UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-KSB





| |  |  |  |            |  |                                                                                                                                                                                                                                                                                        
| |  |  |  | ---------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |  |  | (Mark One) |  |                                                                                                                                                                                                                                                                                        
| |  |  |  | þ          |  | Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934                                                                                                                                                                                                   
| |  |  |  |            |  | For the fiscal year ended July 31, 2006 For
the fiscal year ended July 31, 2005 For the fiscal year ended July 31, 2004 For the fiscal year ended July 31, 2003 For the fiscal year ended July 31, 2002 For the fiscal year ended July 31, 2001 For the fiscal year ended
July 31, 2000
| |  |  |  |            |  | or                                                                                                                                                                                                                                                                                     
| |  |  |  |  ̈          |  | Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934                                                                                                                                                                                               
| |  |  |  |            |  | For the transition period from
                         to                                                                                                                                                                                                                             
| |  |  |  |            |  | Commission file number 000-06649                                                                                                                                                                                                                                                       

JILCO INDUSTRIES, INC.

(Exact name of Small Business Issuer as specified in its charter)



|                                         |  |                                     
|---------------------------------------- |  | ------------------------------------
|California                               |  | 95-2075885                          
|(State of incorporation)                 |  | (I.R.S. employer identification no.)
|                                         | 
|P. O. Box 10539 Beverly Hills, CA        |  | 90213                               
|(Address of principal executive offices) |  | (Zip code)                          

310-274-1986

(Registrants telephone number, including area code)

Securities registered pursuant to Section 12(b) of the
Act:



None





















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Securities registered pursuant to Section 12(g) of the Act:

Common Stock, no par value

Check whether the issuer is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act.

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes
      No ü

Indicate by
check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-B is contained herein, 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.

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

The issuers
revenue for the fiscal years ended July 31, 2006, July 31, 2005, July 3, 2004, July 31, 2003, July 31, 2002, July 31, 2001 and July 31, 2000 were $0.

On July 31, 2006 the aggregate market value of the voting and non-voting common equity held by non-affiliates of the issuer was approximately $ 0
computed by reference to the price at which the common equity was last transacted on that date.

On July 31, 2006, the issuer had
approximately 449,991 shares of Common Stock, no par value.

Transitional Small Business Disclosure Format (Check
One):YES  NOü





Unless the context in this Annual Report otherwise requires, all references in this
Annual Report to our, us and we refer to Jilco Industries, Inc.

Item 1.   Description of Business.

We have not engaged in any revenue-generating
business operations and have not been so engaged since April 2, 1968 when we were discharged from bankruptcy under our former name Sportsways, Inc.

FORWARD LOOKING STATEMENTS AND CERTAIN RISKS ASSOCIATED WITH AN INVESTMENT IN OUR COMMON STOCK

This
Annual Report contains statements which, to the extent they are not recitations of historical fact, constitute forward-looking statements within the meaning of federal securities law. The words believe, estimate, anticipate, project, intend, expect,
plan, outlook, scheduled, forecast and similar expressions are intended to identify forward-looking statements. Statements and assumptions with respect to future revenues, income and cash flows, program performance, the outcome of litigation,
environmental remediation cost estimates and planned dispositions of assets are examples of forward-looking statements. Numerous factors, including potentially the risk factors described in



















2



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this section and elsewhere in this Annual Report, could affect our forward-looking statements and actual
performance.

An investment in our common stock involves substantial risks. You should consider carefully the following information about
these risks, together with the financial and other information, including additional risks, contained elsewhere in this Annual Report, before you decide whether to buy our common stock. If any of the described events actually occur, our business,
financial condition and results of operations would likely suffer and the market price, if any, of our common stock would decline. In such case, you may lose all or part of your investment.

Because we have no revenue-producing operating history, there is no basis on which you can evaluate our prospects. Prospective investors
customarily consider a companys revenue-producing operating history as a factor in determining whether to make an investment. Prospective investors who decide to purchase our shares may have decided not to purchase the shares if they had an
operating history to review.

We have had recurring losses and expect losses to continue for the foreseeable future.We
incurred net losses of $12,735, $12,478, $ 12,625, $12,142, $12,610, $12,060 and $17,686 during the fiscal years ended July 30, 2006, 2005, 2004, 2003, 2002, 2001 and 2000 respectively. See the Financial Statements and related notes begin on
Page F-1 of this Annual Report which show net losses at each reported fiscal year end and each interim fiscal quarter. Presently we do not have revenue-producing operations. Any future operations may not be sufficient to generate the revenues
necessary to reach profitability.

Because of our limited capital, unless we obtain substantial additional capital we may not have
sufficient capital to continue as a going concern. As stated in the Notes to our financial statements, because we have suffered recurring losses and a have a deficiency in net assets and working capital, there is substantial doubt about our
ability to continue as a going concern. However, our affiliates have for a number of years and will continue during the next twelve months to lend us all funds necessary for it to maintain our corporate and filing status.

Item 2.   Description of Property.

We do not have an interest in any property.

Item 3.   Legal Proceedings.

We are not a party to any pending legal proceeding that primarily involves a claim for damages and the amount involved in such proceeding, exclusive
of interest and costs, exceeds 10% of our current assets nor is any of our property the subject of such a pending legal proceeding. We are not aware of any such proceeding that a governmental authority is contemplating.





























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

No matter was submitted during the fiscal years ended July 31, 2006, 2005, 2004, 2003, 2002, 2001 and 2000, respectively, to a vote of our security
holders through the solicitation of proxies or otherwise.

PART II

Item 5.   Market For Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

(a)  Market Information.

Our common stock is not traded in any public trading market.

(b) Holders.

On July 31, 2006, 2005, 2004, 2003, 2002, 2001 and 2000 respectively, our common stock was held of record by approximately 802 holders.

(c)  Dividends.

We
have not paid dividends on our common stock since our discharge from bankruptcy in 1968 and do not anticipate paying cash dividends in the foreseeable future. We intend to retain any earnings for the operation and expansion of our business. Other
than financial ability, we have no legal, contractual or corporate constraints against the payment of dividends.

(d)  Securities Authorized for Issuance Under Equity Compensation Plans.

We do not have any compensation plan
under which equity securities are authorized for issuance.

Issuer Purchases of Equity Securities

During our fiscal years ended July 31, 2006, 2005, 2004, 2003, 2002, 2001 and 2000 respectively, no purchase was made by or on behalf of us or any
affiliated purchaser, as defined in Rule 10b-18(a)(3) under the Securities and Exchange Act of 1934, of shares or other units of any class of our equity securities that is registered by us pursuant to section 12 of that Act.

Recent Sales of Unregistered Equity Securities

We did not sell any equity securities during the fiscal years ended July 30, 2006, 2005, 2004, 2003, 2002, 2001 or 2000 that were not registered under the Securities Act of 1933.























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Item 6.            Managements Discussion and Analysis or Plan of Operation

Our affiliates have for a number of years, and will continue during the next twelve months, to lend us all funds necessary for us to maintain our corporate and filing status. The notes payable schedules appearing in
the notes to the financial statements beginning on Page F-1 of this Annual Report show funds lent to us during each fiscal quarter since the fiscal quarter ending October 31, 1999.

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in
financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

Item 7.            Financial Statements.

Our Financial Statements and related notes begin on Page F-1 of this Annual Report.

Item 8.

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

Not applicable.

Item 8A.

Controls and Procedures.



a. An evaluation was conducted under the supervision and with the participation of our management, including the Chief Executive Officer
(CEO) and Chief Financial Officer (CFO), of the effectiveness of the design and operation of our disclosure controls and procedures as of July 31, 2006. Based on that evaluation, the CEO and CFO concluded that our controls and procedures were
effective as of such date to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in
Securities and Exchange Commission rules and forms.

b.There was no change in our internal control over financial
reporting that occurred during the fiscal years ended July 31, 2006, 2005, 2004, 2003, 2002, 2001 and 2000 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Item 8B. Other Information.

No
information is required to be disclosed in a report on Form 8-K during the fiscal years covered by this Form 10-KSB which has not been reported.



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PART III

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

Directors, Executive Officers and Significant Employees

The following are our directors and
executive officers and significant employees. Each director holds office until the next annual meeting of shareholders and until the directors successor is elected and qualified or until the directors resignation or removal. Each
executive officer holds office for the term for which such officer is elected or appointed and until a successor is elected or appointed and qualified or until such officers resignation or removal.



|                   |  |                                                  |  |     |  |                        |  |                                                   |  | 
|------------------ |  | ------------------------------------------------ |  | --- |  | ---------------------- |  | ------------------------------------------------- |  | 
|Name               |  | Principal Occupation                             |  | Age |  | First Elected Director |  | Common Shares Owned Beneficially On July 31, 2006 |  | 
|Martha J. Kretzmer |  | President, Secretary and Treasurer of Registrant |  | 50  |  | 1991                   |  | 1,000                                             |  | 

There are no family relationships among our directors, executive officers, or persons nominated or
chosen by us to become directors or executive officers.



None of the
following events occurred during the past five years that is material to an evaluation of the ability or integrity of any director, person nominated to become a director, executive officer, promoter or control person:



| |  | Any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years
prior to that time;
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining,
barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; or
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Being found by a court of competent jurisdiction (in a civil action), the SEC or the Commodity Futures Trading Commission to have violated a federal or state securities or
commodities law, and the judgment has not been reversed, suspended, or vacated.
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Item 10.     Executive Compensation

No officer or director
of Registrant receives any remuneration.

Item 11.   Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters.







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Securities Authorized for Issuance Under Equity Compensation Plans

We do not have any compensation plan under which equity securities are authorized for issuance.

Security Ownership of Certain Beneficial Owners and Management

The following table sets forth certain information as of July 31, 2006 with respect to any person (including any group) who is known to
us to be the beneficial owner of more than 5% of any class of our common stock and as to each class of our equity securities beneficially owned by our directors and directors and officers as a group:



|                                                                                                                                                                      |  |                                                  |  |                             
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------ |  | ----------------------------
|Name and Address of Beneficial Owner                                                                                                                                  |  | Shares of Common Stock Beneficially Owned (1)(2) |  | Approximate Percent of Class
|                                                                                                                                                                      |  |                                                  |  |                             
|                                                                                                                                                                      |  |                                                 
|Leonard M. Ross, Trustee of the Leonard M. Ross Revocable Trust u/d/t 12-20-85 1011 North Beverly Drive Beverly Hills, CA 90210                                       |  | 182,455    (3)(4)                                |  | 40.5%                       
|                                                                                                                                                                      |  |                                                 
|Nathalie Zahra Rey-Ross, Trustee of The Ross 1992 Childrens Trust for the Benefit of Landon Michael Ross 1011 North Beverly Drive Beverly Hills, California 90210    |  | 45,000                                           |  | 10.0%                       
|                                                                                                                                                                      |  |                                                 
|Nathalie Zahra Rey-Ross,Trustee of The Ross 1992 Childrens Trust for the Benefit of Jacquelyn Michelle Ross 1011 North Beverly Drive Beverly Hills, California 90210 |  | 45,000                                           |  | 10.0%                       
|                                                                                                                                                                      |  |                                                 
|Nathalie Zahra Rey-Ross,Trustee of The Wolsic 1994 Insurance Trust 1011 North Beverly Drive Beverly Hills, California 90210                                           |  | 20,000                                           |  | 4.44 %                      
|                                                                                                                                                                      |  |                                                 
|Al Ross 3535 East Coast Highway PMB # 362 Corona del Mar, CA 92625                                                                                                    |  | 25,000                                           |  | 5.55%                       
|                                                                                                                                                                      |  |                                                 
|Steven J. Ross 8603 Rosewood Drive College Station, Texas 77845                                                                                                       |  | 45,000                                           |  | 10.0%                       







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|                                                               |  |       |  |      
|-------------------------------------------------------------- |  | ----- |  | -----
|Martha J. Kretzmer 921 Loma Vista El Segundo, California 90245 |  | 1,000 |  | 0.22%



(1) Unless otherwise noted
below, we believe that all persons named in the table have sole voting and investment power with respect to all shares of common stock beneficially owned by them.

(2) For purposes hereof, a person is deemed to be the beneficial owner of securities that can be acquired by such person within 60 days from the date hereof upon the exercise of warrants or options or the conversion
of convertible securities. Each beneficial owners percentage ownership is determined by assuming that any such warrants, options or convertible securities that are held by such person (but not those held by any other person) and which are
exercisable within 60 days from the date hereof, have been exercised.

(3)Excludes 45,000 shares held by The Ross 1992 Childrens
Trust for the Benefit of Landon Michael Ross of which Nathalie Zahra Rey-Ross is the trustee and holds sole voting and investment power.

(4) Excludes 45,000 shares held by The Ross 1992 Childrens Trust for the Benefit of Jacquelyn Michelle Ross, of which Nathalie Zahra Rey-Ross is the trustee and holds sole voting and investment power.

Item 12. Certain Relationships and Related Transactions.

Other than as otherwise set forth in this Annual Report, during the last two years there have been no transactions, or are there any proposed transactions, to which we were or are to be a party, in which any of the
following persons had or is to have a direct or indirect material interest and the amount involved in the transaction or a series of similar transactions does not exceed $60,000:



| |  | Any of our directors or executive officers;
|- |  | -------------------------------------------



| |  | Any nominee for election as a director;
|- |  | ---------------------------------------



| |  | Any security holder named in this Annual Report as beneficially owning more than 5% of our outstanding common stock; and
|- |  | ------------------------------------------------------------------------------------------------------------------------



| |  | Any member of the immediate family (including spouse, parents, children, siblings, and in-laws) of any of the above persons.
|- |  | ----------------------------------------------------------------------------------------------------------------------------



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Item 13. Exhibits.



|               |  |                                                                                                                                                                                          
|-------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Description                                                                                                                                                                              
|3.1            |  | Articles of Incorporation of the Registrant, as amended (incorporated by reference to                                                                                                    
|               |  | Exhibit 3(1) to the Companys 1989 Form 10-K).                                                                                                                                           
|3.2            |  | By-laws of the Registrant, as amended (incorporated by reference to Exhibit 3(2) to the Companys 1989 Form 10-K).                                                                       
|10.1           |  | Revolving Demand Note, dated November 10, 1995 , between the Company and TRACO (incorporated by reference to Exhibit 10(1) to the Companys 1996 Form 10-K).                             
|10.2           |  | Note Extension and Modification Agreement, dated December 1, 1992, between the Company and Leonard M. Ross. (incorporated by reference to Exhibit 10(1) to the Companys 1993 Form
10-K).
|10.3           |  | Revolving Demand Note, dated November 7, 1989, between the Company and Leonard M. Ross (incorporated by reference to Exhibit 10(1) to the Companys 1990 Form 10-K).                     
|10.4           |  | Note Extension and Modification Agreement, dated December 1, 1992, between the Company and Leonard M. Ross. (incorporated by reference to Exhibit 10(1) to the Companys 1993 Form
10-K).
|10.5           |  | Note Extension and Modification Agreement, dated November 7, 1989, between the Company and Leonard M. Ross (incorporated by reference to Exhibit 10(2) to the Companys 1990 Form
10-K). 
|10.6           |  | Revolving Demand Note, dated December 18, 1987, between the Company and Leonard M. Ross (incorporated by reference to Exhibit 10(1) to the Companys 1989 Form 10-K).                    
|10.7           |  | Note Extension and Modification Agreement, dated November 7, 1989, between the Company and Leonard M. Ross (incorporated by reference to Exhibit 10(4) to the Companys 1990 Form
10-K). 
|10.8           |  | Note Extension and Modification Agreement, dated November 7, 1989, between the Company and Leonard M. Ross (incorporated by reference to Exhibit 10(4) to the Companys 1990 Form
10-K). 
|10.9           |  | Note Extension and Modification Agreement, dated July 13, 1988, between the Company and Leonard M. Ross (incorporated by reference to Exhibit 10(2) to the Companys 1989 Form
10-K).    
|10.10          |  | Promissory Note Extension Agreement, dated August 8, 1986, between the Company and Leonard M. Ross (incorporated by reference to Exhibit 10(3) to the Companys 1989 Form
10-K).         
|10.11          |  | Promissory Note, dated August 9, 1972, between the Company and Leonard M. Ross (incorporated by reference to Exhibit 10(3) to the Companys 1989 Form 10-K).                             
|10.12          |  | Note Extension and Modification Agreement, effective December 31, 1997, between the Company and Mill Equities Co.**                                                                      
|10.13          |  | Note Extension and Modification Agreement, effective December 31, 1999, between the Company and Mill Equities Co.**                                                                      
|10.14          |  | Note Extension and Modification Agreement, effective December 31, 1999, between the Company and Mill Equities Co.**                                                                      
|10.15          |  | Note Extension and Modification Agreement, effective December 31, 1994, between the Company and Leonard M. Ross**                                                                        
|10.16          |  | Note Extension and Modification Agreement, effective December 31, 1994, between the Company and Leonard M. Ross**                                                                        
|10.17          |  | Note Extension and Modification Agreement, effective December 31, 1994, between the Company and Leonard M. Ross**                                                                        
|31.1           |  | Rule 13a-14(a) Certification. **                                                                                                                                                         
|32.1           |  | Section 1350 Certification. **                                                                                                                                                           

** Filed herewith.



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Item 14.     Principal Accountant Fees and Services.

Audit Fees

We have not retained
principal accountants for the audit of our annual financial statements for our fiscal years ended July 31, 2006, 2005, 2004, 2003, 2002, 2001 and 2000 respectively. Therefore, no fees were billed by principal accountants for any audit services
for our fiscal years ended July 31, 2006, 2005, 2004, 2003, 2002, 2001 and 2000, respectively, or for the review of financial statements included in our Forms 10-QSB or contained herein. No services were provided by principal accountants in
connection with statutory and regulatory filings or engagements for those fiscal years.

Audit-Related Fees

Since principal accountants were not engaged, nothing was billed by any principal accountants in either of our fiscal years ended July 31, 2006,
2005, 2004, 2003, 2002, 2001 and 2000 respectively and no professional services were rendered by any principal accountants for assurance and related services by any principal accountants

Tax Fees

Since principal accountants were not engaged, nothing was billed by
any principal accountants in either of our fiscal years ended July 31, 2006, 2005, 2004, 2003, 2002, 2001 and 2000 respectively and no professional services were rendered by any principal accountants for tax compliance, tax advice, and tax
planning.

All Other Fees

Since principal accountants were not engaged, nothing was billed by any principal accountants in either of our fiscal years ended July 31, 2006, 2005, 2004, 2003, 2002, 2001 and 2000 respectively and no professional services were
rendered by any principal accountants for products and services provided by the principal accountants, other than the services reported above in this Item 14.

Audit Committee Administration of Engagement of Principal Accountants

Since we did not
engage principal accountants to render audit or non-audit services, we did not have an audit committee approve any engagement terms or pre-approval policies and procedures.



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SIGNATURES

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





|                      |  |                        |  |                                       |  | 
|--------------------- |  | ---------------------- |  | ------------------------------------- |  | 
|Date: August 29, 2006 |  | JILCO INDUSTRIES, INC.
|                      |  |                        | 
|                      |  | By:                    |  | /s/ Martha Kretzmer                   |  | 
|                      |  |                        |  | Martha Kretzmer                      
|                      |  |                        |  | President and Chief Executive Officer

In accordance with the Exchange Act, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates indicated.





|                      |  |                        |  |                         |  | 
|--------------------- |  | ---------------------- |  | ----------------------- |  | 
|Date: August 29, 2006 |  | JILCO INDUSTRIES, INC.
|                      |  |                        | 
|                      |  | By:                    |  | /s/ Martha Kretzmer     |  | 
|                      |  |                        |  | Martha Kretzmer        
|                      |  |                        |  | Chief Financial Officer



In accordance with the
Exchange Act, this report has been signed below by the following persons on behalf of the registrant in the capacities and on the date indicated.



| |  |                                      |  |                                                                                                                               |  |                
| |  | ------------------------------------ |  | ----------------------------------------------------------------------------------------------------------------------------- |  | ---------------
| |  | Signature                            |  | Title                                                                                                                         |  | Date           
| |  |                                      | 
| |  | /s/ Martha Kretzmer  Martha Kretzmer |  | President, Treasurer and
Chief Financial Officer (Principal Executive Officer and Principal Financial and Accounting Officer) |  | August 29, 2006
| |  |                                      | 
| |  | /s/ Martha Kretzmer  Martha Kretzmer |  | Director                                                                                                                      |  | August 29, 2006





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PART I. FINANCIAL INFORMATION

JILCO INDUSTRIES, INC.

BALANCE SHEETS

QUARTERLY AS OF OCTOBER 31, 2004-JULY 31, 2006

(UNAUDITED)



|                                         |  |               |   |  |                |   |  |                  |   |  |                  |   |  |               |   |  |                |   |  |                  |   |  |                  |  
|---------------------------------------- |  | ------------- | - |  | -------------- | - |  | ---------------- | - |  | ---------------- | - |  | ------------- | - |  | -------------- | - |  | ---------------- | - |  | ---------------- | -
|                                         |  | July 31, 2006 |   |  | April 30, 2006 |   |  | January 31, 2006 |   |  | October 31, 2005 |   |  | July 31, 2005 |   |  | April 30, 2005 |   |  | January 31, 2005 |   |  | October 31, 2004 |  
|ASSETS                                   |  |               |   |  |                |   |  |                  |   |  |                  |   |  |               |   |  |                |   |  |                  |   |  |                  |  
|CURRENT ASSETS                           |  |               |   |  |                |   |  |                  |   |  |                  |   |  |               |   |  |                |   |  |                  |   |  |                  |  
|Cash                                     |  | $512          |   |  | $554           |   |  | $771             |   |  | $813             |   |  | $671          |   |  | $671           |   |  | $718             |   |  | $751             |  
|                                         |  |               |   |  |                |   |  |                  |   |  |                  |   |  |               |   |  |                |   |  |                  |   |  |                  |  
|TOTAL CURRENT ASSETS                     |  | 512           |   |  | 554            |   |  | 771              |   |  | 813              |   |  | 671           |   |  | 671            |   |  | 718              |   |  | 751              |  
|                                         |  |               |   |  |                |   |  |                  |   |  |                  |   |  |               |   |  |                |   |  |                  |   |  |                  |  
|TOTAL ASSETS                             |  | $512          |   |  | $554           |   |  | $771             |   |  | $813             |   |  | $671          |   |  | $671           |   |  | $718             |   |  | $751             |  
|                                         |  |               |   |  |                |   |  |                  |   |  |                  |   |  |               |   |  |                |   |  |                  |   |  |                  |  
|                                         |  |               |   |  |                |   |  |                 
|LIABILITIES & SHAREHOLDERS EQUITY       |  |               |   |  |                |   |  |                  |   |  |                  |   |  |               |   |  |                |   |  |                  |   |  |                  |  
|CURRENT LIABILITIES                      |  |               |   |  |                |   |  |                  |   |  |                  |   |  |               |   |  |                |   |  |                  |   |  |                  |  
|Accounts payable                         |  | -             |   |  | -              |   |  | -                |   |  | -                |   |  | -             |   |  | -              |   |  | -                |   |  | -                |  
|Interest payable                         |  | $144,585      |   |  | $141,621       |   |  | $138,741         |   |  | $135,861         |   |  | $133,009      |   |  | $130,157       |   |  | $127,358         |   |  | 124,559          |  
|Notes payable                            |  | 76,000        |   |  | 76,000         |   |  | 76,000           |   |  | 76,000           |   |  | 76,000        |   |  | 76,000         |   |  | 76,000           |   |  | 76,000           |  
|Notes payable shareholder                |  | 57,166        |   |  | 57,166         |   |  | 57,166           |   |  | 57,166           |   |  | 56,166        |   |  | 55,166         |   |  | 54,250           |   |  | 54,250           |  
|Other accrued payables                   |  | 800           |   |  | -              |   |  | -                |   |  | -                |   |  | 800           |   |  | 800            |   |  | 1,600            |   |  | $1,600           |  
|                                         |  |               |   |  |                |   |  |                  |   |  |                  |   |  |               |   |  |                |   |  |                  |   |  |                  |  
|Total current liabilities                |  | 278,551       |   |  | 274,787        |   |  | 271,907          |   |  | 269,027          |   |  | 265,975       |   |  | 262,123        |   |  | 259,208          |   |  | 256,409          |  
|SHAREHOLDERS EQUITY                     |  |               |   |  |                |   |  |                  |   |  |                  |   |  |               |   |  |                |   |  |                  |   |  |                  |  
|Common stock, no par value               |  |               |   |  |                |   |  |                  |   |  |                  |   |  |               |   |  |                |   |  |                  |   |  |                  |  
|1,500,000 shares authorized              |  |               |   |  |                |   |  |                  |   |  |                  |   |  |               |   |  |                |   |  |                  |   |  |                  |  
|449,991 shares issued and outstanding    |  | 749,950       |   |  | 749,950        |   |  | 749,950          |   |  | 749,950          |   |  | 749,950       |   |  | 749,950        |   |  | 749,950          |   |  | 749,950          |  
|Accumulated deficit                      |  | (1,027,990    | ) |  | (1,024,184     | ) |  | (1,021,087       | ) |  | (1,018,164       | ) |  | (1,015,254    | ) |  | (1,011,402     | ) |  | (1,008,440       | ) |  | (1,005,608       | )
|                                         |  |               |   |  |                |   |  |                  |   |  |                  |   |  |               |   |  |                |   |  |                  |   |  |                  |  
|Total shareholders deficit              |  | (278,040      | ) |  | (274,234       | ) |  | (271,137         | ) |  | (268,214         | ) |  | (265,304      | ) |  | (261,452       | ) |  | (258,490         | ) |  | (255,658         | )
|                                         |  |               |   |  |                |   |  |                  |   |  |                  |   |  |               |   |  |                |   |  |                  |   |  |                  |  
|TOTAL LIABILITIES & SHAREHOLDERS EQUITY |  | $512          |   |  | $554           |   |  | $771             |   |  | $813             |   |  | $671          |   |  | $671           |   |  | $718             |   |  | $751             |  
|                                         |  |               |   |  |                |   |  |                  |   |  |                  |   |  |               |   |  |                |   |  |                  |   |  |                  |  



F-1



---

|                                                                                                   |  |               |   |  |                |   |  |                  |   |  |                  |   |  |               |   |  |                |   |  |                  |   |  |                  |  
|-------------------------------------------------------------------------------------------------- |  | ------------- | - |  | -------------- | - |  | ---------------- | - |  | ---------------- | - |  | ------------- | - |  | -------------- | - |  | ---------------- | - |  | ---------------- | -
|(UNAUDITED) JILCO INDUSTRIES, INC. BALANCE SHEETS QUARTERLY AS OF OCTOBER 31, 2002 - JULY 31, 2004 | 
|                                                                                                   |  |               |   |  |                |   |  |                 
|                                                                                                   |  | July 31, 2004 |   |  | April 30, 2004 |   |  | January 31, 2004 |   |  | October 31, 2003 |   |  | July 31, 2003 |   |  | April 30, 2003 |   |  | January 31, 2003 |   |  | October 31, 2002 |  
|ASSETS                                                                                             |  |               |   |  |                |   |  |                  |   |  |                  |   |  |               |   |  |                |   |  |                  |   |  |                  |  
|CURRENT ASSETS                                                                                     |  |               |   |  |                |   |  |                  |   |  |                  |   |  |               |   |  |                |   |  |                  |   |  |                  |  
|Cash                                                                                               |  | $784          |   |  | $817           |   |  | $155             |   |  | $208             |   |  | $4            |   |  | $37            |   |  | $870             |   |  | $903             |  
|                                                                                                   |  |               |   |  |                |   |  |                  |   |  |                  |   |  |               |   |  |                |   |  |                  |   |  |                  |  
|TOTAL CURRENT ASSETS                                                                               |  | 784           |   |  | 817            |   |  | 155              |   |  | 208              |   |  | 4             |   |  | 37             |   |  | 870              |   |  | 903              |  
|                                                                                                   |  |               |   |  |                |   |  |                  |   |  |                  |   |  |               |   |  |                |   |  |                  |   |  |                  |  
|TOTAL ASSETS                                                                                       |  | $784          |   |  | $817           |   |  | $155             |   |  | $208             |   |  | $4            |   |  | $37            |   |  | $870             |   |  | $903             |  
|                                                                                                   |  |               |   |  |                |   |  |                  |   |  |                  |   |  |               |   |  |                |   |  |                  |   |  |                  |  
|                                                                                                   |  |               |   |  |                |   |  |                 
|LIABILITIES & SHAREHOLDERS EQUITY                                                                 |  |               |   |  |                |   |  |                  |   |  |                  |   |  |               |   |  |                |   |  |                  |   |  |                  |  
|CURRENT LIABILITIES                                                                                |  |               |   |  |                |   |  |                  |   |  |                  |   |  |               |   |  |                |   |  |                  |   |  |                  |  
|Accounts payable                                                                                   |  | -             |   |  | -              |   |  | -                |   |  | -                |   |  | -             |   |  | -              |   |  | -                |   |  | -                |  
|Interest payable                                                                                   |  | $121,760      |   |  | 118,961        |   |  | 116,189          |   |  | 113,417          |   |  | 110,655       |   |  | $107,893       |   |  | 105,131          |   |  | 102,369          |  
|Notes payable                                                                                      |  | 76,000        |   |  | 76,000         |   |  | 76,000           |   |  | 76,000           |   |  | 75,500        |   |  | 75,500         |   |  | 75,500           |   |  | 75,500           |  
|Notes payable shareholder                                                                          |  | 54,250        |   |  | 54,250         |   |  | 53,250           |   |  | 53,250           |   |  | 53,250        |   |  | 53,250         |   |  | 53,250           |   |  | 53,250           |  
|Other accrued payables                                                                             |  | 1,600         |   |  | 800            |   |  | 800              |   |  | 800              |   |  | 800           |   |  | -              |   |  | 800              |   |  | 800              |  
|                                                                                                   |  |               |   |  |                |   |  |                  |   |  |                  |   |  |               |   |  |                |   |  |                  |   |  |                  |  
|Total current liabilities                                                                          |  | 253,610       |   |  | 250,011        |   |  | 246,239          |   |  | 243,467          |   |  | 240,205       |   |  | 236,643        |   |  | 234,681          |   |  | 231,919          |  
|SHAREHOLDERS EQUITY                                                                               |  |               |   |  |                |   |  |                  |   |  |                  |   |  |               |   |  |                |   |  |                  |   |  |                  |  
|Common stock, no par value                                                                         |  |               |   |  |                |   |  |                  |   |  |                  |   |  |               |   |  |                |   |  |                  |   |  |                  |  
|1,500,000 shares authorized                                                                        |  |               |   |  |                |   |  |                  |   |  |                  |   |  |               |   |  |                |   |  |                  |   |  |                  |  
|449,991 shares issued and outstanding                                                              |  | 749,950       |   |  | 749,950        |   |  | 749,950          |   |  | 749,950          |   |  | 749,950       |   |  | 749,950        |   |  | 749,950          |   |  | 749,950          |  
|Accumulated deficit                                                                                |  | (1,002,776    | ) |  | (999,144       | ) |  | (996,034         | ) |  | (993,209         | ) |  | (990,151      | ) |  | (986,556       | ) |  | (983,761         | ) |  | (980,966         | )
|                                                                                                   |  |               |   |  |                |   |  |                  |   |  |                  |   |  |               |   |  |                |   |  |                  |   |  |                  |  
|Total shareholders deficit                                                                        |  | (252,826      | ) |  | (249,194       | ) |  | (246,084         | ) |  | (243,259         | ) |  | (240,201      | ) |  | (236,606       | ) |  | (233,811         | ) |  | (231,016         | )
|                                                                                                   |  |               |   |  |                |   |  |                  |   |  |                  |   |  |               |   |  |                |   |  |                  |   |  |                  |  
|TOTAL LIABILITIES & SHAREHOLDERS EQUITY                                                           |  | $784          |   |  | $817           |   |  | $155             |   |  | $208             |   |  | $4            |   |  | $37            |   |  | $870             |   |  | $903             |  
|                                                                                                   |  |               |   |  |                |   |  |                  |   |  |                  |   |  |               |   |  |                |   |  |                  |   |  |                  |  



See Notes to Financial
Statements



F-2



---

JILCO INDUSTRIES, INC.

BALANCE SHEETS

QUARTERLY AS OF OCTOBER 31, 2000 - JULY 31, 2002

(UNAUDITED)



|                                         |  |               |   |  |                |   |  |                  |   |  |                  |   |  |               |   |  |                |   |  |                  |   |  |                  |  
|---------------------------------------- |  | ------------- | - |  | -------------- | - |  | ---------------- | - |  | ---------------- | - |  | ------------- | - |  | -------------- | - |  | ---------------- | - |  | ---------------- | -
|                                         |  | July 31, 2002 |   |  | April 30, 2002 |   |  | January 31, 2002 |   |  | October 31, 2001 |   |  | July 31, 2001 |   |  | April 30, 2001 |   |  | January 31, 2001 |   |  | October 31, 2000 |  
|ASSETS                                   |  |               |   |  |                |   |  |                  |   |  |                  |   |  |               |   |  |                |   |  |                  |   |  |                  |  
|CURRENT ASSETS                           |  |               |   |  |                |   |  |                  |   |  |                  |   |  |               |   |  |                |   |  |                  |   |  |                  |  
|Cash                                     |  | $1,098        |   |  | $1,401         |   |  | $2,354           |   |  | $547             |   |  | $580          |   |  | $613           |   |  | $746             |   |  | $999             |  
|                                         |  |               |   |  |                |   |  |                  |   |  |                  |   |  |               |   |  |                |   |  |                  |   |  |                  |  
|Total current assets                     |  | 1,098         |   |  | 1,401          |   |  | 2,354            |   |  | 547              |   |  | 580           |   |  | 613            |   |  | 746              |   |  | 999              |  
|                                         |  |               |   |  |                |   |  |                  |   |  |                  |   |  |               |   |  |                |   |  |                  |   |  |                  |  
|TOTAL ASSETS                             |  | $1,098        |   |  | $1,401         |   |  | $2,354           |   |  | $547             |   |  | $580          |   |  | $613           |   |  | $746             |   |  | $999             |  
|                                         |  |               |   |  |                |   |  |                  |   |  |                  |   |  |               |   |  |                |   |  |                  |   |  |                  |  
|                                         |  |               |   |  |                |   |  |                 
|LIABILITIES & SHAREHOLDERS EQUITY       |  |               |   |  |                |   |  |                  |   |  |                  |   |  |               |   |  |                |   |  |                  |   |  |                  |  
|CURRENT LIABILITIES                      |  |               |   |  |                |   |  |                  |   |  |                  |   |  |               |   |  |                |   |  |                  |   |  |                  |  
|Accounts Payable                         |  | -             |   |  | -              |   |  | -                |   |  | -                |   |  | -             |   |  | -              |   |  | -                |   |  | -                |  
|Interest payable                         |  | 99,608        |   |  | $96,846        |   |  | 94,084           |   |  | 91,382           |   |  | 88,680        |   |  | 85,978         |   |  | 83,276           |   |  | 80,574           |  
|Notes payable                            |  | 75,500        |   |  | 75,500         |   |  | 75,500           |   |  | 72,500           |   |  | 72,500        |   |  | 72,500         |   |  | 72,500           |   |  | 72,500           |  
|Notes payable to shareholder             |  | 53,250        |   |  | 53,250         |   |  | 53,250           |   |  | 53,250           |   |  | 53,250        |   |  | 53,250         |   |  | 53,250           |   |  | 53,250           |  
|Other accrued payables                   |  | $800          |   |  | -              |   |  | $800             |   |  | $1,600           |   |  | $1,600        |   |  | $800           |   |  | $800             |   |  | $800             |  
|                                         |  |               |   |  |                |   |  |                  |   |  |                  |   |  |               |   |  |                |   |  |                  |   |  |                  |  
|Total current liabilities                |  | 229,158       |   |  | 225,596        |   |  | 223,634          |   |  | 218,732          |   |  | 216,030       |   |  | 212,528        |   |  | 209,826          |   |  | 207,124          |  
|SHAREHOLDERS EQUITY                     |  |               |   |  |                |   |  |                  |   |  |                  |   |  |               |   |  |                |   |  |                  |   |  |                  |  
|Common stock, no par value               |  |               |   |  |                |   |  |                  |   |  |                  |   |  |               |   |  |                |   |  |                  |   |  |                  |  
|1,500,000 shares authorized              |  |               |   |  |                |   |  |                  |   |  |                  |   |  |               |   |  |                |   |  |                  |   |  |                  |  
|449,991 shares issued and outstanding    |  | 749,950       |   |  | 749,950        |   |  | 749,950          |   |  | 749,950          |   |  | 749,950       |   |  | 749,950        |   |  | 749,950          |   |  | 749,950          |  
|Accumulated deficit                      |  | (978,010      | ) |  | (974,145       | ) |  | (971,230         | ) |  | (968,135         | ) |  | (965,400      | ) |  | (961,865       | ) |  | (959,030         | ) |  | (956,075         | )
|                                         |  |               |   |  |                |   |  |                  |   |  |                  |   |  |               |   |  |                |   |  |                  |   |  |                  |  
|Total shareholders deficit              |  | (228,060      | ) |  | (224,195       | ) |  | (221,280         | ) |  | (218,185         | ) |  | (215,450      | ) |  | (211,915       | ) |  | (209,080         | ) |  | (206,125         | )
|                                         |  |               |   |  |                |   |  |                  |   |  |                  |   |  |               |   |  |                |   |  |                  |   |  |                  |  
|TOTAL LIABILITIES & SHAREHOLDERS EQUITY |  | $1,098        |   |  | $1,401         |   |  | $2,354           |   |  | $547             |   |  | $580          |   |  | $613           |   |  | $746             |   |  | $999             |  
|                                         |  |               |   |  |                |   |  |                  |   |  |                  |   |  |               |   |  |                |   |  |                  |   |  |                  |  



F-3



---

|                                                                                                   |  |               |   |  |                |   |  |                  |   |  |                  |   |  |  |  |  |  |  |  | 
|-------------------------------------------------------------------------------------------------- |  | ------------- | - |  | -------------- | - |  | ---------------- | - |  | ---------------- | - |  |  |  |  |  |  |  | 
|JILCO INDUSTRIES, INC. BALANCE SHEETS QUARTERLY AS OF OCTOBER 31, 1999 - JULY 31, 2000 (UNAUDITED)
|                                                                                                   |  |               |   |  |                |   |  |                 
|                                                                                                   |  | July 31, 2000 |   |  | April 30, 2000 |   |  | January 31, 2000 |   |  | October 31, 1999 |   |  |  |  |  |  |  |  | 
|ASSETS                                                                                             |  |               |   |  |                |   |  |                  |   |  |                  |   |  |  |  |  |  |  |  | 
|CURRENT ASSETS                                                                                     |  |               |   |  |                |   |  |                  |   |  |                  |   |  |  |  |  |  |  |  | 
|Cash                                                                                               |  | $1,032        |   |  | $1,065         |   |  | $1,185           |   |  | $2,583           |   |  |  |  |  |  |  |  | 
|                                                                                                   |  |               |   |  |                |   |  |                  |   |  |                  |   |  |  |  |  |  |  |  | 
|Total current assets                                                                               |  | 1,032         |   |  | 1,065          |   |  | 1,185            |   |  | 2,583            |   |  |  |  |  |  |  |  | 
|                                                                                                   |  |               |   |  |                |   |  |                  |   |  |                  |   |  |  |  |  |  |  |  | 
|TOTAL ASSETS                                                                                       |  | $1,032        |   |  | $1,065         |   |  | $1,185           |   |  | $2,583           |   |  |  |  |  |  |  |  | 
|                                                                                                   |  |               |   |  |                |   |  |                  |   |  |                  |   |  |  |  |  |  |  |  | 
|                                                                                                   |  |               |   |  |                |   |  |                 
|LIABILITIES & SHAREHOLDERS EQUITY                                                                 |  |               |   |  |                |   |  |                  |   |  |                  |   |  |  |  |  |  |  |  | 
|CURRENT LIABILITIES                                                                                |  |               |   |  |                |   |  |                  |   |  |                  |   |  |  |  |  |  |  |  | 
|Accounts payable                                                                                   |  | -             |   |  | -              |   |  | -                |   |  | $8,299           |   |  |  |  |  |  |  |  | 
|Interest payable                                                                                   |  | 77,873        |   |  | $75,171        |   |  | $72,469          |   |  | 69,947           |   |  |  |  |  |  |  |  | 
|Notes payable                                                                                      |  | 72,500        |   |  | 72,500         |   |  | 72,500           |   |  | 63,500           |   |  |  |  |  |  |  |  | 
|Notes payable shareholder                                                                          |  | 53,250        |   |  | 53,250         |   |  | 53,250           |   |  | 53,250           |   |  |  |  |  |  |  |  | 
|Other accrued payables                                                                             |  | 800           |   |  | -              |   |  | -                |   |  | -                |   |  |  |  |  |  |  |  | 
|                                                                                                   |  |               |   |  |                |   |  |                  |   |  |                  |   |  |  |  |  |  |  |  | 
|Total current liabilities                                                                          |  | 204,423       |   |  | 200,921        |   |  | 198,219          |   |  | 194,996          |   |  |  |  |  |  |  |  | 
|SHAREHOLDERS EQUITY                                                                               |  |               |   |  |                |   |  |                  |   |  |                  |   |  |  |  |  |  |  |  | 
|Common stock, no par value                                                                         |  |               |   |  |                |   |  |                  |   |  |                  |   |  |  |  |  |  |  |  | 
|1,500,000 shares authorized                                                                        |  |               |   |  |                |   |  |                  |   |  |                  |   |  |  |  |  |  |  |  | 
|449,991 shares issued and outstanding                                                              |  | 749,950       |   |  | 749,950        |   |  | 749,950          |   |  | 749,950          |   |  |  |  |  |  |  |  | 
|Accumulated deficit                                                                                |  | (953,341      | ) |  | (949,806       | ) |  | (946,984         | ) |  | (942,363         | ) |  |  |  |  |  |  |  | 
|                                                                                                   |  |               |   |  |                |   |  |                  |   |  |                  |   |  |  |  |  |  |  |  | 
|Total shareholders deficit                                                                        |  | (203,391      | ) |  | (199,856       | ) |  | (197,034         | ) |  | (192,413         | ) |  |  |  |  |  |  |  | 
|                                                                                                   |  |               |   |  |                |   |  |                  |   |  |                  |   |  |  |  |  |  |  |  | 
|TOTAL LIABILITIES & SHAREHOLDERS EQUITY                                                           |  | $1,032        |   |  | $1,065         |   |  | $1,185           |   |  | $2,583           |   |  |  |  |  |  |  |  | 
|                                                                                                   |  |               |   |  |                |   |  |                  |   |  |                  |   |  |  |  |  |  |  |  | 

See Notes to Financial Statements



F-4



---

JILCO INDUSTRIES, INC.

STATEMENTS OF LOSS AND DEFICIT

QUARTERLY FOR PERIODS ENDING OCTOBER 31, 2004 - JULY 31, 2006

(UNAUDITED)



|                                                |  |                          |   |  |                               |   |  |                                 |   |  |                                 |   |  |                          |   |  |                               |   |  |                                 |   |  |                                 |  
|----------------------------------------------- |  | ------------------------ | - |  | ----------------------------- | - |  | ------------------------------- | - |  | ------------------------------- | - |  | ------------------------ | - |  | ----------------------------- | - |  | ------------------------------- | - |  | ------------------------------- | -
|                                                |  | YEAR ENDED July 31, 2006 |   |  | 3 MONTHS ENDED April 30, 2006 |   |  | 3 MONTHS ENDED January 31, 2006 |   |  | 3 MONTHS ENDED October 31, 2005 |   |  | YEAR ENDED July 31, 2005 |   |  | 3 MONTHS ENDED April 30, 2005 |   |  | 3 MONTHS ENDED January 31, 2005 |   |  | 3 MONTHS ENDED October 31, 2004 |  
|EXPENSES                                        |  |                          |   |  |                               |   |  |                                 |   |  |                                 |   |  |                          |   |  |                               |   |  |                                 |   |  |                                 |  
|Professional fees                               |  | -                        |   |  | -                             |   |  | -                               |   |  | -                               |   |  | -                        |   |  | -                             |   |  | -                               |   |  | -                               |  
|Fees and licenses                               |  | $193                     |   |  | $67                           |   |  | $42                             |   |  | $42                             |   |  | $213                     |   |  | $47                           |   |  | $33                             |   |  | $33                             |  
|Printer fees                                    |  | -                        |   |  | -                             |   |  | -                               |   |  | -                               |   |  | -                        |   |  | -                             |   |  | -                               |   |  | -                               |  
|Interest expense                                |  | 11,576                   |   |  | $2,880                        |   |  | $2,880                          |   |  | $2,852                          |   |  | 11,249                   |   |  | 2,799                         |   |  | 2,799                           |   |  | 2,799                           |  
|Sundry and other                                |  | 150                      |   |  | 150                           |   |  | -                               |   |  | -                               |   |  | 100                      |   |  | -                             |   |  | -                               |   |  | -                               |  
|                                                |  |                          |   |  |                               |   |  |                                 |   |  |                                 |   |  |                          |   |  |                               |   |  |                                 |   |  |                                 |  
|Total expenses                                  |  | 11,919                   |   |  | 3,097                         |   |  | 2,922                           |   |  | 2,894                           |   |  | 11,562                   |   |  | 2,846                         |   |  | 2,832                           |   |  | 2,832                           |  
|                                                |  |                          |   |  |                               |   |  |                                 |   |  |                                 |   |  |                          |   |  |                               |   |  |                                 |   |  |                                 |  
|INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES |  | (11,919                  | ) |  | (3,097                        | ) |  | (2,922                          | ) |  | (2,894                          | ) |  | (11,562                  | ) |  | (2,846                        | ) |  | (2,832                          | ) |  | (2,832                          | )
|PROVISION FOR INCOME TAXES                      |  | 816                      |   |  | -                             |   |  | -                               |   |  | 16                              |   |  | 916                      |   |  | 116                           |   |  | -                               |   |  | -                               |  
|                                                |  |                          |   |  |                               |   |  |                                 |   |  |                                 |   |  |                          |   |  |                               |   |  |                                 |   |  |                                 |  
|NET INCOME (LOSS)                               |  | (12,735                  | ) |  | (3,097                        | ) |  | (2,922                          | ) |  | (2,910                          | ) |  | (12,478                  | ) |  | (2,962                        | ) |  | (2,832                          | ) |  | (2,832                          | )
|ACCUMULATED DEFICIT, BEGINNING OF PERIOD        |  | (1,015,254               | ) |  | (1,021,086                    | ) |  | (1,018,164                      | ) |  | (1,015,254                      | ) |  | (1,002,776               | ) |  | (1,008,440                    | ) |  | (1,005,608                      | ) |  | (1,002,776                      | )
|                                                |  |                          |   |  |                               |   |  |                                 |   |  |                                 |   |  |                          |   |  |                               |   |  |                                 |   |  |                                 |  
|ACCUMULATED DEFICIT, END OF PERIOD              |  | ($1,027,990              | ) |  | ($1,024,183                   | ) |  | ($1,021,086                     | ) |  | ($1,018,164                     | ) |  | ($1,015,254              | ) |  | ($1,011,402                   | ) |  | ($1,008,440                     | ) |  | ($1,005,608                     | )
|                                                |  |                          |   |  |                               |   |  |                                 |   |  |                                 |   |  |                          |   |  |                               |   |  |                                 |   |  |                                 |  
|BASIC INCOME (LOSS) PER SHARE                   |  | ($0.03                   | ) |  | ($0.01                        | ) |  | ($0.01                          | ) |  | ($0.01                          | ) |  | ($0.03                   | ) |  | ($0.01                        | ) |  | ($0.01                          | ) |  | ($0.01                          | )
|                                                |  |                          |   |  |                               |   |  |                                 |   |  |                                 |   |  |                          |   |  |                               |   |  |                                 |   |  |                                 |  
|DILUTED INCOME (LOSS) PER SHARE                 |  | ($0.03                   | ) |  | ($0.01                        | ) |  | ($0.01                          | ) |  | ($0.01                          | ) |  | ($0.03                   | ) |  | ($0.01                        | ) |  | ($0.01                          | ) |  | ($0.01                          | )
|                                                |  |                          |   |  |                               |   |  |                                 |   |  |                                 |   |  |                          |   |  |                               |   |  |                                 |   |  |                                 |  
|WEIGHTED-AVERAGE SHARES OUTSTANDING             |  | 449,991                  |   |  | 449,991                       |   |  | 449,991                         |   |  | 449,991                         |   |  | 449,991                  |   |  | 449,991                       |   |  | 449,991                         |   |  | 449,991                         |  
|                                                |  |                          |   |  |                               |   |  |                                 |   |  |                                 |   |  |                          |   |  |                               |   |  |                                 |   |  |                                 |  



F-5



---

|                                                                                                             |  |                          |   |  |                               |   |  |                                 |   |  |                                 |   |  |                          |   |  |                               |   |  |                                 |   |  |                                 |  
|------------------------------------------------------------------------------------------------------------ |  | ------------------------ | - |  | ----------------------------- | - |  | ------------------------------- | - |  | ------------------------------- | - |  | ------------------------ | - |  | ----------------------------- | - |  | ------------------------------- | - |  | ------------------------------- | -
|JILCO INDUSTRIES, INC. STATEMENTS OF LOSS AND DEFICIT QUARTERLY - AUGUST 1, 2002 - JULY 31, 2004 (UNAUDITED) | 
|                                                                                                             |  | YEAR ENDED July 31, 2004 |   |  | 3 MONTHS ENDED April 30, 2004 |   |  | 3 MONTHS ENDED January 31, 2004 |   |  | 3 MONTHS ENDED October 31, 2003 |   |  | YEAR ENDED July 31, 2003 |   |  | 3 MONTHS ENDED April 30, 2003 |   |  | 3 MONTHS ENDED January 31, 2003 |   |  | 3 MONTHS ENDED October 31, 2002 |  
|EXPENSES                                                                                                     |  |                          |   |  |                               |   |  |                                 |   |  |                                 |   |  |                          |   |  |                               |   |  |                                 |   |  |                                 |  
|Professional fees                                                                                            |  | -                        |   |  | -                             |   |  | -                               |   |  | -                               |   |  | -                        |   |  | -                             |   |  | -                               |   |  | -                               |  
|Fees and licenses                                                                                            |  | $150                     |   |  | $58                           |   |  | $33                             |   |  | $26                             |   |  | $132                     |   |  | $33                           |   |  | $33                             |   |  | $33                             |  
|Printer fees                                                                                                 |  | -                        |   |  | -                             |   |  | -                               |   |  | -                               |   |  | -                        |   |  | -                             |   |  | -                               |   |  | -                               |  
|Interest expense                                                                                             |  | 11,105                   |   |  | 2,772                         |   |  | 2,772                           |   |  | 2,762                           |   |  | 11,048                   |   |  | 2,762                         |   |  | 2,762                           |   |  | 2,762                           |  
|Sundry and other                                                                                             |  | 550                      |   |  | 280                           |   |  | -                               |   |  | 270                             |   |  | -                        |   |  | -                             |   |  | -                               |   |  | -                               |  
|                                                                                                             |  |                          |   |  |                               |   |  |                                 |   |  |                                 |   |  |                          |   |  |                               |   |  |                                 |   |  |                                 |  
|Total expenses                                                                                               |  | 11,805                   |   |  | 3,110                         |   |  | 2,805                           |   |  | 3,058                           |   |  | 11,180                   |   |  | 2,795                         |   |  | 2,795                           |   |  | 2,795                           |  
|                                                                                                             |  |                          |   |  |                               |   |  |                                 |   |  |                                 |   |  |                          |   |  |                               |   |  |                                 |   |  |                                 |  
|INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES                                                              |  | (11,805                  | ) |  | (3,110                        | ) |  | (2,805                          | ) |  | (3,058                          | ) |  | (11,180                  | ) |  | (2,795                        | ) |  | (2,795                          | ) |  | (2,795                          | )
|PROVISION FOR INCOME TAXES                                                                                   |  | 820                      |   |  | -                             |   |  | 20                              |   |  | -                               |   |  | 962                      |   |  | -                             |   |  | -                               |   |  | 162                             |  
|                                                                                                             |  |                          |   |  |                               |   |  |                                 |   |  |                                 |   |  |                          |   |  |                               |   |  |                                 |   |  |                                 |  
|NET INCOME (LOSS)                                                                                            |  | (12,625                  | ) |  | (3,110                        | ) |  | (2,825                          | ) |  | (3,058                          | ) |  | (12,142                  | ) |  | (2,795                        | ) |  | (2,795                          | ) |  | (2,957                          | )
|ACCUMULATED DEFICIT, BEGINNING OF PERIOD                                                                     |  | (990,151                 | ) |  | (996,035                      | ) |  | (993,209                        | ) |  | (990,151                        | ) |  | (978,010                 | ) |  | (983,763                      | ) |  | (980,968                        | ) |  | (978,010                        | )
|                                                                                                             |  |                          |   |  |                               |   |  |                                 |   |  |                                 |   |  |                          |   |  |                               |   |  |                                 |   |  |                                 |  
|ACCUMULATED DEFICIT, END OF PERIOD                                                                           |  | ($1,002,776              | ) |  | ($999,145                     | ) |  | ($996,035                       | ) |  | ($993,209                       | ) |  | ($990,151                | ) |  | ($986,558                     | ) |  | ($983,763                       | ) |  | ($980,968                       | )
|                                                                                                             |  |                          |   |  |                               |   |  |                                 |   |  |                                 |   |  |                          |   |  |                               |   |  |                                 |   |  |                                 |  
|BASIC INCOME (LOSS) PER SHARE                                                                                |  | ($0.03                   | ) |  | ($0.01                        | ) |  | ($0.01                          | ) |  | ($0.01                          | ) |  | ($0.03                   | ) |  | ($0.01                        | ) |  | ($0.01                          | ) |  | ($0.01                          | )
|                                                                                                             |  |                          |   |  |                               |   |  |                                 |   |  |                                 |   |  |                          |   |  |                               |   |  |                                 |   |  |                                 |  
|DILUTED INCOME (LOSS) PER SHARE                                                                              |  | ($0.03                   | ) |  | ($0.01                        | ) |  | ($0.01                          | ) |  | ($0.01                          | ) |  | ($0.03                   | ) |  | ($0.01                        | ) |  | ($0.01                          | ) |  | ($0.01                          | )
|                                                                                                             |  |                          |   |  |                               |   |  |                                 |   |  |                                 |   |  |                          |   |  |                               |   |  |                                 |   |  |                                 |  
|WEIGHTED-AVERAGE SHARES OUTSTANDING                                                                          |  | 449,991                  |   |  | 449,991                       |   |  | 449,991                         |   |  | 449,991                         |   |  | 449,991                  |   |  | 449,991                       |   |  | 449,991                         |   |  | 449,991                         |  
|                                                                                                             |  |                          |   |  |                               |   |  |                                 |   |  |                                 |   |  |                          |   |  |                               |   |  |                                 |   |  |                                 |  

See Notes to Financial Statements



F-6



---

JILCO INDUSTRIES, INC.

STATEMENTS OF LOSS AND DEFICIT

QUARTERLY FOR PERIODS ENDING OCTOBER 31, 2000 - JULY 31, 2002

(UNAUDITED)



|                                                |  |                          |   |  |                               |   |  |                                 |   |  |                                 |   |  |                          |   |  |                               |   |  |                                 |   |  |                                 |  
|----------------------------------------------- |  | ------------------------ | - |  | ----------------------------- | - |  | ------------------------------- | - |  | ------------------------------- | - |  | ------------------------ | - |  | ----------------------------- | - |  | ------------------------------- | - |  | ------------------------------- | -
|                                                |  | YEAR ENDED July 31, 2002 |   |  | 3 MONTHS ENDED April 30, 2002 |   |  | 3 MONTHS ENDED January 31, 2002 |   |  | 3 MONTHS ENDED October 31, 2001 |   |  | YEAR ENDED July 31, 2001 |   |  | 3 MONTHS ENDED April 30, 2001 |   |  | 3 MONTHS ENDED January 31, 2001 |   |  | 3 MONTHS ENDED October 31, 2000 |  
|EXPENSES                                        |  |                          |   |  |                               |   |  |                                 |   |  |                                 |   |  |                          |   |  |                               |   |  |                                 |   |  |                                 |  
|Professional fees                               |  | -                        |   |  | -                             |   |  | -                               |   |  | -                               |   |  | -                        |   |  | -                             |   |  | -                               |   |  | -                               |  
|Fees and licenses                               |  | $152                     |   |  | $53                           |   |  | $33                             |   |  | $33                             |   |  | $132                     |   |  | $33                           |   |  | $33                             |   |  | $33                             |  
|Printer fees                                    |  | -                        |   |  | -                             |   |  | -                               |   |  | -                               |   |  | -                        |   |  | -                             |   |  | -                               |   |  | -                               |  
|Interest expense                                |  | 10,928                   |   |  | 2,762                         |   |  | 2,702                           |   |  | 2,702                           |   |  | 10,808                   |   |  | 2,702                         |   |  | 2,702                           |   |  | 2,702                           |  
|Sundry and other                                |  | 730                      |   |  | 100                           |   |  | 360                             |   |  | -                               |   |  | 320                      |   |  | 100                           |   |  | 220                             |   |  | -                               |  
|                                                |  |                          |   |  |                               |   |  |                                 |   |  |                                 |   |  |                          |   |  |                               |   |  |                                 |   |  |                                 |  
|Total expenses                                  |  | 11,810                   |   |  | 2,915                         |   |  | 3,095                           |   |  | 2,735                           |   |  | 11,260                   |   |  | 2,835                         |   |  | 2,955                           |   |  | 2,735                           |  
|                                                |  |                          |   |  |                               |   |  |                                 |   |  |                                 |   |  |                          |   |  |                               |   |  |                                 |   |  |                                 |  
|INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES |  | (11,810                  | ) |  | (2,915                        | ) |  | (3,095                          | ) |  | (2,735                          | ) |  | (11,260                  | ) |  | (2,835                        | ) |  | (2,955                          | ) |  | (2,735                          | )
|                                                |  |                          |   |  |                               |   |  |                                
|PROVISION FOR INCOME
TAXES                      |  | 800                      |   |  | -                             |   |  | -                               |   |  | -                               |   |  | 800                      |   |  | -                             |   |  | -                               |   |  | -                               |  
|                                                |  |                          |   |  |                               |   |  |                                 |   |  |                                 |   |  |                          |   |  |                               |   |  |                                 |   |  |                                 |  
|NET INCOME (LOSS)                               |  | (12,610                  | ) |  | (2,915                        | ) |  | (3,095                          | ) |  | (2,735                          | ) |  | (12,060                  | ) |  | (2,835                        | ) |  | (2,955                          | ) |  | (2,735                          | )
|                                                |  |                          |   |  |                               |   |  |                                
|ACCUMULATED DEFICIT, BEGINNING OF
PERIOD        |  | (965,400                 | ) |  | (971,231                      | ) |  | (968,135                        | ) |  | (965,400                        | ) |  | (953,341                 | ) |  | (959,031                      | ) |  | (956,076                        | ) |  | (953,341                        | )
|                                                |  |                          |   |  |                               |   |  |                                 |   |  |                                 |   |  |                          |   |  |                               |   |  |                                 |   |  |                                 |  
|ACCUMULATED DEFICIT, END OF PERIOD              |  | ($978,010                | ) |  | ($974,146                     | ) |  | ($971,231                       | ) |  | ($968,135                       | ) |  | ($965,400                | ) |  | ($961,866                     | ) |  | ($959,031                       | ) |  | ($956,076                       | )
|                                                |  |                          |   |  |                               |   |  |                                 |   |  |                                 |   |  |                          |   |  |                               |   |  |                                 |   |  |                                 |  
|                                                |  |                          |   |  |                               |   |  |                                
|BASIC INCOME (LOSS) PER SHARE                   |  | ($0.03                   | ) |  | ($0.01                        | ) |  | ($0.01                          | ) |  | ($0.01                          | ) |  | ($0.03                   | ) |  | ($0.01                        | ) |  | ($0.01                          | ) |  | ($0.01                          | )
|                                                |  |                          |   |  |                               |   |  |                                 |   |  |                                 |   |  |                          |   |  |                               |   |  |                                 |   |  |                                 |  
|                                                |  |                          |   |  |                               |   |  |                                
|DILUTED INCOME (LOSS) PER SHARE                 |  | ($0.03                   | ) |  | ($0.01                        | ) |  | ($0.01                          | ) |  | ($0.01                          | ) |  | ($0.03                   | ) |  | ($0.01                        | ) |  | ($0.01                          | ) |  | ($0.01                          | )
|                                                |  |                          |   |  |                               |   |  |                                 |   |  |                                 |   |  |                          |   |  |                               |   |  |                                 |   |  |                                 |  
|                                                |  |                          |   |  |                               |   |  |                                
|WEIGHTED-AVERAGE SHARES OUTSTANDING             |  | 449,991                  |   |  | 449,991                       |   |  | 449,991                         |   |  | 449,991                         |   |  | 449,991                  |   |  | 449,991                       |   |  | 449,991                         |   |  | 449,991                         |  
|                                                |  |                          |   |  |                               |   |  |                                 |   |  |                                 |   |  |                          |   |  |                               |   |  |                                 |   |  |                                 |  



F-7



---

|                                                                                                                                |  |                          |   |  |                               |   |  |                                 |   |  |                                 |   |  |  |  |  |  |  |  | 
|------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------ | - |  | ----------------------------- | - |  | ------------------------------- | - |  | ------------------------------- | - |  |  |  |  |  |  |  | 
|JILCO INDUSTRIES, INC. STATEMENTS OF LOSS AND DEFICIT QUARTERLY FOR PERIODS ENDING OCTOBER 31, 1999 - JULY 31, 2000 (UNAUDITED)
|                                                                                                                                |  |                          |   |  |                               |   |  |                                
|                                                                                                                                |  | YEAR ENDED July 31, 2000 |   |  | 3 MONTHS ENDED April 30, 2000 |   |  | 3 MONTHS ENDED January 31, 2000 |   |  | 3 MONTHS ENDED October 31, 1999 |   |  |  |  |  |  |  |  | 
|EXPENSES                                                                                                                        |  |                          |   |  |                               |   |  |                                 |   |  |                                 |   |  |  |  |  |  |  |  | 
|Professional fees                                                                                                               |  | $3,449                   |   |  | -                             |   |  | -                               |   |  | $3,449                          |   |  |  |  |  |  |  |  | 
|Fees and licenses                                                                                                               |  | 113                      |   |  | $40                           |   |  | $10                             |   |  | 30                              |   |  |  |  |  |  |  |  | 
|Printer fees                                                                                                                    |  | 2,996                    |   |  | 80                            |   |  | 2,089                           |   |  | 827                             |   |  |  |  |  |  |  |  | 
|Interest expense                                                                                                                |  | 10,328                   |   |  | 2,702                         |   |  | 2,522                           |   |  | 2,402                           |   |  |  |  |  |  |  |  | 
|Sundry and other                                                                                                                |  | -                        |   |  | -                             |   |  | -                               |   |  | -                               |   |  |  |  |  |  |  |  | 
|                                                                                                                                |  |                          |   |  |                               |   |  |                                 |   |  |                                 |   |  |  |  |  |  |  |  | 
|Total expenses                                                                                                                  |  | 16,886                   |   |  | 2,822                         |   |  | 4,621                           |   |  | 6,708                           |   |  |  |  |  |  |  |  | 
|                                                                                                                                |  |                          |   |  |                               |   |  |                                 |   |  |                                 |   |  |  |  |  |  |  |  | 
|INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES                                                                                 |  | (16,886                  | ) |  | (2,822                        | ) |  | (4,621                          | ) |  | (6,708                          | ) |  |  |  |  |  |  |  | 
|                                                                                                                                |  |                          |   |  |                               |   |  |                                
|PROVISION FOR INCOME
TAXES                                                                                                      |  | 800                      |   |  | -                             |   |  | -                               |   |  | -                               |   |  |  |  |  |  |  |  | 
|                                                                                                                                |  |                          |   |  |                               |   |  |                                 |   |  |                                 |   |  |  |  |  |  |  |  | 
|NET INCOME (LOSS)                                                                                                               |  | (17,686                  | ) |  | (2,822                        | ) |  | (4,621                          | ) |  | (6,708                          | ) |  |  |  |  |  |  |  | 
|                                                                                                                                |  |                          |   |  |                               |   |  |                                
|ACCUMULATED DEFICIT, BEGINNING OF
PERIOD                                                                                        |  | (935,655                 | ) |  | (946,984                      | ) |  | (942,363                        | ) |  | (935,655                        | ) |  |  |  |  |  |  |  | 
|                                                                                                                                |  |                          |   |  |                               |   |  |                                 |   |  |                                 |   |  |  |  |  |  |  |  | 
|                                                                                                                                |  |                          |   |  |                               |   |  |                                
|ACCUMULATED DEFICIT, END OF PERIOD                                                                                              |  | ($953,341                | ) |  | ($949,806                     | ) |  | ($946,984                       | ) |  | ($942,363                       | ) |  |  |  |  |  |  |  | 
|                                                                                                                                |  |                          |   |  |                               |   |  |                                 |   |  |                                 |   |  |  |  |  |  |  |  | 
|                                                                                                                                |  |                          |   |  |                               |   |  |                                
|BASIC INCOME (LOSS) PER SHARE                                                                                                   |  | ($0.04                   | ) |  | ($0.01                        | ) |  | ($0.01                          | ) |  | ($0.01                          | ) |  |  |  |  |  |  |  | 
|                                                                                                                                |  |                          |   |  |                               |   |  |                                 |   |  |                                 |   |  |  |  |  |  |  |  | 
|                                                                                                                                |  |                          |   |  |                               |   |  |                                
|DILUTED INCOME (LOSS) PER SHARE                                                                                                 |  | ($0.04                   | ) |  | ($0.01                        | ) |  | ($0.01                          | ) |  | ($0.01                          | ) |  |  |  |  |  |  |  | 
|                                                                                                                                |  |                          |   |  |                               |   |  |                                 |   |  |                                 |   |  |  |  |  |  |  |  | 
|                                                                                                                                |  |                          |   |  |                               |   |  |                                
|WEIGHTED-AVERAGE SHARES OUTSTANDING                                                                                             |  | 449,991                  |   |  | 449,991                       |   |  | 449,991                         |   |  | 449,991                         |   |  |  |  |  |  |  |  | 
|                                                                                                                                |  |                          |   |  |                               |   |  |                                 |   |  |                                 |   |  |  |  |  |  |  |  | 

See Notes to Financial Statements



F-8



---

JILCO INDUSTRIES, INC.

STATEMENTS OF CASH FLOWS

QUARTERLY FOR PERIODS ENDING OCTOBER 31, 2004 - JULY 31, 2006

(UNAUDITED)



|                                                  |  |                          |   |  |                               |   |  |                                 |   |  |                                 |   |  |                          |   |  |                               |   |  |                                 |   |  |                                 |  
|------------------------------------------------- |  | ------------------------ | - |  | ----------------------------- | - |  | ------------------------------- | - |  | ------------------------------- | - |  | ------------------------ | - |  | ----------------------------- | - |  | ------------------------------- | - |  | ------------------------------- | -
|                                                  |  | YEAR ENDED July 31, 2006 |   |  | 3 MONTHS ENDED April 30, 2006 |   |  | 3 MONTHS ENDED January 31, 2006 |   |  | 3 MONTHS ENDED October 31, 2005 |   |  | YEAR ENDED July 31, 2005 |   |  | 3 MONTHS ENDED April 30, 2005 |   |  | 3 MONTHS ENDED January 31, 2005 |   |  | 3 MONTHS ENDED October 31, 2004 |  
|CASH FLOWS FROM OPERATING ACTIVITIES              |  |                          |   |  |                               |   |  |                                 |   |  |                                 |   |  |                          |   |  |                               |   |  |                                 |   |  |                                 |  
|Net income (loss)                                 |  | ($12,735                 | ) |  | ($3,097                       | ) |  | ($2,922                         | ) |  | ($2,910                         | ) |  | ($12,478                 | ) |  | ($2,962                       | ) |  | ($2,832                         | ) |  | ($2,832                         | )
|Increase (decrease) in accounts payable           |  | -                        |   |  | -                             |   |  | -                               |   |  | -                               |   |  | -                        |   |  | -                             |   |  | -                               |   |  | -                               |  
|Increase in accrued interest                      |  | 11,576                   |   |  | 2,880                         |   |  | 2,880                           |   |  | 2,852                           |   |  | 11,249                   |   |  | 2,799                         |   |  | 2,799                           |   |  | 2,799                           |  
|Increase (decrease) in accrued expenses           |  | -                        |   |  | -                             |   |  | -                               |   |  | (800                            | ) |  | (800                     | ) |  | (800                          | ) |  | -                               |   |  | -                               |  
|                                                  |  |                          |   |  |                               |   |  |                                 |   |  |                                 |   |  |                          |   |  |                               |   |  |                                 |   |  |                                 |  
|Net cash used in operating activities             |  | (1,159                   | ) |  | (217                          | ) |  | (42                             | ) |  | (858                            | ) |  | (2,029                   | ) |  | (963                          | ) |  | (33                             | ) |  | (33                             | )
|                                                  |  |                          |   |  |                               |   |  |                                 |   |  |                                 |   |  |                          |   |  |                               |   |  |                                 |   |  |                                 |  
|CASH FLOWS FROM FINANCING ACTIVITIES              |  |                          |   |  |                               |   |  |                                 |   |  |                                 |   |  |                          |   |  |                               |   |  |                                 |   |  |                                 |  
|Proceeds from notes payable                       |  | 1,000                    |   |  | -                             |   |  | -                               |   |  | 1,000                           |   |  | 1,916                    |   |  | 916                           |   |  | -                               |   |  | -                               |  
|                                                  |  |                          |   |  |                               |   |  |                                 |   |  |                                 |   |  |                          |   |  |                               |   |  |                                 |   |  |                                 |  
|Net cash provided by financing activities         |  | 1,000                    |   |  | 0                             |   |  | 0                               |   |  | 1,000                           |   |  | 1,916                    |   |  | 916                           |   |  | 0                               |   |  | 0                               |  
|                                                  |  |                          |   |  |                               |   |  |                                 |   |  |                                 |   |  |                          |   |  |                               |   |  |                                 |   |  |                                 |  
|NET INCREASE (DECREASE) IN CASH                   |  | (159                     | ) |  | (217                          | ) |  | (42                             | ) |  | 142                             |   |  | (113                     | ) |  | (47                           | ) |  | (33                             | ) |  | (33                             | )
|CASH, BEGINNING OF PERIOD                         |  | 671                      |   |  | 771                           |   |  | 813                             |   |  | 671                             |   |  | 784                      |   |  | 718                           |   |  | 751                             |   |  | 784                             |  
|                                                  |  |                          |   |  |                               |   |  |                                 |   |  |                                 |   |  |                          |   |  |                               |   |  |                                 |   |  |                                 |  
|CASH, END OF PERIOD                               |  | $512                     |   |  | $554                          |   |  | $771                            |   |  | $813                            |   |  | $671                     |   |  | $671                          |   |  | $718                            |   |  | $751                            |  
|                                                  |  |                          |   |  |                               |   |  |                                 |   |  |                                 |   |  |                          |   |  |                               |   |  |                                 |   |  |                                 |  
|SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION |  |                          |   |  |                               |   |  |                                 |   |  |                                 |   |  |                          |   |  |                               |   |  |                                 |   |  |                                 |  
|INTEREST PAID                                     |  | -                        |   |  | -                             |   |  | -                               |   |  | -                               |   |  | -                        |   |  | -                             |   |  | -                               |   |  | -                               |  
|                                                  |  |                          |   |  |                               |   |  |                                 |   |  |                                 |   |  |                          |   |  |                               |   |  |                                 |   |  |                                 |  
|INCOME TAXES PAID                                 |  | $800                     |   |  | -                             |   |  | -                               |   |  | $800                            |   |  | $800                     |   |  | $800                          |   |  | -                               |   |  | -                               |  
|                                                  |  |                          |   |  |                               |   |  |                                 |   |  |                                 |   |  |                          |   |  |                               |   |  |                                 |   |  |                                 |  



F-9



---

JILCO INDUSTRIES, INC.

STATEMENTS OF CASH FLOWS

QUARTERLY FOR PERIODS ENDING OCTOBER 31, 2002 - JULY 31, 2004

(UNAUDITED)

|                                                  |  |                        |   |  |                             |   |  |                               |   |  |                               |   |  |                        |   |  |                             |   |  |                               |   |  |                               |  
|------------------------------------------------- |  | ---------------------- | - |  | --------------------------- | - |  | ----------------------------- | - |  | ----------------------------- | - |  | ---------------------- | - |  | --------------------------- | - |  | ----------------------------- | - |  | ----------------------------- | -
|                                                  |  |                        |   |  |                             |   |  |                              
|                                                  |  | YEARENDEDJuly 31, 2004 |   |  | 3 MONTHSENDEDApril 30, 2004 |   |  | 3 MONTHSENDEDJanuary 31, 2004 |   |  | 3 MONTHSENDEDOctober 31, 2003 |   |  | YEARENDEDJuly 31, 2003 |   |  | 3 MONTHSENDEDApril 30, 2003 |   |  | 3 MONTHSENDEDJanuary 31, 2003 |   |  | 3 MONTHSENDEDOctober 31, 2002 |  
|CASH FLOWS FROM OPERATING ACTIVITIES              |  |                        |   |  |                             |   |  |                               |   |  |                               |   |  |                        |   |  |                             |   |  |                               |   |  |                               |  
|Net income (loss)                                 |  | ($12,625               | ) |  | ($3,110                     | ) |  | ($2,825                       | ) |  | ($3,058                       | ) |  | ($12,142               | ) |  | ($2,795                     | ) |  | ($2,795                       | ) |  | ($2,957                       | )
|Increase (decrease) in accounts payable           |  | -                      |   |  | -                           |   |  | -                             |   |  | -                             |   |  | -                      |   |  | -                           |   |  | -                             |   |  | -                             |  
|Increase in accrued interest                      |  | 11,105                 |   |  | 2,772                       |   |  | 2,772                         |   |  | 2,762                         |   |  | 11,048                 |   |  | 2,762                       |   |  | 2,762                         |   |  | 2,762                         |  
|Increase (decrease) in accrued payables           |  | 800                    |   |  | -                           |   |  | -                             |   |  | -                             |   |  | -                      |   |  | (800                        | ) |  | -                             |   |  | -                             |  
|                                                  |  |                        |   |  |                             |   |  |                               |   |  |                               |   |  |                        |   |  |                             |   |  |                               |   |  |                               |  
|Net cash used in operating activities             |  | (720                   | ) |  | (338                        | ) |  | (53                           | ) |  | (296                          | ) |  | (1,094                 | ) |  | (833                        | ) |  | (33                           | ) |  | (195                          | )
|                                                  |  |                        |   |  |                             |   |  |                               |   |  |                               |   |  |                        |   |  |                             |   |  |                               |   |  |                               |  
|CASH FLOWS FROM FINANCING ACTIVITIES              |  |                        |   |  |                             |   |  |                               |   |  |                               |   |  |                        |   |  |                             |   |  |                               |   |  |                               |  
|Proceeds from notes payable                       |  | 1,500                  |   |  | 1,000                       |   |  | -                             |   |  | 500                           |   |  | -                      |   |  | -                           |   |  | -                             |   |  | -                             |  
|                                                  |  |                        |   |  |                             |   |  |                               |   |  |                               |   |  |                        |   |  |                             |   |  |                               |   |  |                               |  
|Net cash provided by financing activities         |  | 1,500                  |   |  | 1,000                       |   |  | -                             |   |  | 500                           |   |  | -                      |   |  | -                           |   |  | -                             |   |  | -                             |  
|                                                  |  |                        |   |  |                             |   |  |                               |   |  |                               |   |  |                        |   |  |                             |   |  |                               |   |  |                               |  
|NET INCREASE (DECREASE) IN CASH                   |  | 780                    |   |  | 662                         |   |  | (53                           | ) |  | 204                           |   |  | (1,094                 | ) |  | (833                        | ) |  | (33                           | ) |  | (195                          | )
|CASH, BEGINNING OF PERIOD                         |  | 4                      |   |  | 155                         |   |  | 208                           |   |  | 4                             |   |  | 1,098                  |   |  | 870                         |   |  | 903                           |   |  | 1,098                         |  
|                                                  |  |                        |   |  |                             |   |  |                               |   |  |                               |   |  |                        |   |  |                             |   |  |                               |   |  |                               |  
|CASH, END OF PERIOD                               |  | $784                   |   |  | $817                        |   |  | $155                          |   |  | $208                          |   |  | $4                     |   |  | $37                         |   |  | $870                          |   |  | $903                          |  
|                                                  |  |                        |   |  |                             |   |  |                               |   |  |                               |   |  |                        |   |  |                             |   |  |                               |   |  |                               |  
|SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION |  |                        |   |  |                             |   |  |                               |   |  |                               |   |  |                        |   |  |                             |   |  |                               |   |  |                               |  
|                                                  |  |                        |   |  |                             |   |  |                              
|INTEREST PAID                                     |  | -                      |   |  | -                           |   |  | -                             |   |  | -                             |   |  | -                      |   |  | -                           |   |  | -                             |   |  | -                             |  
|                                                  |  |                        |   |  |                             |   |  |                               |   |  |                               |   |  |                        |   |  |                             |   |  |                               |   |  |                               |  
|                                                  |  |                        |   |  |                             |   |  |                              
|INCOME TAXES PAID                                 |  | $800                   |   |  | -                           |   |  | -                             |   |  | -                             |   |  | $800                   |   |  | $800                        |   |  | -                             |   |  | -                             |  
|                                                  |  |                        |   |  |                             |   |  |                               |   |  |                               |   |  |                        |   |  |                             |   |  |                               |   |  |                               |  

See Notes to Financial Statements



F-10



---

JILCO INDUSTRIES, INC.

STATEMENTS OF CASH FLOWS

QUARTERLY FOR PERIODS ENDING OCTOBER 31, 2001 - JULY 31, 2002

(UNAUDITED)



|                                                  |  |                          |   |  |                               |   |  |                                 |   |  |                                 |   |  |                          |   |  |                               |   |  |                                 |   |  |                                 |  
|------------------------------------------------- |  | ------------------------ | - |  | ----------------------------- | - |  | ------------------------------- | - |  | ------------------------------- | - |  | ------------------------ | - |  | ----------------------------- | - |  | ------------------------------- | - |  | ------------------------------- | -
|                                                  |  | YEAR ENDED July 31, 2002 |   |  | 3 MONTHS ENDED April 30, 2002 |   |  | 3 MONTHS ENDED January 31, 2002 |   |  | 3 MONTHS ENDED October 31, 2001 |   |  | YEAR ENDED July 31, 2001 |   |  | 3 MONTHS ENDED April 30, 2001 |   |  | 3 MONTHS ENDED January 31, 2001 |   |  | 3 MONTHS ENDED October 31, 2000 |  
|CASH FLOWS FROM OPERATING ACTIVITIES              |  |                          |   |  |                               |   |  |                                 |   |  |                                 |   |  |                          |   |  |                               |   |  |                                 |   |  |                                 |  
|Net income (loss)                                 |  | ($12,610                 | ) |  | ($2,915                       | ) |  | ($3,095                         | ) |  | ($2,735                         | ) |  | ($12,060                 | ) |  | ($2,835                       | ) |  | ($2,955                         | ) |  | ($2,735                         | )
|Increase (decrease) in accounts payable           |  | -                        |   |  | -                             |   |  | -                               |   |  | -                               |   |  | -                        |   |  | -                             |   |  | -                               |   |  | -                               |  
|Increase in accrued interest                      |  | 10,928                   |   |  | 2,762                         |   |  | 2,702                           |   |  | 2,702                           |   |  | 10,808                   |   |  | 2,702                         |   |  | 2,702                           |   |  | 2,702                           |  
|Increase (decrease) in accrued payables           |  | (800                     | ) |  | (800                          | ) |  | (800                            | ) |  | -                               |   |  | 800                      |   |  | -                             |   |  | -                               |   |  | -                               |  
|                                                  |  |                          |   |  |                               |   |  |                                 |   |  |                                 |   |  |                          |   |  |                               |   |  |                                 |   |  |                                 |  
|Net cash used in operating activities             |  | (2,482                   | ) |  | (953                          | ) |  | (1,193                          | ) |  | (33                             | ) |  | (452                     | ) |  | (133                          | ) |  | (253                            | ) |  | (33                             | )
|                                                  |  |                          |   |  |                               |   |  |                                 |   |  |                                 |   |  |                          |   |  |                               |   |  |                                 |   |  |                                 |  
|                                                  |  |                          |   |  |                               |   |  |                                
|CASH FLOWS FROM FINANCING ACTIVITIES              |  |                          |   |  |                               |   |  |                                 |   |  |                                 |   |  |                          |   |  |                               |   |  |                                 |   |  |                                 |  
|Proceeds from notes payable                       |  | 3,000                    |   |  | -                             |   |  | 3,000                           |   |  | -                               |   |  | -                        |   |  | -                             |   |  | -                               |   |  | -                               |  
|                                                  |  |                          |   |  |                               |   |  |                                 |   |  |                                 |   |  |                          |   |  |                               |   |  |                                 |   |  |                                 |  
|Net cash provided by financing activities         |  | 3,000                    |   |  | -                             |   |  | 3,000                           |   |  | -                               |   |  | -                        |   |  | -                             |   |  | -                               |   |  | -                               |  
|                                                  |  |                          |   |  |                               |   |  |                                 |   |  |                                 |   |  |                          |   |  |                               |   |  |                                 |   |  |                                 |  
|                                                  |  |                          |   |  |                               |   |  |                                
|NET INCREASE (DECREASE) IN CASH                   |  | 518                      |   |  | (953                          | ) |  | 1,807                           |   |  | (33                             | ) |  | (452                     | ) |  | (133                          | ) |  | (253                            | ) |  | (33                             | )
|                                                  |  |                          |   |  |                               |   |  |                                
|CASH, BEGINNING OF PERIOD                         |  | 580                      |   |  | 2,354                         |   |  | 547                             |   |  | 580                             |   |  | 1,032                    |   |  | 746                           |   |  | 999                             |   |  | 1,032                           |  
|                                                  |  |                          |   |  |                               |   |  |                                 |   |  |                                 |   |  |                          |   |  |                               |   |  |                                 |   |  |                                 |  
|                                                  |  |                          |   |  |                               |   |  |                                
|CASH, END OF PERIOD                               |  | $1,098                   |   |  | $1,401                        |   |  | $2,354                          |   |  | $547                            |   |  | $580                     |   |  | $613                          |   |  | $746                            |   |  | $999                            |  
|                                                  |  |                          |   |  |                               |   |  |                                 |   |  |                                 |   |  |                          |   |  |                               |   |  |                                 |   |  |                                 |  
|                                                  |  |                          |   |  |                               |   |  |                                
|SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION |  |                          |   |  |                               |   |  |                                 |   |  |                                 |   |  |                          |   |  |                               |   |  |                                 |   |  |                                 |  
|                                                  |  |                          |   |  |                               |   |  |                                
|INTEREST PAID                                     |  | -                        |   |  | -                             |   |  | -                               |   |  | -                               |   |  | -                        |   |  | -                             |   |  | -                               |   |  | -                               |  
|                                                  |  |                          |   |  |                               |   |  |                                 |   |  |                                 |   |  |                          |   |  |                               |   |  |                                 |   |  |                                 |  
|                                                  |  |                          |   |  |                               |   |  |                                
|INCOME TAXES PAID                                 |  | $1,600                   |   |  | $800                          |   |  | $800                            |   |  | -                               |   |  | $800                     |   |  | -                             |   |  | -                               |   |  | -                               |  
|                                                  |  |                          |   |  |                               |   |  |                                 |   |  |                                 |   |  |                          |   |  |                               |   |  |                                 |   |  |                                 |  



F-11



---

|                                                                                                                          |  |                          |   |  |                               |   |  |                                 |   |  |                                 |   |  |  |  |  |  |  |  | 
|------------------------------------------------------------------------------------------------------------------------- |  | ------------------------ | - |  | ----------------------------- | - |  | ------------------------------- | - |  | ------------------------------- | - |  |  |  |  |  |  |  | 
|JILCO INDUSTRIES, INC. STATEMENTS OF CASH FLOWS QUARTERLY FOR PERIODS ENDING OCTOBER 31, 1999 - JULY 31, 2000 (UNAUDITED)
|                                                                                                                          |  |                          |   |  |                               |   |  |                                
|                                                                                                                          |  | YEAR ENDED July 31, 2000 |   |  | 3 MONTHS ENDED April 30, 2000 |   |  | 3 MONTHS ENDED January 31, 2000 |   |  | 3 MONTHS ENDED October 31, 1999 |   |  |  |  |  |  |  |  | 
|CASH FLOWS FROM OPERATING ACTIVITIES                                                                                      |  |                          |   |  |                               |   |  |                                 |   |  |                                 |   |  |  |  |  |  |  |  | 
|Net income (loss)                                                                                                         |  | ($17,686                 | ) |  | ($2,822                       | ) |  | ($4,621                         | ) |  | ($6,708                         | ) |  |  |  |  |  |  |  | 
|Net increase (decrease) in accounts payable                                                                               |  | ($8,299                  | ) |  | -                             |   |  | ($7,499                         | ) |  | -                               |   |  |  |  |  |  |  |  | 
|Increase in accrued interest                                                                                              |  | 10,328                   |   |  | 2,702                         |   |  | 2,522                           |   |  | 2,402                           |   |  |  |  |  |  |  |  | 
|Increase (decrease) in accrued payables                                                                                   |  | 800                      |   |  | -                             |   |  | (800                            | ) |  | -                               |   |  |  |  |  |  |  |  | 
|                                                                                                                          |  |                          |   |  |                               |   |  |                                 |   |  |                                 |   |  |  |  |  |  |  |  | 
|Net cash used in operating activities                                                                                     |  | (14,857                  | ) |  | (120                          | ) |  | (10,398                         | ) |  | (4,306                          | ) |  |  |  |  |  |  |  | 
|                                                                                                                          |  |                          |   |  |                               |   |  |                                 |   |  |                                 |   |  |  |  |  |  |  |  | 
|                                                                                                                          |  |                          |   |  |                               |   |  |                                
|CASH FLOWS FROM FINANCING ACTIVITIES                                                                                      |  |                          |   |  |                               |   |  |                                 |   |  |                                 |   |  |  |  |  |  |  |  | 
|Proceeds from notes payable                                                                                               |  | 15,000                   |   |  | -                             |   |  | 9,000                           |   |  | 6,000                           |   |  |  |  |  |  |  |  | 
|                                                                                                                          |  |                          |   |  |                               |   |  |                                 |   |  |                                 |   |  |  |  |  |  |  |  | 
|                                                                                                                          |  |                          |   |  |                               |   |  |                                
|Net cash provided by financing activities                                                                                 |  | 15,000                   |   |  | -                             |   |  | 9,000                           |   |  | 6,000                           |   |  |  |  |  |  |  |  | 
|                                                                                                                          |  |                          |   |  |                               |   |  |                                 |   |  |                                 |   |  |  |  |  |  |  |  | 
|                                                                                                                          |  |                          |   |  |                               |   |  |                                
|Net increase (decrease) in cash                                                                                           |  | 143                      |   |  | (120                          | ) |  | (1,398                          | ) |  | 1,694                           |   |  |  |  |  |  |  |  | 
|                                                                                                                          |  |                          |   |  |                               |   |  |                                
|CASH, BEGINNING OF PERIOD                                                                                                 |  | 889                      |   |  | 1,185                         |   |  | 2,583                           |   |  | 889                             |   |  |  |  |  |  |  |  | 
|                                                                                                                          |  |                          |   |  |                               |   |  |                                 |   |  |                                 |   |  |  |  |  |  |  |  | 
|                                                                                                                          |  |                          |   |  |                               |   |  |                                
|CASH, END OF PERIOD                                                                                                       |  | $1,032                   |   |  | $1,065                        |   |  | $1,185                          |   |  | $2,583                          |   |  |  |  |  |  |  |  | 
|                                                                                                                          |  |                          |   |  |                               |   |  |                                 |   |  |                                 |   |  |  |  |  |  |  |  | 
|                                                                                                                          |  |                          |   |  |                               |   |  |                                
|SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION                                                                         |  |                          |   |  |                               |   |  |                                 |   |  |                                 |   |  |  |  |  |  |  |  | 
|                                                                                                                          |  |                          |   |  |                               |   |  |                                
|INTEREST PAID                                                                                                             |  | -                        |   |  | -                             |   |  | -                               |   |  | -                               |   |  |  |  |  |  |  |  | 
|                                                                                                                          |  |                          |   |  |                               |   |  |                                 |   |  |                                 |   |  |  |  |  |  |  |  | 
|                                                                                                                          |  |                          |   |  |                               |   |  |                                
|INCOME TAXES PAID                                                                                                         |  | $800                     |   |  | -                             |   |  | $800                            |   |  | -                               |   |  |  |  |  |  |  |  | 
|                                                                                                                          |  |                          |   |  |                               |   |  |                                 |   |  |                                 |   |  |  |  |  |  |  |  | 

See Notes to Financial Statements



F-12



---

JILCO INDUSTRIES, INC.

NOTES TO FINANCIAL STATEMENTS

YEARS ENDED JULY 31, 2006

(UNAUDITED)





NOTE 1  Description of the Business and Summary of Significant Accounting Policies

Description of the Business

Jilco Industries, Inc. (the Company) has been inactive since April 2, 1968 when it was discharged from bankruptcy under its previous name of Sportways, Inc. It has not engaged in any revenue generating activities since that
time nor since the last filing of its form 10-KSB on November 15, 1999 for the year ended July 31, 1999. The expenses the Company has incurred since that time represent those necessary to keep the Company in good standing in its state of
residence.

Significant Accounting Policies

Fair Value of Financial Instruments

For certain of the Companys financial instruments including cash and other
accrued expenses, the carrying amounts approximate fair value due to their short maturities. The amounts shown as notes payable also approximate fair value because current interest rates and terms offered to the Company for notes payable of similar
maturities are substantially the same.

Cash and Cash Equivalents

For purpose of reporting cash flows, the Company includes cash on deposit, cash on hand, and financial instruments purchased with an original maturity of
three months or less to be cash equivalents.

Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the financial statements, as well as the reported amounts of expenses during the reporting period. Accordingly, actual results could differ from those estimates.

Income Taxes

The Company utilizes
SFAS No. 109, Accounting for Income Taxes, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns.
Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and
statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. The provision
for income taxes represents the tax payable for the period and the change during the period in deferred tax assets and liabilities.

Basis of Presentation

The financial statements of the Company have been prepared on the basis on the Company continuing as
a going concern, which contemplates the realization of assets and the payment of liabilities in the ordinary course of business. Should the Company be unable to continue as a going concern, it may be unable to realize the carrying value of its
assets and to meet its liabilities as they become due.

The company has suffered recurring losses and has a deficiency in net assets that
raise substantial doubt about its ability to continue as a going concern. The Companys continued existence is dependent upon its ability to raise additional capital. However, Affiliates of the Company have, for a number of years, and will
continue during the next twelve months, to lend the Company all funds necessary for it to maintain its corporate and filing status.



F-13



---

JILCO INDUSTRIES, INC.

NOTES TO FINANCIAL STATEMENTS

YEARS ENDED JULY 31, 2006

(UNAUDITED)





The accompanying financial statements do not include any adjustments relating to
the recoverability and classification of recorded assets and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

In July 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 48, Accounting for Uncertainty in Income
Taxes (FIN 48), which prescribes a recognition threshold and measurement process for recording in the financial statements uncertain tax positions taken or expected to be taken in a tax return. Additionally, FIN 48 provides guidance on
derecognition, classification, accounting in interim periods and disclosure requirements for uncertain tax positions. FIN 48 will be effective for the Company beginning November 1, 2007. The Company is in the process of determining the effect,
if any, this statement will have on its financial statements.

In March 2006, the FASB issued Statement of Financial Accounting Standards
(SFAS) No. 156, Accounting for Servicing of Financial Assets  An Amendment of FASB Statement No. 140 (SFAS 156), which requires an entity to recognize a servicing asset or servicing liability each time it
undertakes an obligation to service a financial asset by entering into a servicing contract under certain situations at fair value, if practicable, and permits the subsequent measurement of servicing assets and servicing liabilities at fair value.
SFAS 156 will be effective for the Company beginning November 1, 2006. The Company does not expect the adoption of this statement to have a material impact on its financial statements.

These and other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the American Institute of Certified
Public Accountants (AICPA), and the SEC did not or are not believed by management to have a material impact on the Companys present or future financial statements.

NOTE 2 - LOSS PER SHARE

The Company calculates basic loss per share using the weighted-average
number of shares outstanding for the period. Diluted loss per share includes both the weighted-average number of shares and any common share equivalents such as options or warrants in the calculation. As the Company had no common share equivalents
outstanding during any periods presented, basic and diluted loss per share are the same.

NOTE 3 - NOTES PAYABLE TO SHAREHOLDER

Notes payable to shareholder at July 31 consisted of the following:

9% Note - Revolving unsecured note payable, interest accrues at 9% per annum. Principal and accrued interest are due on demand.

10% Note - Revolving unsecured note payable, interest accrues at 10% per annum. Principal and accrued interest are due on demand.

11% Note - Revolving unsecured note payable, interest accrues at 11% per annum. Principal and accrued interest are due on demand.



F-14



---

JILCO INDUSTRIES, INC.

NOTES TO FINANCIAL STATEMENTS

YEARS ENDED JULY 31, 2006

(UNAUDITED)



SCHEDULE OF NOTES PAYABLE SHAREHOLDER

QUARTERLY AS OF OCTOBER 31, 1999 - JULY 31, 2006

(UNAUDITED)



|                                                                                                                          |  |         |  |          |  |         
|------------------------------------------------------------------------------------------------------------------------- |  | ------- |  | -------- |  | --------
|                                                                                                                          |  | 9% Note |  | 10% Note |  | 11% Note
|Balance July 31, 1999                                                                                                     |  | $40,000 |  | $5,000   |  | $8,250  
|Funds Advanced during Fiscal Quarter Ending October 1999                                                                  |  | 0       |  | 0        |  | 0       
|Funds Advanced during Fiscal Quarter Ending January 31, 2000                                                              |  | 0       |  | 0        |  | 0       
|Funds Advanced during Fiscal Quarter Ending April 30, 2000                                                                |  | 0       |  | 0        |  | 0       
|Ending Balance July 31, 2000                                                                                              |  | 40,000  |  | 5,000    |  | 8,250   
|                                                                                                                          |  |         | 
|Funds Advanced during Fiscal Quarter Ending October 2000                                                                  |  | 0       |  | 0        |  | 0       
|Funds Advanced during Fiscal Quarter Ending January 31, 2001                                                              |  | 0       |  | 0        |  | 0       
|Funds Advanced during Fiscal Quarter Ending April 30, 2001                                                                |  | 0       |  | 0        |  | 0       
|Ending Balance July 31, 2001                                                                                              |  | 40,000  |  | 5,000    |  | 8,250   
|                                                                                                                          |  |         | 
|Funds Advanced during Fiscal Quarter Ending October 2001                                                                  |  | 0       |  | 0        |  | 0       
|Funds Advanced during Fiscal Quarter Ending January 31, 2002                                                              |  | 0       |  | 0        |  | 0       
|Funds Advanced during Fiscal Quarter Ending April 30, 2002                                                                |  | 0       |  | 0        |  | 0       
|Ending Balance July 31, 2002                                                                                              |  | 40,000  |  | 5,000    |  | 8,250   
|                                                                                                                          |  |         | 
|Funds Advanced during Fiscal Quarter Ending October 31, 2002 Funds Advanced during Fiscal Quarter Ending January 31, 2003 |  | 00      |  | 00       |  | 00      
|Funds Advanced during Fiscal Quarter Ending April 30, 2003                                                                |  | 0       |  | 0        |  | 0       
|Ending Balance July 31, 2003                                                                                              |  | 40,000  |  | 5,000    |  | 8,250   
|                                                                                                                          |  |         | 
|Funds Advanced during Fiscal Quarter Ending October 2003                                                                  |  | 0       |  | 0        |  | 0       
|Funds Advanced during Fiscal Quarter Ending January 31, 2004                                                              |  | 0       |  | 0        |  | 0       
|Funds Advanced during Fiscal Quarter Ending April 30, 2004                                                                |  | 0       |  | 0        |  | 1,000   
|Ending Balance July 31, 2004                                                                                              |  | 40,000  |  | 5,000    |  | 9,250   
|                                                                                                                          |  |         | 
|Funds Advanced during Fiscal Quarter Ending October 2004                                                                  |  | 0       |  | 0        |  | 0       
|Funds Advanced during Fiscal Quarter Ending January 31, 2005                                                              |  | 0       |  | 0        |  | 0       
|Funds Advanced during Fiscal Quarter Ending April 30, 2005                                                                |  | 0       |  | 0        |  | 1,916   
|Ending Balance July 31, 2005                                                                                              |  | 40,000  |  | 5,000    |  | 11,166  
|                                                                                                                          |  |         | 
|Funds Advanced during Fiscal Quarter Ending October 2005                                                                  |  | 0       |  | 0        |  | 1,000   
|Funds Advanced during Fiscal Quarter Ending January 31, 2006                                                              |  | 0       |  | 0        |  | 0       
|Funds Advanced during Fiscal Quarter Ending April 30, 2006                                                                |  | 0       |  | 0        |  | 0       
|Ending Balance July 31, 2006                                                                                              |  | $40,000 |  | $5,000   |  | $12,166 

NOTE 4 - NOTES PAYABLE

There are three separate Notes Payable, all unsecured and all in favor of an affiliate of the controlling shareholder of the Company and are due July 31, 2007. Interest on each note accrues at 8% per annum
and is payable on July 31, 2007.



F-15



---

JILCO INDUSTRIES, INC.

NOTES TO FINANCIAL STATEMENTS

YEARS ENDED JULY 31, 2006

(UNAUDITED)



SCHEDULE OF NOTES PAYABLE COMBINED BALANCES

QUARTERLY AS OF OCTOBER 31, 1999 - JULY 31,
2006

(UNAUDITED)



|                                                             |  |        
|------------------------------------------------------------ |  | -------
|Balance July 31, 1999                                        |  | $57,500
|Funds Advanced during Fiscal Quarter Ending October 1999     |  | $6,000 
|Funds Advanced during Fiscal Quarter Ending January 31, 2000 |  | $9,000 
|Funds Advanced during Fiscal Quarter Ending April 31, 2000   |  | $0     
|Ending Balance July 31, 2000                                 |  | $72,500
|                                                             | 
|Funds Advanced during Fiscal Quarter Ending October 2000     |  | $0     
|Funds Advanced during Fiscal Quarter Ending January 31, 2001 |  | $0     
|Funds Advanced during Fiscal Quarter Ending April 31, 2001   |  | $0     
|Ending Balance July 31, 2001                                 |  | $72,500
|                                                             | 
|Funds Advanced during Fiscal Quarter Ending October 2001     |  | $0     
|Funds Advanced during Fiscal Quarter Ending January 31, 2002 |  | $3,000 
|Funds Advanced during Fiscal Quarter Ending April 31, 2002   |  | $0     
|Ending Balance July 31, 2002                                 |  | $75,500
|                                                             | 
|Funds Advanced during Fiscal Quarter Ending October 2002     |  | $0     
|Funds Advanced during Fiscal Quarter Ending January 31, 2003 |  | $0     
|Funds Advanced during Fiscal Quarter Ending April 31, 2003   |  | $0     
|Ending Balance July 31, 2003                                 |  | $75,500
|(Note Payable Cont.)                                         |  |        
|Funds Advanced during Fiscal Quarter Ending October 2003     |  | $500   
|Funds Advanced during Fiscal Quarter Ending January 31, 2004 |  | $0     
|Funds Advanced during Fiscal Quarter Ending April 31, 2004   |  | $0     
|Ending Balance July 31, 2004                                 |  | $76,000
|                                                             | 
|Funds Advanced during Fiscal Quarter Ending October 2004     |  | $0     
|Funds Advanced during Fiscal Quarter Ending January 31, 2005 |  | $0     
|Funds Advanced during Fiscal Quarter Ending April 31, 2005   |  | $0     
|Ending Balance July 31, 2005                                 |  | $76,000
|                                                             | 
|Funds Advanced during Fiscal Quarter Ending October 2005     |  | $0     
|Funds Advanced during Fiscal Quarter Ending January 31, 2006 |  | $0     
|Funds Advanced during Fiscal Quarter Ending April 31, 2006   |  | $0     
|Ending Balance July 31, 2006                                 |  | $76,000

NOTE 5 - INCOME TAXES

For the years ended July 31, 2000 - 2006, the Company did not provide a provision for income taxes due to the net losses incurred. At July 31 in each of those years the Company had approximately net
operating loss carryforwards for federal and state income tax purposes as shown in the table below, that began to expire in 2000. The components of the Companys deferred tax assets and liabilities for income taxes consisted of a deferred tax
asset relating to the net operating loss carryforwards for such years as shown in the table below. The other components of the Companys deferred tax assets and liabilities are immaterial. The Company has established a valuation allowance as
shown in the table below for the years ended July 31, 2000 - 2006, to fully offset its deferred tax assets as the Company does not believe the recoverability of these deferred tax assets is more likely than not. The valuation allowance
increased as shown in the table during the years ended July 31, 2000 - 2006.



F-16



---

JILCO INDUSTRIES, INC.

NOTES TO FINANCIAL STATEMENTS

YEARS ENDED JULY 31, 2006

(UNAUDITED)







Annual Net Tax
Losses Sustained and Applied and Deferred Recoverable Assets

|              |  |  |  |  |  |                |  |                         |  |                |  |                     |  |                                
|------------- |  |  |  |  |  | -------------- |  | ----------------------- |  | -------------- |  | ------------------- |  | -------------------------------
|Tax Year      |  |  |  |  |  | Loss Sustained |  | Loss Previously Applied |  | Loss Remaining |  | Valuation Allowance |  | Deferred Recoverable Tax Assets
|              |  |  |  |  |  |                | 
|July 31, 1992 |  |  |  |  |  | $950           |  | $0                      |  | $950           |  | $950                |  | $0                             
|July 31, 1993 |  |  |  |  |  | $920           |  | $0                      |  | $920           |  | $920                |  | $0                             
|July 31, 1994 |  |  |  |  |  | $2,002         |  | $0                      |  | $2,002         |  | $2,002              |  | $0                             
|July 31, 1995 |  |  |  |  |  | $878           |  | $0                      |  | $878           |  | $878                |  | $0                             
|July 31, 1996 |  |  |  |  |  | $925           |  | $0                      |  | $925           |  | $925                |  | $0                             
|July 31, 1997 |  |  |  |  |  | $3,393         |  | $0                      |  | $3,393         |  | $3,393              |  | $0                             
|July 31, 1998 |  |  |  |  |  | $44,728        |  | $0                      |  | $44,728        |  | $44,728             |  | $0                             
|July 31, 1999 |  |  |  |  |  | $9,760         |  | $0                      |  | $9,760         |  | $9,760              |  | $0                             
|July 31, 2000 |  |  |  |  |  | $14,846        |  | $0                      |  | $14,846        |  | $14,846             |  | $0                             
|July 31, 2001 |  |  |  |  |  | $463           |  | $0                      |  | $463           |  | $463                |  | $0                             
|July 31, 2002 |  |  |  |  |  | $2,482         |  | $0                      |  | $2,482         |  | $2,482              |  | $0                             
|July 31, 2003 |  |  |  |  |  | $965           |  | $0                      |  | $965           |  | $965                |  | $0                             
|July 31, 2004 |  |  |  |  |  | $720           |  | $0                      |  | $720           |  | $720                |  | $0                             
|July 31, 2005 |  |  |  |  |  | $1,919         |  | $0                      |  | $1,919         |  | $1,919              |  | $0                             
|July 31, 2006 |  |  |  |  |  | $1,173         |  | $0                      |  | $1,173         |  | $1,173              |  | $0                             
|              |  |  |  |  |  |               
|TOTAL         |  |  |  |  |  | $84,951        |  | $0                      |  | $84,951        |  | $84,951             |  | $0                             
|              |  |  |  |  |  |               

Controls and Procedures

As indicated in the certifications in Exhibits 31.1 and 31.2 of this Annual Report, the Companys chief executive officer and principal financial officer have evaluated the Companys disclosure controls and
procedures as of July 31, 2006. Based on that evaluation, these officers have concluded that the Companys disclosure controls and procedures are effective in ensuring that material information required to be in this quarterly report is
made known to them on a timely basis. There were no changes since the Companys last filed reports that materially affected, or are reasonably likely to materially affect, the Companys internal control over financial reporting.



F-17