**Table
          of Contents**





**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**FORM
      10-KSB**





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


**OF
      THE SECURITIES EXCHANGE ACT OF 1934**


**FOR
      THE YEAR ENDING NOVEMBER 30, 2006**





**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. $132,616




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





**Table
        of Contents**




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


588,245,853
      of common stock outstanding as of February 28, 2007.




**DOCUMENTS
      INCORPORATED BY REFERENCE**




If
      the
      following documents are incorporated by reference, briefly describe them and
      identify the part of the Form 10-KSB (e.g., Part I, Part II, etc.) into which
      the document is incorporated: (1) any annual report to security holders; (2)
      any
      proxy or information statement; and (3) any prospectus filed pursuant to Rule
      424(b) or (c) of the Securities Act of 1933 (“Securities Act”). The listed
      documents should be clearly described for identification purposes (e.g., annual
      report to security holders for fiscal year ended December 24,
      1990).




The
      information set forth in our definitive Proxy Statement pursuant to Regulation
      14A of the Securities Exchange Act of 1934 (the “Exchange Act”) to be filed with
      the Securities and Exchange Commission is incorporated herein by reference
      in
      response to the Items in Part III.




Transitional
      Small Business Disclosure Format (Check
      one):    Yes o ; No x





Indicate
      by check mark whether the registrant is a shell company (as defined in rule
      12b-2 of the Exchange Act).   Yes o ; No x


**Table
          of Contents**




**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
            32Item
                12.
            Certain
                Relationships and Related
                Transactions
            33**PART
                IV**Item
                13.
            Exhibits
            34Item
                14.
            Principal
                Accountant Fees And Services
            35SIGNATURES
            
            36Exhibit
                Index




**Table
          of Contents**




**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-
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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 24700 Capital, Clinton MI 48038 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


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          of Contents**




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-
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          of Contents**




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-
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          of Contents**




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.




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, Inc. and AmeriChip Tool
      and
      Abrasives, 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 not occurred as of the date of this
      report. Accordingly, AmeriChip International Holdings, LLC is at present a
      non-operating entity.




In
      February, 2005, AmeriChip Pipe Technologies, Inc. was established as a wholly
      owned subsidiary of AmeriChip International, Inc. and is a Texas corporation.
      This subsidiary was created in furtherance of the LACC process as it relates
      to
      threading internal and external threads of oil pipe and drilling pipe. We are
      currently working with two of the largest manufacturers of oil pipe and oil
      drilling pipe to establish off line lasering systems to be used in their
      facility. AmeriChip is testing this system currently in the LACC labs for
      demonstration during the first quarter of its fiscal year. Additional
      specialized laser heads and software are being developed for this
      process.





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.





On
      April
      17, 2006, the Company formed AmeriChip Automotive, Inc., a wholly owned
      subsidiary, to develop opportunities related to the automotive industry. As
      of
      the date of this report, AmeriChip Automotive, Inc. is a non-operating entity
      and was incorporated in the State of Michigan.





On
      October 19, 2006, the Company formed Excellence 3, Inc., a wholly owned
      subsidiary, incorporated in the State of Michigan. This subsidiary was
      established in order to acquire the fixed assets of KSI Machine and Engineering,
      Inc. (KSI) as part of AmeriChip International’s acquisition of the outstanding
      common stock of KSI. Upon the acquisition of KSI on February 15, 2007,
      Excellence 3, Inc. will lease the ficed assets back to AmeriChip International,
      Inc. Subsequent to the balance sheet date but prior to the date of this report,
      the acquisition of KSI has been completed. Accordingly, no activity has been
      reflected in Excellence 3, Inc. as of November 30, 2006.





On
      September 14, 2004, the Company executed a letter of intent with KSI Machine
      and
      Engineering, Inc. (KSI) to acquire all of KSI’s outstanding common stock. This
      letter of intent was subsequently modified and executed again on November 7,
      2006. 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 stock purchase agreement with KSI. On June 24, 2005, the Company
      announced that it was entering into a license agreement with KSI for the use
      of
      AmeriChip’s Laser Assisted Chip Control technology. On October 26, 2005, the
      Company paid an additional deposit of $30,000 and on November 7, 2005, the
      Company paid another $20,000 deposit for a total of $200,000. Subsequent to
      the
      balance sheet date but prior to the report date of these financial statements,
      this acquisition was completed **.**




**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-
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          of Contents**




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-
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          of Contents**




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




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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
                restrict robotics 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-
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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-
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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 is 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.




On
      February 15, 2007, AmeriChip completed the acquisition of the common stock
      of
      KSI. The acquisition price of KSI's common stock is $3,200,00, subject to
      certain adjustments related to the amount of retained earnings reflected on
      the
      closing date, the amount of accounts receivable reflected on the closing date,
      and the amount of accounts payable reflected on the closing date. The adjusted
      acquisition price of KSI was $2,988,043, subject to post closing due diligence
      by the Company’s internal accounting firm. Deposits preciously paid to the
      seller in the amount of $200,000 were applied against the purchase price as
      of
      the closing date. The Company paid an additional $150,000 to the seller at
      closing, resulting in an obligation by the Company to the seller in the amount
      of $2,638,043. This obligation is payable in monthly installments of $50,000
      over a period of 18 months, inclusive of interest accruing at a rate of 7%
      per
      annum. After the expiration of the 18 month period, the unpaid balance is due
      to
      the seller. Additional principal payments may be required, depending upon the
      value of the Company’s stock price.





In
      conjunction with this acquisition, ownership Excellence 3, Inc, a fully owned
      subsidiary of AmeriChip International, Inc., was assigned to KSI, another fully
      owned subsidiary of AmeriChip International, Inc. Immediately subsequent to
      the
      acquisition of KSI, Excellence 3, Inc. acquired all of the fixed assets of
      KSI
      in the amount of $3,200,000. $1,600,000 of the funding for this acquisition
      was
      provided by Peoples State Bank, a local area banking institution. $1,280,000
      of
      the funding for this acquisition was provided by the United States Small
      Business Administration (SBA). These funds are scheduled to be provided within
      six months of the closing date. Peoples State Bank agreed to provide
      temporary funding for this six month period. In addition to the funding
      previously described, AmeriChip International, Inc. provided the remaining
      $320,000 in order to complete the acquisition of fixed assets.





Payment
      of the $1,600,000 obligation requires monthly payments in the amount of $26,298,
      over a period of 7 years, inclusive of interest accruing at a rate of $9.68%
      per
      annum. The temporary funding for the SBA portion of the loan provided by Peoples
      State Bank requires interest only payments, accruing at a rate of 9.68% per
      annum until the funding is provided by the SBA. Payment of the permanent portion
      of the SBA obligation will be made over a period of 10 years. The interest
      rate
      and monthly payment amount is dependant upon the terms of a debenture to be
      issued by a local taxing authority.




The
      acquisition of KSI allows AmeriChip International, Inc. to become an operating
      company, with tier one status recognized by many actual and potential customers
      of AmeriChip.


-10-
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          of Contents**




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-
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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.




KSI
      Machine and Engineering, Inc.




On
      February 15, 2007, AmeriChip acquired the common
      stock of KSI Machine and Engineering, Inc. As of the acquisition date, KSI
      is a
      fully owned subsidiary of AmeriChip International, Inc. This subsidiary is
      an
      operating entity, with operating activity expected to be reflected in
      AmeriChip's consolidated financial statements beginning with the quarter ending
      February 28, 2007.




Excellence
      3, Inc.




On
      October 19, 2006, Excellence 3, Inc. was formed in
      order to acquire the fixed assets of KSI Machine and Engineering, Inc. upon
      the
      acquisition of KSI's common stock by AmeriChip. On February 15, 2007 the
      acquisition of KSI's common stock was completed and the acquisition of KSI's
      fixed assets by Excellence 3, Inc. was also completed. Beginning with the
      quarter ending February 28, 2007 Excellence 3, Inc. will begin to lease the
      fixed assets back to KSI.





**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-
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          of Contents**




**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, 2006, we employ nine full-time employees and two full-time
      consultants. We have no collective bargaining agreements with our employees.
      KSI
      Machine and Engineering employs fifteen full time employees.


-13-
 **Table
          of Contents**




**Item
      2.    Description of
      Property**





Our
      principal executive offices are located at 24700 Capital, Clinton Township
      MI,
      Michigan. We also have offices at 9282 General Drive, Plymouth, Michigan. In
      August, 2004, where 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.





As
      of
      February 15, 2007, upon the completion of our acquisition of KSI Machine and
      Engineering, we established our World Headquarters at their facility. KSI has
      50,000 sq. feet of manufacturing space.




**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, 2006, 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. As of the balance
      sheet date the obligation of AmeriChip to Cornell is in default. Payment of
      this
      obligation is being withheld pending the outcome of the lawsuit with
      Cornell.





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-
 **Table
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**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




**Quarter
                Ended**February
                28, 2006
            
            $
            0.05
            
            $
            0.04May
                31, 2006
            
            $
            0.08
            
            $
            0.01August
                31, 2006
            
            $
            0.06
            
            $
            0.05November
                30, 2006
            
            $
            0.03
            
            $
            0.02




**Holders**




We
      have
      approximately 161 record holders of our common stock as of February 28, 2007,
      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-
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          of Contents**




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.




**Conversion
      of AmeriChip Related Party Debt**




On
      January 11, 2006, AmeriChip entered into a stock purchase agreement with Marc
      Walther and Edward
      Rutkowski whereby the Company issued 24,000,000 shares of common stock to the
      shareholders at a price of $0.085 per share for a total of $2,040,000, in
      full payment of principal and interest payments related to two of the three
      license agreements. The issue price of these shares was less than the principal
      and interest due to these two shareholders in the aggregate amount of $2,284,584
      under the licensing agreement, resulting in income from forgiveness of debt
      in
      the amount of $244,584 being recognized during the year ended November 30,
      2006
      as an increase in additional paid-in capital. During the year ended November
      30,
      2006 David Howard assigned his interest in the obligation owed to him by the
      Company to an outside entity. AmeriChip was not a party in this assignment
      agreement. As of November 30, 2006 and 2005, the principal amount due to the
      shareholders under the licensing agreement was $460,000 and $1,020,000,
      respectively, and is included in the related party payable. The accrued interest
      on the principal is $186,248 and $412,499, respectively, and is included in
      accrued interest. As of November 30, 2006, the Company was obligated for only
      one of the license agreements, while the Company was obligated for three
      agreements as of November 30, 2005.




-16-
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          of Contents**




**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-
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•
            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-
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          of Contents**




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.




Common
      Stock




The
      Company reflects common stock issued and common
      stock options exercised for the payment of consulting expenses and services
      at
      the fair market value of the stock issued or the options exercised on the date
      that the service was provided in accordance with Statement of Financial
      Accounting Standard No. 123 (R).




Warrants




The
      Company reflects the value of warrants issued at
      the value as determined by utilizing the Black-Scholes option price calculation
      model, with assumptions determined periodically for each warrant issued by
      the
      Company.




**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 Company's historical experience indicates that a very
      immaterial amount of sales are subsequently returned. 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, 2006 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 vendors 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.





In
      December 2005, the Company issued 750,000 shares of the Company’s common stock
      to James Miller for services rendered prior to joining the Company as Vice
      President of Sales and Marketing.




In
      January 2006 both Marc Walther and Edward Rutkowski were issued 12,000,000
      shares pursuant to Rule 144 for the conversion of the Note for 1 million. In
      addition 5 million shares were issued to both Marc Walther and Edward Rutkowski
      as bonuses in lieu of pay.





In
      April
      2006 Richard Rossman was issued 500,000 shares as a signing bonus. At the same
      time, the company issued 10,000,000 shares to Richard Rossmann in lieu of a
      services.





In
      October 2006, the Company issued to Richard Rossmann 10,000,000 shares in lieu
      of a services.





In
      February 2007 the Company issued to Mr. James Kotsonis 11,500,000 shares for
      consulting services provided.





In
      February 2007, the Company issued to the partner of Legacy Assurance a total
      for
      3 million shares in lieu of commission.


-19-
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          of Contents**




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. The acquisition was completed on February 15, 2007.


-20-
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          of Contents**




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-
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          of Contents**




RM
      Communications, in addition to building and maintaining websites for both
      AmeriChip International and AmeriChip Tool and Abrasives 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. The Company has signed retained
      the
      services of NewTech Computers to manage and host its website and email
      infrastructure. NewTech offers the company an extremely competitive contract
      for
      the services rendered.




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.





On
      April
      18, 2006 Mr. Richard H Rossmann was appointed President of AmeriChip Automotive
      Inc. and Director of AmeriChip International Inc.





On
      February 7, 2007, Mr. Thomas Schwanitz was appointed Director of AmeriChip
      International Inc.


-22-
 **Table
          of Contents**




**RESULTS
      OF OPERATIONS**




FINANCIAL
      CONDITION AND RESULTS OF OPERATIONS


COMPARISON
      OF YEAR ENDED NOVEMBER 30, 2006,


TO
      YEAR
      ENDED NOVEMBER 30, 2005.




**Revenue
      Recognition.** We
      have
      generated revenues from our operations during the last three 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, 2006 increased from $126,122 for the year ended
      November 30, 2005 to $132,616. Gross Profit for the year ended November 30,
      2006
      decreased from $48,462 for the year ended November 30, 2005 to $38,888. The
      increases were primarily from an increased sales effort by the Company’s
      employees.




Operating
      Expenses. Operating
      expenses, which include administrative expenses, legal and accounting expenses,
      consulting expenses and license increased from $4,559,298 (re-stated) for the
      year ended November 30, 2005 to $10,906,303 for the year ended November 30,
      2006
      an increase of $6,347,005. This increase is related to wages, administrative
      service expense and consulting expense.




Net
      Loss. Net
      loss
      increased from a net loss of ($5,102,204) for the year ended November 30, 2005
      to a net loss of ($10,986,583) or the year ended November 30, 2006. The reason
      for this increase is that general and administrative expenses increased
      substantially during the year ended November 30, 2006




PLAN
      OF
      OPERATION





Since
      we
      have completed the acquisition of KSI Machine and Engineering, we are now in
      a
      position to implement our technology on an expanded basis. We anticipate that
      the operations of KSI Machine and Engineering will bring to the


-23-
 **Table
          of Contents**




consolidated
      balance sheet of AmeriChip annual revenues of approximately $5,800,000 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, 2005 had an accumulated deficit of ($10,515,486) and for year
      ended
      November 30, 2006 we had an accumulated deficit of ($21,502,069). For the year
      ended November 30, 2005, we sustained a net loss of ($5,102,204) and for the
      end
      ended November 30, 2006 we had a net loss of ($10,986,583).




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 its acquisition of APM. In April
      2005, the Company, withdrew its bid with the court and did not pursue this
      purchase.


-24-
 **Table
          of Contents**




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, 2006 and 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-
 **Table
          of Contents**


**ITEM
            7.   FINANCIAL
            INFORMATION**
  **AMERICHIP
          INTERNATIONAL, INC.**
  **INDEX
          TO FINANCIAL STATEMENTS**
  Report
                  of Independent Registered Public Accounting Firm
                F-2Consolidated Balance Sheets at November
                  30,
                  2006 and November 30, 2005
                F-3Consolidated Statements of
                  Operations for the years ended November 30, 2006 and November 30,
                  2005
                F-4Consolidated Statement of Stockholders'
                  Deficit
                F-5Consolidated Statements of Cash
                  Flows for the
                  years ended November 30, 2006 and November 30, 2005
                F-6
                    - F-7Notes to Consolidated Financial
                  Statements
                F-8
                    - F-29
  F-1
 **Table
              of Contents**
  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, 2006 and 2005, and the related statements of operations,
            stockholders’ deficit and cash flows for the year 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, 2006 and 2005 and the results of its operations, stockholders’
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.
 
 
 
 Williams
            & Webster, P.S.
 *Certified
            Public Accountants*
 Spokane,
            Washington
 February
            26, 2007
 F-2
 **Table
                of
                Contents**




**AMERICHIP
                    INTERNATIONAL, INC.****CONSOLIDATED
                    BALANCE SHEETS**November
                    30,
                
                November
                    30,2006
                
                2005**ASSETS**CURRENT
                    ASSETSCash
                
                $
                1,716
                
                $
                218Accounts
                    receivable
                
                
                27,015
                
                
                31,646Prepaid
                    expenses
                
                
                31,898
                
                
                5,295Inventory
                
                
                212,517
                
                
                237,047TOTAL
                    CURRENT ASSETS
                
                
                273,146
                
                
                274,206FIXED
                    ASSETSFurniture
                    & fixtures
                
                
                18,252
                
                
                16,903Machinery
                    & equipment
                
                
                622,472
                
                
                261,620Less
                    accumulated depreciation
                
                
                (89,928
                )
                
                (19,134
                )TOTAL
                    FIXED ASSETS
                
                
                550,796
                
                
                259,389OTHER
                    ASSETSDeposits
                
                
                203,200
                
                
                238,959Technology
                    rights and patents, net of amortization
                
                
                16,302
                
                
                20,509Deferred
                    debt offerings costs, net of amortization
                
                
                -
                
                
                52,500TOTAL
                    OTHER ASSETS
                
                
                219,502
                
                
                311,968**TOTAL
                    ASSETS**
                
                $
                1,043,444
                
                $
                845,563**LIABILITIES
                    AND STOCKHOLDERS' DEFICIT**CURRENT
                    LIABILITIESBank
                    overdraft
                
                $
                15
                
                $
                4,561Accounts
                    payable and accrued expenses
                
                
                1,022,250
                
                
                370,149Related
                    party payable
                
                
                545,086
                
                
                1,111,373Related
                    party notes payable, current portion
                
                
                20,203
                
                
                21,129Convertible
                    debentures, net of discounts
                
                
                244,579
                
                
                225,579Accrued
                    interest - related party
                
                
                186,248
                
                
                412,499Accrued
                    interest - other
                
                
                43,742
                
                
                16,368Deposits
                    - private placements
                
                
                388,838
                
                
                325,386TOTAL
                    CURRENT LIABILITIES
                
                
                2,450,961
                
                
                2,487,044LONG-TERM
                    LIABILITIESRelated
                    party notes payable, net of current portion
                
                
                187,901
                
                
                213,502TOTAL
                    LONG-TERM LIABILITIES
                
                
                187,901
                
                
                213,502COMMITMENTS
                    AND CONTINGENCIES
                
                
                -
                
                
                -MINORITY
                    INTEREST
                
                
                3,413
                
                
                3,413**STOCKHOLDERS'
                    DEFICIT**Common
                    stock, $0.001 par value; 900,000,000 shares
                    authorized,458,767,265
                    and 242,031,535 shares issued and outstanding
                
                
                458,767
                
                
                242,032Additional
                    paid-in capital
                
                
                19,444,471
                
                
                8,415,058Accumulated
                    deficit
                
                
                (21,502,069
                )
                
                (10,515,486
                )TOTAL
                    STOCKHOLDERS' DEFICIT
                
                
                (1,598,831
                )
                
                (1,858,396
                )**TOTAL
                    LIABILITIES AND****STOCKHOLDERS'
                    DEFICIT**
                
                $
                1,043,444
                
                $
                845,563
 The
          accompany notes are an integral part of these financial
          statements.
 F-3
 **Table
            of Contents**
  **AMERICHIP
                    INTERNATIONAL, INC.****CONSOLIDATED
                    STATEMENTS OF OPERATIONS**Year
                    EndedNovember
                    30,
                
                November
                    30,2006
                
                2005REVENUES
                
                $
                132,616
                
                $
                126,122COST
                    OF SALES
                
                
                93,728
                
                
                77,660Gross
                    Profit
                
                
                38,888
                
                
                48,462EXPENSESAdministrative
                    service
                
                
                465,526
                
                
                391,268Consulting
                    expense
                
                
                8,091,109
                
                
                3,237,198Depreciation
                    and amortization
                
                
                75,001
                
                
                28,474Legal
                    and accounting
                
                
                318,946
                
                
                268,196License
                    expense
                
                
                1,440,000
                
                
                360,000Office
                    expense
                
                
                42,246
                
                
                33,772Wages-officers
                    and directors
                
                
                239,976
                
                
                111,735Wages-other
                
                
                233,499
                
                
                128,655Total
                    Expenses
                
                
                10,906,303
                
                
                4,559,298LOSS
                    FROM OPERATIONS
                
                
                (10,867,415
                )
                
                (4,510,836
                )OTHER
                    INCOME (EXPENSE)Forgiveness
                    of debt
                
                
                43,904
                
                
                -Financing
                    expense
                
                
                (71,500
                )
                
                (281,539
                )Interest
                    expense
                
                
                (96,798
                )
                
                (316,991
                )Other
                    income
                
                
                5,226
                
                
                7,162Total
                    Other Income (Expense)
                
                
                (119,168
                )
                
                (591,368
                )LOSS
                    BEFORE TAXES
                
                
                (10,986,583
                )
                
                (5,102,204
                )INCOME
                    TAX EXPENSE
                
                
                -
                
                
                -NET
                    LOSS
                
                $
                (10,986,583
                )
                $
                (5,102,204
                )BASIC
                    AND DILUTED NET LOSS PER SHARE
                
                $
                (0.03
                )
                $
                (0.03
                )WEIGHTED
                    AVERAGE NUMBER OFCOMMON
                    SHARES OUTSTANDING,BASIC
                    AND DILUTED
                
                
                367,685,683
                
                
                172,537,334
 The
          accompany notes are an integral part of these financial
          statements.
 F-4
 **Table
            of Contents**
  **AMERICHIP
                    INTERNATIONAL,
                    INC.****CONSOLIDATED
                    STATEMENT OF STOCKHOLDERS' DEFICIT**Additional
                
                
                
                TotalCommon
                    Stock
                
                Paid-in
                
                Accumulated
                
                Stockholders'Shares
                
                Amount
                
                Capital
                
                (Deficit)
                
                (Deficit)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 $0.033 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
                
                
                242,031,535
                
                
                242,032
                
                
                8,415,058
                
                
                (10,515,486
                )
                
                (1,858,396
                )Common
                    stock issued in private placements forcash
                    received in the current year, as well as privateplacement
                    deposits recognized from the priorfiscal
                    year at an average price of $0.048 per share
                
                
                28,046,590
                
                
                28,046
                
                
                1,332,173
                
                
                -
                
                
                1,360,219Common
                    stock options issued for consulting andservices
                    at an average price of $0.04 per share
                
                
                125,526,640
                
                
                125,527
                
                
                5,576,557
                
                
                -
                
                
                5,702,084Common
                    stock issued for consulting and servicesat
                    an average price of $.038 per share
                
                
                29,162,500
                
                
                29,162
                
                
                1,104,713
                
                
                
                
                
                1,133,875Common
                    stock issued in payment of unpaidlicense
                    expense and accrued interest at anaverage
                    price of $0.085 per share
                
                
                24,000,000
                
                
                24,000
                
                
                2,016,000
                
                
                -
                
                
                2,040,000Common
                    stock issued for exercise of warrantsat
                    an average price of $0.037 per share
                
                
                10,000,000
                
                
                10,000
                
                
                366,548
                
                
                -
                
                
                376,548Warrants
                    issued for services at an average priceof
                    $0.029 per share
                
                
                -
                
                
                -
                
                
                388,838
                
                
                -
                
                
                388,838Forgiveness
                    of debt income related to notespayable
                    to two officers
                
                
                -
                
                
                -
                
                
                244,584
                
                
                -
                
                
                244,584Net
                    loss for the year ended November 30, 2006
                
                
                -
                
                
                -
                
                
                -
                
                
                (10,986,583
                )
                
                (10,986,583
                )Balance,
                    November 30, 2006
                
                
                458,767,265
                
                $
                458,767
                
                $
                19,444,471
                
                
                ($21,502,069
                )
                
                ($1,598,831
                )
 The
          accompany notes are an integral part of these financial
          statements.
 F-5
 **Table
            of Contents**
  **AMERICHIP
                    INTERNATIONAL, INC.****CONSOLIDATED
                    STATEMENTS OF CASH FLOWS**Year
                    EndedNovember
                    30,
                
                November
                    30,2006
                
                2005CASH
                    FLOWS FROM OPERATING ACTIVITIESCash
                    received from customers
                
                $
                137,247
                
                $
                126,922Cash
                    paid to suppliers & employees
                
                
                (1,052,108
                )
                
                (540,525
                )Interest
                    paid
                
                
                (11,091
                )
                
                (160,312
                )Net
                    cash used by operating activities
                
                
                (925,952
                )
                
                (573,915
                )CASH
                    FLOWS FROM INVESTING ACTIVITIESAcquisition
                    of fixed assets
                
                
                (74,570
                )
                
                (193,309
                )Payments
                    on deposits
                
                
                -
                
                
                (185,759
                )Net
                    cash used by investing activities
                
                
                (74,570
                )
                
                (379,068
                )CASH
                    FLOWS FROM FINANCING ACTIVITIESProceeds
                    from loan payable - employee
                
                
                -
                
                
                2,025Payments
                    on loan payable - employee
                
                
                -
                
                
                (2,025
                )Payments
                    on related party payable
                
                
                (6,287
                )
                
                (75,034
                )Payments
                    made on related party notes payable
                
                
                (26,527
                )
                
                (15,369
                )Proceeds
                    received on convertible debentures
                
                
                -
                
                
                543,000Proceeds
                    from the issuance of common stock
                
                
                1,034,834
                
                
                319,914Net
                    cash provided by financing activities
                
                
                1,002,020
                
                
                772,511NET
                    INCREASE (DECREASE) IN CASH
                
                
                1,498
                
                
                (180,472
                )CASH,
                    BEGINNING OF PERIOD
                
                
                218
                
                
                180,690CASH,
                    END OF PERIOD
                
                $
                1,716
                
                $
                218
 The
          accompany notes are an integral part of these financial
          statements.
 F-6
 **Table
            of Contents**
 **AMERICHIP
                    INTERNATIONAL, INC.****CONSOLIDATED
                    STATEMENTS OF CASH FLOWS (CONTINUED)**Year
                    EndedNovember
                    30,
                
                November
                    30,2006
                
                2005RECONCILIATION
                    OF NET LOSS TO NET CASHUSED
                    BY OPERATING ACTIVITIESNet
                    loss for the period
                
                $
                (10,986,583
                )
                $
                (5,102,204
                )Forgiveness
                    of debt income which did not require the use of cash
                
                
                (43,904
                )
                
                -Depreciation
                    and amortization which did not require the use of cash
                
                
                75,001
                
                
                28,475Amortization
                    of finance charges which did not require the use of cash
                
                
                71,500
                
                
                241,806Licenses
                    expense which did not require the use of cash
                
                
                1,440,000
                
                
                360,000Warrants
                    issued for services
                
                
                388,838
                
                
                19,524Common
                    stock issued for interest on convertible debt
                
                
                -
                
                
                15,303Common
                    stock issued for consulting services
                
                
                6,835,959
                
                
                291,850Common
                    stock issued for exercise of options for consulting
                    services
                
                
                -
                
                
                2,724,980Beneficial
                    conversion feature
                
                
                -
                
                
                62,500Beneficial
                    conversion recorded as financing expense
                
                
                -
                
                
                87,500Common
                    stock issued upon exercise of warrants
                
                
                376,548
                
                
                5,250Net
                    cash used by operating activities
                
                
                (1,842,641
                )
                
                (1,265,016
                )Adjustments
                    to reconcile net loss to net cash used by operating
                    activitiesIncrease
                    (Decrease)Accounts
                    receivable - trade
                
                
                4,631
                
                
                800Prepaid
                    expenses
                
                
                (26,603
                )
                
                450Inventories
                
                
                24,530
                
                
                (7,047
                )(Increase)
                    DecreaseBank
                    overdraft
                
                
                (4,546
                )
                
                4,561Accounts
                    payable and accrued expenses
                
                
                444,132
                
                
                210,272Accrued
                    interest payable
                
                
                85,707
                
                
                156,679Deposits
                    - private placement
                
                
                388,838
                
                
                325,386Net
                    cash used by operating activities
                
                $
                (925,952
                )
                $
                (573,915
                )SUPPLEMENTAL
                    NON-CASH ACTIVITYStock
                    issued for repayment of convertible debt
                
                $
                -
                
                $
                880,421Common
                    stock issued for interest on convertible debt
                
                
                -
                
                
                15,303Accounts
                    payable for fixed assets
                
                
                -
                
                
                10,775Deposits
                    reclassified to fixed assets
                
                
                -
                
                
                50,000Common
                    stock issued for private placement deposits received in prior
                    year
                
                
                325,386
                
                
                -Contribution
                    of capital related party
                
                
                244,584
                
                
                -
 The
          accompany notes are an integral part of these financial
          statements.
 F-7
 **Table
            of Contents**
  **AMERICHIP
        INTERNATIONAL, INC.**
 **NOTES
        TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 **November
        30, 2006**
  **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
        to facilitate the implementation of flexible manufacturing system that the
        Company had designed to manufacture oil pipe. As of November 30, 2006, this
        subsidiary has generated no sales.
 
 On
        April
        17, 2006, the Company formed AmeriChip Automtotive, Inc., a wholly owned
        subsidiary, to develop sales related to the automotive industry. As of November
        30, 2006, no sales have been generated in this entity.  F-8
 **Table
              of Contents**
  **AMERICHIP
          INTERNATIONAL, INC.**
 **NOTES
          TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 **November
          30, 2006**
 On
        October 19, 2006, the Company formed Excellence 3, Inc., a wholly owned
        subsidiary. This entity was formed in order to acquire the fixed assets of
        KSI
        Machine and Engineering, Inc. (“KSI”) as part of AmeriChip International, Inc.’s
        pending acquisition of the outstanding common stock of KSI. Upon acquisition
        of
        this equipment, this subsidiary will lease the fixed assets back to AmeriChip
        International, Inc. As of November 30, 2006, the acquisition of KSI has not
        been
        completed. Accordingly, no activity has been reflected in Excellence 3, Inc.
        for
        the year ended November 30, 2006.
 
 The
        Company’s year end is November 30. (See Note 12)
  **NOTE
        2 - 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, 2006, the Company had an accumulated
        deficit of $21,502,069, limited cash, and negative working capital. For the
        year
        ended November 30, 2006, the Company sustained a net loss of $10,986,583.
        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
        3 - 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
 **Table
              of Contents**
 **AMERICHIP
          INTERNATIONAL, INC.**
 **NOTES
          TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 **November
          30, 2006**
  Accounting
          Pronouncements-Recent
 
 In
        September, 2006, the Financial Accounting Standards Board issued Statement
        of
        Financial Accounting Standards No. 158, “Employers’ Accounting for Defined
        Benefit Pension and Other Postretirement Plans - an amendment of FASB Statements
        No. 87, 88, 106, and 132(R)” (hereinafter “SFAS No. 158”). This statement
        requires an employer to recognize the overfunded or underfunded statues of
        a
        defined benefit postretirement plan (other than a multiemployer plan) as
        an
        asset or liability in its statement of financial position and to recognize
        changes in that funded status in the year in which the changes occur through
        comprehensive income of a business entity or changes in unrestricted net
        assets
        of a not for profit organization. This statement also requires an employer
        to
        measure the funded status of a plan as of the date of its year end statement
        of
        financial position, with limited exceptions. The adoption of this statement
        had
        no immediate material effect on the Company’s financial condition or results of
        operations.
 
 In
        September, 2006, the Financial Accounting Standards Board issued Statement
        of
        Financial Accounting Standards No. 157, “Fair Value Measurements” (hereinafter
“SFAS No. 157”). This statement defines fair value, establishes a framework for
        measuring fair value in generally accepted accounting principles (GAAP),
        and
        expands disclosure about fair value measurements. This statement applies
        under
        other accounting pronouncements that require or permit fair value measurements.
        This statement does not require any new fair value measurements, but for
        some
        entities, the application of this statement may change current practice.
        Management has not determined the impact that the adoption of this statement
        will have on the Company’s financial condition or results of
        operations.
 
 In
        March,
        2006, the Financial Accounting Standards Board issued Statement of Financial
        Accounting Standards No. 156, “Accounting for Services of Financial Assets - an
        Amendment of FASB Statement No. 140” (hereinafter “SFAS No. 156”). This
        statement amends FASB Statement No. 140 “Accounting for Transfers and Servicing
        of Financial Assets and Extinguishments of Liabilities”, with respect to the
        accounting for separately recognized servicing assets and servicing liabilities.
        This statement requires an entity to recognize a servicing asset or servicing
        liability each time it undertakes an obligation to service a financial asset
        by
        entering into a servicing contract that results from a transfer, acquisition
        or
        assumption of financial assets or liabilities. This statement also requires
        all
        separately recognized servicing assets and servicing liabilities to be initially
        measured at fair value, if practicable. This statement permits an entity
        to
        choose among two subsequent measurement methods for each class of separately
        recognized servicing assets and servicing liabilities. This statement also
        permits at its initial adoption a one time reclassification of available
        for
        sale securities to trading securities by entities with recognized servicing
        rights. Finally, this statement requires separate presentation of servicing
        assets and servicing liabilities subsequently measured at fair value in the
        statement of financial position and additional disclosures for all separately
        recognized servicing assets and servicing liabilities. The adoption of this
        statement had no immediate material effect on the Company’s financial condition
        or results of operations.
 
 In
        February, 2006, the Financial Accounting Standards Board issued Statement
        of
        Financial Accounting Standards No. 155, “Accounting for Certain Hybrid Financial
        Instruments - an Amendment of FASB Statements No. 133 and 140” (hereinafter
“SFAS No. 155”). This
 F-10
 **Table
              of Contents**
 **AMERICHIP
          INTERNATIONAL, INC.**
 **NOTES
          TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 **November
          30, 2006**
  statement
          amends FASB Statements No. 133, “Accounting for Derivative Instruments and
          Hedging Activities” and No. 140, “Accounting for Transfers and Servicing of
          Financial Assets and Extinguishments of Liabilities.” This statement resolves
          issues addressed in Statement No. 133 Implementation Issue No. D1, “Application
          of Statement 133 to Beneficial Interests in Securitized Financial Assets.” This
          statement permits fair value measurement for any hybrid financial instrument
          that contains an embedded derivative that otherwise would require bifurcation.
          This statement clarifies which interest-only strips and principal-only
          strips
          are not subject to the requirement of Statement No. 133. This statement
          establishes a requirement to evaluate interests in securitized financial
          assets
          to identify interests that are freestanding derivatives or that are hybrid
          financial instruments that contain an embedded derivative requiring bifurcation.
          This statement clarifies that concentration of credit risk in the form
          of
          subordination are not embedded derivatives. Finally, this statement amends
          Statement No. 140 to eliminate prohibition on a qualifying special-purpose
          entity from holding a derivative financial instrument that pertains to
          a
          beneficial interest other than another derivative financial instrument.
          The
          adoption of this statement had no material effect on the Company’s financial
          condition or results of operations.
 
 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 net realizable value. 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,
        2006
        and 2005, 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.
 
 Asset
        Impairment Policy
 The
        Company recognizes an impairment loss if the carrying amount of a long-lived
        asset is not recoverable from its undiscounted cash flows. All long-lived
        assets
        are considered to be held or used until they are sold, exchanged, abandoned,
        or
        otherwise disposed of.
 F-11
 **Table
              of Contents**
 **AMERICHIP
          INTERNATIONAL, INC.**
 **NOTES
          TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 **November
          30, 2006**
  Concentration
          of Credit Risk
 The
        Company maintains the majority of its cash in one commercial account at a
        major
        financial institution. At November 30, 2006 and 2005, the Company’s cash balance
        did not exceed FDIC limits.
 
 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,”
and SFAS No. 155 “Accounting for Certain Hybrid Financial Instruments - an
        Amendment of FASB Statements No. 133 and 140”. 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, 2006 and 2005, 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, 2006 and 2005, they
        were
        not included in the calculation of earnings per share because they would
        have
        been considered antidilutive. These common stock equivalents principally
        include
        outstanding warrants of 13,625,000 as of November 30, 2006. 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
 F-12
 **Table
              of Contents**
  **AMERICHIP
          INTERNATIONAL, INC.**
 **NOTES
          TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 **November
          30, 2006**
  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, 2006 and 2005.
 
 Inventories
 Inventories,
        which primarily consist of products available for sale, are recorded using
        the
        weighted average method and valued at the lower of cost or market. As of
        November 30, 2006 and 2005, the inventory of the Company’s subsidiary AmeriChip
        Tool and Abrasives, LLC totaled $212,517 and $237,047, respectively, and
        principally consisted of $210,021 and $227,279, respectively, of grinding
        and
        abrasive products and $2,496 and $9,768, 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, 2006 and 2005, 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 $70,794 and $17,518 in depreciation expense for the years
        ended November 30, 2006 and November 30, 2005, 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.
 
 During
        the year ended November 30, 2006, the Company acquired a CNC lathe machine
        in
        the amount of $257,600. The acquisition of this machine required a down payment
        of $15,000, with monthly payments of $5,000 required in the following two
        months. At the end of the third month after acquisition, the agreement required
        the Company to pay the remaining balance of $232,600. Subsequent to the
        acquisition date, the payment terms were renegotiated. The revised terms
        required continuing monthly payments of $5,000 per month, instead of the
        balance
        due at the end of the third month. As of November 30, 2006, the unpaid balance
        due on this machine was $228,368, and is included in accounts payable. At
        the
        date of acquisition, the Company signed a security agreement with the seller,
        whereby the machine was pledged as security in the event of the Company’s
        default on this obligation.
 F-13
 **Table
              of Contents**
 **AMERICHIP
          INTERNATIONAL, INC.**
 **NOTES
          TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 **November
          30, 2006**
  Impairment
          of Long-Lived Assets
 In
        October, 2001, the Financial Accounting Standards Board issues Statement
        of
        Financial Accounting Standards No. 144 “Accounting for the Impairment or
        Disposal of Long-Lived Assets” (hereinafter “SFAS No. 144”). SFAS No. 144
        replaces SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets and
        for Long-Lived Assets to be Disposed of.” This standard establishes a single
        accounting model for long-lived assets to be disposed of by sale, including
        discontinued operations. SFAS No. 144 requires that these long-lived assets
        be
        measured at the lower of carrying amount or fair value less cost to sell,
        whether reported in continuing operations or discontinued operations. This
        statement is effective beginning for fiscal years after December 15,
        2001.
 
 In
        complying with this standard, the Company reviews its long-lived assets
        quarterly to determine if any events or changes in circumstances have transpired
        which indicate that the carrying value of its assets may not be recoverable.
        The
        Company determines impairment by comparing the present value of future cash
        flows estimated to be generated by its assets to their respective carrying
        amounts. As of November 30, 2006, no impairments were deemed
        necessary.
 
 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, 2006 and 2005, the Company had deferred tax assets of approximately
        $7,200,000 and $3,600,000, 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,
        2006 and 2005.
 F-14
 **Table
              of Contents**
 **AMERICHIP
          INTERNATIONAL, INC.**
 **NOTES
          TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 **November
          30, 2006**
  The
          significant components of the deferred tax assets at November 30, 2006
          and 2005
          were as follows:
  November
                  30,
                2006
              
              
              November
                  30,
                2005Net
                  operating loss carryforward
              
              $
              21,502,000
              
              $
              10,515,000Warrants
                  issued:
              
              $
              465,400
              
              $
              -Deferred
                  tax asset
              
              $
              7,200,000
              
              $
              3,600,000Deferred
                  tax asset valuation allowance
              
              $
              (7,200,000
              )
              $
              (3,600,000
              )
 
 At
        November 30, 2006 and 2005, the Company has net operating loss carryforwards
        of
        approximately $21,502,000 and $10,515,000, respectively, which expire in
        the
        years 2021 through 2026. The Company recognized $465,400 of losses from issuance
        of warrants for services during the fiscal year ended November 30, 2006,
        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, 2005 to 2006 was $3,600,000.
 
 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.
 
 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 the Company’s historical sales experience indicates that a very
        immaterial amount of sales are subsequently returned. 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) and
        collection is probable.
 
 Cost
        of
        sales consists of the purchase price of products sold, inbound and outbound
        shipping charges, and packaging supplies.
 
 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
 F-15
 **Table
              of Contents**
 **AMERICHIP
          INTERNATIONAL, INC.**
 **NOTES
          TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 **November
          30, 2006**
  unsettled
          transactions and events as of the date of the financial statements. Accordingly,
          upon settlement, actual results may differ from estimated
          amounts.
  **NOTE
        4 - 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.
 
 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 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.
 
 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, 2005, allowed the Company to
        issue up to 88,000,000 shares of the Company’s common stock to officers,
        directors, employees and consultants. All 88,000,000 shares issuable in
        accordance with the Plan have been registered with the Securities and Exchange
        Commission on Form S-8. In the year ended November 30, 2005 and 2004, the
        Company granted 59,250,000 and 20,000,000 stock options, respectively, to
        consultants for marketing and advisory services under this plan. As of November
        30, 2005, there were 8,750,000 options remaining under this plan. All other
        registered shares under this plan were issued in periods prior to the fiscal
        year ending November 30, 2005. There were no options issued to officers,
        directors, or employees during the year ending November 30, 2005.
 
 During
        the year ended November 30, 2005, options totaling 59,250,000 were granted
        and
        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 pursuant the terms of the related consulting agreements. The remaining
        options were valued at the market price on the date of grant. All options
        were
        exercised immediately upon grant, and therefore the Company has
 F-16
 **Table
              of Contents**
 **AMERICHIP
          INTERNATIONAL, INC.**
 **NOTES
          TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 **November
          30, 2006**
  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).
 
 During
        the year ended November 30, 2006, the Company registered an additional
        150,000,000 shares of common stock under this plan. During the same fiscal
        year,
        125,526,640 options were granted and exercised under this plan at an average
        price of $0.04 per share for $5,702,084 of consulting and advisory services.
        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. As of November 30,
        2006,
        there were 33,223,360 options available to be issued under this
        plan.
 
 On
        January 31, 2007, the Company’s Board of Directors voted to increase the
        registered number of shares available pursuant the Company’s Non-Qualified Stock
        Option Plan by an additional 60,000,000 shares.
 
 The
        following is a summary of stock option plan activity:
 
 Number
                  of Shares
                OutstandingUnder
                  the Option
              
              Weighted
                  AveragePlan
              
              Exercise
                  PriceOutstanding
                  December 1, 2004
              
              
              -
              
              
              -Granted
              
              
              59,250,000
              
              $
              0.05Exercised
              
              
              (59,250,000
              )
              
              (0.05
              )Outstanding
                  November 30, 2005
              
              
              -
              
              $
              -Weighted
                  average fair value ofoptions
                  granted during theyear
                  ended November 30, 2005
              
              
              
              
              $
              -Outstanding
                  December 1, 2005
              
              
              -
              
              $
              -Granted
              
              
              125,526,640
              
              
              0.04Exercised
              
              
              (125,526,640
              )
              
              (0.04
              )Outstanding
                  November 30, 2006
              
              
              -
              
              $
              -Weighted
                  average fair value of
                options
                  granted during the
                year
                  ended November 30, 2006
              
              
              
              
              $
              -
 
 Warrants
 The
        fair
        value of common stock and warrants issued in the fiscal years ending November
        30, 2006 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%, expected life is .5 to 3 years, and there is no dividend
        yield.
 F-17
 **Table
              of Contents**
 **AMERICHIP
          INTERNATIONAL, INC.**
 **NOTES
          TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 **November
          30, 2006**
  During
          the year ended November 30, 2006, warrants were issued pursuant to a consulting
          agreement to acquire 1,000,000 shares of common stock at an exercise price
          of
          $0.08. The fair value of the warrants, which was determined on the date
          of
          grant, was $24,300. Also, during the year ended November 30, 2006, warrants
          were
          issued pursuant a consulting agreement to acquire 1,250,000 shares of common
          stock at an exercise price of $0.12. The fair value of the warrants, which
          was
          determined on the date of grant, was $27,000. Additionally, during the
          year
          ended November 30, 2006, warrants were issued pursuant a consulting agreement
          to
          acquire 1,375,000 shares of common stock at an exercise price of $0.05.
          The fair
          value of the warrants, which was determined on the date of grant, was $37,538.
 
 During
        the year ended November 30, 2006, warrants were issued pursuant to an agreement
        with an officer and director to acquire 10,000,000 shares of common stock
        at no
        exercise price. The maturity of these warrants was six months from the grant
        date. Due to the lack of a specific exercise price, the Black-Scholes Option
        Price Calculation could not be used in order to determine the fair value
        of the
        warrants on the date of grant. Accordingly, the fair value of these warrants
        was
        estimated to be the fair market value of the corresponding stock as of the
        grant
        date of $0.03 per share. As a result, the fair value of these warrants on
        the
        date of grant was determined to be $300,000.
 
 Additionally,
        during the year ended November 30, 2006, these warrants expired before being
        exercised by the holder. In accordance with SFAS 123(R), this modification
        of
        the terms of the warrant was treated as an exchange of the original warrant
        for
        a new warrant. This exchange resulted in additional consulting expense in
        the
        amount of $76,548, based upon the weighted average fair market value of the
        stock between the maturity date of the expired warrants and the exercise
        date of
        the new warrants that resulted from this exchange. Due to fact that these
        warrants expired before they were exercised, they were reflected as cancelled
        warrants, replaced by new warrants deemed to be exchanged for these expired
        warrants.
 
 During
        the year ended November 30, 2006, these warrants were exercised by the warrant
        holder. As a result, 10,000,000 shares of the Company’s common stock were issued
        to the warrant holder for no cash in full exercise of these warrants. The
        fair
        market value of the common stock issued for the exercise of these warrants
        was
        $0.03 per share, for a cumulative value of $300,000 related to the shares
        issued. The excess value of the warrants over their exercise price in the
        amount
        of $76,548 was included in additional paid in capital.
 
 During
        the year ended November 30, 2006, a second set of warrants was issued pursuant
        an agreement with the same officer and director that exercised the
        aforementioned warrants to acquire 10,000,000 shares of the Company’s common
        stock. These warrants were issued with no exercise price. The maturity of
        these
        warrants is six months from the grant date. Due to the lack of a specific
        exercise price, the Black-Scholes Option Price Calculation could not be used
        in
        order to determine the fair value of the warrants on the date of grant.
        Accordingly, the fair value of these warrants was estimated to be the fair
        market value of the corresponding stock as of the grant date of $0.03 per
        share.
        As a result, the value of these warrants on the grant date was determined
        to be
        $300,000.
 F-18
 **Table
              of Contents**
 **AMERICHIP
          INTERNATIONAL, INC.**
 **NOTES
          TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 **November
          30, 2006**
  Accordingly,
          the fair value of all warrants issued by the Company during the year ended
          November 30, 2006 was $765,386, while the fair value of all warrants exercised
          during the year was $376,548. As a result, warrants with a fair value of
          $388,838 were outstanding as of November 30, 2006.
 
 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
        following is the summarized information about stock warrants outstanding
        and
        exercisable at the fiscal years ended November 30, 2006 and 2005:
 
 Number
                  of Warrants Outstanding
              
              Weighted
                  Average Remaining Life
              
              Average
                Exercise
                  PriceDuring
                  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
              
              
              -
              
              
              -
              
              $
              -During
                  the year ended November 30, 2006:Issued
              
              
              33,625,000
              
              
              0.69
              
              $
              0.034Cancelled
              
              
              (10,000,000
              )
              
              -
              
              
              -Exercised
              
              
              (10,000,000
              )
              
              0.50
              
              
              0.030Total
                  warrants outstanding at November 30, 2006
              
              
              13,625,000
              
              
              0.60
              
              $
              0.037Total
                  unexercised warrants at November 30, 2006
              
              
              13,625,000
              
              
              0.60
              
              $
              0.037
  **NOTE
        5 - 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
 F-19
 **Table
              of Contents**
 **AMERICHIP
          INTERNATIONAL, INC.**
 **NOTES
          TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 **November
          30, 2006**
  common
          stock, and again on December 8, 2006, the board elected to increase the
          authorized capital from 500,000,000 shares to 900,000,000 shares. 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, 2006, 28,046,590 shares of common stock were
        issued
        at an average price of $0.048 per share in private placements for $1,360,219
        in
        cash and expenses paid by investors on behalf of the Company; 24,000,000
        shares
        of common stock were issued to two of the Company’s officers and directors in
        exchange for unpaid license fees and interest at an average price of $0.085
        per
        share with a fair value of $2,040,000; 23,762,500 shares of common stock
        were
        issued to four of the Company’s officers and directors for consulting services
        at an average price of $0.039 per share with a fair value of $917,875;
        125,526,640 shares of common stock options were exercised at an average price
        of
        $0.04 per share for consulting services with a fair value of $5,702,084;
        10,000,000 shares of common stock were issued to an officer and director
        at an
        average price of $0.03 per share for the exercise of warrants held by the
        officer and director with a fair value of $300,000; and 5,400,000 shares
        of
        common stock were issued at an average price of $0.04 per share for consulting
        and services with a fair value of $216,000.
 
 During
        the year ended November 30, 2006, contributed capital was recorded in the
        amount
        of $244,584, which resulted from the conversion of unpaid license fees due
        to
        two shareholders into 24,000,000 shares of the Company’s restricted common
        stock. This debt was converted to common stock at a price of $0.085 per share,
        for a total conversion price of $2,040,000, while the total amount due to
        these
        shareholders for the unpaid license fees was $2,284,584, resulting in
        contributed capital from these shareholders in the amount of
        $244,584.
 
 During
        the year ended November 30, 2006, contributed capital was recorded in the
        amount
        of $88,838, which resulted from warrants issued pursuant various consulting
        agreements. During the year ended November 30, 2006, contributed capital
        was
        also recorded in the amount of $676,548, which resulted from warrants issued
        to
        an officer and director of the Company. During the year ended November 30,
        2006,
        contributed capital was reduced in the amount of $300,000, which resulted
        from
        the exercise of previously outstanding warrants by an officer and director
        of
        the Company (See Note 4).
 
 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
        6.)
        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 stock were issued
        in
        exchange for the cancellation of all outstanding warrants issued 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
 F-20
 **Table
              of Contents**
 **AMERICHIP
          INTERNATIONAL, INC.**
 **NOTES
          TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 **November
          30, 2006**
  common
          stock were issued for consulting and services at an average price of $0.033
          per
          share with a fair value of $109,900.
 
 **NOTE
        6 - 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, 2006, 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 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 was being amortized
        as a
        financing expense over the effective period of 24 months. Amortization for
        the
        years ended November 30, 2006 and 2005 was $52,500 and $105,000,
        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%.
 F-21
 **Table
              of Contents**
  **AMERICHIP
        INTERNATIONAL, INC.**
 **NOTES
          TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 **November
          30, 2006**
 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 years ended November 30, 2006
        and
        2005 was zero and $25,625 respectively. 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 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 years ended November 30, 2006
        and
        2005 was zero and $23,750 respectively. In the fiscal year ended November
        30,
        2005, Cornell Capital converted the note principal of $125,000 into 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
 F-22
 **Table
              of Contents**
 **AMERICHIP
          INTERNATIONAL, INC.**
 **NOTES
          TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 **November
          30, 2006**
 amortized
        as a financing expense over the duration of the note. Amortization for the
        fiscal years ended November 30, 2006 and 2005 was $19,000 and $14,250,
        respectively. 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 $29,349 and $13,405 was accrued for the year ended November 30,
        2006
        and 2005 respectively. 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 determined that this
        cancellation was 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,
        2006,
        no accounting related to this agreement has been received from Cornell. (See
        Note 8)
 
 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 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 years ended
        November 30, 2006 and 2005, the Company recorded zero and $93,000, respectively,
        of financing expense and zero and $3,750, respectively, of interest expense.
        During the year ended November 30, 2005, 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
        7 - 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
        8 and Note 12.)
 F-23
 **Table
            of Contents**
  **AMERICHIP
        INTERNATIONAL, INC.**
 **NOTES
          TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 **November
          30, 2006**
  RM
          Communications
 During
        the year ended November 30, 2005, the Company entered into an agreement with
        RMC
        and cancelled all 3,050,000 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 4.) 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.
 
 Kar
        Enterprises, Inc.
 During
        the year ended November 30, 2006, the Company acquired a CNC lathe machine
        in
        the amount of $257,600 from Kar Enterprises, Inc. (See Note 3). The acquisition
        of this machine required a down payment of $15,000, with monthly payments
        of
        $5,000 required the following two months. At the end of the third month after
        acquisition, the agreement required the Company to pay the remaining balance
        of
        $232,600. Subsequent to the acquisition date, the payment terms were
        renegotiated. The revised terms required continuing monthly payments of $5,000
        per month, instead of the balance due at the end of the third month. As of
        November 30, 2006, the unpaid balance due on this machine was $228,368, and
        is
        included in accounts payable. At the date of acquisition, the Company signed
        a
        security agreement with the seller, whereby the machine was pledged as security
        in the event of the Company’s default on this obligation.
  **NOTE
        8 - COMMITMENTS AND CONTINGENCIES**
 
 The
        Company entered into a standby equity distribution agreement and various
        security and debenture agreements with Cornell Capital. (See Note 6.) 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, 2006, 31,429,368 common shares have
        been
        distributed to Cornell Capital in accordance with these agreements. As of
        November 30, 2006, the Company is in a lawsuit with Cornell Capital regarding
        Cornell’s claim of shares issued under Section 144 of restricted stock. This
        legal 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 its legal dispute with Cornell prior
        to
        any further issuance of common stock under the conversion clauses of their
        agreements. Management expects that the outcome of this lawsuit will be that
        the
        Company will be obligated to Cornell for a maximum amount of $244,579 which
        has
        been accrued by the Company, and that Cornell will be required to provide
        a
        complete accounting of its stock conversions, as well as return any shares
        converted in excess of the number of shares escrowed. Accordingly, an obligation
        in the amount of $244,579 is reflected in the Company’s balance sheet. As of
        November 30, 2006, this obligation is in default. Payment of this obligation
        is
        being withheld pending the outcome of the lawsuit with Cornell.
 F-24
 **Table
            of Contents**
  **AMERICHIP
        INTERNATIONAL, INC.**
 **NOTES
          TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 **November
          30, 2006** 
  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.
 
 During
        the year ended November 30, 2006, the Company entered into a stock purchase
        agreement with two of these shareholders, whereby the Company issued 24,000,000
        shares of common stock to the shareholders at a price of $0.085 per share,
        for a
        total price of $2,040,000, in full payment of principal and interest payments
        related to two of the three license agreements. The issue price of these
        shares
        was less than the principal and interest due to these two shareholders in
        the
        aggregate amount of $2,284,584 under the licensing agreements, resulting
        in
        income from forgiveness of debt in the amount of $244,584 being recognized
        during the year ended November 30, 2006 as an increase in additional paid-in
        capital. During the year ended November 30, 2006, the remaining shareholder
        assigned his interest in the obligation owed to him by the Company to an
        outside
        entity. AmeriChip was not a party in this assignment agreement. As of November
        30, 2006 and 2005, the principal amount due to the shareholders under the
        licensing agreement was $460,000 and $1,020,000, respectively, and is included
        in the related party payable. The accrued interest on the principal is $186,248
        and $412,499, respectively, and is included in accrued interest. As of November
        30, 2006, the Company was obligated for only one of the license agreements,
        while the Company was obligated for three agreements as of November 30,
        2005.
 
 As
        a
        result of the stock purchase agreement previously identified, the total of
        the
        previously unrecognized license expense related to the two shareholders included
        in the stock purchase agreement was immediately recognized as an expense
        during
        the year ended November 30, 2006. Accordingly, the Company recognized $1,440,000
        and $360,000 of expenses for the years ended November 30, 2006 and 2005,
        respectively, under the licensing agreement as licensing expense. The one
        unpaid
        shareholder has agreed to a suspension of payments until the Company begins
        to
        generate substantial revenues from operations. The amounts owed to this
        shareholder will continue to accrue monthly, even though this obligation
        was
        assigned by the shareholder to a third party.
 
 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:
 
 Years
                Ending November 30;2007
              
              $
              14,1962008
              
              $
              7,0982009-11
              
              
              -
 
 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
 F-25
 **Table
              of Contents**
 **AMERICHIP
          INTERNATIONAL, INC.**
 **NOTES
          TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 **November
          30, 2006**
  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:
 
 Years
                  Ending November 30;2007
              
              $
              25,5002008
              
              $
              26,7002009
              
              $
              27,9002010-11
              
              
              -
 
 **NOTE
        9 - 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,
                2006
              
              November
                  30,
                2006Technology
                  licenses and patents
              
              $
              42,069
              
              $
              42,069Less
                  accumulated amortization
              
              
              (25,767
              )
              
              (21,560
              )$
              16,302
              
              $
              20,509
 
 Amortization
        expense was $4,207 in each of the years ended November 30, 2006 and
        2005.
 
 **NOTE
        10 - RELATED PARTY TRANSACTIONS**
 
 The
        Company has a related party payable attributable to shareholder advances
        totaling $85,086 and $91,373 as of November 30, 2006 and 2005, respectively.
        These advances are not interest bearing and are payable upon demand.
 
 In
        addition, as of November 30, 2005, the Company was obligated to three
        shareholders in the amount of $1,020,000, related to the licensing agreement
        described in Note 8. During the year ended November 30, 2006, the Company
        entered into a stock purchase agreement with two of the shareholders, whereby
        the Company issued common stock in full payment of the Company’s obligations to
        these shareholders. See note 8 regarding the assignment of the Company’s
        obligation to the third shareholder to an outside entity. As of November
        30,
        2006, the amount due by the Company related to the third shareholder under
        this
        obligation is $460,000.
  The
        Company’s internal accounting firm, Schwanitz, Hayden and Associates, P.L.C. is
        considered a related party, due to a controlling interest in this firm by
        the
        Company’s Chief Financial Officer, Thomas P. Schwanitz.
  See
        Note
        4 regarding warrants issued to an officer and director, Note 5 regarding
        common
        stock issued to officers and directors, Note 8 regarding a licensing agreement
        with shareholders, and Note 11 regarding long-term debt to a related
        party.
 F-26
 **Table
              of Contents**
  **AMERICHIP
        INTERNATIONAL, INC.**
 **NOTES
          TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 **November
          30, 2006**
  **NOTE
          11 - LONG-TERM DEBT**
 
 In
        August
        2004, the Company signed a ten-year promissory note with a related party,
        secured by the equipment and inventory acquired as a result of this obligation.
        The note has 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:
 2007
              
              $
              26,5872008
              
              $
              29,0042009
              
              $
              29,0042010
              
              $
              29,0042011
              
              $
              29,004
 The
        balance of the Company’s notes payable at November 30, 2006 was as
        follows:
 
 Related
                  party note
              
              $
              208,104Less:
                  Current portion
              
              
              (20,203
              )Long-term
                  portion
              
              $
              187,901
 
 
 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 zero and $6,750 has been charged to expense
        as
        of November 30, 2006 and 2006, respectively.
  **NOTE
        12 - 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.
        This letter of intent was subsequently modified and executed again on November
        7, 2006. 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
 
 F-27
 **Table
              of Contents**
  **AMERICHIP
        INTERNATIONAL, INC.**
 **NOTES
          TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 **November
          30, 2006**
  $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.
 
 On
        February 15, 2007, AmeriChip completed its acquisition of the common stock
        of
        KSI. The acquisition price of KSI’s common stock is $3,200,000, subject to
        certain adjustments related to the amount of retained earnings reflected
        on the
        closing date, the amount of accounts receivable reflected on the closing
        date,
        and the amount of accounts payable reflected on the closing date. The adjusted
        purchase price reflected on the closing date was $2,988,043, subject to a
        post
        closing due diligence analysis by Company management and its professional
        representatives. Deposits related to this acquisition in the amount of $200,000,
        which had paid to the seller prior to the closing date, were offset as a
        partial
        payment against the adjusted purchase price. In addition, the Company paid
        the
        seller $150,000 on the closing date, resulting in a net obligation due by
        the
        Company to the seller in the amount of $2,638,043.
 
 Terms
        of
        this obligation require monthly payments of $50,000, inclusive of interest
        accruing at a rate of 7% per annum, over a period of 18 months. At the end
        of
        this period of time, the remaining unpaid balance is due to the seller.
        Additional principal payments are required over the term of the loan if the
        fair
        market value of AmeriChip’s common stock reach certain minimum levels over a 10
        day period. If the fair market value of AmeriChip’s common stock reaches $0.30
        per share over a 10 day period, one-third of the unpaid balance is due within
        60
        days. After this first period, if the fair market value of AmeriChip’s common
        stock reaches $0.40 per share over a 10 day period, one-half of the unpaid
        balance is due within 60 days. After this second period, if the fair market
        value of AmeriChip’s common stock reaches $0.50 per share over a 10 day period,
        the entire unpaid balance is due.
 
 In
        addition to these terms, the Corporation was required to seek outside financing
        for KSI’s fixed assets acquired as a result of this transaction. This outside
        financing was provided by a Detroit area bank and the United States Small
        Business Administration (hereinafter “SBA”). As a result of this outside
        financing requirement, AmeriChip established a new subsidiary named Excellence
        3, Inc. The ownership of this Excellence 3, Inc. was assigned to KSI immediately
        subsequent to AmeriChip’s acquisition of the common stock of KSI. This new
        subsidiary then acquired the fixed assets of its parent company, KSI, in
        the
        amount of $3,200,000. In order to finance this acquisition of fixed assets,
        financing was obtained from a local area bank in the amount of $1,600,000.
        Additional financing was obtained from the SBA in the amount of $1,280,000,
        plus
        closing costs in the amount of $37,000, resulting in a net obligation due
        to the
        SBA in the amount of $1,317,000. The remaining amount of the acquisition
        cost in
        the amount of $320,000 was provided by AmeriChip International, Inc. The
        funds
        provided by the SBA were not immediately available, pending the issuance
        of a
        debenture bond by a local taxing authority. Accordingly, temporary funding
        of
        the amount financed by the SBA was provided by the same local area bank
        previously identified.
 
 Terms
        of
        the obligation due to the Detroit area bank in the amount of $1,600,000 require
        monthly payments in the amount of $26,298 over a period of seven years,
        inclusive of interest accruing at a rate of 9.68% per annum. As a result
        of this
        obligation, the bank has a first security position on the assets acquired
        by
        Excellence 3, Inc.
 F-28
 **Table
              of Contents**
  **AMERICHIP
        INTERNATIONAL, INC.**
 **NOTES
          TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 **November
          30, 2006**
 Terms
        of
        the obligation to the SBA in the amount of $1,317,000 require monthly payments
        over a period of ten years. The monthly payment amounts and the interest
        rate
        are dependant upon the rate of interest included in the forthcoming debenture
        sale of the local taxing authority. As a result of the obligation, the SBA
        has a
        second security position in the assets acquired by Excellence 3,
        Inc.
 
 Also,
        see
        notes 7 and 8 regarding transactions with KSI.
 
 Funds
        Raised
 Subsequent
        to November 30, 2006, the Company offered for sale to accredited investors
        shares of its restricted common stock, at a price of $0.025 per share, in
        order
        to raise funds for AmeriChip’s pending acquisition of KSI Machine and Tool, Inc.
        As of December 28, 2006, the Company has raised $485,000 through the sale
        of
        19,400,000 shares of its restricted common stock.
 
 In
        addition, subsequent to November 30, 2006, the Company sold a convertible
        debenture in the principal amount of $100,000 to a single investor, before
        discount and loan fees of 6% of the principal amount, plus the sale of 240,000
        shares of its restricted common stock. Under terms of the convertible debenture,
        the Company will pay monthly interest at a rate of 18% per annum, with unpaid
        principal and accrued interest due and payable in full on February 1, 2008.
        The
        holder of the convertible debenture can, at his option and election, convert
        all
        or a portion of the unpaid principal and accrued interest into shares of
        the
        Company’s common stock at a conversion price of $0.10 per share.
 
 Acquisition
        of Machining Center
 In
        December, 2006, the Company took delivery of and installed a Toyota machining
        center in order to complement the lasers and robotic equipment that the Company
        currently owns for performing production runs. Terms of this acquisition
        allow
        the Company to utilize the machine for a period of seven months. At the end
        of
        the seven month period, the Company has an option to acquire the equipment
        for a
        predetermined purchase price of $417,000, or pay a fee of $75,000 for the
        use of
        the machine for the seven month period, in which case the machine would then
        be
        returned to the seller. As of the issue date of these financial statements,
        management has not made a decision regarding which option it intends to
        exercise.
 
 New
        FASB Pronouncement
 In
        February, 2007, the Financial Accounting Standards Board issued Statement
        of
        Financial Accounting Standards No. 159, “The Fair Value Option for Financial
        Assets and Financial Liabilities - Including an amendment of FASB Statement
        No.
        115” (hereinafter SFAS No. 159”). This statement permits entities to choose to
        measure many financial instruments and certain other items at fair value.
        The
        objective is to improve financial reporting by providing entities with the
        opportunity to mitigate volatility in reported earnings caused by measuring
        related assets and liabilities differently without having to apply complex
        hedge
        accounting provisions. This Statement is expected to expand the use of fair
        value measurement, which is consistent with the Board’s long-term measurement
        objectives for accounting for financial instruments. This statement is effective
        as of the beginning of an entity’s first fiscal year that begins after November
        15, 2007, although earlier adoption is permitted. Management has not determined
        the effect that adopting this statement would have on the Company’s financial
        condition or results of operation.
 F-29
 **Table
            of Contents**




ITEM
      8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
      FINANCIALDISCLOSURE





We
      have had no disagreements on any matter of accounting principles or practices,
      financial statement disclosure, or auditing scope or procedures with any of
      our
      accountants for the year ended November 30, 2006 or any interim
      period.





We
      have not had any other changes in nor have we had any disagreements, whether
      or
      not resolved, with our accountants on accounting and financial disclosures
      during our two recent fiscal years or any later interim period.




**ITEM
      8A.  CONTROLS AND PROCEDURES.**





(a)
      Evaluation of Disclosure Controls and Procedures.





Under
      the supervision and with the participation of our management, including our
      Chief Executive Officer and Chief Financial Officer, we evaluated the
      effectiveness of the design and operation of our disclosure controls and
      procedures (as such term is defined in Rule 13a-15(e) under the Securities
      Exchange Act of 1934 (the "Exchange Act")). Disclosure controls and procedures
      are the controls and other procedures that we designed to ensure that we record,
      process, summarize and report in a timely manner the information we must
      disclose in reports that we file with or submit to the Securities and Exchange
      Commission under the Exchange Act. Based on this evaluation, our Chief Executive
      Officer and our Chief Financial Officer concluded that our disclosure controls
      and procedures were effective as of the end of the period covered by this
      report.





Disclosure
      controls and procedures are controls and procedures that are designed to ensure
      that information required to be disclosed in our reports filed or submitted
      under the Securities Exchange Act is recorded, processed, summarized and
      reported, within the time periods specified in the Securities and
      Exchange Commission's rules and forms. Disclosure controls and procedures
      include, without limitation, controls and procedures designed to ensure that
      information required to be disclosed in our reports filed under the Exchange
      Act
      is accumulated and communicated to management, including our principal executive
      officer and our principal financial officer, as appropriate, to allow timely
      decisions regarding required disclosure.




(b)
      Changes in Internal Control over Financial Reporting.





During
      the year ended November 30, 2006, there was no change in our internal control
      over financial reporting (as such term is defined in Rule 13a-15(f) under the
      Exchange Act) that has materially affected, or is reasonably likely to
      materially affect, our internal control over financial reporting.





**ITEM
      8B.  OTHER INFORMATION.**




None.


-26-
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          of Contents**




**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, 2006 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 & DevelopmentRichard
                H Rossmann
            
            61
            
            Director,
                President, AmeriChip Automotive Inc.




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-
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          of Contents**




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.




***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.




***Richard
      H Rossmann***  Mr.
      Rossmann was part of the executive team that rebuilt Chrysler's ailing
      manufacturing structure in the early 1980s. In the 1990s, Richard Rossmann
      was
      hand picked by Richard E. Dauch, Co-Founder, Chairman and Chief Executive
      Officer of American Axle & Manufacturing to lead the manufacturing
      revitalization as Vice President of Manufacturing for the multi-billion dollar
      former General Motors driveline division.




Mr.
      Rossmann attended Penn State's MBA School of International Business. Mr.
      Rossmann has spent over 30 years designing and building world-class
      manufacturing operations in six countries on four continents for such companies
      as Chrysler and American Axle. For the last decade, Mr. Rossmann has owned
      Symtec, Inc., a manufacturing systems technology company providing consulting
      expertise for major manufacturing, acquisition and joint venture projects for
      Fortune 100 companie s.




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, 2006, 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. Mark Tuscany, a certified public
      accountant and Ms. Rhonda Windsor, President of AmeriChip Canada Inc. The Board
      of Directors believes that the Audit Committee, is 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-
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          of Contents**




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-
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          of Contents**




**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, 2006, 2005 and 2004, 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**Marc
                Walther
            
            
            2006
            
            $
            116,975.00
            
            
            —
            
            
            17,000,000
            
            
            —
            
            
            —Chief
                Executive Officer and
            
            
            2005
            
            $
            55,094.96
            
            
            —
            
            
            —
            
            
            —
            
            
            —member
                of the Board of Directors
            
            
            2004
            
            $
            0
            
            
            —
            
            
            —
            
            
            —
            
            
            —Thomas
                Schwanitz
            
            
            2006
            
            $
            0
            
            
            
            
            
            —Chief
                Financial Officer and
            
            
            2005DirectorEd
                Rutkowski
            
            
            2006
            
            $
            123,001.00
            
            
            —
            
            
            17,000,000
            
            
            —
            
            
            —Director,
                Vice President of Research and
            
            
            2005
            
            $
            55,639.55
            
            
            —
            
            
            —
            
            
            —
            
            
            —Development
            
            
            2004
            
            $
            0
            
            
            —
            
            
            —
            
            
            —
            
            
            —Richard
                Rossmann
            
            
            2006
            
            $
            0
            
            
            —
            
            
            20,000,000
            
            
            —
            
            
            —Director,
                President and ChiefOperating
                OfficerDavid
                Howard
            
            
            2005
            
            $
            0
            
            
            —
            
            
            —
            
            
            —
            
            
            —Former
                Chairman of the Board of
            
            
            2004
            
            $
            0
            
            
            —
            
            
            —
            
            
            —
            
            
            —Directors
                and former Officer
            
            
            2003
            
            $
            0
            
            
            —
            
            
            —
            
            
            —
            
            
            —




-30-
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          of Contents**




**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
      Agreements




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 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 August 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. On March 29,
      2006,
      the Board of Directors amended the Company’s 2003 Nonqualified Stock Option Plan
      and reserved an additional 45,000,000 shares of common stock. On July 26, 2006,
      the Board of Directors amended the Company’s 2003 Nonqualified Stock Option Plan
      and reserved an additional 40,000,000 shares of common stock. On November 21,
      2006, the Board of Directors amended the 2003 Nonqualified Stock Option Plan
      and
      reserved an additional 30,000,000 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 indemnification
      is against public policy as expressed in the Act and is, therefore,
      unenforceable.


-31-
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          of Contents**




**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, 2006, we
      had
      458,767,265 shares of common stock outstanding.




**Name
                and Address**
            
            **Title
                of Class**
            
            **Shares**
              **Beneficially**
              **Owned
                (1)**
            
            **Percent**
              **of
                Class****(1)**Marc
                A Walther
              24700
                Capital
              Clinton
                Township MI 48036(Director)
            
            Common
            
            37,000,000
            
            8.1%Edward
                Rutkowski
              24700
                Capital
              Clinton
                Township MI 48036
              (Director)
            
            Common
            
            37,000,000
            
            8.1%Thomas
                P Schwanitz (2)
              24700
                Capital
              Clinton
                Township MI 48036
              (Director)
            
            Common
            
            1,250,000
            
            .3%Richard
                H Rossmann (3)
              24700
                Capital
              Clinton
                Township, MI
              48036
                (Director)
            
            Common
            
            20,500,000
            
            4.5%Officers
                and Directors as a Group
              (4Persons)
            
            Common
            
            95,750,000
            
            20.9%





*
            Less
                than 1%.




(1)
            Applicable
                percentage of ownership is based on 458,767,265 shares of common
                stock
                outstanding as of November 30, 2006, 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, 2006 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)
            On
                January 11,2006 . Thomas Schwanitz was appointed our Chief Financial
                Officer.




(3)
            On
                April 18, 2006 Mr. Richard H Rossmann was appointed a director of
                the
                Company as well as President of AmeriChip Automotive Inc.




-32-
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          of Contents**




**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
      $85,086 and $91,373 as of November 30, 2006 and 2005, 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. During the yearThe Company is
      seeking to obtain


-33-
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          of Contents**




insurance
      to satisfy this provision. The accrued principal due the shareholders at
      November 30, 2006 and November 30, 2005 was $460,000 and $1,020,000 respectively
      and is included in the related party payable. The accrued interest on the
      principal is $186,248 and 412,499 as of November 30, 2006 and 2005,
      respectively, and is included in the accrued interest The Company recognized
      expenses totaling $1,440,000 and $360,000 for the years ended November 30,
      2006
      and 2005, respectively 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





During
      the year ended November 30, 2006, the Company entered into a stock purchase
      agreement with two of these shareholders, whereby the Company issued 24,000,000
      shares of common stock to the shareholders at a price of $0.085 per share,
      for a
      total price of $2,040,000, in full payment of principal and interest payments
      related to two of the three license agreements. The issue price of these shares
      was less than the principal and interest due to these two shareholders in the
      aggregate amount of $2,284,584 under the licensing agreements, resulting in
      income from forgiveness of debt in the amount of $244,584 being recognized
      during the year ended November 30, 2006 as an increase in additional paid-in
      capital. During the year ended November 30, 2006, the remaining shareholder
      assigned his interest in the obligation owed to him by the Company to an outside
      entity. AmeriChip was not a party in this assignment agreement. As of November
      30, 2006 and 2005, the principal amount due to the shareholders under the
      licensing agreement was $460,000 and $1,020,000, respectively, and is included
      in the related party payable. The accrued interest on the principal is $186,248
      and $412,499, respectively, and is included in accrued interest. As of November
      30, 2006, the Company was obligated for only one of the license agreements,
      while the Company was obligated for three agreements as of November 30,
      2005.




We
      believe that 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.




**PART
        IV**


**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)




-34-
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          of Contents**




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 $80,000 and $71,206 for professional  services  rendered for
      their  audit  of our  annual  financial 
statements  and  their  reviews  of the financial 
statements  included in our Forms 10-KSB for the year ended  November
      30, 2006 and November 30, 2005, respectively.




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, 2006 and November 30,
      2005, 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, 2006
      and November 30, 2005, 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.


-35-
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          of Contents**




**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
                WaltherChief
                Executive Officer, Chairman of the Board of Directors
              March
                1, 2007




**AmeriChip
                International Inc.**By:
            /s/ Thomas
                SchwanitzChief
                Financial Officer, Director
              March
                1, 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.
  By:
                /s/ Marc
                    WaltherChief
                    Executive Officer, Chairman of the Board of Directors
                  March
                    1, 2007
 By:
                    /s/ Edward
                        RutkowskiDirector
                      March
                        1, 2007
 By:
                          /s/ Richard
                              H RossmannDirector
                            March
                              1, 2007
 By:
                                /s/ Thomas
                                    P SchwanitzDirector
                                  March
                                    1, 2007


-36-