**SECURITIES
      AND EXCHANGE COMMISSION**


Washington,
      D.C. 20549





**FORM
      10-KSB/A**





**ANNUAL
      REPORT PURSUANT TO SECTION 13 OR 15(d)**


**OF
      THE SECURITIES EXCHANGE ACT OF 1934**


**FOR
      THE YEAR ENDING NOVEMBER 30, 2005**





**AMERICHIP
      INTERNATIONAL INC.**


(Exact
      name of registrant as specified in its charter)





**Nevada**
            **000-33127**
            **98-0339467******(State
                or other jurisdiction of incorporation or organization)
            (Commission
                File Number)
            (I.R.S.
                Employer Identification )







**24700
                  Capital River, Clinton Township MI**
            
            **48036**(Address
                of principal executive
                offices)
            
            (Zip
                Code)




Registrant’s
      telephone number, including area code: **(586)
      783-4598**


(Former
                  name or former address, if changed since last report)




Copies
      of
      all communications, including all communications sent to the agent for service,
      should be sent to:




Joseph
      I.
      Emas, Attorney at Law


1224
      Washington Avenue


Miami
      Beach, Florida 33139




Telephone:
      305.531.1174







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




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. o




State
      issuer’s revenues for its most recent fiscal year. $126,122




State
      the
      aggregate market value of the voting and non-voting common equity held by
      non-affiliates computed by reference to the price at which the common equity
      was
      sold, or the average bid and asked price of such common equity, as of a
      specified date within the past 60 days. (See definition of affiliate in Rule
      12b-2 of the Exchange Act.) $8.0 million, based on the average bid and ask
      price
      as of February 28, 2006.




**(ISSUERS
      INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE
      YEARS)**




Check
      whether the issuer has filed all documents and reports required to be filed
      by
      Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities
      under a plan confirmed by a court.    Yes o No x














State
      the
      number of shares outstanding of each of the issuer’s classes of common equity,
      as of the latest practicable date.   DOCUMENTS
        INCORPORATED BY REFERENCE
      o x
 
 o x









**Explanatory
        Note**
  On
        March
        12, 2007, the Company amended and re-filed annual reports on Form 10-KSB
        for the
        years ended November 30, 2005 and 2004.
  The
        Board
        of Directors, in reviewing the annual reports report on Form 10-KSB for the
        years ended November 30, 2005 and 2004 and in discussion  with the
        Company's auditors, authorized the filing of its Form 10-KSB for the years
        ended
        November 2005 and 2004 for the following reason:
  The
        financial statements for the year ended November 30, 2005 have been restated
        due
        to the Company determining that it had improperly recorded the value of common
        stock issued and common stock options exercised in payment for consulting
        expenses and services during the year ended November 2005.
  In
        all
        other material respects the Amended Annual Reports on Form 10-KSB is unchanged
        from the Annual Reports on Form 10-KSB for the years ended November 30, 2005
        filed by the Company.
  On
        February 22, 2007, the Board of Directors of AmeriChip International Inc.
        determined that the Company's financial statements for the fiscal years ended
        November 30, 2005 should no longer be relied upon.
  The
        financial statements for the year ended November 30, 2005 have been restated
        due
        to the Company determining that the value of common stock issued and common
        stock options exercised for consulting and services was improperly reflected
        at
        the negotiated value for the services rendered instead of the fair market
        value
        of the stock issued on the dates that the services were provided.
  The
        disclosure in the financial statements for the year ended November 20, 2005
        included the following footnote describing the restatement:
  **NOTE
        2 - RESTATEMENT AND CORRECTION OF ERRORS**
 
 The
        accompanying consolidated financial statements for the fiscal year ending
        November 30, 2005 have been restated to correct information concerning the
        fair
        value of the Company’s common stock issued pursuant the exercise of stock
        options. In following the Company’s internal control procedures, management
        determined that the Company originally reflected the exercise of stock options
        related to the payment of consulting services at negotiated values as reflected
        in each consultant’s invoice. Management revisited this issue and determined
        that these stock options should have been reflected at fair value, as determined
        by the fair market value on the date of issuance, instead of at their negotiated
        value. The effect of this adjustment was to increase additional paid in capital
        by $807,328, increase consulting expense by $807,328 increase net loss by
        $807,328 and increase net loss per share from ($0.02) per share to ($0.03)
        per
        share.









**AMERICHIP
      INTERNATIONAL INC.**


**FORM
      10-KSB**





Table
      of Contents




**Page****PART
                I**Item
                1.
            Description
                of Business
            1Item
                2.
            Description
                of Property
            14Item
                3.
            Legal
                Proceedings
            14Item
                4.
            Submission
                of Matters to a Vote of Security
                Holders
            14**PART
                II**Item
                5.
            Market
                for Common Equity and Related Stockholder
                Matters
            15Item
                6.
            Management’s
                Discussion and Analysis of
                Financial Condition and Results of Operations
            17Item
                7.
            Financial
                Statements
            F-1Item
                8.
            Changes
                In and Disagreements With Accountants on Accounting
                and Financial Disclosure
            26Item
                8A.
            Controls
                and Procedures
            26Item
                8B.
            Other
                Information
            26**PART
                III**Item
                9.
            Directors,
                Executive Officers, Promoters and Control
                Persons; Compliance with Section 16(a)
            27Item
                10.
            Executive
                Compensation
            30Item
                11.
            Security
                Ownership of Certain Beneficial Owners and
                Management and Related Stockholder Matters
            33Item
                12.
            Certain
                Relationships and Related
                Transactions
            34**PART
                IV**Item
                13.
            Exhibits
            35Item
                14:
            Principal
                Accountant Fees And Services
            36SIGNATURES
            
            37Exhibit
                Index









**PART
      I**




**Item
      1.     Description of
      Business.**




This
      summary highlights important information about our company and business. Because
      it is a summary, it may not contain all of the information that is important
      to
      you. To understand this offering fully, you should read this entire report
      on
      Form 10-KSB and the financial statements and related notes included in this
      report on Form 10-KSB carefully. Unless the context requires otherwise,
“ *we* ,”
      “ *us* ,”
      “ *our* ”,
“
and
      the “ *company* ”
and
      similar terms refer to AmeriChip International, Inc., and our subsidiaries
      collectively, while the term “AmeriChip” refers to AmeriChip International, Inc.
      in its corporate capacity.




**The
      Company**




We
      were
      incorporated in the State of Nevada on October 17, 2000 as Southborrough
      Technology Corporation. On March 9, 2001 we changed our name to Southborrough
      Ventures, Inc. We were in the business of mineral exploration but initially
      relied upon the mineral exploration of others and never conducted any mineral
      exploration ourselves. We obtained an option to acquire a 100% interest in
      a
      mineral claim located in the Slocan Mining District Province of British
      Columbia, Canada. We referred to this mineral claim as the Cedar mineral claim.
      This option was exercisable by us completing further cash payments and share
      issuances to the option or and by completing minimum required exploration
      expenditures on the Cedar mineral claim. We allowed the option on this claim
      to
      expire on or about June 30, 2003.





Our
      objective was to conduct mineral exploration activities on the Cedar mineral
      claim in order to assess whether the claim possessed commercially exploitable
      reserves of silver, lead or zinc. We were unable to identify any commercially
      exploitable reserves. Our proposed exploration program was designed to search
      for commercially exploitable deposits.





On
      February 27, 2003, our board of directors approved the termination of our
      exploration activity and the acquisition of the AmeriChip Laser Assisted Chip
      Control (“LACC”) technology.





On
      February 27, 2003 our Board of Directors signed an Agreement and Plan of
      Reorganization with AmeriChip Ventures, Inc. (“AVI”), of Detroit, Michigan to
      acquire 100% of the outstanding common stock of AVI, in exchange for 60 million
      shares of our common stock.





On
      March
      22, 2003 the terms of the Agreement and Plan of Reorganization dated February
      27, 2003 were consummated pursuant to which we, AVI and AVI shareholders agreed
      to effect a reorganization under Section 368 (a) (1) (B) of the Internal Revenue
      Code of 1986, as amended. Pursuant to




1




the
      Agreement and Plan of Reorganization, we acquired all of the issued and
      outstanding shares of AVI’s common stock with the result that AVI is now our
      wholly owned subsidiary corporation. In exchange, for the shares of AVI, we
      issued 60 million shares common stock to David Howard, the former Chairman
      of
      our Board of Directors, Marc Walther, our Chief Executive Officer, and Ed
      Rutkowski, a member of our Board of Directors. Each of the foregoing individuals
      received 20 million shares of common stock and were the sole shareholders of
      AVI.





On
      January 21, 2003, Ed Rutkowski, transferred his patent, which covers the
      technology discussed below, to AVI. In consideration of the transfer of the
      patent, we are obligated to pay the following: Messrs Howard, Walther and
      Rutkowski, each received US $1 million payable at the rate of $10,000 on or
      before the first day of each calendar month beginning September 1, 2003 with
      interest accruing on any unpaid balance at the greater of (i) five percent
      (5%)
      and (ii) the prime rate plus 1% as reported in the Wall Street Journal on the
      first business day following each July and January 1, of each year until paid
      in
      full. The company may repay any or all of this amount without penalty. Messrs
      Howard, Walther and Rutkowski have agreed to a suspension in payments until
      we
      begin generating revenues from operations. The amounts owed to them, however,
      will continue to accrue.





On
      October 16, 2003, we executed a definitive Asset Purchase Agreement with
      American Production Machining LLC, a Michigan limited liability company (“APM”)
      to acquire certain of its assets, pay APM’s outstanding balance to Comerica Bank
      and, assume $1,900,000 in liabilities owed by APM to Comerica Bank. The
      agreement expired on January 24, 2004. Subsequently
      we were unable to obtain the necessary funding to conclude the
      transaction .
      In
      August 2004, we tendered a bid to the United States Bankruptcy Court to pursue
      our acquisition of APM . On
      April
      13 th ,
      2005,
      the Company on advice of counsel withdrew its offer to purchase the assets
      of
      APM.





In
      December 2003, we changed our name to AmeriChip International Inc. and we now
      trade on the Bulletin Board operated by the National Association of Securities
      Dealers, Inc. under the symbol (OTC-BB) under the symbol “ACHI”.





Our
      principal offices are located at 9282 General Drive, Suite 100, Plymouth, MI
      48170-4607 USA.




**Summary**




Currently,
      we have two patents covering the technology described below. To support these
      patents, we have ordered and put a deposit on equipment sufficient to
      manufacture production and trial orders. The deposit was in the amount of
      $50,000 and paid to GSI Lumonics, Inc. The total cost of




2




the
      robot
      and laser is $229,845. In April 2005, the Company paid the balance owing on
      the
      robot and laser and took delivery of the equipment . Between
      October and November of 2005, we acquired a Clausing lathe, costing $7,000
      for
      the testing lab at the KSI Machine and Engineering facility. We have ordered
      a
      Mazak 350M machining center, costing $210,487, to assist in the testing and
      implementation process for prospective customers that is due to be received
      in
      late March, 2006.





**Overview**





Our
      core
      patented technology includes the use of lasers to effect a controlled breaking
      of the metal chip. Our technology focuses on increasing the machining
      efficiencies to effect faster feed rates, deeper depths of cut and less down
      time. The process is designed to work with technologies of existing machines
      and
      operations. We expect to continue to develop additional proprietary technology
      to enhance the patent and its benefits.





Our
      technology, when implemented by customer, will eliminate dangerous ribbon-like
      steel chips that tangle around moving tool parts, automation devices and other
      components essential to the machine processing of low to medium grade carbon
      steels and non-ferrous metal parts. We believe that the result of this process
      is a superior product manufactured in a safer working environment, avoiding
      many
      of the health and safety issues associated with traditional metal processing
      methodologies, while offering potential cost savings. The core cost savings
      to
      this technology is the ability to effect faster thru put with less capital
      equipment and labor as a component of cost per piece.





We
      have
      completed the design and testing of the patented LACC technology. We are
      currently working with automakers and vendors with a view to supplying processed
      parts.





**Alliances**





The
      Company has the following alliances:





Meritage
      Solutions is now known as Automated Concepts. This company delivers integrated
      systems for automated production lines. Automated Concepts has designed
      production cells that are lasered between centers.




GSI
      Group
      - A leading provider of laser equipment. GSI Lumonics has been used as the
      exclusive supplier of laser equipment to the Company. **** This is
      being done, in part, as a result of GSI’s participation and support of the
      Company during our research and development stage.





3




Creative
      Automation - A leading integrator of palletized automation and integration
      with
      laser, robots and part quality.





Seco-Carboloy
      - Carboloy, a Seco Tools company, is
      a
      leader in metalworking technology.





The
      Company does not have written agreements with the four named strategic alliance
      companies. The Company’s arrangement with GSI Group is that the Company will
      exclusively purchase lasers and robots from them in exchange for being able
      to
      run trials in their laboratory in their Plymouth, MI testing facility. Meritage,
      Inc. will be utilized if there is a requirement to process a fully automated
      system which includes lasers robots and conveyors. Should an order require
      palletization, then the Company is committed to giving Creative Automation
      Company the right to fill the requirement on a first come, first serve basis.
      All of the Company arrangements are sales driven.





**Subsidiaries**





On
      May 5,
      2004, the Company created a wholly-owned subsidiary, AmeriChip Tool and
      Abrasives, LLC. (“ATA”). The new subsidiary will be responsible for providing
      all the tools necessary for metal removal in the machining process.





On
      July
      19, 2004, ATA secured the right to represent Seco-Carboloy, in addition to
      Kinik , Superior
      Abrasive and Val-U-Max. ATA has entered into distribution
      agreements/arrangements with: Kinik - Grinding Wheels , Superior Abrasive -
      abrasive products, Valu-U-Max,(Special cutting tools) - ACE Drill Corporation,
      (High Speed Drills) Sidley Diamond Tool Company, ( Diamond Drills ) Bates
      Abrasives, Inc. (Abrasive products) The Desmond-Stephan Mfg. Co., Production
      Tool Supply, (Dressers and Cutters) Michigan Drill Corporation, (Drills)
      Carboloy, (Carbide Tools) Oil Screen-Reven, (filters) Keo Cutters, (Drills)
      Morse Cutting Tools (Cutting Tools), Marxman Tools (Cutting Tools) Gemtex
      (Abrasive products) Indasa (Coated Abrasives) Howell Tool Service (Tooling
      and
      Abrasives) Felton Brush ( Brushes) and Mitutoyo Gauges (Gauges) Magafor
      Precision (Drills), Sandusky CO. (Abrasives), Cumi (Grinding Wheels). These
      relationships give the Company the right to make sales calls and or sell the
      products of these companies directly to ATA’s customer base. The right to
      represent is defined by “being appointed to act as a distributor on behalf of a
      specific company and given the right to represent their product line on behalf
      of the subject company.” The products are sold to ATA, which acts as a
      distributor, at a discount from market price. ATA then sells the product at
      the
      market price. The companies provide the Company with all their marketing tools,
      samples and other selling material, which assists the Company in selling their
      product line. The Company is also able to offer their products via our on-line
      marketing section of the Company’s website at www.AmeriChiplacc.com .
      The
      Company derives the Company’s income from selling the various companies products
      to their




4




customers.
      The primary motivation for having distributors is to eliminate the need for
      a
      sales staff. All of the companies, with which ATA has chosen to become
      associated, make products that are in the metal removal industry, which is
      consistent with our business model.





On
      August
      3, 2004, ATA announced its purchase of the Nasco Brand name of abrasive
      products. This line of abrasive products has been sold throughout the United
      States and Canada for many years. The Company believes that the acquisition
      of
      this brand and its inventory will allow its subsidiary, AmeriChip Tool and
      Abrasives, to immediately generate sales by offering a wider breadth of products
      for all its current and future customers who require abrasive products in their
      manufacturing processes. Abrasives are typically used in the process after
      machining. The purchase of this brand name is consistent with the implementation
      of the Company’s business model.




We
      have also formed a Canadian wholly-owned
      non-operating subsidiary, AmeriChip Canada Inc., located in Newmarket, Ontario,
      in order to facilitate the transaction of business with Canadian suppliers
      and
      customers.





**The
      Process**





The
      AmeriChip LACC process is designed to increase thru put with less capital
      equipment and labor as a component of cost per unit. By increasing depth of
      cut
      and feed rates, less capital equipment and labor are required to perform the
      same manufacturing tasks. The LACC process also sets up an additional platform
      for savings that can be utilized but is not essential to creating the
      justification for the use of this patented process. For Example, Traditional
      methods of handling the residue of machining metal parts has necessitated the
      manufacture of specially designed chip control inserts and or the use of
      coolants to assist in the separation and flushing of contaminated metal chips,
      a
      problem that has plagued the metal parts manufacturing industry for more than
      60
      years. The problem, however, has become even more prevalent with the development
      of highly automated machine tools during the last two decades. Automated
      machinery was developed to satisfy the demand for the increased production
      of
      machined metal components by the automotive sector as well as other industries.
      Certain operations resulted in such serious chip control problems that some
      companies were unable to effectively capitalize on the benefits of automation.





The
      metal
      machining industry seeks to increase production and automate the machining
      process. The automotive industry has been particularly hard pressed to effect
      lower costs both within its own internal operations as well as components
      manufactured on its behalf by outside suppliers who must remain competitive.
      Preventing the forfeiting of contracts to foreign parts providers where labor
      and other costs are considered lower than in the United States is of key
      importance. Stringy metal chips wrap around automatic gauging and interfere
      with
      robotics to cause an interruption or discontinuance of the automation to manual
      operations. The AmeriChip LACC process allows this problem to be
      eliminated.





5




Currently
      coolant is deployed to flush the long stringy chips out of the machine
      components and remove them from the machine base itself. If the base becomes
      clogged it can cause many hours of non-productive down time and added costs
      while the machinery is cleaned. Coolant represents a major component of the
      entire manufacturing processes, representing as much as 15% of the total
      machining production cost. Coolant also has to be disposed of in accordance
      with
      environmental regulations, adding even more cost. Additional, coolant fumes
      may
      pose potentially serious health risks and the cause of long term problems when
      inhaled. The International Union, United Automobile, Aerospace and Agricultural
      Implement Workers of America (“UAW”) has established standards for coolant
      exposure in the five (5ml) per cubic meter and has requested that even stricter
      regulations be adopted at ten times more stringent. The multiple cost factor
      associated with the use of coolant as well as related health and environmental
      factors represent a challenge for metal machining manufacturing companies to
      significantly reduce the consumption of coolant or to eliminate its use
      altogether. By eliminating the use of coolant, incidence of workman’s
      compensation claims will be dramatically reduced. Additionally, the ribbons
      of
      metal chips that remain following the machining of metal components without
      the
      contamination of bacteria laden coolant will provide an additional revenue
      source for the company as the “chips” can be salvaged and recycled.





We
      have
      targeted the automotive sector initially, but our process can be applied to
      any
      industry where the machining of metal is a major process of manufacturing of
      component parts. This includes, but is not limited to oil pipe and coupling
      production, heavy truck, off-road construction, farm implements, aerospace
      and
      defense industries.





AmeriChip
      has a flexible marketing plan that is customer driven.





1)****
            **License
                the process**to
                specific customers for specific parts. Under this scenario, the customer
                would pay AmeriChip a per piece price on a monthly or*quarterly*basis. This is the most desirable, due to the fact that AmeriChip
                has no
                capital outlay.





2)****
            **AmeriChip
                will process parts with the LACC process**and deliver to the customer location for a cost per piece price.
                This
                operation can be at the customer facility, at or close by the metal
                supplier to stay in the logistics path or at an AmeriChip facility
                at an
                agreed upon location.





3)****
            **AmeriChip
                manufactures a complete part**and delivers to customer for a per piece cost. This is the most capital
                intensive but gives a significant increase in total revenues and
                profit
                over the previously mentioned market
                approaches.





6





Our
      customers are expected to find a variety of compelling benefits. We believe
      that
      many of these benefits result in operational efficiencies and significant cost
      savings in the overall machining of metal parts. We believe that the benefits
      of
      using our process would include the following:





***
      Less Machine Down-Time**




1.
            Chip Clearing by operators
              of
              tools and parts2.
            Reduced unpredictable tool
              breakage resulting from wrapping of chips, re-cutting of
              chips3.
            Eliminate down time required
              for
              chip pullers to clear machines and under floor conveyers of clogged
              chip
              bundles4.
            Increased machine efficiency
              by
              eliminating chip bundles from tangling around tool slides, posts, holders
              and interfering with adjacent moving parts, such as robotics, automation,
              chucking and in-line process gauging5.
            Predictable tool change
              management
              program linked to consistency in tool life6.
            Reduced incidents of on-the-job injury
              from
              exposure to sharp, long continuous stringy chips, which requires medical
              down time. Jobs are handled more quickly and efficiently leading to
              less
              frustration and constant worry about dealing with dangerous
              chips.




***
      Reduced Costs**




1.
            Increased
              thru-put will require less time needed to create the same number of
              parts.
              Faster feed rates and deeper depth of cut.2.
            Reduction
              of direct labor - chip pullers are no longer required.3.
            Elimination
              of maintenance and outside special services to clean and repair chip
              evacuation systems, thus increasing productivity through reduced machine
              down time4.
            Reduction
              of overtime because of increased thru-put per machine. Less machinery
              and
              labor required to do the same number of parts.5.
            Reduced
              use of Hi-Lo driver’s time to removed containers filled quickly because of
              the chip bundles. Few containers are necessary due to chip
              compaction.6.
            Improved
              tool life due to less breakage because of chip bundles and the heat
              dissipating with the chip.7.
            Less
              machine maintenance required8.
            Reduced
              scrap9.
            Elimination
              of coolant. The LACC process does not require the use of coolant
              whatsoever. The working environment is therefore less toxic, cleaner
              and
              safer. Helps achieve the Zero Waste- Zero Landfill philosophy.10.
            Reduction
              in coolant filter cost11.
            Reduction
              in coolant disposal cost




7




12.
            Reduced
              costs of gloves and aprons as fewer are needed13.
            Better
              railcar utilization due to chip compaction14.
            Lower
              insurance rates as a result in the reduction of injuries related to
              the
              handling of long, sharp, stringy chips, cleaner and safer work area,
              which
              is less toxic15.
            Uncontaminated
              chips can now be sold for profit as compared to the cost of removal
              of
              contaminated chips.




***
      Tooling and Process Efficiencies -**




1.
            Elimination of the need for light/semi-finish
              and finish depths of cuts in low to medium carbon materials and
              non-ferrous metals thus allowing in many cases one pass to remove the
              desired amount of metal. Faster Feed rates and deeper depth of cut
              allow
              faster thru put which requires less capital equipment and labor.2.
            Reduced welding and packing of chips,
              which
              reduces the wear and tear on cutting tools and the amount of heat that
              is
              transfer to the cutting tool and part.3.
            Improved chip disposal and handling
              costs
              through better management of chip lengths4.
            Reduced capital equipment expenditures
              since
              high-pressure coolant systems and the filters that accompany them are
              no
              longer necessary5.
            The need for specially designed chip
              control
              inserts and the use of coolants to manage the “chip” are no longer
              required with the LACC process.6.
            Utilization of automation because of
              the
              elimination of chips that restrictrobotics
              and automatic gauging.





·
            **Raw
                Material Efficiencies**-





The
      machining industry has strived to move towards machining castings and forgings
      to more near net shapes to eliminate the amount of material being removed
      because of slow costly machining cycles and all problems inherent to long
      stringy chip producing materials. The AmeriChip LACC process creates a platform
      for faster thru put due to the ability to machine parts with faster feed rates
      and deeper depths of cut with the elimination of those inherent problems. With
      this in mind, the LACC process will allow the part to be machined from a solid
      bar rather than a costly forging and significantly reduce the total part cost
      even if the total machine time is at or slightly more than it would be without
      the LACC process. For example, a given forging for a shaped shaft is $30 and
      the
      cost of a solid bar is $10. If the cost of machining stays the same even though
      the AmeriChip LACC process will machine with faster feed rates and deeper depth
      of cut. The reduction in going from an expensive forging to a piece of




8




round
      bar
      stock is a savings of $20. This allows the customer to redefine the way he
      processes a part and receive savings up stream and down stream from the
      machining process.





Our
      management believes that as a result of implementing our LACC process on certain
      parts prior to machining that we well be able to pass on to the customer many
      benefits that will result in operational efficiencies and significant cost
      savings in the overall machining of metal parts.





Other
      down stream savings achieved by applying the AmeriChip LACC process to parts
      prior to machining are reductions in machine down time which is traditionally
      caused because chips have to be cleared by the operators from tools and parts
      and the replacement of tools which have been broken as a result of the wrapping
      of chips around them. Down time is also created when time is taken by chip
      pullers to clear machines and under floor conveyers of clogged chip bundles.
      Since we can eliminate chip bundles from tangling around tool slides, posts,
      holders and interfering with adjacent moving parts, such as robotics,
      automation, chucking and in-line process gauging we increase machine
      efficiencies. Tools are not damaged from chips and there we can offer
      predictable tool change management program linked to consistency in tool life.
      We believe that there will be reduced incidents of on-the-job injury from
      exposure to sharp, long continuous stringy chips keeping workers working instead
      of seeking medical treatment. With a continuous job run, projects will be
      handled more quickly and efficiently leading to less frustration and constant
      worry about dealing with dangerous chips.





With
      the
      implementation of the LACC prior to machining metal parts our customers will
      enjoy reduced costs due to increased throughput as a result of less downtime
      and
      the reduction of direct labor since chip pullers will no longer be required.
      Our
      process eliminates the need for maintenance and outside special services to
      clean and repair chip evacuation systems, thus increasing productivity through
      reduced machine down time.  The
      LACC
      process provides for increased through-put for each machine and therefore more
      work can be accomplished per shift, allowing for the reduction of overtime
      costs
      required to ensure that jobs are completed on schedule. With no chip bundles
      being produced, a client would no longer need to use a Hi-Lo driver’s time to
      removed containers filled with chip bundles. In addition, fewer containers
      are
      necessary due to chip compaction adding to reduced costs. Other benefits
      included improved tool life due to less breakage because of chip bundles, less
      machine maintenance, reduced scrap and the scrap that remains can be recycled
      and sold for cash. Uncontaminated chips can now be sold for profit as compared
      to the cost of removal of contaminated chips.





The
      LACC
      process does not require the use of coolant whatsoever and therefore the working
      environment is therefore less toxic, cleaner and safer. The benefits to the
      client include a reduction in coolant filter cost, reduction in coolant




9




disposal
      cost, reduced costs of gloves and aprons as fewer are needed and better railcar
      utilization due to chip compaction. The reduction of injuries related to the
      handling of long, sharp, stringy chips in a cleaner and safer work area, in
      which there are fewer toxins can lead to reduced insurance costs for the client.


.


One
      of
      the key benefits to applying the LACC process prior to machining is that it
      results in tooling and process efficiencies . This is accomplished due to the
      elimination of the need for light/semi finish and finish depths of cuts in
      low
      to medium carbon materials and non-ferrous metals. In addition, the welding
      and
      packing of chips is reduced which normally affects the wear and tear on cutting
      tools, shortening their life span. Improved chip disposal and handling costs
      through better management of chip lengths makes the machining process run much
      more smoothly. Since high-pressure coolant systems are no longer necessary,
      the
      client will enjoy reduced capital equipment expenditures. The need for specially
      designed chip control inserts and the use of coolants to manage the “chip” are
      no longer required with the LACC process.




KSI
      Machine & Engineering Inc.





On
      September 14, 2004, the Company executed a letter of intent with KSI Machine
      and
      Engineering, Inc. (hereinafter “KSI”) to acquire all of KSI’s outstanding stock.
      KSI is a manufacturer of automotive die and mold castings which use horizontal
      spindle 5 axis computer numerical controlled machines. During the year ended
      November 30,2005, the Company paid an accumulated deposit of $50,000 for this
      agreement. During the year ended November 30, 2005, the Company paid an
      additional $150,000 and signed a stock purchase agreement with KSI. This total
      deposit of $200,000 completes the deposit requirement related to the KSI
      acquisition. On June 24, 2005 the Company announced that it was entering in
      to a
      license agreement with KSI Machine and Engineering Inc. for the use of
      AmeriChip’s Laser Assisted Chip Control technology. KSI and AmeriChip are also
      negotiating a joint venture relationship, from which AmeriChip will generate
      revenues from the application of its proprietary technology in a Tier One
      environment. As of the report date of these financial statements, this
      acquisition has not been completed.




The
      completion of the transaction is subject to a number of factors, including
      but
      not limited to, the satisfactory completion of due diligence, the negotiation
      and execution of definitive agreements, and other customary closing conditions.
      There can be no assurance that the purchase will be consummated. The material
      terms of the agreement are as follows: The stock purchase will be for an
      aggregate consideration of $3.2 million. The Company agreed under a separate
      agreement with Mr. Jim Kotsonis, owner of KSI to issue 500,000 restricted shares
      of the Company’s common stock for consulting services to be rendered over the
      next 18 months. The Company has created a testing facility at KSI Machine and
      is
      currently running customers parts for evaluation. The




10




Company
      has also hired a full time robotic and laser technician to provide faster
      turnaround for customer parts located at the KSI facility.





Osborn
      International





On
      December 2, 2004, we issued a press release to announce the appointment of
      AmeriChip International as a distributor for Osborn International, the world's
      largest industrial brush maker and a manufacturer of tools for surface
      finishes.





AmeriChip
      International Holdings, LLC





On
      September 10, 2004, we established AmeriChip International Holdings, LLC, as
      a
      wholly owned subsidiary of AmeriChip International, Inc. This entity was created
      in order to acquire American Production and Machining, LLC, an unrelated entity,
      out of bankruptcy. This transaction has been terminated due to the Board of
      Directors determination that this was not a transaction AmeriChip should
      continue to pursue. Accordingly, AmeriChip International Holdings, LLC is at
      present a non-operating entity.





RM
      Communications





In
      October 2003, we executed a six-month agreement with RM Communications
      (hereinafter “RMC”), to provide services and website development for AmeriChip.
      RMC is entitled to receive $2,000 per month for six months, 100,000 shares
      of
      common stock upon signing the agreement, 100,000 shares of common stock upon
      completion of services, and 300,000 three-year warrants, which will expire
      in
      January 22, 2007. The warrants are exercisable per the following terms: 100,000
      warrants at $0.30, 100,000 warrants at $0.40, and 100,000 warrants at $0.50.
      We
      will also pay additional costs incurred by RMC in performance of the contract.





In
      April
      2004, we executed a continuation of the aforementioned agreement for an
      additional year. RMC is entitled to receive $3,500 per month, 200,000 shares
      of
      common stock upon signing the agreement, and 3-year warrants exercisable at
      $0.25, payable in increments of 150,000 to be issued at the beginning of each
      quarter. During the year ended November 30, 2004, 100,000 shares of common
      stock, 300,000 warrants, and $9,000 in cash were paid to RMC. During the three
      months ended February 28, 2005, the Company entered into a new agreement with
      RMC and cancelled all 1,050,000 existing warrants issued to RMC. The Company
      issued 3,200,000 new three-year warrants to acquire 3,200,000 shares of common
      stock at an exercise price of $0.035 per share. Additional fair value of the
      warrants determined on the new grant date of $19,524 was expensed to consulting
      and 150,000 warrants of the aforementioned new issuance were exercised for
      common stock for cash of $5, 250.
      In
      June 2005,  the
      Company cancelled all remaining warrants issued




11




to
      RMC.
      In June 2005, the Company issued 6,065,000 shares of its common stock to RMC.
      These shares replaced all outstanding warrants and completed the Company’s
      contract with RMC. The Company will not be renewing its contract in January
      2006.





**AmeriChip
      Pipe Technologies, Inc.**





AmeriChip
      Pipe Technologies, Inc., (a Texas Corporation), was formed in February 2005
      to facilitate the implementation of the Flexible Manufacturing System that
      the
      company designed to manufacture oil pipe in a billion dollar industry. At
      present, AmeriChip Pipe Technologies, Inc. is a non -operating
      company.





**Current
      Products and Services**





Our
      patented laser assisted chip control process is readily applicable to any metal
      component that requires precision finishing. We believe that our process will
      provide significant value to our customers by decreasing the costs and
      increasing the efficiency of their operations. We are targeting our service
      to
      businesses in the following markets:





*Automobiles


*Oil
      Production and Refining


*Aerospace


*Off-Road
      Construction


*Farm
      Implements Manufacturing


*Defense
      Contractors





**Sales
      & Marketing**





We
      intend
      to transition from being a company focusing almost solely on product development
      and testing, to focusing on sales and marketing. We expect to sell a service
      and
      a product. The service will be the manufacturing of a finished product using
      equipment with the LACC technology. We further anticipate that customers will
      purchase equipment using LACC technology from one of our strategic alliances
      and
      also pay AmeriChip a royalty for use of the LACC technology. Initially we will
      focus on customers in the automobile and heavy truck industry.





Management
      has identified what is believed to be large markets that remain underserved
      but
      would be logical, potentially strong candidates given an appropriate product
      and
      service offering at the right price. Just for automotive products, management
      has identified particular market segments that would be likely to benefit from
      our LACC technology: axle shafts, axle tubes, torque converters, spindles,
      pinions, input/output shafts, side gears and connecting rods.





12




**Government
      Regulations**





In
      addition to regulations applicable to businesses in general, our plant
      operations will be subject to other regulations that are common in industrial
      manufacturing.




**Competition**





We
      compete with other parts machining companies. We have not generated any revenues
      from our operations and are a minuscule participant in the parts manufacturing
      business.





**Intellectual
      Property**





We
      rely
      on our patents to protect our technology.
      We also
      have unpatented proprietary technology. We rely on nondisclosure and other
      contractual provisions to protect our proprietary technology. Currently, we
      have
      two patents granted and we intend to file other patent applications for
      enhancements to the existing patents. As part of our confidentiality procedures,
      we generally enter into nondisclosure agreements with our employees,
      consultants, distributors and partners and limit the dissemination and access
      to
      our technical documentation and other proprietary information. There is no
      assurance our patents will provide us with adequate protection. If a third
      party
      infringes on our patents, we do not have adequate funds available for protracted
      litigation and consequently may not be able to enforce our rights under
      applicable patent laws.





As
      of
      September 8, 2004, we had filed a total of two patent applications with the
      U.S.
      Patent and Trademark Office (PTO) covering our technology, both of which have
      been approved. The approved patents are as follows:





1.
            “UNITED
                STATES PATENT RUTKOWSKI” with PTO Patent Number 5,200,593, issued April 6,
                1993.


2.
            “UNITED
                STATES PATENT RUTKOWSKI” with PTO Patent Number 5,384,446, issued January
                24, 1995.





**Employees**





As
      of
      November 30, 2005, we employ seven full-time employees and two full-time
      consultants. We have no collective bargaining agreements with our
      employees.





13




**Item
      2. Description of Property**





Our
      principal executive offices are located at 9282 General Drive, Plymouth,
      Michigan. In August, 2004, our wholly-owned subsidiary, AmeriChip Tool and
      Abrasives, LLC signed a five (5) year lease for $2,000 per month with gradual
      increasing scale of the monthly payments. We share office space with our
      subsidiary, AmeriChip Tool and Abrasives, LLC and we do not pay rent to our
      subsidiary.




**Item
      3. Legal Proceedings**




Cornell
      Capital filed an action against the Company in the Superior Court of New Jersey,
      Hudson County, Chancery Division, General Equity Part. In response to this
      filing, the Company (a) removed the action to the United States District Court,
      District of New Jersey; (b) answered the complaint denying its material
      allegations of liability and (c) interposed a counterclaim for damages against
      Cornell. As of November 30, 2005, we expect, at minimum that there will be
      a
      substantial reduction in the amount that Cornell claims it is owed. The
      Company may require previously issued common stock to be returned in settlement
      of these claims. Although the Company believes it will prevail under the
      circumstances, there is still a chance that the Company may have to honor
      Cornell conversion rights and payments under its agreements.





Other
      than the above, we are not a party to any pending material legal proceedings
      and
      are not aware of any threatened or contemplated proceeding by any governmental
      authority against the Company or its subsidiaries. Notwithstanding, from time
      to
      time, the Company may become subject to legal proceedings and claims in the
      ordinary course of business, including employment-related and trade related
      claims.





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





None.





14




**PART
      II**





**Item
      5. Market for Common Equity and Related Stockholder
      Matters**




**Market
      Information**




Our
      common shares are currently quoted on the OTC Bulletin Board under the symbol
      “ACHI.OB.” The following table sets forth the quarterly high and low bid prices
      for our common shares on the OTC Bulletin Board for the periods indicated.
      The
      prices set forth below represent inter-dealer quotations, without retail markup,
      markdown or commission and may not be reflective of actual transactions. Our
      shares began trading on January 10, 2003.




**Bid
                Price Per Share****High**
            
            **Low****2003****Quarter
                ended**February
                28, 2003
            $3.45
            
            $2.75May
                31, 2003
            $2.15
            
            $1.60August
                31, 2003
            $2.00
            
            $0.14November
                30, 2003
            $0.47
            
            $0.07**2004**February
                29, 2004
            $0.19
            
            $0.12May
                31, 2004
            $0.17
            
            $0.05August
                31, 2004
            $0.11
            
            $0.04November
                30, 2004
            $0.03
            
            $0.03**2005****Quarter
                ended**February
                28, 2005
            $0.06
            
            $0.05May
                31, 2005
            $0.04
            
            $0.03August
                31, 2005
            $0.05
            
            $0.04November
                30, 2005
            $0.04
            
            $0.03


_______________


**Holders**




We
      have
      approximately 48 record holders of our common stock as of February 24, 2006,
      according to a shareholders’ list provided by our transfer agent as of that date
      and our records relating to issuable shares.




**Dividend
      Policy**




We
      have
      never paid any cash dividends on our common shares, and we do not anticipate
      that we will pay any dividends with respect to those securities in the
      foreseeable future. Our current business plan is to retain any future earnings
      to




15




finance
      the expansion development of our business. Any future determination to pay
      cash
      dividends will be at the discretion of our board of directors, and will be
      dependent upon our financial condition, results of operations, capital
      requirements and other factors as our board may deem relevant at that
      time.




**Recent
      Sales of Unregistered Securities**




On
      January 11, 2006, AmeriChip entered into and closed a Stock Purchase Agreement
      with Marc Walther and Edward Rutkowski, being officers and directors of the
      Company, whereby 24,000,000 shares of its common stock were sold at $0.085
      per
      share and 10,000,000 shares of its common stock were sold at $0.04 per share
      in
      satisfaction and payment of indebtedness in the amount of $1,220,000 due and
      owing to each person under the terms of that certain Licensing Agreement with
      the Company dated on or about January 21, 2003. As of January 1, 2006, the
      $1,220,000 indebtedness amount represented the accrued principal and interest
      current due and owing to each person plus the discounted present value of the
      monthly payments arising from the unpaid $650,000 principal and interest due
      under the terms of the said Licensing Agreement.




Subsequent
      to November 30, 2005, the Company issued 32,723,122 shares of common stock
      at an
      average price of $0.032 per share under the Company's 2003 Nonqualified Stock
      Option Plan.




Subsequent
      to November 30, 2005, the Company issued 21,236,887 shares of common stock
      at an
      average price of $0.039 per share for services rendered to the
      Company.




The
      shares of the Company’s common stock sold to Messrs. Walther and Rutkowski were
      issued pursuant to an exemption from the registration requirements of the
      Securities Act of 1933, as amended (the “Act”), afforded by Section 3(b) and/or
      Section 4(2) of the Act and Rules 505 and/or 506 of Regulation D thereunder,
      as
      a transaction not involving a public offering. Each investor represented that
      he
      acquired the securities for investment only and not with a view of or for sale
      in connection with any distribution thereof and an appropriate investment legend
      will be affixed to the share certificate issued to each investor. Each of the
      investors is an accredited investor as defined in Rule 501 of Regulation D
      promulgated under the Act.




16




**Item
      6. Management’s Discussion and Analysis of
      Financial Condition and Results of Operations**




The
      following discussion should be read in conjunction with, and is qualified in
      its
      entirety by, our consolidated financial statements and the notes thereto and
      other financial information included elsewhere in this Annual Report on Form
      10-KSB. This Annual Report, including the following Management’s Discussion and
      Analysis, and other reports filed by the Registrant from time to time with
      the
      Securities and Exchange Commission (collectively the “Filings”) contain
      forward-looking statements which are intended to convey our expectations or
      predictions regarding the occurrence of possible future events or the existence
      of trends and factors that may impact our future plans and operating results.
      These forward-looking statements are derived, in part, from various assumptions
      and analyses we have made in the context of our current business plan and
      information currently available to us and in light of our experience and
      perceptions of historical trends, current conditions and expected future
      developments and other factors we believe to be appropriate in the
      circumstances. You can generally identify forward-looking statements through
      words and phrases such as “seek”, “anticipate”, “believe”, “estimate”, “expect”,
“intend”, “plan”, “budget”, “project”, “may be”, “may continue”, “may likely
      result”, and similar expressions. When reading any forward-looking statement you
      should remain mindful that all forward-looking statements are inherently
      uncertain as they are based on current expectations and assumptions concerning
      future events or future performance of our company, and are subject to risks,
      uncertainties, assumptions and other factors relating to our industry and  results
      of operations, including but not limited to the following factors:




•
            Changes
                in existing product liability, tort or warranty laws or the introduction
                of new laws, regulations or policies that could affect our business
                practices: these laws, regulations or policies could impact our industry
                as a whole, or could impact only those portions in which we are currently
                active.




•
            Changes
                in environmental regulations: these regulations could have a negative
                impact on our earnings; for example, laws mandating greater fuel
                efficiency could increase our research and development
                costs.




•
            Changes
                in economic conditions, including changes in interest rates, financial
                market performance and our industry: these types of changes can impact
                the
                economy in general, resulting in a downward trend that impacts not
                only
                our business, but all companies with which we
                compete;




•
            Changes
                in relationships with major customers and/or suppliers: an adverse
                change
                in our relationships with major customers and/or suppliers would
                have a
                negative impact on our earnings and financial
                position.


17


•
            Armed
                conflicts and other military actions: the considerable political
                and
                economic uncertainties resulting from these events, could adversely
                affect
                our order intake and sale,.




•
            Factors
                that we have discussed in previous public reports and other documents
                filed with the Securities and Exchange
                Commission.




Should
      one or more of these risks or uncertainties materialize, or should the
      underlying assumptions prove incorrect, actual results may differ significantly
      from those anticipated, believed, estimated, expected, intended or
      planned.




Each
      forward-looking statement should be read in context with, and with an
      understanding of, the various other disclosures concerning our company and
      our
      business made in our Filings. You should not place undue reliance on any
      forward-looking statement as a prediction of actual results or developments.
      We
      are not obligated to update or revise any forward-looking statement contained
      in
      this report to reflect new events or circumstances unless and to the extent
      required by applicable law.




CRITICAL
      ACCOUNTING POLICIES





Management’s
      discussion and analysis of our financial condition and results of operations
      are
      based on our consolidated financial statements, which have been prepared in
      accordance with accounting principles generally accepted in the United States.
      The preparation of these consolidated financial statements requires management
      to make estimates and judgments that affect the reported amounts of assets,
      liabilities, revenues and expenses, and related disclosure of contingent assets
      and liabilities. Our critical accounting policies are described in Note 2 of
      the
      Company’s Consolidated Financial Statements. This summary of critical accounting
      policies of the Company is presented to assist in understanding the Company’s
      financial statements. All accounting estimates are at risk to change because
      of
      internal and external factors, and when adjustments are adopted. Most of our
      estimates are based upon historically known data and have remained stable over
      time. Certain estimates are subject to market place conditions, and are
      discussed below.





On
      an
      ongoing basis, management evaluates its estimates, including those related
      to
      impairment of long-lived assets, including finite lived intangible assets,
      accrued liabilities and certain expenses. We base our estimates on historical
      experience and on various other assumptions that we believe 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 materially from
      these estimates under different assumptions or conditions.





We
      believe the following critical accounting estimates and policies, among others,
      involve the more significant judgments and estimates used in the preparation
      of
      our financial statements as of this time. These assessments may change as the
      Company completes its acquisitions.




**Accounting
      for Convertible Notes and Securities
      with Beneficial Conversion Features**




Following
      guidance by EITF 00-27, the Company allocates a portion of proceeds received
      from convertible notes to warrants (granted to note holders) and also to the
      beneficial conversion feature of the debt. The value of the warrants and the
      beneficial conversion feature are recorded on the balance sheet as a debt
      discount and as an increase to stockholders’ equity. The discounts are amortized
      over the life of the loans.





**Inventories**




Inventories
      are stated at the lower of cost to purchase and/or manufacture the inventory
      or
      the current estimated market value of the inventory. We regularly review our
      inventory quantities on hand and record a provision for excess and obsolete
      inventory based primarily on our estimated forecast of product demand and/or
      our
      ability to sell the products and production requirements. Demand for the our
      products can fluctuate significantly. Factors which could affect demand for
      our
      products include unanticipated changes in consumer preferences, general




18




market
      conditions or other factors, which may result in cancellations of advance orders
      or a reduction in the rate of reorders placed by customers and/or continued
      weakening of economic conditions. Additionally, our estimates of future product
      demand may be inaccurate, which could result in an understated or overstated
      provision required for excess and obsolete inventory. Our estimates are based
      upon our understanding of historical relationships which can change at anytime.




**Revenue
      and Product Sales**





The
      Company recognizes revenue from product sales when the products are shipped
      and
      title passes to customers. The Company has not provided an allowance for sales
      returns because the revenues are new and there is no historical experience
      on
      which to base an estimate. This assessment may change as the Company develops
      the appropriate history of transactions in its operating companies and a
      provision for sales returns will be established. Returns of a product, if
      permitted by the manufacturer, are charged a 15% restock fee. Specialized
      machined products created to the customer’s blueprint specifications are also
      being produced. These product costs are market driven and the Company warrants
      the finished product to the extent they meet the specifications.





During
      the year ended November 30, 2005, the Company, through its business plan
      expanded its focus to include certain agency relationships for multiple vendors.
      As such, its policy for revenue recognition has been revised to recognize its
      status as an agent for these vendors. As an agent, the Company recognizes its
      commissions when earned. Commissions are earned by the Company when an order
      has
      been placed, delivery taken, and title has passed to the customer.




OVERVIEW





Our
      technology, when implemented, will eliminate dangerous ribbon-like steel chips
      that tangle around moving tool parts, automation devices and other components
      essential to the machine processing of low to medium grade carbon steels and
      non-ferrous metal parts. The result of this process is a superior product
      manufactured in a safer working environment, avoiding many of the health and
      safety issues associated with traditional metal processing methodologies, while
      offering potential cost savings.





We
      have
      completed the design and testing of our patented laser assisted chip control
      technology. We are currently working with automakers and v endors
      with a view to supplying processed parts.




In
        August
        2004, the Company's wholly owned subsidiary, AmeriChip Tool and Abrasives,
        LLC, agreed to purchase certain assets and inventory valued at $250,000.
        The Company signed a promissory note providing for a monthly payment of $729.17
        representing interest only for the first six months. Thereafter, the Company
        has
        committed to paying $2417.00 per month; such payments include interest on
        the
        unpaid portion. The Company has 10 years to redeem the Note.
 In
          addition, Richard Zyla received 125,000 shares of the Company's common
          stock for
          signing a non-compete agreement. The Company also issued 25,000 shares
          of its
          common stock to Mr. Thomas Howard in exchange for signing a non-compete
          agreement. The fair market value was recorded at .06 per share which was
          the
          common stock trading price during the respective periods. Mr. Thomas Howard,
          has
          no material relationship to the Company but is Mr. Walther's cousin and
          a
          founder of Americhip, Inc. Mr. Richard Zyla is Vice President of Engineering
          for
          AmeriChip International Inc. and for AmeriChip Tool and Abrasives, LLC,
          a wholly
          owned subsidiary of the Company. He works with the Company on select customer
          projects and assists with engineering and application for
          abrasives.




19




On
      April
      23, 2003, the Company executed a letter of intent with American Production
      Machining, LLC (hereinafter "APM") to acquire certain assets of APM subject
      to the execution of a definitive agreement. APM is manufacturer of automotive,
      truck and aircraft parts. They use computer numerical controlled machines
      and state of the art inspection equipment. On October 16, 2003, the Company
      executed a definitive Asset Purchase Agreement which required the payment
      of cash and the assumption of $1,900,000 in liabilities owed by APM to Comerica
      Bank. The original closing date for this transaction was November 15, 2003.
      We
      were, at the time, unable to obtain the necessary funding to conclude the
      transaction. Currently, the Company has secured the financing resources
      to pursue
      this acquisition with its agreement with Cornell Capital. In August 2004, the
      Company tendered a bid to the United States Bankruptcy Court to pursue its acquisition
      of APM. APM continued to operate under bankruptcy protection during this period.
      In April 2005 the Board of Directors, on advice of its attorneys, withdrew
      its
      bid to purchase the assets of APM.


On
        September 14, 2004, the Company executed a letter of intent with KSI Machine
        and
        Engineering, Inc. (hereinafter "KSI") to acquire all of KSI's outstanding
        stock.
        KSI is a manufacturer of automotive die and mold castings which use horizontal
        spindle 5 axis computer numerical controlled machines. During the year ended
        November 30, the Company paid a deposit of $50,000 for this agreement. On
        December 7, 2004 the Company paid an additional $100,000 and signed a purchase
        agreement with KSI the closing of such transaction being subject
        to a number of factors as described below. During the year ended November
        30,
        2005, the Company paid an additional $150,000 and signed a stock purchase
        agreement with KSI. This total deposit of $200,000 completes the deposit
        requirement related to the KSI acquisition. On June 24, 2005 the Company
        announced that it was entering in to a license agreement with KSI Machine
        and
        Engineering Inc. for the use of AmeriChip’s Laser Assisted Chip Control
        technology. KSI and AmeriChip are also negotiating a joint venture relationship,
        from which AmeriChip will generate revenues from the application of its
        proprietary technology in a Tier One environment. As of the report date of
        these
        financial statements, this acquisition has not been completed. The Company
        intends to complete this transaction.
  The
        completion of the transaction is subject to a number of factors, including but
        not
        limited to, the satisfactory completion of due diligence, the negotiation
        and
        execution of definitive agreements, and other customary closing conditions.
        There can be no assurance that the purchase will be consummated. The material
        terms of the agreement are as follows: The stock purchase will be for an
        aggregate consideration of $3.2 million. The Company agreed under a separate
        agreement with Mr. Jim Kotsonis, owner of KSI to issue 500,000 restricted
        shares
        of the Company's common stock for consulting services to be rendered over
        the
        next 18 months.
 
 20
  In
        November 2003, the Company executed a six-month agreement with CEOcast, Inc.
        (hereinafter "CEOcast") to provide consulting services for AmeriChip. CEOcast
        is
        entitled to receive $10,000 upon signing the agreement, 300,000 shares of
        common
        stock, and $10,000 per month for six months commencing on December 2003.
        During
        the year ended November 30, 2004, 100,000 shares of common stock were issued
        and
        CEOcast agreed to cancel the agreement with no penalties and also to agree
        to
        cancel the amounts owed to CEOcast by the Company. In July 2004, the Company
        signed a new agreement with CEOcast whereby the Company paid a retainer of
        $5,000 and issued 2,000,000 shares of common stock. The Company also agreed
        to
        pay $5,000 per month commencing in August 2004. During the year ended November
        30, 2004, the Company paid $17,000 to CEOcast under the terms of the agreement.
        CEOcast Inc. distributes the Company's press releases to its proprietary database
        of investors, provides leads to the Company from interested potential investors,
        posts a profile of the key products and services on CEOcast home page as
        well as
        all company press releases, coverage of Company updates where appropriate
        and
        introduction to potential financing sources. As of this report the Company
        has
        not renewed its contract with CEOcast.
  In
        October 2003, the Company executed a six-month agreement with RM Communications
        (hereinafter "RMC"), to provide services and website development for AmeriChip.
        RMC is entitled to receive $2,000 per month for six months, 100,000 shares
        of
        common stock upon signing the agreement, 100,000 shares of common stock upon
        completion of services, and 300,000 three-year warrants, which will expire
        in
        January 22, 2007. The warrants are exercisable per the following terms: 100,000
        warrants at $0.30, 100,000 warrants at $0.40, and 100,000 warrants at $0.50.
        The
        Company will also pay additional costs incurred by RMC in performance of
        the
        contract. In April 2004, the Company executed a continuation of the
        aforementioned agreement for an additional year. RMC is entitled to receive
        $3,500 per month, 200,000 shares of common stock upon signing the agreement,
        and
        3-year warrants exercisable at $0.25, payable in increments of 150,000 to
        be
        issued at the beginning of each quarter. During the year ended November 30,
        2004, 100,000 shares of common stock, 300,000 warrants, and $9,000 in cash
        were
        paid to RMC.
  21
  RM
        Communications, in addition to building and maintaining websites for both AmeriChip
        International and AmeriChip Tool and Abrasives, created our email infrastructure
        which it maintains, developed our corporate logo and branding. The Company
        did
        not renew the contract with RM Communications.
 
 On
        August
        29, 2005 the Company announced a new website address www.americhiplacc.com . At
        that
        time it engaged the services of Progressive Marketing Ltd. of Mississauga,
        Ontario to maintain and update the corporate websites as required. The Company
        pays for these services on an invoice basis.
  On
        September 7, 2005 the Company appointed James Miller as Vice President
        Sales/Marketing. Mr. Miller will be responsible for the development of new
        business using his extensive list of key contacts at the upper management
        levels
        within the automotive, aerospace and farm implement industries.
  On
        January 11, 2006, the Company appointed Thomas Schwanitz as its Chief Financial
        Officer. Mr. Schwanitz also joined the audit committee.


22




**RESULTS
      OF OPERATIONS**




FINANCIAL
      CONDITION AND RESULTS OF OPERATIONS


COMPARISON
      OF YEAR ENDED NOVEMBER 30, 2005,


TO
      YEAR
      ENDED NOVEMBER 30, 2004.




**Revenue
      Recognition.** We
      have
      generated revenues from our operations during the last two years. . We recognize
      revenue, when received of which there is no assurance, in accordance with
      Securities and Exchange Commission Staff Accounting Bulletin No. 101 ("SAB
      101"), "Revenue Recognition in Financial Statements." Revenue is recognized
      only
      when the price is fixed or determinable, persuasive evidence of an arrangement
      exists, the service is performed, and collectibility is reasonably assured.




**Revenues
      and Sales** .****Revenues for the year ended November 30, 2005 increased from $37,964
      for the year ended November 30, 2004 to $126,122. Gross Profit for the year
      ended November 30, 2005 increased from $23,750 for the year ended November
      30,
      2004 to $48,462. The increases were primarily from the sales of products during
      the whole year of 2005 compared to only a partial year in 2004.




**Operating
      Expenses** **.** Operating
      expenses, which include administrative expenses, legal and accounting expenses,
      consulting expenses and license increased from $3,019,832 for the year ended
      November 30, 2004 to $3,751,970 for the year ended November 30, 2005 an increase
      of $732,138. This increase is related to wages, administrative service expense
      and consulting expense.




**Net
      Loss** **.** Net
      loss
      increased from a net loss of ($3,467,384) for the year ended November 30, 2004
      to a net loss of ($4,294,876) for the year ended November 30, 2005. The reason
      for this increase is that general and administrative expenses increased
      substantially during the year ended November 30, 2005.




**PLAN
      OF OPERATION**





While
      we
      are in the process of finalizing our relationship with KSI Machine and
      Engineering, we are now in a position to implement our technology. We anticipate
      that the operations of KSI Machine and Engineering will bring to the




23




consolidated
      balance sheet of AmeriChip annual revenues of approximately $3,600,000 based
      on
      revenues generated in 2006.





The
      facilities of KSI Machine and Engineering are large enough to permit allocation
      of space for our new laser and robotic equipment which is now in operation
      at
      the KSI location,. This equipment is required in the implementation  of
      the
      LACC process and we are currently conducting pilot projects for various Tier
      One
      suppliers.





KSI
      Machine and Engineering is a manufacturer of automotive die and mold castings
      which use horizontal spindle 5 axis computer numerical controlled machines.





We
      believe that the patented technology, Laser Assisted Chip Control process
      ("LACC") for companies engaged in the machining of automobile parts can produce
      significant revenues for us. While we are optimistic about our initial customer
      experiences, there can be no assurances that the savings realized will be
      experience by all customers or that we will achieve significant
      revenues.




LIQUIDITY
      AND CAPITAL RESOURCES





We
      have
      not attained profitable operations since inception and we have not progressed
      significantly in our operations. We have incurred recurring losses and at
      November 30, 2004 had an accumulated deficit of ($5,413,282) and for year ended
      November 30, 2005 we had an accumulated deficit of ($9,708,158). For the year
      ended November 30, 2004, we sustained a net loss of ($3,467,384) and for the
      end
      ended November 30, 2005 we had a net loss of ($4,294,876).




On
      April
      23, 2003, the Company executed a letter of intent with American Production
      Machining, LLC (hereinafter “APM”) to acquire certain assets of APM subject to
      the execution of a definitive agreement. APM is manufacturer of automotive,
      truck and aircraft parts. They use computer numerical controlled machines and
      state of the art inspection equipment. On October 16, 2003, the Company executed
      a definitive Asset Purchase Agreement which required the payment of cash and
      the
      assumption of $1,900,000 in liabilities owed by APM to Comerica Bank. The
      original closing date for this transaction was November 15, 2003. We were,
      at
      the time, unable to obtain the necessary funding to conclude the transaction.
      The Company secured the financing resources to pursue this acquisition with
      its
      agreement with Cornell Capital. In
      August
      2004, the Company tendered a bid to the United States Bankruptcy Court to pursue
      itsacquisition of APM. In April 2005, the Company, withdrew its bid with the court
      and did not pursue this purchase.




24




As
      a
      result of our new relationship with KSI Machine and Engineering, we no longer
      need to access the Line of Credit arranged with Cornell Capital Partners, LLC.
      Accordingly, on June 20, 2005 we informed Cornell in writing that we would
      no
      longer draw down any funds against the existing SEDA. We also requested that
      Cornell provide a full accounting of all transactions from inception with
      respect to our account with Cornell. Cornell Capital filed an action against
      the
      Company in the Superior Court of New Jersey, Hudson County, Chancery Division,
      General Equity Part. In response to this filing, the Company (a) removed the
      action to the United States District Court, District of New Jersey; (b) answered
      the complaint denying its material allegations of liability and (c) interposed
      a
      counterclaim for damages against Cornell. As
      of
      November 30, 2005, the Company has $244,579 in un-converted debt owed to Cornell
      and claims from Cornell of 1,288,401 un-issued common stock concerning part
      of
      this debt.




Even
      though we have secured adequate funding, no assurances can be provided that
      our
      business activities will generate sufficient revenues which may result in net
      profits for the Company.





Our
      auditors have raised substantial doubt as to our ability to continue as a going
      concern. The financial statements do not include any adjustments that might
      result from the outcome of the underlying uncertainties as
      discussed.





We
      intend
      to continue to explore potential business combinations with other parties which
      may enhance or supplement the operation of our business or which may generate
      new or additional sources of revenues related to the patented Laser Assisted
      Chip process. For example, we are exploring whether it may be feasible to
      acquire the assets of an existing manufacturing firm engaged in manufacturing
      automobile parts which we could subsequently enhance and benefit through the
      use
      of the patented process. Any additional acquisition or other business
      combination will be dependent on our ability to obtain financing from
      traditional sources or from seller carryback financing, or a combination
      thereof. There is no assurance that we will be able to obtain any financing
      to
      pursue any future acquisitions or combinations. Even if adequate financing
      is
      obtained, no assurance can be provided that any additional acquisition or
      combination will generate sufficient revenues which may result in net profits
      for us.




**ACCOUNTING
      POLICIES SUBJECT TO ESTIMATION AND JUDGMENT**


Management’s
        Discussion and Analysis of Financial Condition and Results of Operations
        are
        based upon our consolidated financial statements, which have been prepared
        in
        accordance with accounting principles generally accepted in the United States.
        When preparing our financial statements, we make estimates and judgments
        that
        affect the reported amounts on our balance sheets and income statements,
        and our
        related disclosure about contingent assets and liabilities. We continually
        evaluate our estimates, including those related to revenue, allowance for
        doubtful accounts, reserves for income taxes, and litigation. We base our
        estimates on historical experience and on various other assumptions, which
        we
        believe to be reasonable in order to form the basis for making judgments
        about
        the carrying values of assets and liabilities that are not readily ascertained
        from other sources. Actual results may deviate from these estimates if
        alternative assumptions or condition are used.


25




**Item
      7. Financial Statements**




Index
      to Financial Statements




**Description**
            **Page**Report
                of Independent Registered Certified Public
                Accounting Firm
            F-2Consolidated
                balance sheets at November 30, 2005 and
                2004
            F-3Consolidated
                statements of operations for the for the years ended November 30,
                2005 and
                November 30, 2004
            F-4Consolidated
                statements of shareholders’ equity (deficit) for the years ended November
                30, 2005 and November 30,, 2004
            F-5Consolidated
                statements of cash flows for the years ended November 30, 2005 and
                November 30, 2004
            F-6Notes
                to consolidated financial statements for the years ended November
                30, 2005
                and November 30, 2004
            F-7















Board
      of
      Directors


AmeriChip
      International Inc.


Plymouth,
      MI





**REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**








We
      have
      audited the accompanying balance sheets of AmeriChip International Inc. as
      of
      November 30, 2005 and 2004, and the related statements of operations,
      stockholders’ equity (deficit) and cash flows for the years then ended. These
      financial statements are the responsibility of the Company’s management. Our
      responsibility is to express an opinion on these financial statements based
      on
      our audit.





We
      conducted our audit 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. An audit includes examining,
      on a
      test basis, evidence supporting the amounts and disclosures in the financial
      statements. An audit also includes assessing the accounting principles used
      and
      significant estimates made by management, as well as evaluating the overall
      financial statement presentation. We believe that our audit provides a
      reasonable basis for our opinion.





In
      our
      opinion, the financial statements referred to above present fairly, in all
      material respects, the financial position of AmeriChip International Inc. as
      of
      November 30, 2005 and 2004 and the results of its operations, stockholders’
equity (deficit) and its cash flows for the years then ended in conformity
      with
      accounting principles generally accepted in the United States of
      America.





The
      accompanying financial statements have been prepared assuming that the Company
      will continue as a going concern. As discussed in Note 2 to the financial
      statements, the Company’s significant operating losses raise substantial doubt
      about its ability to continue as a going concern. Management’s plans regarding
      the resolution of this issue are also discussed in Note 2. The financial
      statements do not include any adjustments that might result from the outcome
      of
      this uncertainty.





As
      more
      fully described in Notes 2, 5 and 6, errors resulting in the understatement
      of
      previously reported net losses at November 30, 2005 were discovered by
      management subsequent to the issuance of the Company’s November 30, 2005 and
      2004 financial statements. These errors were due to the Company originally
      reflecting the exercise of stock options related to the payment of consulting
      services at negotiated values rather than fair market value on date of issuance.
      Accordingly, an adjustment has been made to the accompanying financial
      statements as of November 30, 2005 to correct these errors.







Williams
      & Webster, P.S.


*Certified
      Public Accountants*


Spokane,
      Washington


February
      24, 2006, except for Notes 2, 5 and 6, which are dated February 23,
      2007




F-2


**AMERICHIP
                  INTERNATIONAL INC****CONSOLIDATED
                  BALANCE SHEETS**November
                  30,
              
              November
                  30,2005(Restated)
              
              2004**ASSETS**CURRENT
                  ASSETSCash
              
              $
              218
              
              $
              180,690Accounts
                  receivable
              
              
              31,646
              
              
              32,446Prepaid
                  expenses
              
              
              5,295
              
              
              5,745Inventory
              
              
              237,047
              
              
              230,000TOTAL
                  CURRENT ASSETS
              
              
              274,206
              
              
              448,881FIXED
                  ASSETSFurniture
                  & fixtures
              
              
              16,903
              
              
              10,439Machinery
                  & equipment
              
              
              261,620
              
              
              14,000Less
                  accumulated depreciation
              
              
              (19,134
              )
              
              (1,616
              )TOTAL
                  FIXED ASSETS
              
              
              259,389
              
              
              22,823OTHER
                  ASSETSIntangible
                  assets, net of amortization
              
              
              -
              
              
              6,750Deposits
              
              
              238,959
              
              
              103,200Technology
                  rights and patents, net of amortization
              
              
              20,509
              
              
              24,716Deferred
                  debt offerings costs, net of amortization
              
              
              52,500
              
              
              157,500TOTAL
                  OTHER ASSETS
              
              
              311,968
              
              
              292,166**TOTAL
                  ASSETS**
              
              $
              845,563
              
              $
              763,870**LIABILITIES
                  AND STOCKHOLDERS' DEFICIT**CURRENT
                  LIABILITIESBank
                  overdraft
              
              $
              4,561
              
              $
              -Accounts
                  payable and accrued expenses
              
              
              370,149
              
              
              149,102Related
                  party payable
              
              
              1,111,373
              
              
              826,407Related
                  party notes payable, current portion
              
              
              21,129
              
              
              23,940Convertible
                  debentures, net of discounts
              
              
              225,579
              
              
              426,194Accrued
                  interest - related party
              
              
              412,499
              
              
              264,688Accrued
                  interest - other
              
              
              16,368
              
              
              7,500Deposits
                  - private placements
              
              
              325,386
              
              
              -TOTAL
                  CURRENT LIABILITIES
              
              
              2,487,044
              
              
              1,697,831LONG-TERM
                  LIABILITIESRelated
                  party notes payable, net of current portion
              
              
              213,502
              
              
              226,060TOTAL
                  LONG-TERM LIABILITIES
              
              
              213,502
              
              
              226,060COMMITMENTS
                  AND CONTINGENCIES
              
              
              -
              
              
              -MINORITY
                  INTEREST
              
              
              3,413
              
              
              3,413**STOCKHOLDERS'
                  DEFICIT**Common
                  stock, $0.001 par value; 500,000,000 shares authorized,242,031,535
                  and 128,787,255 shares issued and outstanding
              
              
              242,032
              
              
              128,787Additional
                  paid-in capital
              
              
              8,415,058
              
              
              4,121,061Accumulated
                  deficit
              
              
              (10,515,486
              )
              
              (5,413,282
              )TOTAL
                  STOCKHOLDERS' DEFICIT
              
              
              (1,858,396
              )
              
              (1,163,434
              )**TOTAL
                  LIABILITIES AND****STOCKHOLDERS'
                  DEFICIT**
              
              $
              845,563
              
              $
              763,870


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


F-3




**AMERICHIP
                  INTERNATIONAL INC****CONSOLIDATED
                  STATEMENTS OF OPERATIONS**Year
                  EndedNovember
                  30,
              
              November
                  30,2005
              
              2004(Restated)REVENUES
              
              $
              126,122
              
              $
              37,964COST
                  OF SALES
              
              
              77,660
              
              
              14,214Gross
                  Profit
              
              
              48,462
              
              
              23,750EXPENSESAdministrative
                  service
              
              
              391,268
              
              
              211,158Consulting
                  expense
              
              
              3,237,198
              
              
              2,088,915Depreciation
                  and amortization
              
              
              28,474
              
              
              8,073Legal
                  and accounting
              
              
              268,196
              
              
              263,452License
                  expense
              
              
              360,000
              
              
              360,000Office
                  expense
              
              
              33,772
              
              
              29,412Wages-officers
                  and directors
              
              
              111,735
              
              
              -Wages-other
              
              
              128,655
              
              
              58,822Total
                  Expenses
              
              
              4,559,298
              
              
              3,019,832LOSS
                  FROM OPERATIONS
              
              
              (4,510,836
              )
              
              (2,996,082
              )OTHER
                  INCOME (EXPENSE)Forgiveness
                  of debt
              
              
              -
              
              
              7,588Financing
                  expense
              
              
              (281,539
              )
              
              (315,301
              )Interest
                  expense
              
              
              (316,991
              )
              
              (163,589
              )Other
                  income
              
              
              7,162
              
              
              -Total
                  Other Income (Expense)
              
              
              (591,368
              )
              
              (471,302
              )LOSS
                  BEFORE TAXES
              
              
              (5,102,204
              )
              
              (3,467,384
              )INCOME
                  TAX EXPENSE
              
              
              -
              
              
              -NET
                  LOSS
              
              $
              (5,102,204
              )
              $
              (3,467,384
              )BASIC
                  AND DILUTED NET LOSS PER SHARE
              
              $
              (0.03
              )
              $
              (0.03
              )WEIGHTED
                  AVERAGE NUMBER OFCOMMON
                  SHARES OUTSTANDING,BASIC
                  AND DILUTED
              
              
              172,537,334
              
              
              104,710,469


The
        accompanying notes are an integral part of these financial
        statements.
 F-4




**AMERICHIP
                  INTERNATIONAL INC****CONSOLIDATED
                  STATEMENT OF STOCKHOLDERS' DEFICIT**Additional
              
              Discount
                  on
              
              
              
              TotalCommon
                  Stock
              
              Paid-in
              
              Common
              
              Accumulated
              
              Stockholders'Shares
              
              Amount
              
              Capital
              
              Stock
              
              (Deficit)
              
              Equity(Deficit)Balance,
                  November 30, 2003
              
              
              85,370,000
              
              $
              85,370
              
              $
              831,650
              
              $
              (46,365
              )
              $
              (1,945,898
              )
              
              (1,075,243
              )Common
                  stock issued in private placementfor
                  cash at $0.05 per share
              
              
              2,900,000
              
              
              2,900
              
              
              142,100
              
              
              -
              
              
              -
              
              
              145,000Common
                  stock issued for debt offering costsfor
                  convertible debt at $0.067 per share
              
              
              3,134,329
              
              
              3,134
              
              
              206,866
              
              
              -
              
              
              -
              
              
              210,000Common
                  stock issued for consulting andservices
                  at an average of $0.06 per share
              
              
              5,365,500
              
              
              5,366
              
              
              324,219
              
              
              -
              
              
              -
              
              
              329,585Common
                  stock and warrants issued for consultingand
                  services at an average of $0.07 per share
              
              
              7,914,285
              
              
              7,914
              
              
              543,186
              
              
              -
              
              
              -
              
              
              551,100Common
                  stock issued for non-competition agreementat
                  an average of $0.06 per share
              
              
              150,000
              
              
              150
              
              
              8,850
              
              
              -
              
              
              -
              
              
              9,000Common
                  stock issued for director services at anaverage
                  of $0.07 per share
              
              
              250,000
              
              
              250
              
              
              17,250
              
              
              -
              
              
              -
              
              
              17,500Common
                  stock issued for the exercise of options forconsulting
                  services at an average of $0.11 per share
              
              
              14,650,000
              
              
              14,650
              
              
              1,567,850
              
              
              -
              
              
              -
              
              
              1,582,500Common
                  stock issued for debt and interest expenseat
                  an average of $0.033 per share
              
              
              9,053,141
              
              
              9,053
              
              
              269,848
              
              
              -
              
              
              -
              
              
              278,901Beneficial
                  conversion features of $800,000 ofconvertible
                  debt
              
              
              -
              
              
              -
              
              
              224,107
              
              
              -
              
              
              -
              
              
              224,107Warrants
                  issued for consulting services
              
              
              -
              
              
              -
              
              
              31,500
              
              
              -
              
              
              -
              
              
              31,500Adjustment
                  to discount approved by directors
              
              
              -
              
              
              -
              
              
              (46,365
              )
              
              46,365
              
              
              -
              
              
              -Net
                  loss for the year ended November 30, 2004
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (3,467,384
              )
              
              (3,467,384
              )Balance,
                  November 30, 2004
              
              
              128,787,255
              
              
              128,787
              
              
              4,121,061
              
              
              -
              
              
              (5,413,282
              )
              
              (1,163,434
              )Common
                  stock issued for debt and interest expenseat
                  an average price of $0.03 per share
              
              
              31,429,368
              
              
              31,430
              
              
              864,294
              
              
              -
              
              
              -
              
              
              895,724Common
                  stock issued in private placements forcash
                  at an average price of $0.024 per share
              
              
              13,009,638
              
              
              13,010
              
              
              306,904
              
              
              -
              
              
              -
              
              
              319,914Common
                  stock issued for consulting and servicesat
                  an average price of $0.031 per share
              
              
              9,405,274
              
              
              9,405
              
              
              282,445
              
              
              -
              
              
              -
              
              
              291,850Common
                  stock issued for warrants at $0.035 per share
              
              
              150,000
              
              
              150
              
              
              5,100
              
              
              -
              
              
              -
              
              
              5,250Common
                  stock issued for the exercise of optionsfor
                  consulting services at a weighted average priceof
                  $0.05 per share
              
              
              59,250,000
              
              
              59,250
              
              
              2,665,730
              
              
              -
              
              
              -
              
              
              2,724,980Warrants
                  reissued for services
              
              
              -
              
              
              -
              
              
              19,524
              
              
              -
              
              
              -
              
              
              19,524Beneficial
                  conversion feature of $250,000 ofconvertible
                  debt
              
              
              -
              
              
              -
              
              
              62,500
              
              
              -
              
              
              -
              
              
              62,500Beneficial
                  conversion recorded as financing expense
              
              
              -
              
              
              -
              
              
              87,500
              
              
              -
              
              
              -
              
              
              87,500Net
                  loss for the year ended November 30, 2005
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (5,102,204
              )
              
              (5,102,204
              )Balance,
                  November 30, 2005 (Restated)
              
              
              242,031,535
              
              $
              242,032
              
              $
              8,415,058
              
              $
              -
              
              $
              (10,515,486
              )
              $
              (1,858,396
              )


The
        accompanying notes are an integral part of these financial
        statements.
 F-5




**AMERICHIP
                  INTERNATIONAL INC****CONSOLIDATED
                  STATEMENTS OF CASH FLOWS**Year
                  EndedNovember
                  30,
              
              November
                  30,2005
              
              2004(Restated)CASH
                  FLOWS FROM OPERATING ACTIVITIESCash
                  received from customers
              
              $
              126,922
              
              $
              4,993Cash
                  paid to suppliers & employees
              
              
              (540,525
              )
              
              (387,683
              )Interest
                  paid
              
              
              (160,312
              )
              
              (136,481
              )Net
                  cash used by operating activities
              
              
              (573,915
              )
              
              (519,171
              )CASH
                  FLOWS FROM INVESTING ACTIVITIESAcquisition
                  of fixed assets
              
              
              (193,309
              )
              
              (4,439
              )Payments
                  on deposits
              
              
              (185,759
              )
              
              (103,200
              )Net
                  cash used by investing activities
              
              
              (379,068
              )
              
              (107,639
              )CASH
                  FLOWS FROM FINANCING ACTIVITIESProceeds
                  from loan payable - employee
              
              
              2,025
              
              
              -Payments
                  on loan payable - employee
              
              
              (2,025
              )
              
              -Payments
                  on related party payable
              
              
              (75,034
              )
              
              -Payments
                  made on related party notes payable
              
              
              (15,369
              )
              
              -Proceeds
                  received on convertible debentures
              
              
              543,000
              
              
              662,500Proceeds
                  from the issuance of common stock
              
              
              319,914
              
              
              145,000Net
                  cash provided by financing activities
              
              
              772,511
              
              
              807,500NET
                  INCREASE (DECREASE) IN CASH
              
              
              (180,472
              )
              
              180,690CASH,
                  BEGINNING OF PERIOD
              
              
              180,690
              
              
              -CASH,
                  END OF PERIOD
              
              $
              218
              
              $
              180,690


The
        accompanying notes are an integral part of these financial
        statements.
 F-6




**AMERICHIP
                  INTERNATIONAL INC****CONSOLIDATED
                  STATEMENTS OF CASH FLOWS**Year
                  EndedNovember
                  30,
              
              November
                  30,2005
              
              2005(Restated)RECONCILIATION
                  OF NET LOSS TO NET CASHUSED
                  BY OPERATING ACTIVITIESNet
                  loss for the period
              
              $
              (5,102,204
              )
              $
              (3,467,384
              )Depreciation
                  and amortization which did not require the use of cash
              
              
              28,475
              
              
              8,073Amortization
                  of finance charges which did not require the use of cash
              
              
              241,806
              
              
              -Licenses
                  expense which did not require the use of cash
              
              
              360,000
              
              
              360,000Warrants
                  issued for services
              
              
              19,524
              
              
              31,500Common
                  stock issued for interest on convertible debt
              
              
              15,303
              
              
              3,901Common
                  stock issued for consulting services
              
              
              291,850
              
              
              329,585Common
                  stock issued for exercise of options for consulting
                  services
              
              
              2,724,980
              
              
              1,582,500Beneficial
                  conversion feature
              
              
              62,500
              
              
              224,107Beneficial
                  conversion recorded as financing expense
              
              
              87,500
              
              
              -Common
                  stock issued upon exercise of warrants
              
              
              5,250
              
              
              -Amortization
                  of discount on convertible debt
              
              
              -
              
              
              91,194Common
                  stock issued for director services
              
              
              -
              
              
              17,500Common
                  stock issued for services
              
              
              -
              
              
              551,100Net
                  cash used by operating activities
              
              
              (1,265,016
              )
              
              (267,924
              )Adjustments
                  to reconcile net loss to net cash used by operating
                  activitiesIncrease
                  (Decrease)Accounts
                  receivable - trade
              
              
              800
              
              
              (32,446
              )Prepaid
                  expenses
              
              
              450
              
              
              (5,745
              )Inventories
              
              
              (7,047
              )
              
              -(Increase)
                  DecreaseBank
                  overdraft
              
              
              4,561
              
              
              -Accounts
                  payable and accrued expenses
              
              
              210,272
              
              
              (437,313
              )Accrued
                  interest payable
              
              
              156,679
              
              
              147,188Related
                  party payables
              
              
              -
              
              
              77,069Deposits
                  - private placement
              
              
              325,386
              
              
              -Net
                  cash used by operating activities
              
              $
              (573,915
              )
              $
              (519,171
              )SUPPLEMENTAL
                  NON-CASH ACTIVITYStock
                  issued for repayment of convertible debt
              
              $
              880,421
              
              $
              275,000Warrants
                  issued for services
              
              
              19,524
              
              
              31,500Common
                  stock issued for interest on convertible debt
              
              
              15,303
              
              
              3,901Common
                  stock issued for consulting services
              
              
              291,850
              
              
              329,585Common
                  stock issued for exercise of options for consulting
                  services
              
              
              2,724,980
              
              
              1,582,500Beneficial
                  conversion feature
              
              
              62,500
              
              
              224,107Beneficial
                  conversion recorded as financing expense
              
              
              87,500
              
              
              -Accounts
                  payable for fixed assets
              
              
              10,775
              
              
              -Deposits
                  reclassified to fixed assets
              
              
              50,000
              
              
              -Common
                  stock issued upon exercise of warrants
              
              
              5,250
              
              
              -Common
                  stock issued for debt offering costs
              
              
              -
              
              
              210,000Stock
                  issued for intangible assets
              
              
              -
              
              
              9,000Note
                  payable issued for inventory & equipment
              
              
              -
              
              
              250,000Common
                  stock issued for director services
              
              
              -
              
              
              17,500Common
                  stock and warrants issued for services
              
              
              -
              
              
              551,100


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


F-7


**AMERICHIP
      INTERNATIONAL INC.**


**NOTES
        TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 **November
        30, 2005**
 **NOTE
        1 - ORGANIZATION AND DESCRIPTION OF BUSINESS**





AmeriChip
      International, Inc. (hereinafter “AmeriChip” or “the Company”) was incorporated
      in the State of Nevada on October 17, 2000 as Southborrough Technology
      Corporation for the purpose of mineral exploration. On March 9, 2001, the
      corporate name was changed to Southborrough Ventures, Inc. Although the Company
      obtained an option to acquire a mineral claim in British Columbia, Canada,
      the
      Company allowed the option on that claim to expire on or about June 30, 2003,
      as
      the Company was unable to identify any commercially exploitable reserves. The
      Company changed its name to AmeriChip International, Inc. on December 1, 2003.
      The Company is currently engaged in the development of its patented technology
      for use in manufacturing.





On
      March
      22, 2003, the Company acquired all of the outstanding stock of AmeriChip
      Ventures, Inc., an 80% owner of the stock of AmeriChip, Inc., which holds the
      patents for the Laser Assisted Chip Control (“LACC”) technology. For accounting
      purposes, the acquisition has been treated as a recapitalization of AmeriChip,
      Inc. with AmeriChip International, Inc. as the acquirer in a reverse
      acquisition.





On
      November 12, 2003, the Company incorporated a subsidiary, AmeriChip Tool and
      Abrasives, LLC (hereinafter “ATA”), whose primary focus is to the sale of
      machining products. ATA has secured office space and established headquarters
      in
      Plymouth, Michigan. On August 21, 2004, AmeriChip International, Inc., through
      ATA, entered into an agreement to acquire certain assets of National Abrasive
      Systems Co. (hereinafter (“NASCO”), a Michigan corporation. NASCO is considered
      a related entity because its president is also the president of AmeriChip
      International, Inc. With the acquisition of inventory, ATA became the Company’s
      first fully operating subsidiary. With the establishment of planned operations
      in its subsidiary, the Company moved from a development stage enterprise into
      an
      operating company in August, 2004. The Company was in the development stage
      from
      December 1, 2000 through November 30, 2003. The year 2004 is the first year
      during which it is considered an operating company. This transaction is more
      fully described in Note 12.





On
      September 10, 2004, the Company formed AmeriChip International Holdings, LLC,
      a
      wholly owned subsidiary, to acquire an unrelated entity out of bankruptcy.
      This
      transaction was later terminated and the LLC is currently dormant.





On
      August
      9, 2004, the Company incorporated a wholly owned subsidiary, AmeriChip Canada,
      Inc., a Canadian charter corporation. This entity was formed to channel Canadian
      based opportunities to both AmeriChip International and AmeriChip Tool and
      Abrasives.





In
      February 2005, a Texas Corporation, AmeriChip Pipe Technologies, Inc. was formed
      as a non-operating entity to facilitate the implementation of flexible
      manufacturing system that the Company had designed to manufacture oil
      pipe.





The
      Company’s year end is November 30.


F-8


**AMERICHIP
      INTERNATIONAL INC.**


**NOTES
          TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 **November
          30, 2005**
 **NOTE
          2 - RESTATEMENT AND CORRECTION OF ERRORS**


The
      accompanying consolidated financial statements for the fiscal year ending
      November 30, 2005 have been restated to correct information concerning the
      fair
      value of the Company’s common stock issued pursuant the exercise of stock
      options.





In
      following the Company’s internal control procedures, management determined that
      the Company originally reflected the exercise of stock options related to the
      payment of consulting services at negotiated values as reflected in each
      consultant’s invoice. Management revisited this issue and determined that these
      stock options should have been reflected at fair value, as determined by the
      fair market value on the date of issuance, instead of at their negotiated value.
      The effect of this adjustment was to increase additional paid in capital by
      $807,328, increase consulting expense by $807,328 increase net loss by $807,328
      and increase loss per share from ($0.02) per share to ($0.03) per share.





**NOTE
      3 - GOING CONCERN UNCERTAINTY**




The
      accompanying financial statements have been prepared on a going concern basis,
      which contemplates the realization of assets and satisfaction of liabilities
      in
      the normal course of business. The Company has incurred material recurring
      losses from operations. At November 30, 2005, the Company had an accumulated
      deficit of $10,515,486, limited cash, and negative working capital. For the
      year
      ended November 30, 2005, the Company sustained a net loss of $5,102,204. These
      factors, among others, indicate that the Company may be unable to continue
      as a
      going concern for a reasonable period of time. The financial statements do
      not
      include any adjustments relating to the recoverability and classification of
      recorded asset amounts or the amounts and classification of liabilities that
      may
      be necessary should the Company be unable to continue as a going concern. The
      Company’s continuation as a going concern is contingent upon its ability to
      obtain additional financing and to generate revenue and cash flow to meet its
      obligations on a timely basis. Management plans to merge the Company with an
      active private company engaged in the manufacturing of automotive die and mold
      castings. Management is currently putting sales strategies in place which will,
      if successful, mitigate these factors which raise substantial doubt about the
      Company’s ability to continue as a going concern.




**NOTE
      4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**




This
      summary of significant accounting policies is presented to assist in
      understanding the financial statements. The financial statements and notes
      are
      representations of the Company’s management, which is responsible for their
      integrity and objectivity. These accounting policies conform to accounting
      principles generally accepted in the U.S. and have been consistently applied
      in
      the preparation of the financial statements.





Accounting
      Methods


The
      Company’s financial statements are prepared using the accrual basis of
      accounting in accordance with accounting principles generally accepted in the
      United States of America.


F-9


**AMERICHIP
      INTERNATIONAL INC.**


**NOTES
          TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 **November
          30, 2005**


Accounting
      Pronouncements-Recent


In
      May,
      2005, The Financial Accounting Standards Board issued Statement of Financial
      Accounting Standards No. 154, “Accounting Changes and Error Corrections - a
      Replacement of APB Opinion No. 20 and FASB Statement No. 3 (“hereinafter” “SFAS
      No. 154”). This statement replaces APB Opinion No. 20, “Accounting Changes” and
      FASB Statement No. 3, “Reporting Accounting Changes in Internal Financial
      Statements” and revises the requirements regarding accounting for and reporting
      a change in accounting principle. This statement requires retrospective
      application of the accounting change to the financial statements of prior
      periods, unless it is impractical to determine the period-specific effects
      or
      the cumulative effect of changing to the new accounting principle. This
      statement also addresses the reporting issues related to a change in accounting
      principle if it is impractical to determine the period-specific effects or
      the
      cumulative effect of the change. (See Note 2)





In
      November, 2004, the Financial Accounting Standards Board issued Statement of
      Financial Accounting Standards No. 151, “Inventory Costs - an amendment of ARB
      No. 43, Chapter 4” (hereinafter “SFAS No. 151”). This statement amends the
      guidance in ARB No. 43, Chapter 4, “Inventory Pricing,” by clarifying that
      abnormal amounts of idle facility expense, freight, handling costs, and wasted
      material (spoilage) should be recognized as current-period charges and by
      requiring the allocation of fixed production overheads to inventory based on
      the
      normal capacity of the production facilities. The adoption of this statement
      had
      no immediate material impact on the Company’s financial condition or results of
      operations.





In
      December, 2004, the Financial Accounting Standards Board issued Statement of
      Financial Accounting Standards No. 152, “Accounting for Real Estate Time-Sharing
      transactions - an amendment of FASB Standards No. 66 and 67” (hereinafter “SFAS
      No. 152”), which amends FASB Statement No. 66, “Accounting for Sales of Real
      Estate”, to reference the financial accounting and reporting guidance for real
      estate time-sharing transactions” (hereinafter “SOP 04-2”). This statement also
      amends FASB Statement No. 67, “Accounting for Costs and Initial Rental
      Operations of Real Estate Projects” to state that the guidance for (a)
      incidental operations and (b) costs incurred to sell real estate projects does
      not apply to real estate time-sharing transactions. The accounting for those
      operations and costs is subject to the guidance in SOP 04-02. The adoption
      of
      this statement had no immediate impact on the Company’s financial condition or
      results of operations.





In
      December, 2004, the Financial Accounting Standards Board issued Statement of
      Financial Accounting Standards No. 153, “Exchanges of Nonmonetary Assets - An
      Amendment of APB Opinion No. 29”, (hereinafter “SFAS No. 153”). This statement
      eliminates the exception to fair value for exchanges of similar productive
      assets and replaces it with a general exception for exchange transactions that
      do not have commercial substance, defined as transactions that are not expected
      to result in significant changes in cash flows of the reporting entity. The
      adoption of this statement had no immediate impact on the Company’s financial
      condition or results of operations.





In
      December, 2004, the Financial Accounting Standards Board issued Statement of
      Financial Accounting Standards No. 123 (R) (revised 2004), “Share-Based
      Payments” (hereinafter SFAS No. 123 (R)”). This statement replaces FASB
      Statement No. 123, “Accounting for Stock-Based


F-10


**AMERICHIP
        INTERNATIONAL INC.**
 **NOTES
          TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 **November
          30, 2005**


Compensation”,
      and supersedes APB Statement Opinion No. 25, “Accounting for Stock Issued to
      Employees”. SFAS No. 123 (R) establishes standards for the accounting of
      share-based payment transactions in which an entity exchanges its equity
      instruments for goods or services. It also addresses transactions in which
      an
      entity incurs liabilities in exchange for goods or services that are based
      on
      the fair value of the entity’s equity instruments or that may be settled by the
      issuance of those equity instruments. This statement covers a wide range of
      share-based compensation arrangements including share options, restricted share
      plans, performance-based award, share appreciation rights and employee share
      purchase plans. SFAS 123 (R) requires a public entity to measure the cost of
      employee services received in exchange for an award of equity instruments based
      on the fair value of the award on the grant date (with limited exceptions).
      That
      cost will be recognized in the entity’s financial statements over the period
      during which the employee is required to provide services in exchange for the
      award. The Company was previously reporting in compliance with SFAS No. 123.
      Management has adopted SFAS 123 (R) and has determined that this statement
      had
      no immediate impact on its overall results of operations or financial
      position.





Accounting
      for Convertible Notes and Securities with Beneficial Conversion
      Features


Following
      guidance by EITF 00-27, the Company allocates a portion of proceeds received
      from convertible notes to warrants (granted to note holders) and also to the
      beneficial conversion feature of the debt. The value of the warrants and the
      beneficial conversion feature are recorded on the balance sheet as a debt
      discount and as an increase to stockholders’ equity. The discounts are amortized
      over the life of the loans.





Accounts
      Receivable


The
      Company carries its accounts receivable at cost less an allowance for doubtful
      accounts. On a periodic basis, the Company evaluates its accounts receivable
      and
      establishes an allowance for doubtful accounts, based on a history of past
      write-offs and collections and current credit conditions. For the years ended
      November 30, 2005 and 2004, the Company had estimated that no allowance for
      doubtful accounts was necessary, as all of the Company’s receivables are
      expected to be collected. This assessment may change as the Company develops
      the
      appropriate history of transactions in its operating companies and a provision
      for doubtful accounts will be established.





Cash
      and Cash Equivalents


For
      purposes of the statements of cash flows, the Company considers all highly
      liquid investments (or short-term debt) with original maturities of three months
      or less to be cash equivalents.





Concentration
      of Credit Risk


The
      Company maintains the majority of its cash in one commercial account at a major
      financial institution. Although the financial instrument is considered
      creditworthy and has not experienced any losses on its deposits, at November
      30,
      2004, the Company’s cash balance exceeded Federal Deposit Insurance Corporation
      (FDIC) limits by $66,245. At November 30, 2005, the Company’s cash balance did
      not exceed FDIC limits.


F-11


**AMERICHIP
        INTERNATIONAL INC.**
 **NOTES
          TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 **November
          30, 2005**


Derivative
      Instruments


The
      Financial Accounting Standards Board issued Statement of Financial Accounting
      Standards No. 133, “Accounting for Derivative Instruments and Hedging
      Activities” (hereinafter “SFAS No. 133”), as amended by SFAS No. 137,
“Accounting for Derivative Instruments and Hedging Activities - Deferral of
      the
      Effective Date of FASB No. 133”, and SFAS No. 138, “Accounting for Certain
      Derivative Instruments and Certain Hedging Activities”, and SFAS No. 149,
“Amendment of Statement 133 on Derivative Instruments and Hedging Activities”.
      These statements establish accounting and reporting standards for derivative
      instruments embedded in other contracts, and for hedging activities. They
      require that an entity recognize all derivatives as either assets or liabilities
      in the balance sheet and measure those instruments at fair value.





If
      certain conditions are met, a derivative may be specifically designated as
      a
      hedge, the objective of which is to match the timing of gain or loss recognition
      on the hedging derivative with the recognition of (i) the changes in the fair
      value of the hedged asset or liability that are attributable to the hedged
      risk
      or (ii) the earnings effect of the hedged forecasted transaction. For a
      derivative not designated as a hedging instrument, the gain or loss is
      recognized in income in the period of change.





Historically,
      the Company has not entered into derivatives contracts to hedge existing risks
      or for speculative purposes.





At
      November 30, 2005 and 2004, the Company has not engaged in any transactions
      that
      would be considered derivative instruments or hedging activities.





Earnings
      (Losses) Per Share


On
      January 1, 1998, the Company adopted Statement of Financial Accounting Standards
      No. 128, which provides for calculation of “basic” and “diluted” earnings
      (losses) per share. Basic earnings (losses) per share includes no dilution
      and
      is computed by dividing net income (loss) available to common shareholders
      by
      the weighted average common shares outstanding for the period. Diluted earnings
      per share reflect the potential dilution of securities that could share in
      the
      earnings of an entity similar to diluted earnings per share. Although there
      were
      common stock equivalents outstanding at November 30, 2005 and 2004, they were
      not included in the calculation of earnings per share because they would have
      been considered antidilutive. These common stock equivalents principally include
      shares issuable upon a conversion of debt (approximately 8,200,000 shares at
      November 30, 2005 and 9,053,000 shares at November 30, 2004) and outstanding
      warrants of 3,050,000 as of November 30, 2004. The Company had no outstanding
      warrants as of November 30, 2005.





Fair
      Value Financial Instruments


The
      Company’s financial instruments as defined by Statement of Financial Accounting
      Standards No. 107, “Disclosures about Fair Value of Financial Instruments”,
      include trade accounts receivable and payable, accrued expenses and short-term
      borrowings. All instruments are accounted for on a historical cost basis, which,
      due to the short maturity of these financial instruments, approximates fair
      value at November 30, 2005 and 2004.


F-12


**AMERICHIP
        INTERNATIONAL INC.**
 **NOTES
          TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 **November
          30, 2005**


Inventories


Inventories,
      which primarily consist of products available for sale, are recorded using
      the
      weighted average method. As of November 30, 2005 and 2004, the inventory of
      the
      Company’s subsidiary AmeriChip Tool and Abrasives, LLC totaled $237,047 and
      $230,000, respectively, and principally consisted of $227,279 and $223,862,
      respectively, of grinding and abrasive products and $9,768 and $6,138,
      respectively, of other materials.





Principles
      of Consolidation and Minority Interest


The
      consolidated financial statements include the accounts of the Company and its
      subsidiaries, after elimination of intercompany accounts and transactions.
      (See
      Note 1.)





During
      the years ended November 30, 2005 and 2004, no allocation of losses was made
      to
      the minority interest, because the Company’s 80% owned subsidiary, AmeriChip,
      Inc., is considered dormant and is not expected to conduct business in the
      future.





Property
      and Equipment


Property
      and equipment are stated at cost. Depreciation of property and equipment is
      calculated using the straight-line method over the estimated useful lives of
      the
      assets, which range from three to seven years.




The
      Company recognized $17,518 and $1,616 in depreciation expense for the years
      ended November 30, 2005 and November 30, 2004, respectively. The Company
      evaluates the recoverability of property and equipment when events and
      circumstances indicate that such assets might be impaired. The Company
      determines impairment by comparing the undiscounted future cash flows estimated
      to be generated by these assets to their respective carrying amounts.
      Maintenance and repairs are expensed as incurred. Replacements and betterments
      are capitalized. The cost and related reserves of assets sold or retired are
      removed from the accounts and any resulting gain or loss is reflected in results
      of operations.





Provision
      for Taxes


Income
      taxes are provided based upon the liability method of accounting pursuant to
      Statement of Financial Accounting Standards No. 109 (hereinafter “SFAS No.
      109”), “Accounting for Income Taxes.” Under this approach, deferred income taxes
      are recorded to reflect the tax consequences in future years of differences
      between the tax basis of assets and liabilities and their financial reporting
      amounts at each year-end. A valuation allowance is recorded against deferred
      tax
      assets if management does not believe the Company has met the “more likely than
      not” standard imposed by SFAS No. 109 to allow recognition of such an
      asset.





At
      November 30, 2005 and 2004, the Company had deferred tax assets of approximately
      $3,600,000 and $1,737,000, respectively, principally arising from net operating
      loss carryforwards for income tax purposes multiplied by an expected tax rate
      of
      34%. As management of the Company cannot determine that it is more likely than
      not that the Company will realize its benefit of the deferred tax assets, a
      valuation allowance equal to the deferred tax assets was present at November
      30,
      2005 and 2004.


F-13


**AMERICHIP
        INTERNATIONAL INC.**
 **NOTES
          TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 **November
          30, 2005**


The
      significant components of the deferred tax assets at November 30, 2005 and
      2004
      were as follows:




November
                30,
              2005
            
            
            November
                30,
              2004Net
                operating loss carryforward****
            
            $
            10,515,000
            
            $
            5,108,000Warrants
                issued:
            
            $
            —
            
            $
            305,600Deferred
                tax asset
            
            $
            3,600,000
            
            $
            1,737,000Deferred
                tax asset valuation allowance
            
            $
            (3,600,000
            )
            $
            (1,737,000
            )





At
      November 30, 2005 and 2004, the Company has net operating loss carryforwards
      of
      approximately $10,515,000 and $5,108,000, respectively, which expire in the
      years 2021 through 2025. The Company recognized $305,600 of losses from issuance
      of warrants for services during the fiscal year ended November 30, 2004, which
      are not deductible for tax purposes and are not included in the above
      calculation of deferred tax assets. The change in the allowance account from
      November 30, 2004 to 2005 was $1,863,000.





The
      Tax
      Reform Act of 1986 substantially changed the rules relative to the use of net
      operating losses and general business credit carryforwards in the event of
      an
“ownership change” of a corporation. The Company’s issuances of common stock may
      have resulted in restrictions on the future use of net operating losses and
      tax
      credit carryforwards generated before an ownership change. The effect of such
      change has not been determined.





Reclassification


Certain
      amounts from prior periods have been reclassified to conform to the current
      period presentation. This reclassification has resulted in no changes to the
      Company’s accumulated deficit or net losses presented.





Revenue
      and Cost Recognition Policies


The
      Company recognizes revenue from product sales when products are shipped and
      title passes to customers. The Company has not provided an allowance for sales
      returns because its revenues are new and there is no historical experience
      on
      which to base an estimate. This assessment may change as the Company develops
      the appropriate history of transactions in its operating companies and a
      provision for sales returns will be established. Returns of a product, if
      permitted by the manufacturer, are charged a 15% restock fee. Specialized
      machined products created to the customer’s blueprint specifications are also
      being produced. These product costs are market driven and the Company warrants
      the finished product to the extent they meet the specifications.





As
      an
      agent for vendors, the Company recognizes its commissions when the earnings
      process is completed (delivery taken and title passed to the
      customer).





Cost
      of
      sales consists of the purchase price of products sold, inbound and outbound
      shipping charges, and packaging supplies.


F-14


**AMERICHIP
        INTERNATIONAL INC.**
 **NOTES
          TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 **November
          30, 2005**
 Use
          of
          Estimates


The
      process of preparing financial statements in conformity with accounting
      principles generally accepted in the United States of America requires the
      use
      of estimates and assumptions regarding certain types of assets, liabilities,
      revenues, and expenses. Such estimates primarily relate to unsettled
      transactions and events as of the date of the financial statements. Accordingly,
      upon settlement, actual results may differ from estimated amounts.




**NOTE
      5 - STOCK OPTIONS AND WARRANTS**




Statement
      of Financial Accounting Standards No. 123, “Accounting for Stock-Based
      Compensation,” ** defines
      a
      fair value-based method of accounting for stock options and other equity
      instruments. The Company has adopted this method, which measures compensation
      costs based on the estimated fair value of the award and recognizes that cost
      over the service period.





Stock
      Options


On
      October 22, 2003, the Company’s board of directors approved the AmeriChip
      International Inc. 2003 Non-Qualified Incentive Stock Option Plan (hereinafter
      “the Plan”), which as amended through November 30, 2004, allowed the Company to
      issue up to 28,000,000 shares of the Company’s common stock to officers,
      directors, employees and consultants. All 28,000,000 shares issuable in
      accordance with the Plan have been registered with the Securities and Exchange
      Commission on Form S-8. In the years ended November 30, 2004 and 2003, the
      Company issued 14,650,000 and 5,350,000 stock options, respectively, under
      this
      plan. As of November 30, 2004, there were 8,000,000 options to be issued under
      the Plan due to the Company issuing 14,650,000,000 options to consultants for
      marketing, website, and advisory services. There were no options issued to
      officers, directors or employees. During the year ended November 30, 2004,
      options totaling 14,650,000 were exercised at an average of $0.11 per share
      for
      $1,582,500 of consulting services provided to the Company. The options were
      valued at the market price on the date of grant. These options were exercised
      immediately upon grant, and therefore the Company has deemed that no additional
      value should be assigned to the options.





The
      Company registered an additional 60,000,000 shares of common stock under this
      plan during the year ended November 30, 2005 and in this same period, issued
      59,250,000 to consultants for marketing and advisory services. As of November
      30, 2005, there were 8,750,000 options available to be issued under the plan.
      There were no options issued to officers, directors, or employees during the
      year ended November 30, 2005.





During
      the year ended November 30, 2005, options totaling 59,250,000 were exercised
      at
      a weighted average price of $0.05 per share for $2,724,980 of consulting fees
      provided to the Company. When applicable, these options were valued at the
      market price on the date of grant. All options were exercised immediately upon
      grant, and therefore the Company has deemed that no additional value should
      be
      assigned to the options. The value of the services provided as a result of
      these
      share based payments was determined in accordance with SFAS 123 and SFAS 123
      (R). (See Note 4.)  F-15
 **AMERICHIP
        INTERNATIONAL INC.**
 **NOTES
          TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 **November
          30, 2005**


The
      following is a summary of stock option activity:





Number
                of SharesUnder
                the Option
            
            Weighted
                AveragePlan
            
            Exercise
                PriceOutstanding
                December 1, 2003
            
            
            -
            
            
            -Granted
            
            
            14,650,000
            
            $
            0.11Exercised
            
            
            (14,650,000
            )
            
            (0.11
            )Outstanding
                November 30, 2004
            
            
            -
            
            $
            -Weighted
                average fair value ofoptions
                granted during theperiod
                ended November 30, 2004
            
            
            
            
            $
            -Outstanding
                December 1, 2004
            
            
            -
            
            $
            -Granted
            
            
            59,250,000
            
            
            0.05Exercised
            
            
            (59,250,000
            )
            
            (0.05
            )Outstanding
                November 30, 2005
            
            
            -
            
            $
            -Weighted
                average fair value of
              options
                granted during the
              Period
                ended November 30, 2005
            
            
            
            
            $
            -





Warrants


The
      fair
      value of common stock and warrants issued in the fiscal years ending November
      30, 2005 was estimated on the grant date using the Black-Scholes Option Price
      Calculation with the following assumptions: risk-free interest rate is 4%,
      volatility is 148%, and expected life is 3 years.





During
      the year ended November 30, 2005, 3,050,000 stock warrants previously issued
      under certain consulting agreements were cancelled. The Company issued 3,200,000
      new three-year warrants to acquire 3,200,000 shares of common stock at an
      exercise price of $0.035 per share. Additional fair value of the warrants
      determined on the new grant date of $19,524 was expensed to consulting and
      150,000 warrants of the aforementioned new issuance were exercised during the
      six months ended May 31, 2005 for common stock for cash of $5,250, which
      approximates the fair value on the date of grant. In June, 2005, these 3,050,000
      of outstanding warrants were cancelled and replaced by the issuance of 6,065,000
      shares of common stock.





The
      fair
      value of common stock and warrants issued in the fiscal years ending November
      30, 2004 was estimated on the grant date using the Black-Scholes Option Price
      Calculation with the following assumptions: risk-free interest rate is 5%,
      volatility is 100%, and expected life is 3 years.





In
      the
      year ended November 30, 2004, warrants were issued pursuant to a consulting
      agreement to acquire 750,000 shares of common stock at an exercise price of
      $0.25. The fair value of the


F-16


**AMERICHIP
        INTERNATIONAL INC.**
 **NOTES
          TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 **November
          30, 2005**


warrants,
      which was determined on the date of grant, was $31,500. The Company also issued
      7,914,285 shares of common stock with 11,871,428 warrants attached. The warrants
      have an exercise price of $0.08 per share. The fair value of the warrants,
      which
      was determined on the date of grant, was $277,000. All warrants were issued
      for
      three years and were immediately expensed to consulting. Also, during this
      year,
      11,571,428 warrants were cancelled.





The
      following is the summarized information about stock warrants outstanding and
      exercisable at the fiscal years ended November 30, 2005 and 2004:




Number
                    of shares
                  under
                    warrants
                
                Weighted
                    Average
                  Remaining
                    Life
                
                Average
                  Exercise
                    PriceDuring
                    the year ended November 30, 2004:Issued
                
                
                12,621,428
                
                
                2.25
                
                $
                0.09Cancelled
                
                
                (11,571,428
                )
                
                2.25
                
                
                0.09Total
                    warrants outstanding at November 30, 2004
                
                
                1,050,000
                
                
                2.25
                
                $
                0.09Total
                    unexercised warrants at November 30, 2004
                
                
                1,050,000
                
                
                2.25
                
                $
                0.09During
                    the year ended November 30, 2005:Issued
                
                
                3,200,000
                
                
                3.00
                
                $
                0.035Cancelled
                
                
                (3,050,000
                )
                
                2.75
                
                
                0.035Exercised
                
                
                (150,000
                )
                
                -
                
                
                0.035Total
                    warrants outstanding at November 30, 2005
                
                
                -
                
                
                -
                
                
                -Total
                    unexercised warrants at November 30, 2005
                
                
                -
                
                
                -
                
                
                -




**NOTE
      6 - COMMON STOCK**





In
      May
      2004, the Company’s board of directors elected to increase the authorized
      capital of the Company from 100,000,000 shares of common stock to 500,000,000
      shares of $0.001 par value common stock. All shares have equal voting rights,
      are non-assessable and have one vote per share. Voting rights are not cumulative
      and, therefore, the holders of more than 50% of the common stock could, if
      they
      choose to do so, elect all of the directors of the Company.





During
      the year ended November 30, 2005, the Company issued 31,429,368 shares of common
      stock for an average of $0.03 per share for convertible debt of $880,421 and
      related interest costs of $15,303. The value of these shares was determined
      by
      the agreement between the Company and Cornell Capital Partners LP. (See Note
      7.)
      The Company also issued 150,000 shares of common stock for the exercise of
      warrants for cash of $5,250, 6,065,000 shares of common


F-17


**AMERICHIP
      INTERNATIONAL INC.**


**NOTES
        TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 **November
        30, 2005**


stock
      were issued in exchange for the cancellation of all outstanding warrants issued
      for consulting services by the Company at a price of $0.03 per share for a
      fair
      value of $181,950, 13,009,638 shares of common stock were issued at average
      price of $0.024 per share in a private placement for $319,914 in cash,
      59,250,000 shares were issued for options exercised at an average price of
      $0.05
      per share for consulting services with a fair value of $2,724,980, and 3,340,274
      shares of common stock were issued for consulting and services at an average
      price of $0.033 per share with a fair value of $109,900.





During
      the year ended November 30, 2004, 14,650,000 shares of common stock were issued
      upon exercise of options at an average of $0.11 per share for consulting
      services with a fair value of $1,582,500, 7,914,285 shares of common stock
      and
      warrants were issued for an average of $0.07 per share for consulting and
      services with a fair value of $551,100, and 2,900,000 shares of common stock
      were issued in a private placement for $145,000 in cash for $0.05 per share.
      The
      Company issued 3,134,329 shares of common stock for an average of $0.067 per
      share for $210,000 of debt offering costs and 9,053,141 shares of common stock
      for an average of $0.033 per share for $275,000 of convertible debt and $3,901
      of related interest costs. The Company also issued 150,000 shares of common
      stock for $0.06 per share for non-compete agreements valued at $9,000, related
      to the asset purchase agreement, 250,000 shares of common stock for $0.07 per
      share for $17,500 for director services, and 5,365,500 shares of common stock
      were issued for an average of $0.06 per share for consulting and services valued
      at $329,585. The fair value for all common stock issuances for consulting and
      services was determined using the fair market value of the stock on the dates
      of
      issuance.




**NOTE
      7 - CORNELL CAPITAL PARTNERS LP FINANCING**




Following
      guidance by EITF 00-27, the Company allocates a portion of proceeds received
      from convertible notes to warrants (granted to the note holders), and also
      to
      the beneficial conversion feature of the debt. The value of the warrants and
      the
      beneficial conversion feature are recorded on the balance sheet as a debt
      discount and as an increase to stockholders’ equity. The discounts are amortized
      over the life of the loans.





In
      accordance with EITF 98-5 and 00-27, the amount of beneficial conversion is
      determined at the commitment date of each debt instrument as the difference
      between the stated conversion price within the instrument and the fair market
      value at the date of the draw-down on the debt instrument.





On
      May
      25, 2004, the Company entered into a standby equity distribution agreement
      and
      various security and debenture agreements with Cornell Capital Partners LP
      (hereinafter “Cornell Capital”) in order to provide the Company with up to
      $6,000,000 of funding over approximately the next 24 months. These agreements
      are subject to limitation on borrowing and conversion of debt to equity. As
      part
      of its obligation under the agreements, the Company filed a registration
      statement on Form SB-2 to register the common stock issued to Cornell Capital
      and the common stock issuable in accordance with the terms of the equity
      distribution agreement. As of November 30, 2005, the Company has received a
      total of $1,205,500 under these agreements net of associated costs totaling
      $194,500. The Company also issued 3,134,329 shares of common


F-18


**AMERICHIP
      INTERNATIONAL INC.**


**NOTES
          TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 **November
          30, 2005**


stock
      valued at $210,000 as the commitment fee associated with this agreement. The
      commitment fee was deemed to be a deferred debt offering cost and is being
      amortized as a financing expense over the effective period of 24 months.
      Amortization for the years ended November 30, 2005 and 2004 was $105,000 and
      $52,500, respectively.





Standby
      Equity Agreement Transactions


In
      August
      2004, the Company signed a short-term promissory note in favor of Cornell
      Capital for $225,000. Terms of the note included a stipulated interest rate
      of
      12% and a provision for full repayment within sixty-two calendar days. The
      note
      was convertible at the holder’s option any time up to maturity at a conversion
      price equal to the lower of 120% of the of the closing bid price of the common
      stock as listed on a principal market as of the date of the debenture or an
      amount equal to 80% of the lowest closing bid price of the Company’s common
      stock for the five trading days immediately preceding the conversion date.
      The
      Company received $206,125 in cash and incurred related fees and expenses of
      $18,875, which were expensed to financing costs. During the year ended November
      30, 2004, Cornell Capital converted the loan into 5,809,251 shares of common
      stock in payment of the aforementioned note principal and related interest
      of
      $3,901. The Company recorded beneficial conversion feature of $56,250 attributed
      to the aforementioned debt. According to EITF 00-27, because the debt was
      convertible at issuance, the debt discount was recorded as a charge to interest
      and was immediately expensed. The effective interest rate is approximately
      2% on
      interest, 8% on financing fees and 25% on the beneficial conversion feature
      for
      a total of 35%.





In
      November 2004, the Company signed a short-term promissory note in favor of
      Cornell Capital for $275,000. Terms of the note included a stipulated interest
      rate of 12% and a provision for full repayment within eighty-nine calendar
      days.
      The note was convertible at the holder’s option any time up to maturity at a
      conversion price equal to the lower of 120% of the of the closing bid price
      of
      the common stock as listed on a principal market as of the date of the debenture
      or an amount equal to 80% of the lowest closing bid price of the Company’s
      common stock for the five trading days immediately preceding the conversion
      date. The Company received $249,375 in cash and incurred related fees and
      expenses of $25,625, which are being amortized as a financing expense over
      the
      duration of the note. Amortization for the year ended November 30, 2005 was
      $25,625 and no amortization was recognized during 2004. In the year ended
      November 30, 2004, Cornell Capital received 3,243,210 shares of common stock
      in
      payment of $50,000 of principal for the aforementioned note. In the fiscal
      year
      ended November 30, 2005, Cornell Capital received 4,961,842 shares of common
      stock for payment of the remaining note principal of $225,000 and related
      interest of $10,464. The Company recorded beneficial conversion feature of
      $68,750 attributed to the aforementioned debt. According to EITF 00-27, because
      the debt was convertible at issuance, the debt discount was recorded as a charge
      to interest and was immediately expensed. The effective interest rate is
      approximately 4% on interest, 9% on financing fees and 25% on the beneficial
      conversion feature for a total of 38%.





In
      January 2005, the Company signed a short-term promissory note in favor of
      Cornell Capital for $250,000. Terms of the note included a stipulated interest
      rate of 12% and a provision for full repayment within eighty-two calendar days.
      The note is convertible at the holder’s option any time up to maturity at a
      conversion price equal to the lower of 120% of the of the closing bid price
      of
      the common stock as listed on a principal market as of the date of the debenture
      or an


F-19


**AMERICHIP
      INTERNATIONAL INC.**


**NOTES
          TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 **November
          30, 2005**


amount
      equal to 80% of the lowest closing bid price of the Company’s common stock for
      the five trading days immediately preceding the conversion date. The Company
      received $226,250 in cash and incurred related fees and expenses of $23,750,
      which are being amortized as a financing expense over the duration of the note.
      Amortization for the year ended November 30, 2005 was $23,750. In the fiscal
      year ended November 30, 2005, Cornell Capital converted note principal of
      $125,000 for 2,274,979 shares of common stock. Interest of $9,016 was expensed
      for the year ended November 30, 2005. The Company had a beneficial conversion
      feature of $62,500 attributed to the aforementioned debt. According to EITF
      00-27, because the debt was convertible at issuance, the debt discount was
      recorded as a charge to interest and was immediately expensed. The effective
      interest rate is approximately 3% on interest, 10% on financing fees and 25%
      on
      the beneficial conversion feature for a total of 38%.





In
      March
      2005, the Company signed a short-term promissory note in favor of Cornell
      Capital for $350,000. Terms of the note included a stipulated interest rate
      of
      12% and a provision for full repayment within one hundred twenty-seven calendar
      days. The note is convertible at the holder’s option any time up to maturity at
      a conversion price equal to the lower of 120% of the of the closing bid price
      of
      the common stock as listed on a principal market as of the date of the debenture
      or an amount equal to 80% of the lowest closing bid price of the Company’s
      common stock for the five trading days immediately preceding the conversion
      date. The Company received $316,750 in cash and incurred related fees and
      expenses of $33,250, which are being amortized as a financing expense over
      the
      duration of the note. Amortization for the fiscal year ended November 30, 2005
      was $33,250. In the year ended November 30, 2005, Cornell Capital converted
      4,831,260 shares of common stock for payment of note principal of $105,421.
      Interest of $19,999 was accrued for the year ended November 30, 2005. The
      Company recorded beneficial conversion feature of $87,500 attributed to the
      aforementioned debt. According to EITF 00-27, because the debt was convertible
      at issuance, the debt discount was recorded as a charge to interest and was
      immediately expensed. The effective interest rate is approximately 3% on
      interest, 10% on financing fees and 25% on the beneficial conversion feature
      for
      a total of 38%.





In
      June
      2005, the Company’s board of directors agreed to cancel its standby equity
      agreement with Cornell Capital. The Company’s management feels that this
      cancellation is in the best interest of the Company. In addition, the Company
      requested a complete accounting from Cornell Capital related to the standby
      equity agreement, from inception to the current date. As of November 30, 2005,
      no accounting related to this agreement has been received from
      Cornell.





Convertible
      Debenture


In
      May
      2004, the Company signed a convertible debenture in favor of Cornell Capital
      for
      $300,000. Terms of the debenture agreement include a maturity date of May 25,
      2007, an interest rate of 5% per annum, and a provision for the holder to
      convert unpaid principal and interest into Company common stock. The debenture
      is convertible at the holder’s option any time up to maturity at a conversion
      price equal to the lower of 120% of the of the closing bid price of the common
      stock as listed on a principal market as of the date of the debenture or an
      amount equal to 80% of the lowest closing bid price of the Company’s common
      stock for the five trading days immediately preceding the conversion date.
      In
      connection with the debenture, the Company received $207,000 in cash and
      incurred loan fees and expenses of $93,000 which are being


F-20


**AMERICHIP
      INTERNATIONAL INC.**


**NOTES
          TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 **November
          30, 2005**


amortized
      as a financing expense over the three-year life of the debenture and a preferred
      conversion feature of $99,107, which was expensed. According to EITF 00-27,
      because the debt was convertible at issuance, the debt discount was recorded
      as
      a charge to interest and was immediately expensed. During the year ended
      November 30, 2005, the Company recorded $93,000 of financing expense and $3,750
      of interest expense, no interest or financing expenses were recognized during
      2004. Cornell Capital also converted 14,219,021 shares of common stock at an
      average price of $0.0211 per share for payment of the entire principal in the
      amount of $300,000. The effective interest rate is approximately 15% on
      interest, 31% on financing fees and 33% on the beneficial conversion feature
      for
      a total of 79%.





**NOTE
      8 - CONTRACTS AND AGREEMENTS**





KSI
      Machine and Engineering, Inc .


During
      the fiscal year ended November 30, 2005, the Company entered into a licensing
      agreement with KSI Machine and Engineering, Inc. (hereinafter “KSI”), whereby
      KSI would be licensed to utilize the Company’s patented laser technology in
      exchange for a performance based licensing fee payable to the Company (See
      Note
      9.)





CEOcast,
      Inc.


In
      November 2003, the Company executed a six-month agreement with CEOcast, Inc.
      (hereinafter “CEOcast”) to provide consulting services for AmeriChip. During the
      year ended November 30, 2004, 300,000 shares of common stock valued on the
      date
      of grant at a fair value of $30,000 were issued and recorded as consulting
      expense, and CEOcast agreed to cancel the agreement with no penalties and to
      cancel the amounts owed to CEOcast by the Company.





In
      July
      2004, the Company signed a new agreement with CEOcast whereby the Company paid
      a
      retainer of $5,000 and issued 2,000,000 shares of common stock valued on the
      date of grant at a fair value of $140,000. The Company also agreed to pay $5,000
      per month commencing in August 2004. During the year ended November 30, 2004,
      the Company paid $17,000 to CEOcast under the terms of the agreement. All
      amounts were immediately recorded as consulting expense. During the year ended
      November 30, 2005, the Company paid no fees to CEOcast, as their services were
      not required.





RM
      Communications


In
      October 2003, the Company executed a six-month agreement with RM Communications
      (hereinafter “RMC”), to provide services and website development for AmeriChip.
      RMC is entitled to receive $2,000 per month for six months, 100,000 shares
      of
      common stock upon signing the agreement, 100,000 shares of common stock upon
      completion of services, and 300,000 three-year warrants, which will expire
      in
      January 22, 2007. The warrants are exercisable per the following terms: 100,000
      warrants at $0.30, 100,000 warrants at $0.40, and 100,000 warrants at $0.50.
      The
      warrants were determined to have an estimated fair value of $54,000. The Company
      will also pay additional costs incurred by RMC in performance of the contract.
      During the year ended November 30, 2004, the Company issued 100,000 shares
      of
      common stock valued on the date of grant at a fair value of $18,000, 300,000
      warrants, and $9,000 in cash to RMC. All amounts were immediately recorded
      as
      consulting expense.


F-21


**AMERICHIP
      INTERNATIONAL INC.**


**NOTES
          TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 **November
          30, 2005**


In
      April
      2004, the Company executed a continuation of the aforementioned agreement for
      an
      additional year. RMC is entitled to receive $3,500 per month, 200,000 shares
      of
      common stock upon signing the agreement, and 3-year warrants exercisable at
      $0.25, payable in increments of 150,000 to be issued at the beginning of each
      quarter. In the year ended November 30, 2004, the Company issued 750,000
      warrants under the agreement, valued at the fair value on the date of grants
      of
      $31,500. The warrant value was immediately expensed to consulting. The 200,000
      shares of common stock were issued with a fair market value of
      $20,000.




During
      the year ended November 30, 2005, the Company entered into a new agreement
      with
      RMC and cancelled all 1,050,000 existing warrants issued to RMC. The Company
      issued 3,200,000 new three-year warrants to acquire 3,200,000 shares of common
      stock at an exercise price of $0.035 per share. Additional fair value of the
      warrants determined on the new grant date of $19,524 was expensed to consulting
      and 150,000 warrants of the aforementioned new issuance were exercised for
      common stock for cash of $5,250. (See Note 5.) In addition, during the year
      ended November 30, 2005, the Company cancelled the 3,050,000 warrants
      outstanding which were issued to RMC, and issued 6,065,000 shares of restricted
      common stock to replace these cancelled warrants. These restricted shares were
      issued at a price of $0.035 per share, for a total amount of $212,275, which
      was
      expensed as consulting expenses at the time of issuance.




**NOTE
      9 - COMMITMENTS AND CONTINGENCIES**




The
      Company entered into a standby equity distribution agreement and various
      security and debenture agreements with Cornell Capital. (See Note 7.) The
      Company agreed to reserve 81,119,403 shares of common shares under these
      agreements and to pursue a registration of these shares with Securities and
      Exchange Commission. As of November 30, 2005, 31,429,368 common shares have
      been
      distributed to Cornell Capital in accordance with these agreements. As of August
      2005, the Company is in a dispute with Cornell Capital regarding to Cornell’s
      claim of shares issued under Section 144 of restricted stock. As of November
      30,
      2005, the dispute has not been resolved. Cornell has made demands for the
      conversion of 1,288,401 shares of the Company’s common stock which have not been
      delivered. Management has decided to fully resolve their dispute with Cornell
      prior to any further issuance of common stock under the conversion clauses
      of
      their agreements.





Licensing
      Agreement


In
      January 2003, the Company entered into a cancelable licensing agreement for
      patented technology with three shareholders which required aggregate payments
      of
      $1,000,000 to each of the three shareholders, payable in monthly installments
      of
      $10,000 to each shareholder. Interest on the unpaid principal is accrued at
      prime plus 1% or 5%, whichever is greater. The
      Company is currently in default under the agreement, due to non-fulfillment
      of
      the insurance clause provision of the contract. The Company is seeking to obtain
      insurance to satisfy this provision. The
      accrued principal due the shareholders at November 30, 2005 and 2004 was
      $1,020,000 and $660,000, respectively, and is included in the related party
      payable. The accrued interest on the principal is approximately $413,000 and
      $262,500, respectively, and is included in the accrued interest. During the
      year
      ended November 30, 2004, the Company paid interest due to two shareholders
      in
      the amount of $12,500. The Company recognized $360,000 of monthly
      expenses


F-22


**AMERICHIP
      INTERNATIONAL INC.**


**NOTES
          TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 **November
          30, 2005**


in
      each
      of the years ended November 30, 2005 and 2004, under the licensing agreement as
      license expense. The three shareholders have agreed to a suspension of payments
      until the Company begins generating substantial revenues from operations. The
      amounts owed will continue to accrue monthly.





Operating
      Lease


During
      the year ended November 30, 2004, the Company entered into an operating lease
      for a vehicle and paid a refundable security deposit of $925 and lease payments
      of approximately $1,183. The remaining approximate lease payments for the
      contract are as follows:





$
            14,196$
            14,196$
            7,098





Rental
      Agreement


During
      the year ended November 30, 2004, the company signed a lease agreement and
      made
      a deposit of $2,000 for the rental of office space in Plymouth, Michigan. The
      lease term is for five years and payments of $2,000 per month are required
      on a
      gradually increasing scale. The remaining lease payments for this contract
      are
      as follows:





$
            24,300$
            25,500$
            26,700$
            27,900








**NOTE
      10 - TECHNOLOGY RIGHTS AND PATENTS**





In
      the
      year ended November 30, 2003, the Company acquired rights to patents held by
      AmeriChip Ventures, Inc., a wholly owned subsidiary of AmeriChip International
      Inc. These patents are for a process known as Laser Assisted Chip Control
      technology (“LACC”) which can be used in manufacturing.





Technology
      licenses and patents are stated at cost. Amortization is provided using the
      straight-line method over the remaining estimated useful lives of the assets,
      which is ten years.





The
      following is a summary of technology licenses and patents and accumulated
      amortization:





November
                30,
              2005
            
            November
                30,
              2004Technology
                licenses and patents
            
            $
            42,069
            
            $
            42,069Less
                accumulated amortization
            
            
            (21,560
            )
            
            (17,353
            )$
            20,509
            
            $
            24,716





Amortization
      expense was $4,207 in each of the years ended November 30, 2005 and
      2004.


F-23


**AMERICHIP
      INTERNATIONAL INC.**


**NOTES
          TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 **November
          30, 2005**
 **NOTE
          11 - RELATED PARTY TRANSACTIONS**





The
      Company has a related party payable attributable to shareholder advances
      totaling $91,373 and $166,407 as of November 30, 2005 and 2004, respectively.
      These advances are not interest bearing and are payable upon
      demand.





In
      the
      years ended November 30, 2005 and 2004, there were 10,467,500 and 5,750,000
      stock options, respectively, issued to a related party under the Company’s S-8
      stock option plan. (See Note 5.) In addition, during the year ended November
      30,
      2005, there were 4,125,000 shares of common stock issued to a related party
      in a
      private placement transaction. No shares were issued during 2004.





See
      Note
      9 regarding a licensing agreement with shareholders and Note 12 regarding
      related party debt.





**NOTE
      12 - PURCHASE OF NATIONAL ABRASIVE SYSTEMS, CO. ASSETS**




In
      August
      2004, the Company through its wholly owned subsidiary, AmeriChip Tool &
Abrasives LLC, entered into an agreement to acquire certain assets of National
      Abrasive Systems, Co. (hereinafter “NASCO”), a Michigan corporation. NASCO is
      considered to be a related party because its president is also the president
      of
      the AmeriChip International Inc.





Assets
      acquired included inventory, equipment, and intangible assets. The transaction
      was funded by the Company’s execution of a $250,000 promissory note and a UCC-1
      security interest in the assets acquired. In recording the transaction, the
      Company assigned fair values to the equipment and inventory, and no additional
      value to intangible assets acquired. The purchase was recorded as
      follows:





Furniture
                and fixtures
            
            $
            6,000Machinery
                and equipment
            
            
            14,000Inventory
            
            
            230,000Total
                purchase price
            
            $
            250,000




**NOTE
      13- LONG-TERM DEBT**





In
      August
      2004, the Company signed a ten-year promissory note with terms of 3.5% interest
      per annum payment of interest only of $729 for the first six months and monthly
      payments thereafter of $2,417.





Payments
      of principal and interest are due on this note as follows for the next five
      years:


2006
            
            $
            29,0042007
            
            $
            29,0042008
            
            $
            29,0042009
            
            $
            29,0042010
            
            $
            29,004




F-24


**AMERICHIP
        INTERNATIONAL INC.**
 **NOTES
          TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 **November
          30, 2005**
 The
          balance of the Company’s notes payable at November 30, 2005 was as
          follows:





Related
                party note
            
            $
            234,631Less:
                Current portion
            
            
            (21,129
            )Long-term
                portion
            
            $
            213,502




As
      part
      of the transaction, the Company also issued 150,000 shares of its common stock
      valued at $9,000 to two NASCO shareholders for their execution of one-year
      non-competition agreements in favor of the Company. These non-competition
      agreements are included in other assets on the balance sheet as intangible
      assets. The cost is being amortized on the straight-line method over the term
      of
      the arrangements. Amortization of $6,750 and $2,250 has been charged to expense
      as of November 30, 2005 and 2004, respectively.





**NOTE
      14 - SUBSEQUENT EVENTS**





KSI
      Machine and Engineering Inc.


On
      September 14, 2004, the Company executed a letter of intent with KSI Machine
      and
      Engineering, Inc. (hereinafter “KSI”) to acquire all of KSI’s outstanding stock.
      KSI is a manufacturer of automotive die and mold castings which use horizontal
      spindle 5 axis computer numerical controlled machines. During the year ended
      November 30, 2004, the Company paid a deposit of $50,000 for this agreement.
      On
      December 7, 2004, the Company paid an additional $100,000 and signed a purchase
      agreement with KSI. On October 26, 2005, the Company paid an additional $30,000
      for this agreement. On November 7, 2005, the Company paid an additional $20,000
      for this agreement. As of November 30, 2005, the total required accumulated
      deposit of $200,000 has been paid to the current shareholder of KSI. As of
      the
      date of these financial statements, this acquisition has not been completed. The
      board
      of directors of AmeriChip International, Inc. entered into a licensing agreement
      with KSI Machine & Engineering, Inc. for the use of Americhip’s patented
      Laser Assisted Chip Control technology. KSI and AmeriChip are also negotiating
      a
      joint venture relationship, from which AmeriChip would generate revenues from
      the application of its proprietary technology in a Tier One environment.





Conversion
      of Related Party Debt


On
      January 11, 2006, the Company entered into an agreement with two of its
      principal officers, whereby 24,000,000 shares of the Company’s common stock were
      issued to the officers in exchange for the outstanding principal and accrued
      interest due these officers related to the Company’s licensing agreement. (See
      Note 9.) These shares were issued at a price of $0.085 per share for a total
      amount of $2,040,000. This transaction represents a complete payment of the
      amounts due these officers under the licensing agreement.





Acquisition
      of Equipment


Subsequent
      to November 30, 2005, but prior to the issuance of this report, the Company
      placed an order for a Mazak 350M machine center for $226,000 in preparation
      for
      conducting limited production runs. As of the date of this report, this
      equipment has not been delivered to the Company or placed in service in an
      operating capacity nor has the signed a formal agreement.


F-25







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





None.





**ITEM
      8A. CONTROLS AND PROCEDURES**





(a)
      Evaluation of Disclosure Controls and Procedures. The Company's management,
      with
      the participation of the chief executive officer/chief financial officer,
      carried out an evaluation of the effectiveness of the Company's "disclosure,
      controls and procedures" (as defined in the Securities Exchange Act of 1934
      (the
      "Exchange Act") Rules 13a-15(3) and 15-d-15(3) as of the end of the period
      covered by this annual report (the "Evaluation Date"). Based upon that
      evaluation, the chief executive officer/chief financial officer concluded that,
      as of the Evaluation Date, the Company's disclosure, controls and procedures
      are
      effective.





(b)
      Changes in Internal Control over Financial Reporting. There were no changes
      in
      the Company's internal controls over financial reporting, known to the chief
      executive officer/chief financial officer that occurred during the period
      covered by this report that has materially affected, or is reasonably likely
      to
      materially affect, the Company's internal control over financial
      reporting.





1.
      Pertain to the maintenance of records that in reasonable detail accurately
      and
      fairly reflect the transactions and dispositions of its assets;





2.
      Provide reasonable assurance that transactions are recorded as necessary to
      permit preparation of financial statements in accordance with generally accepted
      accounting principles, and that receipts and expenditures of the issuer are
      being made only in accordance with authorizations of it's management and
      directors; and





3.
      Provide reasonable assurance regarding prevention or timely detection of
      unauthorized acquisition, use or disposition of the issuer's assets that could
      have a material effect on the financial statements.




**ITEM
      8B. OTHER INFORMATION**





All
      requisite reports on Form 8-K were filed in the forth quarter ended November
      30,
      2005.







26
 
  PART
        III
  **ITEM
        9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
        COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE
        ACT**




EXECUTIVE
      OFFICERS AND DIRECTORS





The
      directors and executive officer as of November 30, 2005 are as
      follows:




**Name**
            **Age**
            **Position**Marc
                Walther
            50
            Chief
                Executive Officer and DirectorThomas
              Schwanitz
            55
            Chief
              Financial Officer, DirectorEdward
                Rutkowski
            41
            Director,
                Vice President Research & DevelopmentRuss
                Weldon*
            74
            Director




*
      On
      October 17, 2005, Mr. Russ Weldon submitted his resignation as an officer and
      as
      a member of the Board of Directors of AmeriChip International, Inc. On January
      5, 2006, AmeriChip International, Inc. accepted his resignation. There were
      no
      disagreements with AmeriChip International, Inc. on any matter relating to
      AmeriChip International, Inc.’s operations, policies or practices.


The
      following is a brief description of the background of our directors and
      executive officers.





**Background
      Information**




***Marc
      Walther***. Mr. Walther is our Chief Executive Officer and a Director
      since May, 2003. Since May 2003, Mr. Walther has served our Company in several
      capacities, most recently as its Chief Executive Officer and a director. Prior
      to joining our Company, Mr. Walther was an original founder in AmeriChip
      Ventures, Inc. and AmeriChip, Inc. Since 1999 Mr. Walther has also been the
      owner and President of National Abrasive Systems Company) a manufacturer and
      distributor of various abrasive products throughout the north-eastern United
      States. Mr. Walther is still affiliated with that company, which he acquired
      in
      1999.





***Edward
      Rutkowski***. Mr. Rutkowski is a member of our Board of Directors and
      has been serving in that capacity since May 2003. Mr. Rutkowski has also served
      the Company in a variety of capacities since May 2003, most recently as Vice
      President Operations / Research & Development and President of AmeriChip
      Tool and Abrasives. Prior to joining the Company, Mr. Rutkowski founded
      AmeriChip, Inc. and AmeriChip Ventures in January 2001. Between 1993 and January
      2001, Mr. Rutkowski had been employed in various capacities involving product
      engineering, technical support, distribution and marketing of products within
      the automotive industry, most recently as a distribution account




27




specialist
      for Komet of America and prior to working with Komet, Mr. Rutkowski worked
      as a
      Supplier Product Engineer for EWIE Company of Romeo, MI. In 1993, Mr. Rutkowski
      developed and was issued the patent for the AmeriChip laser chip control process
      which is currently held by AmeriChip.





***Russ
      Weldon.*** Mr. Weldon is a member of our Board of Directors and has been serving in that
      capacity since July, 2004. Mr. Weldon has spent over 40 years in the automotive
      industry in a career that has spanned all aspects of the industry. Mr. Weldon
      currently provides consulting services to companies engaged in all areas of
      the
      Company’s target markets. Prior to earning a mechanical engineering degree at
      the University of Washington, Mr. Weldon apprenticed as a tool and die maker.
      Mr. Weldon’s professional experiences have included work with companies
      including Distel Tools and Machining, Detroit, MI; ITT, Higgby, Detroit, MI;
      Allied Products of Chicago, IL and Saturn, Springhill, TN. **** For
      the
      past five years (5) Mr. Weldon has been a commissioned salesman and consultant
      to Distel Tools and Machining of Detroit, MI.




***Thomas
      Schwanitz*** .
      Mr.
      Schwanitz is Managing Partner of Schwanitz, Hayden & Associates, P.L.C. of
      Detroit, Michigan, and has a Bachelor of Science - Accounting from Northern
      Michigan University. His professional affiliations include member of American
      Institute of Certified Public Accountants, Michigan Association of Certified
      Public Accountants, Consultant to the Association of Macomb County Life
      Underwriters and Financial & Estate Planning Councils of Detroit and Macomb
      County. Mr. Schwanitz is also a member of the Board of Directors for and is
      the
      Treasurer of the Mount Clemens General Hospital and on the Board of Trustees
      for
      Baker College, Mount Clemens.




COMPLIANCE
      WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934





Section
      16(a) of the Securities Exchange Act of 1934, as amended, requires that the
      Company directors and executive officers, and persons who own more than ten
      percent (10%) of the Company's outstanding common stock, file with the
      Securities and Exchange Commission (the "Commission") initial reports of
      ownership and reports of changes in ownership of Common Stock. Such persons
      are
      required by the Commission to furnish the Company with copies of all such
      reports they file. The Company's knowledge, based solely on a review of the
      copies of such reports furnished to the Company and written representation,
      as
      of November 30, 2005, all of the Section 16(a) filing requirements applicable
      to
      its officers, directors and greater than 10% beneficial owners have been
      satisfied.




Audit
      Committee


The
        principal functions of the Audit Committee is to recommend the annual
        appointment of the Company’s auditors concerning the scope of the audit and the
        results of their examination, to review and approve any the Company’s internal
        control procedures. Our audit committee consists of Mr. Thomas Schwanitz
        who is
        Chairman of the Committee and Mr. Peter Wanner, a certified public
        accountant. The Board of Directors believes that the Audit Committee, are
        capable of concluding that the Company’s disclosure controls and procedures were
        effective for purposes of the Securities Exchange Act of 1934 filings with
        the
        Securities and Exchange Commission. The full audit committee is currently
        being
        constituted and will have two outside directors, one of which will be the
        chairman.


28




Family
      Relationships





There
      are
      no family relationships between any two or more of our directors or executive
      officers. There is no arrangement or understanding between any of our directors
      or executive officers and any other person pursuant to which any director or
      officer was or is to be selected as a director or officer, and there is no
      arrangement, plan or understanding as to whether non-management shareholders
      will exercise their voting rights to continue to elect the current board of
      directors. There are also no arrangements, agreements or understandings to
      our
      knowledge between non-management shareholders that may directly or indirectly
      participate in or influence the management of our affairs.





Involvement
      in Certain Legal Proceedings





To
      the
      best of our knowledge, during the past five years, none of the following
      occurred with respect to a present or former director or executive officer
      of
      the Company: (1) any bankruptcy petition filed by or against any business of
      which such person was a general partner or executive officer either at the
      time
      of the bankruptcy or within two years prior to that time; (2) any conviction
      in
      a criminal proceeding or being subject to a pending criminal proceeding
      (excluding traffic violations and other minor offenses); (3) being subject
      to
      any order, judgment or decree, not subsequently reversed, suspended or vacated,
      of any court of any competent jurisdiction, permanently or temporarily
      enjoining, barring, suspending or otherwise limiting his involvement in any
      type
      of business, securities or banking activities; and (4) being found by a court
      of
      competent jurisdiction (in a civil action), the Securities and Exchange
      Commission or the commodities futures trading commission to have violated a
      federal or state securities or commodities law, and the judgment has not been
      reversed, suspended or vacated.




29




**ITEM
      10. EXECUTIVE COMPENSATION**





Summary
      Compensation Table. The
      following table sets forth the annual and long-term compensation for services
      in
      all capacities for the fiscal years ended November 30, 2005, 2004 and 2003,
      paid
      to our most highly compensated executive officers.




**Summary
                Compensation Table****Annual
                Compensation**
            
            **Long
                Term Compensation****Awards****Name
                and Principal Position**
            
            **Year**
            
            **Salary**
            
            **Bonus**
            
            **Restricted**
              **Stock**
              **Award(s)**
            
            **Securities**
              **Underlying**
              **Options**
            
            **All****Other**
              **Compensation**David
                Howard(1)
            
            
            2004
            
            
            $0
            
            
            —
            
            
            —
            
            
            —
            
            
            —Former
                Chairman of the Board of
            
            
            2003
            
            
            $0
            
            
            —
            
            
            —
            
            
            —
            
            
            —Directors
                and former Officer
            
            
            2002
            
            
            $0
            
            
            —
            
            
            —
            
            
            —
            
            
            —Marc
                Walther
            
            
            2005
            
            
            $56,140
            
            
            —
            
            
            —
            
            
            —
            
            
            —Chief
                Executive Officer, President and
            
            
            2004
            
            
            $0
            
            
            —
            
            
            —
            
            
            —
            
            
            —member
                of the Board of Directors
            
            
            2003
            
            
            $0
            
            
            —
            
            
            —
            
            
            —
            
            
            —Thomas
                Schwantiz
            
            
            2005
            
            
            $0Chief
                Financial OfficerEd
                Rutkowski
            
            
            2005
            
            
            $55,595
            
            
            —
            
            
            —
            
            
            —
            
            
            —Director,
                Vice President of Research and
            
            
            2004
            
            
            $0
            
            
            —
            
            
            —
            
            
            —
            
            
            —Development,
                Chief Operating Officer
            
            
            2003
            
            
            $0
            
            
            —
            
            
            —
            
            
            —
            
            
            —John
                Taylor
            
            
            2004
            
            
            $0
            
            
            —
            
            
            —
            
            
            —
            
            
            —Former
                President and Chief
            
            
            2003
            
            
            $0
            
            
            —
            
            
            —
            
            
            —
            
            
            —Executive
                Officer
            
            
            2002
            
            
            $12,000
            
            
            —
            
            
            —
            
            
            —
            
            
            —





_________________________




(1)
            David
                Howard retired and was replaced as a director by Russ Weldon on July
                19,
                2004. On October 17, 2005, Mr. Russ Weldon submitted his resignation
                as an
                officer and as a member of the Board of Directors of AmeriChip
                International, Inc. On January 5, 2006, AmeriChip International,
                Inc.
                accepted his resignation.




30




**Aggregated
      Option Exercises in Last Fiscal Year And Fiscal**


**Year-End
      Option Values**




The
      Company has not issued any stock options to any of the executive officers listed
      in the Summary Compensation Table above.





Compensation
      of Directors




We
      have
      no standard arrangement pursuant to which our Directors are compensated for
      services provided as a Director.





Employment
      Agreement s


On
        October 22, 2003, the Board of Directors approved the AmeriChip International
        Inc. 2003 Nonqualified Stock Option Plan under which employees, officers,
        directors and consultants are eligible to receive grants of stock options.
        AmeriChip has reserved a total of 20,000,000 shares of common stock under
        the
        2003 Nonqualified Stock Option Plan. On May 26, 2004 the Board of Directors
        amended the Company’s 2003 Nonqualified Stock Option Plan and reserved an
        additional 8,000,000 shares of common stock. On June 30, 2005 the Board of
        Directors amended the Company’s 2003 Nonqualified Stock Option Plan and reserved
        an additional 18,000,000 shares of common stock. On Jaugust 8, 2005 the Board
        of
        Directors amended the Company’s 2003 Nonqualified Stock Option Plan and reserved
        an additional 20,000,000 shares of common stock. .On September 19, 2005 the
        Board of Directors amended the Company’s 2003 Nonqualified Stock Option Plan and
        reserved an additional 22,000,000 shares of common stock. On December 12,
        2005
        the Board of Directors amended the Company’s 2003 Nonqualified Stock Option Plan
        and reserved an additional 35,000,000 shares of common stock. The Plan is
        presently administered by the Board of Directors. Subject to the provisions
        of
        the 2003 Nonqualified Stock Option Plan, the Board of Directors has full
        and
        final authority to select the individuals to whom options will be granted,
        to
        grant the options and to determine the terms and conditions and the number
        of
        shares issued pursuant thereto.


Change
      in
      Control





There
      are
      no arrangements which would result in payments to any officers or directors
      in
      the event of a change-in-control of AmeriChip.





**Indemnification**




Our
      Articles of Incorporation and Bylaws provide that we may indemnify an officer
      or
      director who is made a party to any proceeding, including a lawsuit, because
      of
      his position, if he acted in good faith and in a manner he reasonably believed
      to be in our best interest. In certain cases, we may advance expenses incurred
      in defending any such proceeding. To the extent that the officer or director
      is
      successful on the merits in any such proceeding as to which such person is
      to be
      indemnified, we must indemnify him against all expenses incurred, including
      attorney’s fees. With respect to a derivative action, indemnity may be made only
      for expenses actually and reasonably incurred in defending the proceeding,
      and
      if the officer or director is judged liable, only by a court order. The
      indemnification is intended to be to the fullest extent permitted by the laws
      of
      the State of Nevada.





Insofar
      as indemnification for liabilities arising under the Securities Act of 1933
      (the
“Act”) may be permitted to our directors, officers and controlling persons
      pursuant to the foregoing provisions, or otherwise, we have been advised that
      in
      the opinion of the  Securities
      and Exchange Commission such




31




indemnification
      is against public policy as expressed in the Act and is, therefore,
      unenforceable.





32




**ITEM
      11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
      MANAGEMENT**





The
      following table shows the amount of our capital stock beneficially owned by
      our
      directors, the executive officers named in the Summary Compensation Table above
      and by all directors and executive officers as a group as of November 30, 2005.
      Unless otherwise indicated, beneficial ownership is direct and the person
      indicated has sole voting and investment power. As of November 30, 2005, we
      had
      242,031,535  shares
      of
      common stock outstanding.





**Name
                and Address**
            **Title
                of Class**
            **SharesBeneficially**
                **Owned
                  (1)**
            **Percentof
                Class****(1)**David
                Howard(2)
              9282
                General Drive
              Plymouth,
                MI 48170
            Common
            20,000,000
            8.3%Marc
                Walther
              9282
                General Drive
              Plymouth,
                MI 48170 (Director)
            Common
            20,000,000
            8.3%Edward
                Rutkowski
              9282
                General Drive
              Plymouth,
                MI 48170 (Director)
            Common
            20,000,000
            8.3%Thomas
              Schwanitz
            Common
            0
            0%Officers
                and Directors as a Group
              (3
                Persons)
            Common
            40,000,000
            16.6%


_______________________




*
            Less
                than 1%.




(1)
            Applicable
                percentage of ownership is based on 242,031,535shares of common stock outstanding as of November 30, 2005, together
                with
                applicable options for each shareholder. Beneficial ownership is
                determined in accordance with the rules of the Securities and Exchange
                Commission and generally includes voting or investment power with
                respect
                to securities. Shares of common stock subject to options that are
                currently exercisable or exercisable within sixty days of November
                30,
                2005 are deemed to be beneficially owned by the person holding such
                options for the purpose of computing the percentage of ownership
                of such
                person, but are not treated as outstanding for the purpose of computing
                the percentage ownership of any other
                person.




(2)
            David
                Howard retired and was replaced as a director by Russ Weldon on July
                19,
                2004. On October 17, 2005, Mr. Russ Weldon submitted his resignation
                as an
                officer and as a member of the Board of Directors of AmeriChip
                International, Inc. On January 5, 2006, AmeriChip International,
                Inc.
                accepted his resignation.




(3)
              On
                    January 11, 2006 Mr. Thomas Schwanitz joined the Board of Directors
                    and
                    was appointed our Chief Financial Officer. At the time of this
                    report Mr.
                    Schwanitz has not been granted any shares of common stock of
                    the
                    Company.


33




**ITEM
      12. CERTAIN RELATIONSHIPS AND RELATED
      TRANSACTIONS**





On
      March
      22, 2003 the terms of the Agreement and Plan of Reorganization dated February
      27, 2003, were consummated pursuant to which we, AVI and AVI shareholders agreed
      to effect a reorganization under Section 368 (a) (1) (B) of the Internal Revenue
      Code of 1986, as amended. Pursuant to the Agreement and Plan of Reorganization,
      we acquired all of the issued and outstanding shares of AVI’s common stock with
      the result that AVI is now our wholly owned subsidiary corporation. In exchange,
      for the shares of AVI, we issued 60 million shares common stock to David Howard,
      the former Chairman of the Board of Directors, Marc Walther, our President
      and
      Chief Executive Officer, and Ed Rutkowski, one of our directors. Each of the
      foregoing individuals received 20 million shares of common stock and were the
      sole shareholders of AVI.





On
      January 21, 2003, Ed Rutkowski, transferred his patent, which covers the
      technology discussed hereinafter, to AVI. In consideration of the transfer
      of
      the patent, we are obligated to pay the following:





Messrs
      Howard, Walther and Rutkowski, each shall receive US $1 million payable at
      the
      rate of $10,000 on or before the first day of each calendar month beginning
      September 1, 2003 with interest accruing on any unpaid balance at the greater
      of
      (i) five percent (5%) and (ii) the prime rate plus 1% as reported in the Wall
      Street Journal on the first business day following each July and January 1,
      of
      each year until paid in full. The Company may repay any or all of this amount
      without penalty. Messrs Howard, Walther and Rutkowski have agreed to a
      suspension in payments until we begin generating revenues from operations;
      however, the amounts owed will continue to accrue.





The
      Company has a related party payable for advances from shareholders totaling
      $91,373 and $166,407 as of November 30, 2005 and 2004, respectively. These
      advances are uncollateralized, non-interest bearing and are payable upon
      demand.





Mr.
      Walther is the President of National Abrasives System, Co. He is also the
      President/ CEO and Director of our Company. In the transaction with National
      Abrasives System, Co., Mr. Walther received a note from the Company for
      $250,000. During the Company’s Board of Directors meeting held to approve the
      purchase of National Abrasives System, Co., Mr. Walther abstained from
      voting.





In
      January 2003, the Company entered into a cancelable licensing agreement for
      patented technology (see Note 9) with three shareholders which required
      aggregate payments of $1,000,000 to each of the three shareholders, payable in
      monthly installments of $10,000 to each shareholder. Interest on the unpaid
      principal is accrued at prime plus 1% or 5%, whichever is greater. The Company
      is currently in default under the agreement, due to non-fulfillment of the
      insurance clause provision of the contract. The Company is seeking to obtain




34




insurance
      to satisfy this provision. The accrued principal due the shareholders at
      November 30, 2005 and November 30, 2004 was $1,020,000 and $660,000 respectively
      and is included in the related party payable. The accrued interest on the
      principal is $275,000 and is included in the accrued interest. During the year
      ended November 30, 2005 and November 30, 2004, the Company paid interest due
      to
      two shareholders in the amount of $0 and $20,500 respectively. The Company
      recognized monthly expenses totaling $360,000 under the licensing agreement
      as
      license expense. The three shareholders have agreed to a suspension of payments
      until the Company begins generating revenues from operations. The amounts owed
      will continue to accrue monthly **.**




Conversion
      of Related Party Debt


On
        January 11, 2006, the Company entered into an agreement with two of its
        principal officers, whereby 24,000,000 shares of the Company’s common stock were
        issued to the officers in exchange for the outstanding principal and accrued
        interest due these officers related to the Company’s licensing agreement. (See
        Note 8.) These shares were issued at a price of $0.085 per share for a total
        amount of $2,040,000. In addition the company issued 10,000,000 shares of
        common
        stock at $0.04 per share for a total amount of $400,000. This transaction
        represents a complete payment of the amounts due these officers under the
        licensing agreement.


We
      believe that each of the above referenced transactions was made on terms no
      less
      favorable to us than could have been obtained from an unaffiliated third party.
      Furthermore, any future transactions or loans between us and our officers,
      directors, principal stockholders or affiliates, and any forgiveness of such
      loans, will be on terms no less favorable to us than could be obtained from
      an
      unaffiliated third party, and will be approved by a majority of our
      directors.




**ITEM
      13. EXHIBITS**




3.1
              Company's
                  Amended and Restated Articles of Incorporation (1)3.2
              Company's
                  Revised Amended and Restated Bylaws (1)14.1
              Code
                  of Business Conduct (2)10.1
              Patent
                  Licensing Agreement, dated January 21, 2003, by and between AmerChip,
                  Inc.
                  and AmeriChip Ventures (2)10.2
              Shareholder
                  Agreement, dated February 24, 2003, by and among David Howard,
                  Edward
                  Rutkowski and Marc Walther. (2)10.3
              Agreement,
                  dated October 22, 2003, by and between RM Communications and AmerChip,
                  Inc. (2)10.4
              Agreement,
                  dated April 1, 2004, by and between RM Communications and AmerChip,
                  Inc.
                  (2)10.5
              Purchase
                  and Sale of Business Assets Agreement, dated August 1, 2004, between
                  National Abrasive Systems, Co. and AmerChip Tool and Abrasives,
                  LLC
                  (2)10.6
              Promissory
                  Note issued on August 1, 2004 by AmerChip Tool and Abrasives, LLC
                  to
                  National Abrasive Systems, Co.
                  (2)


10.7
              Security
                  Agreement, dated on August 1, 2004 between AmerChip Tool and Abrasives,
                  LLC to National Abrasive Systems, Co. (2)10.8
              Promissory
                  Note issued on August 2, 2004 by AmeriChip International, Inc.
                  to Cornell
                  Capital (2)10.9
              Promissory
                  Note issued on September 30, 2004 by AmeriChip International, Inc.
                  to
                  Cornell Capital (2)
  35
  10.10
              Promissory
                  Note issued on January 10, 2004 by AmeriChip International, Inc.
                  to
                  Cornell Capital (2)23.1
              Consent
                  of Independent Auditors (3)31.1
              Certification
                  of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley
                  Act. (3)31.2
              Certification
                  of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley
                  Act. (3)32.1
              Certification
                  of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley
                  Act. (3)32.2
              Certification
                  of Chief Financial Officer Pursuant to Section 906 of the
                  Sarbanes-Oxley Act. (3)




(1)
      Incorporated by reference to the Registrant’s Registration Statement on Form
      SB-2 filed on December 4, 2001.


(2)
      Incorporated by reference to the Registrant’s Annual Report on Form 10-KSB filed
      on March 15, 2005.


(3)
      Filed
      herewith.








**ITEM
      14: PRINCIPAL ACCOUNTANT FEES AND
      SERVICES**





AUDIT
      FEES





Williams
      & Webster, P.S. ("Williams & Webster")  billed us in the aggregate
      amount of $71,206 and $68,181 for professional  services  rendered for
      their  audit  of our  annual  financial 
statements  and  their  reviews  of the financial 
statements  included in our Forms 10-QSB for the year ended  November
      30, 2005 and November 30, 2004, respectively, and review of and SB2 registration
      statement.




AUDIT-RELATED
      FEES





Williams
      & Webster did not bill us for, nor perform professional  services
      rendered for  assurance  and  related  services 
that  were  reasonably  related  to  the
      performance  of audit or review of the Company's  financial 
statements  for the fiscal years ended November 30, 2005 and November 30,
      2004, respectively.





TAX
      FEES





Williams
      & Webster did not bill us for, nor were perform professional services
      rendered for tax related services for the fiscal years ended November 30, 2005
      and November 30, 2004, respectively





ALL
      OTHER
      FEES




Williams
&
Webster
      did not bill us for, nor were
      perform professional services rendered during the last two fiscal years, 
other than as reported  above.




36




**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.




**AmeriChip International
              Inc.**By:
            /s/ Marc
              WaltherPresident,
                Chief Executive Officer, Chairman of the Board of Directors
              March
                12, 2007




**AmeriChip International
              Inc.**By:
            /s/ Thomas
              SchwanitzChief
                Financial Officer,
              March
                  12, 2007




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




/s/
                Marc WaltherMarc
                WaltherPresident,
                Chief Executive Officer,Chairman
                of the Board of DirectorsMarch
                12, 2007/s/
                Edward RutkowskiEdward
                RutkowskiDirectorMarch
                12, 2007






37