UNITED STATESSECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549

FORM 10-K

|(Mark
      One)                          
|------------------------------------------
|þ                                         
|                                          
|For the
      Year Ended December 31, 2008
|                                          
|OR                                        
|                                          
|o                                         

For the transition period from _______
to  _______

Commission file number: 001-14753

INTERNATIONALSMARTSOURCING,INC.(Exact Name of Registrant as specified in its charter)

|Delaware                              |  | 11-3423157               
|------------------------------------- |  | -------------------------
|(State or
      other jurisdiction of |  | (I.R.S.
      Employer   
|incorporation
      or organization)  |  | Identification
      No.)

320 Broad Hollow Road Farmingdale,
NY 11735 (Address of principal executive offices)

(631) 293-4650(Issuers telephone
number)

Securities registered under section
12(b) of the Exchange Act: None. Securities registered under section 12 (g)
of the Exchange Act:Common stock, Par
value $.001Common Stock Purchase Warrants

Indicate by check mark if the
registrant is a well-known seasoned issuer, as defined in Rule 405 of the
Securities Act. YESoNO þ

Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act. YES þNOo

Indicate by check mark whether the
registrant (1) filed all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the past 12 months (or for such
shorter period that the registrant was required to file such reports) and (2)
has been subject to such filing requirements for the past 90 days. YES þ       NOo

Indicate by check mark if disclosure of
delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this
chapter) is not contained herein, and will not 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-K or any amendment to this
Form 10-K.YES þ       NOo

Indicate by check mark whether the
Registrant is a large accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of large accelerated
filer, accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act.

|Large
      accelerated filer                                                     | Accelerated
      filer         
|--------------------------------------------------------------------------------- | --------------------------------
|Non-accelerated
      filer   (Do not check if a smaller reporting
      company) | Smaller
      reporting companyþ

Indicate by check mark whether the
Registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act)
YES þ       NOo

The aggregate market value of the
voting stock held by non-affiliates based upon the last sale price on January
20, 2009 was approximately $1,975,398. As of January 20, 2009, the Registrant
had 18,899,435 shares of its Common Stock, $0.001 par value, issued and
10,974,435 outstanding.

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TABLE OF CONTENTS

|           |    |                                                                                                        | Page
|---------- | -- | ------------------------------------------------------------------------------------------------------ | ----
|PART I     |    |                                                                                                        | 3   
|Item 1.    |    | Business                                                                                               | 3   
|Item 1A.   |    | Risk
      Factors                                                                                     | 4   
|Item 1B.   |    | Unresolved Staff
      Comments                                                                        | 4   
|Item 2.    |    | Properties                                                                                             | 4   
|Item 3.    |    | Legal
      Proceedings                                                                                | 4   
|Item 4.    |    | Submission of Matters to a Vote of Security Holders                                                    | 4   
|          
|PART II    |    |                                                                                                        | 5   
|Item 5.    |    | Market for
      Registrants Common Equity, Related Stockholder Matters and Issuer
      Purchases of |     
|           |    | Equity
      Securities                                                                                | 5   
|Item 6.    |    | Selected Financial Data                                                                                | 7   
|Item 7.    |    | Managements Discussion and
      Analysis of Financial Condition and Results of Operations            | 7   
|Item 7A.   |    | Quantitative and Qualitative Disclosures About Market
Risk                                             | 11  
|Item 8.    |    | Financial
      Statements and Supplementary Data                                                      | 12  
|Item 9.    |    | Changes in and Disagreements with Accountants on Accounting and
      Financial Disclosure             | 13  
|Item 9A.   |    | Controls and
      Procedures                                                                          | 13  
|Item 9B.   |    | Other
      Information                                                                                | 14  
|          
|PART III   |    |                                                                                                        | 15  
|Item 10.   |    | Directors, Executive
      Officers and Corporate Governance                                           | 15  
|Item 11.   |    | Executive
      Compensation                                                                           | 17  
|Item 12.   |    | Security Ownership of
      Certain Beneficial Owners and Management and Related Shareholder           |     
|           |    | Matters                                                                                                | 17  
|Item 13.   |    | Certain
      Relationships and Related Transactions, and Director
Independence                        | 18  
|Item 14.   |    | Principal Accountant Fees
      and Services                                                           | 19  
|Item 15.   |    | Exhibits                                                                                               | 19  
|          
|SIGNATURES | 21
|          

|Exhibit 23.1 |  | INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS
      CONSENT           | 
|------------ |  | ----------------------------------------------------------------------- | 
|            
|Exhibit 31.1 |  | SECTION 302 CERTIFICATION                                               | 
|            
|Exhibit 31.2 |  | SECTION 302 CERTIFICATION                                               | 
|            
|Exhibit 32.1 |  | CERTIFICATE OF CEO PURSUANT TO 18 U.S.C. SECTION 1350, AS
      ADOPTED | 
|             |  | **PURSUANT
      TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002**     | 
|            
|Exhibit 32.2 |  | CERTIFICATE OF CFO PURSUANT TO 18 U.S.C. SECTION 1350, AS
      ADOPTED | 
|             |  | **PURSUANT
      TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002**     | 

1

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FORWARD-LOOKING STATEMENTS

This Annual Report on form 10-K
contains forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended (the Securities Act),Section 21E of the
Securities Exchange Act of 1934, as amended (the Exchange Act) and the Private
Securities Litigation Reform Act of 1995 and International Smart Sourcing, Inc.
intends that such forward-looking statements be subject to the safe harbors
created thereby. The forward-looking statements relate to future events or the
future financial performance of International Smart Sourcing, Inc. including,
but not limited to, statements contained in: Item 1. Business and Item 7.
Managements Discussion and Analysis of Financial Condition and Results of
Operations. Readers are cautioned that such statements, which may be identified
by words including anticipates, believes, intends, estimates,
expects, and similar expressions, are only predictions or estimations and
are subject to known and unknown risks and uncertainties. In evaluating such
statements, readers should consider the various factors identified in this
Annual Report on Form 10-K which could cause actual events, performance or
results to differ materially from those indicated by such statements. In light
of the significant uncertainties inherent in the forward-looking information
included herein, the inclusion of such information should not be regarded as a
representation by International Smart Sourcing, Inc. or any other person that
its objectives or plans will be achieved. International Smart Sourcing, Inc.
does not undertake and specifically declines any obligation to update any
forward-looking statements or to publicly announce the results of any revisions
to any statements to reflect new information or future events or developments.

2

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PART I

Item 1. Business.

The Company

International Smart Sourcing, Inc.
(referred to herein as the Company, we, our, ours, and us) was
incorporated in February 1998 in Delaware as a holding company for the purpose
of acquiring the common stock of Electronic Hardware Corp. (EHC) and Compact
Disc Packaging Corp., (CDP), an inactive corporation. On May 7, 1999, we
formed a company called Smart Sourcing Inc. (SSI, and together with EHC and
CDP, the Subsidiaries), a Delaware corporation. EHC manufactured, distributed
and warehoused knobs, dials and pointers. SSI specialized in assisting companies
in reducing their cost of manufacturing by outsourcing manufacturing in China.

We specialized in the out-sourcing of
manufacturing and the manufacturing of injection molded plastic components,
products and assemblies. We performed the manufacturing and outsourcing
functions for our customers, through our United States facilities and through
our outsourcing contacts and offices in the Peoples Republic of China.

On September 28, 2006, we sold the
Subsidiaries. Effective September 28, 2006, we are reporting as a development
stage company.

Sale of the Subsidiaries

Until the sale of the Subsidiaries on
September 28, 2006, we were a holding company and the shares of the Subsidiaries
constituted substantially all of our assets. Accordingly, since the sale of the
Subsidiaries, we have existed as a shell company with no subsidiaries and no
business operations. Our plan of operation is to seek a target company with
which to merge or to complete a business combination.

On July 29, 2008, we entered into a
letter of intent with Network 1 Financial Securities Inc., a Texas corporation
(NETW), pursuant to which we would purchase one hundred percent (100%) of the
issued and outstanding capital stock of NETW, resulting in NETW becoming our
wholly owned subsidiary, in exchange for twenty-two million (22,000,000) shares
of our common stock, $0.001 par value, which amount shall be subject to
adjustment after the completion of (a) NETWs audited financial statements for
the years ended June 30, 2008 and 2007, and (b) a due diligence review by us.
NETW is a registered broker-dealer. The acquisition is subject to due diligence
and the execution of definitive agreements. If the transaction is consummated,
it would constitute a reverse acquisition of NETW by us, as NETW would control
the post-merged company. We can give no assurance that any transaction discussed
herein will occur, or that if such a transaction were to occur, it would enhance
our future operations or financial results, or specifically that we would become
and remain profitable as a result of such transaction.

We do not plan to restrict our search
to any specific business, industry or geographic location, and we may
participate in a business venture of virtually any kind or nature.

We may seek a business opportunity with
entities which have recently commenced operations, or that desire to utilize the
public marketplace in order to raise additional capital to expand into new
products or markets, to develop a new product or service, or for other corporate
purposes. We may acquire assets and establish wholly owned subsidiaries in
various businesses or acquire existing businesses as subsidiaries.

3

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Employees

We currently have 3 employees all of
whom are part-time employees.

Item 1A. Risk Factors.

Not applicable.

Item 1B. Unresolved Staff Comments.

Not applicable.

Item 2. Properties.

We currently maintain an office at 320
Broadhollow Road, Farmingdale, New York 11735 but have not entered into a lease
agreement with K&G Realty for such premises. Our offices are provided to us
free of charge by K&G Realty. K&G Realty is owned by a former
shareholder of ISSI. Until a merger or acquisition has occurred, ISSI will
maintain an office at this location.

Item 3. Legal Proceedings.

There are no pending, nor to our
knowledge threatened, legal proceedings against us.

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

No matters were submitted to a vote of
security holders during the year ended December 31, 2008.

4

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PART II

Item 5. Market for Registrants
Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities.

We completed our initial public
offering pursuant to a Registration Statement on Form SB-2 (Registration No.
333-48701), which was declared effective by the Securities and Exchange
Commission (SEC) on April 23, 1999.

As of January 20, 2009, we had issued
18,899,435 shares of common stock, $.001 par value, of which 10,974,435 were
outstanding. Our common stock is traded on the NASDAQ Over-the-Counter Bulletin
Board under the symbol ISSG.

The following table sets forth the high
and low bid prices for the common stock as reported on the NASDAQ
Over-the-Counter Bulletin Board. The high and low bid prices reflect
inter-dealer prices, without mark-up, markdown or commission, and may not
necessarily represent actual transactions.

|                     |  | Common Stock Sale
  Prices
|-------------------- |  | --------------------------
|2008                 |  | High                      
|First Quarter        |  | 0.40                      
|Second
      Quarter |  | 0.35                      
|Third Quarter        |  | 0.32                      
|Fourth Quarter       |  | 0.33                      
|                     |  | Common Stock Sale
  Prices
|2007                 |  | High                      
|First Quarter        |  | 0.18                      
|Second
      Quarter |  | 0.34                      
|Third Quarter        |  | 0.37                      
|Fourth Quarter       |  | 0.45                      

On January 20, 2009, there were 107
holders of record and 207 beneficial holders of our common stock.

On January 20, 2009, the last sale
price of the Common Stock as reported on the NASDAQ Bulletin Board was $0.18 per
share.

Common Stock

On December 8, 2004, we filed a
Certificate of Amendment to our Certificate of Incorporation increasing the
total number of authorized shares to 101,000,000, consisting of 100,000,000
shares of common stock and 1,000,000 shares of preferred stock.

On September 28, 2006, as a result of
the sale of the Subsidiaries, 7,925,000 shares of our common stock were received
by us from certain stockholders/directors and returned to our treasury.

5

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Warrants

We currently have 1,727,400 warrants
outstanding, which are exercisable for a total of 7,657,733 shares of our common
stock, which were issued by us as follows:

1,427,400 warrants remain outstanding
of 1,437,500 warrants issued in our initial public offering in April 1999 (IPO
Warrants), as described below. In 2001, 10,100 IPO Warrants were exercised.

On March 28, 2007, our Board of
Directors approved the grant of 300,000 warrants (the Executive Warrants) to
our three executive officers, who also serve on our Board of Directors, Messrs.
David Hale, President and Chairman of the Companys Board of Directors; Richard
A. Peters, Secretary; and Michael S. Rakusin, Chief Financial Officer
(collectively referred to herein as the Executive Officers), for their,
services as directors. They are currently serving without receiving compensation
for their services as officers. The Executive Officers also serve as our
Directors.

The fair value of each stock warrant
grant is estimated based upon the grant date fair value using the Black-Scholes
option-pricing model. There were no warrants granted during the year ended
December 31, 2008.

IPO Warrants

On December 4, 2006, we reduced the
total exercise price of each IPO Warrant from $4.85 to $1.03092756 (i.e. $0.20
per share of common stock). As a result, each IPO Warrant now entitles the
holder of the IPO Warrant to purchase 5.1546378 shares of our common stock at a
total price of $1.03092756. We have extended the expiration date of the Warrants
by three years, from April 23, 2007 until April 23, 2010. The other terms of the
IPO Warrants have not been changed. Accordingly, all of the IPO Warrants
collectively, may be exercised for a total of 7,357,733 shares of common stock
at an aggregate price of $1,471,546.

Registration of Shares Underlying
the IPO Warrants

The registration for the shares of
common stock issuable upon exercise of the IPO Warrants and the underwriter
warrants expired in April 2001. On September 27, 2004, the SEC declared
effective the registration statement for the common stock issuable upon the
exercise of the IPO Warrants.

Subsequently, we have complied with the
blue sky registration requirements or appropriate exemptions in New York, New
Jersey, Connecticut and Texas. Accordingly, at the present time, the IPO
Warrants may be exercised in New York, New Jersey, Connecticut and
Texas.

Executive Warrants

The Executive Warrants were granted to
compensate the Executive Officers for the services they have provided to us as
officers subsequent to the sale of the Subsidiaries and to induce them to
continue serving as officers. Currently, the Executive Officers receive $500 per
month as compensation for serving as our Directors.

The Executive Warrants issued to each
of the Executive Officers entitles each Executive Officer to purchase 100,000
shares of common stock of ISSI at an exercise price of $0.20 per share. The
market price of our common stock on January 20, 2009 was $0.18 per share. The
exercise price and the number of shares which may be purchased upon exercise of
an Executive Warrant are subject to adjustment in certain circumstances. The
Executive Warrants were fully vested and exercisable on the date of grant and
expire five years from such date. Neither the Executive Warrants nor the shares
of common stock issuable upon the exercise of the Executive Warrants hereof have
been registered under the Securities Act and have been issued in reliance upon
an exemption from the registration requirements of the Securities Act.

6

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Options

On August 28, 2006, we sent a Notice of
Termination of Stock Options to all option holders announcing the proposed sale
of the Subsidiaries. Effective September 28, 2006, upon the sale of the
Subsidiaries, all unexercised options were effectively terminated.

Dividend Policy

We intend to retain future earnings for
use in our business for the foreseeable future. The payment of cash dividends,
if any, in the future is within the discretion of the Board of Directors and
will depend upon our earnings, capital requirements, financial condition and
other relevant factors.

Repurchase of Securities

We did not repurchase any of our common
stock during the year ended December 31, 2008.

Issuance of Unregistered Common Stock

We did not issue any unregistered
common stock during the year ended December 31, 2008.

Securities Authorized for Issuance
Under Equity Compensation Plans

We do not have any equity compensation
plans in place.

Item 6. Selected Financial Data.

Not applicable.

Item 7. Managements Discussion and
Analysis of Financial Condition and Results of Operations.

Certain statements contained herein may
constitute forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act
of 1934, as amended, and the Private Securities Litigation Reform Act of 1995.
Because such statements include risks and uncertainties, actual results may
differ materially from those expressed or implied by such forward-looking
statements. Factors that could cause actual results to differ materially
include, but are not limited to, risks associated with the integration of
businesses following an acquisition, our inability to maintain working capital
requirements to fund future operations or our inability to attract and retain
highly qualified management.

You should read the following
discussion and analysis in conjunction with the Financial Statements and Notes
attached thereto and the other financial information appearing elsewhere in this
Annual Report.

Results of Operations

As a result of the sale of the
Subsidiaries, we had no operations during the years ended December 31, 2008 and
2007.

7

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General and Administrative
Expenses

General and administrative expenses for
the year ended December 31, 2008 were $202,800 as compared to $225,875 for the
year ended December 31, 2007. The decrease of $23,075 or 10.2% was the result of
reduced office expenses and no stock based compensation for warrants issued
during the year ended December 31, 2008, as compared to $15,000 for the year
ended December 31, 2007. As a result of the sale of the Subsidiaries we are
currently in the development stage and exist as a shell company with only
minimal general and administrative expenses.

Going forward, general and
administrative expenses should remain relatively constant unless we undertake an
acquisition in which legal and accounting expenses would significantly
increase.

Interest Income

Interest income for the year end
December 31, 2008 was $34,417, a decrease of $22,843, or 39.9%, from $57,260 for
the year ended December 31, 2007. The decrease was attributable to lower
interest rates with the financial institution holding the certificate of deposit
and to a portion of the amount being held in a certificate being liquidated
during the year ended December 31, 2008. Interest income is earned from the
certificate of deposit which we hold.

Income Tax

We had a net operating loss for tax
purposes of approximately $338,000 at December 31, 2008, an increase of $169,000
or 100% from $169,000 at December 31, 2007.

We adopted the provisions of FASB
Interpretation No. 48, Accounting for Uncertainty in Income Taxes - an
interpretation of FASB Statement No. 109 (FIN 48), on January 1, 2007. FIN 48
clarifies the accounting for uncertainty in income taxes recognized in an
enterprises financial statements in accordance with SFAS No. 109, Accounting
for Income Taxes, and prescribes a recognition threshold and measurement
process for financial statement recognition and measurement of a tax position
taken or expected to be taken in a tax return. FIN 48 also provides guidance on
derecognition, classification, interest and penalties, accounting in interim
periods, disclosure and transition. There were no unrecognized tax benefits as
of January 1, 2007 and December 31, 2008.

We have identified our federal tax
return and our state tax return in New York State as major tax jurisdictions.
Based on our evaluation, we have concluded that there are no significant
uncertain tax positions which require recognition in our financial statements.
Our evaluation was performed for the tax years ended 2003 through 2007, the only
periods subject to examination. Consequently, we did not record a cumulative
effect adjustment related to the adoption of FIN 48.

We classify interest and penalties
related to unrecognized tax benefits in other expenses. We did not incur
interest or penalties during the year ended December 31, 2008 and 2007.

Liquidity and Capital Resources

Our total assets as of December 31,
2008 were $1,104,426, which is comprised primarily of $455,675 cash, a $546,055
certificate of deposit with a maturity of six months and a $100,000 note
receivable. We have approximately $3,000 in current liabilities which are
primarily comprised of office expenses and taxes. We anticipate that cash
requirements during the next twelve months will relate to maintaining the
corporate entity, complying with the periodic reporting requirements of the SEC,
evaluating and reviewing possible business ventures and acquisition
opportunities and potentially negotiating and consummating any such
transactions. We believe that we have sufficient cash on hand to meet these cash
requirements over a period of twelve months.

8

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Cash for the year ended December 31,
2008 was $455,675, a decrease of $233,962, or 33.9%, from $689,637 at December
31, 2007.

Cash flow used in operating activities
was $183,962 for the year ended December 31, 2008, which included a net loss of
$168,383.

Cash used in investing activities for
the year ended December 31, 2008 was $50,000, which consisted of a promissory
note issued to Network 1 Financial Advisors Inc. in the amount of $100,000
offset by the repayment of a promissory note from Charter Fabrics Inc. in the
amount of $50,000.

There were no financing activities for
the year ended December 31, 2008.

We do not have any off-balance sheet
arrangements that have or are reasonably likely to have a current or future
effect on our financial condition, changes in financial condition, revenue,
expenses, results of operations, liquidity, capital expenditures or capital
resources.

Critical Accounting
Policies

Our financial statements are prepared
in accordance with generally accepted accounting principles in the United States
of America (GAAP). Preparation of the financial statements in accordance with
GAAP requires that we make estimates, using available data and our judgment for
such things as valuing assets, accruing liabilities, and estimating expenses.
The following is a list of what we believe are the most critical estimations
that we make when preparing the financial statements.

|(a) | Use of Estimates  The
      preparation of financial statements in conformity with GAAP 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 revenue and expenses during the reporting
  period.                                                                                                                                                                                                                                                                                                                                                                                                                         
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|(b) | Cash and Cash Equivalents  For
      purposes of the statement of cash flows, we consider all highly liquid
      debt instruments with original maturities of three months or less when
      purchased to be cash equivalents.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   
|(c) | Income Taxes  We account for
      income taxes in accordance with Financial Accounting Standards Board
      (FASB) Statement of Financial Accounting Standards (SFAS) No. 109,
      Accounting for Income Taxes. We recognize deferred tax assets and
      liabilities based on the differences between the book bases and the tax
      bases of the assets and liabilities, using the effective tax rates in the
      years in which the differences are expected to reverse. A valuation
      allowance is recorded when it is probable that some or all of a deferred
      tax asset will not be realized. Income tax expense consists of the tax
      payable for the period and the change during the period in deferred tax
      assets and liabilities.                                                       
|   
|(d) | Loss per Share  Basic loss per
      share (LPS) is determined by dividing net loss for the period by the
      weighted average number of common shares outstanding during the same
      period. Diluted LPS reflects the potential dilution that could occur if
      securities or other contracts to issue common stock were exercised or
      converted into common stock or resulted in the issuance of common stock,
      which would then share in our earnings. For the years ended December 31,
      2008 and 2007, we had approximately 7.7 million warrants which were not
      included in the dilutive loss per share calculation since the effect would
      be anti-dilutive. We had net losses during the years ended December 31,
      2008 and 2007 and any adjustment would have been
    anti-dilutive.

9

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|(e) | Fair Value of Financial
      Instruments  Our financial instruments consist of cash, cash equivalents,
      certificate of deposits, notes receivable, accounts payable and accrued
      expenses. The carrying amounts of these financial instruments in the
      balance sheet approximate fair value due to their short-term
      nature.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(f) | Recent Accounting
      Pronouncements                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                   
|    | (i)                                                                                                                                                                                                                                                                                                                                               
|   
|    | (ii)                                                                                                                                                                                                                                                                                                                                              
|   
|    | (iii)                                                                                                                                                                                                                                                                                                                                             

10

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| | (iv) | In December
      2007, the FASB issued SFAS No. 160, Non-controlling Interests in
      Consolidated Financial Statements  An Amendment of ARB No. 51 (SFAS
      160). SFAS 160 establishes accounting and reporting standards for the
      non-controlling interest in a subsidiary (previously referred to as a
      minority interests). SFAS 160 also requires that a retained
      non-controlling interest upon the deconsolidation of a subsidiary be
      initially measured at its fair value. Upon adoption of SFAS 160, the
      Company would be required to report any non-controlling interests as a
      separate component of shareholders equity. The Company would also be
      required to present any net income allocable to non-controlling interests
      and net income attributable to the shareholders of the Company separately
      in its consolidated statement of operations. SFAS 160 is effective for the
      Company, January 1, 2009. SFAS 160 requires retroactive adoption of the
      presentation and disclosure requirements for existing minority interests.
      All other requirements of SFAS 160 shall be applied prospectively. SFAS
      160 would have an impact on the presentation and disclosure of the
      non-controlling interests of any non-wholly owned businesses acquired in
      the future.
| | ---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | (v)  | In May 2008, the
      FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting
      Principles (SFAS 162). SFAS 162 identifies the sources of accounting
      principles and framework for selecting the principles to be used in the
      preparation of financial statements of nongovernmental entities that are
      presented in conformity with generally accepted accounting principles in
      the United States. It is effective 60 days following the SECs approval of
      the Public Company Oversight Board amendments to AU Section 411, The
      Meaning of Present Fairly in Conformity With Generally Accepted Accounting
      Principles. The adoption of this statement is not expected to have a
      material effect on the Companys financial position, statement of
      operations or cash flows.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |     
| | (vi) | On June 12,
      2008, the FASB ratified Emerging Issue Task Force (EITF) 07-5,
      Determining Whether an Instrument (or an Embedded Feature) is Indexed to
      an Entitys Own Stock (EITF 07-5). EITF 07-5 provides framework for
      determining whether an instrument is indexed to an entitys own stock.
      EITF 07-5 is effective for fiscal years beginning after December 15, 2008.
      The Company is currently evaluating the impact of the adoption of EITF
      07-5 on its financial position and results of
  operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

Item 7A. Quantitative and
Qualitative Disclosures About Market Risk

Not applicable.

11

---

Item 8. Financial Statements and
Supplementary Data

|Index to Financial
      Statements                     |  |             | Page
|------------------------------------------------------- |  | ----------- | ----
|Report of Independent Registered Public Accounting Firm |  | F1        
|                                                        |  |            
|Balance Sheet                                           |  | F2        
|                                                        |  |            
|Statements of Operations                                |  | F3        
|                                                        |  |            
|Statements of Changes in Shareholders Equity           |  | F4        
|                                                        |  |            
|Statements of Cash Flows                                |  | F5        
|                                                        |  |            
|Notes to Financial Statements                           |  | F6 to F12

12

---

REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders
ofInternational Smart Sourcing, Inc.Farmingdale, New York

We have audited the accompanying
balance sheet of International Smart Sourcing, Inc. (a development stage
company) (the Company), as of December 31, 2008 and 2007 and the related
statements of operations, changes in shareholders equity and cash flows for the
years ended December 31, 2008 and 2007 and for the period from September 29,
2006 (inception of development stage) to December 31, 2008. 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 the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. The Company is not required to have, nor were we engaged to
perform, an audit of its internal control over financial reporting. Our audits
included consideration of internal control over financial reporting as a basis
for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the
Companys internal control over financial reporting. Accordingly, we express no
such opinion. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.

In our opinion, the financial
statements referred to above present fairly, in all material respects, the
financial position of International Smart Sourcing, Inc. as of December 31, 2008
and 2007, and the results of its operations and its cash flows for the years
ended December 31, 2008 and 2007 and for the period from September 29, 2006
(inception of development stage) to December 31, 2008, in conformity with United
States generally accepted accounting principles.

/s/Marcum & Kliegman
LLPMarcum & Kliegman LLP

New York, New YorkJanuary 23, 2009

F1

---

INTERNATIONAL SMART SOURCING, INC.(A
Development Stage Company)BALANCE SHEET

|ASSETS                                                              
|--------------------------------------------------------------------
|                                                                    
|CURRENT ASSETS:                                                     
|Cash and cash equivalents                                           
|Certificate of deposit                                              
|Prepaid expenses                                                    
|Note Receivable                                                     
|                                                                    
|TOTAL ASSETS                                                        
|                                                                    
|LIABILITIES AND SHAREHOLDERS' EQUITY                                
|                                                                    
|CURRENT LIABILITIES:                                                
|Accounts payable and accrued expenses                               
|                                                                    
|TOTAL LIABILITIES                                                   
|                                                                    
|SHAREHOLDERS' EQUITY:                                               
|Preferred Stock, $.001 par value, 1,000,000 shares
      authorized,
|no shares issued or outstanding                                     
|Common Stock, $.001 par value, 100,000,000 shares
    authorized,   
|18,899,435 issued and 10,974,435
    outstanding                    
|Additional paid-in capital                                          
|Accumulated deficit                                                 
|Deficit accumulated during the development
      stage              
|                                                                    
|Less: Treasury Stock, at cost, 7,925,000
      shares               
|                                                                    
|TOTAL SHAREHOLDERS' EQUITY                                          
|                                                                    
|TOTAL LIABILITIES AND SHAREHOLDERS'
    EQUITY                      

The accompanying notes are an
integral part of these financial statements

F2

---

INTERNATIONAL SMART SOURCING, INC.(A
Development Stage Company)STATEMENTS OF OPERATIONS

|                                                        |  |   |               |   |  |                    |            |   |                      |   | Cumulative from
|------------------------------------------------------- |  | - | ------------- | - |  | ------------------ | ---------- | - | -------------------- | - | ---------------
|                                                        |  |   | For
      the |   |  | September 29, 2006
|                                                        |  |   | Years Ended   |   |  | (Inception of     
|                                                        |  |   | December 31,  |   |  | December 31,       |            |   | development stage)  
|                                                        |  |   | 2008          |   |  | 2007               |            |   | to December 31, 2008
|GENERAL AND ADMINISTRATIVE                              |  | $ | 202,800       |   |  | $                  | 225,875    |   |                      | $ | 495,534        
|                                                       
|LOSS BEFORE OTHER INCOME                                |  |   | 202,800       |   |  |                    | 225,875    |   |                      |   | 495,534        
|OTHER
      INCOME                                      |  |   |               |   |  |                    |            |   |                      |   |                
|Interest income                                         |  |   | 34,417        |   |  |                    | 57,260     |   |                      |   | 92,212         
|                                                       
|LOSS BEFORE PROVISION FOR INCOME TAX                    |  |   | 168,383       |   |  |                    | 168,615    |   |                      |   | 403,322        
|Income tax                                              |  |   | -             |   |  |                    | -          |   |                      |   | (10,227        
|NET LOSS                                                |  | $ | 168,383       |   |  | $                  | 168,615    |   |                      | $ | (413,549       
|                                                       
|Loss per share of common stock:                         |  |   |               |   |  |                    |            |   |                      |   |                
|Net loss
      per share - Basic and diluted            |  | $ | (0.02         | ) |  | $                  | (0.02      | ) |                      |   |                
|Weighted average number of shares of common
      stock |  |   |               |   |  |                    |            |   |                      |   |                
|outstanding - Basic and diluted                         |  |   | 10,974,435    |   |  |                    | 10,974,435 |   |                      |   |                

The accompanying notes are an
integral part of these financial statements

F3

---

INTERNATIONAL SMART SOURCING, INC.(A
Development Stage Company)STATEMENTS OF
CHANGES IN SHAREHOLDERS' EQUITY

|                                |  |              |  |                |        |        |               |  |            |             |  |   |             |   |  |         |            |  |       |   |            |       |  |        | Deficit     |   |  |   |          
|------------------------------- |  | ------------ |  | -------------- | ------ | ------ | ------------- |  | ---------- | ----------- |  | - | ----------- | - |  | ------- | ---------- |  | ----- | - | ---------- | ----- |  | ------ | ----------- | - |  | - | ---------
|                                |  |              |  |                |        |        |               |  |            |             |  |   |             |   |  |         |            |  |       |   |            |       |  |        | Accumulated |   |  |   |          
|                                |  |              |  |                |        |        |               |  |            |             |  |   |             |   |  |         | Additional |  |       |   |            |       |  | During |             |   |  |  
|                                |  | Common Stock |  | Treasury Stock |        |        | Paid
      In |  |            | Accumulated |  |   | Development |   |  |         |           
|                                |  | Shares       |  |                | Amount |        | Shares        |  |            | Amount      |  |   | Capital     |   |  | Deficit |            |  | Stage |   |            | Total
|Balance January 1, 2007         |  | 18,899,435   |  |                | $      | 18,899 |               |  | (7,925,000 | )           |  | $ | (1,664,250  | ) |  | $       | 8,239,495  |  |       | $ | (5,094,144 | )     |  |        | (76,551     | ) |  | $ | 1,423,449
|                               
|Non-cash compensation expense   |  |              |  |                |        |        |               |  |            |             |  |   |             |   |  |         |            |  |       |   |            |       |  |        |             |   |  |   |          
|related to issuance of warrants |  | -            |  |                |        | -      |               |  | -          |             |  |   | -           |   |  |         | 15,000     |  |       |   | -          |       |  |        | -           |   |  |   | 15,000   
|Net loss                        |  | -            |  |                |        | -      |               |  | -          |             |  |   | -           |   |  |         | -          |  |       |   | -          |       |  |        | (168,615    | ) |  |   | (168,615 
|                               
|Balance December 31, 2007       |  | 18,899,435   |  |                | $      | 18,899 |               |  | (7,925,000 | )           |  | $ | (1,664,250  | ) |  | $       | 8,254,495  |  |       | $ | (5,094,144 | )     |  |        | (245,166    | ) |  | $ | 1,269,834
|                               
|Net loss                        |  | -            |  |                |        | -      |               |  | -          |             |  |   | -           |   |  |         | -          |  |       |   | -          |       |  |        | (168,383    | ) |  |   | (168,383 
|                               
|Balance December 31,
2008       |  | 18,899,435   |  |                | $      | 18,899 |               |  | (7,925,000 | )           |  | $ | (1,664,250  | ) |  | $       | 8,254,495  |  |       | $ | (5,094,144 | )     |  | $      | (413,549    | ) |  | $ | 1,101,451

The accompanying notes are an
integral part of these financial statements

F4

---

INTERNATIONAL SMART SOURCING, INC.(A
Development Stage Company)STATEMENTS OF CASH FLOWS

|                                                       |  |   |                      |   |  |                    |          |   |                       |   | Cumulative from   
|------------------------------------------------------ |  | - | -------------------- | - |  | ------------------ | -------- | - | --------------------- | - | ------------------
|                                                       |  |   |                      |   |  |                    |          |   |                       |   | September 29, 2006
|                                                       |  |   | For
      the Fiscal |   |  | (Inception of     
|                                                       |  |   | Years Ended          |   |  | development stage)
|                                                       |  |   | December 31,         |   |  | December 31,       |          |   | to
      December 31,
|                                                       |  |   | 2008                 |   |  | 2007               |          |   | 2008                 
|Cash flows from operating activities:                  |  |   |                      |   |  |                    |          |   |                       |   |                   
|Net loss                                               |  | $ | (168,383             | ) |  | $                  | (168,615 | ) |                       | $ | (413,549          
|Adjustments to reconcile net loss to net               |  |   |                      |   |  |                    |          |   |                       |   |                   
|cash used in operating activities:                     |  |   |                      |   |  |                    |          |   |                       |   |                   
|Non-cash expenses related to issuance of
    warrants  |  |   | -                    |   |  |                    | 15,000   |   |                       |   | 15,000            
|Interest earned on certificate of deposit              |  |   | (16,967              | ) |  |                    | (29,088  | ) |                       |   | (46,055           
|                                                       |  |   |                      |   |  |                    |          |   |                       |   |                   
|Changes in operating assets and liabilities:           |  |   |                      |   |  |                    |          |   |                       |   |                   
|Prepaid expenses and other current assets              |  |   | 3,428                |   |  |                    | (6,124   | ) |                       |   | (2,696            
|Accounts payable and accrued expenses                  |  |   | (2,040               | ) |  |                    | (40,156  | ) |                       |   | 2,975             
|Income taxes payable                                   |  |   | -                    |   |  |                    | (10,227  | ) |                       |   | -                 
|Total
      adjustments                                |  |   | (15,579              | ) |  |                    | (70,595  | ) |                       |   | (30,776           
|Net cash used in operating activities                  |  |   | (183,962             | ) |  |                    | (239,210 | ) |                       |   | (444,325          
|                                                      
|Cash flows (used in) provided by investing activities: |  |   |                      |   |  |                    |          |   |                       |   |                   
|Purchase of certificate of deposit                     |  |   | -                    |   |  |                    | -        |   |                       |   | (600,000          
|Proceeds from repayment of note receivable             |  |   | 50,000               |   |  |                    | -        |   |                       |   | (50,000           
|Expenditure for note receivable                        |  |   | (100,000             | ) |  |                    | -        |   |                       |   | -                 
|Proceeds from maturity of certificate of deposit       |  |   | -                    |   |  |                    | 100,000  |   |                       |   | 100,000           
|                                                      
|Net cash (used in) provided by investing activities    |  |   | (50,000              | ) |  |                    | 100,000  |   |                       |   | (550,000          
|                                                      
|Net decrease in cash and cash equivalents              |  |   | (233,962             | ) |  |                    | (139,210 | ) |                       |   | (994,325          
|                                                      
|Cash and cash equivalents - beginning of period        |  |   | 689,637              |   |  |                    | 828,847  |   |                       |   | 1,450,000         
|                                                      
|Cash and cash equivalents - end of
      period        |  | $ | 455,675              |   |  | $                  | 689,637  |   |                       | $ | 455,675           
|                                                      
|Cash paid during the period for
      taxes            |  | $ | -                    |   |  | $                  | 15,904   |   |                       | $ | 15,904            

The accompanying notes are an
integral part of these financial statements

F5

---

INTERNATIONAL SMART SOURCING,
INC.NOTES TO FINANCIAL STATEMENTSFor the Years Ended December 31, 2008
and 2007

1.BASIS OF
PRESENTATION

International Smart Sourcing, Inc.
(ISS or the Company) was incorporated in February 1998 in Delaware as a
holding company for the purpose of acquiring the common stock of Electronic
Hardware Corp. (EHC) and Compact Disc Packaging Corp., (CDP), an inactive
corporation, in connection with an initial public offering of ISSs stock (the
Offering), which was successfully completed in April of 1999. On May 7, 1999,
ISS formed a company called Smart Sourcing Inc. (SSI), a Delaware corporation.
EHC manufactured, distributed and warehoused knobs, dials and pointers. SSI
specialized in assisting companies in reducing their cost of manufacturing by
outsourcing manufacturing in China.

The Company specialized in the
out-sourcing of manufacturing and the manufacturing of injection molded plastic
components, products and assemblies. The Company performed the manufacturing and
outsourcing functions for its customers, through its United States facilities
and through its outsourcing contacts and offices in the Peoples Republic of
China.

On September 28, 2006, the Company sold
the operating subsidiaries, EHC and SSI, as well as CDP (collectively, the
Subsidiaries). Effective September 28, 2006, the Company is reporting as a
development stage company.

2.PLAN OF OPERATIONS

Until the sale of the Subsidiaries on
September 28, 2006, the Company was a holding company and the shares of the
Subsidiaries held by the Company constituted substantially all of the Companys
assets. Accordingly, since the sale of the Subsidiaries, the Company has existed
as a shell company with no subsidiaries and no business operations. The
Companys plan of operation is to seek a target company with which to merge or
to complete a business combination. In any transaction, management anticipates
that the Company would be the surviving legal entity and the shareholders of the
Company would retain a percentage ownership interest in the post-transaction
company. The amount of the retained equity ownership by the shareholders will be
negotiated by management and the target company.

On July 29, 2008, the Company entered
into a letter of intent with Network 1 Financial Securities Inc., a Texas
corporation (NETW), pursuant to which the Company would purchase one hundred
percent (100%) of the issued and outstanding capital stock of NETW, resulting in
NETW becoming the Companys wholly owned subsidiary, in exchange for twenty-two
million (22,000,000) shares of the Companys common stock, $0.001 par value,
which amount shall be subject to adjustment after the completion of (a) NETWs
audited financial statements for the years ended June 30, 2008 and 2007 and (b)
a due diligence review by the Company. NETW is a registered broker-dealer. The
acquisition is subject to due diligence and the execution of definitive
agreements. If consummated, the transaction would constitute a reverse
acquisition of the Company by NETW, as NETW would control the post merged
company.

The Company can give no assurance that
any transaction discussed herein will occur, or that if such a transaction were
to occur, it would enhance its future operations or financial results, or
specifically that the Company would become and remain profitable as a result of
such transaction.

The Company does not plan to restrict
its search to any specific business, industry or geographic location, and it may
participate in a business venture of virtually any kind or nature.

F6

---

INTERNATIONAL SMART SOURCING, INC.
NOTES TO FINANCIAL STATEMENTSFor
the Years Ended December 31, 2008 and 2007 (contd)

The Company may seek a business
opportunity with entities which have recently commenced operations, or that
desire to utilize the public marketplace in order to raise additional capital to
expand into new products or markets, to develop a new product or service, or for
other corporate purposes. The Company may acquire assets and establish wholly
owned subsidiaries in various businesses or acquire existing businesses as
subsidiaries.

3.SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES

|(a) |  | Use of
      Estimates  The preparation of financial statements in conformity with
      Generally Accepted Accounting Principles accepted in the United States of
      America (GAAP) 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 revenue and expenses during the
      reporting period.                                                                                                                                                                                                                                                                                                                                                            
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(b) |  | Cash and
      Cash Equivalents  For purposes of the statement of cash flows, the
      Company considers all highly liquid debt instruments with original
      maturities of three months or less when purchased to be cash
      equivalents.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   
|(c) |  | Income Taxes
       The Company accounts for income taxes in accordance with Financial
      Accounting Standards Board (FASB) Statement of Financial Accounting
      Standards (SFAS) No. 109, Accounting for Income Taxes. The Company
      recognizes deferred tax assets and liabilities based on the differences
      between the book bases and the tax bases of the assets and liabilities,
      using the effective tax rates in the years in which the differences are
      expected to reverse. A valuation allowance is recorded when it is probable
      that some or all of a deferred tax asset will not be realized. Income tax
      expense consists of the tax payable for the period and the change during
      the period in deferred tax assets and liabilities.                                                                      
|   
|(d) |  | Loss per
      Share  Basic loss per share (LPS) is determined by dividing net loss
      for the period by the weighted average number of common shares outstanding
      during the same period. Diluted LPS reflects the potential dilution that
      could occur if securities or other contracts to issue common stock were
      exercised or converted into common stock or resulted in the issuance of
      common stock, which would then share in the earnings of the Company. For
      the years ended December 31, 2008 and 2007, the Company had approximately
      7.7 million warrants which were not included in the dilutive loss per
      share calculation since the effect would be anti-dilutive. The Company had
      net losses during the years ended December 31, 2008 and 2007 and any
      adjustment would have been anti-dilutive.
|   
|(e) |  | Fair Value
      of Financial Instruments  The Companys financial instruments consist of
      cash, cash equivalents, certificate of deposits, notes receivable,
      accounts payable and accrued expenses. The carrying amounts of these
      financial instruments in the balance sheet approximate fair value due to
      their short-term nature.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

F7

---

INTERNATIONAL SMART SOURCING, INC.
NOTES TO FINANCIAL STATEMENTSFor
the Years Ended December 31, 2008 and 2007 (contd)

|   
|---
|(f)

| | (i)   |  | In September 2006, the
      Financial Accounting Standards Board (FASB) issued SFAS No. 157, Fair
      Value Measurements. SFAS No. 157 establishes a single definition of fair
      value and a framework for measuring fair value, sets out a fair value
      hierarchy to be used to classify the source of information used in fair
      value measurements, and requires new disclosures of assets and liabilities
      measured at fair value based on their level in the hierarchy. This
      statement applies under other accounting pronouncements that require or
      permit fair value measurements. In February 2008, the FASB issued Staff
      Position (FSPs) No. 157-1 and No. 157-2, which, respectively, remove
      leasing transactions from the scope of SFAS No. 157 and defer its
      effective date for one year relative to certain nonfinancial assets and
      liabilities. As a result, the application of the definition of fair value
      and related disclosures of SFAS No. 157 (as impacted by these two FSPs)
      was effective for the Company beginning January 1, 2008 on a prospective
      basis with respect to fair value measurements of (a) nonfinancial assets
      and liabilities that are recognized or disclosed at fair value in the
      Companys financial statements on a recurring basis (at least annually)
      and (b) all financial assets and liabilities. This adoption did not have a
      material impact on the Companys results of operations or financial
      condition. The remaining aspects of SFAS No. 157 for which the effective
      date was deferred under FSP No. 157-2 was adopted effective January 1,
      2008. Areas impacted by the deferral relate to nonfinancial assets and
      liabilities that are measured at fair value, but are recognized or
      disclosed at fair value on a nonrecurring basis. This deferral applies to
      such items as nonfinancial assets and liabilities initially measured at
      fair value in a business combination (but measured at affair value in
      subsequent periods) or nonfinancial long-lived asset groups measured at
      fair value for an impairment assessment. The effects of these remaining
      aspects of SFAS No. 157 are to be applied to fair value measurements
      prospectively beginning January 1, 2009. The adoption of SFAS No. 157-2 is
      not expected to have a material effect on the Companys financial
      position, statement of operation or cash flows.
| | ----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      
| | (ii)  |  | In February 2007, the
      FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and
      Financial Liabilities (SFAS 159). SFAS 159 is effective for years
      beginning after November 15, 2007. SFAS 159 permits companies to measure
      many financial instruments and certain other assets and liabilities at
      fair value on an instrument-by-instrument basis. SFAS 159 also establishes
      presentation and disclosure requirements to facilitate comparisons between
      companies that select different measurement attributes for similar types
      of assets and liabilities. Our adoption of SFAS 159 has not had a material
      impact on our financial position and results of operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |      
| | (iii) |  | In December 2007, the
      FASB issued SFAS No. 141R, Business Combinations (SFAS 141R), which
      replaces SFAS No. 141, Business Combinations. SFAS 141R establishes
      principles and requirements for determining how an enterprise recognizes
      and measures the fair value of certain assets and liabilities acquired in
      a business combination, including noncontrolling interests, contingent
      consideration, and certain acquired contingencies. SFAS 141R also requires
      acquisition-related transaction expenses and restructuring costs be
      expensed as incurred rather than capitalized as a component of the
      business combination. SFAS 141R will be applicable to the Company
      prospectively to business combinations for which the acquisition date is
      on or after January 1, 2009. SFAS 141R would have an impact on accounting
      for any business acquired after the effective date of this
      pronouncement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

F8

---

INTERNATIONAL SMART SOURCING, INC.
NOTES TO FINANCIAL STATEMENTSFor
the Years Ended December 31, 2008 and 2007 (contd)

| | (iv) |  | In December 2007, the FASB issued
      SFAS No. 160, Noncontrolling Interests in Consolidated Financial
      Statements  An Amendment of ARB No. 51 (SFAS 160). SFAS 160
      establishes accounting and reporting standards for the noncontrolling
      interest in a subsidiary (previously referred to as a minority interests).
      SFAS 160 also requires that a retained noncontrolling interest upon the
      deconsolidation of a subsidiary be initially measured at its fair value.
      Upon adoption of SFAS 160, the Company would be required to report any
      noncontrolling interests as a separate component of shareholders equity.
      The Company would also be required to present any net income allocable to
      noncontrolling interests and net income attributable to the shareholders
      of the Company separately in its consolidated statement of operations.
      SFAS 160 is effective for the Company, January 1, 2009. SFAS 160 requires
      retroactive adoption of the presentation and disclosure requirements for
      existing minority interests. All other requirements of SFAS 160 shall be
      applied prospectively. SFAS 160 would have an impact on the presentation
      and disclosure of the noncontrolling interests of any non-wholly owned
      businesses acquired in the future.
| | ---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     
| | (v)  |  | In May 2008, the FASB issued SFAS
      No. 162, The Hierarchy of Generally Accepted Accounting Principles
      (SFAS 162). SFAS 162 identifies the sources of accounting principles and
      framework for selecting the principles to be used in the preparation of
      financial statements of nongovernmental entities that are presented in
      conformity with generally accepted accounting principles in the United
      States. It is effective 60 days following the SECs approval of the Public
      Company Oversight Board amendments to AU Section 411, The Meaning of
      Present Fairly in Conformity With Generally Accepted Accounting
      Principles. The adoption of this statement is not expected to have a
      material effect on the Companys financial position, statement of
      operations or cash flows.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |     
| | (vi) |  | On June 12, 2008, the FASB
      ratified Emerging Issue Task Force (EITF) 07-5, Determining Whether an
      Instrument (or an Embedded Feature) is Indexed to an Entitys Own Stock
      (EITF 07-5). EITF 07-5 provides framework for determining whether an
      instrument is indexed to an entitys own stock. EITF 07-5 is effective for
      fiscal years beginning after December 15, 2008. The Company is currently
      evaluating the impact of the adoption of EITF 07-5 on its financial
      position and results of operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

4.CONCENTRATION OF
CREDIT RISK

Financial instruments that potentially
subject the Company to significant concentrations of credit risk consist of cash
and cash equivalents and certificates of deposit. At times, the cash in any one
bank account may exceed the Federal Deposit Insurance Corporations (the FDIC)
current $250,000 limit. At December 31, 2008, the Company maintained balances
that were over the FDIC limit. The Company places its cash with high credit
quality financial institutions and does not believe it is exposed to any
significant credit risk on cash or cash equivalents and certificate of
deposits.

F9

---

INTERNATIONAL SMART SOURCING, INC.
NOTES TO FINANCIAL STATEMENTSFor
the Years Ended December 31, 2008 and 2007 (contd)

5.NOTE
RECEIVABLE

On November 18, 2008, the Company
loaned to and received a promissory note in the amount of $100,000 from Network
1 Financial Advisors Inc., an affiliate of Network 1 Financial Securities, Inc.
(see Note 2). The effective interest rate for the note is 6% per annum. The note
matures on November 18, 2009.

6.INCOME TAXES

As of December 31, 2008, the Company
has a net operating loss (NOL) of approximately $338,000. The deferred tax
asset related to such NOL has been fully reserved.

The Company has adopted the provisions
of FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes  an
interpretation of FASB Statement No. 109 (FIN 48), on January 1, 2007. FIN 48
clarifies the accounting for uncertainty in income taxes recognized in an
enterprises financial statements in accordance with SFAS No. 109, Accounting
for Income Taxes, and prescribes a recognition threshold and measurement
process for financial statement recognition and measurement of a tax position
taken or expected to be taken in a tax return. FIN 48 also provides guidance on
derecognition, classification, interest and penalties, accounting in interim
period, disclosure and transition. There were no unrecognized tax benefits as of
January 1, 2007 and December 31, 2008.

The Company has identified its federal
tax return and its state tax return in New York State as major tax
jurisdictions, as defined. Based on the Companys evaluation, it has been
concluded that there are no significant uncertain tax positions requiring
recognition in the Companys financial statements. The Companys evaluation was
performed for the tax years ended 2003 through 2007, the only periods subject to
examination. The Company believes that its income tax positions and deductions
would be sustained on audit and does not anticipate any adjustments that would
result in a material change to its financial position. Consequently, the Company
did not record a cumulative effect adjustment related to the adoption of FIN
48.

The Company classifies interest and
penalties related to unrecognized tax benefits in other expenses. The Company
did not incur interest or penalties during the year ended December 31, 2008.

The differences between the statutory
federal rate and the effective rate for the years ended December 31, 2008 and
December 31, 2007 is indicated below:

December 31,
    
    December 31,2008
    
    2007Income tax provision at 34%
    
    
    (34%
    )
    
    
    (34%
    )State and local income
      taxes net of federal benefit
    
    
    (6%
    )
    
    
    (6%
    )Effect of permanent differences
    
    
    0%
    
    
    
    (6%
    )Change in deferred tax
      asset valuation allowance
    
    
    40%
    
    
    
    46%Total
    
    
    0%
    
    
    
    0%


F10

---

INTERNATIONAL SMART SOURCING, INC.
NOTES TO FINANCIAL STATEMENTSFor
the Years Ended December 31, 2008 and 2007 (contd)

7. STOCK OPTION AND GRANT PLAN AND
WARRANTS

In March 1998, the Company adopted the
Stock Option and Grant Plan (the Plan) which was amended in June 2000 and
provides for an aggregate grant of options to purchase 5,000,000 shares of the
Companys common stock.

As a result of the sale of the
Subsidiaries on September 28, 2006, all unexercised stock options and the
Companys Stock Option Plan were terminated.

The following tables illustrate the
Companys warrant issuances and balances outstanding as of, and during the years
ended December 31, 2008 and 2007, restated for the anti-dilution provisions
related to the Companys common stock warrants.

| |                                           |  | WARRANTS  
| | ----------------------------------------- |  | ----------
| |                                           |  |           
| |                                           |  | Shares    
| |                                           |  | Underlying
| |                                           |  | Warrants  
| | Outstanding at December 31, 2006          |  | 7,357,733 
| | Granted                                   |  | 300,000   
| | Outstanding at December 31, 2007 and 2008 |  | 7,657,733 

On March 28, 2007, the Board of
Directors approved a grant of warrants to the Companys three executive
officers, David Hale, President and Chairman of the Companys Board of
Directors; Richard A. Peters, Secretary; and Michael S. Rakusin, Chief Financial
Officer (collectively referred to herein as the Executive Officers), who are
currently serving the Company without receiving cash compensation for their
services as officers. The Executive Officers also comprise all of the directors
of the Company.

The warrants were granted to compensate
the Executive Officers for their services provided to the Company as officers
subsequent to the sale of the Subsidiaries and to induce them to continue
serving as officers. Currently each of the directors of the Company also
receives compensation of $500 per month for their services as
directors.

The warrants issued to each of the
Executive Officers entitles each Executive Officer to purchase 100,000 shares of
the Companys common stock at an exercise price of $0.20 per share. The market
price on March 28, 2007 was $0.16 per share. The exercise price and the number
of shares which may be purchased upon exercise of a warrant are subject to
adjustment in certain circumstances. The warrants were fully vested and
exercisable on the date of grant and expire five years from such date. Neither
the warrants nor the shares of common stock issuable upon the exercise of the
warrants hereof have been registered under the Securities Act of 1933, as
amended, and have been issued in reliance upon an exemption from the
registration requirements of that act.

The fair value of each stock warrant
grant is estimated based upon grant date fair value using the Black-Scholes
option-pricing model with the following weighted average assumptions used for
stock warrants granted during the year ended December 31, 2007: (i) annual
dividends of $0.00, (ii) expected volatility of 37.96%, (iii) risk-free interest
rate of 4.50%, and (iv) expected warrant lives of five years for the year ended
December 31, 2007. The weighted average fair value of the stock warrants granted
for the year ended December 31, 2007 was $0.05. There were warrants issued to
purchase 300,000 shares of the Companys common stock during the year ended
December 31, 2007.

F11

---

INTERNATIONAL SMART SOURCING, INC.
NOTES TO FINANCIAL STATEMENTSFor
the Years Ended December 31, 2008 and 2007 (contd)

Accordingly, the Company valued the
warrants at their fair value and recorded a charge to operations in the amount
of $15,000 which is included in general and administrative expenses in the
accompanying consolidated financial statements.

The following is additional information
with respect to the Companys warrants as of December 31, 2008:

| | WARRANTS OUTSTANDING AND
      EXERCISABLE
| | ------------------------------------------
| |                                           
| |                                           
| |                                           
| | Exercise                                  
| | Price                                     
| | $0.20                                     
| |                                           

8. PREFERRED STOCK

The Board of Directors of the Company
is authorized, without further action of the shareholders of the Company, to
issue up to 1,000,000 shares of Preferred Stock in one or more classes or series
and to fix the rights, preferences, privileges and restrictions thereof,
including dividend rights, conversion rights, voting rights, terms of
redemption, liquidation preferences, and the number of shares constituting any
series or the designation of such series. As of December 31, 2008 and 2007,
there were no shares of preferred stock issued and outstanding.

F12

---

Item 9. Changes in and Disagreements
with Accountants on Accounting and Financial Disclosure

There were no changes in accounting
principles or disagreements with our auditors regarding applications of any
accounting principles during the year ended December 31, 2008.

Item 9A. Controls and Procedures

We conducted an evaluation of the
effectiveness of the design and operation of our disclosure controls and
procedures (as defined in Rules 13a-15(e) and 15d-15(f) under the Exchange Act)
(the Disclosure Controls) as of the end of the period covered by this Annual
Report. The Disclosure Controls evaluation was done under the supervision and
with the participation of management, including our Principal Executive Officer
(PEO) and Principal Accounting Officer (the PAO, and together with the PEO,
the Certifying Officers).

Attached as exhibits to this Annual
Report are certifications of the Certifying Officers, which are required in
accordance with Rule 13a-14 of the Securities Exchange Act of 1934, as amended
(the Exchange Act). This Controls and Procedures section includes the
information concerning the controls evaluation referred to in the certifications
and it should be read in conjunction with the certifications for a more complete
understanding of the topics presented.

Disclosure Controls and
Procedures

The term disclosure controls and
procedures (as defined in Exchange Act Rule 13a-15(e)) refers to the controls
and other procedures that are designed to ensure that information required to be
disclosed by a company in the reports that it files under the Exchange Act is
recorded, processed, summarized and reported within time periods specified in
the SECs rules and forms. Disclosure controls and procedures include, without
limitation, controls and procedures designed to ensure that information required
to be disclosed by an issuer in the reports that it files or submits under the
Exchange Act is accumulated and communicated to the issuers management,
including its Certifying Officers, or persons performing similar functions, as
appropriate to allow timely decisions regarding required disclosures.

We have designed our disclosure
controls and procedures to ensure that information required to be disclosed by
us in the reports that we file under the Exchange Act is recorded, processed,
summarized and reported within time periods specified the SECs rules and forms.
We have also designed our disclosure controls and procedures to ensure that
information required to be disclosed by us in the reports that we file under the
Exchange Act is accumulated and communicated to our management to allow timely
decisions regarding required disclosures. Based on managements evaluation, we
have determined that our disclosure controls and procedures were not effective
as a result of the material weakness described below.

This Annual Report does not include an
attestation report of our registered public accounting firm regarding internal
controls over financial reporting. Managements report was not subject to
attestation by our registered public accounting firm pursuant to temporary rules
of the SEC that permit us to provide only Managements Report in this Annual
Report.

13

---

Managements Annual Report on
Internal Control Over Financial Reporting

Management is responsible for the
preparation of the Companys financial statements and related information.
Management uses its best judgment to ensure that the financial statements
present fairly, in all material aspects, the Companys financial position and
results in conformity with Generally Accepted Accounting Principles
(GAAP).

Internal control over financial
reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the
Exchange Act as a process designed by, or under the supervision of, Certifying
Officers and effected by our board of directors, management and other personnel,
to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with GAAP.

Under the supervision of management, we
conducted an evaluation of the effectiveness of our internal control over
financial reporting based on the framework in Internal Control  Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission published in 1992.

As a result of this evaluation, we
concluded that our internal control over financial reporting was not effective
as of December 31, 2008 due to the identification of a material weakness. A
material weakness is a control deficiency or combination of control deficiencies
such that there is a reasonable possibility that a material misstatement of our
annual or interim financial statements will not be prevented or detected on a
timely basis.

To address the material weakness
described below, we performed additional analysis and performed other procedures
to ensure our financial statements were prepared in accordance with GAAP.
Accordingly, management believes that the financial statements included in this
Annual Report on Form 10-K, fairly present, in all material aspects, our
financial condition, results of operations and cash flows for the periods
presented in accordance with GAAP.

The weakness, identified by management,
related to the lack of necessary accounting resources to ensure consistently
complete and accurate reporting of financial reporting. We do not employ a full
time in-house controller or chief financial officer nor do we employ any
in-house accounting personnel to do routine record keeping. Consequently, our
financial reporting function is limited. Commencing on September 28, 2006, David
Hale ceased serving as our Chief Financial Officer and we appointed Michael
Rakusin as our Chief Financial Officer, on a part time basis. In order to
correct this deficiency, upon the conclusion of an acquisition, management plans
to seek additional qualified in house accounting personnel to ensure that
management will have adequate resources in order to attain complete reporting of
financial information disclosures in a timely manner. We are not presently
conducting operations and do not anticipate conducting operations prior to an
acquisition.

We believe that for the reasons
described above, after the conclusion of an acquisition, we will be able to
improve our disclosure controls and procedures, remedy the material weaknesses
identified above and provide reasonable assurance that assets are safeguard from
loss or unauthorized use, that transactions are recorded in accordance with GAAP
under managements directions, and that financial records are reliable to
prepare financial statements. However, because of inherent limitations in all
control systems, no evaluation can provide absolute assurance that all control
issues and instances of fraud, if any, will be or have been detected.

Changes in Internal Controls over
Financial Reporting

Other than the identification of the
material weakness described above, there have not been any other changes in our
internal control over financial reporting that occurred during the quarter ended
December 31, 2008 that have materially affected or are reasonably likely to
affect our internal control over financial reporting.

Item 9B. Other Information

Not applicable.

14

---

PART III

Item 10. Directors, Executive Officers
and Corporate Governance.

|Name                              |  | Age |  | Position                                                                                  
|--------------------------------- |  | --- |  | ------------------------------------------------------------------------------------------
|David Hale                        |  | 63  |  | Chairman, President and Former Chief Executive Officer (principal
      executive officer)
|Richard A.
      Peters(1)(2)(3)  |  | 71  |  | Director,
      Secretary                                                                 
|Michael S.
      Rakusin(1)(2)(3) |  | 53  |  | Director, Chief Financial
      Officer                                                   

|(1) |  | Member of the Audit
      Committee.       
|--- |  | -------------------------------------------
|(2) |  | Member of the
      Compensation Committee.
|(3) |  | Member of the
      Nominating Committee.  

David Halehas served as our President and Chief Operating Officer since
April 2002. In 2005, Mr. Hale became our chairman, and in 2006, he became our
Chief Executive Officer. Mr. Hale commenced employment with us in October 1999
as Director of Operations and became Chief Operating Officer in May 2001. Mr.
Hale is a manager and shareholder of Rencol Acquisitions LLC, a holding company
which owns a knobs, handles and wheels manufacturer located in the United
Kingdom.

Richard A.
Petershas served as our Secretary since
September 28, 2006. Mr. Peters has over forty years experience in business,
development, marketing and management consulting. His product areas of expertise
include data storage, telecommunications, computer graphics and software. Mr.
Peters was the Vice President of World Wide Channel Marketing at Quantum
Corporation in Milpitas, California from April 1998 until his retirement in
February 2001. Mr. Peters lived and worked in Asia, Europe and South America for
twelve years. He led acquisition teams, strategic partnerships and product
introductions.

Michael S.
Rakusinhas served as our Chief Financial
Officer since September 28, 2006. Since 2001, Mr. Rakusin has served as the
Managing Director of 54 Pearl Street Associates, a restaurant management holding
company. Mr. Rakusin is also a certified public accountant and currently
maintains an active accounting and tax practice. He also has extensive
experience as a builder of single-family homes. Mr. Rakusin previously served as
Chief Executive Officer of Echo Springs Water Co., Inc., a distributor of
bottled water. Michael Rakusin has been designated as our Audit Committee
Financial Expert.

Meetings of the Board

Our Board of Directors met one (1) time
in person or via conference call during the year ended December 31, 2008. All
Directors attended the meeting.

Board Committees

Our Board of Directors has established
a compensation committee (the Compensation Committee), an audit committee (the
Audit Committee), and a nominating and corporate governance committee (the
Nominating and Corporate Governance Committee).

The Compensation Committee.The Compensation Committee consists of
Richard Peters and Michael Rakusin. The Compensation Committee determines the
salaries and bonuses of our executive officers.

15

---

***The Audit
Committee.***Mr. Peters and Mr. Rakusin
serve as members of the Audit Committee. We have determined that Mr. Rakusin
qualifies as an audit committee financial expert under applicable SECregulations. The Audit Committee has the responsibilities set forth in
the Audit Committee Charter, which was revised and adopted by our Board of
Directors on March 4, 2004 including appointing auditors, pre-approving all
auditing services, reviewing the audited financial statements and other
financial disclosures, and overseeing our accounting and audit functions. The
Audit Committee reports its findings to the Board of Directors. At the present
time, no members of the audit committee are independent. The Charter of the
Audit Committee is attached as Appendix D of the Companys definitive proxy
statement filed with the SEC on August 28, 2006.

Nominating and Corporate
Governance Committee.The members of the
Nominating Committee are Richard Peters and Michael Rakusin. The Nominating
Committee has the responsibilities set forth in the Nominating and Corporate
Governance Committee charter, which was adopted by our Board of Directors on
March 4, 2004, including making recommendations to the Board of Directors of
persons qualified to serve as our directors, chairman and members of committees
of the Board of Directors. The Nominating Committee is also responsible for
certain corporate governance practices, including the development of ethical
conduct standards for our Directors, officers and employees and an annual
evaluation to determine whether the Board of Directors and its committees are
functioning effectively.

The Nominating Committee expects to
identify nominees to serve as our directors primarily by accepting and
considering the suggestions and nominee recommendations made by directors,
management and stockholders. The Nominating Committee has not established
specific minimum qualifications for recommended nominees. However, as a matter
of practice, the Nominating Committee does evaluate recommended nominees for
directors based on their integrity, judgment, independence, financial and
business acumen, relevant experience, and their ability to represent and act on
behalf of all stockholders, as well as the needs of the Board of Directors. In
general, the Nominating Committee would expect to renominate incumbent directors
who express an interest in continuing to serve on the Board of
Directors.

The Charter of the Nominating and
Corporate Governance Committee can be found as Appendix E of the definitive
proxy statement filed with the SEC on August 28, 2006.

Director Independence

Our determination of independence of
directors is made by using the definition of independent director contained
under Rule 4200(a)(15) of the Rules of the Financial Industry Regulatory
Authority. The Chairman of the Board of Directors, Mr. Hale is our President and
principal executive officer and therefore is not independent under this rule.
Further, our other two directors, Mr. Peters and Mr. Rakusin, serve as our
Secretary and Chief Financial Officer, respectively, and as a result also do not
satisfy the standard under Rule 4200(a)(15) of independent judgment.

Code of Business Conduct and
Ethics

The Board of Directors has also adopted
a Code of Business Conduct and Ethics, which can be found in Appendix F of the
Definitive Proxy Statement filed by the Company with the SEC on August 28, 2006.
The Code of Business Conduct and Ethics will be provided without charge, upon
written request to the us at the following address: International Smart
Sourcing, Inc., 320 Broad Hollow Road, Farmingdale, New York 11735, Attention:
David Hale.

Section 16(a) Beneficial
Ownership Reporting

Section 16(a) of the Exchange Act
requires our executive officers and directors, and persons who own more than 10%
of a registered class of our equity securities, to file reports of ownership and
changes in ownership with the SEC and NASDAQ. Officers, directors and greater
than 10% stockholders are required by SEC regulations to furnish us with copies
of all Section 16(a) forms they file. To the our knowledge, based solely on a
review of such reports provided to us and written representations that no other
reports were required during, or with respect to, the year ended December 31,
2008, all Section 16(a) filing requirements applicable to our executive
officers, directors and greater than 10% beneficial owners have been
satisfied.

16

---

Item 11. Executive Compensation.

Executive Compensation

None of our executive officers received
compensation in excess of $100,000 during the years ended December 31, 2008 and
2007.

Year-End Option
Holdings.On August 28, 2006, we sent a
Notice of Termination of Stock Options to all option holders announcing the
proposed sale of the Subsidiaries. Effective September 28, 2006, upon the sale
of the Subsidiaries, all unexercised options were effectively terminated.

Compensation of Directors

Prior to September 28, 2006, our
Directors who were also employees received no additional compensation for their
service as directors, and our non-employee Directors received a fee of $500 a
month for serving on the Board of Directors and reimbursement of reasonable
expenses incurred in attending meetings. At the present time, all of our
directors receive $500 a month for serving on the Board of Directors as well as
reimbursement of reasonable expenses incurred in attending meetings.

|DIRECTOR
      COMPENSATION
|---------------------------
|                           
|                           
|                           
|                           
|                           
|                           
|David Hale                 
|Richard
      Peters       
|Michael Rakusin            

Item 12. Security Ownership of
Certain Beneficial Owners and Management and Related Shareholder Matters

The following table sets forth as of
January 20, 2009 certain information regarding the beneficial ownership of
Common Stock by (i) each person or group (as that term is defined in Section
13(d)(3) of the Exchange Act) known by the Company to be the beneficial owner of
more than 5% of the common stock, (ii) each of our executive officers, (iii)
each director and nominee and (iv) all directors and executive officers as a
group. Except as otherwise indicated, we believe, based on information furnished
by such persons, that each person listed below has sole voting and investment
power over the shares of common stock shown as beneficially owned, subject to
community property laws, where applicable. Beneficial ownership is determined
under the rules of the SEC and includes any shares which the person has the
right to acquire within 60 days after January 20, 2009 through the exercise of
any stock option or other right.

17

---

|               |  |                                                                   |  |                          |     | Percentage           
|-------------- |  | ----------------------------------------------------------------- |  | ------------------------ | --- | ---------------------
|Title
      of |  |                                                                   |  | Number of Shares         |     | of
      Common Stock
|Class          |  | Name of Beneficial Owner                                          |  | Beneficially
      Owned |     | **Owned**(1)         
|Common         |  | Horace T. Ardinger, Jr.                                           |  | 10,965,820               | (2) |                      
|Common         |  | Jay
      Gottlieb                                                |  | 946,505                  | (3) |                      
|Common         |  | Donald Adams                                                      |  | 1,063,500                | (4) |                      
|Common         |  | Richard
      Peters                                              |  | 100,000                  | (5) |                      
|Common         |  | Michael Rakusin                                                   |  | 100,000                  | (6) |                      
|Common         |  | David
      Hale                                                  |  | 100,500                  | (7) |                      
|Common         |  | All directors and executive
      officers as a group (3 persons) |  | 300,500                  | (8) |                      

|(*) |  | Represents less than 1%.                                                                                                                                                                                                                                                                                                                                                             
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |  |                                                                                                                                                                                                                                                                                                                                                                                      
|(1) |  | Based on 10,974,435 outstanding
      shares of common stock.                                                                                                                                                                                                                                                                                                                        
|(2) |  | Includes 965,000 warrants to
      purchase a total of 4,979,400 shares of common stock which expire on April
      23, 2010. Also includes 317,500 shares of common stock held by Mr.
      Ardingers wife and 5,668,920 shares of common stock held by H.T. Ardinger
      & Sons, Inc., a Texas corporation, of which Mr. Ardinger has sole
      voting and dispositive control.
|(3) |  | Number of shares as set forth on
      the Schedule 13G, as filed with the SEC on February 13, 2008.                                                                                                                                                                                                                                                                                 
|(4) |  | Number of shares as set forth on
      the Schedule 13G filed on March 13, 2006.                                                                                                                                                                                                                                                                                                     
|(5) |  | Includes 100,000 warrants to
      purchase a total of 100,000 shares of common stock exercisable within 60
      days of February 28, 2008.                                                                                                                                                                                                                                         
|(6) |  | Includes 100,000 warrants to
      purchase a total of 100,000 shares of common stock exercisable within 60
      days of February 28, 2008.                                                                                                                                                                                                                                         
|(7) |  | Includes 100,000 warrants to
      purchase a total of 100,000 shares of common stock exercisable within 60
      days of February 28, 2008.                                                                                                                                                                                                                                         
|(8) |  | Includes 300,000 warrants to
      purchase a total of 300,000 shares of common stock exercisable within 60
      days of February 28, 2008.                                                                                                                                                                                                                                         

Item 13. Certain Relationships and
Related Transactions, and Director Independence.

There were no related party
transactions for the year ended December 31, 2008.

Our determination of independence of
directors is made by using the definition of independent director contained
under Rule 4200(a)(15) of the Rules of the Financial Industry Regulatory
Authority. The Chairman of the Board of Directors, Mr. Hale is also our
President and principal executive officer and therefore is not independent
under this rule. Further, our other two directors, Mr. Peters and Mr. Rakusin,
serve as our Secretary and Chief Financial Officer, respectively, and as a
result also do not satisfy the standard under Rule 4200(a)(15) of independent
judgment.

18

---

Item 14. Principal Accountant Fees
and Services.

|                         |  | Fees   
|------------------------ |  | -------
|Fee Category             |  | 2008   
|Audit Fees               |  | $47,500
|Audit Related
      Fees |  |       
|Tax Fees                 |  |       
|All Other
      Fees     |  |       
|Total Fees               |  | $47,500

Audit Fees

Marcum & Kliegman LLP (M&K)
billed us an aggregate of approximately $47,500 in fees for professional
services rendered in connection with the audit of our financial statements for
the most recent year end financial statements included in each of our quarterly
reports on Form 10-Q during the year ended December 31, 2008. M&K billed us
an aggregate of approximately $60,450 in fees for professional services rendered
in connection with the audit of our financial statements for the year ended
December 31, 2007 and financial statements included in each of our quarterly
reports on Form 10-Q during the year ended December 31, 2007.

Audit Related Fees

We did not incur any audit related fees
for the years ended December 31, 2008 and 2007.

Tax Fees

We did not engage M& K for tax
services during the years ended December 31, 2008 and 2007.

Item 15. Exhibits.

| | (A)
      Exhibits                                         |  |            
| | ---------------------------------------------------------- |  | -----------
| | Financial
      Statements                                 |  |            
| |                                                            |  |            
| | Report of Independent Registered Public Accounting Firm    |  | F1        
| |                                                            |  |            
| | Balance Sheet                                              |  | F2        
| |                                                            |  |            
| | Consolidated Statements of Operations                      |  | F3        
| |                                                            |  |            
| | Consolidated Statements of Changes in Shareholders Equity |  | F4        
| |                                                            |  |            
| | Consolidated Statements of Cash Flows                      |  | F5        
| |                                                            |  |            
| | Notes to Consolidated Financial Statements                 |  | F6 to F12

19

---

|Exhibit  |  |                                                                                                                                                                                                                                                                                                                                                                      
|-------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|No.      |  | Description of
      Exhibit                                                                                                                                                                                                                                                                                                                                         
|**3.1**  |  | Certificate of Incorporation of
      International Plastic Technologies Inc. and Amendment to the Certificate
      of Incorporation dated December 7, 1998 (Incorporated by reference to
      Exhibit 3.1 to the Companys Registration Statement on Form SB-2
      (Registration Statement No. 333-48701 declared effective by the SEC on
      April 23, 1999.)
|         |  |                                                                                                                                                                                                                                                                                                                                                                      
|3.2      |  | Amendment to the Certificate of Incorporation of International
      Smart Sourcing dated June 19, 2000 (Incorporated by reference to Exhibit
      3.1 to the Quarterly Report on Form 10-QSB filed with the SEC on August
      15, 2000.)                                                                                                                         
|        
|3.3      |  | Amendment to the Certificate of Incorporation of International
      Smart Sourcing dated December 8, 2004 (Incorporated by reference to
      Exhibit A to the Definitive Information Statement on Schedule 14C filed
      with the SEC on November 15, 2004.)                                                                                                     
|        
|3.4      |  | By-Laws of International Plastic Technologies, Inc. (Incorporated
      by reference to Exhibit 3.2 to the Companys Registration Statement on
      Form SB-2 (Registration Statement 333-48701 declared effective by the SEC
      on April 23, 1999.)                                                                                                             
|        
|3.5      |  | Amendment of the By-Laws of International Smart Sourcing, Inc.
      dated as of October 14, 2004 (Incorporated by reference to Exhibit B to
      the Definitive Information Statement on Schedule 14C filed with the SEC on
      November 15, 2004.)                                                                                                              
|        
|4.1      |  | Form
      of Common Stock Certificate (Incorporated by reference to Exhibit 4.1 to
      the Companys Registration Statement on Form SB-2 (Registration Statement
      No. 333-48701 declared effective with the SEC on April 23,
  1999.)                                                                                                                        
|        
|4.2      |  | Form
      of Warrant Certificate (Incorporated by reference to Exhibit 4.2 to the
      Companys Registration Statement on Form SB-2 (Registration Statement No.
      333-48701, declared effective by the SEC on April 23, 1999.)                                                                                                                                
|        
|4.3      |  | Form
      of Warrant Agreement between the Company and Continental Stock Transfer
      and Trust Company (Incorporated by reference to Exhibit 4.3 to the
      Companys Registration Statement on Form SB-2 (Registration Statement No.
      333-48701 declared effective by the SEC on April 23, 1999.)                                                        
|        
|4.4      |  | Amendment 1 to the Warrant Agreement between the Company and
      Continental Stock and Trust Company dated as of April 20, 2005
      (Incorporated by reference to Exhibit 4.1 to the Current Report on Form
      8-K filed with the SEC on April 20, 2005.)                                                                                                     
|        
|4.5      |  | Amendment 2 to the Warrant Agreement between the Company and
      Continental Stock and Trust Company dated December 4, 2006 (Incorporated
      by reference to Exhibit 4.1 to the Current Report on Form 8-K filed with
      the SEC on December 5, 2006.)                                                                                                       
|        
|23.1     |  | Independent Registered Public Accounting Firms
Consent                                                                                                                                                                                                                                                                                                              
|        
|31.1     |  | Rule
      13a 4(a)/15d14(a) certification, as adopted pursuant to Section 302 of
      the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                             
|        
|31.2     |  | Rule
      13a14(a)/15d14(a) certification, as adopted pursuant to Section 302 of
      the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                             
|        
|32.1     |  | Certification of Chairman pursuant to 18 U.S.C. § 1350, as adopted
      pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                   
|         |  |                                                                                                                                                                                                                                                                                                                                                                      
|**32.2** |  | Certification of Chief Financial
      Officer pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906
      of the Sarbanes-Oxley Act of
2002                                                                                                                                                                                                              

20

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SIGNATURES

In accordance with Section 13 or 15(d)
of the Securities Exchange Act of 1934, as amended, the Registrant has duly
caused this Annual Report on Form 10-K to be signed on its behalf by the
undersigned, thereunto duly authorized.

|                             | INTERNATIONAL
      SMART SOURCING, INC.               
|---------------------------- | -------------------------------------------------------
|                            
|                            
|Date: January
      26, 2009 | /s/ David Hale                                         
|                             | David
      Hale                                       
|                             | Chairman,
      President (principal executive officer)

In accordance with the Securities
Exchange Act of 1934, as amended, 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                  
|--------------------- |  | --------------------------------------------------------------------------------- |  | ----------------------
|                     
|/s/ David Hale        |  | Chairman of the
      Board of Directors, President (Principal Executive Officer) |  | January 26,
      2009
|David
      Hale      |  |                                                                                   |  |                       
|                     
|/s/ Richard Peters    |  | Secretary,
      Director                                                         |  | January 26,
      2009
|Richard
      Peters  |  |                                                                                   |  |                       
|                     
|/s/ Michael Rakusin   |  | Chief Financial
      Officer, Director                                           |  | January 26,
      2009
|Michael
      Rakusin |  |                                                                                   |  |                       

21

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