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U.S. SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-KSB/A
 (Amendment Number 1)
  þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
 For the fiscal year ended December 31, 2006
 o
    
    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
 Commissions file number 002-41703
 THE X-CHANGE CORPORATION
  Nevada
    
    90-0156146(State of Incorporation or Organization)
    
    (I.R.S. Employer Identification No.)
 Allen, TX 75013
 (972) 747-0051
   Common Stock, $.001 par value
 þ o
 o
    o þ




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2




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##### 



THE X-CHANGE CORPORATION
FORM 10-KSB
TABLE OF CONTENTS
 PART IITEM 1. Description of Business
    
    
    4ITEM 1A Risk Factors
    
    
    9ITEM 2. Description of Property
    
    
    20ITEM 3. Legal Proceedings
    
    
    20ITEM 4. Submission of Matters to a Vote of Security Holders
    
    
    20PART IIITEM 5. Market for Common Equity and Related Stockholder Matters
    
    
    20ITEM 6. Managements Discussion and Analysis or Plan of Operation
    
    
    22ITEM 7. Financial Statements
    
    
    25ITEM 8. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    26ITEM 8a. Controls and Procedures
    
    
    26ITEM 8b. Other Information
    
    
    26PART IIIITEM 9. Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16 (a) of the Exchange Act
    
    
    27ITEM 10. Executive Compensation
    
    
    29ITEM 11. Security Ownership of Certain Beneficial Owners and Management
    
    
    30ITEM 12. Certain Relationships and Related Transactions
    
    
    31ITEM 13. Exhibits and Reports on Form 8-K
    
    
    31ITEM 14. Principal Accountant Fees and Services
    
    
    33Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
    3




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CAUTIONARY STATEMENTS
   
    
    our belief that our revenues will increase significantly in 2007;
    
    our expectations related to our strategic relationships with Hitachi, Hexion Specialty
Chemicals, Inc., Carinthian Tech Research, SECURUS Technologies, Inc. and Graco Childrens
Products, Inc.;
    
    our expectations regarding the capabilities of our products such as our GenuDot System
and the down-hole tool we are developing with Hexion;
    
    our expectations regarding our cash needs;
    
    our expectations regarding the completion of our private offering;
    
    expected trends in our cost of operations, consulting expenses, general and
administrative expenses;
  
 ITEM 1 DESCRIPTION OF BUSINESS
 Organization and History:
   Business Model:
   4




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Market Overview:
   
    
    healthcare and pharmaceutical;
    
    retail and consumer packaged goods;
    
    oil and gas;
    
    automotive;
    
    technology manufacturing/production.
  
    
    product authentication;
    
    anti-counterfeiting;
    
    work-in-process in the manufacturing sector;
    
    high value inventory management and asset tracking;
    
    real-time location systems; and
    
    remote sensors
 Revenue Opportunities:
   
    
    a product-authentication system we are developing using Hitachis μ-Chip (pronounced
mu-chip) RFID tag;
    
    a down-hole tool we are developing for Hexion Specialty Chemicals, Inc. for use in the
oil and gas exploration and development;
    
    reselling SAW-based RFID systems developed by Carinthian Tech Research of Austria that
utilize AirGATE software and application systems;
    
    a RFID-enabled system we are developing for SECURUS Technologies, Inc. that enables
SECURUS and correctional facilities to keep track of prisoners collect telephone calls;
and
    
    a child safety seat we are developing for Graco Childrens Products, Inc., a Newell
Rubbermaid company.
 
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Product Authentication  Hitachi μ-Chips and our GenuDot Systems
   
    
    GenuDot will also support ISO 14443 tags at 13.56 MHz. for additional flexibility and
application;
    
    the GenuDot system will provide an end-to-end, highly secure product authentication
solution that includes readers, software and a database;
    
    the GenuDot System readers will be intelligent and able to operate in standalone or
network ready mode with automatic provisioning and recovery after power or network failure;
    
    that all readers will include an integrated two line display for visual authentication.
   Oil
and Gas Applications  Hexion
 Surface Acoustic Wave (SAW) Technology  Carinthian Tech Research of Austria
  6




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Law Enforcement  SECURUS Technologies, Inc.
 Safety Applications  Graco Childrens Products, Inc.
 Strategic Relationships:
   Sales and Marketing:
   7




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Intellectual Property:
   Employees:
  Competition and Competitive Advantage:
   Manufacturing:
  Regulatory
   8




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ITEM 1A RISK FACTORS
  We need capital to avoid insolvency, sustain our operations and grow our business.
  Our near-term financial performance depends on the success of our strategic relationships with
Hitachi America, Ltd.; Hexion Specialty Chemicals, Inc.; Carinthian Tech Research; SECURUS
Technologies, Inc.; and Graco Childrens Products, Inc.
  Our dependence on Hitachi America, Ltd.
  9




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Our dependence on Hexion Specialty Chemicals, Inc.
 Our dependence on Carinthian Tech Research of Austria.
 Our dependence on SECURUS Technologies, Inc.
 Our dependence on Graco Childrens Products, Inc.
 We will not be successful unless there is widespread acceptance of RFID and other wireless
technologies in the vertical markets we are targeting.
  Authentication Applications
  10




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Oil and Gas Industry
 SAW Technologies
 Law Enforcement
 Safety Applications
 We expect that almost all of our projected 2007 recurring revenue will relate to products under
development that we have not yet sold in volume to customers. As a result, we have limited
visibility regarding the length of our sales cycle, which makes projecting revenue difficult and
could otherwise adversely affect our business.
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Our success depends on our ability to generate recurring revenue streams, which depends in large
part on our ability to scale our sales and marketing efforts.
  You may not be able to resell your common stock at a price you would like or at all.
  The volatility of our stock price could subject us to an increased risk of securities litigation.
  The market in which we operate is highly competitive, which could adversely affect our ability to
meet our financial objectives.
  Our current financial position may deter potential customers and strategic relationships.
  We have a history of losses, expect to incur additional losses in the future and may not be able to
achieve or sustain profitability.
   12




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We will likely need to enter into additional strategic relationships to meet our customer needs.
  To meet our financial objectives, we must grow rapidly.
  If we are unable to manage this growth, we could incur costs that could adversely affect our
operating results and financial condition.
  If we overestimate customer demand, we may increase our cost structure unnecessarily.
   13




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Although we are not targeting the supply chain RFID market, public perceptions of the viability of
RFID applications in the supply chain could adversely affect acceptance of RFID in the vertical
markets we are targeting.
  Widespread adoption of our RFID solutions depends on declines in selling prices for RFID tags such
as Hitachis μ-Chip tag.
  Our products are new and evolving and our business model is unproven, which makes it difficult to
evaluate our current business and future prospects.
  Most of our products are part of larger solutions that are offered to end customers, and we must
work with third parties to ensure that our products inter-operate correctly.
   14




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If our products and systems do not meet our customers needs or otherwise malfunction, our business
will be adversely affected.
  Fluctuations in quarterly and annual operating results may adversely affect our business, and these
fluctuations make evaluating our business difficult.
  If we are unsuccessful in developing and introducing new products and enhancements, we may be
unable to meet our financial goals.
  Our GenuDot System is a closed loop application, meaning it does not comply with the EPCglobal
standards and is not intended to work with third party readers. This could adversely affect market
acceptance of the GenuDot System.
   15




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We rely on patents, trademarks, copyrights and trade secrets to protect our proprietary rights,
which may not be sufficient to protect all of our intellectual property.
  We do not own several key technologies that we are developing for third parties such as Hexion
Specialty Chemicals, Inc., which may make us a less attractive acquisition candidate.
  We may need to license RFID-related patents from third parties, and we may not be able to obtain
these licenses on acceptable terms, or at all.
  We may become subject to intellectual property infringement claims and other litigation that might
be costly to resolve and, if resolved adversely, may harm our business.
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Complying with applicable governmental regulations could adversely affect our ability to sell our
products and impair operating results.
  We expect to depend on a limited number of suppliers and assemblers of our products.
  We expect to rely on third party manufacturers.
  If unauthorized access is obtained to our customers data as a result of our products, including
through breach of security measures or unauthorized encoding of RFID tags, we could be subject to
related legal claims, and customers may curtail or stop their use of our products, which would
harm the business, operating results and financial condition.
   17




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Privacy concerns relating to elements of RFID technology could damage our reputation and deter
current and potential customers from using our products and systems.
  We depend on key personnel, including our chief executive officer, to manage our business
effectively. If we are unable to hire, retain or motivate qualified personnel, we will have
trouble meeting our financial goals.
  Complying with Section 404 of the Sarbanes-Oxley Act, which we must do in connection with our
financial statements for the year ending December 31, 2007, will entail substantial cost, expense,
effort and management distraction.
  If we fail to maintain proper and effective internal controls, our ability to produce accurate
financial statements could be impaired.
   18




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Until recently, no members of our board of directors were independent within the meaning of federal
securities laws.
  The costs being a public company can be significant.
  Our stock is not listed on a major stock market.
  If securities or industry analysts do not publish research or reports about us, we may not be able
to generate significant trading volume in our stock.
  Future sales of shares by existing stockholders, or perceptions of these sales, could cause
the stock price to decline.
  Available Information
 www.sec.gov
  19




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ITEM 2 DESCRIPTION OF PROPERTY
  
 ITEM 3 LEGAL PROCEEDINGS
  
 ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 PART II
 
 ITEM 5 MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
 Principal Market and Sales Prices for Common Stock:
   20




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Fiscal Year
    
    
    Fiscal Year2005
    
    
    2006High
    
    
    Low
    
    
    High
    
    
    LowFirst Quarter
    
    $
    2.35
    
    
    $
    1.26
    
    
    $
    0.705
    
    
    $
    0.40Second Quarter
    
    $
    2.25
    
    
    $
    0.48
    
    
    $
    1.84
    
    
    $
    0.34Third Quarter
    
    $
    0.88
    
    
    $
    0.25
    
    
    $
    2.76
    
    
    $
    1.55Fourth Quarter
    
    $
    0.85
    
    
    $
    0.30
    
    
    $
    2.40
    
    
    $
    0.71
 Dividends:
 Recent Sales of Unregistered Securities:
  
    
    In July of 2005, we issued 10,000,000 shares of our common stock to Michael Sheriff, our
chief executive officer and director, in exchange for the outstanding stock of our wholly
owned subsidiary AirGATE Technologies, Inc.
    
    On of March 31, 2005, we issued 100,000 shares of common stock to an outside investor
for $1.00 per share.
    
    On January 5, 2006, we issued 500,000 shares of common stock to Hexion Specialty
Chemical, Inc. in connection with and as part of our development contract with Hexion.
    
    During the first quarter of 2007 (up to March 30, 2007), we issued 770,000 shares of
common stock, 770,000 warrants to purchase one share of common stock at $1.50 per share and
770,000 warrants to purchase one share of common stock at $2.00 per share to outside
investors under a private placement memorandum for proceeds in the amount of $550,000.
    
    The following shares were issued to consultants of the Company in consideration of services rendered:
 
    
    On January 11, 2005, we issued 1,120,000 shares of common stock;
    
    On March 31, 2005, we issued 70,000 shares of common stock;
    
    On November 11, 2005, we issued 20,000 shares of common stock;
    
    After the AirGATE acquisition, we issued 650,000 shares of common stock
to consultants of AirGATE Technologies, Inc.
    
    On January 5, 2006, we issued 10,000 shares of common stock;
    
    On May 1, 2006, we issued 30,000 shares of common stock;
    
    On June 1, 2006, we issued 40,000 shares of common stock;
    
    On June 14, 2006, we issued 12,500 shares of common stock;
    
    On June 16, 2006, we issued 100,000 shares of common stock;
    
    On July 10, 2006, we issued 30,000 shares of common stock;
    
    On August 16, 2006, we issued 30,000 shares of common stock;
    
    On September 1, 2006, we issued 30,000 shares of common stock;
    
    On October 1, 2006, we issued 30,000 shares of common stock;
    
    On October 26, 2006, we issued 200,000 shares of common stock;
    
    On November 1, 2006, we issued 30,000 shares of common stock;
    
    On December 1, 2006, we issued 30,000 shares of common stock, and
    
    On December 31, 2006, we issued 80,000 shares of common stock.
  21




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Repurchases of Equity Securities
  Equity Compensation Plans
  
 ITEM 6 MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
  Plan of Operation:
   Results of Operations:
   22




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Liquidity and Capital Resources:
    st
   23




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Off-Balance Sheet Arrangements:
 Recently Issued Accounting Standards:
     24




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Managements Discussion of Critical Accounting Policies:
  
 ITEM 7 FINANCIAL STATEMENTS
   25




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ITEM 8

    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  
 ITEM 8a CONTROLS AND PROCEDURES
    
 ITEM 8b OTHER INFORMATION
  
  26




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PART III
 
 ITEM 9

    DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH
SECTION 16(A) OF THE EXCHANGE ACT
  Name
    
    Age
    
    Positions HeldMichael L. Sheriff
    
    
    61
    
    
    President, Chief Executive Officer and Chairman of the BoardScott R. Thompson
    
    
    44
    
    
    Chief Financial Officer, Treasurer, Secretary, DirectorH. David Friedman
    
    
    61
    
    
    Director
  Executive Officers and Directors
 Michael Sheriff, Chairman, President & CEO and Director
   27




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Scott R. Thompson, Secretary, Treasurer, CFO, and Director
  H. David Friedman, Director
  Other Significant Employees
  Kathleen K. Hanafan, Chief Operating Officer of AirGATE
  Karey Y. Daniels, Vice President of Finance and Controller
  Ivan Chow, Chief Technical Officer and Sr. Vice President of Software Solutions
   28




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Compliance with Section 16(a) of the Exchange Act
  
    
    Mike Sheriff and Scott Thompson did not timely file their Form 3s as required by Section
16(a) of the Exchange Act, although such forms have now been filed;
    
    Mike Sheriff has not yet filed a Form 4 as required by Section 16(a) of the Exchange Act
in connection with the following transfers of his shares of common stock;
    
    Mike Sheriff has not yet filed a Form 4 as required by Section 16(a) of the Exchange Act
in connection with the transfer of shares of common stock to him in connection with our
settlement with James E. Flowers described under Item 3  Legal Proceedings;
    
    H. David Friedman, who became a director in February, has not yet filed his Form 3; and
    
    Robert Barbee, one of our former directors, did not file a Form 3.
 Audit Committee Financial Expert
  Code of Ethics
  
 ITEM 10 EXECUTIVE COMPENSATION
   29




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Summary Compensation Table
 Change inPension ValueandNonqualifiedName and
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Non-equity
    
    
    DeterredPrincipal
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stock
    
    
    Option
    
    
    Incentive Plan
    
    
    Compensation
    
    
    All otherPosition
    
    Year
    
    
    Salary
    
    
    Bonus
    
    
    Awards
    
    
    Awards
    
    
    Compensation
    
    
    Earnings
    
    
    Compensation
    
    
    TotalMichael Sheriff, CEO
    
    
    2006
    
    
    $
    125,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    125,0002005
    
    
    
    109,167
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    109,167Scott Thompson, CFO
    
    
    2006
    
    
    
    60,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    60,0002005
    
    
    
    25,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25,000Robert Barbee, VP
of Operations
    
    
    2006
    
    
    
    120,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    120,0002005
    
    
    
    48,500
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    48,500
 
 ITEM 11 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
  
    
    each person who, to our knowledge, is the beneficial owner of more than five percent of
our common stock;
    
    each director and executive officer of the X-Change Corporation; and
    
    all of our directors and officers as a group.
   30




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Name of Beneficial Owner
    
    Shares Beneficially Owned(1)
    
    
    Percent of ClassMichael Sheriff
    
    
    6,650,000
    
    
    
    23.31
    %Scott R. Thompson
    
    
    250,000
    
    
    
    0.88
    %H. David Friedman
    
    
    0
    
    
    
    0.00
    %Frank Kwong
    
    
    1,540,000
    
    
    
    5.40
    %All directors and officers
as a group (3 persons)
    
    
    6,900,000
    
    
    
    24.18
    %
 
 (1)
    
    Based upon 28,534,500 shares of our common stock outstanding on March 30, 2007. 
 ITEM 12 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
   
 ITEM 13 EXHIBITS
 Exhibit No.
    
    Exhibit Name3.1
    
    
    Articles of Incorporation (To be filed on a future Current Report on 8-K.)3.2
    
    
    Certificate of Amendment to Articles of Incorporation (Incorporated by
reference to Exhibit 3.1 included with our Current Report on Form 8-K
filed with the SEC on January 30, 2002.)3.3
    
    
    By-Laws (To be filed on a future Current Report on Form 8-K.)4.1
    
    

Specimen
of common stock Certificate  previously filed.10.1
    
    
    Promissory Note, dated August 15, 2006, between the X-Change Corporation
and Melissa CR 364 Ltd. (Incorporated by reference to Exhibit 10.01
included with our Current Report on Form 8-K filed with the SEC on August
21, 2006.)10.2
    
    
    Form of Subscription Agreement, February-March 2007, Private Placement.
(Incorporated by reference to Exhibit 10.1 included with our Current
Report on Form 8-K filed with the SEC on February 23, 2007.)
  31




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Exhibit No.
    
    Exhibit Name10.3
    
    
    Form of Registration Rights Agreement, Private Placement (Incorporated
by reference to Exhibit 10.2 included with our Current Report on Form 8-K
filed with the SEC on February 23, 2007.)10.4
    
    
    Form of $1.50 Warrant Agreement, Private Placement (Incorporated by
reference to Exhibit 10.3 included with our Current Report on Form 8-K
filed with the SEC on February 23, 2007.)10.5
    
    
    Form of $2.00 Warrant Agreement, Private Placement (Incorporated by
reference to Exhibit 10.4 included with our Current Report on Form 8-K
filed with the SEC on February 23, 2007.)10.6
    *
    
    Memorandum of Understanding, dated December 3, 2004, between AirGATE
Technologies and Hexion Specialty Chemicals (formerly Borden Chemical
Inc.) (Certain portions of this exhibit have been omitted pursuant to a
confidential treatment request filed with the Securities and Exchange
Commission.)10.7
    *
    
    Phase II of Memorandum of Understanding, effective January 3 2006,
between AirGATE Technologies and Hexion Specialty Chemicals (Certain
portions of this exhibit have been omitted pursuant to a confidential
treatment request filed with the Securities and Exchange Commission.)10.8
    *
    
    First Amendment to Memorandum of Understanding, dated September 12, 2006,
between AirGATE Technologies and Hexion Specialty Chemicals Chemicals
(Certain portions of this exhibit have been omitted pursuant to a
confidential treatment request filed with the Securities and Exchange
Commission.)10.9
    *
    
    Development Agreement, dated October 26, 2006, between AirGATE
Technologies and Graco Childrens Products, Inc. (a unit of Newell
Rubbermaid, Inc.)21.1
    *
    
    List of subsidiaries31.1
    **
    
    Certification of Principal Executive Officer Pursuant to 18 U.S.C Section
1350 as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.31.2
    **
    
    Certification of Principal Financial Officer Pursuant to 18 U.S.C Section
1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.32.1
    **
    
    Certification of Principal Executive Officer Pursuant to 18 U.S.C Section
1350 as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.32.2
    **
    
    Certification of Principal Financial Officer Pursuant to 18 U.S.C Section
1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
 *
    
    Filed with original
Form 10KSB April 6, 2007**
    
    Filed Herewith  32




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ITEM 14  PRINCIPAL ACCOUNTANT FEES AND SERVICES
  Service
    
    2005
    
    
    2006Audit Fees
    
    $
    14,600
    
    
    $
    14,340Audit-Related Services
    
    
    
    
    
    
    Tax Fees
    
    
    130All Other Fees
    
    
    
    
    
    
    Total
    
    $
    14,730
    
    
    $
    14,340
 Audit Fees
 Tax Fees
 Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditors:
  33




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SIGNATURES
  THE X-CHANGE CORPORATION
(Registrant)Dated: April 10, 2008
    By:
    /s/ Michael L. SheriffChief Executive Officer(Principal Executive Officer)Dated: April 10, 2008
    By:
    /s/ George DeCourcyChief Financial Officer(Principal Financial Officer) 
  34




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EXHIBIT INDEX
 Exhibit No.
    
    Exhibit Name31.1**
    
    Certification of Principal Executive Officer Pursuant to 18 U.S.C
Section 1350 as Adopted Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.31.2**
    
    Certification of Principal Financial Officer Pursuant to 18 U.S.C
Section 1350 as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.32.1**
    
    Certification of Principal Executive Officer Pursuant to 18 U.S.C
Section 1350 as Adopted Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.32.2**
    
    Certification of Principal Financial Officer Pursuant to 18 U.S.C
Section 1350 as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
 **
    
    Filed Herewith  35




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The X-Change Corporation
 -:-
 INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS REPORT
 December 31, 2006 and 2005




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PageReport of Independent Registered Public Accountants
    
    
    F-3Consolidated Balance Sheet
December 31, 2006 and 2005
    
    
    F-4Consolidated Statements of Operations
For the years ended December 31, 2006 and 2005
    
    
    F-5Consolidated Statement of Stockholders Equity
For the years ended December 31, 2006 and 2005
    
    
    F-6Consolidated Statements of Cash Flows
For the years ended December 31, 2006 and 2005
    
    
    F-7Notes to Consolidated Financial Statements
    
    
    F-9
  F-2




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ROBISON, HILL & CO.
    
    CERTIFIED PUBLIC ACCOUNTANTSA PROFESSIONAL CORPORATION
 
 
 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS
 
     \s\ Robison, Hill & Co.Certified Public Accountants
 
  F-3




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For the Year EndedDecember 31(Restated)2006
    
    
    2005ASSETSCurrent Assets:Cash
    
    $
    1,955
    
    
    $
    5,847Deposits
    
    
    15,885
    
    
    
    10,270Prepaid Expenses
    
    
    61,000
    
    
    
    Accounts Receivable
    
    
    119,053
    
    
    
    Employee Advances
    
    
    
    
    
    
    338Total Current Assets
    
    
    197,893
    
    
    
    16,455Fixed AssetsComputer Equipment
    
    
    36,082
    
    
    
    12,396Furniture and Fixtures
    
    
    64,845
    
    
    
    30,174Less Accumulated Depreciation
    
    
    (31,918
    )
    
    
    (11,371
    )Total Fixed Assets
    
    
    69,009
    
    
    
    31,199Other AssetsNet Assets of Discontinued Operations
    
    
    
    
    
    
    10,221Total Other Assets
    
    
    
    
    
    
    10,221TOTAL ASSETS
    
    $
    266,902
    
    
    $
    57,875LIABILITIESCurrent Liabilities:Accounts Payable
    
    $
    297,557
    
    
    $
    103,253Accrued Expenses
    
    
    139,932
    
    
    
    11,414Deferred Revenue
    
    
    27,000
    
    
    
    Short Term Related Party Payable
    
    
    120,000
    
    
    
    Total Current Liabilities
    
    
    584,489
    
    
    
    114,667Long-Term Liabilities:Long-Term Related Party Payable
    
    
    797,794
    
    
    
    155,742Less: Convertible Note Discount
    
    
    (629,331
    )
    
    
    TOTAL LIABILITIES
    
    
    752,952
    
    
    
    270,409STOCKHOLDERS EQUITY (DEFICIT)Preferred Stock, Par Value $.001,
Authorized 10,000,000 Shares, none Issued
at December 31, 2006 and December 31, 2005
    
    
    
    
    
    
    Common Stock, Par value $.001, Authorized
100,000,000 Shares, Issued 27,764,500 and
26,712,000 at December 31, 2006 and
December 31, 2005
    
    
    27,765
    
    
    
    26,712Paid-In Capital
    
    
    11,717,497
    
    
    
    9,870,399Retained Deficit
    
    
    (12,231,312
    )
    
    
    (10,109,645
    )TOTAL STOCKHOLDERS EQUITY (DEFICIT)
    
    
    (486,050
    )
    
    
    (212,534
    )TOTAL LIABILITIES AND STOCKHOLDERS
EQUITY (DEFICIT)
    
    $
    266,902
    
    
    $
    57,875
   F-4




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##### Table of Contents



For the Year EndedDecember 31,(Restated )2006
    
    
    2005Revenues
    
    $
    1,130,308
    
    
    $
    414,203Costs of Operations
    
    
    333,953
    
    
    
    158,866Net Operating Income
    
    
    796,355
    
    
    
    255,337ExpensesAdvertising
    
    
    53,045
    
    
    
    29,871Consulting
    
    
    199,486
    
    
    
    216,500General & Administrative (including goodwill
impairment charge of $6,690,000 in 2005)
    
    
    1,606,260
    
    
    
    9,283,016Salaries
    
    
    877,181
    
    
    
    347,493Net Income (Loss) from Continuing Operations
    
    
    (1,939,617
    )
    
    
    (9,621,543
    )Other Income (Expense)Interest Expense
    
    
    (171,861
    )
    
    
    (26,942
    )Interest Income
    
    
    32
    
    
    
    195Total Income (Loss) from Continuing Operations
    
    
    (2,111,446
    )
    
    
    (9,648,290
    )Discontinued OperationsNet Income (Loss) from Discontinued Operations
    
    
    (8,029
    )
    
    
    207,192Loss from Disposal of Discontinued Operations
    
    
    (2,192
    )
    
    
    Total Income (Loss) from Discontinued Operations
    
    
    (10,221
    )
    
    
    207,192Net Income (Loss)
    
    $
    (2,121,667
    )
    
    $
    (9,441,098
    )Earnings per Share from Continuing Operations
    
    $
    (0.08
    )
    
    $
    (0.46
    )Earnings per Share from Discontinued Operations
    
    $
    
    
    
    $
    0.01Weighted Average Shares Outstanding
    
    
    27,399,500
    
    
    
    20,835,077
   F-5




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##### Table of Contents



THE X-CHANGE CORPORATION
 
 CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY
 Restated for 2005 and 2006
 Preferred Stock
    
    
    Common Stock
    
    
    Paid-In
    
    
    RetainedShares
    
    
    Par Value
    
    
    Shares
    
    
    Par Value
    
    
    Capital
    
    
    DeficitBalance at December 31, 2004
    
    
    
    
    
    $
    
    
    
    
    14,752,000
    
    
    $
    14,752
    
    
    $
    653,283
    
    
    $
    (668,547
    )Shares issued for consulting
    
    
    
    
    
    
    
    
    
    
    1,120,000
    
    
    
    1,120
    
    
    
    2,014,880
    
    
    
    Shares issued for cash
    
    
    
    
    
    
    
    
    
    
    100,000
    
    
    
    100
    
    
    
    99,900
    
    
    
    Shares issued for consulting
    
    
    
    
    
    
    
    
    
    
    70,000
    
    
    
    70
    
    
    
    139,930
    
    
    
    Shares exchanged for AirGate
    
    
    
    
    
    
    
    
    
    
    10,000,000
    
    
    
    10,000
    
    
    
    6,515,576
    
    
    
    Shares issued for consulting
    
    
    
    
    
    
    
    
    
    
    650,000
    
    
    
    650
    
    
    
    434,850
    
    
    
    Shares issued for consulting
    
    
    
    
    
    
    
    
    
    
    20,000
    
    
    
    20
    
    
    
    11,980
    
    
    
    Net Income (Loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,441,098
    )Balance at December 31, 2005
    
    
    
    
    
    
    
    
    
    
    26,712,000
    
    
    
    26,712
    
    
    
    9,870,399
    
    
    
    (10,109,645
    )Shares issued for consulting
    
    
    
    
    
    
    
    
    
    
    10,000
    
    
    
    10
    
    
    
    5,990
    
    
    
    Shares issued for Hexion
cost obligation
    
    
    
    
    
    
    
    
    
    
    500,000
    
    
    
    500
    
    
    
    289,500
    
    
    
    Adjusment for Convertible
Note Feature
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    756,950
    
    
    
    Shares issued for consulting
    
    
    
    
    
    
    
    
    
    
    30,000
    
    
    
    30
    
    
    
    14,970
    
    
    
    Shares issued for consulting
    
    
    
    
    
    
    
    
    
    
    40,000
    
    
    
    40
    
    
    
    17,960
    
    
    
    Shares issued for consulting
    
    
    
    
    
    
    
    
    
    
    12,500
    
    
    
    13
    
    
    
    7,988
    
    
    
    Shares issued for consulting
    
    
    
    
    
    
    
    
    
    
    100,000
    
    
    
    100
    
    
    
    59,900
    
    
    
    Shares issued for consulting
    
    
    
    
    
    
    
    
    
    
    30,000
    
    
    
    30
    
    
    
    49,470
    
    
    
    Shares issued for consulting
    
    
    
    
    
    
    
    
    
    
    30,000
    
    
    
    30
    
    
    
    72,870
    
    
    
    Shares issued for consulting
    
    
    
    
    
    
    
    
    
    
    30,000
    
    
    
    30
    
    
    
    76,470
    
    
    
    Shares issued for consulting
    
    
    
    
    
    
    
    
    
    
    30,000
    
    
    
    30
    
    
    
    68,370
    
    
    
    Shares issued for consulting
    
    
    
    
    
    
    
    
    
    
    200,000
    
    
    
    200
    
    
    
    289,800
    
    
    
    Shares issued for consulting
    
    
    
    
    
    
    
    
    
    
    30,000
    
    
    
    30
    
    
    
    41,970
    
    
    
    Shares issued for Settlement
    
    
    
    
    
    
    
    
    
    
    (100,000
    )
    
    
    (100
    )
    
    
    100
    
    
    
    Shares issued for consulting
    
    
    
    
    
    
    
    
    
    
    30,000
    
    
    
    30
    
    
    
    28,470
    
    
    
    Shares issued for consulting
    
    
    
    
    
    
    
    
    
    
    30,000
    
    
    
    30
    
    
    
    24,870
    
    
    
    Shares issued for consulting
    
    
    
    
    
    
    
    
    
    
    50,000
    
    
    
    50
    
    
    
    41,450
    
    
    
    Net Income (Loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,121,667
    )Balance at December 31, 2006
    
    
    
    
    
    $
    
    
    
    
    27,764,500
    
    
    $
    27,765
    
    
    $
    11,717,497
    
    
    $
    (12,231,312
    )
   F-6




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##### Table of Contents



For the Year EndedDecember 31,(Restated)2006
    
    
    2005CASH FLOWS FROM OPERATING ACTIVITIES:Net Income (Loss)
    
    $
    (2,121,667
    )
    
    $
    (9,648,290
    )Adjustments to reconcile net loss to net cash
Provided by operating activities:Depreciation
    
    
    20,547
    
    
    
    7,364Stock Issued for Services
    
    
    801,200
    
    
    
    2,602,500Hexion related costs satisfied with stock
    
    
    290,000
    
    
    
    Loss on Disposal of Discontinued Operations
    
    
    8,029
    
    
    
    Amortization of convertible note discount
    
    
    127,619
    
    
    
    Impairment Charge to Goodwill
    
    
    
    
    
    
    6,690,000Change in Operating Assets and Liabilities:(Increase) Decrease in Employee Advances
    
    
    338
    
    
    
    (338
    )(Increase) Decrease in Accounts Receivable
    
    
    (119,053
    )
    
    
    (Increase) Decrease in Prepaid Expenses
    
    
    (61,000
    )
    
    
    (Increase) Decrease in Deposits
    
    
    (5,615
    )
    
    
    (7,770
    )Increase (Decrease) in Accounts Payable
    
    
    194,304
    
    
    
    77,439Increase (Decrease) in Accrued Expenses
    
    
    128,518
    
    
    
    11,414Increase (Decrease) in Deferred Revenues
    
    
    27,000Net Cash Used in Continuing Operations
    
    
    (709,780
    )
    
    
    (267,681
    )Net Cash Used in Discontinued Operations
    
    
    2,193
    
    
    
    22,736Net Cash Used in Operating Activities
    
    
    (707,587
    )
    
    
    (244,945
    )CASH FLOWS FROM INVESTING ACTIVITIES:Purchase of Computer Equipment
    
    
    (23,686
    )
    
    
    657Purchase of Furniture and Fixtures
    
    
    (34,671
    )
    
    
    (16,174
    )Purchase of Goodwill
    
    
    
    
    
    
    (10,896
    )Net Cash Provided by Investing Activities
    
    
    (58,357
    )
    
    
    (26,413
    )Net Cash Used in Discontinued Operations
    
    
    
    
    
    
    169,232Net Cash Provided by Investing Activities
    
    
    (58,357
    )
    
    
    142,819CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from Stock Issued
    
    
    
    
    
    
    100,000Proceeds from Related Party Loan
    
    
    120,000Proceeds from Shareholder Loan
    
    
    642,052
    
    
    
    199,941Net Cash Provided by Financing Activities
    
    
    762,052
    
    
    
    299,941Net Cash Used in Discontinued Operations
    
    
    
    
    
    
    (196,870
    )Net Cash Provided by Financing Activities
    
    
    762,052
    
    
    
    103,071Net (Decrease) Increase in Cash
    
    
    (3,892
    )
    
    
    945Cash at Beginning of Period
    
    
    5,847
    
    
    
    4,902Cash at End of Period
    
    $
    1,955
    
    
    $
    5,847
   F-7




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##### Table of Contents



For the Year EndedDecember 31,(Restated)2006
    
    
    2005CASH FLOWS FROM OPERATING ACTIVITIES:SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:Cash paid during the year for:Interest
    
    $
    21,450
    
    
    $
    Franchise and income taxes
    
    $
    
    
    
    $
    SUPPLEMENTAL
DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:Common Stock Exchanged for Services
    
    $
    801,200
    
    
    $
    2,602,500Common Stock Exchanged for Expected
Development Costs
    
    $
    290,000
    
    
    $
    
   F-8




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##### Table of Contents



THE X-CHANGE CORPORATION
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 1  ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
  Nature of Operations and Going Concern
       F-9




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##### Table of Contents



THE X-CHANGE CORPORATION  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 NOTE 1  ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
 Organization and History:
   Nature of Business
  Principals of Consolidation
  Cash and Cash Equivalents
   F-10




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##### Table of Contents



THE X-CHANGE CORPORATION  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 NOTE 1  ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
 Depreciation
  Asset
    
    RateOffice equipment
    
    5 yearsFurniture and Fixtures
    
    5 yearsComputer Equipment
    
    3 years
  Revenue Recognition
   F-11




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##### Table of Contents



THE X-CHANGE CORPORATION  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 NOTE 1  ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
 Allowance for Doubtful Accounts
  Advertising
  Concentrations of Credit Risk
  Pervasiveness of Estimates
  Stock Compensation for Non-Employees
   F-12




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##### Table of Contents



THE X-CHANGE CORPORATION  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 NOTE 1  ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
 Earnings (Loss) per Share
  Financial Instruments
  Income Taxes
  Recent Accounting Standards
   F-13




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##### Table of Contents



THE X-CHANGE CORPORATION  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 NOTE 1  ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
 Recent Accounting Standards (Continued)
    F-14




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##### Table of Contents



THE X-CHANGE CORPORATION  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 NOTE 1  ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
 Recent Accounting Standards (Continued)
   NOTE 2  INCOME TAXES
  2006
    
    
    2005Net Operating Losses
    
    
    714,000
    
    
    
    340,000Valuation Allowance
    
    
    (714,000
    )
    
    
    (340,000
    )
    
    
    
    
  F-15




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##### Table of Contents



THE X-CHANGE CORPORATION  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 NOTE 2  INCOME TAXES (Continued)
  2006
    
    
    2005Provision (Benefit) at US Statutory Rate
    
    
    352,206
    
    
    
    123,793Increase (Decrease) in Valuation Allowance
    
    
    (374,000
    )
    
    
    (137,999
    )Other Differences
    
    
    21,794
    
    
    
    14,206
    
    
    
    
  NOTE 3  COMMITMENTS
   F-16




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##### Table of Contents



THE X-CHANGE CORPORATION  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 NOTE 3  COMMITMENTS (Continued)
  Year ending:
    
    Amount2007
    
    $
    96,9002008
    
    
    96,9002009
    
    
    96,9002010
    
    
    96,9002011
    
    
    Thereafter
    
    
    Total
    
    $
    387,600
 NOTE 4  RELATED PARTY PAYABLES
 Long-term related party payables
     F-17




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##### Table of Contents



THE X-CHANGE CORPORATION  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 NOTE 4  RELATED PARTY PAYABLES (Continued)
 Short-term related party payables
   st
 NOTE 5  PREFERRED STOCK
     NOTE 6  COMMON STOCK TRANSACTIONS
 
    
    In July of 2005, the company issued 10,000,000 shares of common stock to Michael
Sheriff, chief executive officer and director, in exchange for the outstanding stock of our
wholly owned subsidiary AirGATE Technologies, Inc.
 
    
    On of March 31, 2005, the company issued 100,000 shares of common stock to an outside
investor for $1.00 per share.
  F-18




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##### Table of Contents



THE X-CHANGE CORPORATION  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 NOTE 6  COMMON STOCK TRANSACTIONS (Continued)
 
    
    On January 5, 2006, the company issued 500,000 shares of common stock to Hexion
Specialty Chemical, Inc. in connection with and as part of our development contract with
Hexion. In return for the 500,000 shares $290,000 was capitalized as an deferred cost for
the increase in Hexions burden to the project. As part of the negotiation, the royalty
period for the contract was extended from 5 to 7 years. The cost was amortized over the
life of the contract.
 
    
    During the first quarter of 2007 (up to March 30, 2007), the company issued 770,000
shares of common stock, 770,000 warrants to purchase one share of common stock at $1.50 per
share and 770,000 warrants to purchase one share of common stock at $2.00 per share to
outside investors under a private placement memorandum for proceeds in the amount of
$550,000.
 
    
    The following shares were issued to consultants of the Company in consideration of
services rendered:(Par Value for $0.001)
 
    
    On January 11, 2005, the company issued 1,120,000 shares of common
stock for services
    
    On March 31, 2005, the company issued 70,000 shares of common stock for
services
    
    On November 11, 2005, the company issued 20,000 shares of common stock
for services
    
    After the AirGATE acquisition, the company issued 650,000 shares of
common stock to consultants of AirGATE Technologies, Inc. for services
    
    On January 5, 2006, the company issued 10,000 shares of common stock
for services
    
    On May 1, 2006, the company issued 30,000 shares of common stock for
services
    
    On June 1, 2006, the company issued 40,000 shares of common stock for
services
    
    On June 14, 2006, the company issued 12,500 shares of common stock for
services
    
    On June 16, 2006, the company issued 100,000 shares of common stock
for services
    
    On July 10, 2006, the company issued 30,000 shares of common stock for
services
    
    On August 16, 2006, the company issued 30,000 shares of common stock
for services
  F-19




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##### Table of Contents



THE X-CHANGE CORPORATION  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 NOTE 6  COMMON STOCK TRANSACTIONS (Continued)
 
    
    On September 1, 2006, the company issued 30,000 shares of common stock
for services
    
    On October 1, 2006, the company issued 30,000 shares of common stock
for services
    
    On October 26, 2006, the company issued 200,000 shares of common
stock for services
    
    On November 1, 2006, the company issued 30,000 shares of common stock
for services
    
    On December 1, 2006, the company issued 30,000 shares of common stock
for services
    
    On December 31, 2006, the company issued 80,000 shares of common stock
for services
 NOTE 7  LEGAL PROCEEDINGS
   F-20




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##### Table of Contents



THE X-CHANGE CORPORATION  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 NOTE 8  SUBSEQUENT EVENTS
   NOTE 9  DISCONTINUED OPERATIONS
   December 31,
    
    
    December 31,2006
    
    
    2005Cash
    
    $
    
    
    
    $
    4,569Oil Inventory
    
    
    
    
    
    
    4,657Computer Equipment, net of $62 accumulated depreciation
    
    
    
    
    
    
    995Total assets
    
    $
    
    
    
    $
    10,221
    F-21




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##### Table of Contents



THE X-CHANGE CORPORATION  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 NOTE 9  DISCONTINUED OPERATIONS (Continued)
  December 31,2006
    
    
    2005Revenue
    
    $
    
    
    
    $
    153,035Cost of Sales
    
    
    (2,109
    )
    
    
    (91,718
    )General and Administrative
    
    
    (83
    )
    
    
    (23,358
    )Gain on Sale of Oil Wells
    
    
    
    
    
    
    169,233Net Income (Loss)
    
    $
    (2,192
    )
    
    $
    207,192
 NOTE 10  MERGER/ACQUISITION
    NOTE 11  RESTATEMENT  2006
  
    
    The acquisition of AirGATE Technologies, Inc. was revised to reflect a valuation
consistent with the market price of Companys common stock at the date of acquisition.
    
    All stock-based payments to non-employees for consulting services were revalued to
reflect the market price of the Companys common stock at the time of payment.
  F-22




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##### Table of Contents




    
    Debt Discount  The Company established that its related party note payable had an
embedded beneficial conversion feature that had not been recorded in accordance with
Generally Accepted Accounting Principles. This beneficial conversion feature was
recorded and amortized over the term of the note.
    
    Deferred Costs Amortization  In connection with the issuance of 500,000 shares to
Hexion, the estimated value of this transaction was previously recorded as a long-term
asset. The Company subsequently determined that the issuance of the shares should be
accounted for as a deferred cost. The Company has amortized the fair value of the
revised value of these shares over the life of the related contract period from January
to July 2006.
    
    Revenue Recognition  The Company recognized revenue at the time of invoicing for
development contract scheduled payments, which should be recognized over the life of
the project.
  Statement of Operations Data
 Year ending
    
    
    Year endingDecember 31, 2006
    
    
    December 31, 2005Restated
    
    
    Previously Filed
    
    
    Restated
    
    
    Previously FiledRevenue
    
    $
    1,130,308
    
    
    $
    1,154,573
    
    
    $
    414,203
    
    
    $
    414,203Expenses
    
    
    3,069,925
    
    
    
    2,136,042
    
    
    
    10,035,746
    
    
    
    958,746Operating income (loss)
    
    
    (1,939,617
    )
    
    
    (981,469
    )
    
    
    (9,621,543
    )
    
    
    (544,543
    )Other income (expense)
    
    
    (171,829
    )
    
    
    (44,210
    )
    
    
    (26,747
    )
    
    
    (26,747
    )Income (loss) from
dicontinued operations
    
    
    (10,221
    )
    
    
    (10,221
    )
    
    
    207,192
    
    
    
    207,192$
    (2,121,667
    )
    
    $
    (1,035,900
    )
    
    $
    (9,441,098
    )
    
    $
    (364,098
    )Earnings per Share from
Continuing Operations
    
    $
    (0.08
    )
    
    $
    (0.04
    )
    
    $
    (0.46
    )
    
    $
    (0.03
    )Earnings per Share from
Discontinued Operations
    
    $
    
    
    
    $
    
    
    
    $
    0.01
    
    
    $
    0.01
 Balance Sheet Data
 As of December 31, 2006
    
    
    As of December 31, 2005Restated
    
    
    Previously Filed
    
    
    Restated
    
    
    Previously FiledAssets
    
    $
    266,902
    
    
    $
    483,347
    
    
    $
    57,875
    
    
    $
    57,875Liabilities
    
    
    752,952
    
    
    
    1,359,030
    
    
    
    270,409
    
    
    
    270,409Stockholders Deficit
    
    $
    (486,050
    )
    
    $
    (875,683
    )
    
    $
    (212,534
    )
    
    $
    (212,534
    )
  F-23