**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

FORM 10-KSB

 

(Mark One)

 

|   | [X] | Annual Report Pursuant to Section 13 or 15(d) of The                            Securities Exchange Act of 1934 |
|--------|-----|-----------------------------------------------------------------------------------------------------------------|

 

For the Fiscal Year Ended December 31, 2007

 

|   | [   ] | Transition Report Pursuant to Section 13 or 15(d) of The                            Securities Exchange Act of 1934 |
|--------|----------------------|---------------------------------------------------------------------------------------------------------------------|

 

Commission File Number: 000-31199

 

**CALYPSO MEDIA SERVICES GROUP, INC.**

(Name of small business issuer in its charter)

 

|   | Nevada | 87-0638338 |
|--------|--------|------------|

|   | (State or other jurisdiction of | (I.R.S. Employer |
|--------|---------------------------------|------------------|

|   | incorporation or organization) | Identification No.) |
|--------|--------------------------------|---------------------|

 

12 North Washington Street, Montoursville, Pennsylvania 17754

(Address of principal executive offices) (Zip Code)

 

Issuer's telephone no.: (570) 368-7633

 

| Securities registered pursuant to Section 12(b) of the                            Exchange Act: | None |
|-------------------------------------------------------------------------------------------------|------|

 

| Securities registered pursuant to Section 12(g) of the                            Exchange Act: | Common |
|-------------------------------------------------------------------------------------------------|--------|

 

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

 

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

 

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

 

|   | State the issuer's revenues for its most recent fiscal                            year.     $ 3,617,047 |
|--------|-----------------------------------------------------------------------------------------------------------------------------|

 

State the aggregate market value of the voting stock held by            non-affiliates computed by reference to the price at which the stock was sold, or the            average bid and ask prices of such stock as of a specified date within 60 days. $            -0-

 

State the number of shares outstanding of each of the issuer's classes            of common equity, as of the latest practicable date.

 

|   | Class | Outstanding as of March 21, 2008 |
|--------|-------|----------------------------------|

             

|   | Common Stock, Par Value |
|--------|-------------------------|

|   | $0.00001 par value | 5,000,000 |
|--------|--------------------|-----------|

 

DOCUMENTS INCORPORATED BY REFERENCE

 

A description of "Documents Incorporated by Reference" is contained in            Part III, Item 14.

 

| Transitional Small Business Disclosure                            Format. | Yes [ | ] | No [ X ] |
|---------------------------------------------------------------------------|-------|---|----------|

----

**CALYPSO MEDIA SERVICES GROUP, INC.**

 

**TABLE OF CONTENTS**

 

|   | Page |
|--------|------|

**PART I**

 

| Item 1. | Description of Business | 3 |
|---------|-------------------------|---|

 

| Item 2. | Description of Property | 12 |
|---------|-------------------------|----|

 

| Item 3. | Legal Proceedings | 12 |
|---------|-------------------|----|

 

| Item 4. | Submission of Matter to a Vote of Security                            Holders | 12 |
|---------|-------------------------------------------------------------------------------|----|

 

**PART II**

 

| Item 5. | Market for Common Equity and Related Stockholder                            Matters | 12 |
|---------|-------------------------------------------------------------------------------------|----|

 

| Item 6. | Management's Discussion and Analysis or Plan of                            Operation | 14 |
|---------|--------------------------------------------------------------------------------------|----|

 

| Item 7. | Financial Statements | 16 |
|---------|----------------------|----|

 

| Item 8. | Changes in and Disagreements with Accountants on                            Accounting |
|---------|----------------------------------------------------------------------------------------|

|   | and Financial Disclosure | 16 |
|--------|--------------------------|----|

 

| Item 8A(T). | Controls and Procedures | 16 |
|-------------|-------------------------|----|

 

| Item 8B | Other Information | 17 |
|---------|-------------------|----|

             

**PART III**

 

| Item 9. | Directors, Executive Officers, Promoters and Control                        Persons; Corporate Governance;

Compliance with Section 16(a) of the Exchange                        Act | 16 |
|---------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----|

              

| Item 10. | Executive Compensation | 19 |
|----------|------------------------|----|

 

| Item 11. | Security Ownership of Certain Beneficial Owners and                            Management | 20 |
|----------|-------------------------------------------------------------------------------------------|----|

 

| Item 12. | Certain Relationships and Related Transactions and                            Director Independence | 21 |
|----------|-----------------------------------------------------------------------------------------------------|----|

 

| Item 13. | Exhibits | 21 |
|----------|----------|----|

 

| Item 14. | Principal Accountant Fees and Services | 22 |
|----------|----------------------------------------|----|

 

|   | Signatures | 23 |
|--------|------------|----|

-2-

**PART I**

 

**Item 1.**

**Description of Business**

 

                             

*History*

 

We incorporated on July 27, 1999 in the State of Delaware as Calypso            Financial Services, Inc. Our original purpose was to actively seek potential operating            businesses and/or business opportunities, with the intent to acquire or merge with such            businesses. Following our organization, we issued a total of 1.5 million shares of its            common stock.

 

On November 17, 1999, we filed a registration statement with the SEC on            Form SB-2 under the Securities Act of 1933 for the purpose of registering for resale            the 1.5 million shares of common stock then outstanding. The registration statement was            subsequently withdrawn and, on July 31, 2000, we filed a registration statement on Form            10-SB under the Securities Exchange Act of 1934. The registration statement became            effective automatically 60 days after filing with the SEC.

 

On December 31, 2007, we completed the acquisition of Media Depot, Inc.,            a Nevada corporation, changed our corporate domicile to the State of Nevada and changed            our name to Calypso Media Services Group, Inc.

 

Our principal executive offices are located at 12 North Washington            Street, Montoursville, Pennsylvania 17754, telephone number (570) 368-7633. We also            maintains a satellite office in Lonoke, Arkansas, telephone number, (501) 676-0233. Our            website can be accessed atwww.CalypsoAdvertising            dot.com.

 

                             

*Current Business*

 

Following the Media Depot acquisition, we became engaged in offering a            full line of advertising services to manufacturers, distributors and dealers across the            United States and Canada. Media Depot is a national agency that specializes in co-op            advertising and offers an array of services ranging from buying and planning media in            radio, TV, cable, print or outdoor advertising, to creating print ads and producing            electronic commercials. Media Depot was founded in March 2005 by combining Media Max, a            privately held corporation, and Media Depot. Media Max has been operating since 1998.            Both companies offer a full line of advertising services to manufacturers, distributors            and dealers. In August 2007, Media Depot acquired all of Media Max’s assets,            properties, goods, inventories, contracts and other intangible assets. Media Max            remains a subsidiary of Media Depot. Unless otherwise indicated, references herein to            Media Depot will include Media Max as its subsidiary.

 

Our primary business strategy is to offer quality advertising services            at a reduced cost to our clients. Most agencies bill clients for creative expense,            however Media Depot provides these services at no cost, which we consider a primary            selling tool when soliciting clients. In seeking prospective clients, we first identify            targeted manufacturer clients, establish corporate relationships that lead to            distributors/dealers, and then implement ad campaigns for segmented client groups. Our            target markets are manufacturers that use a co-op advertising strategy with their            distributor/dealer network. Media Depot offers a cohesive ad campaign for the            manufacturer as well as advertising buying power for the distributor/dealer that they            otherwise would not have. Media Depot aggressively negotiates rates for the benefit of            clients resulting in increased exposure for the client’s advertising            campaign.

 

Media Depot also offers, through an arrangement with Rovion,            “*InPerson Moving Media*,”            a unique way to deliver video characters on a web site with a personalize message to            anyone who visits that website. This product runs video clips of actors, spokespersons            or company representatives that draw a visual connection with customers visiting web            sites. We allows a client’s web site the opportunity to get personal by            delivering content in a way that truly speaks to their customers.

 

Media Depot is familiar with many local and regional markets in the            United States. Its media buyers have in the aggregate over 30 years of experience in            the advertising arena. Media Depot offers an array of services as outlined            below:

-3-

 

                             

*Media & Marketing*

                             

●

Media buying & planning

                             

●

Radio

                             

●

Network TV

                             

●

Cable

                             

●

Newspaper

                             

●

Magazine

                             

●

Direct mail

                             

●

Outdoor

                             

●

Market research

                             

●

Co-Op management

                             

*Graphic Design*

                             

●

Logo design

                             

●

Point of purchase

                             

●

Display design

                             

●

Outdoor advertising

                             

●

Printed materials

                             

●

Newspaper ads

                             

●

Magazine ads

                             

●

Business cards

                             

●

Door hangers

                             

●

Direct mail

                             

●

Brochures

                             

●

Postcards

                             

●

Inserts

                             

*Video*

                             

●

Television scripts

                             

●

Television storyboards

                             

●

Television production

                             

*Radio*

                             

●

Radio scripts

                             

●

Professional voices

                             

●

Radio production

                             

*Interactive Media*

                             

●

Web site consulting

                             

●

Web site design

                             

●

Custom graphics

                             

●

Web Hosting

 

There are certain costs directly attributable to each advertising            campaign. These costs represent approximately 10% of a campaign's budget and include            creative, planning and verification of ads placed. Most agencies bill clients for            creative expense, but Media Depot provides creative services at no cost and considers            this a primary selling tool when soliciting clients.

 

Our overall strategy is to first identify targeted manufacturer clients,            establish corporate relationships that lead to distributors/dealers, and then implement            ad campaigns for segmented client groups that benefit from pricing leverage. Our target            markets are manufacturers that utilize a Co-Op advertising strategy with their            distributor/dealer network. We offer a cohesive ad campaign for the manufacturer as            well as advertising buying power for the distributor/dealer that they otherwise would            not have.

 

A typical advertising agency generates a 15% agency fee and does not            generally negotiate rates for the benefit of the client. Media Depot compares rate card            cost with the client's past invoices, reviews circulation/subscriber numbers, and then            contacts the media offering what Media Depot’s buyers feel is a competitive price            for the client's ads. We aggressively negotiate rates for the benefit of the client            resulting in increased exposure for the client’s advertising campaign. Because we            are not necessarily tied to a particular media, the media bids for the customer's            advertising budgets.

             

-4-

**Services**

 

Media Depot is a full service advertising agency offering media planning            and placement for clients throughout the United States and Canada. We specialize in            Co-Op advertising campaigns for manufacturers and dealers.

 

We aggressively negotiate media rates that deliver more ads per dollar            spent providing a competitive advantage for clients that the typical agency does not            provide. We also handles all aspects of creating, buying and planning media in radio,            TV, cable, print and outdoor advertising.

 

Through an agreement with Rovion, we also offer            “*InPerson Moving Media*,”            a unique way to deliver video characters on web sites with a personalize message to            anyone who visits a website. This product runs video clips of actors, spokespeople or            company representatives, that can draw a visual connection with customers visiting web            sites. Learning what a company does online is no longer about reading content, but            about viewing and listening. Moving Media, allows a client’s web site the chance            to get personal by delivering their content in a way that truly speaks to their            customers.

 

**Trademarks and Copyrights**

 

We do not typically own trademarks or copyrights on properties on which            our services and products are based. These rights are owned or controlled by the            creator of the property or by the entity which licenses its intellectual property            rights, such as a motion picture or television producer.

 

**Markets and Competition**

 

Media Depot operates in a highly competitive marketplace. Principal            competitors include Interpublic Group, Catalina Marketing Group, Omnicom Group Inc. and            other local and national advertising agencies. We must also compete with various local            companies in each regional market. We believe the principal competitive factors            affecting Media Depot’s business are the development of client marketing and            promotional strategies, unique consumer insights, creative execution, license            selection, price and service quality. We must compete with companies that have far more            extensive sales and development staffs and significantly greater financial            resources.

 

Management believes that we are competitive in our offered services and            the marketing and promotional strategies we develop. We also use bulk buying of            advertising time and space so that we can offer reduced rates to clients. Further, by            not charging for creative expenses, additional savings are passed onto clients. We            believe that the Moving Media product is unique to the marketplace and gives us an            advantage when competing for on-line advertising business.

 

**Creative Expertise**

 

Some Media Depot clients will require that we provide certain creative            services to produce ads. Media Depot employs experienced graphic design persons to            create ads for the required media as a client demands. We also employ creative writing            and in-house production personnel as needed.

 

**Government Regulation**

 

                             

Our business may be subject to certain government                            regulations and agencies, such

as truth in advertising and legal disclaimers for certain            advertisements, in addition to certain consumer advocacy groups.

 

**Employees**

 

Media Depot presently has 11 full time employees, three part-time            employees and one consultant. We anticipate that during the next 12 months, we will add            approximately 13 employees, including a chief operating officer. Media Depot’s            employees are not members of any union, nor have they entered into any collective            bargaining agreements, nor is it anticipated in the near future. We believe that our            relationship with employees is good. 

-5-

**Facilities**

 

Media Depot maintains its principal offices at 12 North Washington            Street, Montoursville, Pennsylvania, which consists of 4,000 sq. ft. of office space.            The offices are leased from the Hoff Family Limited Partnership that is controlled by            Rose Hoff, the wife of Matthew Hoff, a principal stockholder. Lease payments are $1,500            per month and renews monthly.

 

We also maintain a satellite office in Lonoke, Arkansas, which consists            of 2,000 sq. ft. of office space. The offices are leased for $916 per month and renews            monthly. The facilities are owned by the J.S. Parnell Trust, of which our C.E.O.            Michael D. Parnell is trustee.

 

**Employee Stock Plan**

 

Media Depot has adopted an employee stock plan whereby nine employees            will receive an aggregate of 120,000 shares of Calypso common stock. An aggregate of            180,000 shares may be issued under the plan. All of the shares to be issued will remain            in trust and ownership of the shares shall not vest with the individual employee and            considered outstanding until the certain employment criteria have been met. Each            employee must execute an employment agreement with Media Depot and continuously remain            an employee for the time period indicated below.

 

                             

**Time Period**

**Percent of Shares Vested**

                             

12 months from the date employment agreement is                            signed

25%

                             

24 months from the date employment agreement is                            signed

25%

                             

36 months from the date employment agreement is                            signed

25%

                             

48 months from the date employment agreement is                            signed

25%

 

Upon an employee fulfilling each time period of employment, we will            deliver to the employee a stock certificate for that number of shares of Calypso common            stock indicated above. In the event an employee does not enter into an employment            agreement or fails to fulfill any of the applicable time periods of employment, those            shares of common stock not so earned by and vested with the employee will be delivered            to us and canceled.

 

None of the shares issued under the plan will be registered under the            Securities Act. The shares are being issued pursuant to an exemption from registration            under the Securities Act and are deemed restricted securities. Certificates            representing the shares will bear an appropriate restrictive legend and may not be            offered for sale, sold or otherwise transferred except pursuant to a registration            statement under the Securities Act or an appropriate exemption from such            registration.

 

**Industry Segments**

 

No information is presented as to industry segments. We are presently            engaged in the principal business of offering a full line of advertising services            through our national advertising agency. Reference is made to the statements of            operations contained in the financial statements included herewith for a statement of            our revenues and operating loss for the past two fiscal years.

 

**Risk Factors**

 

*You should carefully consider the risks and uncertainties described            below and other information in this report. If any of the following risks or            uncertainties actually occur, our business, financial condition and operating results,            would likely suffer. Additional risks and uncertainties, including those that are not            yet identified or that we currently believe are immaterial, may also adversely affect            our business, financial condition or operating results.*

 

**Risks Relating to Our Business**

 

***The success of our future operations depends on Media            Depot’s ability to generate revenues from new and existing clients that may be            subject to many factors.***

 

-6-

             

Media Depot, together with its subsidiary Media Max, have operated since            1998 and reported a net profit in the past two years. The ability for us to generate            profits in the future depends on many factors, including the following:

 

                             

●

Our ability to maintain Media Depot’s current                            client base and to secure new clients in the future;

 

                             

●

the ability to develop new advertising marketing                            strategies to offer existing and future clients;

 

                         

●

our ability to compete with existing and new entities that                        offer the same or similar  services and

products as Media Depot;

                         

                             

●

the costs of maintaining and expanding operations;                            and

 

                             

●

our ability to attract and retain a qualified work                            force.

 

We cannot assure you that we will achieve or maintain any of the            foregoing factors or realize profitable operations in future.

 

***Future operating results are difficult to            predict.***

 

We may experience significant quarter-to-quarter fluctuations in            revenues and net income (loss). The advertising business tends to include larger            promotions in the summer and during the winter holiday season. Advertising budgets for            existing and new clients vary year-to-year, influencing their advertising schedules.            Thus, we believe that quarter-to-quarter comparisons of historical operating results            will not be a good indication of future performance. It is likely that in some future            quarter, operating results may fall below the expectations of securities analysts and            investors, which could have negative impact on the price of our common            stock.

 

***Media Depot relies on the continued development of new and            competitive promotional programs and advertising campaigns.***

 

A significant portion of Media Depot’s revenues come from            promotional programs and advertising campaigns it develop for its clients. We must            continually develop and market new and competitive promotional programs and advertising            campaigns that will be competitive with other companies offering the same or similar            services and products. There can be no assurance that Media Depot or its clients will            be able to secure necessary licenses for additional entertainment properties on which            to base promotional programs or that, if secured, such licenses will result in            successful campaigns.

 

***If some Media Depot clients experience financial distress, their            weakened financial position could negatively affect our own financial position and            results.***

 

Media Depot has a diverse client base and, at any given time, one or            more clients may experience financial distress, file for bankruptcy protection or go            out of business. If a client with whom Media Depot does a substantial amount of            business experiences financial difficulty, it could delay or jeopardize the collection            of accounts receivable, result in significant reductions in services provided by us and            may have a material adverse effect on our financial position, results of operations and            liquidity.

 

***Media Depot receives approximately 28% of its revenue from its            three largest clients and the loss of one or more of these clients could adversely            impact results of operations and financial condition.***

 

Media Depot clients generally are able to reduce advertising and            marketing spending or cancel projects at any time for any reason. It is possible that            clients could reduce spending in comparison with historical patterns, or they could            reduce future spending. Media Depot’s three largest clients account for            approximately 28% of its total revenues. A significant reduction in advertising and            marketing spending by its largest clients, or the loss of one or more of these clients,            if not replaced by new client accounts or an increase in business from existing            clients, would adversely affect revenues. This could have a material adverse effect on            our results of operations and financial condition.

 

-7-

             

***Our business may be vulnerable to potential lawsuits regarding ad            content or system failure.***

 

Because Media Depot facilitates the placement of advertisements in print            and/or on-line publications, potential claims may be asserted for negligence,            defamation or personal injury, or for reasons based on other theories, due to the            nature of the advertisements’ content. Current technology does not contemplate            the review of classified ad content processed on websites for libelous or other            statements that might give rise to possible liability. This role has been fulfilled            historically by each publication and we expect the publications will continue to            monitor their ads. Although we anticipate obtaining general and professional liability            insurance, such coverage may not cover potential claims or may not be adequate to            indemnify us fully. Any imposition of liability or legal defense expenses that are not            covered by insurance or that are in excess of our insurance coverage could place a            strain on our available cash resources, could seriously jeopardize the success of our            business plan and could materially and adversely affect our financial position, results            of operations and cash flows.

 

***The advertising industry is highly competitive and if we are            unable to compete successfully, our results of operations could be negatively and            severely affected.***

 

The advertising and media industry is highly competitive and marked by            several competitors of various size and resources. A significant capital base is not            necessarily required to enter into the business making it relatively easy for new            competitors to enter the market. Our principal competitors and potential competitors            include Interpublic Group, Catalina Marketing Group, Omnicom Group Inc. and other local            and national advertising agencies. Our services must compete with other agencies and            providers of creative or media services in order to maintain existing client            relationships and to win new clients. A client’s perception of the quality of our            creative work, our reputation and the reputations of the agencies with which we work,            are important factors in determining our competitive position. An agency’s            ability to serve clients, particularly large international clients, on a broad            geographic basis is also an important competitive consideration. Because an            agency’s principal asset is its people, freedom of entry into the business is            almost unlimited and a small agency is, on occasion, able to take all or some portion            of a client’s account from a much larger competitor. Many existing and potential            competitors have greater financial resources, larger market share, and larger            production and creative capability, which may enable them to establish a stronger            competitive position than we have. If we fail to address competitive

developments quickly and effectively, we will not be able to grow our            business or remain a viable entity.

 

***If we fail to keep up with changes affecting marketing trends,            technology and the markets that we serve, we will become less competitive that would            adversely affect future financial performance.***

 

In order to remain competitive we must respond on a timely and            cost-efficient basis to changes in advertising and marketing trends, technology,            industry standards and procedures and customer preferences. We need to continuously            develop new strategies, advertising and marketing campaigns, technologies and services            to address new developments in advertising. In some cases these changes may be            significant and the cost to comply with these changes substantial. We cannot assure you            that we will be able to adapt to any changes in the future or that we will have the            financial resources to keep up with changes in the marketplace. Also, the cost of            adapting to changes may have a material and adverse effect on our operating            results.

 

***Our future success depends on retaining Media Depot’s            existing key employees and hiring and assimilating new key            employees.***

 

In order to achieve success, we must retain Media Depot’s key            employees, including its executive officers, creative staff and research and media            personnel, and be able to attract new personnel as needed. Although we currently have            employment agreements with two executive officers, each executive may be able to            terminate his agreement at any time. Presently, no other employment contracts exist.            Our ability to attract and retain key personnel is influenced by a variety of factors,            including compensation we pay, which could be adversely affected by our financial or            market performance. It would be difficult for us to replace any one of these            individuals. In addition, as we grow we may need to hire additional key personnel. We            may not be able to identify and attract high quality employees or successfully            assimilate new employees into our existing management structure.

-8-

             

***Government regulations and consumer advocates may limit the scope            of the content of our services, which could affect our ability to meet clients’            needs.***

 

Government agencies and consumer advocacy groups may, directly or            indirectly from time to time, affect or attempt to affect the scope, content and manner            of presentation of advertising, marketing and corporate communications services,            whether through regulations or other governmental actions. There has been an increasing            tendency on the part of advertisers and consumer groups to challenge advertising            through legislation, regulation, the courts or otherwise. These actions may be premised            on the grounds that the advertising is false and deceptive or injurious to public            welfare. Any such limitations on the scope of the content of services provided could            affect our ability to meet clients’ needs. In addition, there has been an            increasing tendency on the part of businesses to resort to the judicial system to            challenge advertising practices. We cannot assure investors in our stock that such            claims by businesses or governmental agencies will not have a material adverse effect            on our results of operations and financial condition in the future.

 

***Our business could be adversely affected by negative economic            developments in the advertising industry and/or the economy in            general.***

 

Media Depot depends on the perceived demand for advertising in the            business community, which can be adversely affected by declines in the businesses of            clients and prospective clients and/or downturns in the general economy. Accordingly,            the success of our business is susceptible to downturns in not only the business of our            clients, but also in the economy in general. Any significant downturn in the            advertising market or in general economic conditions would likely hurt our business and            operating results.

 

***We may not be able to manage future growth effectively, which            could adversely affect our operations and financial performance.***

 

The ability to manage and operate our business as we execute our            development and growth strategy will require effective planning. Significant rapid            growth and/or possible future acquisitions could strain management and internal            resources that could adversely affect financial performance. We anticipate that future            growth or acquisitions could place a significant strain on personnel, management            systems, infrastructure and other resources. Our ability to manage future growth            effectively will also require attracting, training, motivating, retaining and managing            new employees and continuing to update and improve operational, financial and            management controls and procedures. If we do not manage growth effectively, our            operations could be adversely affected resulting in slower growth and a failure to            achieve or sustain profitability.

 

                             

***There are risks associated with possible future                            acquisitions.***

 

As a term of the Media Depot acquisition, we are reserving 5.0 million            shares of our common stock for use in potential future acquisitions of other            businesses, entities or assets related to the Media Depot’s business. No            business, asset or acquisition has currently been identified and none is anticipated in            the immediate future. However, if presented with an appropriate opportunity, we may            make an acquisition of one or more complementary companies or businesses. There can be            no assurance that the anticipated benefits of any future acquisition will be realized.            In the event we make a future acquisition, we could have difficulty in assimilating            that business’ personnel and operations. In addition, key personnel of an            acquired business may decide not to work for us. If we make other types of            acquisitions, we could have difficulty in assimilating the acquired technology or            products into our operations. These difficulties could disrupt our ongoing business,            distract management and employees and increase expenses. Also, future acquisitions            would most likely result in potentially dilutive issuances of our common stock, the            incurrence of debt, contingent liabilities and/or amortization expenses related to            goodwill and other intangible assets, which could adversely affect our results of            operations and financial condition.

 

***Being a public company involves increased administrative costs,            which could result in lower net income and make it more difficult for us to attract and            retain key personnel.***

 

As a public company, we incur significant legal, accounting and other            expenses that Media Depot did not incur as a private company. In addition, the            Sarbanes-Oxley Act of 2002 as well as new rules subsequently implemented by the SEC,            have required changes in corporate governance practices of public companies.            We

 

-9-

             

expect that these new rules and regulations will increase our legal and            financial compliance costs and make some activities more time consuming. For example,            in connection with being a public company, we may have to create new board committees,            implement additional internal controls and disclose controls and procedures, retain a            financial printer, adopt an insider trading policy and incur costs relating to            preparing and distributing periodic public reports. These new rules and regulations            could also make it more difficult for us to attract and retain qualified executive            officers and members of our board of directors, particularly to serve on our audit            committee.

 

**Risks Relating to Ownership of Our Common Stock**

 

***There is not currently, nor has there ever been, a public trading            market for our common stock***

 

There is no current public trading market for our common stock, nor has            there ever been a market. We intend to file with the SEC in the near future a            registration statement under the Securities Act of 1933 to register shares held by            certain selling stockholders. In connection with this registration, we will request a            broker/dealer to make an initial application to the Financial Industry Regulatory            Authority to have our shares quoted on the OTC Bulletin Board. Inclusion on the OTC            Bulletin Board would permit price quotations for our shares to be published by that            service. However, we do not anticipate a substantial public trading market in our            shares in the immediate future and, any trading market that may develop, will most            likely be very volatile and numerous factors beyond our control may have a significant            effect on the market.

 

Except for the application to the OTC Bulletin Board, there are no            plans, proposals, arrangements or understandings with any person concerning the            development of a trading market in any of our securities. There can be no assurance            that our shares will be accepted for trading on the OTC Bulletin Board or any other            recognized trading market. Also, there can be no assurance that a public trading market            will develop following acceptance by the OTC Bulletin Board or at any other time in the            future or, that if such a market does develop, that it can be sustained. Only companies            that report their current financial information to the SEC may have their securities            included on the OTC Bulletin Board. Therefore, we must keep current in our filing            obligations with the SEC, including periodic and annual reports and the financial            statements required thereby. In the event that we become delinquent in our filings or            otherwise lose our status as a "reporting issuer," any future quotation of our shares            on the OTC Bulletin Board would be jeopardized.

 

The ability of individual stockholders to trade their shares in a            particular state may be subject to various rules and regulations of that state. A            number of states require that an issuer's securities be registered in their state or            appropriately exempted from registration before the securities are permitted to trade            in that state. Presently, we have no plans to register our securities in any particular            state.

 

***In the event that our shares are quoted in a public market, the            stock price may be volatile because of factors beyond our control.***

 

There can be no assurance that our shares will be accepted for trading            on the OTC Bulletin Board or other recognized trading market, or that if they are,            there will be an active trading market for the shares. Accordingly, it could be            difficult for holders of our common stock to liquidate their shares.

 

The market price of our common stock could be subject to significant            fluctuations and the market price could be subject to any of the following            factors:

 

                             

●

Our failure to achieve and maintain                            profitability;

 

                             

●

Changes in earnings estimates and recommendations by                            financial analysts;

 

                             

●

Actual or anticipated variations in our quarterly and                            annual results of operations;

 

                             

●

Changes in market valuations of similar                            companies;
                             
                             

●

Announcements by us or our competitors of significant                            contracts, new products or services,

acquisitions, commercial relationships, joint ventures                            or capital commitments;
-10-
                             

●

The loss of significant clients or customers;

 

                             

●

The loss of significant partnering relationships;                            and
                             
                             

●

General market, political and economic                            conditions.

 

In the past, following periods of extreme volatility in the market price            of a company's securities, securities class action litigation has often been            instituted. A securities class action suit against us could result in substantial costs            and divert our management's time and attention, which would otherwise be used to            benefit our business.

 

                             

***Effective voting control of our company is held by                            directors and certain principal stockholders.***

 

Approximately 70% of our outstanding shares of common stock are held by            our directors and a small number of principal stockholders. These persons will have the            ability to exert significant control in matters requiring stockholder vote and may have            interests that conflict with other stockholders. As a result, a relatively small number            of stockholders, acting together, have the ability to control all matters requiring            stockholder approval, including the election of directors and approval of acquisitions,            mergers and other significant corporate transactions. This concentration of ownership            may have the effect of delaying, preventing or deterring a change in control of our            company. It could also deprive our stockholders of an opportunity to receive a premium            for their shares as part of a sale of our company and it may affect the market price of            our common stock.

 

***We do not expect to pay dividends in the foreseeable future, which            could make our stock less attractive to potential investors.***

 

We anticipate that we will retain any future earnings and other cash            resources for operation and business development and do not intend to declare or pay            any cash dividends in the foreseeable future. Any future payment of cash dividends will            be at the discretion of our board of directors after taking into account many factors,            including operating results, financial condition and capital requirements. Corporations            that pay dividends may be viewed as a better investment than corporations that do            not.

 

***If our shares eventually trade on the OTC Bulletin Board,            transactions may be subject to certain "penny stock” regulation which could have            a negative effect on the price of our shares in the public market.***

 

Public trading of our common stock on the OTC Bulletin board may be            subject to certain provisions, commonly referred to as the penny stock rules,            promulgated under the Securities Exchange Act of 1934. A penny stock is generally            defined to be any equity security that has a market price less than $5.00 per share,            subject to certain exceptions. If our stock is deemed to be a penny stock, trading in            the shares will be subject to additional sales practice requirements on broker-dealers.            These may require a broker dealer to:

 

                             

●

make a special suitability determination for purchasers                            of penny stocks;

 

                             

●

receive the purchaser's prior written consent to the                            transaction; and

 

                         

●

deliver to a prospective purchaser of a penny stock, prior                        to the first transaction,

a risk disclosure document relating to the penny stock                        market. 

 

Consequently, penny stock rules may restrict the ability of            broker-dealers to trade and/or maintain a market in our common stock and may affect the            ability of stockholders to sell their shares. These requirements may be considered            cumbersome by broker-dealers and could impact the willingness of a particular            broker-dealer to make a market in our shares, or they could affect the value at which            our shares trade. Also, many prospective investors may not want to get involved with            the additional administrative requirements, which may have a material adverse effect on            the trading of our shares.

             

-11-

***Future sales or the potential for sale of a substantial number of            shares of our common stock, could cause our market value to decline.***

 

We currently have 5.0 million shares of common stock outstanding, a            portion of which, currently held by selling stockholders, will be included in our            registration statement. The shares included in the registration statement will be            freely tradeable without restriction upon the effectiveness of the registration            statement. A number of shares, yet to be determined, to be offered by selling            stockholders will be subject to certain lock-up/leak-out agreements that restrict the            number of shares a particular stockholder may sell during a designated            period.

 

The remaining shares not included in our registration statement, are            considered restricted securities and may be sold only pursuant to a registration            statement or the availability of an appropriate exemption from registration. A portion            of these shares will also subject to lock-up/leak-out agreements. Sales of a            substantial number of these restricted shares in the public markets, or the perception            that these sales may occur, could cause the market price of our common stock to decline            and materially impair our ability to raise capital through the sale of additional            equity securities.

 

**Forward-Looking and Cautionary Statements**

 

This report contains forward-looking statements relating to future            events or our future financial performance. In some cases, you can identify            forward-looking statements by terminology such as “may,” “will”            “should," “expect," "intend," "plan," anticipate," "believe," "estimate,"            "predict," "potential," "continue," or similar terms, variations of such terms or the            negative of such terms. These statements are only predictions and involve known and            unknown risks, uncertainties and other factors, including those risks discussed in the            “Risk Factors” section above. Although forward-looking statements, and any            assumptions upon which they are based, are made in good faith and reflect our current            judgment, actual results could differ materially from those anticipated in such            statements. Except as required by applicable law, including the securities laws of the            United States, we do not intend to update any of the forward-looking statements to            conform these statements to actual results.

 

**Item 2.**

**Description of Property**

 

We do not presently own any real property. Our principal offices are            located in leased facilities located at 12 North Washington Street, Montoursville,            Pennsylvania. The facilities consist of 4,000 sq. ft. of office space and are leased            from a related party at the rate of $1,500 per month and renews monthly. We also lease            an office in Lonoke, Arkansas, which consists of 2,000 sq. ft. of office space. The            offices are leased from a related party at the rate of $916 per month and renews            monthly.

 

**Item 3.**

**Legal Proceedings**

 

There are no material pending legal proceedings to which our company, or            any subsidiary thereof, is a party or to which any of our property is subject and, to            the best of our knowledge, no such actions against us are contemplated or            threatened.

 

**Item 4.**

**Submission of Matters to a Vote of Security                            Holders**

 

No matters were submitted to a vote of our securities holders during the            fourth quarter of the fiscal year ended December 31, 2007.

 

**PART II**

 

**Item 5.**

**Market for Common Equity and Related Stockholder                            Matters**

 

There is not currently, nor has there ever been, a public trading market            for our common stock. As of the date hereof there are approximately 50 stockholders of            record of our common stock. We intend to request a broker/dealer to make an initial            application to the Financial Industry Regulatory Authority to have our            shares

-12-

             

quoted on the OTC Bulletin Board. The application will consist of            current corporate information, financial statements and other documents as required by            Rule 15c2-11 of the Securities Exchange Act of 1934.

 

Inclusion on the OTC Bulletin Board will permit price quotations for our            shares to be published by that service. Although we intend to request that an            application to the OTC Bulletin Board be submitted, we do not anticipate a public            trading market in our shares in the immediate future. Any future secondary trading of            our shares may be subject to certain state imposed restrictions. Except for the            application to the OTC Bulletin Board, there are no plans, proposals, arrangements or            understandings with any person concerning the development of a trading market in any of            our securities. There can be no assurance that our shares will be accepted for trading            on the OTC Bulletin Board or any other recognized trading market. Also, there can be no            assurance that a public trading market will develop following acceptance by the OTC            Bulletin Board or at any other time in the future or, that if such a market does            develop, that it can be sustained.

 

The ability of individual stockholders to trade their shares in a            particular state may be subject to various rules and regulations of that state. A            number of states require that an issuer's securities be registered in their state or            appropriately exempted from registration before the securities are permitted to trade            in that state. Presently, we have no plans to register our securities in any particular            state.

 

**Recent Issuance of Securities**

 

Upon the closing of our acquisition of Media Depot on December 31, 2007,            we issued 3.5 million shares of our authorized, but previously unissued common stock to            15 persons pursuant to the terms of the merger agreement. These shares were issued in            consideration for the exchange of the recipients’ Media Depot securities and were            issued pursuant to an exemption from registration under the Securities Act of 1933            provided by Section 4(2) of that Act.

 

**Penny Stock Rule**

 

It is unlikely that our securities will be listed on any national or            regional exchange or The Nasdaq Stock Market in the foreseeable future. Therefore our            shares most likely will be subject to the provisions of Section 15(g) and Rule 15g-9 of            the Exchange Act, commonly referred to as the "penny stock" rule. Section            15(g) sets forth certain requirements for broker-dealer transactions in penny stocks            and Rule 15g-9(d)(1) incorporates the definition of penny stock as that used in            Rule 3a51-1 of the Exchange Act.

 

The SEC generally defines a penny stock to be any equity security that            has a market price less than $5.00 per share, subject to certain exceptions. Rule            3a51-1 provides that any equity security is considered to be a penny stock unless that            security is:

 

                             

●

registered and traded on a national securities exchange                            meeting specified criteria set by the SEC;

 

                             

●

authorized for quotation on The Nasdaq Stock                            Market;

 

                             

●

issued by a registered investment company;

 

                             

●

excluded from the definition on the basis of price (at                            least $5.00 per share) or the issuer's net tangible assets;                            or

 

                             

●

exempted from the definition by the SEC.

 

Broker-dealers who sell penny stocks to persons other than established            customers and accredited investors are subject to additional sales practice            requirements. An accredited investor is generally defined as a person with assets in            excess of $1,000,000 or annual income exceeding $200,000, or $300,000 together with            their spouse.

 

For transactions covered by these rules, broker-dealers must make a            special suitability determination for the purchase of such securities and must receive            the purchaser's written consent to the transaction prior to the purchase. Additionally,            for any transaction involving a penny stock, unless exempt, the rules require            the

-13-

             

delivery, prior to the first transaction, of a risk disclosure document            relating to the penny stock market. A broker-dealer also must disclose the commissions            payable to both the broker-dealer and the registered representative and current            quotations for the securities. Finally, monthly statements must be sent to clients            disclosing recent price information for the penny stocks held in the account and            information on the limited market in penny stocks. Consequently, these rules may            restrict the ability of broker-dealers to trade and/or maintain a market in our common            stock and may affect the ability of stockholders to sell their shares.

 

These requirements may be considered cumbersome by broker-dealers and            could impact the willingness of a particular broker-dealer to make a market in our            shares, or they could affect the value at which our shares trade. Classification of the            shares as penny stocks increases the risk of an investment in our shares.

 

**Rule 144**

 

All shares of our common stock presently outstanding were issued in            private transactions and not registered with the SEC. We are in the process of            preparing for filing with the SEC a registration statement that will register a portion            of our outstanding shares. Currently, we have not made a final determination as to the            number of shares to be included in the registration statement. Any shares not included            for resale registration statement are deemed to be “restricted securities”            as defined by Rule 144 under the Securities Act. Rule 144 is the common means for a            stockholder to resell restricted securities and for affiliates, to sell their            securities, either restricted on non restricted (control) shares. Rule 144 has been            amended by the SEC, effective February 15, 2008.

 

Under the amended Rule 144, an affiliate of a company filing reports            under the Exchange Act who has held their shares for more than six months, may sell in            any three-month period an amount of shares that does not exceed the greater            of:

             

                         

●

the average weekly trading volume in the common stock, as                        reported through the automated quotation

system of a registered securities association, during the                        four calendar weeks preceding such sale, or

 

                             

●

1% of the shares then outstanding.

 

Sales by affiliates under Rule 144 are also subject to certain            requirements as to the manner of sale, filing appropriate notice and the availability            of current public information about the issuer.

 

A non-affiliate stockholder of a reporting company who has held their            shares for more than six months, may make unlimited resales under Rule 144,*provided*only that the issuer has available            current public information about itself. After a one-year holding period, a            non-affiliate may make unlimited sales with no other requirements or            limitations.

 

An important exception to the above described availability of the            amended Rule 144 is that Rule 144 is not available for either a reporting or            non-reporting shell company, unless the company:

 

                             

●

has ceased to be a shell company;

 

                             

●

is subject to the Exchange Act reporting                            obligations;

 

                             

●

has filed all required Exchange Act reports during the                            preceding twelve months; and

 

                         

●

at least one year has elapsed from the time the company                        filed with the SEC current Form 10 type

information reflecting its status as an entity that is not a                        shell company.

             

Following our acquisition of Media Depot, we ceased to be a shell            company. On January 4, 2008, we filed with the SEC a Form 8-K current report that            included comprehensive information that reflects that we are no longer a shell company.            Accordingly, our stockholders may not avail themselves to Rule 144 until January 5,            2009.

-14-

             

We cannot predict the effect any future sales under Rule 144 may have on            the market price of our common stock, if a market for our shares develops, but such            sales may have a substantial depressing effect on such market price.

 

**Dividends Policy**

 

We have never declared cash dividends on our common stock, nor do we            anticipate paying any dividends on our common stock in the foreseeable            future.

 

**Item 6.**

**Management's Discussion and Analysis or Plan of                            Operation**

 

*The following discussion and analysis of our financial condition and            results of operations should be read in conjunction with the financial statements and            notes thereto appearing elsewhere in this report.*

 

**Results of Operations**

 

                             

*For the years ended December 31, 2007 and                            2006.*

 

Total revenues for the year ended December 31, 2007 were $3,617,047            compared to $3,208,548 for 2005. This 14% increase is attributed to increasing            advertising revenues from existing and new clients . Cost of goods sold (sales)            increased 15% from $2,093,526 in 2006 to $2,410,713 in 2007, primarily attributed to            the increase in sales and media costs. General and administrative expenses increased            from $918,285 in 2006 to $952,658 in 2007, due to an increase in employees and related            expenses. Net income for 2007 was $245,928 ($0.06 per share), a 20% increase from the            net income of $205,130 ($0.06 per share) in 2006.

 

                             

*For the years ended December 31, 2006 and                            2005.*

 

For the year ended December 31, 2006, total revenues were $3,208,548            compared to $983,601 for 2005. The 226% increase reflects increasing advertising            revenues from existing and new clients. Cost of goods sold (sales) for 2006 were            $2,093,526 compared to $627,457 in 2005, a 234% increase due to increased sales and            media costs. General and administrative expenses increased from $585,867 in 2005 to            $918,285 in 2006, due to an increase in employees and related expenses. Net income for            2006 was $205,130 ($0.06 per share), compared to a net loss of $265,044 (-$0.08 per            share) in 2006.

 

**Liquidity and Capital Resources**

 

At December 31, 2007, we had total current assets of $614,005, primarily            in accounts receivable of $579,968 and cash of $31,539. At December 31, 2006, current            assets were $723,384, primarily in accounts receivable of $670,052 and cash of $37,252.            Working capital at December 31, 2007 was $497,293 compared to $257,850 at December 31,            2006 This increase in working capital is due to decreases in accounts payable and            payables to stockholders. At December 31, 2007, we had total assets of $656,929 and a            stockholders' equity of $540,217 compared to total assets of $762,473 and total            stockholders' equity of $270,467 at December 31, 2006.

 

**Inflation**

 

In the opinion of management, inflation has not and will not have a            material effect on our operations in the immediate future. Management will continue to            monitor inflation and evaluate the possible future effects of inflation on our business            and operations.

 

**Off-balance Sheet Arrangements**

 

                             

We have no off-balance sheet arrangements.

 

-15-

 

**Recent Accounting Pronouncements**

 

In September 2006, the Financial Accounting Standards Board            (“FASB”) issued Statement of Financial Accounting Standards            (“SFAS”) No.  157, “*Fair Value            Measurements*.” SFAS 157 defines fair value,            establishes a framework for measuring fair value in accordance with U.S. GAAP, and            expands disclosures about fair value measurements. The statement clarifies that the            exchange price is the price in an orderly transaction between market participants to            sell an asset or transfer a liability at the measurement date. The statement emphasizes            that fair value is a market-based measurement and not an entity-specific measurement.            It also establishes a fair value hierarchy used in fair value measurements and expands            the required disclosures of assets and liabilities measured at fair value.            SFAS 157 is effective for financial statements issued for fiscal years beginning            after November 15, 2007. The adoption of this standard is not expected to have a            material impact on our financial condition, results of operation or            liquidity.

 

In June 2006, the FASB issued FASB Interpretation No. 48            (“FIN 48”), “*Accounting for Uncertainty            in Income Taxes* *— an            interpretation of FASB Statement No.* *109*,” which prescribes comprehensive            guidelines for recognizing, measuring, presenting and disclosing in the financial            statements tax positions taken or expected to be taken on tax returns. FIN 48,            effective for fiscal years beginning after December 15, 2006, seeks to reduce the            diversity in practice associated with certain aspects of the recognition and            measurement related to accounting for income taxes. We are currently assessing the            impact of FIN 48 on our consolidated financial position and results of            operations.

 

In March 2006, the FASB issued SFAS No. 156, “Accounting for            Servicing of Financial Assets, an amendment of FASB Statement No. 140, Accounting for            Transfers and Servicing of Financial Assets and Extinguishments of Liabilities.”            This statement requires all separately recognized servicing assets and servicing            liabilities to be initially measured at fair value, if practicable. It permits for            subsequent measurement using either fair value measurement with changes in fair value            reflected in earnings, or the amortization and impairment requirements of Statement No.            140. Subsequent measurement of separately recognized servicing assets and servicing            liabilities at fair value, eliminates the necessity for entities that manage risks            inherent in servicing assets and servicing liabilities with derivatives, to qualify for            hedge accounting treatment and eliminates the characterization of declines in fair            value as impairments or direct write-downs. SFAS No. 156 is effective for an entity's            first fiscal year beginning after September 15, 2006. The adoption of this statement is            not expected to have a material effect on our future reported financial position or            results of operations.

 

**Item 7.**

**Financial Statements**

 

Financial statements for the fiscal years ended December 31, 2007 and            2006 have been examined to the extent indicated in their reports by Moore &            Associates, Chartered, independent certified public accountants and have been prepared            in accordance with accounting principles generally accepted in the United States of            America and pursuant to Regulation S-B as promulgated by the SEC. The aforementioned            financial statements are included herein starting with page F-1.

 

**Item 8.**

**Changes in and Disagreements with Accountants on                            Accounting and Financial Disclosure**

 

On January 22, 2007, we terminated Chisholm Bierwolf & Nilson, LLC,            Certified Public Accountants, as our independent certifying accountants. The            termination of our relationship with Chisholm Bierwolf & Nilson was unanimously            accepted by our board of directors on January 22, 2007. Also on January 22, 2007, our            board of directors unanimously approved a resolution to engage Moore & Associates,            Chartered, Certified Public Accountants, to become our new independent certifying            accountants. Media Max, our newly acquired wholly owned subsidiary, also engages Moore            & Associates, Chartered, Certified Public Accountants, as its independent            certifying accountants.

 

-16-

 

 

**Item 8A(T).**

**Controls and Procedures**

 

                             

*Evaluation of Disclosure Controls and                            Procedures*

 

As of the end of the period covered by this annual report, management,            with the participation of our chief executive officer and principal accounting officer,            carried out an evaluation of the effectiveness of the design and operation of our            “disclosure controls and procedures”, as defined in the Securities Exchange            Act of 1934, Rules 13a-15(e) and 15-d-15(e). Based upon that evaluation, our chief            executive officer and principal accounting officer concluded that as of December 31,            2007, our disclosure controls and procedures are effective to ensure that information            required to be disclosed by us in the reports that we file or submit under the Exchange            Act is:

 

(i) recorded, processed, summarized and reported, within the time            periods specified in the SEC's rules and forms; and

 

(ii) accumulated and communicated to our management, including our chief            executive officer and principal accounting officer, as appropriate, to allow timely            decisions regarding required disclosure.

 

In designing and evaluating the disclosure controls and procedures,            management recognizes that there are inherent limitations to the effectiveness of any            system of disclosure controls and procedures, including the possibility of human error            and the circumvention or overriding of the controls and procedures. A control system,            no matter how well conceived and operated, can provide only reasonable, not absolute,            assurance that the objectives of the control system are met. Further, the design of a            control system must reflect the fact that there are resource constraints and the            benefits of controls must be considered relative to their costs. Accordingly, even            effective disclosure controls and procedures can only provide reasonable assurance of            achieving their desired control objectives. Additionally, in evaluating and            implementing possible controls and procedures, management is required to apply its            reasonable judgment.

 

                             

*Management’s Annual Report on Internal Control                            Over Financial Reporting*

 

Management of Nine Mile Software is responsible for establishing and            maintaining adequate internal control over financial reporting for our company. Our            control system is designed to provide reasonable assurance regarding the reliability of            financial reporting and the preparation of financial statements for external purposes            in accordance with U.S. generally accepted accounting principals. Our internal control            over financial reporting includes those policies and procedures that :

 

                             

●

pertain to the maintenance of records that, in                            reasonable detail, accurately and fairly reflect the transactions and                            disposition of our assets;

 

                             

●

provide reasonable assurance that the transactions are                            recorded as necessary to permit preparation of the financial statements                            in accordance with generally accepted accounting principles and that                            receipts and expenditures are being made only with proper                            authorizations; and

 

                             

●

provide reasonable assurance regarding prevention or                            timely detection of unauthorized acquisition, use or disposition of our                            assets that could have a material effect on the financial                            statements.

 

Because of inherent limitations, internal control over financial            reporting may not prevent or detect misstatements. Also, projections of any evaluation            of effectiveness to future periods are subject to the risk that controls may become            inadequate because of changes in conditions, or that the degree of compliance with the            policies or procedures may deteriorate.

 

Management, including our principal executive officer and principal            financial officer, assessed the effectiveness of our internal control over financial            reporting as of December 31, 2007. In making this assessment, management used the            criteria set forth by the Committee of Sponsoring Organizations of the Treadway            Commission (COSO) in*Internal Control Over Financial Reporting            – Guidance for Smaller Public**Companies.*Based on our assessment and those criteria, our management concluded            that our internal control over financial reporting was effective as of December 31,            2007.

             

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This annual report does not include an attestation report of our            registered public accounting firm regarding internal control over financial reporting.            Managements report was not subject to attestation by our registered public accounting            firm pursuant to temporary rules of the Securities and Exchange Commission that permit            us to provide only management’s report in this annual report.

 

                             

*Changes in Internal Control over Financial                            Reporting*

 

There have been no significant changes in our internal controls over            financial reporting or in other factors that could materially affect, or would be            likely to materially affect, our internal controls over financial reporting subsequent            to the date we carried out our evaluation.

 

**Item 8B.**

**Other Information**

 

                             

Not applicable.

 

**PART III**

 

**Item 9.**

**Directors, Executive Officers, Promoters and Control                            Persons; Corporate Governance; Compliance with                            Section** **16(a)                            of the Exchange** **Act**

 

At the effective time of our acquisition of Media Depot on December 31,            2007, our directors and executive officers resigned in accordance with the provisions            of the merger agreement. At that time, two new directors were appointed to serve on the            board of directors. The following table sets forth the name, age and position of our            present directors and executive officers.

             

                             

**Name**

**Age**

**Position**

                             

Michael D. Parnell

49

Chief Executive Officer and Director

                             

Timothy Young

42

Director

                             

Phyllis Park

49

Secretary

___________________________

 

All directors serve for one-year terms until their successors are            elected or they are re-elected at the annual stockholders' meeting. Officers hold their            positions at the pleasure of the board of directors, absent any employment agreement,            of which none currently exists or is contemplated.

 

There is no arrangement, agreement or understanding between any of the            directors or officers and any other person pursuant to which any director or officer            was or is to be selected as a director or officer. Also, there is no arrangement,            agreement or understanding between management and non-management stockholders under            which non-management stockholders may directly or indirectly participate in or            influence the management of our affairs.

 

                             

The business experience of each of the persons listed                            above during the past five years is as follows:

 

***Michael D. Parnell***was appointed as            a directors, President and Chief Executive Officer on December 31, 2007 following the            acquisition of Media Depot. Mr. Parnell is a graduate of the University of Arkansas            with a degree in Agricultural Economics. In 2002, Mr. Parnell joined J.I.T.            Distribution as President and was responsible for marketing, licensing and branding a            variety of odor control products through retail distribution chains. In 2004, Mr.            Parnell joined GWA, a national advertising agency as a National Account Director,            directing Co-Op advertising for 23 markets across the United States. In 2005, Mr.            Parnell joined Media Depot as National Account Director and was responsible for            securing new clients and maintaining existing client relationships.

 

***Timothy Young***was appointed as a            director following the acquisition of Media Depot. Mr. Young is a graduate of            Pepperdine University with a degree in Communications. He has worked in media sales            management and revenue generation, specific to the Internet and television, for the            past 15 years with afocused on revenue forecasting, sales training, and concept            selling. In 2002, Mr. Young joined Time Warner Cable Inc. as Regional Vice President,            responsible for over $200 million in revenue and 250 sales and marketing personnel. In            2007, Mr. Young joined Rovion Inc., a leading provider of on-line media solutions for            web publishers, advertisers, media organizations and business users as            President.

             

-18-

             

 

***Phyllis Park***was appointed as our            corporate Secretary on January 8, 2008. Prior to joining the Company, Ms. Park handled            all the accounting functions for Media Depot since its inception in 2004 including            payroll, receivables and payables, costing spreadsheets and maintaining all financials            records. Prior to 2004, she work in a similar position with a private company, J.I.T.            Packaging, LLC, which she joined in 2001, where she was responsible for all clerical            and accounting duties for the Company.

 

**Key Personnel**

 

Our future success depends in large part on the continued services of            senior management and key personnel.  In particular, we are highly dependent on            the services of Matthew J. Hoff and Michael D. Parnell. Mr. Hoff is the founder of both            Media Max and Media Depot and currently serves as Business Manager. Mr. Parnell            currently serves as President and Chief Executive Officer. Both Mr. Hoff and Mr.            Parnell will be instrumental in the growth of the Company through acquisitions and            strategic partnerships.

 

Except as set forth below, during the past five years, none of our            officers, directors, promoters or control persons has had any of the following events            occur:

● 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 substantially                reversed, suspended or vacated, of any court of competent jurisdiction, permanently                enjoining, barring, suspending or otherwise limiting his involvement in any type of                business, securities or banking business; and

● 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.

On            January 21, 2000, our current C.E.O. Michael Parnell, entered into a Judgment with the            SEC against Mr. Parnell and Ammonia Hold, Inc., of which Mr. Parnell was a major            stockholder and one-time President. Without admitting or denying the SEC’s            allegations, Mr. Parnell and Ammonia Hold consented to the entry of a judgment            permanently enjoining them from violation Sections 5(a), 5(c) and 17(a) of the            Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule            10b-5 thereunder. Mr. Parnell also agreed to pay a $25,000 civil penalty.

 

This action arose from the SEC’s allegation that Ammonia Hold and            Mr. Parnell violated the registration requirements of the Securities Act in the            issuance and sale of stock to a public relations firm. The SEC further alleged that            Ammonia Hold and Mr. Parnell improperly reported the proceeds from the sale of stock as            licensing revenues instead as an infusion of capital.

 

**Committees of the Board of Directors**

 

Currently we do not have any standing committees of the board of            directors. Until formal committees are established, our board of directors will perform            some of the functions associated with a nominating committee and a compensation            committee, including reviewing all forms of compensation provided to our executive            officers, directors, consultants and employees, including stock compensation. The board            will also perform the functions of an audit committee until we establish a formal            committee.

             

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**Code of Ethics**

 

We have adopted a Code of Ethics and Business Conduct that applies to            our directors and employees, including our principal executive officer, principal            financial officer, principal accounting officer and controller, or persons performing            similar functions. In addition, we intend to promptly disclose (i) the nature of any            amendment to the policy that applies to these persons, and (ii) the nature of any            waiver, including an implicit waiver, from a provision of the policy that is granted to            one of these specified individuals, the name of such person who is granted the waiver            and the date of the waiver on our website in the future.

 

A written copy of the Code will be provided upon request at no charge by            writing to our Principal Accounting Officer, c/o Calypso Media Services Group, Inc., 12            North Washington Street, Montoursville, Pennsylvania 17754.

 

**Compliance With Section 16(a) of the Exchange Act**

 

Section 16(a) of the Exchange Act requires our directors and executive            officers, and persons who own more than 10% of our common stock, to file with the SEC            initial reports of ownership and reports of changes in ownership of our common stock            and other equity securities. We believe that these reports were not filed during the            fiscal year 2007.

 

**Item 10.**

**Executive Compensation**

 

Prior to our acquisition of Media Depot, we did not have a bonus, profit            sharing, or deferred compensation plan for the benefit of employees, officers or            directors. We did not pay any salaries or other compensation to our officers, directors            or employees for the years ended December 31, 2007 and 2006.

 

In 2006, Media Depot paid compensation of $49,000 to Matthew J. Hoff,            its President and CEO, and $5,500 in 2007. Also in 2006 it paid $27,000 to Michael D.            Parnell, its National Account Director, and $62,666 in 2007

 

Following the Media Depot acquisition, we assumed the employment            agreements of Messrs. Hoff and Parnell. Each agreement is for a term of three years            commencing January 1, 2007 and will be automatically renewed for an additional year,            unless within 90 days prior to the expiration date either party notifies the other            party of its intention not to renew.

 

Mr. Hoff is employed as the company’s business manager and Mr.            Parnell as the Chief Executive Officer. Each employee will receive an annual salary of            $72,000, which will escalate to $78,000 in year two and $85,000 in year three. Each            employee is entitled to four weeks annual vacation and benefits generally extended to            executive employees including health and hospitalization insurance for the employee and            his family. Also, we may pay each employee an annual incentive bonus, the terms of            which will be determined and approved by the board of directors.

 

**Item 11.**

**Security Ownership of Certain Beneficial Owners and                            Management**

 

The following table sets forth certain information as of March 21, 2008            with respect to the beneficial ownership of our common stock, giving effect to the            acquisition of Media Depot and issuance of 3.5 million shares to the Media Depot            stockholders:

 

                             

●

each stockholder believed to be the beneficial owner of                            more than 5% of our common stock;

 

                             

●

by each of our directors and executive officers;                            and

 

                             

●

all of our directors and executive officers as a                            group.

For purposes of the following table, a person is deemed to be the            beneficial owner of any shares of common stock (i) over which the person has or shares,            directly or indirectly, voting or investment power, or (ii) of which the person has a            right to acquire beneficial ownership at any time within 60 days after the date of this            report.

             

 -20-

             

“Voting power” is the power to vote or direct the voting of            shares and “investment power” includes the power to dispose or direct the            disposition of shares. The address of each person listed below, unless otherwise            indicated, is c/o Calypso Media Services Group, Inc., 12 North Washington Street,            Montoursville, Pennsylvania 17754. The number of shares outstanding is 5.0 million            shares.

             

**Name and Address**

**Amount and Nature of**

**Percent**

**of Beneficial Owner**

**Beneficial                            Ownership**(1)

**of                            Class**(2)

                             

*5% Beneficial                            Owners*:

Matthew J. Hoff

1,035,000(3)(4)

20.7 %

                             

91 Faircrest Road

                             

Montoursville, PA 17754

Greg Welteroth

1,000,000(3)

20.0 %

                             

356 Laurens Road

                             

Montoursville, PA 17754

Edward F. Cowle

600,000

12.0 %

                             

20 West 64th Street

                             

New York, NY 10023

H. Deworth Williams

596,000

11.9 %

                             

19 East 200 South, Suite 1080

                             

Salt Lake City, Utah 84111

Leonard E. Neilson

250,000(3)

5.0 %

                             

8160 South Highland Drive, Suite 104

                             

Salt Lake City, Utah 84093

                             

*Directors and Executive                            Officers*:

                             

Michael D. Parnell

1,035,000(3)(5)

20.7 %

                             

c/o Media Depot, Inc.

                             

12 North Washington Street

                             

Montoursville, PA 17754

Timothy Young

0

0.0 %

 

All directors and executive officers

1,035,000(3)(5)

20.7 %

as a group (2 persons)

_____________________________

 

(1)  Unless otherwise indicated, the named person will be the            record and beneficially owner of the shares indicated.

 

(2)  Percentage ownership is based on 5.0 million shares of            common stock outstanding as of March 21, 2008.

 

(3)  These share amounts represent the number of shares issued            to each respective individual following the closing of the Media Depot            acquisition.

 

                             

(4)

Includes 750,000 shares in the name of the Hoff Family                            Trust of which Rose Hoff is the trustee.

 

(5)  Includes 1,035,000 shares in the name of the Michael D.            Parnell Living Trust, of which Mr. Parnell is the trustee.

 

**Item 12.**

**Certain Relationships and Related Transactions and                            Director Independence.**

 

Media Depot has entered into an acquisition agreement with two of its            principals, Matthew J. Hoff and Michael D. Parnell, as an incentive to locate and            acquire new businesses associated with the advertising industry. This would include,            but not be limited to businesses such as advertising agencies, printing and public            relations firms. The agreement provides that if Media Depot makes an acquisition            through the efforts of

             

-21-

             

Messrs. Hoff and Parnell, they will be entitled to a fee of 10% of the            value of the acquisition. Payment of the fee may be in cash or in shares of our common            stock. We have assumed the agreement following the acquisition of Media Depot. No            prospective acquisitions have been identified as of the date hereof and there can be no            assurance that any acquisition will be made in the future.

 

Media Depot’s principal offices in Montoursville, Pennsylvania are            leased from the Hoff Family Limited Partnership that is controlled by Matthew Hoff, a            founder of Media Depot and a principal stockholder of Calypso. This agreement was            entered into before we acquired Media Depot and has been continued following the            acquisition. Lease payments are $1,500 per month and renews monthly.

 

Our Lonoke, Arkansas offices are leased from the J.S. Parnell Trust, of            which our C.E.O. Michael D. Parnell is trustee. This agreement was entered into before            we acquired Media Depot and has been continued following the acquisition. Lease            payments are $916 per month and renews monthly.

 

Except as set forth above, we have not entered into any other material            transactions with any officer, director, nominee for election as director, or any            stockholder owning greater than five percent (5%) of our outstanding shares, nor any            member of the above referenced individuals' immediate family.

 

None of the Company’s directors are deemed to be independent            directors. The Company does not have a compensation, audit or nominating committee,            rather those functions are carried out by the Board as a whole.

 

**Item 13.**

**Exhibits**

 

                             

(a)

Exhibits

 

Exhibit No.

Exhibit Name

                             

2.1*

Agreement and Plan of Merger with Media Depot, Inc. and                            Calypso Acquisitions, Inc. [Included as Appendix C to 14C Information                            Statement filed with SEC on December 10, 2007]

                             

2.2*

Merger Agreement (Change of Domicile) [Included as                            Appendix B to 14C Information Statement filed with SEC on December 10,                            2007]

                             

3.1*

Articles of Incorporation (Nevada – change of                            domicile) [Included as Appendix A to 14C Information Statement filed                            with SEC on December 10, 2007]

                             

3.2*

By-Laws [Filed as Exhibit to the Form 10-SB registration                            statement filed with SEC on July 28, 2000]

                             

4.1*

Specimen Stock Certificate [Filed as Exhibit to the Form                            10-SB registration statement filed with SEC on July 28,                            2000]

                             

10.1*

Employment Contract of Matthew J. Hoff [Filed as Exhibit                            to Form 8-K Current Notice filed with SEC on January 4,                            2008]

                             

10.2*

Employment Contract of Michael D. Parnell [Filed as                            Exhibit to Form 8-K Current Notice filed with SEC on January 4,                            2008]

                             

10.3*

Incentive Acquisition Agreement [Filed as Exhibit to                            Form 8-K Current Notice filed with SEC on January 4, 2008]

                             

21.1*

Subsidiaries [Filed as Exhibit to Form 8-K Current                            Notice filed with SEC on January 4, 2008]

                             

                             

31.1

Certification of C.E.O. and Principal Accounting Officer                            Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

                             

32.1

Certification of C.E.O. and Principal Accounting Officer                            Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906                            of the Sarbanes-Oxley Act of 2002

________________

                             

*

Previously filed as indicated.

 

**Item 14.**

**Principal Accountant Fees and Services**

 

We do not have an audit committee and as a result our entire board of            directors performs the duties of an audit committee. Our board of directors will            approve in advance the scope and cost of the engagement of anauditor before the auditor            renders audit and non-audit services. As a result, we do not rely on pre-approval            policies and procedures.

             

-22-

             

 

We do not have an audit committee and as a result our entire board of            directors performs the duties of an audit committee. Our board of directors will            approve in advance the scope and cost of the engagement of an auditor before the            auditor renders audit and non-audit services. As a result, we do not rely on            pre-approval policies and procedures.

 

                             

*Audit Fees*

 

The aggregate fees billed by our independent auditors, Moore &            Associates, Chartered, for professional services rendered for the audit of our annual            financial statements included in our Annual Reports on Form 10-KSB for the years            ended December 31, 2007 and 2006, and for the review of quarterly financial statements            included in our Quarterly Reports on Form 10-QSB for the quarters ended March 31, June            30 and September 30, 2007, were $13,400 for 2007 and $2,573 for 2006 (by our former            auditors Chisholm, Bierwolf & Nilson).

 

                             

*Audit Related Fees*

 

For the years ended December 31, 2007 and 2006, there were no fees            billed for assurance and related services by Chisholm, Bierwolf & Nilson or Moore            & Associates, Chartered relating to the performance of the audit of our financial            statements which are not reported under the caption "Audit Fees" above.

 

                             

*Tax Fees*

 

For the years ended December 31, 2007 and 2006, no fees were billed by            Chisholm, Bierwolf & Nilson or Moore & Associates, Chartered for tax            compliance, tax advice and tax planning.

 

We do not use Moore & Associates, Chartered for financial            information system design and implementation. These services, which include designing            or implementing a system that aggregates source data underlying the financial            statements or generates information that is significant to our financial statements,            are provided internally or by other service providers. We do not engage Moore &            Associates, Chartered to provide compliance outsourcing services.

 

The board of directors has considered the nature and amount of fees            billed by Moore & Associates, Chartered and believes that the provision of services            for activities unrelated to the audit is compatible with maintaining Moore &            Associates, Chartered's independence.

             

-23-

             

**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.

 

**Calypso Media Services Group, Inc.**

 

 

By:/S/MICHAELD.PARNELL 

Michael D. Parnell

                             

Chief Executive Officer

 

Dated:

March 28, 2008

 

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.

 

                             

Signature

Title

Date

             

             

                             

March 28, 2008

/S/

MICHAELD.PARNELL

Chief Executive Officer and director

                             

Michael D. Parnell

(Principal Accounting Officer)

 

 

                             

March 28, 2008

/S/

TIMOTHYYOUNG

Director

                             

Timothy Young

-24-

 

**CALYPSO            MEDIA SERVICES GROUP, INC.**

**(A Development Stage Company)**

 

FINANCIAL STATEMENTS

 

December 31, 2007

             

             

             

             

             

             

             

             

             

             

             

             

             

             

F-1

             

             

**C O N T E N T S**

 

Report of Independent Registered                        Public Accounting Firm

F-3
  
Balance Sheet

F-4

 
 
Statements of Operations

F-5
  
Statements of Stockholders' Equity (Deficit)

F-6
  
Statements of Cash Flows

F-8
  
Notes to Financial Statements

F-9

             

             

             

             

             

             

             

             

             

             

             

             

             

F-2

                                                                                                                                                                             

**MOORE & ASSOCIATES, CHARTERED**

                             

*ACCOUNTANTS AND ADVISORS*

                             

*PCAOB REGISTERED*

 

 

**REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING            FIRM**

 

**To the Board of Directors**

**Calypso Media Services Group, Inc.**

 

We            have audited the accompanying balance sheets of Calypso Media Services Group, Inc. as            of December 31, 2007 and December 31, 2006 and the related statements of operations,            stockholders’ equity and cash flows for the years ended December 31, 2007,            December 31, 2006 and December 31, 2005. These financial statements are the            responsibility of the Company’s management. Our responsibility is to express an            opinion on these financial statements based on our audits.

 

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

 

In            our opinion, the financial statements referred to above present fairly, in all material            respects, the financial position of Calypso Media Services Group, Inc. as of December            31, 2007 and December 31, 2006 and the related statements of operations,            stockholders’ equity and cash flows for the years ended December 31, 2007,            December 31, 2006 and December 31, 2005, in conformity with accounting principles            generally accepted in the United States of America.

 

 

***/s/ Moore & Associates, Chartered***

 

Moore & Associates Chartered

Las            Vegas, Nevada

March 27, 2008

 

*2675 S. Jones Blvd. Suite 109, Las Vegas, NV 89146 (702) 253-7499            Fax (702) 253-7501*

 

F-3

 

**CALYPSO MEDIA SERVICES GROUP, INC.**

Balance Sheets

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

**ASSETS**

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

December 31,

                             

December 31,

                             

                             

                             

2007

                             

2006

CURRENT ASSETS

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

Cash

$

31,539 

                             

$

37,252 

                             

Accounts receivable, net

                             

579,968 

                             

                             

670,052 

                             

Prepaid expenses

                             

2,498 

                             

                             

16,080 

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

Total Current Assets

                             

614,005 

                             

                             

723,384 

                             

                             

                             

                             

                             

                             

                             

                             

FIXED ASSETS

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

Office equipment

                             

25,754 

                             

                             

25,754 

                             

Leasehold improvements

                             

145,464 

                             

                             

130,080 

                             

Accumulated depreciation

                             

(128,294)

                             

                             

(116,745)

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

Total Fixed Assets

                             

42,924 

                             

                             

39,089 

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

TOTAL ASSETS

$

656,929 

                             

$

762,473 

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

**LIABILITIES AND STOCKHOLDERS'                            EQUITY**

                             

                             

                             

                             

                             

                             

                             

                             

CURRENT LIABILITIES

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

Accounts payable and accrued expenses

$

54,312 

                             

$

211,459 

                             

Due to stockholder

                             

62,400 

                             

                             

254,075 

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

Total Current Liabilities

                             

116,712 

                             

                             

465,534 

                             

                             

                             

                             

                             

                             

                             

                             

STOCKHOLDERS' EQUITY

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

Common stock; 20,000,000 shares authorized,

                             

                             

                             

                             

                             

                             

at $0.00001 par value, 5,000,000 and 3,500,000 shares                            issued and outstanding, respectively

50 

                             

                             

35 

                             

                             

                             

                             

                             

                             

                             

                             

Additional paid-in capital

                             

19,920 

                             

                             

22,585 

                             

Retained earnings

                             

520,247 

                             

                             

274,319 

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

Total Stockholders' Equity

                             

540,217 

                             

                             

296,939 

                             

                             

                             

                             

                             

                             

                             

 

                         

                         

TOTAL LIABILITIES AND STOCKHOLDERS'                        EQUITY                                                                                                                          

$     

656,929 

                         

$

762,473 

 

F-4
                             
 

 

 

**CALYPSO MEDIA SERVICES GROUP, INC.**

Statements of Operations

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

Year Ended

                             

Year Ended

                             

Year Ended

                             

                             

                             

December 31,

                             

December 31,

                             

December 31,

                             

                             

                             

2007

                             

2006

                             

2005

REVENUES

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

Advertising revenue

$

3,617,047

                             

$

3,208,548 

                             

$

983,601 

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

Total Revenue

                             

3,617,047

                             

                             

3,208,548 

                             

                             

983,601 

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

COST OF GOODS SOLD

                             

2,410,713

                             

                             

2,093,526 

                             

                             

627,457 

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

Gross Margin

                             

1,206,334

                             

                             

1,115,022 

                             

                             

356,144 

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

EXPENSES

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

General and administrative

                             

952,658

                             

                             

918,265 

                             

                             

585,867 

                             

Depreciation expense

                             

11,549

                             

                             

11,521 

                             

                             

39,818 

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

Total Expenses

                             

964,207

                             

                             

929,786 

                             

                             

625,685 

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

Income (Loss) from Operations

                             

242,127

                             

                             

185,236 

                             

                             

(269,541)

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

OTHER INCOME (EXPENSES)

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

Interest income

                             

7,661

                             

                             

6,279 

                             

                             

4,497 

                             

Gain on sale of asset

                             

-

                             

                             

13,615 

                             

                             

- 

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

 

                             

                             

Total Other Income (Expenses)

                             

7,661

                             

                             

19,894 

                             

                             

4,497 

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

INCOME (LOSS) BEFORE INCOME TAXES

                             

249,788 

                             

                             

205,130 

                             

                             

(265,044)

INCOME TAX EXPENSE

                             

(3,860)

                             

                             

- 

                             

                             

-

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

Net Income (Loss)

$

245,928 

                             

$

205,130 

                             

$

(265,044)

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

PER SHARE DATA:

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

BASIC AND DILUTED INCOME

                             

                             

                             

                             

                             

                             

                             

                             

(LOSS) PER SHARE

$

0.06 

                             

$

0.06 

                             

$

(0.08)

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

WEIGHTED AVERAGE NUMBER

                             

                             

                             

                             

                             

                             

                             

                             

OF SHARES OUTSTANDING

                             

4,250,000 

                             

                             

3,500,000 

                             

                             

3,500,000 

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

The accompanying notes are an integral part of these                            financial statements.

F-5

 

 

 

**CALYPSO MEDIA SERVICES GROUP, INC.**

Statements of Stockholders' Equity

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

Additional

                             

                             

                             

                             

                             

                             

Common Stock

                             

Paid-in

                             

Retained

                             

                             

                             

                             

Shares

                             

Amount

                             

Capital

                             

Earnings

                             

Total

Balance, December 31, 2004

                             

                             

3,500,000 

                             

$

35 

                             

$

(35,525)

                             

$

417,467 

                             

$

381,977 

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

Net loss for the year ended December 31, 2005

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

- 

                             

                             

-

                             

                             

-

                             

                             

(265,044)

                             

                             

(265,044)

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

Balance, December 31, 2005

                             

                             

3,500,000 

                             

                             

35 

                             

                             

(35,525)

                             

                             

152,423 

                             

                             

116,933 

 

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

Owner distribution and contribution

                             

                             

- 

                             

                             

-

                             

                             

58,110 

                             

                             

(83,234)

                             

                             

(25,124)

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

Net income for the year ended December 31,                            2006

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

- 

                             

                             

-

                             

                             

-

                             

                             

205,130

                             

                             

205,130 

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

Balance, December 31, 2006

                             

                             

3,500,000 

                             

                             

35 

                             

                             

22,585 

                             

                             

274,319 

                             

                             

296,939 

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

Owner distribution

                             

                             

- 

                             

                             

-

                             

                             

(2,650)

                             

                             

- 

                             

                             

(2,650)

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

Recapitalization

                             

                             

1,500,000 

                             

                             

15 

                             

                             

(15)

                             

                             

- 

                             

                             

- 

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

Net income for the year ended December 31,                            2007

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

- 

                             

                             

-

                             

                             

- 

                             

                             

245,928 

                             

                             

245,928 

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

Balance, December 31, 2007

                             

                             

5,000,000 

                             

$

50 

                             

$

19,920 

                             

$

520,247 

                             

$

540,217 

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

The accompanying notes are an integral part of these                            financial statements.

F-6

 

 

 

**CALYPSO MEDIA SERVICES GROUP, INC.**

Statements of Cash Flows

 

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

Year Ended

                             

Year Ended

                             

Year Ended

                             

                             

                             

December 31,

                             

December 31,

                             

December 31,

                             

                             

                             

2007

                             

2006

                             

2005

CASH FLOWS FROM OPERATING ACTIVITIES

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

Net income (loss)

$

245,928 

                             

$

205,130 

                             

$

(265,044)

                             

Adjustments to Reconcile Net Loss to Net Cash

                             

                             

                             

                             

                             

                             

                             

                             

Used by Operating Activities:

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

Depreciation and amortization

                             

11,549 

                             

                             

11,512 

                             

                             

39,818 

                             

                             

Gain on sale of assets

                             

- 

                             

                             

(13,615)

                             

                             

- 

                             

Changes in Operating Assets and Liabilities:

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

(Increase) decrease in accounts receivable

                             

90,084 

                             

                             

(454,815)

                             

                             

436,811 

                             

                             

(Increase) decrease in prepaid expenses

                             

13,582 

                             

                             

(16,080)

                             

                             

- 

                             

                             

Increase (decrease) in accounts payable

                             

(157,147)

                             

                             

(26,335)

                             

                             

(135,565)

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

Net Cash Provided (Used) by

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

Operating Activities

                             

203,996 

                             

                             

(294,203)

                             

                             

76,020 

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

CASH FLOWS FROM INVESTING ACTIVITIES

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

Proceeds from sale of assets

                             

- 

                             

                             

13,615 

                             

                             

- 

                             

Purchase of fixed assets

                             

(15,384)

                             

                             

(15,158)

                             

                             

(60,844)

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

Net Cash Provided (Used) By

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

Investing Activities

                             

(15,384)

                             

                             

(1,543)

                             

                             

(60,844)

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

CASH FLOWS FROM FINANCING ACTIVITIES

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

Proceeds from shareholder loans

                             

- 

                             

                             

254,075 

                             

                             

- 

                             

Repayment of shareholder loans

                             

(191,675)

                             

                             

- 

                             

                             

- 

                             

Shareholder distributions

                             

(2,650)

                             

                             

(25,124)

                             

                             

- 

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

Net Cash Provided (Used) By

                             

(194,325)

                             

                             

228,951 

                             

                             

- 

                             

                             

Financing Activities

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

INCREASE (DECREASE) IN CASH

                             

(5,713)

                             

                             

(66,795)

                             

                             

15,176 

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

CASH AT BEGINNING OF YEAR

                             

37,252 

                             

                             

104,047 

                             

                             

88,871 

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

CASH AT END OF YEAR

$

31,539 

                             

$

37,252 

                             

$

104,047 

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

Supplemental Cash Flow Disclosures:

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

Cash paid for:

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

Interest expense

$

- 

                             

$

- 

                             

$

- 

                             

                             

Income taxes

$

- 

                             

$

- 

                             

$

- 

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

Non Cash Financing Activities:

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

None

$

- 

                             

$

- 

                             

$

- 

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

                             

The accompanying notes are an integral part of these                            financial statements.

F-7

 

 

**CALYPSO MEDIA SERVICES GROUP, INC.**

Notes            to the Financial Statements

December 31, 2007 and 2006

 

NOTE 1            - NATURE OF ORGANIZATION

 

a.            Organization and Business Activities

 

The            Company was incorporated under the laws of the State of Delaware on July 27, 1999. Upon            the acquisition of Media Depot, Inc. the Company’s principal business objective            is that of offering a full line of advertising services to manufacturers, distributors            and dealers across the United States and Canada. The Company specializes in co-op            advertising and offers services ranging from buying and planning media in radio, TV,            cable, print or outdoor advertising, to creating print ads and producing electronic            commercials. Prior to the acquisition of Media Depot, Inc., the Company was a            development stage enterprise.

             

b.            Depreciation

 

The            cost of the property and equipment will be depreciated over the estimated useful life            of 5 to 7 years. Depreciation is computed using the straight-line method when the            assets are placed in service.

 

c.            Accounting Basis

 

The            basis is accounting principles generally accepted in the United States of America. The            Company has adopted a December 31 fiscal year end. The owners of Media Depot, Inc.            became the controlling shareholders of the Company at the acquisition date. Accordingly            the acquisition is accounted for as a recapitalization of Media Depot, Inc. The            historical financial statements of Media Depot, Inc. are accounted for as those of the            Company. The financial statements present the consolidated operations of Media Depot,            Inc. and Media Max, Inc. on a consolidated basis from January 1, 2005.

 

d.            Cash and Cash Equivalents

 

For            the purpose of the statement of cash flows, the Company considers all highly liquid            investments purchased with a maturity of three months or less to be cash            equivalents.

 

e.            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 and disclosure of contingent assets and            liabilities at the date of the financial statements and the reported amounts of            revenues and expenses during the reporting period. Actual results could differ from            those estimates.

             

f.            Revenue Recognition

 

The            Company recognizes when products are fully delivered or services have been provided and            collection is reasonably assured.

             

             

 

F-8

 

**CALYPSO MEDIA SERVICES GROUP, INC.**

Notes            to the Financial Statements

December 31, 2007 and 2006

 

NOTE 1 -

NATURE OF ORGANIZATION (continued)

 

g.            Concentrations of Risk

 

The            Company’s bank accounts are deposited in insured institutions. The funds are            insured up to $100,000. At December 31, 2007, the Company’s bank deposits did not            exceed the insured amounts.

 

h.            Basic Income per Share

 

The            Computation of basic net income per share of common stock is based on the weighted            average number of shares outstanding during the year. Diluted earnings per share is            calculated by dividing the Company’s net income available to common shareholders            by the diluted weighted average number of shares outstanding during the year. The            diluted weighted average number of shares outstanding is the basic weighted number of            shares adjusted for any potentially dilutive debt or equity. There are no such common            stock equivalents outstanding as of December 31, 2007, 2006 and 2005.

 

                             

Year Ended December 31, 2007

                             

Year Ended December 31, 2006

                             

Year Ended December 31, 2005

Net income (loss)

$                            249,788)

                             

$                            205,130)

                             

$ (265,044)

Shares (denominator)

4,250,000)

                             

3,500,000)

                             

3,500,000)

                             

Per share amount

$                            0.06)

                             

$                            0.06)

                             

$ (0.08)

 

i.            Income Taxes

 

Prior to its acquisition, Media Depot, Inc. had elected to be taxed as a            Sub-chapter S corporation whereby the income and expenses of the Company are taxed at            the shareholder level. Accordingly, there is no income tax expense (benefit) on the            Company’s financial statements prior to October 12, 2007.

 

The            Company provides for income taxes under Statement of Financial Accounting Standards No.            109, Accounting for Income Taxes. SFAS No. 109 requires the use of an asset and            liability approach in accounting for income taxes. Deferred tax assets and liabilities            are recorded based on the differences between the financial statement and tax bases of            assets and liabilities and the tax rates in effect when these differences are expected            to reverse. The Company’s predecessor operated as entity exempt from Federal and            State income taxes.

             

SFAS            No. 109 requires the reduction of deferred tax assets by a valuation allowance if,            based on the weight of available evidence, it is more likely than not that some or all            of the deferred tax assets will not be realized.

             

The            provision for income taxes differs from the amounts which would be provided by applying            the statutory federal and state income tax rate of 20% to net income before provision            for income taxes for the following reasons:

 

 

F-9

 

**CALYPSO MEDIA SERVICES GROUP, INC.**

Notes            to the Financial Statements

December 31, 2007 and 2006

 

NOTE 1 -

NATURE OF ORGANIZATION (continued)

 

i.            Income Taxes

                             

December 31,

December 31,

                             

2007

2006

.

Income tax expense at statutory rate

$

3,860

$

-0-

Common stock issued for services

-0-

(-0-)

Valuation allowance

-0-

(-0-)

 

Income tax expense per books

$

3,860

$

-0-

 

Net            deferred tax assets consist of the following components as of:

             

                             

December 31,

December 31,

                             

2007

2006

.

NOL Carryover

$

-0-

$

-0-

Valuation allowance

-0-

-0-  

             

Net deferred tax asset

$

-0-

$

-0-

             

Due            to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss            carry forwards for federal income tax reporting purposes are subject to annual            limitations. Should a change in ownership occur net operating loss carry forwards may            be limited as to use in future years.

             

j.            Accounts Receivable

 

The            Company’s accounts receivable are net of the allowance for the estimated doubtful            accounts of $-0- and $-0- as of December 31, 2007 and 2006.

 

k.            Comprehensive Income

             

The            Company has no component of other comprehensive income. Accordingly, net income equals            comprehensive income for the years ended December 31, 2007, 2006 and 2005.

 

l.            Stock-based compensation.

             

As            of September 30, 2007, the Company has not issued any share-based payments to its            employees.

 

The            Company adopted SFAS No. 123-R effective January 1, 2006 using the modified            prospective method. Under this transition method, stock compensation expense includes            compensation expense for all stock-based compensation awards granted on or after            January 1,2006, based on the grant-date fair value estimated in accordance with            the provisions of SFAS No. 123-R.

 

 

 

F-10

 

**CALYPSO MEDIA SERVICES GROUP, INC.**

Notes            to the Financial Statements

December 31, 2007 and 2006

NOTE 1 -

NATURE OF ORGANIZATION (continued)

 

m.            Impairment of Long-Lived Assets

             

The            Company continually monitors events and changes in circumstances that could indicate            carrying amounts of long-lived assets may not be recoverable. When such events or            changes in circumstances are present, the Company assesses the recoverability of            long-lived assets by determining whether the carrying value of such assets will be            recovered through undiscounted expected future cash flows. If the total of the future            cash flows is less than the carrying amount of those assets, the Company recognizes an            impairment loss based on the excess of the carrying amount over the fair value of the            assets. Assets to be disposed of are reported at the lower of the carrying amount or            the fair value less costs to sell.

 

n. Impact of Recent Accounting Pronouncements

 

In            December 2007, the FASB issued SFAS 160, “Noncontrolling interests in            Consolidated Financial Statements – an amendment of ARB No. 51”. This            Statement amends ARB 51 to establish accounting and reporting standards for the            noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. It            clarifies that a noncontrolling interest in a subsidiary is an ownership interest in            the consolidated entity that should be reported as equity in the consolidated financial            statements. This Statement is effective for fiscal years beginning on or after December            15, 2008. Early adoption is not permitted. Management is currently evaluating the            effects of this statement, but it is not expected to have any impact on the            Company’s financial statements.

             

In            February 2007 , the FASB issued SFAS 159, “The Fair Value Option for Financial            Assets and Financial Liabilities. SFAS 159 creates a fair value option allowing an            entity to irrevocably elect fair value as the initial and subsequent measurement            attribute for certain financial assets and financial liabilities, with changes in fair            value recognized in earnings as they occur. SFAS 159 also requires an entity to report            those financial assets and financial liabilities measured at fair value in a manner            that separates those reported fair values from the carrying amounts of assets and            liabilities measured using another measurement attribute on the face of the statement            of financial position. Lastly, SFAS 159 requires an entity to provide information that            would allow users to understand the effect on earnings of changes in the fair value on            those instruments selected for the fair value election. SFAS 159 is effective for            fiscal years beginning after November 15, 2007 with early adoption permitted. The            Company is continuing to evaluate SFAS 159 and to assess the impact on its results of            operations and financial condition if an election is made to adopt the            standard.

 

In            September 2006, the Financial Accounting Standards Board issued Statement of Financial            Accounting Standards No. 157, “Fair Value Measurements” which defines fair            value, establishes a framework for measuring fair value in generally accepted            accounting principles (GAAP), and expands disclosures about fair value measurements.            Where applicable, SFAS No. 157 simplifies and codifies related guidance within            GAAP and does not require any new fair value measurements. SFAS No. 157 is            effective for financial statements issued for fiscal years beginning after            November 15, 2007, and interim periods within those fiscal years. Earlier            adoption is encouraged. The Company does not expect the adoption of SFAS            No. 157 to have a significant effect on its financial position or results of            operation.

 

F-11

 

             

**CALYPSO MEDIA SERVICES GROUP, INC.**

Notes            to the Financial Statements

December 31, 2007 and 2006

 

NOTE 2 -

SIGNIFICANT EVENTS

 

On October 12, 2007, the Company finalized an agreement to be acquired            by Calypso Financial Services, Inc., (Calypso) a Nevada corporation. The acquisition            will be facilitated by merging the Company into a newly created, wholly-owned            subsidiary, of the Calypso, with the Company being the surviving entity for accounting            purposes. As a result of the transaction, the Company became Calypso’s            wholly-owned subsidiary for legal purposes.

             

Under the terms of the agreement and as consideration for the            acquisition, the current holders of the Company common stock received an aggregate of            3.5 million shares of Calypso’s authorized, but previously unissued common stock.            These shares represented approximately 70% of the total outstanding shares following            the transaction. Additionally, Calypso has reserved an additional 5.0 million shares of            its authorized but unissued common stock for possible future issuance in connection            with potential acquisitions of other businesses, entities or assets related to the            business of the Company. However, there is no present commitment or definitive            agreement to issue any of these shares and no assurances can be given that any future            acquisitions will be finalized.

 

On October 12, 2007, Calypso’s board of directors approved the            execution of the agreement with the Company. The board also approved a proposal to take            all necessary and appropriate actions to change Calypso’s corporate domicile from            Delaware to Nevada and to change the corporate name to Calypso Media Services Group,            Inc.

 

F-12