  also  provides  guidance  on  derecognition,
classification,   interest  and  penalties,   accounting  in  interim   periods,
disclosure,  and  transition  is  effective  for fiscal  years  beginning  after
December 15, 2006.  Earlier  application is encouraged if the enterprise has not
yet issued financial statements,  including interim financial statements, in the
period the  Interpretation  is adopted.  FIN 48,  Accounting for  Uncertainty in
Income  Taxes--an  interpretation  of FASB  Statement  No. 109, is effective for
fiscal  years  beginning  after  December  15,  2006.  Earlier   application  is
encouraged if the enterprise has not yet issued financial statements,  including
interim  financial  statements,  in the period the  Interpretation  is  adopted.
Management is evaluating the financial impact of this pronouncement.

         In September  2006, the FASB issued SFAS No. 157,  "Accounting for Fair
Value  Measurements."  SFAS No.  157  defines  fair  value,  and  establishes  a
framework for measuring fair value in generally accepted  accounting  principles
and expands disclosure about fair value measurements.  SFAS No. 157 is effective
for the Company for financial statements issued subsequent to November 15, 2007.
The Company does not expect the new standard to have any material  impact on the
financial position and results of operations.



                                       23
<PAGE>

         In September 2006, the staff of the Securities and Exchange  Commission
issued Staff Accounting Bulletin No. 108 ("SAB 108") which provides interpretive
guidance  on how  the  effects  of the  carryover  or  reversal  of  prior  year
misstatements  should be considered in quantifying a current year  misstatement.
SAB 108 becomes effective in fiscal 2007. Management is evaluating the financial
impact of this pronouncement.

MANAGEMENT'S DISCUSSION OF CRITICAL ACCOUNTING POLICIES:

         Our financial  statements  are prepared in accordance  with  accounting
principles  generally  accepted in the United States.  The  preparation of these
financial  statements  requires  management to make estimates and judgments that
affect  the  reported  amounts  of assets  and  liabilities  and  disclosure  of
contingent  assets and  liabilities at the date of the financial  statements and
the reported  amounts of revenues and expenses  during the reporting  year.  The
accounting  policies discussed below are considered by management to be the most
important  to an  understanding  of  our  financial  statements,  because  their
application  places the most  significant  demands on management's  judgment and
estimates   about  the  effect  of  matters  that  are   inherently   uncertain.
Management's assumptions and estimates were based on the facts and circumstances
known at December 31, 2006,  future events rarely  develop  exactly as forecast,
and the best estimates  routinely  require  adjustment.  These policies are also
discussed in Note 1 of the Notes to Financial  Statements  included in Item 7 of
this report.

ITEM 7   FINANCIAL STATEMENTS



                                       24
<PAGE>
















                            THE X-CHANGE CORPORATION


                                       -:-

                INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS' REPORT

                           DECEMBER 31, 2006 AND 2005





















<PAGE>

                                    CONTENTS


                                                                          Page

Report of Independent Registered Public Accountants.......................F-1

Consolidated Balance Sheet
December 31, 2006 and 2005................................................F-3

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

Consolidated Statement of Stockholders' Equity
For the years ended December 31, 2006 and 2005............................F-5

Consolidated Statements of Cash Flows
For the years ended December 31, 2006 and 2005............................F-6

Notes to Consolidated Financial Statements................................F-8




















<PAGE>


--------------------------------------------------------------------------------

ROBISON, HILL & CO.                                 CERTIFIED PUBLIC ACCOUNTANTS
A PROFESSIONAL CORPORATION
                                                    BRENT M. DAVIES, CPA
                                                    DAVID O. SEAL, CPA
                                                    W. DALE WESTENSKOW, CPA
                                                    BARRY D. LOVELESS, CPA
                                                    STEPHEN M. HALLEY, CPA


               REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS

The X-Change Corporation
(A Development Stage Company)

We have audited the  accompanying  consolidated  balance  sheets of The X-Change
Corporation  as of December 31,  2006,  and 2005,  and the related  consolidated
statements of operations,  and cash flows for the years ended December 31, 2006,
and 2005.  These financial  statements are the  responsibility  of the Company's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements based on our audit.

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 financial
statements  are free of material  misstatement.  The Company is not  required to
have,  nor were we engaged to perform,  an audit of its  internal  control  over
financial reporting.  Our audit included  consideration of internal control over
financial  reporting  as  a  basis  for  designing  audit  procedures  that  are
appropriate  in the  circumstances,  but not for the  purpose of  expressing  an
opinion on the  effectiveness  of the company's  internal control over financial
reporting.  Accordingly,  we express  no such  opinion.  An audit also  includes
examining,  on a test basis,  evidence supporting the amounts and disclosures in
the  financial   statements,   assessing  the  accounting  principles  used  and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects,  the financial position of The X-Change Corporation as of
December 31, 2006, and 2005 and the results of its operations and its cash flows
for the years ended December 31, 2006, and 2005, in conformity  with  accounting
principles generally accepted in the United States of America.




                                     F - 1
<PAGE>




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
financial statements, the Company has recurring losses from operations and has a
net capital  deficiency,  which  raises  substantial  doubt about its ability to
continue as a going concern.  Management's  plans in regard to these matters are
also  described  in  Note  1.  The  financial  statements  do  not  include  any
adjustments that might result from the outcome of this uncertainty


                                                      \s\ Robison, Hill & Co.
                                                      --------------------------
Certified Public Accountants
Salt Lake City, Utah
April 4, 2007































                                     F - 2
<PAGE>

                    THE X-CHANGE CORPORATION
                   CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                          For the Year Ended
                                                              December 31
                                                         2006             2005
                                                     --------------   --------------
<S>                                                  <C>              <C>
ASSETS
Current Assets:
     Cash                                                  $ 1,955          $ 5,847
     Deposits                                               15,885           10,270
     Prepaid Expenses                                       61,000                -
     Accounts Receivable                                   116,318                -
     Employee Advances                                           -              338
                                                     --------------   --------------
Total Current Assets                                       195,158           16,455
                                                     --------------   --------------

Fixed Assets
     Computer Equipment                                     36,082           12,396
     Furniture and Fixtures                                 64,845           30,174
          Less Accumulated Depreciation                    (31,918)         (11,371)
                                                     --------------   --------------
Total Fixed Assets                                          69,009           31,199
                                                     --------------   --------------

Other Assets
      Intangible Assets                                    219,180                -
      Net Assets of Discontinued Operations                      -           10,221
                                                     --------------   --------------
Total Other Assets                                         219,180           10,221
                                                     --------------   --------------

                                                     --------------   --------------
TOTAL ASSETS                                             $ 483,347         $ 57,875
                                                     ==============   ==============

LIABILITIES
Current Liabilities:
     Accounts Payable                                    $ 279,701        $ 103,253
     Accrued Expenses                                      126,699           11,414
     Checks in excess of cash                               22,491                -
     Short Term Related Party Payable                      120,500                -
                                                     --------------   --------------
Total Current Liabilities                                  549,391          114,667

Long-Term Liabilities:
     Long-Term Related Party Payable                       809,639          155,742
                                                     --------------   --------------
TOTAL LIABILITIES                                        1,359,030          270,409
                                                     --------------   --------------

STOCKHOLDERS' EQUITY (DEFICIT)
  Preferred Stock, Par Value $.001, Authorized
   10,000,000 Shares, none Issued at December 31,
   2006 and December 31, 2005                                    -                -
  Common Stock, Par value $.001, Authorized
   100,000,000 Shares, Issued 27,764,500 and
   26,712,000 at December                                   27,765           26,712
   31, 2006 and December 31, 2005
     Paid-In Capital                                     1,165,097          793,399
     Retained Deficit                                   (2,068,545)      (1,032,645)
                                                     --------------   --------------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT)                      (875,683)        (212,534)
                                                     --------------   --------------

TOTAL LIABILITIES AND STOCKHOLDERS'
                                                     --------------   --------------
EQUITY (DEFICIT)                                         $ 483,347         $ 57,875
                                                     ==============   ==============
</TABLE>

    The accompanying notes are an integral part of these financial statements

                                       F-3

<PAGE>

                            THE X-CHANGE CORPORATION
                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                   For the Year Ended
                                                                      December 31,
                                                                 2006             2005
                                                            ---------------- ----------------
<S>                                                         <C>              <C>
Revenues                                                        $ 1,154,573        $ 414,203
Costs of Operations                                                 333,953          158,866
                                                            ---------------- ----------------

   Net Operating Income                                             820,620          255,337

Expenses
   Advertising                                                       53,045           29,871
   Consulting                                                       199,486          216,500
   General & Administrative                                         672,377          206,016
   Salaries                                                         877,181          347,493
                                                            ---------------- ----------------

Net Income (Loss) from Continuing Operations                       (981,469)        (544,543)

Other Income (Expense)
   Interest Expense                                                 (44,242)         (26,942)
   Interest Income                                                       32              195

                                                            ---------------- ----------------
Total Income (Loss) from Continuing Operations                   (1,025,679)        (571,290)
                                                            ---------------- ----------------

Discontinued Operations
    Net Income (Loss) from Discontinued Operations                   (8,029)         207,192
    Loss from Disposal of Discontinued Operations                    (2,192)               -

                                                            ---------------------------------
Total Income (Loss) from Discontinued Operations                    (10,221)         207,192
                                                            ---------------------------------

     Net Income (Loss)                                         $ (1,035,900)      $ (364,098)
                                                            ================ ================

Earnings per Share from Continuing Operations                       $ (0.04)         $ (0.03)
                                                            ================ ================
Earnings per Share from Discontinued Operations                         $ -           $ 0.01
                                                            ================ ================

Weighted Average Shares Outstanding                              27,399,500       20,835,077
                                                            ================ ================
</TABLE>











    The accompanying notes are an integral part of these financial statements

                                       F-4


<PAGE>



                            THE X-CHANGE CORPORATION
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                 Preferred Stock             Common Stock
                                              Shares     Par Value       Shares       Par Value    Paid-In Capital Retained Deficit
                                            ------------------------------------------------------------------------------------
<S>                                         <C>          <C>             <C>          <C>          <C>             <C>
 Balance at December 31, 2004                        -           $ -     14,752,000      $ 14,752       $ 653,283    $ (668,547)

 Shares issued for consulting                        -             -      1,120,000         1,120          82,880             -
 Shares issued for cash                              -             -        100,000           100          99,900             -
 Shares issued for consulting                        -             -         70,000            70             930             -
 Shares exchanged for AirGate                        -             -     10,000,000        10,000        (174,424)            -
 Shares issued for consulting                        -             -        650,000           650         129,350             -
 Shares issued for consulting                        -             -         20,000            20           1,480             -
 Net Income (Loss)                                   -             -              -             -               -      (364,098)
                                            ------------------------------------------------------------------------------------

 Balance at December 31, 2005                        -             -     26,712,000        26,712         793,399    (1,032,645)

 Shares issued for consulting                        -             -         10,000            10             740             -
 Shares issued for Intangible Asset                  -             -        500,000           500         218,680             -
 Shares issued for consulting                        -             -         30,000            30           2,970             -
 Shares issued for consulting                        -             -         40,000            40           3,560             -
 Shares issued for consulting                        -             -         12,500            13           1,588             -
 Shares issued for consulting                        -             -        100,000           100          11,900             -
 Shares issued for consulting                        -             -         30,000            30           4,290             -
 Shares issued for consulting                        -             -         30,000            30          10,350             -
 Shares issued for consulting                        -             -         30,000            30          15,270             -
 Shares issued for consulting                        -             -         30,000            30          13,650             -
 Shares issued for consulting                        -             -        200,000           200          57,800             -
 Shares issued for consulting                        -             -         30,000            30          10,470             -
 Shares issued for Settlement                        -             -       (100,000)         (100)            100             -
 Shares issued for consulting                        -             -         30,000            30           6,570             -
 Shares issued for consulting                        -             -         30,000            30           5,610             -
 Shares issued for consulting                        -             -         50,000            50           8,150             -
 Net Income (Loss)                                   -             -              -             -               -    (1,035,900)
                                            ------------------------------------------------------------------------------------

 Balance at December 31, 2006                        -           $ -     27,764,500      $ 27,765     $ 1,165,097   $(2,068,545)
                                            ====================================================================================
</TABLE>

    The accompanying notes are an integral part of these financial statements

                                       F-5

<PAGE>

                            THE X-CHANGE CORPORATION
                       CONSOLIDATED STATEMENT OF CASH FLOW

<TABLE>
<CAPTION>
                                                                    For the Year Ended
                                                                        December 31,
                                                                      2006             2005
                                                              ----------------  --------------
<S>                                                           <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss)                                                $ (1,035,900)     $ (571,290)
     Adjustments to reconcile net loss to net cash
     Provided by operating activities:
Depreciation                                                           20,547           7,364
Stock Issued for Services                                             153,570         215,500
Loss on Disposal of Discontinued Operations                             8,029               -
Change in Operating Assets and Liabilities:
(Increase) Decrease in Employee Advances                                  338            (338)
(Increase) Decrease in Accounts Receivable                           (116,318)              -
(Increase) Decrease in Prepaid Expenses                               (61,000)              -
(Increase) Decrease in Deposits                                        (5,615)         (7,770)
Increase (Decrease) in Accounts Payable                               175,559          77,439
Increase (Decrease) in Accrued Expenses                               116,174          11,414
Increase (Decrease) in Short Term Note Payable                        120,500               -
                                                              ----------------  --------------

Net Cash Used in Continuing Operations                               (624,116)       (267,681)
Net Cash Used in Discontinued Operations                                2,193          22,736
                                                              ----------------  --------------

Net Cash Used in Operating Activities                                (621,923)       (244,945)
                                                              ----------------  --------------

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Computer Equipment                                        (23,686)            657
Purchase of Furniture and Fixtures                                    (34,671)        (16,174)
Purchase of Goodwill                                                        -         (10,896)
                                                              ----------------  --------------

Net Cash Provided by Investing Activities                             (58,357)        (26,413)
Net Cash Used in Discontinued Operations                                    -         169,232
                                                              ----------------  --------------

Net Cash Provided by Investing Activities                             (58,357)        142,819
                                                              ----------------  --------------

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Stock Issued                                                  -         100,000
Proceeds from Shareholder Loan                                        653,897         199,941
Checks in excess of cash                                               22,491               -
                                                              ----------------  --------------

Net Cash Provided by Financing Activities                             676,388         299,941
Net Cash Used in Discontinued Operations                                    -        (196,870)
                                                              ----------------  --------------

Net Cash Provided by Financing Activities                             676,388         103,071
                                                              ----------------  --------------

Net (Decrease) Increase in Cash                                        (3,892)            945
Cash at Beginning of Period                                             5,847           4,902
                                                              ----------------  --------------

Cash at End of Period                                                 $ 1,955         $ 5,847
                                                              ================  ==============
</TABLE>


                                       F-6



<PAGE>


                            THE X-CHANGE CORPORATION
                       CONSOLIDATED STATEMENT OF CASH FLOW
                                   (Continued)

<TABLE>
<CAPTION>
                                                                    For the Year Ended
                                                                        December 31,
                                                                    2006             2005
                                                              ----------------  --------------
<S>                                                           <C>               <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:

  Interest                                                           $ 21,450             $ -
  Franchise and income taxes                                              $ -             $ -

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING
ACTIVITIES:

Common Stock Exchanged for Services                                 $ 153,570       $ 215,500
Common Stock Exchanged for Expected
   Development Costs                                                $ 219,180             $ -
</TABLE>





























    The accompanying notes are an integral part of these financial statements

                                       F-7



<PAGE>


                            THE X-CHANGE CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         This summary of  accounting  policies for The X-Change  Corporation  is
presented to assist in understanding  the Company's  financial  statements.  The
accounting policies conform to generally accepted accounting principles and have
been consistently applied in the preparation of the financial statements.

Nature of Operations and Going Concern

         The accompanying  financial  statements have been prepared on the basis
of accounting principles applicable to a "going concern",  which assume that the
Company  will  continue in  operation  for at least one year and will be able to
realize  its assets  and  discharge  its  liabilities  in the  normal  course of
operations.

         Several conditions and events cast doubt about the Company's ability to
continue  as  a  "going  concern".  The  Company  has  incurred  net  losses  of
approximately  $2,068,545  for the period  from  October 4, 2000  (inception  of
development  stage) to December  31,  2006.  The company is  dependent  upon the
expected  cash flow of  several  ongoing  development  contracts,  and  requires
additional  financing  in order to fund its  business  activities  on an ongoing
basis.  In the first quarter of 2007 the company started the process to raise up
to $6 million  under a private  placement of its common  stock.  As of March 30,
2007, they have raised  approximately  $550,000.  If they raise the full amount,
they expect to have enough  liquidity to meet their working  capital and capital
expenditure needs for at least the next 36 months.

         The  Company's  future  capital  requirements  will  depend on numerous
factors  including,  but not limited to, their ability to perform on current and
future development contracts and the commercialization thereof.

         These  financial  statements do not reflect  adjustments  that would be
necessary  if the Company  were unable to continue as a "going  concern".  While
management  believes that the actions already taken or planned will mitigate the
adverse  conditions  and events,  which  raise  doubt about the  validity of the
"going concern" assumption used in preparing these financial  statements,  there
can be no assurance that these actions will be successful.

         If the  Company  were unable to  continue  as a "going  concern",  then
substantial adjustments would be necessary to the carrying values of assets, the
reported  amounts of its  liabilities,  the reported  expenses,  and the balance
sheet classifications used.





                                     F - 8
<PAGE>




                            THE X-CHANGE CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

ORGANIZATION AND HISTORY:

         The X-Change  Corporation was incorporated  under the laws of the State
of Delaware on February 5, 1969, and changed its domicile to the State of Nevada
on  October  4,  2000.  We  were  originally  organized  to seek  merger  and/or
acquisition   candidates.   In  this  respect,   we  have  engaged  in  numerous
transactions  since our inception.  As of June 30, 2006, we have disposed of all
of the assets and liabilities of all of our  subsidiaries  with the exception of
AirGATE Technologies, Inc.

         X-Change Corporation acquired AirGATE  Technologies,  Inc, now a wholly
owned  subsidiary of the X-Change  Corporation,  on July 20, 2005 for 10,000,000
shares of the our common stock.

Nature of Business

         The Company's  business  model is focused on furthering  the success of
its wholly owned  subsidiary  AirGATE  Technologies,  Inc.  AirGATE is a leading
end-to-end,    solution-based    company   specializing   in   radio   frequency
identification    (RFID)   and   related    wireless    technologies   for   the
business-to-business  customer  worldwide.  The Company focuses on RFID products
and services in vertical  markets that differ from the  traditional  RFID supply
chain model.  They intend to deliver  wireless  solutions  in selected  vertical
markets built around a strategy  focused on high-value,  high-return,  recurring
revenue opportunities

Principals of Consolidation

         The  consolidated  financial  statements  include the  accounts for The
X-Change  Corporation and its wholly owned  subsidiaries  AirGATE  Technologies,
Inc. The  discontinued  operations  of Curado  Energy  Resources,  Inc. are show
separately in the financial  statements.  All significant  intercompany accounts
and transactions have been eliminated

Cash and Cash Equivalents

         For the purpose of  reporting  cash flows,  the Company  considers  all
highly liquid debt  instruments  purchased with maturity of three months or less
to be cash equivalents to the extent the funds are not being held for investment
purposes.




                                     F - 9
<PAGE>




                            THE X-CHANGE CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Depreciation

         Fixed  assets  are  stated at cost.  Depreciation  is  calculated  on a
straight-line basis over the estimated useful lives of the assets as follows:

 Asset                                                  Rate
 ------------------------------------------------ -------------------
 Office equipment                                      5 years
 Furniture and Fixtures                                5 years
 Computer Equipment                                    3 years


         Maintenance  and  repairs are charged to  operations;  betterments  are
capitalized.  The  cost  of  property  sold  or  otherwise  disposed  of and the
accumulated  depreciation  thereon is  eliminated  from the property and related
accumulated depreciation accounts, and any resulting gain or loss is credited or
charged  to  income.  Depreciation  expense  for 2006 and 2005 was  $20,547  and
$6,794.

Revenue Recognition

         The  Company  generates  revenues  from  RFID  application  development
contracts. The Company recognizes revenues in accordance with the Securities and
Exchange  Commission  Staff  Accounting  Bulletin  (SAB)  number  104,  "Revenue
Recognition."  SAB  104  clarifies  application  of  U.  S.  generally  accepted
accounting  principles to revenue  transactions.  The Company recognizes revenue
when the earnings  process is  complete.  That is, when the services or products
are delivered and  collectibility  is reasonably  assured.  An allowance for bad
debt is provided  based on  estimated  losses.  The company has not recorded any
allowance as we believe that all revenue recognized is collectible.  For revenue
received  in  advance  for  goods,  the  Company  records  a  current  liability
classified as either deferred revenue or customer deposits. As of the year ended
December 31, 2006 and 2005, there was no deferred revenue.




                                     F - 10
<PAGE>


                            THE X-CHANGE CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Allowance for Doubtful Accounts

         The Company  recognizes  an allowance  for doubtful  accounts to ensure
accounts  receivable  are  not  overstated  due to  uncollectibility.  Bad  debt
reserves  are  maintained  for all  customers  based on a  variety  of  factors,
including the length of time the receivables are past due,  significant one-time
events and historical experience.  An additional reserve for individual accounts
is recorded when the Company becomes aware of a customer's inability to meet its
financial obligation, such as in the case of bankruptcy filings or deterioration
in the customer's  operating  results or financial  position.  If  circumstances
related to customers  change,  estimates of the  recoverability  of  receivables
would be further  adjusted.  As of December  31, 2006 and 2005,  the Company has
determined an allowance for doubtful accounts is not necessary.

Advertising

         Advertising  costs are  expensed as incurred.  Advertising  expense was
$53,045 and $29,871 for the years ended December 31, 2006 and 2005.

Concentrations of Credit Risk

         The  Company has no  significant  off-balance-sheet  concentrations  of
credit  risk such as foreign  exchange  contracts,  options  contracts  or other
foreign hedging arrangements.

Pervasiveness of Estimates

         The  preparation of financial  statements in conformity  with generally
accepted  accounting  principles  required  management  to  make  estimates  and
assumptions  that  affect the  reported  amounts of assets and  liabilities  and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements  and the  reported  amounts  of  revenues  and  expenses  during  the
reporting period. Actual results could differ from those estimates.

Stock Compensation for Non-Employees

         The  Company  accounts  for the fair  value of its  stock  compensation
grants for  non-employees  in accordance with FASB Statement 123. The fair value
of each grant is equal to the market price of the Company's stock on the date of
grant if an active  market  exists or at a value  determined  in an arms  length
negotiation between the Company and the non-employee.



                                     F - 11
<PAGE>




                            THE X-CHANGE CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Earnings (Loss) per Share

         Basic loss per share has been  computed  by  dividing  the loss for the
year  applicable to the common  stockholders  by the weighted  average number of
common  shares  outstanding  during  the  years.  The  effects  of common  stock
equivalents are anti-dilutive and thus are not considered.

Financial Instruments

         The  Company's  financial  assets  and  liabilities  consist  of  cash,
deposits, prepaid expenses,  accounts receivable and accounts payable. Except as
otherwise  noted, it is management's  opinion that the Company is not exposed to
significant  interest or credit risks arising from these financial  instruments.
The fair values of these financial instruments approximate their carrying values
due to the sort-term maturities of these instruments.

Income Taxes

         The Company  accounts  for income  taxes under the  provisions  of SFAS
No.109,  "Accounting  for Income  Taxes." SFAS No.109  requires  recognition  of
deferred  income tax assets and  liabilities  for the expected future income tax
consequences,  based on enacted tax laws, of temporary  differences  between the
financial reporting and tax bases of assets and liabilities.

Recent Accounting Standards

            In  February  2006,  The FASB issued  SFAS No. 155  "Accounting  for
Certain Hybrid  Financial  Instruments - an amendment of FASB Statements No. 133
and 140." This statement amends FASB 133, Accounting for Derivative  Instruments
and Hedging  Activities and Statement and No. 140,  Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities.  The statement
permits  fair value  remeasurement  for any  hybrid  financial  instrument  that
contains  an  embedded  derivative  that would  otherwise  require  bifurcation,
clarifies  which  interest  only  strips and  principal  are not  subject to the
requirements of Statement 133, establishes a requirement to evaluate interest in
securitized  financial assets,  clarifies that  concentrations of credit risk in
the form of subordination are not embedded  derivatives and amends statement 140
to eliminate the prohibition on a qualifying special-purpose entity from holding
a derivative  financial  instrument to a beneficial  interest other than another
derivative  financial  instrument.  The  statement is effective for fiscal years
beginning after September 15, 2006. Management does not expect this statement to
have any material effect on its financial statements.



                                     F - 12
<PAGE>

                            THE X-CHANGE CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Recent Accounting Standards (Continued)

         In March 2006 the FASB issued SFAS No. 156 " Accounting  for  Servicing
of Financial Instruments - an amendment of FASB No.140, Accounting for Transfers
and Servicing of Financial  Instruments and Extinguishments of Liabilities.  The
statement  requires  an entity  to  recognize  a  servicing  asset or  servicing
liability  each time it undertakes an obligation to service an asset by entering
into a servicing contract,  requires all separately  recognized servicing assets
and servicing liabilities to be initially measured at fair market value, permits
an  entity  to choose  either  the  amortization  method  or fair  market  value
measurement  method  for  subsequent  measurement  periods  for  each  class  of
separately  recognized  servicing  assets and servicing  liabilities,  permits a
one-time reclassification of available-for-sale securities to trading securities
by  entities  with  recognized  servicing  rights at its initial  adoption,  and
requires  separate  presentation of servicing  assets and servicing  liabilities
subsequently measured at fair value. The statement is effective for fiscal years
beginning after September 15, 2006. Management does not expect this statement to
have any material effect on its financial statements

         In June,  2006 the FASB issued FIN 48,  "Accounting  for Uncertainty in
Income Taxes--an  interpretation of FASB Statement No. 109". This Interpretation
clarifies,  among other things,  the accounting for  uncertainty in income taxes
recognized in an  enterprise's  financial  statements  in  accordance  with FASB
Statement No. 109, Accounting for Income Taxes. This Interpretation prescribes a
recognition  threshold and  measurement  attribute  for the financial  statement
recognition and measurement of a tax position taken or expected to be taken in a
tax  return.  This  Interpretation  also  provides  guidance  on  derecognition,
classification,   interest  and  penalties,   accounting  in  interim   periods,
disclosure,  and  transition  is  effective  for fiscal  years  beginning  after
December 15, 2006.  Earlier  application is encouraged if the enterprise has not
yet issued financial statements,  including interim financial statements, in the
period the  Interpretation  is adopted.  FIN 48,  Accounting for  Uncertainty in
Income  Taxes--an  interpretation  of FASB  Statement  No. 109, is effective for
fiscal  years  beginning  after  December  15,  2006.  Earlier   application  is
encouraged if the enterprise has not yet issued financial statements,  including
interim  financial  statements,  in the period the  Interpretation  is  adopted.
Management is evaluating the financial impact of this pronouncement.




                                     F - 13
<PAGE>


                            THE X-CHANGE CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Recent Accounting Standards (Continued)

         In September  2006, the FASB issued SFAS No. 157,  "Accounting for Fair
Value  Measurements."  SFAS No.  157  defines  fair  value,  and  establishes  a
framework for measuring fair value in generally accepted  accounting  principles
and expands disclosure about fair value measurements.  SFAS No. 157 is effective
for the Company for financial statements issued subsequent to November 15, 2007.
The Company does not expect the new standard to have any material  impact on the
financial position and results of operations.

         In September 2006, the staff of the Securities and Exchange  Commission
issued Staff Accounting Bulletin No. 108 ("SAB 108") which provides interpretive
guidance  on how  the  effects  of the  carryover  or  reversal  of  prior  year
misstatements  should be considered in quantifying a current year  misstatement.
SAB 108 becomes effective in fiscal 2007. Management is evaluating the financial
impact of this pronouncement.

NOTE 2 - INCOME TAXES

         As of December 31,  2006,  the Company had a net  operating  loss carry
forward for income tax reporting  purposes of approximately  $2,100,000 that may
be offset against future taxable income through 2026. Current tax laws limit the
amount of loss  available  to be offset  against  future  taxable  income when a
substantial  change in  ownership  occurs.  Therefore,  the amount  available to
offset future taxable income may be limited. No tax benefit has been reported in
the financial statements, because the Company believes there is a 50% or greater
chance the  carry-forwards  will expire unused.  Accordingly,  the potential tax
benefits of the loss  carry-forwards are offset by a valuation  allowance of the
same amount.

                                     2006                2005
                               ------------------  ------------------
      Net Operating Losses               714,000             340,000
      Valuation Allowance              (714,000)           (340,000)
                               ------------------  ------------------
                                               -                   -
                               ==================  ==================




                                     F - 14
<PAGE>




                            THE X-CHANGE CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)

NOTE 2 - INCOME TAXES (Continued)

         The provision for income taxes differs from the amount  computed  using
the federal US statutory income tax rate as follows:

                                                2006             2005
                                             ---------------  ---------------
 Provision (Benefit) at US Statutory Rate           352,206          123,793
 Increase (Decrease) in Valuation Allowance       (374,000)        (137,999)
 Other Differences                                   21,794           14,206
                                             ---------------  ---------------
                                                          -                -
                                             ===============  ===============

         The Company  evaluates its valuation  allowance  requirements  based on
projected future operations.  When  circumstances  change and causes a change in
management's  judgment  about the  recoverability  of deferred  tax assets,  the
impact of the change on the valuation is reflected in current income.
NOTE 3 - COMMITMENTS

         On  November 4, 2005,  The  Company  entered  into a  commercial  lease
agreement (the "Lease") with Armet Bethany Limited  Partnership (the "Landlord")
for approximately  11,400 square feet of rentable area in Bethany Tech Center at
710  Century  Parkway  in  Allen,  Texas.  The term of the  Lease  is 62  months
commencing on November 1, 2005 and ending on December 31, 2010.  The Company has
no option to extend  the  Lease.  The base rent  under the Lease is as  follows:
January 1, 2006 to December 31, 2006:  $7,600 per month;  and January 1, 2007 to
December 31, 2010:  $8,075 per month. In addition to base rent, the Company will
be responsible for certain costs and expenses specified in the Lease, including,
without  limitation,  certain  utility,  HVAC service,  insurance,  maintenance,
repair,  tax,  insurance and CAM (common area  maintenance)  costs and expenses.
Total lease expenses for 2006 and 2005 consisted of $85,681 and $22,615.




                                     F - 15
<PAGE>


                            THE X-CHANGE CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)

NOTE 3 - COMMITMENTS (Continued)

         Lease payments due on commercial  lease  agreement for each of the five
years subsequent to December 31, 2006 and thereafter are as follows:

       Year ending: Amount
            --------------------------- -------------------
                       2007                        $96,900
                       2008                         96,900
                       2009                         96,900
                       2010                         96,900
                       2011                              -
                    Thereafter                           -
                                        -------------------
                      Total                       $387,600
                                        ===================


NOTE 4 - RELATED PARTY PAYABLES

Long-term related party payables

            On August 15,  2006,  The Company  executed a  Promissory  Note with
Melissa CR 364 Ltd., a Texas Limited  Partnership  and a current  shareholder of
the Company, providing the Company with a $1,000,000 line of credit.

            Certain funds  advanced  under the note have been used to extinguish
all  existing  notes  and  accrued  interest  the  Borrowers  had  accrued  with
shareholders  through August 15, 2006. The note carries a term of 24 months with
interest  accruing at 10% per annum.  Accrued interest under the note is payable
quarterly beginning November 1, 2006, and the principal and accrued interest are
due upon expiration.  At the discretion of the Lender, the note may be converted
into  restricted  common stock of the Company at any time during the term of the
note at a  conversion  rate  equal to $0.825 per share of the  Company's  common
stock.  In addition  the note may be prepaid at any time  without  penalty.  The
balance  with  interest as of December  31,  2006 and 2005 was  $809,639  and $0
respectively.




                                     F - 16
<PAGE>


                            THE X-CHANGE CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)

NOTE 4 - RELATED PARTY PAYABLES (Continued)

Short-term related party payables

         As of  November  22,  2006,  South  Beach  Live,  a company  owned by a
shareholder,  has loaned the Company $60,000. This loan is payable on demand and
carries an interest rate of 10%.
         As of December 18, 2006, Melissa CR 364 Ltd, and a current shareholder,
has loaned the Company  $60,000.  This loan is payable in 90 days and carries an
interest rate of 10%.

         As of  December  31, 2006 and 2005 the  balance on  short-term  related
party payables was $120,500 and $0  respectively.  These notes were both paid in
the 1st quarter of 2007.

NOTE 5 - PREFERRED STOCK

         The Company has  authorized a total of  10,000,000  shares of Preferred
Stock.  Series A Convertible  Preferred Stock is the initial series of Preferred
Stock. This series shall consist of 5,000,000 shares with a par value of $.001.

         The  Corporation  is under no  obligation to pay dividends or to redeem
the Series A Convertible  Preferred  Stock.  This series of stock is convertible
into 10  shares  of  Common  Stock  at the  option  of the  shareholder  or upon
automatic conversion.

         In the  event of any  liquidation,  dissolution  or  winding-up  of the
Corporation,  the holders of outstanding  shares of Series A Preferred  shall be
entitled  to be  paid  out  of  the  assets  of the  Corporation  available  for
distribution to  shareholders,  before any payment shall be made to or set aside
for holders of the Common Stock, at an amount of $1 per share.

         As of  December  31,  2006 and 2005,  there  were no  preferred  shares
issued.

NOTE 6 - COMMON STOCK TRANSACTIONS

o        In July of 2005, the company issued  10,000,000  shares of common stock
         to Michael Sheriff,  chief executive officer and director,  in exchange
         for the  outstanding  stock  of our  wholly  owned  subsidiary  AirGATE
         Technologies, Inc.



                                     F - 17
<PAGE>


                            THE X-CHANGE CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)

NOTE 6 - COMMON STOCK TRANSACTIONS (Continued)

o        On of March 31, 2005, the company issued 100,000 shares of common stock
         to an outside investor for $1.00 per share.
o        On January 5, 2006,  the company  issued 500,000 shares of common stock
         to Hexion  Specialty  Chemical,  Inc. in connection with and as part of
         our development  contract with Hexion. In return for the 500,000 shares
         $219,180 was  capitalized  as an  intangible  asset for the increase in
         Hexion's burden to the project. As part of the negotiation, the royalty
         period for the contract was extended from 5 to 7 years.  The asset will
         be amortized over the life of the royalty period.
o        During the first  quarter of 2007 (up to March 30,  2007),  the company
         issued 770,000 shares of common stock, 770,000 warrants to purchase one
         share of  common  stock at $1.50  per share  and  770,000  warrants  to
         purchase  one  share of  common  stock at $2.00  per  share to  outside
         investors  under a private  placement  memorandum  for  proceeds in the
         amount of $550,000.
o        The  following  shares  were  issued to  consultants  of the Company in
         consideration of services rendered:(Par Value for $0.001)
         o        On January 11, 2005,  the company issued  1,120,000  shares of
                  common stock for $84,000 in services
         o        On March 31, 2005,  the company issued 70,000 shares of common
                  stock for  $1,000 in  services
         o        On November  11, 2005,  the company  issued  20,000  shares of
                  common  stock for  $1,500  in  services
         o        After the  AirGATE  acquisition,  the company  issued  650,000
                  shares of common stock to consultants of AirGATE Technologies,
                  Inc.  for  $130,000  in  services
         o        On January 5, 2006, the company issued 10,000 shares of common
                  stock  for $750 in  services
         o        On May 1, 2006,  the company  issued  30,000  shares of common
                  stock for $3,000 in  services
         o        On June 1, 2006,  the company  issued  40,000 shares of common
                  stock for $3,600 in services
         o        On June 14, 2006,  the company  issued 12,500 shares of common
                  stock for $1,600 in services
         o        On June 16, 2006,  the company issued 100,000 shares of common
                  stock for $12,000 in services
         o        On July 10, 2006,  the company  issued 30,000 shares of common
                  stock for $4,320 in services
         o        On August 16, 2006, the company issued 30,000 shares of common
                  stock for $10,380 in services



                                     F - 18
<PAGE>




                            THE X-CHANGE CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)

NOTE 6 - COMMON STOCK TRANSACTIONS (Continued)

         o        On  September 1, 2006,  the company  issued  30,000  shares of
                  common stock for $15,300 in services
         o        On October 1, 2006, the company issued 30,000 shares of common
                  stock for  $13,680  in  services
         o        On October 26,  2006,  the company  issued  200,000  shares of
                  common  stock for  $58,000 in  services
         o        On  November  1, 2006,  the company  issued  30,000  shares of
                  common  stock for  $10,500 in  services
         o        On  December  1, 2006,  the company  issued  30,000  shares of
                  common  stock for $6,600 in services
         o        On December  31, 2006,  the company  issued  80,000  shares of
                  common stock for $13,840 in services

NOTE 7 - LEGAL PROCEEDINGS

         On January 11, 2006, the Company and Michael  Sheriff,  Chief Executive
Officer,  commenced a legal action  against  former  employee  James E. Flowers,
Logix  Consulting,  Inc. and  WaveTrac,  Inc. in which we sought  temporary  and
permanent  injunctive  relief and damages  against the defendants as a result of
their  unlawful and malicious  breach of contract  (violation of  non-disclosure
provisions);  breach of fiduciary  duty,  misappropriation  of trade secrets and
other proprietary  information;  tortuous interference with prospective business
relationships; and conversion. As part of the legal action, the company demanded
the return of 4,250,000 shares of common stock held by Mr. Flowers.  On November
15, 2006, an agreement and mutual  general  release was reached for this lawsuit
pursuant to which Mr.  Flowers was allowed to retain  950,000 shares of X-Change
Corporation  common stock,  and Flowers agreed to return 3,300,000 shares of our
common stock to Michael Sheriff,  our Chief Executive  Officer and President and
Chairman of our Board of Directors. In addition, Mr. Flowers agreed to indemnify
AirGATE  Technologies  and Mr. Sheriff from any tax  consequences as a result of
this settlement and agreed to a lock-up agreement relating to his shares,  which
shall also remain subject to applicable  resale  restrictions  under  applicable
securities  laws. The lock-up  agreement limits his sales of our common stock on
any given day to the greater  of: (i) a daily total of ten percent  (10%) of the
average daily trading volume for the ten (10) trading days immediately preceding
the date of sale of our common stock, or (ii) 100,000 shares, per month.



                                     F - 19
<PAGE>




                            THE X-CHANGE CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)

NOTE 8  SUBSEQUENT EVENTS

         Under a private placement  memorandum initiated in the first quarter of
2007, the company issued  770,000  shares of common stock,  770,000  warrants to
purchase  one share of common  stock at $1.50 per share and 770,000  warrants to
purchase one share of common stock at $2.00 per share to outside investors under
a private placement memorandum for proceeds in the amount of $550,000.

NOTE 9-DISCONTINUED OPERATIONS

         On June 30,  2006,  Curado  Energy  Resources,  Inc.,  a  wholly  owned
subsidiary  of the  Company,  was  sold,  and is no longer a  subsidiary  of the
Company.

The assets and liabilities of Curado Energy  Resources,  Inc.,  consisted of the
following:

                                         December 31,       December 31,
                                             2006               2005
                                      ------------------ ------------------

 Cash                                          $      -          $   4,569
 Oil Inventory                                        -              4,657
 Computer Equipment, net of $62
      accumulated depreciation                        -                995
                                      ------------------ ------------------
       Total assets                            $      -          $  10,221
                                      ================== ==================

         On  June  30,  2006,  the  Company  sold  its  Curado  subsidiary  to a
shareholder of the company for $10 and the assumption of any potential liability
pertaining to the subsidiary.  A loss has been recognized in connection with the
disposal of $8,029.

         Net assets to be disposed  of have been  separately  classified  in the
accompanying  consolidated  balance sheet at December 31, 2005. The December 31,
2005  balance  sheet  has  been  restated  to  conform  to  the  current  year's
presentation.



                                     F - 20
<PAGE>




                            THE X-CHANGE CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)

NOTE 9-DISCONTINUED OPERATIONS (Continued)

         Operating results of this  discontinued  operation for the period ended
December  30,  2006  are  shown  separately  in  the  accompanying  consolidated
statement of operations.  The operating statement period ended December 30, 2005
has been  restated to conform to the  current  year's  presentation  and is also
shown separately.  The operating results of this discontinued  operation for the
periods ended December 31, 2006 and 2005 consist of:

                                                     December 31,
                                                2006               2005
                                          -----------------  -----------------

Revenue                                           $      -         $  153,035
Cost of Sales                                      (2,109)           (91,718)
General and Administrative                            (83)           (23,358)
Gain on Sale of Oil Wells                                -            169,233
                                          -----------------  -----------------
Net Income (Loss)                               $  (2,192)         $  207,192
                                          =================  =================

NOTE 10 - MERGER/ACQUISITION

         On  July  20,  2005,  The  X-Change  Corporation  acquired  all  of the
outstanding shares (the "Acquisition") of AirGate Technologies, Inc.("AirGate"),
pursuant to a Stock Purchase Agreement dated the same.

In consideration  for the Acquisition,  the Company issued  10,000,000 shares of
restricted common stock.

AirGATE is a leading end-to-end,  solution-based  company  specializing in radio
frequency  identification  (RFID)  and  related  wireless  technologies  for the
business-to-business customer worldwide.




                                     F - 21
<PAGE>


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

         None.

ITEM 8A  CONTROLS AND PROCEDURES

We have established  disclosure  controls and procedures to ensure that material
information  relating to the X-Change  Corporation,  including its  consolidated
subsidiaries,  is made known to the officers who certify our  financial  reports
and to other members of senior management and the board of directors.

Based on their  evaluation,  as of the end of the period  covered by this Annual
Report on Form 10-KSB, the principal  executive officer and principal  financial
officer  of the  X-Change  Corporation  and its  principal  subsidiary,  AirGATE
Technologies,  Inc., have concluded that the X-Change  Corporation's  disclosure
controls and procedures (as defined in Rules  13a-15(e) and 15d-15(e)  under the
Securities  Exchange Act of 1934) are effective in ensuring that the information
required to be disclosed by the X-Change Corporation in reports that it files or
submits  under  the  Securities  Exchange  Act of 1934 is  recorded,  processed,
summarized and reported within the time periods specified in the SEC's rules and
forms.

There were no significant changes in the X-Change Corporation's internal control
over  financial  reporting  during our fourth fiscal quarter that has materially
affected,  or is reasonably  likely to materially  affect,  our internal control
over financial reporting.


ITEM 8B  OTHER INFORMATION

We are in the  process of raising  capital in a private  placement,  the maximum
amount that will be raised from the offering  will be  $6,000,000.  We intend to
use the net proceeds from the  offering,  after  deducting the costs  associated
with the  offering,  for debt  reduction,  sales  expenses  and general  working
capital.  The  maximum  number of shares of our  common  stock that will be sold
pursuant to this offering is 8,400,000,  in addition to 8,400,000  shares of our
common  stock  issuable  upon  exercise of warrants at $1.50 per share and up to
8,400,000 shares of our common stock issuable upon exercise of warrants at $2.00
per share.  We have agreed to file  registration  statements with the Securities
and  Exchange  Commission  by June 20, 2007  covering the shares of common stock
and, when  exercised,  the shares  underlying the warrants.  We will pay certain
costs associated with the filing of the registration statement.

We have sold 22 units of our securities at an offering price of $25,000 per unit
to certain  accredited  investors in the initial closing of a private placement.
The  initial   closing  was  conditioned  on  our  receipt  of  acceptable  cash
subscriptions  for a minimum  of  $500,000.  The  initial  closing  occurred  on
February 20, 2007, as reported on our Current Report on Form 8-K, filed February
23, 2007.  Each unit consists of 35,000 shares of our common stock, a warrant to
purchase  35,000 shares of our common stock at $1.50 per share  exercisable  for
five years and a warrant to purchase  35,000 shares of our common stock at $2.00
per share  exercisable  for five years.  Subject to  subscriber  demand,  we had
originally  planned to have one or more  additional  closings  before  March 31,
2007. However, we have extended this deadline until June 20, 2007.

The  securities  issued  in the  offering  have not been  registered  under  the
Securities  Act of 1933,  and  until so  registered  the  securities  may not be
offered or sold in the United States absent  registration  or availability of an
applicable exemption from registration.  This disclosure is not an offer to sell


                                       25
<PAGE>

our securities,  and is made only as required under  applicable rules for filing
current reports with the United States Securities and Exchange  Commission,  and
as permitted under Rule 135c under the Securities Act of 1933.

                                    PART III

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

The  following  table  sets forth all of our  current  directors  and  executive
officers and their ages as of the date of this report.

------------------------------ ----- -------------------------------------------
                     NAME       AGE              POSITIONS HELD
------------------------------ ----- -------------------------------------------
Michael L. Sheriff               61  President, Chief Executive Officer and
                                              Chairman of the Board
------------------------------ ----- -------------------------------------------
Scott R. Thompson                44    Chief Financial Officer, Treasurer,
                                               Secretary, Director
------------------------------ ----- -------------------------------------------
H. David Friedman 61 Director
------------------------------ ----- -------------------------------------------

None of our  executive  officers,  directors  and/or  control  persons have been
convicted  in or been the subject of any pending  criminal  proceedings,  or the
subject of any order, judgment or decree involving the violation of any state or
federal   securities   laws.  No  current   director  has  any   arrangement  or
understanding whereby he is or will be selected as a director or as an executive
officer.  All  directors  will hold  office  until the next  annual  meeting  of
shareholders  and until their  respective  successors have been duly elected and
qualified,  unless and until they earlier resign or are removed from office. Our
executive  officers are elected by our board of directors at its annual  meeting
immediately  following the annual meeting of  shareholders.  We do not currently
have any standing audit, nominating or compensation committees, or any committee
performing similar functions.

EXECUTIVE OFFICERS AND DIRECTORS

MICHAEL SHERIFF, CHAIRMAN, PRESIDENT  & CEO AND DIRECTOR

Michael  Sheriff  has been our  president  and chief  executive  officer and the
chairman  of our board of  directors  since  July  2005.  Mr.  Sheriff  has over
thirty-seven   years   of   experience   in  the   computer,   electronics   and
telecommunications  industry. Before he founded AirGATE in 2001, Mr. Sheriff had
previously been the founder of several companies, including Net Access Exchange,
Inc.,  dba YPAY,  an Internet  media network that  provided  advertisers  with a
unique and  compelling  value  proposition  to reach  consumers via the Internet
through use of broadband-like rich media over dial-up connections, CyberQuest, a
full-service  Internet  development company that focus edits efforts on Internet
commerce in the  business-to-business  marketplace,  Good Stuff Cheap (GSC), the
first to pioneer market  Internet-based  retail sites, Action Fax International,
Inc.,  which was one of the  largest  public  fax  networks  in the  world  with
locations in airports globally,  and First National Computer Corporation,  which

                                       26

<PAGE>

was one of the largest PC rental firms in the United States. Mr. Sheriff's other
prior positions included senior sales,  marketing and management  positions with
National Semiconductor, Northern Telecom, SYCOR, Inc. and SINGER.

SCOTT R. THOMPSON, SECRETARY, TREASURER, CFO, AND DIRECTOR

Scott R. Thompson has been our chief financial officer,  treasurer and secretary
and a member of our board of directors  since the final  quarter of 2004.  After
earning his  Bachelor's  degree in  Accounting  in 1985 from the  University  of
Denver,  Mr. Thompson spent his early career in public accounting with the multi
national  accounting  firm of Ernst &  Whinney.  Since 1993 he has  focused  his
efforts in the real estate brokerage business including sales, sales management,
finance, mergers and acquisitions,  development,  and marketing. Since 2001, Mr.
Thompson  has also been an owner and  managing  member for a capital  management
company specializing in alternative investments.

H. DAVID FRIEDMAN, DIRECTOR

H. David  Friedman,  a member of our board of directors since February 2007, has
30 years  experience and has founded or co-founded and held board seats for nine
companies,  four of which were  publicly  traded.  Mr.  Friedman has held senior
level   management   positions  in  Fortune  200  companies   such  as  Motorola
Communications,  W.R.  Grace,  Litton  Industries  (telecom  division) and U. S.
Telephone Inc. (now Sprint).  For the past three years,  Mr. Friedman has worked
with  C5  Partners,  a  strategic  consulting  firm  located  in  Dallas,  Texas
specializing  in developing  strategies,  management and resources for companies
with  "high-growth"  potential.  Before that, Mr. Friedman  managed The Friedman
Group as Chairman and CEO.

OTHER SIGNIFICANT EMPLOYEES

In addition to the executive  officers and directors  described  above,  we also
have the following significant employees:

KATHLEEN K. HANAFAN, CHIEF OPERATING OFFICER OF AIRGATE

Kathleen Hanafan,  AirGATE's chief operating officer since December 2006, has 20
years of executive  experience  driving revenues for both major corporations and
highly successful  niche-focused  companies including VCampus Corporation,  Onit
Communications,    Primedia   Workplace   Learning,   BroadbandNow,    Archstone
Communities,  Inc, and Telecommunications,  Inc. She currently sits on the board
of Onit Communications Inc. and other boards in various industries.  Ms. Hanafan
is also an  advisory  board  member to an  investment  banking  firm and a board
member for a non-profit organization in preventive care for urban areas.

KAREY Y. DANIELS, VICE PRESIDENT OF FINANCE AND CONTROLLER

Karey Daniels, AirGATE's vice president of finance and controller since December
2006, has 17 years of experience as a financial analyst and accountant. Prior to
joining us, Ms. Daniels worked as vice president of finance for TRIO Industries,
vice president of finance at Fibromamyalgia and Fatigue Center,  Inc.,  director
of finance &  administration  at Active  Organics,  Inc,  controller for Fleming
companies,  senior financial analyst for Mentor Graphics, and controller for the
Americas  Business  Unit for  Texas  Instruments.  Ms.  Daniels  has an MBA from
Southern Methodist University.

IVAN CHOW, CHIEF TECHNICAL OFFICER AND SR. VICE PRESIDENT OF SOFTWARE SOLUTIONS

Ivan Chow,  AirGATE's  chief  technical  officer  and senior vice  president  of
software  solutions  since  October  2004,  has  over  16  years  of  technology
experience.  Prior  to  joining  us,  Mr.  Chow  founded  a  company  called  IP

                                       27

<PAGE>

Communications,  which developed a Voice IP gateway over the Internet.  Prior to
IP  Communications,  Mr.  Chow  served as  Engineer  for Sprint and  developed a
middleware system called Distributed  Computing  Architecture  (DCA). Mr. Chow's
has also worked for the Super Conducting Super Collider.

COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

Based on our review of filings with the Securities and Exchange Commission:

o        Mike  Sheriff and Scott  Thompson  did not timely file their Form 3s as
         required by Section 16(a) of the Exchange Act, although such forms have
         now been filed;
o        Mike Sheriff has not yet filed a Form 4 as required by Section 16(a) of
         the  Exchange Act in  connection  with the  following  transfers of his
         shares of common stock;
o        Mike Sheriff has not yet filed a Form 4 as required by Section 16(a) of
         the  Exchange Act in  connection  with the transfer of shares of common
         stock to him in connection  with our  settlement  with James E. Flowers
         described under Item 3 - Legal Proceedings;
o        H. David Friedman, who became a director in February, has not yet filed
         his Form 3; and
o        Robert Barbee, one of our former directors, did not file a Form 3.

AUDIT COMMITTEE FINANCIAL EXPERT

We do not have an audit  committee  or an  "audit  committee  financial  expert"
within the meaning of such phrase under applicable regulations of the Securities
and Exchange  Commission.  Like many small companies,  it is difficult for us to
attract  and retain  board  members who  qualify as "audit  committee  financial
experts," and competition for these individuals is significant.

CODE OF ETHICS

We have  not yet  adopted  a code of  ethics  for  our  officers,  directors  or
employees,  however,  the Company does  maintain an Employee  Manual  addressing
these issues.

ITEM 10  EXECUTIVE COMPENSATION

Our  by-laws  authorize  our  board  of  directors  to fix the  compensation  of
directors,  to establish a set salary for each  director  and to  reimburse  the
director's expenses for attending each meeting of our board of directors.  As of
the date of this  report,  no salaries or other  compensation,  including  stock
options,  have been paid to any of our board of directors,  individually or as a
group.

The following table provides  summary  information  concerning cash and non-cash
compensation paid to or earned by our principal  executive officer and principal
financial  officer in the two most recent fiscal years. We do not have any other
executive officers.

                                       28

<PAGE>

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
---------------- ------- ------------ --------- ----------- --------- ----------------- ----------------- --------------- ----------
   NAME AND        YEAR     SALARY      BONUS    STOCK       OPTION      NON-EQUITY         CHANGE IN         ALL OTHER      TOTAL
                                                                                         PENSION VALUE
                                                                                              AND
                                                                                          NONQUALIFIED
                                                                                            DETERRED
   PRINCIPAL                                                           INCENTIVE PLAN     COMPENSATION
   POSITION                                       AWARDS     AWARDS     COMPENSATION        EARNINGS        COMPENSATION
---------------- ------- ------------ --------- ----------- --------- ----------------- ----------------- --------------- ----------
<S>              <C>     <C>          <C>       <C>         <C>       <C>               <C>               <C>             <C>
    MICHAEL        2006     $125,000  -         -           -         -                 -                 -               $  125,000
 SHERIFF, CEO      2005    109,167    -         -           -         -                 -                 -                  109,167
---------------- ------- ------------ --------- ----------- --------- ----------------- ----------------- --------------- ----------
     SCOTT         2006      60,000   -         -           -         -                 -                 -                   60,000
 THOMPSON, CFO     2005      25,000   -         -           -         -                 -                 -                   25,000
---------------- ------- ------------ --------- ----------- --------- ----------------- ----------------- --------------- ----------
     ROBERT        2006    120,000    -         -           -         -                 -                 -                  120,000
 BARBEE, VP OF     2005     48,500    -         -           -         -                 -                 -                   48,500
  OPERATIONS
---------------- ------- ------------ --------- ----------- --------- ----------------- ----------------- --------------- ----------
</TABLE>

ITEM 11 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT


The following  table sets forth  certain  information  regarding the  beneficial
ownership as of March 26, 2007, of our common stock by:

o        each person who, to our knowledge, is the beneficial owner of more than
         five percent of our common stock;

o        each director and executive officer of the X-Change Corporation; and

o        all of our directors and officers as a group.

Information  relating to  beneficial  ownership of the X-Change  Corporation  is
based upon "beneficial  ownership"  concepts set forth in the rules  promulgated
under the Exchange Act. Under these rules a person is deemed to be a "beneficial
owner" of a security if that person has or shares "voting power," which includes
the power to vote or to direct the voting of a security,  or "investing  power,"
which includes the power to dispose or to direct the  disposition of a security.
Under the rules,  more than one person may be deemed to be a beneficial owner of
the same  securities.  A person is also deemed to be a  beneficial  owner of any
security as to which that person has the right to acquire  beneficial  ownership
within  sixty (60) days from the  current  date  (although  none of the  persons
identified below hold any such rights).



                                       29
<PAGE>

NAME OF BENEFICIAL OWNER   SHARES BENEFICIALLY OWNED (1)    PERCENT OF CLASS

Michael Sheriff                     6,650,000                         23.31%

Scott R. Thompson                     250,000                          0.88%

H. David Friedman                           0                          0.00%

Frank Kwong                         1,540,000                          5.40%

All directors and officers          6,900,000                         24.18%
as a group (3 persons)
----------------------
(1)      Based upon 28,534,500  shares of our common stock  outstanding on March
         30, 2007.

ITEM 12  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         We acquired all of the outstanding shares of AirGATE Technologies Inc.,
currently our wholly owned subsidiary, in July of 2005 from Michael Sheriff, who
became  our chief  executive  and  president  and the  chairman  of our board of
directors  following this  transaction.  As consideration  for this transaction,
Michael Sheriff received 10,000,000 shares of our common stock.

         On August 15, 2006,  we executed a promissory  note with Melissa CR 364
Ltd., a Texas limited partnership, providing us with a $1,000,000 line of credit
with an interest  rate of 10% per annum.  Melissa CR 364 Ltd. is a common  stock
shareholder.   As  of  March  30,  2007,   $797,794  of  this  indebtedness  was
outstanding.  The largest  amount of principal  outstanding  under this note was
$845,971.

ITEM 13 EXHIBITS

Exhibit No.                                 Exhibit Name

3.1      Articles of  Incorporation  (To be filed on a future  Current Report on
         8-K.)

3.2      Certificate of Amendment to Articles of Incorporation  (Incorporated by
         reference to Exhibit 3.1 included  with our Current  Report on Form 8-K
         filed with the SEC on January 30, 2002.)

3.3      By-Laws (To be filed on a future Current Report on Form 8-K.)

4.1      Specimen of common stock Certificate

10.1     Promissory   Note,   dated  August  15,  2006,   between  the  X-Change
         Corporation  and  Melissa CR 364 Ltd.  (Incorporated  by  reference  to
         Exhibit 10.01  included with our Current  Report on Form 8-K filed with
         the SEC on August 21, 2006.)

10.2     Form of Subscription Agreement, February-March 2007, Private Placement.
         (Incorporated  by reference to Exhibit 10.1  included  with our Current
         Report on Form 8-K filed with the SEC on February 23, 2007.)

10.3     Form of Registration Rights Agreement,  Private Placement (Incorporated
         by reference to Exhibit 10.2 included  with our Current  Report on Form
         8-K filed with the SEC on February 23, 2007.)

10.4     Form of $1.50 Warrant  Agreement,  Private  Placement  (Incorporated by
         reference to Exhibit 10.3 included with our Current  Report on Form 8-K
         filed with the SEC on February 23, 2007.)

10.5     Form of $2.00 Warrant  Agreement,  Private  Placement  (Incorporated by
         reference to Exhibit 10.4 included with our Current  Report on Form 8-K
         filed with the SEC on February 23, 2007.)

10.6*    Memorandum of  Understanding,  dated December 3, 2004,  between AirGATE
         Technologies and Hexion Specialty  Chemicals  (formerly Borden Chemical
         Inc.) (Certain portions of this exhibit have been omitted pursuant to a
         confidential  treatment  request filed with the Securities and Exchange
         Commission.)




                                       30
<PAGE>

10.7*    Phase II of  Memorandum  of  Understanding,  effective  January 3 2006,
         between AirGATE  Technologies and Hexion Specialty  Chemicals  (Certain
         portions of this exhibit have been omitted  pursuant to a  confidential
         treatment request filed with the Securities and Exchange Commission.)

10.8*    First  Amendment to Memorandum of  Understanding,  dated  September 12,
         2006,  between  AirGATE  Technologies  and Hexion  Specialty  Chemicals
         Chemicals  (Certain portions of this exhibit have been omitted pursuant
         to a  confidential  treatment  request  filed with the  Securities  and
         Exchange Commission.)

10.9*    Development   Agreement,   dated  October  26,  2006,  between  AirGATE
         Technologies  and Graco  Children's  Products,  Inc.  (a unit of Newell
         Rubbermaid, Inc.)

21.1*    List of subsidiaries

31.1*    Certification  of  Principal  Executive  Officer  Pursuant  to 18 U.S.C
         Section 1350 as Adopted  Pursuant to Section 302 of the  Sarbanes-Oxley
         Act of 2002.

31.2*    Certification  of  Principal  Financial  Officer  Pursuant  to 18 U.S.C
         Section 1350 as Adopted  Pursuant to Section 906 of the  Sarbanes-Oxley
         Act of 2002.

32.1*    Certification  of  Principal  Executive  Officer  Pursuant  to 18 U.S.C
         Section 1350 as Adopted  Pursuant to Section 302 of the  Sarbanes-Oxley
         Act of 2002.

32.2*    Certification  of  Principal  Financial  Officer  Pursuant  to 18 U.S.C
         Section 1350 as Adopted  Pursuant to Section 906 of the  Sarbanes-Oxley
         Act of 2002.

               * Filed herewith.

ITEM 14 - PRINCIPAL ACCOUNTANT FEES AND SERVICES

The  following is a summary of the fees billed to us by Robison,  Hill & Company
for  professional  services  rendered for the years ended  December 31, 2006 and
2005:

  Service                              2005            2006
  ------------------------------   -------------   -------------
  Audit Fees                        $    14,600     $  14,340

  Audit-Related Services                    -             -
  Tax Fees                                  130

  All Other Fees                            -             -
                                   -------------   -------------

  Total                             $    14,730     $    14,340
                                   =============   =============

AUDIT FEES  consist of fees billed for  professional  services  rendered for the
audits  of  our  financial  statements,  reviews  of  our  interim  consolidated
financial  statements  included in  quarterly  reports,  services  performed  in
connection  with filings with the  Securities & Exchange  Commission and related
comfort letters and other services that are normally provided by Robison, Hill &
Company in connection with statutory and regulatory filings or engagements.


                                       31
<PAGE>

TAX FEES consist of fees billed for  professional  services for tax  compliance,
tax  advice  and tax  planning.  These  services  include  assistance  regarding
federal,  state and local tax compliance  and  consultation  in connection  with
various transactions and acquisitions.
PRE-APPROVAL  OF  AUDIT  AND  PERMISSIBLE   NON-AUDIT  SERVICES  OF  INDEPENDENT
AUDITORS:  We do not  have an  audit  committee,  but  our  board  of  directors
pre-approves  all audit  and  non-audit  services  provided  by the  independent
auditors,  including all of the services  related to the fees  described  above.
These services may include audit services,  audit-related services, tax services
and other  services as allowed by law or regulation.  Pre-approval  is generally
provided  for  up to  one  year  and  any  pre-approval  is  detailed  as to the
particular  service  or  category  of  services  and is  generally  subject to a
specifically  approved  amount.  The  independent  auditors and  management  are
required to periodically  report to the Audit Committee  regarding the extent of
services   provided  by  the  independent   auditors  in  accordance  with  this
pre-approval and the fees incurred to date.















                                       32
<PAGE>


                                   SIGNATURES



In accordance with 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.

THE X-CHANGE CORPORATION
(Registrant)


Dated: April 5, 2007    By:/s/ Michael L. Sheriff
                        ----------------------------------------------------
                        Michael L. Sheriff, President and Chief
                        Executive Officer
                        (Principal Executive Officer)



Dated: April 5, 2007    By:/s/ Scott Thompson
                        ----------------------------------------------------
                        Scott Thompson, Chief
                        Financial Officer
                        (Principal Financial Officer)





























                                       33
<PAGE>