SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549



FORM 10-KSB



xANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934



For the fiscal year endedDecember 31, 2006



oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934



Commission File Number000-50048



MOTIVNATION, INC.

(Name of small business issuer in its charter)



|Nevada                                                         |  | 82-6008492                          
|-------------------------------------------------------------- |  | ------------------------------------
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)
|                                                               |  |                                     
|18101 Von Karman Avenue, Suite 330                             |  |                                     
|Irvine, California                                             |  | 92612                               
|(Address of principal executive offices)                       |  | (zip code)                          



Issuer's telephone number including area code:(888) 258-6458



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



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



Common Stock, $0.001 par value

(Title if Class)



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



Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  YesXNo _____



Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B is not contained in this form, and no disclosure will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB.  [     ]



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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes ____ NoX__



The issuers revenues for its most recent fiscal year ended December 31, 2006 was $2,329,507.



The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the average bid and ask price, as of March 30, 2007 was approximately $85,173 based on a share value of $0.02.



The number of shares of Common Stock, $0.001 par value, outstanding on December 31, 2006 was 7,045,463 shares.



Documents Incorporated by Reference



None



Transitional Small Business Disclosure Format (check one):  Yes __ NoX



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MOTIVNATION, INC.

FOR THE FISCAL YEAR ENDED

December 31, 2006



Index to Report

on Form 10-KSB





PART I
        Pages(s)Item 1.
        Description of Business.
        1Item 2.
        Description of Property.
        4Item 3.
        Legal Proceedings.
        4Item 4.
        Submission of Matters to a Vote of Security Holders.
        6PART IIItem 5.
        Market for Common Equity and Related Stockholder Matters.
        6Item 6.
        Managements Discussion and Analysis or Plan of Operation.
        10Item 7.
        Financial Statements.
        F-1F-27Item 8.
        Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
        22Item 8A.
        Controls and Procedures.
        22Item 8B.
        Other Information.
        22PART IIIItem 9.
        Directors and Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act.
        22Item 10.
        Executive Compensation.
        26Item 11.
        Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
        27Item 12.
        Certain Relationships and Related Transactions.
        28Item 13.
        Exhibits.
        29Item 14.
        Principal Accountant Fees and Services
        29






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FORWARD-LOOKING STATEMENTS



This document contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact are forward-looking statements for purposes of federal and state securities laws, including, but not limited to, any projections of earnings, revenue or other financial items; any statements of the plans, strategies and objections of management for future operations; any statements concerning proposed new services or developments; any statements regarding future economic conditions or performance; any statements or belief; and any statements of assumptions underlying any of the foregoing.



Forward-looking statements may include the words may, could, estimate, intend, continue, believe, expect or anticipate or other similar words.  These forward-looking statements present our estimates and assumptions only as of the date of this report. Except for our ongoing securities laws, we do not intend, and undertake no obligation, to update any forward-looking statement.



Although we believe that the expectations reflected in any of our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any or our forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and inherent risks and uncertainties. The factors impacting these risks and uncertainties include, but are not limited to:




        Our ability to distribute, sell, and market our services and products;



        Our ability to develop and offer new services and products;



        The performance of our motorcycle and automotive products and accessories;



        The significant and ongoing funds needed to achieve our production, marketing, and sales objectives;



        The appeal of our services and products to consumers;



        Our ability to generate adequate revenue to support our operations;



        Our ability to maintain positive cash flow resulting from extended periods of monetary responsibility in the form of labor for extensive custom works in progress;



        The loss or injury of our principal design or technical staff; and



        Changes in environmental regulation and enforcement relating to our operations, including those governing VOC emissions.




Actual future performance and results could differ from that contained in or suggested by these forward-looking statements as a result of factors set forth in this Form 10-KSB (including those sections hereof incorporated by reference from other filings with the Securities and Exchange Commission), in particular as set forth in the "Managements Discussion and Analysis" under Item 6.



In this filing references to MotivNation, Company, we, our, and/or us, refers to MotivNation, Inc.



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PART I



ITEM 1.
        DESCRIPTION OF BUSINESS




(a) Business Development



We were incorporated on April 26, 1946, under the laws of the State of Idaho for the purpose of exploring, acquiring and developing mineral properties in the Idaho.  The initial and subsequent efforts in the acquisition, exploration, and development of potentially viable and commercial mineral properties were unsuccessful.  We have since ceased our mining business.



In 2003, we merged with our wholly-owned Nevada subsidiary and changed our corporate domicile from the State of Idaho to the State of Nevada.  We also changed our corporate name from Aberdeen Idaho Mining Company to Aberdeen Mining Company.



On March 8, 2004, pursuant to the terms of the Asset Purchase Agreement dated February 26, 2004, we acquired substantially all of the assets and liabilities of C&M Transportation, Inc., a Kansas corporation whose sole shareholder was Velocity Holdings, Inc.  In the agreement we acquired substantially all of the assets and liabilities of C&M in exchange for the issuance and delivery to C&M of 888,799 (post-split) shares of our common stock.



Due to subsequent events after the closing of the transaction the company discovered undisclosed issues such as the imposition of a tax lien by the Internal Revenue Service on certain assets of C&M and the refusal by First State Bank to further finance the activities of C&M, the parties to the Asset Purchase Agreement agreed to unwind and rescind the C&M transaction, according to terms and conditions of a Rescission and Mutual Release Agreement, dated May 6, 2004.



Shortly after the rescission of the C&M transaction, on May 11, 2004 we entered into an Asset Purchase Agreement with Damons Motorcycle Creations, Inc, a California corporation.  According to the terms of the agreement we acquired substantially all of the assets and liabilities of Damons in exchange for 888,799 (post-split) shares of our common stock that we issued to Damons sole shareholders, Thomas Prewitt and Richard Perez.  The shares issued are restricted stock and bear a restrictive legend.  As a result of the transaction, Mr. Prewitt and Mr. Perez together obtained indirect control of the Company through Damons ownership of a majority of our issued and outstanding shares.



On June 25, 2004, we changed our corporate name to MotivNation, Inc. by filing an amendment to our Articles of Incorporation with the Nevada Secretary of State.  We feel the name is more indicative of our new line of business and is more identifiable.



On October 11, 2004, MotivNation, Inc. and its wholly owned subsidiary, TrixMotive Inc., a Nevada corporation, entered into an Asset Purchase Agreement with Moonlight Industries, Inc., a California corporation, to acquire certain assets and liabilities.  According to the terms of the agreement, we acquired certain assets and liabilities of Moonlight in exchange for 140,000 (post-split) shares of MotivNation common stock that was issued to Moonlights sole shareholders, Leslie McPhail and her husband David McPhail.  The president of Moonlight, Leslie A. McPhail, also serves as the Secretary of TrixMotive.  Tom Prewitt and Richard Perez,



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president and secretary of MotivNation respectively, agreed to return 140,000 (post-split) shares of MotivNations common stock held by them prior to the closing of the acquisition. The company will continue under the Moonlight brand but will operate under the TrixMotive corporate entity.



(b) Business of Issuer



Following the acquisitions of Damons, and TrixMotive, we ceased our prior business operations, but we intend to continue in the motorcycle and automotive industry that Damons and TrixMotive, are a part of as well as plan to expand these businesses using the assets we acquired. Damons was in the business of customizing motorcycles and automobiles for individuals and performing custom parts and accessories for independent dealers and manufacturers.  TrixMotive is in the business of converting automobile chassis into stretched limousines and other specialized automotives.



Additionally, these businesses provide a full-range of services that cater to the custom motorcycle and automotive enthusiast, including the sale, manufacture, converting, customization, armor protecting, and installation of custom-built motorcycles and auto parts and accessories, as well as restoration, repair, and servicing. Damons and TrixMotive, also specialized in custom paint work for both motorcycles and automobiles while engaging in the retail sale of aftermarket motorcycle and automotive parts, accessories, and related apparel.



Our target clients fall into two categories: the individual custom automotive enthusiast or collectors of the one of a kind custom motorcycle and auto creations, and those of local fabricators, custom shops, and Original Equipment Manufacturers.  Our primary market is the latter of two listed and these customers buy materials, supplies, and finished parts for their work in serving the growing market of custom or modified automobile and motorcycle creations.  In addition to distributing several lines of materials and equipment, we plan to provide training through independent dealers and our own distribution infrastructure to our primary market clientele.



Principal Products or Services



Our manufacturing operations consist of in-house production of components and parts, assembly and finishing of components, painting, conversion and assembly of motorcycles and automobiles, and quality control, which includes performance testing of finished products under running conditions.  The custom design, fabrication, finish and paint processes are moved into and out of each aspect of the manufacturing process.



We offer various products and services depending on which client we are catering to.  For our individual retail clients we offer products and services direct and include restoration work, finish and paint for motorcycles and automobiles as well as signature paint and design applied to non automotive personal property.  For our independent dealers we offer products and services direct to the dealers which include custom and signature finish and design work on a dealers own restoration or manufactured work.  We also offer consultative work in the preparation of signature paints blends, techniques, and design advice related to the dealers own project.  For our original equipment manufacturers we offer services and products that include signature design and fabrication for manufactured parts and accessories, which are a party of a designer or signature series of products or design themes.  These products and services are also sold direct to the original equipment manufacturers.





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Competition



The market for our products and services are highly competitive and there are no substantial barriers to entry.  There are a lot of competitors in this industry but our main ones are:  Arlen Ness, West Coast Choppers, Chip Foose, Orange Coast Choppers, Rock & Roll Custom Paintwork, Al Martinez Paint and Body, Tiffany Coachworks, Pinnacle Limousine, Coach Industries Group, Aladdin Limousine, VIP Coachworks, and Royal Coach by Victor. We expect that competition will intensify and new competitors may enter the market with the growing trends of custom motorcycles and automobiles, which may result in a reduction in profit margins on our products and services.



Sources of Materials and Suppliers



We obtain our supplies from national manufacturers and after market manufacturers of motorcycle and automotive parts, paints, and supplies.  These supplies are readily available and there is no dependency on any single supplier.  We have no need for long term supply contracts since material and parts cost are not the most significant factor to the cost of our completed work.



Dependence on One or More Customers



The Company has no major customer for the year ended December 31, 2006. One customer accounted for approximately $967,065 or 32.5% of the Customized Automotive segment revenues for the year ended December 31, 2005. A major customer accounted for approximately $52,440 or 17% of the Customized Motorcycle segment revenues for the year ended December 31, 2005.



Intellectual Property



We have not filed for any patents or trademarks, and we have no license agreements.  We are not a licensed Harley-Davidson dealer, as we do not sell new Harley-Davidson motorcycles.  Although we believe we have obtained common law rights outside that of the United States Patent and Trademark Office through the use of the name Damons Motorcycle Creations, Moonlight Industries, MotivNation, and TrixMotive, in connection with our business, our failure to obtain proprietary protection in the future for the use of the name could negatively impact our operations.



Government Regulations



Our business is subject to certain federal, state, and local government regulations, including those of the Environmental Protection Agency (EPA) and comparable state agencies that regulate emissions of Volatile Organic Compounds (VOC) and other air contaminants, the Occupational Safety and Heal Administrations (OSHA), and regulations governing the disposal of oil, grease, tires, batteries, and the prevention of pollution.  Although we believe we are in compliance with all of these agencies and government regulations, our failure to comply



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with such regulations could result in the termination of our operations, impositions of fines, or liabilities in excess of our capital resources.  In addition, any changes in the laws or regulations imposed on us could significantly increase our costs of doing business and could have a negative impact on our business.



Personnel



As of March 31, 2007 we had 29 full-time employees, including 24 in production staff and 5 in sales and administration. Management believes our future success will depend in large part upon our ability to attract and retain qualified employees.  We have no collective bargaining agreements with our employees and believe our relations with our employees are good.



(c)  Reports to Security Holders



We file annual, quarterly and special reports and other information with the SEC that can be inspected and copied at the public reference facility maintained by the SEC at 450 Fifth Street, N.W., Room 1024, Washington D.C. 20549.  Information regarding the public reference facilities may be obtained from the SEC by telephoning 1-800-SEC-0030.  Our filings are also available through the SECs Electronic Date Gathering Analysis and Retrieval System which is publicly available through the SECs website (www.sec.gov).  Copies of such materials may also be obtained by mail from the public reference section of the SEC at 450 Fifth Street, N.W., Washington D.C. 20549 at prescribed rates.



ITEM 2.
        DESCRIPTION OF PROPERTY.




MotivNation maintains its corporate headquarters at 18101 Von Karman Ave. Ste 330, Irvine, CA 92612.   We lease approximately 250 square feet of office space under a month to month lease. The minimum monthly rental for the premises is approximately $1,405, plus standard, ancillary charges, such as property taxes, insurance, and certain operating expenses applicable to the leased premises.



Damon's currently leases 1 unit that is approximately 13,890 square feet of retail, service, warehouse, and fenced yard space. The units are located at 1741 E. Lambert Road, La Habra, CA 90631. The lease requires a monthly rental payment of approximately $5,000.



TrixMotive currently lease 1 unit that is approximately 24,000 square feet for its production operations at 13659 Excelsior Drive, Santa Fe Springs, CA 90670. The leases require a collective monthly rental payment of approximately $13,125.





ITEM 3.
        LEGAL PROCEEDINGS.




We may from time to time be involved in routine legal matters incidental to our business; however, at this point in time we are currently not involved in any litigation, nor are we aware of any threatened or impending litigation.



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Prior to our acquisition of the assets of Moonlight Industries a workers compensation claim had been filed against Moonlight Industries by a former employee.  Despite the fact that the injury had taken place with an employer that was not Moonlight Industries as claim was filed against Moonlight and has been in litigation.  Moonlight continues to defend against this claim and believes it is without merit.  Despite the fact that this incident had taken place prior to our acquisition on the assets of Moonlight Industries and that we acquired only the assets and not the liabilities of Moonlight Industries, this workers compensation claim could become material to the company. In 2006 there were no inquiries regarding this claim.



Damons historically leased four (4) units space in city of Brea, California under four separate non-cancelable operating lease agreements, which expires through November 30, 2007. Damons currently does not occupy the spaces. In July, the landlord filed claims against Damons for the past due rent and charges of all units, aggregate of $19,657, and the additional amounts due pursuant to the remaining terms of the lease agreements. The obligations under the remaining terms of the lease agreements are estimated at a total of $89,086. Subsequently, Damons and the landlord entered into a Surrender Agreement for one unit, providing that Damons agreed to forfeit a security deposit of $1,568 and to pay a sum of $3,822, representing the unpaid charges and rent through the date of agreement. In return, the landlord agreed to discharge and release Damons from all
obligations under the lease agreement of that unit.



No provision for any contingent liabilities has been made in the accompanying consolidated financial statements since management cannot predict the outcome of the claims or estimate the amount of any loss that may result. However, the Company has accrued the past due rent of $19,657 in the accompanying financial statements.



On December 7, 2005, a customer of TrixMotive filed a lawsuit in the Superior Court of Santa Clara County of California against TrixMotive claiming for breach of contract and warranty, intentional and negligence misrepresentation for a customized vehicle. The plaintiff seeks $98,827 in compensatory damages and other unspecified damages plus interest, attorneys fees and costs. Subsequent to year end, there was a settlement court appearance by which the Company and the Plaintiff agreed to settle the claim in the amount of $2,000. Final settlement agreement is being processed. No liability was accrued as of December 31, 2006 as the settlement amount was considered insignificant.



The Company is also currently party to various legal proceedings and claims, either asserted or unasserted, which arise in the ordinary course of business. While the outcome of these matters cannot be predicted with certainty, management do not believe that the outcome of any of these claims or any of the above mentioned legal matters will have a material adverse effect on the Companys consolidated financial position, results of operations, or cash flows.



While the outcome of these matters is not determinable, the Company does not expect that the ultimate costs to resolve these matters will have a material adverse effect on the Companys financial position, results of operations, or cash flows.







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ITEM 4.
        SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.






None occurred during the 4th Quarter.



PART II



ITEM 5.
        MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.




Market Information

We have been eligible to participate in the OTC Bulletin Board, an electronic quotation medium for securities traded outside of the NASDAQ Stock Market, and prices for our common stock were published on the OTC Bulletin under the trading symbol MOVN through October 25, 2005, subsequently on October 26, 2005, in conjunction with the a one for one-hundred reverse split., our OTC: BB trading symbol changed to MOVT. The quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions. This market is extremely limited and the prices quoted are not a reliable indication of the value of our common stock.  The following table sets forth the quarterly high and low bid prices for our Common Stock during our last two fiscal years, as reported by a Quarterly Trade and Quote Summary Report of the OTC Bulletin
Board. The quotations reflect inter-dealer prices, without retail mark-up, markdown or commission, and may not necessarily represent actual transactions.



2006*
        2005*High
        Low
        High
        Low1st Quarter
        $0.05
        $0.028
        $2.30
        $1.102nd Quarter
        $0.06
        $0.012
        $1.50
        $0.803rd Quarter
        $0.069
        $0.0095
        $1.70
        $0.104th Quarter
        $0.029
        $0.0095
        $3.00
        $0.05




2007*High
        Low1st Quarter
        $0.05
        $0.015




* Prices have been modified to reflect post split values



Holders of Common Stock



As of December 31, 2006, we had approximately 544 stockholders of record of the 7,045,463 shares outstanding



Dividends



We have never declared or paid dividends on our Common Stock.  We intend to follow a policy of retaining earnings, if any, to finance the growth of the business and do not anticipate paying any cash dividends in the foreseeable future.  The declaration and payment of future



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dividends on the Common Stock will be the sole discretion of the Board of Directors and will depend on our profitability and financial condition, capital requirements, statutory and contractual restrictions, future prospects and other factors deemed relevant.



Transfer Agent and Registrar



MOVTs transfer agent is Fidelity Transfer Company, 1800 S. West Temple, Suite 301

Salt Lake City, UT  84115



Securities authorized for issuance under equity compensation plans.



N/A



Recent Sales of Unregistered Securities



The following is a description of all equity securities of the Company sold by the Company during the period covered by this Annual Report on Form 10-KSB that were not registered under the Securities Act of 1933 as amended, including registered sales made pursuant to Section 4(2) of the Securities Act of 1933, as follows:



On April 20, 2004, we and NeoTactix (NTX) entered into a Business Consulting Agreement pursuant to which Neotactix agreed to provide certain business consulting services to us as specified in the Agreement, In exchange for such services, we agreed to issue 196,000 (post-split) shares of our common stock. We and NTX agree that the compensation shares issued by us to affiliates of NTX shall be cancelled and returned to us if, prior to October 31, 2005, we have has not achieved certain benchmarks pursuant to the Agreement. The agreement was amended by the Board of Directors on October 15, 2005 to extend the Agreement to October 31, 2006.



As of December 31, 2005, none of the benchmarks have occurred. The services, valued at $6.47 million, were deferred until the performances commit.



Restricted Stock Agreements



On February 15, 2005, the Company entered into a Restricted Stock Agreement with each of the following directors: Mark Absher, David Psachie, and Richard Holt. The agreement held that the company would issue 50,000 (post-split) restricted shares to each director, in exchange for the services provided by each director.



On February 14, 2005, the Company entered into a Restricted Stock Agreement with each of two consultants: George R. Lefevre, and Scott Absher. In consideration for extraordinary services rendered by the Consultants to the Company and the continuing dedication of the Consultants to the Company and its business, we have issued 150,000 restricted shares to each George R. Lefevre, and Scott Absher.



On February 15, 2005, the Company entered into Shares for Debt Agreement with each Jay Isco, the CFO, and Secretary of MotivNation, and Leslie McPhail the Chief Operating Officer together with her husband David McPhail (McPhails). The company issued 100,000



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(post-split)  and 600,000 (post-split)  restricted shares to Jay Isco and the McPhails respectively, pursuant to the terms described in the Shares for Debt Agreements.



On November 30, 2005 MotivNation issued $300,000 in Convertible Debentures, at an 8% annual interest rate, pursuant to a Securities Purchase Agreement (the Agreement). The convertible debentures can be converted into shares of common stock under the following calculation: the Applicable Percentage (as defined herein) multiplied by the Market Price (as defined herein).  Market Price means the average of the lowest three (3) Trading Prices (as defined below) for the Common Stock during the twenty (20) Trading Day period ending one Trading Day prior to the date the Conversion Notice is sent by the Holder to the Borrower via facsimile (the Conversion Date).  Trading Price means, for any security as of any date, the intraday trading price on the Over-the-Counter Bulletin Board (the OTCBB) as reported by a reliable reporting service
(Reporting Service) mutually acceptable to Borrower and Holder and hereafter designated by Holders of a majority in interest of the Notes and the Borrower or, if the OTCBB is not the principal trading market for such security, the intraday trading price of such security on the principal securities exchange or trading market where such security is listed or traded or, if no intraday trading price of such security is available in any of the foregoing manners, the average of the intraday trading prices of any market makers for such security that are listed in the pink sheets by the National Quotation Bureau, Inc.  If the Trading Price cannot be calculated for such security on such date in the manner provided above, the Trading Price shall be the fair market value as mutually determined by the Borrower and the holders of a majority in interest of the Notes being converted for which the calculation of the Trading Price is required in order to determine the
Conversion Price of such Notes.  Trading Day shall mean any day on which the Common Stock is traded for any period on the OTCBB, or on the principal securities exchange or other securities market on which the Common Stock is then being traded. Applicable Percentage shall mean 50.0%.



The above notes were issued to the following: AJW Partners, LLC a $35,700 secured convertible debenture, AJW Qualified Partners, LLC a $97,800 secured convertible debenture, New Millennium Capital Partners II, LLC a $4,500 secured convertible debenture, and AJW Offshore, LTD a $162,000 secured convertible debenture.



In connection with the convertible notes, the following common stock issuable upon the exercise of warrants at $1.50: 44,625 shares of common stock issuable to AJW Partners, LLC, 122,250 shares of common stock issuable to AJW Qualified Partners, LLC, 6,625 shares of common stock issuable to New Millennium Capital Partners II, LLC and 202,500 to AJW Offshore, LTD.



The holders of the 8% convertible debentures may not convert its securities into shares of MotivNations common stock if after the conversion such holder would beneficially own over 4.99% of the outstanding shares of MotivNations common stock. Since the number of shares of MotivNations common stock issuable upon conversion of the debentures will change based upon fluctuations of the market price of MotivNations common stock prior to a conversion, the actual number of shares of MotivNations common stock that will be issued under the debentures owned by the holders is based on a reasonable good faith estimate of the maximum amount needed.



On January 4th, 2006 MotivNation issued $500,000 in Convertible Debentures under the same conditions disclosed on November 30, 2005.



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The above notes were issued to the following: AJW Partners, LLC a $59,500 secured convertible debenture, AJW Qualified Partners, LLC a $163,000 secured convertible debenture, New Millennium Capital Partners II, LLC a $7,500 secured convertible debenture, and AJW Offshore, LTD a $270,000 secured convertible debenture.



In connection with the convertible notes, the following common stock issuable upon the exercise of warrants at $1.50: 74,375 shares of common stock issuable to AJW Partners, LLC, 203,750 shares of common stock issuable to AJW Qualified Partners, LLC, 9,375 shares of common stock issuable to New Millennium Capital Partners II, LLC and 337,500 to AJW Offshore, LTD.



The holders of the 8% convertible debentures may not convert its securities into shares of MotivNations common stock if after the conversion such holder would beneficially own over 4.99% of the outstanding shares of MotivNations common stock. Since the number of shares of MotivNations common stock issuable upon conversion of the debentures will change based upon fluctuations of the market price of MotivNations common stock prior to a conversion, the actual number of shares of MotivNations common stock that will be issued under the debentures owned by the holders is based on a reasonable good faith estimate of the maximum amount needed.



On January 30th, 2006 MotivNation issued $1,200,000 in Convertible Debentures, under the same conditions as disclosed for agreements signed Janary 4th, 2006 and November 30th, 2005.



The above notes were issued to the following: AJW Partners, LLC a $142,800 secured convertible debenture, AJW Qualified Partners, LLC a $391,200 secured convertible debenture, New Millennium Capital Partners II, LLC a $18,000 secured convertible debenture, and AJW Offshore, LTD a $648,000 secured convertible debenture.



In connection with the convertible notes, the following common stock issuable upon the exercise of warrants at $1.50: 178,500 shares of common stock issuable to AJW Partners, LLC, 489,000 shares of common stock issuable to AJW Qualified Partners, LLC, 22,500 shares of common stock issuable to New Millennium Capital Partners II, LLC and 810,000 to AJW Offshore, LTD.



The holders of the 8% convertible debentures may not convert its securities into shares of MotivNations common stock if after the conversion such holder would beneficially own over 4.99% of the outstanding shares of MotivNations common stock. Since the number of shares of MotivNations common stock issuable upon conversion of the debentures will change based upon fluctuations of the market price of MotivNations common stock prior to a conversion, the actual number of shares of MotivNations common stock that will be issued under the debentures owned by the holders is based on a reasonable good faith estimate of the maximum amount needed.









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ITEM 6.
        MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.




Overview



Following the acquisitions of Damons, and TrixMotive in 2004, we ceased our prior business operations. We intend to continue in the motorcycle and automotive industry that Damons and TrixMotive are a part of as well as expand in those markets using the assets we acquired. Damons was in the business of customizing motorcycles and automobiles for individuals and provided custom parts and accessories for independent dealers and manufacturers.  TrixMotive is in the business of converting automobile chassis into stretched limousines and other specialized automotives.



Additionally, these businesses provide a full-range of services that cater to the custom motorcycle and automotive enthusiast, including the sale, manufacture, converting, customization, armor protecting, and installation of custom-built motorcycles and auto parts and accessories, as well as restoration, repair, and servicing. Damons and TrixMotive, also specialized in custom paint work for both motorcycles and automobiles while engaging in the retail sale of aftermarket motorcycle and automotive parts, accessories, and related apparel.



Our target clients fall into two categories: the individual custom automotive enthusiast or collectors of the one of a kind custom motorcycle and auto creations, and those of local fabricators, custom shops, and Original Equipment Manufacturers.  Our primary market is the latter of two listed and these customers buy materials, supplies, and finished parts for their work in serving the growing market of custom or modified automobile and motorcycle creations.  In addition to distributing several lines of materials and equipment, we plan to provide training through independent dealers and our own distribution infrastructure to our primary market clientele.



Fiscal Year 2006 Compared to Fiscal Year 2005



Results of Operations for the Years Ended December 31, 2006 and 2005 Compared.



Year Ended
December 31, 2006
        Year Ended
December 31, 2005 (restated)Revenues
        $               2,329,507
        $                 3,286,523Cost of Revenues
        2,283,297
        2,784,831Gross Profit
        46,210
        501,692Total Operating Expenses
        1,847,617
        1,618,710Total Other Expenses
        1,879,369
        1,138,393Provision for income taxes
        2,400
        2,400Net Loss
        $             3,683,176
        $                  2,257,811






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Revenue



2006
        2005
        Increase/(decrease)$For the year ended December 31:Revenue
        $    2,329,507
        $        3,286,523
        $        (957,016)




Revenues for the year ended December 31, 2006 were $2,329,507 compared to revenues of $3,286,523 in the year ended December 31, 2005. This resulted in a decrease in revenues of $957,016, approximately 29.1% from the same period one year ago. The decrease in revenues was primarily due to the



Cost of Revenues



2006
        2005
        Increase/(decrease)$For the year ended December 31:Cost of revenue
        $2,283,297
        $2,784,831
        $501,534




Cost of revenues for the year ended December 31, 2006 was $2,283,297, an increase of $2,784,831 from $501,534 for the same period ended December 31, 2005.  The decrease in cost of revenues of approximately 18% was primarily due to the direct costs associated with the decrease in revenues compared to last year.



Operating expenses



Our selling, general and administrative expenses consist primarily of sales, marketing, production and other administrative personnel, cost of facilities and related spending, salaries, and related costs.  Major expenses increased by 15.6% for the same period in 2006 versus 2005, primarily as a result of increases in consulting and bad debt expense of 77.3% and 188.1%, respectively. Also attributing largely to the increase was an increase in impairment of goodwill of $166,621 during the twelve months ending December 31, 2006 compared to same prior period. Additional increases were in accounting and insurance fees of 21.9% and 3.1%, respectively for the same time period. The largest offset was a decrease in loss on disposal of assets of $107,627 or 94.4%. There were also slight decreases during this period in depreciation, rent, shipping/deliver, and advertising expense of 23.3%, 11.5%,
10.9%, and 7.9%. Total Operating expenses were $1,847,617 and $1,618,710, respectively, for the twelve months ended December 31, 2006 and 2005.



The Major expenses incurred during the twelve months ended December 31, 2006 and 2005 were:





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12 Months Ended
December 31, 2006
        
        
        12 Months
Ended
December 31,
2005
        
        Percentage
Change
Increase
(Decrease)Major Expenses:Rent
        $
        215,399
        
        $
        243,476
        
        (11.5)
        %Salary & Wages
        
        444,393
        
        
        452,759
        
        (1.8)
        %Insurance
        
        153,323
        
        
        148,642
        
        3.1
        %Accounting Fees
        
        67,088
        
        
        55,033
        
        21.9
        %Consulting
        
        384,775
        
        
        217,052
        
        77.3
        %Advertising
        
        36,144
        
        
        39,251
        
        (7.9)
        %Shipping and Delivery
        
        24,693
        
        
        27,713
        
        (10.9)
        %Depreciation
        
        41,332
        
        
        53,912
        
        (23.3)
        %Bad debt expense
        
        51,141
        
        
        17,752
        
        188.1
        %Impairment of Goodwill
        
        166,621
        
        
        0
        
        100
        %Loss on disposal of assets
        
        6,368
        
        
        113,995
        
        (94.4)
        %Utilities
        
        44,329
        
        
        45,704
        
        (3.0)
        %Total Major Expenses
        
        1,635,606
        
        
        1,415,289
        
        15.6
        %Total Operating Expenses
        
        1,847,617
        
        
        1,618,710
        
        14.1
        %








Other Income (Expenses) and Net Loss



Our other income and expenses and net loss for the twelve months ended December 31, 2006 and 2005 are as follows:



12 Months Ended
December 31, 2006
        
        
        12 Months
Ended
December 31,
2005
        
        Percentage
Change
Increase
(Decrease)Other income (expenses)Interest and other income
        
        28,084
        
        
        41,620
        
        (32.5)
        %Change in derivative liabilities
        
        1,936,311
        
        
        4,080
        
        47358.6
        %Loss on debt settlement
        
        -
        
        
        (425,000)
        
        (100)Interest expenses
        
        (237,628)
        
        
        (156,352)
        
        52.0
        %Financing costs
        
        (3,606,136)
        
        
        (602,741)
        
        498.3
        %Total other income (expenses)
        
        (1,879,369)
        
        
        (1,138,393)
        
        65.1
        %Net (loss)
        $
        (3,683,176)
        
        
        (2,257,811)
        
        63.1
        %






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Other expenses increased approximately $740,976 from the year ending December 31, 2006 compared to the same period in 2005. This was primarily due to increases in Finance costs and Interest expense of $3,003,395 and $81,276 respectively. Finance costs increased primarily due to the Stock Purchase agreements signed in January 2006. Interest expense increased primarily because of the interest related to the Stock Purchase agreements. In addition loan from officers and related parties contributed to this increase. This increase was marginally offset by an increase in change of derivative liability of $1,932,231. The net loss for the year ended December 31, 2006 was $3,683,176, versus a net loss of $2,257,811 for the year ended December 31, 2005, an increase in net loss of $1,425,365, or 63.1%



LIQUIDITY AND CAPITAL RESOURCES



At December 31, 2006, we had a working deficit of $264,221 resulting primarily from the companys large Short-term notes payable, Accrued liabilities and trade accounts payable.



Net cash provided by operating activities was a negative $1,524,505 for the year ending December 31, 2006. This resulted primarily from the increase in inventory of $288,475 and an increase in prepaid/other assets of $85,830. In addition a decrease in unearned revenue of $113,757 contributed to the negative cash flow from operating activities. An offset to this was an increase in Accounts Payable/Accrued expenses of $293,313. Other offsets were adjustments to depreciation, loss on disposal of assets, non-cash interest expense/financing costs, impairment of goodwill and change in derivative liabilities of $41,331, $6,368, $3,606,136, $166,621 and ($1,936,311) respectively.



Net cash provided in investing activities for the year ending December 31, 2006 was a negative $13,865 which was primarily due to the purchase of property and equipment. This was slightly offset by an proceeds from disposal of property and equipment of $200.



Net cash from financing activities was $1,622,569 for the year ending December 31, 2006 and resulted primarily from net proceeds from convertible debt of $1,678,500. This was slightly offset by repayments of long-term debt and capital lease obligations of $30,371. In addition there were repayments to related parties of $25,560.



Our liquidity is dependent on our ability to continue to meet our obligations, to obtain additional financing as may be required and to obtain and maintain profitability.  Our management continues to look for ways to reduce operating expenses and secure an infusion of capital through either public or private investment in order to maintain our liquidity.  These steps include increasing operating revenues over last year through the growth of the business by expanding our product line to offer complete customized vehicles by financing our own chassis through our credit line and equity financing. In addition the company has been looking into, reducing costs by bringing certain projects in-house through possible acquisitions, and constantly testing the market for better pricing on our costs of goods sold. As well as making timely payments of our obligations, building our stock and debt
sources to provide additional working capital, and continuing to review our business plan to assure we are moving the business forward in a cost-effective manner. The company will and continuing continue to examine the segments of our business that offer the most profitable opportunity for success and eliminating



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operations and practices which detract from our profitability. During the course of 2006 the company continued to focus on a production line of in-house custom vehicles to be sold as an end product, as well as continuing to do client-end automotive conversions.



There can be no assurance that we will be successful in executing our plans to improve operations or obtain additional debt or equity financing. If the company is unable to have adequate cash from operations and is unsuccessful in obtaining financing, the company would have to cut back on operations. In addition there would be substantial doubt as mentioned in our financial footnotes about our ability to continue due to a decrease in our working capital and inability to obtain financing.



OFF-BALANCE SHEET ARRANGEMENTS



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, revenues or expenses, results or operations, liquidity, capital expenditures or capital resources that is material to investors.



APPLICATION OF CRITICAL ACCOUNTING POLICIES AND PRONOUNCEMENTS.



Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). GAAP requires us to make estimates and assumptions that affect the reported amounts in our consolidated financial statements including various allowances and reserves for accounts receivable and inventories, the estimated lives of long-lived assets and trademarks and trademark licenses as well as claims and contingencies arising out of litigation or other transactions that occur in the normal course of business. The following summarize our most significant accounting and reporting policies and practices:



MotivNation, Inc Accounting Policies



Our accounting policies are fully described in Note 2 to our consolidated financial statements. The following describes the general application of accounting principles that impact our consolidated financial statements.



Impairment or Disposal of Long-Lived Assets.The Company reviews long-lived assets for impairment annually, and whenever circumstances and situations change such that there is an indication that the carrying amounts may not be recovered. At December 31, 2006, the Company believes that there has been no major impairment of its long-lived assets.



Use of estimates: The preparation of the accompanying financial statements in conformity with accounting principles generally accepted in the United States (U.S. GAAP) requires our management to make certain estimates and assumptions that directly affect the results of reported assets, liabilities, revenue, and expenses. Actual results may differ from these estimates.



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Revenue Recognition.The Companys primary source of revenue comes from the sales of customized automotive conversions. We recognize revenue based on the completed-contact method, whereas customer deposits and partial payments of the conversion are deferred and treated as current liabilities, until the vehicle is completed and recognized as revenue. Other services such as repairs minor alterations are recorded when the service is performed.



Allowance for Doubtful Accounts: We provide an allowance for doubtful accounts that is based upon our review of outstanding receivables, historical collection information, and existing economic conditions.



Cash Equivalents:For purposes of the statements of cash flows, we consider all highly liquid debt instruments with an original maturity of three months or less to be cash equivalents.



Fair Value of Financial Instruments:The carrying amounts of the financial instruments have been estimated by our management to approximate fair value.



Inventories.Inventory includes parts and materials related to the vehicles in the process of being modified and converted. In addition the company will include the cost of the unmodified vehicle chassis if purchased in house. Shipping and handling costs are included in inventory. All inventories are valued at the lower of cost or market.

The Company performs periodic inventory procedures and at times identifies supply inventory that is considered excess inventory or obsolete. The Company writes the obsolete and excessive inventory down to the lower of cost or market and the amount is included in general and administrative expenses for the period.



Income Taxes. The Companys income tax expense involves using the deferred tax assets and liabilities included on the balance sheet. These tax assets and liabilities are recognized for the expected tax consequences of temporary differences between the tax bases of assets and liabilities and their reported amounts. Management judgment is required in determining the Companys provision for income taxes, deferred tax assets and liabilities.



Property and Equipment: Property and Equipment are valued at cost. Maintenance and repair costs are charged to expenses as incurred. Depreciation is computed on the straight-line method based on the following estimated useful lives of the assets: 3 to 7 years for office equipment, and 7 years for furniture and fixtures, and 10 years for machinery and tools.



Income Taxes.The Companys income tax expense involves using the deferred tax assets and liabilities included on the balance sheet. These tax assets and liabilities are recognized for the expected tax consequences of temporary differences between the tax bases of assets and liabilities and their reported amounts. Management judgment is required in determining the Companys provision for income taxes, deferred tax assets and liabilities.



Net Loss Per Common Share: The Company accounts for income (loss) per share in accordance with Statement of Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS 128"). SFAS No. 128 requires that presentation of basic and diluted earnings per share for entities with complex capital structures. Basic earnings per share includes no dilution and is computed by dividing net income (loss) available to common stockholders by the weighted average number of common stock outstanding for the period. Diluted earnings per share reflect



15



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the potential dilution of securities that could share in the earnings of an entity. Diluted net loss per common share does not differ from basic net loss per common share due to the lack of dilutive items in the Company.



MotivNation, Inc. results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principals generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to bad debt, inventories, investments, intangible assets, income taxes, financing operations, and contingencies and litigation.



MotivNation bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.



FACTORS THAT MAY AFFECT OUR RESULTS OF OPERATIONS



RISKS RELATING TO OUR BUSINESS AND OUR MARKETPLACE



We are a relatively young company with a minimal operating history



Since we were a non-operating company for many years prior to our acquisition of Damons, it is difficult to evaluate our business and prospects.  At this stage of our business operations, even with our good faith efforts, potential investors have a high probability of losing their investment.  Since our acquisition and reorganization in May 2004 and our change of business direction, we have acquired the assets of a growing industry.  However, our future operating results will depend on many factors, including the ability to generate sustained and increased demand and acceptance of our products, the level of our competition, and our ability to attract and maintain key management and employees. While management believes its estimates of projected occurrences and events are within the timetable of its business plan, there can be no guarantees or assurances that the results anticipated will occur.



In addition, as a result of our limited operating history, our historical and operating information is of limited value in predicting our future operating results.  We may not accurately forecast customer behavior and recognize or respond to emerging trends, changing preferences or competitive factors facing us, and therefore, we may fail to make accurate financial forecasts.  Our current and future expense levels are based largely on our investment plans and estimates of future revenue.  As a result, we may be unable to adjust our spending in a timely manner to compensate for any unexpected revenue shortfall, which could force us to curtail or cease our business operations.



We have not achieved profitability on an annual basis and expect to continue to incur net losses in future quarters.



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If we do not achieve profitability, our business may not grow or continue to operate.  In order to become profitable, we must increase our revenues and/or decrease expenses.  We may not be able to increase or even maintain our revenues, and we may not achieve sufficient revenues or profitability in any future period.  We recorded a net loss of $3,683,176 for the year ended December 31, 2006, and have an accumulated deficit of $6,410,692.  We could incur net losses for the foreseeable future.  We will need to generate additional revenues from the sales of our products or take steps to reduce operating costs to achieve and maintain profitability.  Even if we are able to increase revenues, we may experience price competition that will lower our gross margins and our profitability.  If we do achieve profitability, we cannot be certain that we can sustain or increase profitability on a
quarterly or annual basis.



We may require additional funds to operate in accordance with our business plan.



We may not be able to obtain additional funds that we may require.  We do not presently have adequate cash from operations or financing activities to meet our long-term needs.  Our operations have been financed to date through debt and sales of our equity.  We believe our estimated cash flow from operations will be sufficient to satisfy our contemplated cash requirements for our current proposed plans and assumptions relating to our operations for approximately 6 months.



If unanticipated expenses, problems, and unforeseen business difficulties occur, which result in material delays, we will not be able to operate within our budget.  If we do not achieve our internally projected sales revenues and earnings, we will not be able to operate within our budget.  If we do not operate within our budget, we will require additional funds to continue our business.  If we are unsuccessful in obtaining those funds, we cannot assure you of our ability to generate positive returns to the Company.  Further, we may not be able to obtain the additional funds that we require on terms acceptable to us, if at all.  We do not currently have any established third-party bank credit arrangements.  If the additional funds that we may require are not available to us, we may be required to curtail significantly or to eliminate some or all of our development, manufacturing, or sales
and marketing programs.



If we need additional funds, we may seek to obtain them primarily through equity or debt financings.  Such additional financing, if available on terms and schedules acceptable to us, if available at all, could result in dilution to our current stockholders and to you.  We may also attempt to obtain funds through arrangement with corporate partners or others.  Those types of arrangements may require us to relinquish certain rights or resulting products.



Our auditors report reflects the fact that we have suffered recurring losses, which raises substantial doubt about our ability to continue as a going concern.



The report of our independent auditors accompanying our financial statements for the year ended December 31, 2006 and previous filings include an explanatory paragraph indicating there is a substantial doubt about our ability to continue as a going concern due to recurring losses.  We plan to overcome the circumstances that impact our ability to remain a going concern through a combination of increased revenues and decreased costs, and additional debt and/or equity financing.  There can be no assurances that these plans will be successful.



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If we acquire additional companies or products in the future, they could prove difficult to integrate, disrupt our business, dilute stockholder value or adversely affect our operating results.



We anticipate that we will make other investments in complementary companies or products.  We may not realize the anticipated benefits of any such acquisition or investment.  The success of our acquisition program will depend on our ability to overcome substantial obstacles, such as the availability of acquisition candidates, our ability to compete successfully with other acquirers seeking similar acquisition candidates, the availability of funds to finance acquisitions and the availability of management resources to oversee the operation of acquired businesses.  Furthermore, we may have to incur debt or issue equity securities to pay for future acquisitions or investments, the issuance of which could be dilutive to us or our existing stockholders.  In addition, our profitability may suffer because of acquisition-related costs or future impairment costs for acquired goodwill and other
intangible assets.



We have limited resources and we can offer no assurance that we will be able to integrate and manage any acquisitions successfully.  We have no present commitments, understandings, or plans to acquire other complementary companies or products.



We may not be able to compete effectively in markets where our competitors have more available resources.



The motorcycle and automobile customization and accessories market is competitive and there are no substantial barriers to entry.  We expect that competition will intensify and that new competitors may enter the market in the future.  Increased competition may result in reduced profit margins on our products and services.



In addition, many of our competitors have longer operating histories, larger customer bases, longer relationships with clients, and significantly greater financial, technical, marketing, and public relations resources than us.  We may not successfully compete in any market in which we conduct business currently or in the future.  The fact that we compete with established competitors who have substantially greater resources and longer operating histories than us, enables them to engage in substantial advertising and promotion and attract a greater number of customers and business that we currently attract.  While this competition is already intense, it could have a material adverse impact on our revenues and profitability if it were to increase.



We are highly dependent on a limited number of key personnel.  The loss of these personnel, whose knowledge, leadership, and technical expertise upon which we rely, would harm our ability to execute our business plan.



We are largely dependent on duties performed by the officers of the company George R. Lefevre, Jay Isco, and Leslie McPhail. In addition we are dependent on the co-founder of Damons Motorcycle Creations, Richard Perez and the co-founder of Moonlight Industries, David McPhail for specific proprietary technical knowledge and specialized market knowledge.  Our intellectual property and our ability to successfully market and distribute our products and services may be at risk from the unanticipated accident, injury, illness, incapacitation, or death of either Mr. Lefevre, Mr. Isco, Mrs. McPhail, Mr. Perez, or Mr. McPhail or the loss of other principal design or technical staff.  Upon such occurrence, unforeseen expenses, delays, losses,



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and diminished abilities to deliver signature work that our clients desire may be encountered.  We maintain key person life insurance on Mr. Lefevre and Mr. Isco, but do carry insurance on Mrs. McPhail, Mr. Perez, and Mr. McPhail.



We also have other key employees who manage our operations and if we were to lose their services, senior management would be required to expend time and energy to replace and train their replacements which could severely harm our business.



Our success may also depend on our ability to attract and retain other qualified management and sales and marketing personnel.  We compete for such persons with other companies and other organizations, some of which have substantially greater capital resources than we do.  We cannot give you any assurance that we will be successful in recruiting or retaining personnel of the requisite caliber or in adequate numbers to enable us to conduct our business.



We are subject to federal, state, and local government regulations affecting motorcycles and automotive customization and restoration that may affect our operations.



Our business is subject to certain federal, state and local government regulations, including those of the Environmental Protection Agency ("EPA") and comparable state agencies that regulate emissions of Volatile Organic Compounds ("VOC") and other air contaminants, the Occupational Safety and Health Administration ("OSHA"), and regulations governing the disposal of oil, grease, tires, batteries and the prevention of pollution, and State tax authorities where vehicle sales may be affected as well as State motor vehicle regulators with an interest in our manufacturing, sales and distribution of finished products . Any changes in the laws or regulations imposed on us by these agencies could significantly increase our costs of doing business and could have a very negative effect on our business.



State tax and motor vehicle regulations are migratory and in some cases regulating bodies may decide that a code or regulation may apply to our business when there was no history of such application.  We may in the process of conducting our business or yielding to a customer request have inadvertently or in ignorance created a possible infraction of these regulations.  We may encounter a situation in which a regulator from a State tax authority or motor vehicle regulator would decide that we have not been in compliance and insist on a material change in the way we have done business that could seriously impact our ability to continue to market our products to our customers.  We may further encounter a corrective measure by a similar regulator that would take action more aggressive that a correction of our process or practice that could include a back payment, a fine or termination of our
ability to do business within a particular state.  These applications of regulations that our business has not historically been subject to by any of these state regulators would have a serious negative impact on our business.



In the event our business operations and facilities are subject to a number of federal, state and local environmental laws and regulations, such application of these laws, regulations to our operations may require us to make significant additional capital expenditures to ensure compliance in the future. Our failure to comply with environmental laws could result in the termination of our operations, impositions of fines, or liabilities in excess of our capital resources.



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Our painting operations are subject to air quality management standards and enforcement by The South Coast Air Quality Management District (AQMD).  AQMD requires licensing and conducts inspections from time to time relative to vapor as a result of our paint operations.  If we were found to require adjustment or replacement of our paint and ventilation equipment as a result of an unfavorable AQMD inspection or suspension or change of our license with AQMD we could risk experiencing an interruption in production that would have a negative impact on revenue and profits.



We may incur material losses as a result of product recall and product liability.



Given the nature of our products and services, we expect that we will be subject to potential product liability claims that could, in the absence of sufficient insurance coverage, have a material impact on our business.  A significant product liability judgment against us, or a widespread product recall, could have a material adverse effect on our business, financial condition and results of operations. The government may adopt regulations that could increase our costs or our liabilities.



From time to time we warrant or guarantee the quality of our work for a limited duration and under limited circumstances.  If we were to experience an adverse workmanship issue under a warranty or not under a warranty or similar guarantee it could result in a remedy or litigation that would have a negative impact on our revenue and profits.



Our success is dependent upon the popularity of Harley-Davidson Motorcycles and Customized Automotives.



Although our products and services are not limited to Harley-Davidson motorcycles, the success of our business is depended upon the popularity of Harley-Davidson motorcycles, and the custom automotive industry. There can be no assurance, however, that the current popularity of Harley-Davidson motorcycles and custom automotives will continue. If such popularity declines, our business operations may be adversely affected.



We do not own any patents or registered trademarks or trade names. Protecting our proprietary technology and other intellectual property may be costly and ineffective, and if we are unable to protect our intellectual property, we may not be able to compete effectively in our market.



Our business success will depend materially on our ability to protect our trademarks and trade names, to preserve our trade secrets, and to avoid infringing the proprietary rights of third parties. In general, our proprietary rights will be protected only to the extent that protection is available and to the extent we have the financial and other resources to enforce any rights we hold.



We do not own any patents or registered trademarks or trade names. We may apply for federal and other governmental trademark registrations in the future, but we cannot assure you that any of our trademark applications will result in a registered and protectable trademark. Any registered or unregistered trademarks held or asserted by us may be canceled, infringed, circumvented or declared generic, or determined to be infringing on other marks owned by third parties. We intend to rely upon trade secrets, proprietary know-how and continuing technological



20



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innovation to become competitive in our market. We cannot assure you that others may not independently develop the same or similar technologies or otherwise obtain access to our technology and trade secrets.



Costly litigation might be necessary to protect our intellectual property or to determine the scope and validity of third-party proprietary rights. If an adverse outcome in litigation finds that we have infringed on proprietary rights of others, we may be required to pay substantial damages and may have to discontinue use of our products or re-design our products. Any claim of infringement may involve substantial expenditures and divert the time and effort of management.



RISKS RELATING TO OUR COMMON STOCK



We are subject to price volatility due to our operations materially fluctuating.



As a result of the evolving nature of the markets in which we compete, as well as the current nature of the public markets and our current financial condition, we believe that our operating results may fluctuate materially, as a result of fiscal year comparisons and our results of operations may not be meaningful.  If our results of operations fall below the expectations of investors, the trading price of our common stock would likely be materially and adversely affected.  You should not rely on our results of any period as an indication of our future performance.  Additionally, our quarterly results of operations may fluctuate significantly in the future as a result of a variety of factors, many of which are outside our control such as:




        Our ability to retain existing customers;



        Our ability to attract new customers at a steady pace;



        Our ability to maintain customer satisfaction;



        The extent to which our products and services gain market acceptance;



        Introductions of products and services by competitors;



        Price competition in the markets in which we compete;



        Our ability to attract, train, and retain skilled management;



        The amount and timing of operating costs and capital expenditures relating to the expansion of our business, operations, and infrastructure; and



        General economic conditions and economic conditions specific to the aftermarket motorcycle and automotive parts, services, and accessories industry.




We do not expect to pay dividends for the foreseeable future.



For the foreseeable future, it is anticipated that earnings, if any, that may be generated from our operations will be used to finance our operations and that cash dividends will not be paid to holders of our common stock.



Our common stock may be affected by limited trading volume and may fluctuate significantly, which may affect our stockholders' ability to sell shares of our common stock



There has been a limited public market for our common stock and there can be no assurance that a more active trading market for our common stock will develop. An absence of an active trading market could adversely affect our stockholders' ability to sell our common



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stock in short time periods, or possibly at all. Our common stock has experienced, and is likely to experience in the future, significant price and volume fluctuations, which could adversely affect the market price of our common stock without regard to our operating performance. In addition, we believe that factors such as quarterly fluctuations in our financial results and changes in the overall economy or the condition of the financial markets could cause the price of our common stock to fluctuate substantially. These fluctuations may also cause short sellers to enter the market from time to time in the belief that we will have poor results in the future. We cannot predict the actions of market participants and, therefore, can offer no assurances that the market for our stock will be stable or appreciate over time. These factors may negatively impact stockholders' ability to sell shares of our common stock.



Because our common stock is deemed a low-priced Penny stock, an investment in our common stock should be considered high risk and subject to marketability restrictions.



Since our common stock is a penny stock, as defined in Rule 3a51-1 under the Securities Exchange Act, it will be more difficult for investors to liquidate their investment.  Until the trading price of the common stock rises above $5.00 per share, if ever, trading in our common stock is subject to the penny stock rules of the Securities Exchange Act specified in rules 15g-1 through 15g-10. Those rules require broker-dealers, before effecting transactions in any penny stock, to:




        Deliver to the customer, and obtain a written receipt for, a disclosure document;



        Disclose certain price information about the stock;



        Disclose the amount of compensation received by the broker-dealer or any associated person of the broker-dealer;



        Send monthly statements to customers with market and price information about the penny stock; and



        In some circumstances, approve the purchasers account under certain standards and deliver written statements to the customer with information specified in the rules.




Consequently, the penny stock rules may restrict the ability or willingness of broker-dealers to sell the common stock and may affect the ability of holders to sell their common stock in the secondary market and the price at which such holders can sell any such securities. These additional procedures could also limit our ability to raise additional capital in the future.



We are subject to SEC regulations and changing laws, regulations and standards relating to corporate governance and public disclosure, including the Sarbanes-Oxley Act of 2002, new SEC regulations and other trading market rules, are creating uncertainty for public companies.



We are committed to maintaining high standards of corporate governance and public disclosure.  As a result, we intend to invest appropriate resources to comply with evolving standards, and this investment may result in increased general and administrative expenses and a diversion of management time and attention from revenue-generating activities to compliance activities.





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ITEM 7.
        FINANCIAL STATEMENTS.




See Financial Statements and Financial Statement Schedules appearing on page F-1 through F-31 of this Form 10-KSB.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



To the Board of Directors and

Stockholders of MotivNation, Inc.



We have audited the accompanying consolidated balance sheets of MotivNation, Inc. as of December 31, 2006 and 2005, and the related consolidated statements of operations, stockholders equity, and cash flows for the years then ended. These consolidated financial statements are the responsibility of the companys management. Our responsibility is to express an opinion on these consolidated 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 audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the companys internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.



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



The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1, the Company's ability to continue in the normal course of business is dependent upon the success of future operations. The Company has recurring losses, substantial working capital and stockholders' deficit and negative cash flows from operations. These conditions raise substantial doubt about the Company's ability to continue as a going concern. Management's plans regarding these matters are also described in Note 1. These consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.



As discussed in Note 3 to the consolidated financial statements, the Company has restated its December 31, 2005 consolidated financial statements to reflect the proper treatment of its convertible debt and the associated liabilities surrounding that debt, and the proper treatment of the restricted stock award payments.



/s/Spector & Wong, LLP

Pasadena, California

April 13, 2007



F-1



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MOTIVNATION, INC. (F/K/A ABERDEEN MINING COMPANY)



CONSOLIDATED BALANCE SHEETS





2006
        
        2005(Restated)ASSETSCurrent AssetsCash
        $        180,785
        
        $          96,586Accounts receivable, net
        47,351
        
        92,405Prepaid expenses and other current assets
        24,292
        
        26,912Inventory
        454,329
        
        165,854Total Current Assets
        706,757
        
        381,757Property and equipment, net
        164,077
        
        197,911Goodwill
        166,621
        
        333,242Debt issuance cost, net
        49,305
        
        53,472Other assets
        110,146
        
        21,696TOTAL ASSETS
        $     1,196,906
        
        $        988,078LIABILITIES AND STOCKHOLDERS' DEFICITCurrent LiabilitiesAccounts payable
        $        208,788
        
        $        249,740Accrued liabilities
        432,431
        
        363,226Unearned revenue
        35,610
        
        149,367Short-term notes payable to related parties
        275,101
        
        264,911Current portion of long-term notes payable
        4,667
        
        4,216Current portion of capital lease obligations
        14,381
        
        31,299Total Current Liabilities
        970,978
        
        1,062,759Long-Term DebtLong-term notes payable, excluding current portion
        3,754
        
        7,349Capital lease obligations, excluding current portion
        261
        
        10,570Convertible notes payable, net of unamortized discount of $1,735,436
        208,131
        
        2,038and  $297,962 for 2006 and 2005, respectivelyDerivative liabilities
        3,918,296
        
        895,095Total Long-Term Liabilities
        4,130,442
        
        915,052Total Liabilities
        5,101,420
        
        1,977,811Stockholders' DeficitPreferred Stock, $0.001 par value; 100,000,000 shares authorized;none issued and outstanding
        -
        
        -Common Stock, $0.001 par value; 300,000,000 shares authorized;issued and outstanding 2006 7,045,463 shares; 2005 2,293,463 shares
        7,046
        
        2,294Paid-in Capital
        2,499,132
        
        2,159,710Deferred consulting
        -
        
        (424,221)Accumulated deficit
        (6,410,692)
        
        (2,727,516)Total Stockholders' Deficit
        (3,904,514)
        
        (989,733)TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT
        $     1,196,906
        
        $        988,078




See Notes to Consolidated Financial Statements

F-2



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MOTIVNATION, INC. (F/K/A ABERDEEN MINING COMPANY)



CONSOLIDATED STATEMENTS OF OPERATIONS





For years ended December 31,
        2006
        
        2005(Restated)Sales:Sales - products
        $        1,131,948
        
        $             876,910Sales - services
        1,197,559
        
        2,409,613Total sales
        2,329,507
        
        3,286,523Cost of salesCost of products
        582,636
        
        809,497Cost of services
        1,700,661
        
        1,975,334Total costs of sales
        2,283,297
        
        2,784,831Gross profit
        46,210
        
        501,692Operating Expenses:Selling, general and administrative Expenses
        1,674,628
        
        1,504,715Impairment of Goodwill
        166,621
        
        -Loss on disposal of assets
        6,368
        
        113,995Total Operating Expenses
        1,847,617
        
        1,618,710Operating loss
        (1,801,407)
        
        (1,117,018)Other income(expenses)Interest and other income
        28,084
        
        41,620Change in derivative liabilities
        1,936,311
        
        4,080Loss on debt settlement
        -
        
        (425,000)Interest expense
        (237,628)
        
        (156,352)Financing costs
        (3,606,136)
        
        (602,741)Total other income(expenses)
        (1,879,369)
        
        (1,138,393)Net loss before state franchise tax
        (3,680,776)
        
        (2,255,411)State franchise tax
        2,400
        
        2,400Net loss
        $      (3,683,176)
        
        $         (2,257,811)Net loss per share-Basic and Diluted
        $                (0.72)
        
        $                  (1.16)Weighted Average Number of Shares
        5,110,004
        
        1,948,682




See Notes to Consolidated Financial Statements

F-3



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MOTIVNATION, INC. (F/K/A ABERDEEN MINING COMPANY)



CONSOLIDATED STATEMENTS OF STOCKHDOLERS EQUITY (DEFICIT)

For years ended December 31, 2006 and 2005 (Restated)





Common Stock
        Paid-in
        Deferred
        AccumulatedShares
        Amount
        Capital
        Consulting
        Deficit
        TotalBalance at December 31, 2004
        118,346,350
        $     118,347
        $   7,035,857
        $  (6,468,000)
        $      (469,705)
        $         216,499Reverse split 1 for 100 onSeptember 9, 2005
        (117,162,887)
        (117,163)
        117,163
        
        
        -Balance at December 31, 2004,retroactively restated
        1,183,463
        1,184
        7,153,020
        (6,468,000)
        (469,705)
        216,499Issuance of common stock for:Deferred consulting
        450,000
        450
        494,550
        (495,000)
        
        -Retirement of related party debt
        500,000
        500
        549,500
        
        
        550,000Debt issuance cost
        60,000
        60
        65,940
        
        
        66,000Reduction of accrued liability
        100,000
        100
        109,900
        
        
        110,000Deferred consulting adjustment
        
        
        (6,213,200)
        6,213,200
        
        -Amortization of deferred consulting
        
        
        
        325,579
        
        325,579Net loss
        
        
        
        
        (2,257,811)
        (2,257,811)Balance at December 31, 2005,
        2,293,463
        2,294
        2,159,710
        (424,221)
        (2,727,516)
        (989,733)as restatedIssuance of common stock forreduction of accrued liability
        652,000
        652
        149,348
        
        
        150,000Forgiven debt by related party
        
        
        79,310
        
        
        79,310Conversion of notes payable
        4,100,000
        4,100
        52,333
        
        
        56,433Reclassification of derivative liabilites and unamortized discount due to conversion58,431
        
        
        58,431Amortization of deferred consulting
        
        
        
        424,221
        
        424,221Net loss
        
        
        
        
        (3,683,176)
        (3,683,176)Balance at December 31, 2006
        7,045,463
        $         7,046
        $   2,499,132
        $                    -
        $   (6,410,692)
        $    (3,904,514)




See Notes to Consolidated Financial Statements

F-4



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MOTIVNATION, INC. (F/K/A ABERDEEN MINING COMPANY)



CONSOLIDATED STATEMENTS OF CASH FLOWS





For years ended December 31,
        2006
        
        2005(Restated)CASH FLOW FROM OPERATING ACTIVITIES:Net loss
        $      (3,683,176)
        
        $   (2,257,811)Adjustments to reconcile net loss to net cash used in operating activities:Depreciation
        41,331
        
        53,912Impairment of goodwill
        166,621
        
        -Noncash interest expense and financing costs
        3,606,136
        
        602,741Change in derivative liabilities
        (1,936,311)
        
        (4,080)Non-cash adjustments
        -
        
        26,573Loss on disposal of assets
        6,368
        
        113,995Issuance of common stock for expenses
        -
        
        126,000Loss on debt settlement
        -
        
        425,000Compensation recognized on vested shares
        424,221
        
        325,579(Increase) Decrease in:Accounts receivable
        45,054
        
        690,646Inventory
        (288,475)
        
        (9,317)Prepaid and other assets
        (85,830)
        
        (18,621)Increase (Decrease) in:Accounts payable and accrued liabilities
        293,313
        
        290,957Unearned revenue
        (113,757)
        
        (612,052)Net cash flows used in operating activities
        (1,524,505)
        
        (246,478)CASH FLOW FROM INVESTING ACTIVITIES:Purchase of property and equipment
        (14,065)
        
        (11,694)Proceeds from disposal of property and equipment
        200
        
        -Net cash flows used in investing activities
        (13,865)
        
        (11,694)CASH FLOW FROM FINANCING ACTIVITIES:Repayment on long-term notes payable and capital lease obligations
        (30,371)
        
        (51,348)Net proceeds from (repayments to) related parties
        (25,560)
        
        175,086Net proceeds from convertible debt
        1,678,500
        
        225,000Net cash flows provided by financing activities
        1,622,569
        
        348,738NET INCREASE IN CASH
        84,199
        
        90,566CASH AT BEGINNING OF YEAR
        96,586
        
        6,020CASH AT END OF YEAR
        $           180,785
        
        $         96,586Supplemental Disclosure of Cash Flow Information:Income Taxes Paid
        $               2,400
        
        $           2,400Interest Paid
        $               5,584
        
        $         21,917Noncash Investing and Financing  Activities:Assumption of accounts payable by related party
        $             17,098
        
        $                   -Issuance of common stocks for:Reduction of accrued liabilities
        $           150,000
        
        $         50,000Conversion of notes payable
        56,433
        
        -Deferred consulting service
        -
        
        495,000Retirement of related party debt
        -
        
        125,000$           206,433
        
        $       670,000Issuance of warrants in connection with convertible debt
        $       1,678,507
        
        $       299,975Recorded a beneficial conversion feature
        $       3,393,635
        
        $       599,200Transfer unamortized discount and derivative liabilities to paid incapital due to conversion
        $             58,431
        
        $                   -Equipment purchased under capital lease obligations
        $                        -
        
        $           4,700




See Notes to Consolidated Financial Statements

F-5



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MOTIVNATION, INC. (F/K/A ABERDEEN MINING COMPANY)



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 1  NATURE OF BUSINESS AND GOING CONCERN



Nature of Business:MotivNation, Inc. (F/k/a Aberdeen Mining Company, the Company) was incorporated on April 26, 1946, under the laws of the State of Idaho. The Company was organized to explore for, acquire and develop mineral properties in the State of Idaho. The initial and subsequent efforts in the acquisition, exploration and development of potentially viable and commercial mineral properties were unsuccessful. The Company has since ceased its mining business.



In 2003, the Company merged into its wholly-owned Nevada subsidiary, and changed its corporate domicile from the State of Idaho to the State of Nevada. The Company also changed its name from Aberdeen Idaho Mining Company to Aberdeen Mining Company.



On May 11, 2004, the Company completed a reverse acquisition transaction with Damons Motorcycle Creations, Inc. (DAMON), from which the Company acquired substantially all the assets and assumed substantially all the liabilities of DAMON, in consideration for the issuance of a majority of the Companys shares of common stock. The reverse acquisition was completed pursuant to the Asset Purchase Agreement, dated as of May 11, 2004. Concurrent with the closing of the reverse acquisition, DAMON agreed to transfer 45,000 of the 888,799 shares it acquired from the Company to a creditor in exchange for the cancellation of the trade debt and as payment for ongoing consultant services by such creditor. For accounting purposes, DAMON is the acquirer in the reverse acquisition transaction, and consequently the assets and liabilities and the historical operations
reflected in the financial statements are those of DAMON and are recorded at the historical cost basis of DAMON. All shares and per share data prior to the acquisition have been restated to reflect the stock issuance as a recapitalization of DAMON. Since the reverse acquisition transaction is in substance a recapitalization of the Company and is not a business combination, pro forma information is not presented. Such pro forma statements of operations would be substantially identical to the historical statements of operations of the Company, which are presented in the accompanying consolidated statements of operations.



Following the reverse acquisition, the Company changed its name to MotivNation, Inc.



On October 11, 2004, the Company and its wholly owned subsidiary, TrixMotive Inc. (TrixMotive), a Nevada corporation, entered into an Asset Purchase Agreement with Moonlight Industries, Inc., a California corporation (MOONLIGHT), to acquire certain assets and liabilities of MOONLIGHT in exchange for 140,000 shares of the Companys common stock. The president of MOONLIGHT became the Secretary of TrixMotive. The Companys president and secretary agreed to return, in the aggregate, 140,000 shares of the Companys common stock held by them to the Company prior to the closing of this acquisition. The company will continue under the MOONLIGHT brand but will operate under the TrixMotive corporate entity.



Following the acquisitions of DAMON, and MOONLIGHT, the Company ceased prior business operations, but intends to continue in the motorcycle and automotive industry that DAMON and TrixMotive, are a part of as well as plan to expand these businesses using the assets acquired. DAMON was in the business of customizing motorcycles and automobiles for



F-6



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MOTIVNATION, INC. (F/K/A ABERDEEN MINING COMPANY)



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



individuals and performing custom parts and accessories for independent dealers and manufacturers. TrixMotive is in the business of converting automobile chassis into stretched limousines and other specialized automotives.



Additionally, these businesses provide a full-range of services that cater to the custom motorcycle and automotive enthusiast, including the sale, manufacture, converting, customization, armor protecting, and installation of custom-built motorcycles and auto parts and accessories, as well as restoration, repair, and servicing. Damon's and TrixMotive, also specialized in custom paint work for both motorcycles and automobiles while engaging in the retail sale of aftermarket motorcycle and automotive parts, accessories, and related apparel.



Going Concern:The Company's consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. The Company incurred operating losses totaling $3,683,176 and $2,257,811 for the years ended December 31, 2006 and 2005, respectively. In addition, the Company has an accumulated deficit of $6,410,692 and its total liabilities exceed its total assets by $3,904,514 as of December 31, 2006.  In the near term, the Company expects operating costs to continue to exceed funds generated from operations. As a result, the Company expects to continue to incur operating losses and may not have enough money to grow its business in the future. The Company can give no assurance that it will achieve profitability or be capable of sustaining profitable operations.
 As a result, operations in the near future are expected to continue to use working capital.



Management's plans include raising additional working capital through debt or equity financing and increasing marketing efforts to increase revenues. On January 30, 2006, the Company completed the sale of $2 million aggregate principal amount of 8% callable secured convertible notes due in 2009, and issued stock warrants purchasing up to $2.5 million shares of the Companys common stock pursuant to a Security Purchase Agreement dated November 30, 2005 (See Note 9  Convertible Notes Payable and Derivative Liabilities).  The ability of the Company to continue as a going concern is dependent its ability to meet its financing arrangement and the success of its future operations. The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.



NOTE 2  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



Principle of Consolidation and Presentation:The accompanying consolidated financial statements include the accounts of MotivNation, Inc. and its subsidiaries after elimination of all intercompany accounts and transactions.  Certain prior period balances have been reclassified to conform to the current period presentation.



Use of estimates:The preparation of the accompanying consolidated financial statements in conformity with accounting principles generally accepted in the United States (U.S. GAAP) requires management to make certain estimates and assumptions that directly affect the results of reported assets, liabilities, revenue, and expenses. Actual results may differ from these estimates.





F-7



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MOTIVNATION, INC. (F/K/A ABERDEEN MINING COMPANY)



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Revenue and Cost Recognition:The Company recognizes revenues from fixed-price contracts on the completed-contract method. Under this method, contract costs and related billings are accumulated in the accounting records and reported as deferred items on the balance sheet until the job is complete or substantially complete, provided that collectibility is reasonably assured. A contract is regarded as substantially complete if remaining costs of completion are immaterial. When the accumulated costs exceed the related billings, the excess is presented as a current asset (inventory account). If billings exceed related costs, the difference is presented as a current liability.  Cash payments received in advance are deferred. Completed-contract method is used because management considers estimated total costs are not dependable measure of progress on the contracts.



Contract costs include all direct material and labor costs and those indirect costs related to contract performance, such as indirect labor, supplies, tools, and warranty work.



Vehicle sales are recorded when the title and risks and rewards of ownership have passed, provided that collectibility is reasonably assured.



Allowance for Bad Debts:The Company provides an allowance for doubtful accounts that is based upon a review of outstanding receivables, historical collection information, and existing economic conditions.  As of December 31, 2006 and 2005, the Company considered its accounts receivable to be fully collectible; accordingly, no allowance for bad debts was recorded for each of the year. Bad debt expense for the years ended December 31, 2006 and 2005 was $51,140 and $17,752, respectively.



Cash Equivalents:For purposes of the statements of cash flows, the Company considers all highly liquid debt instruments with an original maturity of three months or less to be cash equivalents.



Fair Value of Financial Instruments:The Companys financial instruments consist principally of cash, accounts receivable, accounts payable and borrowings. The Company believes the financial instruments recorded values approximate current values because of their nature and respective durations. The convertible notes payable issued on November 2005 and January 2006 were evaluated and determined not conventional convertible and, therefore, because of certain terms and provisions including liquidating damages under the associated registration rights agreement the embedded conversion option was bifurcated and has been accounted for as a derivative liability instrument. The stock warrants issued in conjunction with these convertible notes payable were also evaluated and determined to be a derivative instrument and, therefore, classified as a liability on the balance sheet.
The accounting guidance also requires that the conversion feature and warrants be recorded at fair value for each reporting period with changes in fair value recorded in the Consolidated Statements of Operations. The fair value of embedded conversion options and stock warrants are based on a Black-Scholes fair value calculation. The fair value of convertible notes payable is based on discounted cash flows of principal and interest payments.



Inventories:Raw materials and vehicles inventories are stated at the lower of cost or market, using the first-in, first-out method. Work in process inventory includes all direct materials, labor and overhead costs.



F-8



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MOTIVNATION, INC. (F/K/A ABERDEEN MINING COMPANY)



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Property and Equipment:Property and Equipment are valued at cost. Maintenance and repair costs are charged to expenses as incurred. Depreciation is computed on the straight-line method based on the following estimated useful lives of the assets: 3 to 7 years for office equipment, and 7 years for furniture and fixtures, and 10 years for machinery and tools. Depreciation expense was $41,331 and $53,912 for 2006 and 2005, respectively.



Goodwill:The Company accounts for goodwill in accordance with SFAS No. 141,Business Combinationsand SFAS No. 142,Goodwill and Other Intangible Assets.Under SFAS No. 142, goodwill and intangibles that are deemed to have indefinite lives are no longer amortized but, instead, are to be reviewed at least annually for impairment.  Application of the goodwill impairment test requires judgment, including the identification of reporting units, assigning assets and liabilities to reporting units, assigning goodwill to reporting units, and determining the fair value.  Significant judgments required to estimate the fair value of reporting units include estimating future cash flows, determining appropriate discount rates and other assumptions.  Changes in these estimates
and assumptions could materially affect the determination of fair value and/or goodwill impairment for each reporting unit.  The Company recorded goodwill in connection with the Companys acquisition described in Note 13 amounting to $333,242.  The Companys annual impairment review of goodwill has identified that the goodwill impairment charge of $166,621 are necessary for the year ended December 31, 2006 as discussed in Note 5.



Convertible Notes Payable and Derivative Liabilities:The Company accounts for convertible notes payable and warrants in accordance with Statement of Financial Accounting Standards (SFAS) No. 133,"Accounting for Derivative Instruments and Hedging Activities."This standard requires the conversion feature of convertible debt be separated from the host contract and presented as a derivative instrument if certain conditions are met. Emerging Issue Task Force (EITF) 00-19,"Accounting for Derivative Financial Instruments Indexed to and Potentially Settled in a Company's Own Stock"and EITF 05-2,"The Meaning of "Conventional Convertible Debt Instrument" in Issue No. 00-19"were also analyzed to determine whether the debt instrument is to be
considered a conventional convertible debt instrument and classified in stockholders' equity. The convertible notes payable issued on November 2005 and January 2006 were evaluated and determined not conventional convertible and, therefore, because of certain terms and provisions including liquidating damages under the associated registration rights agreement the embedded conversion option was bifurcated and has been accounted for as a derivative liability instrument. The stock warrants issued in conjunction with these convertible notes payable were also evaluated and determined to be a derivative instrument and, therefore, classified as a liability on the balance sheet. The accounting guidance also requires that the conversion feature and warrants be recorded at fair value for each reporting period with changes in fair value recorded in the consolidated statements of operations.



A Black-Scholes valuation calculation was applied to both the conversion features and warrants at issuance dates and reporting date. The issuance date valuation was used for the effective debt discount that these instruments represent. The debt discount is amortized over the three-year life of the debts using the effective interest method. The reporting date valuation was used to record the fair value of these instruments at the end of the reporting period with any difference from prior period calculations reflected in the consolidated statement of operations.



F-9



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MOTIVNATION, INC. (F/K/A ABERDEEN MINING COMPANY)



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Net Income Per Share:Basic net income per share includes no dilution and is computed by dividing net income available to common stockholders by the weighted average number of common stock outstanding for the period. Diluted net income per share is computed by dividing net income by the weighted average number of common shares and the dilutive potential common shares outstanding during the period. Diluted net loss per common share is computed by dividing net loss by the weighted average number of common shares and excludes dilutive potential common shares outstanding, as their effective is anti-dilutive. Dilutive potential common shares primarily consist of stock warrants, unvested common stocks, and shares issuable under convertible debt.



Advertising Costs:All advertising costs are expensed as incurred. Advertising expenses were $12,890 and $17,490 for 2006 and 2005, respectively.



Income Taxes:Income tax expense is based on pretax financial accounting income. Deferred tax assets and liabilities are recognized for the expected tax consequences of temporary differences between the tax bases of assets and liabilities and their reported amounts.



Stock-Based Compensation:The Company accounts for stock issued to non-employees in accordance with the provisions of SFAS No. 123,Accounting for Stock-Based Compensationand the EITF Issue No. 00-18,Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services.SFAS No. 123 states that equity instruments that are issued in exchange for the receipt of goods or services should be measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. Under the guidance in Issue 00-18, the measurement date occurs as of the earlier of (a) the date at which a performance commitment is reached or (b) absent a
performance commitment, the date at which the performance necessary to earn the equity instruments is complete (that is, the vesting date).



New Accounting Pronouncements: In February 2006, the Financial Accounting Standards Board (FASB) issued SFAS No. 155, Accounting for Certain Hybrid Financial Instrument-an amendment of FASB Statements No. 133 and 140.SFAS No. 155 provides entities with relief from having to separately determine the fair value of an embedded derivative that would otherwise be required to be bifurcated from its host contract in accordance with SFAS No. 133.  SFAS No. 155 allows an entity to make an irrevocable election to measure such a hybrid financial instrument at fair value in its entirety, with changes in fair value recognized in earnings. SFAS No. 155 is effective for all financial instruments acquired or issued after the beginning of an entitys first fiscal year that begins after September 15, 2006. Management is
evaluating the financial statement impact of the adoption of SFAS No. 155.



In June 2006, the FASB issued FASB Interpretation No. 48 (FIN 48),Accounting for Uncertainty in Income Taxes, an Interpretation of FASB Statement No.109,which clarifies the accounting of uncertainty in income taxes recognized in financial statements in accordance with FASB Statement No. 109,Accounting of Income Taxes.FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The provisions of this Interpretation are effective for fiscal years beginning after December 15, 2006.  Management is currently evaluating the financial statement impact of the adoption of FIN 48.



F-10



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MOTIVNATION, INC. (F/K/A ABERDEEN MINING COMPANY)



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. This statement addresses how to calculate fair value measurements required or permitted under other accounting pronouncements. Accordingly, this statement does not require any new fair value measurements. However, for some entities, the application of the statement will change current practice. SFAS No. 157 is effective for the Company beginning January 1, 2008. The Company is currently evaluating the impact of this standard.



In September 2006, the Securities and Exchange Commission ("SEC") staff issued Staff Accounting Bulletin No. 108 ("SAB 108"),Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements.The stated purpose of SAB 108 is to provide consistency between how registrants quantify financial statement misstatements.



Prior to the issuance of SAB 108, there have been two widely-used methods, known as the "roll-over" and "iron curtain" methods, of quantifying the effects of financial statement misstatements. The roll-over method quantifies the amount by which the current year income statement is misstated while the iron curtain method quantifies the error as the cumulative amount by which the current year balance sheet is misstated. Neither of these methods considers the impact of misstatements on the financial statements as a whole.



SAB 108 established an approach that requires quantification of financial statement misstatements based on the effects of the misstatement on each of the Company's financial statements and the related financial statement disclosures. This approach is referred to as the "dual approach" as it requires quantification of errors under both the roll-over and iron curtain methods.



SAB 108 allows registrants to initially apply the dual approach by either retroactively adjusting prior financial statements as if the dual approach had always been used, or by recording the cumulative effect of initially applying the dual approach as adjustments to the carrying values of assets and liabilities as of January 1, 2006 with an offsetting adjustment recorded to the opening balance of retained earnings.



The Company will initially apply SAB 108 using the cumulative effect transition method in connection with the preparation of the annual financial statements for the year ending December 31, 2006. The Company does not believe the adoption of SAB 108 will have a significant effect on its consolidated financial statements.



In June 2005, the FASB issued SFAS No. 154,Accounting Changes and Errors Corrections, a replacement of APB Opinion No. 20,Accounting Changes, and FASB Statement No. 3,Reporting Accounting Changes in Interim Financial Statement. SFAS 154 changes the requirements for the accounting for and reporting of a change in accounting principle. Previously, most voluntary changes in accounting principles were required recognition via a cumulative effective adjustment within net income of the period of the change. SFAS 154 requires retrospective application to prior periods financial statements, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. SFAS 154



F-11



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MOTIVNATION, INC. (F/K/A ABERDEEN MINING COMPANY)



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



is effective for accounting changes and corrections of errors made in fiscal years beginning after December 14, 2005; however, the Statement does not change the transition provisions of any existing accounting pronouncements.  The Company does not believe this pronouncement will have a material impact in its consolidated financial position, results of operations or cash flows.



The FASB has also issued SFAS No. 156, Accounting for Servicing of Financial Assets-an amendment of FASB Statement No. 140 and SFAS No. 158, Employers Accounting for Defined Benefit Pension and Other Postretirement Plans, but they will not be applicable to the current operations of the Company. Therefore a description and the impact on the Companys operations and financial position for each of the pronouncements above have not been disclosed



NOTE 3  RESTATEMENT OF PREVIOUSLY ISSUED CONSOLIDATED FINANCIAL STATEMENTS



The accompanying 2005 consolidated financial statements have been restated to correct the accounting for convertible debt under the SFAS No. 133,"Accounting for Derivative Instruments and Hedging Activities."and the accounting for restricted stock based compensation under EITF Issue No. 96-18,Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services.



The following table sets forth a reconciliation of previously reported and restated net loss and net loss per share for the year ended December 31, 2005:



Amount
        
        Per shareNet loss as previously reported
        $      (872,918)
        
        $            (0.40)Weighted average number of shares adjustment
        -
        
        (0.05)Financing costs and derivative liabilities adjustments:Additional financing costs results of beneficial conversion feature
        (601,213)
        
        (0.31)Change in fair value of derivative liabilities
        4,080
        
        -Total financing costs and dervative liabilities adjustments
        (597,133)
        
        (0.31)Restricted stock award payments adjustment
        (787,760)
        
        (0.40)Total adjustments
        (1,384,893)
        
        (0.71)Net loss as restated
        $   (2,257,811)
        
        $            (1.16)




These restatement adjustments and revisions are further described below:



Financing Costs And Derivative Liabilities Adjustments



The December 31, 2005 consolidated financial statements have been restated to record a beneficial conversion feature related to convertible notes payable issued by the Company on November 30, 2005. The result is to record a discount on debt to $300,000 which will be amortized over the three-year life of the notes using interest method and to increase the excess discounts to financing costs by $299,200. Also, in accordance with EITF 00-19, the conversion feature of each convertible debenture should have been included as a long-term liability, originally valued at fair value at the date of issuance. As a liability, the convertible features are revalued each period until and unless the debt is converted. If the debt is converted prior to maturity, the carrying value will be transferred to equity. The conversion feature should be



F-12



---



MOTIVNATION, INC. (F/K/A ABERDEEN MINING COMPANY)



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



revalued each period until the convertible debt is converted, with the change in fair value from the date of issuance to the end of the period recorded as other income or expense for each period.



The Company has also recorded an amount of $299,975 related to the fair value of warrants issued with the debt, which was recorded as a liability due to a registration rights agreement. The result is to increase aggregate financing costs by $601,213 for the year ended December 31, 2005. Also, the fair values of the conversion features and warrants have been corrected to reflect a fair value of $895,095 at December 31, 2005, and an income of change in fair values of $4,080 has been recorded during the year ended December 31, 2005.



Restricted Stock Award Payments Adjustments



In addition, the original accounting treatment for restricted stock award payments was based upon a subjective determination of the most appropriate value of the Companys common shares. Specifically, the Company elected to use $0.25 per share for such calculations, representing about a 75% discount of the quoted market price of $1.10 on the date of grant. Upon subsequent re-examination of the circumstances, it was determined that the use of the quoted market price was required by the EITF Issue No. 96-18,Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services.Consequently, the calculations were revised and additional stock based payment was recorded.  The weighted average number of common shares used to calculate the net loss per share was also revised to
exclude all unvested shares.



NOTE 3  RESTATEMENT OF PREVIOUSLY ISSUED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



The restatement also included a reclassification of loss on disposal of equipment from other expense to operating expenses to comply with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. The correction for this reclassification increased operating expenses by $113,995 and decreased other expenses by the same amount. This correction did not affect net loss or net loss per share for the year ended December 31, 2005.



The following is a summary of the effect of the restatement on the originally issued Consolidated Statement of Operations, Consolidated Balance Sheet and Consolidated Statement of Cash Flows as of and for the year ended December 31, 2005.















F-13



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MOTIVNATION, INC. (F/K/A ABERDEEN MINING COMPANY)



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





CONSOLIDATED STATEMENT OF OPERATIONSPreviouslyReported
        
        RestatedSales:Sales - products
        $             876,910
        
        $             876,910Sales - services
        2,409,613
        
        2,409,613Total sales
        3,286,523
        
        3,286,523Cost of sales:Cost of products
        809,497
        
        809,497Cost of services
        1,975,334
        
        1,975,334Total costs of sales
        2,784,831
        
        2,784,831Gross profit
        501,692
        
        501,692Operating Expenses:Selling, general and administrative Expenses
        1,192,955
        
        1,504,715Loss on disposal of assets
        -
        
        113,995Total Operating Expenses
        1,192,955
        
        1,618,710Operating loss
        (691,263)
        
        (1,117,018)Other income(expenses)Interest and other income
        41,620
        
        41,620Change in derivative liabilities
        -
        
        4,080Loss on debt settlement
        -
        
        (425,000)Loss on disposal of assets
        (113,995)
        
        -Interest expense
        (106,880)
        
        (156,352)Financing costs
        -
        
        (602,741)Total other income(expenses)
        (179,255)
        
        (1,138,393)Net loss before state franchise tax
        (870,518)
        
        (2,255,411)State franchise tax
        2,400
        
        2,400Net loss
        $            (872,918)
        
        $         (2,257,811)Net loss per share-Basic and Diluted
        $                  (0.40)
        
        $                  (1.16)Weighted Average Number of Shares
        2,200,964
        
        1,948,682














F-14



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MOTIVNATION, INC. (F/K/A ABERDEEN MINING COMPANY)



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







CONSOLIDATED BALANCE SHEETPreviouslyReported
        
        RestatedASSETSCurrent AssetsCash
        $               96,586
        
        $               96,586Accounts receivable, net
        92,405
        
        92,405Prepaid expenses and other current assets
        26,912
        
        26,912Inventory
        165,854
        
        165,854Total Current Assets
        381,757
        
        381,757Property and equipment, net
        197,911
        
        197,911Goodwill
        333,242
        
        333,242Debt issuance cost, net
        53,472
        
        53,472Other assets
        21,696
        
        21,696TOTAL ASSETS
        $             988,078
        
        $             988,078LIABILITIES AND STOCKHOLDERS' DEFICITCurrent LiabilitiesAccounts payable
        $             249,740
        
        $             249,740Accrued liabilities
        363,226
        
        363,226Unearned revenue
        149,367
        
        149,367Short-term notes payable to related parties
        264,911
        
        264,911Current portion of long-term notes payable
        4,216
        
        4,216Current portion of capital lease obligations
        31,299
        
        31,299Total Current Liabilities
        1,062,759
        
        1,062,759Long-Term DebtLong-term notes payable, excluding current portion
        7,349
        
        7,349Capital lease obligations, excluding current portion
        10,570
        
        10,570Convertible notes payable, net of unamortized discount of $297,962
        300,000
        
        2,038Derivative liabilities
        -
        
        895,095Total Long-Term Liabilities
        317,919
        
        915,052Total Liabilities
        1,380,678
        
        1,977,811Stockholders' DeficitPreferred Stock, $0.001 par value; 100,000,000 shares authorized;none issued and outstanding
        -
        
        -Common Stock, $0.001 par value; 300,000,000 shares authorized;issued and outstanding 2,293,463 shares
        2,294
        
        2,294Paid-in Capital
        1,241,210
        
        2,159,710Deferred consulting
        (293,481)
        
        (424,221)Accumulated deficit
        (1,342,623)
        
        (2,727,516)Total Stockholders' Deficit
        (392,600)
        
        (989,733)TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT
        $             988,078
        
        $             988,078








F-15



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MOTIVNATION, INC. (F/K/A ABERDEEN MINING COMPANY)



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 3  RESTATEMENT OF PREVIOUSLY ISSUED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



CONSOLIDATED STATEMENT OF CASH FLOWSPreviouslyReported
        
        RestatedCASH FLOW FROM OPERATING ACTIVITIES:Net loss
        $           (872,918)
        
        $   (2,257,811)Adjustments to reconcile net loss to net cash used in operating activities:Depreciation
        53,912
        
        53,912Noncash interest expense and financing costs
        1,528
        
        602,741Change in derivative liabilities
        -
        
        (4,080)Non-cash adjustments
        26,573
        
        26,573Loss on disposal of assets
        113,995
        
        113,995Issuance of common stock for expenses
        15,000
        
        126,000Loss on debt settlement
        -
        
        425,000Compensation recognized on vested shares
        73,819
        
        325,579(Increase) Decrease in:Accounts receivable
        690,646
        
        690,646Inventory
        (9,317)
        
        (9,317)Prepaid and other assets
        (18,621)
        
        (18,621)Increase (Decrease) in:Accounts payable and accrued liabilities
        290,957
        
        290,957Unearned revenue
        (612,052)
        
        (612,052)Net cash flows used in operating activities
        (246,478)
        
        (246,478)CASH FLOW FROM INVESTING ACTIVITIES:Purchase of property and equipment
        (11,694)
        
        (11,694)Net cash flows used in investing activities
        (11,694)
        
        (11,694)CASH FLOW FROM FINANCING ACTIVITIES:Repayment on long-term notes payable and capital lease obligations
        (51,348)
        
        (51,348)Net proceeds from (repayments to) related parties
        175,086
        
        175,086Net proceeds from convertible debt
        225,000
        
        225,000Net cash flows provided by financing activities
        348,738
        
        348,738NET INCREASE IN CASH
        90,566
        
        90,566CASH AT BEGINNING OF YEAR
        6,020
        
        6,020CASH AT END YEAR
        $               96,586
        
        $         96,586Supplemental Disclosure of Cash Flow Information:Income Taxes Paid
        $                 2,400
        
        $           2,400Interest Paid
        $               21,917
        
        $         21,917Noncash Investing and Financing  Activities:Issuance of common stocks for:Reduction of accrued liabilities
        $               50,000
        
        $         50,000Deferred consulting service
        112,500
        
        495,000Retirement of related party debt
        125,000
        
        125,000$             287,500
        
        $       670,000Issuance of warrants in connection with convertible debt
        $                         -
        
        $       299,975Recorded a beneficial conversion feature
        $                         -
        
        $       599,200Equipment purchased under capital lease obligations
        $                 4,700
        
        $           4,700










F-16



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MOTIVNATION, INC. (F/K/A ABERDEEN MINING COMPANY)



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







NOTE 4  BALANCE SHEET DETAILS



The following tables provide details of selected balance sheet items:



At December 31,
        2006
        
        2005Accounts Receivable, netBilled -Completed jobs
        $    21,750
        
        $    58,925Unbilled -Completed jobs
        25,601
        
        32,389Jobs in progress
        -
        
        1,091Subtotal
        25,601
        
        33,480Accounts receivable, net
        $    47,351
        
        $    92,405InventoryPainted materials
        $    81,477
        
        $    85,513Mechanical materials
        26,903
        
        23,634Body shop materials
        10,390
        
        10,359Vehicles
        181,577
        
        46,348Work-in Process
        153,982
        
        -Total inventory
        $  454,329
        
        $  165,854Property and Equipment, netAutomobiles
        $    19,026
        
        $    19,026Furniture and fixtures
        7,114
        
        1,839Machinery and equipment
        226,590
        
        228,188Office equipment
        700
        
        700253,430
        
        249,753Less: accumulated depreciation
        (89,353)
        
        (51,842)Property and Equipment, net
        $  164,077
        
        $  197,911Accrued LiabilitiesAccrued payroll and related taxes
        $  177,231
        
        $    69,178Credit cards payable
        10,697
        
        22,685Accrued vacation
        10,778
        
        20,529Accrued interest
        177,736
        
        58,551Accurd services
        -
        
        150,000Others
        55,989
        
        42,283Total accrued liabilities
        $  432,431
        
        $  363,226




NOTE 5  IMPAIRMENT OF GOODWILL



The Company recorded $333,242 of goodwill in connection with its acquisition of Moonlight Industries, Inc. (see Note 13).  The amount that the Company recorded in connection with this acquisition was determined by comparing the aggregate amounts of the respective purchase price plus related transaction costs to the fair values of the net tangible and identifiable intangible assets acquired for the business acquired.



F-17



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MOTIVNATION, INC. (F/K/A ABERDEEN MINING COMPANY)



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



The Company performed its annual impairment test of goodwill at its designated valuation date of December 31, 2006 in accordance with SFAS 142.  As a result of these tests, the Company determined that the amount of goodwill recorded was not recoverable.  Accordingly the Company recorded a goodwill impairment charge of $166,621 for the year ended December 31, 2006.



NOTE 6  SHORT-TERM NOTES PAYABLE TO RELATED PARTIES



At December 31, short-term notes payable to related parties consisted of the following:



2006
        
        20051.)
        Revolving line of credit up to $50,000, payableto a related party a
        $  107,998
        
        $  111,3022.)
        Payable to a related party, interest accrued at10%, due on July 2, 2005 b
        32,388
        
        32,3883.)
        Demand note payable to a related party, non-interest bearing
        49,000
        
        49,0004.)
        Demand note payable to a related party, non-interest bearing
        3,617
        
        3,3735.)
        Inventory line of credit to a related party c
        65,000
        
        68,8486.) Payable to a related party, interest accrued at 8%,due on November 8, 2007d
        17,098
        
        -Total
        $  275,101
        
        $  264,911




a.
        On July 26, 2004, the Company entered into a revolving line of credit agreement with the Companys CEO. Under this agreement the Company can borrow working capital advances up to a total of $50,000, payable on or before July 26, 2005, extended to December 31, 2006, with interest payable monthly commencing on December 15, 2004 at 10% per annum. Borrowings under this agreement are unsecured. The Company is currently negotiating the note payments.




b.
        The note is convertible into the Companys common stock at 70% of the average of the three lowest closing bid prices within the first seven trading days after the effective day of the note. The due date of the note is extended to December 31, 2006. The Company is currently negotiating the note payments.




c.
        On December 21, 2004, TrixMotive entered into an agreement with Infinity Capital Partners, LLC (IPC), a related party, for inventory financing in the amount of $250,000 to finance the Companys vehicle inventory chassis. Interest is payable at 9% for every inventory chassis financed below $48,000 and at 7% for every inventory chassis financed above $48,000. Principal and interest is due, no longer than ten weeks, upon the delivery and or final payment made to the Company for the finished goods. The line of credit is secured by




F-18



---



MOTIVNATION, INC. (F/K/A ABERDEEN MINING COMPANY)



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



the inventory chassis vehicle title and remains in force until January 31, 2006. On December 28, 2006, TrixMotive and IPC entered in to a settlement agreement providing that IPC shall forgive the original note balance and related accrued interest of $144,310 in exchange of a new promissory note of $65,000. As a result, an aggregate amount of $79,310 was forgiven. The new note is payable in minimum quarterly installments of $3,000. The remaining unpaid amount will be due at June 30, 2008.The new note bears a zero interest.  The Company recorded the transaction as equity transaction because IPC is a related party based on the guidance outlined in paragraph 20 of APB Opinion 26,Early Extinguishment of Debt.



The Company had issued 6,000,000 shares of the Companys common stock for the consideration for this line of credit (see Note 10).



d.
        On July 18, 2006, the Companys CEO assumed a liability of $17,098 payable to a former attorney. The Company issued a note payable of this amount on November 8, 2006. The note bears interest at 8% per annum payable quarterly in cash. The note is due on November 8, 2007.




As of December 31, 2006 and 2005, total accrued interest due to these related parties was $27,023 and $56,512, respectively.



NOTE 7  LONG-TERM NOTES PAYABLE



At December 31, long-term notes payable consisted of the following:



2006
        
        20051.)
        Note Payable to Dell - Monthly installments of$90, including interest at 9.99% per annum, dueMarch 2006. Secured by office equipment.
        $         980
        
        $         7942.)
        Note Payable to Bank of America - Monthlyinstallments of $337, including interest at 5.99%per annum, due January 2009. Secured by a vehicle
        7,441
        
        10,7718,421
        
        11,565Less: current maturities
        (4,667)
        
        (4,216)Long-term notes payable
        $      3,754
        
        $      7,349




The future principal payments on the notes payable as of December 31, 2006 are summarized as follows:



Year ending December 31,2007
        
        
        $      4,6672008
        
        
        3,754$    11,565






F-19



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MOTIVNATION, INC. (F/K/A ABERDEEN MINING COMPANY)



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







NOTE 8  CAPITAL LEASE OBLIGATIONS



Certain long-term lease transactions relating to the financing of equipment and machinery are accounted for as capital leases. Capital lease obligations reflect the present value of future rental payments, les an interest amount implicit in the lease.



A corresponding amount is capitalized as property and equipment, and amortized over the individual assets estimated useful life. Amortization of assets under capital lease obligations is included in depreciation expense.



The leases bear interest rate ranging from 8.87% to 9.70% and require monthly lease payments aggregate of $2,997.



The following table presents the future minimum lease payments under the capital leases together with the present value of the minimum lease payments as of December 31, 2006:



Year Ending December 31,2007
        $    17,0632008
        286Total minimum lease payments
        17,349Lease amount representing interest
        2,707Present value of minimum lease payments
        14,642Less: current portion
        14,381Non-current portion
        $         261




The following is an analysis of leased assets included in property and equipment at December 31, 2006 and 2005:



At December 31,
        
        2006
        
        2005Machinery and equipment
        
        $   91,841
        
        $   91,841Less: accumulated depreciation
        
        (21,330)
        
        (11,675)Net leased assets
        
        $   70,511
        
        $   80,166




NOTE 9  CONVERTIBLE NOTES PAYABLE AND DERIVATIVE LIABILITIES



On January 30, 2006, the Company completed the sale of $2 million aggregate principal amount of 8% callable secured convertible notes due in 2009, and issued stock warrants purchasing up to 2.5 million shares of the Companys common stock.  Proceeds from the notes amounted to $1,903,500 after issuance costs, of which the first traunch of $300,000 (less issuance costs of $55,000 and $20,000 for prepaid officers life insurance) was received on November 30, 2005, the second traunch of $500,000 (less issuance costs of $6,000) was received on January 5, 2006, and the third and final traunch of $1,200,000 (less issuance costs of $15,500) was received on January 30, 2006. During 2006, the Company has converted $56,433 principal amount into



F-20



---



MOTIVNATION, INC. (F/K/A ABERDEEN MINING COMPANY)



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



4,100,000 shares of the Companys common stock at the request of the note holders. No conversion took place in 2005.



The Company filed a registration statement with the SEC on December 15, 2005 and amended the registration statement on December 30, 2005, with respect to the sale of the notes and common stock issuable upon the conversion of the notes. The issuance costs incurred in connection with the convertible notes are deferred and being amortized to interest expense over the life of each debenture traunch.



The Company is accounting for the conversion option in the debentures and the associated warrants as derivative liabilities in accordance with SFAS 133, Accounting for Derivative Instruments and Hedging Activities,EITF 00-19, Accounting for Derivative Financial Instruments Indexed to and Potentially Settled in a Companys Own Stockand EITF No. 05-2, The Meaning of Conventional Convertible Debt Instrument in Issue No. 00-19.  The Company attributed beneficial conversion features to the convertible debt using the Black-Scholes Option Pricing Model. The fair value of the conversion feature has been included as a discount to debt in the accompanying balance sheet up to the proceeds received from each traunch,
with any excess charged to operations. The discount is being amortized over the life of each debenture traunch using the interest method.



The following tables describe the valuation of the conversion feature of each traunch of the convertible debenture, using the Black Scholes pricing model:



11/30/05
Traunch
        1/4/06
Traunch
        1/30/06
TraunchApproximate risk free rate
        4.41%
        4.28%
        4.47%Average expected life
        3 years
        3 years
        3 yearsDividend yield
        0%
        0%
        0%Volatility
        356.33%
        348.92%
        342.77%Estimated fair value of conversion feature
        $599,200
        $998,346
        $2,395,289




The Company recorded the fair value of the conversion feature, aggregate of $599,200 and $3,393,635 as a discount to the convertible debt in the accompanying balance sheets as of December 31, 2006 and 2005, respectively, up to the proceeds received from each traunch, with any excess or $299,200 and $1,693,635 charged to expense for the years then ended.  Amortization expense related to the conversion feature discount for the years ended December 31, 2006 and 2005 was $208,327 and $2,038, respectively. Remaining unamortized discount as of those dates was $1,735,436 and $297,962, respectively.



The Company also granted warrants to purchase 2,500,000 shares of common stock in connection with the financing. The warrants are exercisable at $1.50 per share for a period of five years, and were fully vested. The warrants have been valued at $1,978,482 using the Black-Scholes Option Pricing Model with the following weighted-average assumptions used.







F-21



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MOTIVNATION, INC. (F/K/A ABERDEEN MINING COMPANY)



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS







11/30/05
Traunch
        1/4/06
Traunch
        1/30/06
TraunchApproximate risk free rate
        4.42%
        4.28%
        4.46%Average expected life
        5 years
        5 years
        5 yearsDividend yield
        0%
        0%
        0%Volatility
        356.33%
        348.92%
        342.77%Number of warrants granted
        375,000
        625,000
        1,500,000Estimated fair value of total warrants granted
        $299,975
        $493,692
        $1,184,815




In accordance with the EITF 00-19, the conversion feature of each convertible debenture and the stock warrants issued in conjunction with convertible debentures have been included as long-term liabilities and were originally valued at fair value at the date of issuance. As a liability, the convertible features and the stock warrants are revalued each period until and unless the debt is converted. As of December 31, 2006 and 2005, the fair values of the conversion feature and the stock warrants aggregated to $3,918,296 and $895,095, respectively.  The Company recorded a gain of $1,936,311 and $4,080 for the years then ended related to the change in fair value from the dates of issuance of the convertible debt (or December 31, 2005 for the traunch received on November 30, 2005) to December 31, 2006. This amount is recorded as Change in Derivative Liabilities a component of other income in the
accompanying consolidated statement of operations.  If the debt is converted prior to maturity, the carrying value will be transferred to equity.



NOTE 10  STOCKHOLDERS EQUITY



Shares for Debt Agreement



On February 2, 2006 the Board of Directors approved the issuance of 217,000 unregistered shares of common stock to the Chief Financial Officer and Secretary of the Company, and the Company entered into Shares for Debt Agreement with the CFO on the same date. The consideration received by the Company consisted of $50,000 in services rendered by the CFO during the period from January 1, 2005 through December 31, 2005, and a full release from any other claims for compensation relating to such period. The services had been accrued in prior year.

The Board has also approved the issuance of 435,000 unregistered shares of common stock to the Chief Executive Officer and Chairman of the Board of the Company, and the Company entered into Shares for Debt Agreement with the CEO on the same date. The consideration received by the Registrant consisted of $100,000 in services rendered by the CEO during the period from January 1, 2005 through December 31, 2005, and a full release from any other claims for compensation relating to such period.  The services had been accrued in prior year.

The value of the shares was based on the lowest price of the last trading day from February 2, 2006 (date of grant) which was $0.23 per share as there was limited trading volume.  Therefore, no gain or loss on debt settlement was recorded.



F-22



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MOTIVNATION, INC. (F/K/A ABERDEEN MINING COMPANY)



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



On February 15, 2005, the Board has approved the issuance of 100,000 unregistered shares of common stock to the Chief Financial Officer, and the Company entered into Shares for Debt Agreement with him. The consideration received by the Registrant consisted of $50,000 in services rendered by the CFO during the period from May 11, 2004 through December 31, 2004, and a full release from any other claims for compensation relating to such period. The shares were valued at $1.10 which was the closing market price on the date of grant. Therefore, additional compensation of $60,000 was recognized in 2005. The services had been accrued in 2004.



Restricted Stock Agreements



On February 15, 2005, the Board of Directors approved the issuance of 50,000 unregistered shares of the Companys common stock to each of the three directors and the issuance of 150,000 unregistered shares to each of the two consultants, and entered into a Restricted Stock Agreement with each of these directors and consultants. Each Restricted Stock Agreement provides for certain vesting conditions, a lock-up agreement, a first refusal right of the Company with respect to certain proposed transfers, a drag-along right of the Company in connection with certain corporate transactions, and a 5-year market stand-off agreement prohibiting transfers for up to 180 days following the effective date of any registration statement of the Company. If the director or the consultant does not meet the vesting conditions pursuant to the Agreement by December 31, 2005 (amended to December 31, 2006), then a pro rata
portion of the restricted shares shall be vested based on the formula provided by the Agreement. All restricted shares that do not vest as of December 31, 2006 shall be automatically rescinded and cancelled. Each director or consultant may vote the stock received to the extent any unvested shares are rescinded and cancelled. The consideration received by the Company consisted of services rendered to the Company and the continuing dedication of these directors and consultants to the Companys business. The shares were valued at $1.10 per share (the closing market price on date of grant), or $495,000 of total. Compensation expense is recognized over the vesting period based on the formula provided by the Agreements.



As of December 31, 2006, all shares under the Agreements were vested and the Company recognized $169,421 and $325,579 in compensation for years ended December 31, 2006 and 2005, respectively.



Retirement of a Related Party Debt



In 2005, the Board has also approved the issuance of 600,000 unregistered shares of the Companys common stock to an officer to retire her debt in the amount of $125,000.  As of September 30, 2005, the excess of 100,000 shares over the carrying value of the debt were cancelled. The shares were valued at $1.10, which was the closing market price on the date of issuance. Therefore, a loss on debt settlement of $425,000 was recorded.



Collateral of Line of Credit



In 2005, the Board of Directors has also approved to issue 60,000 unregistered shares of the Companys common stock for the consideration for the inventory line of credit as disclosed in Note 6. The shares will be held in an escrow and be released upon either approval from the



F-23



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MOTIVNATION, INC. (F/K/A ABERDEEN MINING COMPANY)



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Company or a default on the terms from the Company. The Company has an option to buy back the shares at $6.00 per share within one year. The shares were released in first quarter and the Company had recognized an interest expense of $66,000. The shares were valued at $1.10 which was the closing market price on the date of issuance.



Reverse Stock Split



On September 9, 2005, the Company filed a Certificate of Amendment to its Certificate of Incorporation with the Nevada Secretary of State, pursuant to which the Company effectuated a reverse stock split in an exchange ratio of one newly issued share for each hundred shares of its common stock outstanding, thereby decreasing the number of issued and outstanding shares to 2,293,464.  The Board of Directors also amended its articles of incorporation to maintain the par value of the stock at $0.001.  The accompanying consolidated financial statements have been retroactively adjusted to reflect the reverse stock split.



NOTE 11  INCOME TAX



Provision of income tax consists of a minimum state franchise tax of $2,400 for each of the year ended December 31, 2006 and 2005, respectively.



As of December 31, 2006, the Company has net operating loss carryforwards, approximately of $3.1 million and $3 million to reduce future federal and state taxable income, respectively. To the extent not utilized, the carryforwards will begin to expire through 2026 for federal tax purposes and through 2016 for state tax purposes. The Companys ability to utilize its net operating loss carryforwards is uncertain and thus a valuation reserve has been provided against the Companys net deferred tax assets.



The deferred tax assets as of December 31, 2006 and 2005 consist of the following:



2006
        
        2005Tax Benefit on net operating loss carryforward
        $1,307,897
        
        $   606,697Temporary difference in other accruals
        71,082
        
        102,630Temporary difference in depreciation and amortization
        57,865
        
        (3,342)Others
        743,476
        
        127,722Less: valulation allowance
        (2,180,320)
        
        (833,707)Net deferred tax assets
        $             -
        
        $             -




NOTE 12  NET LOSS PER SHARE



The following table sets forth the computation of basic and diluted net loss per share for the periods:



For years ended December 31,2006
        
        2005Numerator:Net Loss
        
        $     (3,683,176)
        
        $     (2,257,811)Denominator:Weighted Average Number of Shares
        
        5,110,004
        
        1,948,682Net loss per share-Basic and Diluted
        
        $           (0.72)
        
        $         (1.16)






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MOTIVNATION, INC. (F/K/A ABERDEEN MINING COMPANY)



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





As the Company incurred net losses for the year ended December 31, 2006, potential dilutive securities from stock warrants and unvested common stocks totalling 68,460 equivalent shares have been excluded from diluted net loss per share computations as their effect was deemed anti-dilutive. In accordance with SFAS No. 128,Earnings Per Share,the Company also has excluded from the calculation of diluted net loss per share approximately 3,626 shares relating to its 10% related party convertible debt that are anti-dilutive.  As of December 31, 2006, depending on the stock price on the conversion date, up to maximum of 209,427,866 shares, subject to certain adjustments, may be issued upon conversion of the 8% Callable Secured Convertible Notes. For additional information, see Note 9  Convertible Notes Payable and Derivative
Liabilities.  Stock warrants to purchase approximately 2,513,875 shares were outstanding, but were not included in the computation of diluted net loss per share because the exercise price of the stock warrants were greater than the average share price of the common stocks, and, therefore, the effect would have been antidilutive.



As the Company incurred net losses for the years ended December 31, 2005, potential dilutive securities from stock warrants and unvested common stocks totalling 252,282 equivalent shares have been excluded from diluted net loss per share computations as their effect was deemed anti-dilutive. In accordance with SFAS No. 128,Earnings Per Share,the Company also has excluded from the calculation of diluted net loss per share approximately 3,395 shares relating to its 10% related party convertible debt that are anti-dilutive.  As of December 31, 2005, depending on the stock price on the conversion date, up to maximum of 411,871 shares, subject to certain adjustments, may be issued upon conversion of the 8% Callable Secured Convertible Notes. Stock warrants to purchase approximately 375,000 shares were outstanding, but were not included in the
computation of diluted net loss per share because the exercise price of the stock warrants were greater than the average share price of the common stocks, and, therefore, the effect would have been antidilutive.



NOTE 13  MERGER AND ACQUISITION



Damon Motorcycle Creations, Inc.



Pursuant to terms of an Asset Purchase Agreement dated May 11, 2004, the Company acquired substantially all of the assets and liabilities of DAMON in consideration for the issuance of 888,799 shares to the shareholders of DAMON.



The acquisition is a reverse takeover transaction whereby DAMON is identified as the acquirer (accounting parent) of MotivNation, Inc. The purchase price of DAMON is assumed to be equal to its book value and no goodwill is recorded on the transaction.  The amount ascribed to the shares issued to the shareholders of DAMON represents the net book value of MotivNation, Inc. at date of closing May 11, 2004.









F-25



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MOTIVNATION, INC. (F/K/A ABERDEEN MINING COMPANY)



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





Details of the net liabilities assumed at book value at the acquisition date are as follows:



Current assets
        $                      -Less: Current Liabilities
        (9,874)Net liabilities assumed
        $              (9,874)




Supplemental Information for MotivNation, Inc. at and for the period ended May 11, 2004 (formerly known as Aberdeen Mining Company):



Summary Balance Sheets:



Assets
        $                      -Liabilities
        (9,874)Net Assets (Liabilities)
        $              (9,874)




Stockholders Deficit:



Preferred stock, $0.001 par value; 100,000,000 sharesauthorized; none issued and outstanding
        $                        -Common stock, $0.001 par value; 300,000,000 sharesauthorized;9,866,500 shares issued and outstanding
        9,867Additional paid-in capital
        911,881Accumulated deficit
        (931,622)Total stockholders' deficit
        $              (9,874)




Summary Statements of Operations:



Revenue
        $                            45General and administrative expenses
        43,210Net Loss for the Period
        $                    (43,165)




Moonlight Industries, Inc.



On October 11, 2004, the Company acquired substantially of all assets and liabilities of Moonlight Industries, Inc. (Moonlight) through its acquisition subsidiary, TrixMotive, Inc. (TrixMotive). The purchase price for this acquisition was 140,000 shares of the Companys common stock, approximately valued at $2.375 per share, which is the average price of the Companys common stock over the five trading days immediately preceding and two trading days immediately following October 11, 2004. The Companys president and secretary agreed to return, in the aggregate, 140,000 shares of the Companys common stock held by them to the Company prior to the closing of this acquisition.



The acquisition was accounted for as purchase transaction under SFAS No. 141, and accordingly, the tangibles assets acquired were recorded at their fair value at the date of the



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MOTIVNATION, INC. (F/K/A ABERDEEN MINING COMPANY)



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



acquisition. The results of operations of Moonlight Industries have been included in the Companys consolidated financial statements subsequent to the date of acquisition.



The purchase price was approximately $332,500. Direct transaction costs incurred in connection with the acquisition were immaterial. The allocation of the purchase price to assets acquired and liabilities assumed is presented in the table that follows:



Tangible assets acquired
        $      286,991Property and equipment
        
        148,193Goodwill
        
        333,242Liabilities assumed
        
        (435,926)Total purchase price
        
        $      332,500




The president of Moonlight became the Companys chief operating officer and secretary of TrixMotive. Moonlight specializes in creating customized vehicles to suit the tastes and needs of each individual customer.



NOTE 14 - CHANGE OF OFFICERS AND DIRECTORS



On January 6, 2006, the Board of Directors of the Company elected George R. Lefevre, the Chief Executive Officer to the MotivNation Board of Directors as well as the Chairman of the Board.



On February 15, 2005, the Board of Directors approved the removal of both officers from the Company and the election of George R. Lefevre to the position of Chief Executive Officer and President of the Company, Jay Isco to the position of Chief Financial Officer and Secretary of the Company, and Leslie A. McPhail to the position of Chief Operating Officer of the Company.



NOTE 15  BUSINESS AND CREDIT CONCENTRATIONS



The Company has no major customer in both Customized Automotive and Customized Motorcycle segments for year ended December 31, 2006. One customer accounted for approximately $967,065 or 32.5% of the Customized Automotive segment revenues for the year ended December 31, 2005. A major customer accounted for approximately $52,440 or 17% of the Customized Motorcycle segment revenues for the year ended December 31, 2005.



The Company maintains its cash deposit accounts at commercial banks. At times, account balances may exceed federally insured limits.  The Company has not experienced any losses on these accounts, and management believes the Company is not exposed to any significant risk on cash accounts.



NOTE 16  COMMITMENTS AND CONTINGENCIES



Lease Commitments



The Company leases its office facilities under various non-cancelable operating leases that expire through August 2009. The lease expense for the years ended December 31, 2006 and 2005 was $215,398 and $243,373, respectively.



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MOTIVNATION, INC. (F/K/A ABERDEEN MINING COMPANY)



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





As of December 31, 2006, the minimum lease payments under these leases are:



Year ended December 31,
        Amount2007
        
        $      220,7522008
        
        206,0792009
        
        110,334$       426,831




Business Consulting Agreement



On April 20, 2004, the Company and NeoTactix (NTX) entered into a Business Consulting Agreement pursuant to which NeoTactix agreed to provide certain business consulting services to the Company as specified in the Agreement, In exchange for such services, the Company agreed to issue 196,000 shares of the Companys common stock. The Company and NTX agree that the compensation shares issued the Company to affiliates of NTX shall be cancelled and returned to the Company if, prior to October 31, 2005, the Company has not achieved certain benchmarks pursuant to the Agreement. The shares were initially valued at $33 per share or $6,470,000 of total. On October 5, 2005, the Board of Directors approved an extension to the consulting agreement to expire October 31, 2006. The Company wrote-down the deferred consulting services, offset against additional paid-in capital, to $254,800 at $1.30 per share which was
the closing market price on October 5, 2005.



On November 6, 2006, the Board of Directors approved to eliminate the forfeiture clause of the agreement. As a result, the Company recognized the compensation expense.



Legal Proceedings



A former employee of Moonlight Industries filed a workers compensation claim against the Company. The former employee is alleging that he was injured during the course of his employment with Moonlight Industries. The damages claimed by the former employee do not appear to be covered by insurance. Management is responding to the case vigorously defending it as they believe the claim is frivolous and potentially fraudulent. In the opinion of the Companys legal counsel, the likelihood of an unfavourable outcome is low.



Damons historically leased four (4) units space in city of Brea, California under four separate non-cancelable operating lease agreements, which expires through November 30, 2007. Damons currently does not occupy the spaces. In July, the landlord filed claims against Damons for the past due rent and charges of all units, aggregate of $19,657, and the additional amounts due pursuant to the remaining terms of the lease agreements. The obligations under the remaining terms of the lease agreements are estimated at a total of $89,086. Subsequently, Damons and the landlord entered into a Surrender Agreement for one unit, providing that Damons agreed to forfeit a security deposit of $1,568 and to pay a sum of $3,822, representing the unpaid charges and rent through the date of agreement. In return, the landlord agreed to discharge and release Damons from all obligations under the
lease agreement of that unit.



No provision for any contingent liabilities has been made in the accompanying consolidated financial statements since management cannot predict the outcome of the claims or estimate the



F-28



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MOTIVNATION, INC. (F/K/A ABERDEEN MINING COMPANY)



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



amount of any loss that may result. In addition, the Company has received an outside legal opinion from an attorney that states the outstanding liability is not the Companys as the original lease was signed by the previous owners of Damons. However, the Company will continue to accrue the past due rent of $19,657 in the accompanying financial statements until this matter is resolved.



On December 7, 2005, a customer of TrixMotive filed a lawsuit in the Superior Court of Santa Clara County of California against TrixMotive claiming for breach of contract and warranty, intentional and negligence misrepresentation for a customized vehicle. The plaintiff seeks $98,827 in compensatory damages and other unspecified damages plus interest, attorneys fees and costs. The arbitrator after a hearing held on September 22, 2006 awarded that the plaintiff shall recover from the Company the price of the refrigerator and microwave which were ordered and paid for by the plaintiff but not installed in the vehicle, and that all other claims of plaintiff are denied as to the Company. The Plaintiff rejected the arbitration award on October 19, 2006.  Subsequent to year end, there was a settlement court appearance by which the Company and the Plaintiff agreed to settle the claim in the amount of $2,000.
Final settlement agreement is being processed. No liability was accrued as of December 31, 2006 as the settlement amount was considered insignificant.



The Company is also currently party to various legal proceedings and claims, either asserted or unasserted, which arise in the ordinary course of business. While the outcome of these matters cannot be predicted with certainty, management do not believe that the outcome of any of these claims or any of the above mentioned legal matters will have a material adverse effect on the Companys consolidated financial position, results of operations, or cash flows.



While the outcome of these matters is not determinable, the Company does not expect that the ultimate costs to resolve these matters will have a material adverse effect on the Companys financial position, results of operations, or cash flows.



Officer Indemnification



Under the Company's organizational documents, the Company's officers, employees and directors are indemnified against certain liability arising out of the performance of their duties. The Company's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Company that have not yet occurred. The Company does not carry Director and Officers insurance policy. However, based on experience, the Company expects any risk of loss to be remote.



Risk Management



The Company has been exposed to various risks of loss related to torts; theft of, damage to and destruction of assets; error and omissions and natural disasters for which Damons does not carry commercial insurance between June 29, 2005 and December 20, 2005.



NOTE 17  GUARANTEES AND PRODUCT WARRANTIES



F-29



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MOTIVNATION, INC. (F/K/A ABERDEEN MINING COMPANY)



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



The Company from time to time enters into certain types of contracts that contingently require the Company to indemnify parties against third party claims. These contracts primarily relate to: (i) divestiture agreements, under which the Company may provide customary indemnifications to purchasers of the Companys businesses or assets; (ii) certain real estate leases, under which the Company may be required to indemnify property owners for environmental and other liabilities, and other claims arising from the Companys use of the applicable premises; and (iii) certain agreements with the Company's officers, directors and employees, under which the Company may be required to indemnify such persons for liabilities arising out of their employment relationship.



The terms of such obligations vary. Generally, a maximum obligation is not explicitly stated. Because the obligated amounts of these types of agreements often are not explicitly stated, the overall maximum amount of the obligations cannot be reasonably estimated. Historically, the Company has not been obligated to make significant payments for these obligations, and no liabilities have been recorded for these obligations on its balance sheets as of December 31, 2006 and 2005.



In general, Damons offers a five-year warranty on workmanship to original purchaser and a manufacturers warranty from 90 days to one year for most of its products sold.  TrixMotive warrants to the first registered owner for a period of one year or twelve thousand miles from the date of original purchase, whichever comes first, that this conversion shall be free from defects in materials and workmanship, under normal use and service. The Companys liability under this warranty is limited solely to the repair or replacement of defective parts and/or workmanship.



The following table summarizes the activity related to the product warranty liability during 2006 and 2005:



For years ended December 31,
        
        2006
        
        2005Beginning Balance
        
        $            12,350
        
        $            14,173Provision of warranties
        
        12,000
        
        12,000Utilization of warranty reserve
        
        (15,356)
        
        (13,823)Ending Balance
        
        $              8,994
        
        $            12,350




NOTE 18  RELATED PARTY TRANSACTIONS



As of December 31, 2006 and 2005, the Company chief executive officer, chief operating officer jointly with a beneficial owner, the former president and the former secretary own a controlling interest of 29% and 86.5% in the Company, respectively.



NOTE 19  SEGMENT INFORMATION



The Company evaluates its reporting segments in accordance with SFAS No. 131,Disclosures about Segments of an Enterprise and Related Information.The Chief Executive Officer has been identified as the Chief Operating Decision Maker as defined by SFAS No. 131. The Chief Executive Officer allocates resources to each segment based on their business prospects, competitive factors, net sales and operating results.



The Company currently reported two principal operating segments: (i) custom motorcycle, and



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MOTIVNATION, INC. (F/K/A ABERDEEN MINING COMPANY)



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



(ii) custom automotive. The custom motorcycle segment provides a full range of services that cater to motorcycle enthusiast, including the sale, manufacture and installation of custom-built parts and accessories, the restoration, repair and servicing and the custom painting work. The custom automotive segment specializes in creating customized limousines to suit the tastes and needs of each individual customer.



The Company does not track its assets by operating segments. Consequently, it is not practical to show assets by operating segments.



Summarized financial information of the Companys results by operating segment is as follows:



For years ended December 31,
        
        
        2006
        2005Custom Motorcycle:Net revenue to external customers
        
        
        $          47,424
        $        308,246Cost of revenue
        
        
        79,585
        177,889Margin
        
        
        $        (32,161)
        $        130,357Custom Automotive:Net revenue to external customers
        
        
        $     2,282,083
        $     2,978,277Cost of revenue
        
        
        2,203,712
        2,606,942Margin
        
        
        $          78,371
        $        371,335Total Net Revenue to External Customers
        
        
        $     2,329,507
        $     3,286,523Total Cost of Revenue
        
        
        2,283,297
        2,784,831Total Margin
        
        
        46,210
        501,692Intersegment Revenues:Custom Motorcycles
        
        
        $                   -
        $            2,150Custom Automotive
        
        
        -
        -Total Intersegment Revenues
        
        
        $                   -
        $            2,150




Intersegment transactions are recorded at cost. The margins reported reflect only the direct controllable expenses of each line of business and do no represent the actual margins for each operating segment because they do not contain corporate and general and administrative expenses, reduction of goodwill as well as stock-based compensation incurred in support of the lines of business.



Reconciliation of operating segment margin to net loss before income taxesFor years ended December 31,
        
        
        2006
        2005Total margin for reportable segments
        
        #
        $          46,210
        $        501,692Corporate and general and administrative expenses
        
        
        (1,674,628)
        (1,504,715)Impairment of goodwill
        
        
        (166,621)
        -Loss on disposal of assets
        
        
        (6,368)
        (113,995)Loss on debt settlement
        
        
        -
        (425,000)Interest and Other Expense
        
        
        (237,628)
        (156,352)Financing costs
        
        
        (3,606,136)
        (602,741)Change in Derivative Liabilities
        
        
        1,936,311
        4,080Interest and Other Income
        
        
        28,084
        41,620Net loss before income taxes
        
        
        $    (3,680,776)
        $    (2,255,411)






F-31



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




None




ITEM 8A.
        CONTROLS AND PROCEDURES.




We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the specified time periods.  As of the end of the period covered by this Annual Report, 12/31/06, our Chief Executive Officer George R. Lefevre, and Jay Isco, our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures. Based on the evaluation, which disclosed no significant deficiencies or material weaknesses, Mr. Lefevre and Mr. Isco concluded that our disclosure controls and procedures are effective. There were no changes in our internal control over financial reporting that occurred during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.



ITEM 8B.
        OTHER INFORMATION.




Not Applicable.




PART III



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




The following table sets forth the names and positions of the executive officers and directors of the Company.  Directors will be elected at our annual meeting of stockholders and serve for one year or until their successors are elected and qualify.  Officers are elected by the Board and their terms of office are, except to the extent governed by employment contract, at the discretion of the Board.

Name
        Age
        Positions and Offices heldMartyn Powell (1)
        54
        President, DirectorRobert OBrien (1)
        71
        Secretary, Treasurer, DirectorDale Lavigne (1)
        76
        DirectorDennis OBrien (1)
        45
        DirectorJames Etter (1)
        70
        DirectorJohn Ohle (2)
        49
        President, Interim Chief Financial OfficerArthur Lefevre (3) (5)
        69
        DirectorMark Absher (3)
        45
        DirectorVincent Michael Keyes III (3)(5)
        50
        DirectorThomas Prewitt (4) (8)
        51
        PresidentRichard Perez (4) (8)
        48
        SecretaryJay Isco  (4) (7)
        26
        Chief Financial Officer, SecretaryRichard Holt (6)(10)
        66
        DirectorDavid Psachie (7)
        67
        DirectorGeorge R. Lefevre (8)
        39
        Chief Executive Officer, PresidentLeslie McPhail (9)
        34
        Chief Operating Officer


(1)
        In connection with Aberdeen Mining Company acquiring C&M Transportation, Inc. the officers and directors resigned on March 8, 2004.




24



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(2)
        As part of the acquisition agreement of C&M Transportation, Inc. Mr. Ohle was appointed the President and interim Chief Financial Officer.  Once the C&M Transportation, Inc. agreement was rescinded, Mr. Ohle was removed from his positions.


(3)
        Upon consummation of the acquisition with C&M Transportation, Mr. Lefevre, Mr. Absher, and Mr. Keyes were appointed to fill the board of directors.


(4)
        On May 11, 2004, the Company acquired Damons Motorcycle Creations, Inc. and the Board elected Mr. Prewitt to serve as the President, Mr. Perez to serve as the Secretary, and Mr. Isco to serve as the Interim Chief Financial Officer.


(5)
        On September 25, 2004, Mr. Lefevre and Vincent Michael Keyes resigned as  Directors from the Board of Directors


(6)
        On October 6, 2004, the Board of Directors elected Richard Holt to serve as a Director.


(7)
        On February 11, 2005, the Board of Directors elected Mr. Psachie to serve as a Director


(8)
        On February 15, 2005, the Board of Directors approved the removal of Mr. Prewitt and Mr. Perez as the President and Secretary respectively.  George R. Lefevre was appointed to the position of Chief Executive Officer and President.  Mr. Isco was elected to the position of Chief Financial Officer and Secretary.


(9)
        On February 15, 2005, the Board of Directors elected Ms. McPhail to the position of Chief Operating Officer.


(10)
        On October 2, 2006, Richard Holt resigned as director of the company




Duties, Responsibilities and Experience



George R. Lefevre, Chief Executive Officer, and Director



As CEO of MotivNation, Mr. Lefevre is responsible for the oversight, and management of the companys day to day business affairs.



Since 2004, Mr. Lefevre has served as a director, Chief Financial Officer and Secretary for EntreMetrix, Inc. Since 2000, George R. Lefevre has been the co-founder and Managing Partner of NeoTactix, a company focused on mergers, acquisitions and structural guidance for small public companies. From 1998 to 2000, Mr. Lefevre assisted in the formation and funding of PTM Molecular Biosystems. He was the Chief of Finance and key officer for strategic business ventures. Mr. Lefevre has invested in and managed portfolios of securities since 1991. He received a B.S. in Business Administration Finance from California State University, Long Beach.



Jay Isco, Chief Financial Officer & Secretary



As CFO of MotivNation, Mr. Iscos primary duty is to oversee and manage the internal controls related to the cash flow of the company.



In 2004 Mr. Isco was serving as the interim Chief Financial Officer for MotivNation. In 2005 he was elected by the Board of Directors to Chief Financial Officer and Secretary of MotivNation. Since 2002, Mr. Isco has served as an accounting consultant for various OTCBB companies and in 2004 joined NeoTactix, a company focused on mergers, acquisitions and structural guidance for small public companies. Mr. Isco received a B.A. in Business Economics with and emphasis in accounting from the University of California, Santa Barbara.



25



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Leslie McPhail, Chief Operating Officer



As COO of MotivNation, Mrs. McPhail is responsible for the day to day management of TrixMotive, Inc. a wholly owned subsidiary of MotivNation.



Leslie McPhail graduated from Platt College's Graphic Design program in 1994. Mrs. McPhail has served as Assistant Creative Director for Sarbacker Advertising and Propper Design Group, based in Irvine, CA. In 1999 Mrs. McPhail has run her own graphic design company, Moonlight Productions, and in 2001 with her husband David McPhail started Moonlight Industries, a Limousine Manufacturer in Santa Fe Springs, CA. In 2004 TrixMotive, Inc., a wholly owned subsidiary of MotivNation, acquired Moonlight Industries, and Leslie McPhail has served as lead management for the production and work flow for TrixMotive, Inc.



Election of Directors and Officers.




Directors are elected to serve until the next annual meeting of stockholders and until their successors have been elected and qualified. Officers are appointed to serve until the meeting of the Board of Directors following the next annual meeting of stockholders and until their successors have been elected and qualified.



No Executive Officer or Director of the Corporation has been the subject of any Order, Judgment, or Decree of any Court of competent jurisdiction, or any regulatory agency permanently or temporarily enjoining, barring suspending or otherwise limiting him from acting as an investment advisor, underwriter, broker or dealer in the securities industry, or as an affiliated person, director or employee of an investment company, bank, savings and loan association, or insurance company or from engaging in or continuing any conduct or practice in connection with any such activity or in connection with the purchase or sale of any securities.



No Executive Officer or Director of the Corporation has been convicted in any criminal proceeding (excluding traffic violations) or is the subject of a criminal proceeding which is currently pending.



No Executive Officer or Director of the Corporation is the subject of any pending legal proceedings.



Section 16(a) Beneficial Ownership Reporting Compliance



Section 16(a) of the Securities Exchange Act of 1934, as amended (the Exchange Act), requires our executive officers and directors, and persons who beneficially own more than ten percent of our common stock, to file initial reports of ownership and reports of changes in ownership with the SEC. Executive officers, directors and greater than ten percent beneficial owners are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file. Based upon a review of the copies of such forms furnished to us and written representations from our executive officers and directors, we believe that during the year ended 2006, all officers and directors  filed all forms 3, forms 4 and forms 5.





26



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Audit Committee and Financial Expert



We do not have an Audit Committee, our board of directors during 2006, performed some of the same functions of an Audit Committee, such as: recommending a firm of independent certified public accountants to audit the annual financial statements; reviewing the independent auditors independence, the financial statements and their audit report; and reviewing management's administration of the system of internal accounting controls. The Company does not currently have a written audit committee charter or similar document.



We have no financial expert. We believe the cost related to retaining a financial expert at this time is prohibitive. Further, because of our start-up operations, we believe the services of a financial expert are not warranted.



Code of Ethics



A code of ethics relates to written standards that are reasonably designed to deter wrongdoing and to promote:



(1)
        Honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;


(2)
        Full, fair, accurate, timely and understandable disclosure in reports and documents that are filed with, or submitted to, the Commission and in other public communications made by an issuer;


(3)
        Compliance with applicable governmental laws, rules and regulations;


(4)
        The prompt internal reporting of violations of the code to an appropriate person or persons identified in the code; and


(5)
        Accountability for adherence to the code.




We have adopted a corporate code of ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions.  MotivNation will provide, without charge, a copy of the Code of Ethics on the written request of any person addressed to MotivNation at:  18101 Von Karman Avenue, Suite 330, Irvine, CA 92612.



Nominating Committee



We do not have a Nominating Committee or Nominating Committee Charter. Our board of directors in 2006, performed some of the functions associated with a Nominating Committee. We have elected not to have a Nominating Committee in that we are a development stage company with limited operations and resources.



Limitation of Liability of Directors



Pursuant to the Nevada General Corporation Law, our Articles of Incorporation exclude personal liability for our Directors for monetary damages based upon any violation of their fiduciary duties as Directors, except as to liability for any breach of the duty of loyalty, acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, or any transaction from which a Director receives an improper personal benefit.  This



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exclusion of liability does not limit any right which a Director may have to be indemnified and does not affect any Directors liability under federal or applicable state securities laws.  We have agreed to indemnify our directors against expenses, judgments, and amounts paid in settlement in connection with any claim against a Director if he acted in good faith and in a manner he believed to be in our best interest.



ITEM 10.
        EXECUTIVE COMPENSATION.




The following table sets forth the cash compensation of our executive officer and director during the last three fiscal years. The remuneration described in the table does not include the cost to us of benefits furnished to the named executive officers, including premiums for health insurance and other benefits provided to such individual that are extended in connection with the conduct of our business.



Summary Compensation Table

Annual Compensation
        Long Term CompensationName and Principal Position
        Year
        Salary (3)
        Bonus
        Other Annual Compensation
        Restricted Stock
(4)
        Options
        LTIP Payouts
        All Other CompensationGeorge R. Lefevre - CEO & Director (1) (2) (3)
        2006
        $150,0002005
        $112,5002004Jay Isco- CFO & Secretary (1) (3)
        2006
        $75,0002005
        $55,1672004
        $50,000Leslie McPhail- Chief Operating Officer (1) (3)
        20062005
        $74,8802004
        $15,600Mark Absher  Director (1) (2) (5) (3)
        2006
        $12,0002005
        
        
        
        $55,0002004David Psachie- Director (1) (2) (5) (3)
        2006
        $12,0002005
        
        
        
        $55,0002004Richard Holt- Director (1) (2) (5) (3)
        2006
        $9,0002005
        
        
        
        $55,0002004




(1)
        There was no compensation for George R. Lefevre, Mark Absher, David Psachie, and Richard Holt for the year ending December 31, 2004


(2)
        Amounts noted are actual cash amounts paid and accrued salaries combined in their respective year.  The following are the portions of accrued salaries:


a.
        George R. Lefevre


i.
        2006- $62,500 in accrued salary


ii.
        2005- $100,000 in accrued salary


b.
        Jay Isco


i.
        2006- $23,666.64 in accrued salary


ii.
        2005- $50,000 in accrued salary




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iii.
        2004- $50,000 in accrued salary


c.
        Leslie McPhail


i.
        2005- $24,960 in accrued salary


d.
        Mark Absher


i.
        2006- $12,000 in accrued salary


e.
        David Psachie


i.
        2006- $12,000 in accrued salary


f.
        Richard Holt


i.
        2006- $9,000 in accrued salary


(3)
        The dollar value of the restricted shares is calculated by multiplying the closing market price of our unrestricted stock on the date of issuance as required in instructions to Item 402(b)(2)(iv)(A).


(4)
        Mark Absher, David Psachie, Richard Holt each received 50,000 (post split) shares at a price of $1.10 (post split), the close price of the stock on February 15, 2005.




Employment agreements



On July 31, 2006 the Company entered into a five year employment agreement with George R. Lefevre its CEO. Effective January 1, 2006, MotivNation agreed to a monthly salary of $12,500 per month with annual increases equaling 10% of the base salary. In addition he is eligible for a quarterly bonus of 20,000 based on the Company achieving a net profit for that quarter



On July 31, 2006 the Company entered into a five year employment agreement with Jay Isco its CFO. Effective January 1, 2006, MotivNation agreed to a monthly salary of $6,250 per month with annual increases equaling 10% of the base salary. In addition he is eligible for a quarterly bonus of 10,000 based on the Company achieving a net profit for that quarter



As of December 31, 2006, we have employment agreements with do not have any agreements in place for the amount of annual compensation that our officers, directors and employees will receive in the future.



Compensation Committee



We currently do not have a compensation committee of the board of directors. However, the board of directors intends to establish a compensation committee, which is expected to consist of three inside directors and two independent members.  Until a formal committee is established our entire board of directors will review all forms of compensation provided to our executive officers, directors, consultants and employees including stock compensation and loans.











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ITEM 11.
        SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.




As of the close of business on December 31, 2006, based on information available to the Company:



Name of Officer, Director and Beneficial Owner
        
        Number
of Shares
        
        Percent
Beneficially
Owned*Thomas Prewitt- Former President (2)(3)
547 Apollo Unit C
Brea, CA 92821
        
        748,799
        
        10.62%Jay Isco- Chief Financial Officer, Secretary(3)
18101 Von Karman Ave. Ste. 330
Irvine, CA 92612
        
        317,000
        
        4.5%Richard Perez Former Secretary (2)(3)
1741 E. Lambert Road
La Habra, CA 90631
        
        748,799
        
        10.62%George R. Lefevre- Chief Executive Officer (3)
18101 Von Karman Ave. Ste. 330
Irvine, CA 92612
        
        683,000
        
        9.69%Scott Absher- Beneficial Owner (4)
18101 Von Karman Ave. Ste. 330
Irvine, CA 92612
        
        248,000
        
        3.52%Leslie McPhail-Chief Operating Officer(1)(3)
14948 Shoemaker Avenue
Santa Fe Springs, CA 90670
        
        640,000
        
        9.08%David McPhail- Beneficial Owner(1)
14948 Shoemaker Avenue
Santa Fe Springs, CA 90670
        
        640,000
        
        9.08%Mark Absher- Director
18101 Von Karman Ave. Ste. 330
Irvine, CA 92612
        
        50,000
        
        0.71%David Psachie- Director
18101 Von Karman Ave. Ste. 330
Irvine, CA 92612
        
        50,000
        
        0.71%Richard Holt- Director (5)
18101 Von Karman Ave. Ste. 330
Irvine, CA 92612
        
        50,000
        
        0.71%All Directors, Officers, & Beneficial Holders as a Group
        
        2,786,799
        
        39.55%




1.
        Leslie McPhail owns jointly with David McPhail 740,000 (post-split) shares of the Company.




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2.
        Thomas Prewitt and Richard Perez own jointly 748,799 (post-split) shares of the Company.


3.
        On February 15, 2005, the Board of Directors approved the removal of Mr. Prewitt and Mr. Perez as the President and Secretary respectively.  George R. Lefevre was appointed to the position of Chief Executive Officer and President.  Mr. Isco was elected to the position of Chief Financial Officer and Secretary, and Mrs. McPhail to the position of Chief Operating Officer.


4.
        Scott Absher served as a consultant for the company and is the brother of Mark Absher a director of the company.


5.
        On October 2, 2006, Richard Holt resigned as director of the company




*
        Number of shares and percent of ownership based upon 7,045,463 shares outstanding on December 31, 2006




ITEM 12.
        CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.




On April 20, 2004, the Company and NeoTactix (NTX) entered into a Business Consulting Agreement pursuant to which Neotactix agreed to provide certain business consulting services, in exchange for 196,000(post split) shares of the Companys common stock. George R. Lefevre and Scott Absher are partners in Neotactix and in February 15, 2005 George R. Lefevre was elected to serve as CEO of MotivNation. In addition Scott Absher is the brother of Mark Absher who is a Director of MotivNation. On November 6, 2006, the Board of Directors approved to eliminate the forfeiture clause of the agreement. As a result, the Company recognized the compensation expense.



On December 21, 2004, TrixMotive, Inc. a wholly owned subsidiary of MotivNation entered into a $250,000 revolving line of credit inventory financing agreement with Infinity Capital Partners, LLC. On December 28, 2006, TrixMotive and IPC entered in to a settlement agreement providing that IPC shall forgive the original note balance and related accrued interest of $144,310 in exchange of a new promissory note of $65,000. As a result, an aggregate amount of $79,310 was forgiven. The new note is payable in minimum quarterly installments of $3,000. The remaining unpaid amount will be due at June 30, 2008.The new note bears a zero interest. The president of Infinity Capital Partners is Michael Isco, who is the father of Jay Isco the CFO of MotivNation.



MotivNation uses Entremetrix Corporation for employee leasing and other human resource activities. George R. Lefevre acts as the CFO of Entremetrix. MotivNation paid approximately $18,000 in fees to Entremetrix for services provided during the year ending December 31, 2006













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ITEM 13.
        EXHIBITS.




(a)
        Exhibits




Exhibit
        DescriptionNumber3(i)
        Articles of Incorporation**3(ii)
        ByLaws**23.1
        Consent of Spector & Wong LLP, the Companys Independent Public Accountants31.1
        Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
        Certification of  Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 200232
        Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley act of 2002.


_____

* Filed herewith

** Incorporated herein by reference from the Companys Form 10-SB filed with the Commission on 10-24-2002

Reports on Form 8-K



1.
        On October 6th 2006, the company filed an 8-K announcing the resignation of Richard Holt as Director.




ITEM 14.
        PRINCIPAL ACCOUNTANT FEES AND SERVICES.




(1) AUDIT FEES



The aggregate fees billed for the fiscal year ended December 31, 2006, for professional services rendered by Spector & Wong LLP, for the audit of the registrant's annual financial statements and review of the financial statements included in the registrant's Form 10-QSB or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for fiscal year 2006 and 2005 were approximately $54,000 and $53,000, respectively.



(2) AUDIT-RELATED FEES



The aggregate fees billed for the fiscal year ended December 31, 2006, for assurance and related services by Spector & Wong LLP, that are reasonably related to the performance of the audit or review of the registrant's financial statements for fiscal year 2006 were $8,731 and $0 for 2005.



(3) TAX FEES



The aggregate fees billed for each of the fiscal years ended December 31, 2006 and 2005, for professional services rendered by Spector & Wong LLP, for tax compliance, tax advice, and tax planning, for those fiscal years were $2,500 and $2,250 respectively. Services provided



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included preparation of Federal Income Tax Returns Form 1120, tax planning, and research regarding 1031 exchange.



(4) ALL OTHER FEES



There were no other aggregate fees billed in each of the fiscal years ended December 31, 2006 and 2005, for products and services provided by Spector & Wong LLP, other than those services reported above, for those fiscal years.



(5) AUDIT COMMITTEE POLICIES AND PROCEDURES



Not Applicable.




(6) If greater than 50 percent, disclose the percentage of hours expended on the principal accountant's engagement to audit the registrant's financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant's full-time, permanent employees.



Not Applicable.




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SIGNATURES



Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.





By:/s/
George Lefevre

| | George Lefevre- CEO
| | -------------------



| | Dated:
			April 17, 2007
| | ------------------------



Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.



|NAME | Title | DATE
|---- | ----- | ----



|/s/ George Lefevre | April 17, 2007
|------------------ | --------------
|George Lefevre     | CEO           



|/s/ Jay Isco | April 17, 2007
|------------ | --------------
|Jay Isco     | CFO, Secretary

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