U.S.
      SECURITIES AND EXCHANGE COMMISSION


Washington,
      D.C. 20549





**FORM
      10-KSB**


x ANNUAL
      REPORT
      UNDER SECTION 13 OR 15(d)


OF
      THE
      SECURITIES EXCHANGE ACT OF 1934


For
      the
      fiscal year ended December 31, 2006





OR




o
      TRANSITION UNDER
      SECTION 13 OR 15(d)


OF
      THE
      SECURITIES EXCHANGE ACT OF 1934


For
      the
      transition period from ________ to ________




**The
      KingThomason Group, Inc.**


(Exact
      name of registrant as specified in its charter)




Nevada
              (state
                of
              incorporation)
            333-60880
              (Commission
                File Number)
            73-1602395
              (IRS
                Employer
              I.D.
                Number)




309
      Avenue H, Suite #C


Redondo
      Beach, CA 90277


310-540-1960


____________________________________________________


(Address
      and telephone number of registrant's principal


executive
      offices and principal place of business)




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





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





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





Check
      whether the issuer (1) filed all reports required to be filed by Section 13
      or 15(d) of the Securities Exchange Act during the past twelve 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 the registrant’s knowledge, in definitive proxy or
      information statements incorporated by reference in Part III of this Form 10-KSB
      or any amendment to this Form 10-KSB. x




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





State
      issuer’s revenues for its most recent fiscal year: $36,953





State
      the
      aggregate market value of the 10,722,209 voting and non-voting common equity
      held by non-affiliates computed by reference to the $0.04 average bid and asked
      price of such common equity, as of April 3, 2007: $428,888.





As
      of
      February 22, 2007, there were 23,771,636 shares of the Registrant's Common
      Stock, par value $0.001 per share, outstanding.





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).
      None





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









**TABLE
      OF CONTENTS**




PageItem
                  1
              Description
                  of Business
              
              1Business
                  Development
              
              1Our
                  Business
              
              1Revenue
                  by Sectors
              
              4Competition
              
              4Distribution
                  Methods
              
              4Dependence
                  on Major Customers or Suppliers
              
              4Patents,
                  Trademarks and Licenses
              
              4Government
                  Approval of Principal Products or Services
              
              4Government
                  Regulations
              
              5Research
                  and Development
              
              5Environmental
                  Laws and Controls
              
              5Employees
              
              5Seasonality
              
              5Item
                  2
              Description
                  of Property
              
              5Item
                  3
              Legal
                  Proceedings
              
              5Item
                  4
              Submission
                  of Matters to a Vote of Security Holders
              
              5Item
                  5
              Market
                  for Common Equity and Related Stockholder Matters
              
              6Item
                  6
              Management’s
                  Discussion and Analysis
              
              7Results
                  of operations
              
              7Balance
                  sheet items
              
              8Outlook
              
              8Liquidity
                  and Capital Resources
              
              8Off-Balance
                  Sheet Arrangements
              
              8Contractual
                  obligations
              
              8Item
                  7
              Financial
                  Statements
              
              9Item
                  8
              Changes
                  In and Disagreements With Accountants on Accounting and
                  Financial DisclosureItem
                  8A(T)
              Controls
                  and Procedures
              
              25Item
                  8B
              Other
                  Information
              
              25
  ii
  Item
                  9
              Directors,
                  Executive Officers, Promoters and Control Persons;Compliance
                  with Section 16(a) of the Exchange Act
              
              25Directors,
                  Executive Officers and Significant Employees
              
              25Audit
                  Committee and Audit Committee Financial Expert
              
              27Code
                  of Ethics
              
              28Compliance
                  with Section 16(a) of the Exchange Act
              
              28Item
                  10
              Executive
                  Compensation
              
              28Employment
                  Contracts
              
              29Item
                  11
              Security
                  Ownership of Certain Beneficial Ownersand
                  Management
              
              29Item
                  12
              Certain
                  Relationships and Related Transactions
              
              30Item
                  13
              Exhibits
              
              30Item
                  14
              Principal
                  Accountant Fees and Services
              
              32Signatures
              
              
              33




iii


ITEM
      1.  **DESCRIPTION
      OF BUSINESS.**




**Business
      Development** **.**





KingThomason
      Group, Inc. was incorporated in Nevada on November 8, 2000. On December 7,
      2001
      it was the surviving corporation in a merger between it and KingThomason, Inc.,
      which was incorporated in Nevada on July 21, 2000. Prior December 31, 2000
      KingThomason, Inc. operated through Subchapter S corporations that owned the
      different products and programs that were developed. (A Subchapter S corporation
      is a small business corporation whose income, with some exceptions, is not
      taxed
      at the corporate level but is passed through and taxed to its shareholders.)
      On
      December 31, 2000 the interests of the founders in the Subchapter S corporations
      were transferred to KingThomason, Inc. The Subchapter S status of all the
      corporations in the group was terminated, and on December 7, 2001, the merger
      between The KingThomason Group, Inc. and KingThomason, Inc. was effected. The
      historical financial statements of the post-merger company are those of
      KingThomason, Inc.





**Our
      Business** **.**





Presently
      we have two wholly owned and operating subsidiaries, KingThomason Credit Card
      Services, Inc. (KTCC) and KingThomason, Inc. (KTI) -





·
              KTCC’s
                  business plan is to offer a proprietary patient-pay medical accounts
                  receivable recovery program,***TotalCare,***based on a credit card, that enables physicians and hospitals to
                  recover
                  that portion of a medical provider’s bill not covered by insurance and
                  that is the responsibility of the patient, and


·
              KTI
                  markets healthcare insurance products, on a wholesale basis, to
                  retail
                  insurance brokerage firms that offer the products to the underinsured
                  and
                  uninsured.





The
      following is a brief description of our two divisions:





**1.**
            ***TotalCare*****Medical
                Accounts Receivable Credit Card
                Program**





Participating
      physicians and hospitals assign their past due patient-pay receivables to KTCC.
      KTCC offers the then past due patients a MasterCard credit card enabling the
      patient with a flexible means to pay down their medical bill on a monthly basis.
      After a 12 month period, the Company is able to monetize the performing credit
      cards and return up to 70% of the original receivable amount to the physician.
      KingThomason retains the remaining 30%.





The
      TotalCare Program offers a solution that is designed to recover a significantly
      higher percentage of past due patient-pay accounts receivable, and in less
      time,
      than the traditional collection process. Furthermore, there is no cost to the
      physician and the process can be expected to help repatriate the patient’s
      relationship with their physician. To date we have realized no revenues from
      this segment of our business due to a previous lack of funding.




1




**Marketing**





We
      have a
      growing number of agreements in place to market the medical accounts receivable
      program including:





·
              An
                  April 1, 2002 agreement with Cal-Centurion Management Insurance
                  Services,
                  Inc. (“Cal-Centurion”). Cal-Centurion represents specific healthcare
                  providers in the Los Angeles and Ventura County Medical Foundations
                  throughout Southern California whose high priority is to address
                  the issue
                  of past due accounts receivable that keep expanding. For its efforts,
                  Cal-Centurion will receive a commission on the revenues received
                  by us
                  derived from Cal-Centurion clients enrolled in our credit card
                  program.





·
              A
                  March 6, 2004 agreement with Medical Capital Corporation. Medical
                  Capital
                  Corporation is a company that represents specific health care providers
                  and institutions in the United States and is especially focused
                  on the
                  issue of past due accounts receivable. Pursuant to our March 6,
                  2004
                  agreement, Medical Capital Corporation will promote our credit
                  card
                  program with its clients. We will pay a commission to it based
                  on the
                  revenues we receive from Medical Capital Corporation’s clients for the
                  recovery of past due accounts
                  receivable.





·
              An
                  August 22, 2003 agreement with PracticeXpert. PracticeXpert is
                  in the
                  business of managing healthcare practices and improving their operational
                  billing procedures and efficiencies. Pursuant to the August 22ndagreement PracticeXpert is commencing the integration of our TotalCare
                  Medical Accounts Receivable Credit Card Program into their product
                  offerings to help their clients recapture a greater percentage
                  of their
                  private-pay medical receivables.





·
              An
                  April 1, 2002 agreement with The Independent Physicians Association
                  of
                  America (TIPAAA). TIPAAA is the leading trade association serving
                  Independent Physician Associations (IPAs). They are in 39 states
                  and
                  represent more than 300,000 physicians affiliated with IPAs. TIPAAA’s
                  mission is to provide services that assist IPAs in improving their
                  overall
                  operations and to become more cost efficient in the managed care
                  environment. TIPAAA intends to integrate the TotalCare program
                  into the
                  basket of services they offer to their members





**2.**
            **Healthcare
                Product Offerings**





We
      operate as a Master General Insurance Agency or MGA as it is better known in
      the
      insurance industry. As an MGA we market, on what can be described as a wholesale
      basis, our insurance products to retail insurance agencies whose insurance
      brokers, in turn, offer the insurance products for sale to the general public.
      The two healthcare products currently being sold generate revenue to us in
      the
      form of a commission that is paid monthly for each policy that is active that
      month.




2




**SpectraOne
      and HealthNext Major Medical Insurance Plans**





These
      two
      programs provide a basic major medical plan to an underserved market of
      uninsured people. It is affordable to that segment of the population that is
      incapable to pay all-inclusive medical insurance but need more protection than
      a
      hospital-only plan with minimal coverage. With $2,000,000 in coverage, the
      plan
      offers an affordable alternative to little or no medical insurance. The plan
      features a simplified application, is easy for an agent to sell and costs,
      on
      average, only fifty percent of an all-inclusive medical insurance plan. The
      plans are provided by American Select Insurance Management Corporation.





American
      Select Insurance Management Corporation (“American Select”) manages medical
      insurance programs for insurers. Our December 1, 2001 agreement with American
      Select provides that we are the exclusive marketing agent of American Select’s
      limited medical plans in states where we are licensed to sell our two limited
      medical plans.





We
      are
      responsible for recruiting all agents that will sell the limited medical plan
      and for providing all marketing materials. We receive fees and commissions
      attributable to our recruitment of agents for American Select and their sales
      of
      the insurance products.





The
      term
      of our agreement with American Select depends on the attainment of stated
      production goals. It can be canceled if either party’s license to solicit
      insurance business expires or is terminated. The American Select Plans now
      being
      offered are the SpectraOne and HealthNext Plans.





**3.**
            **Transaction
                with Fusion Capital Fund II,
                LLC**




On
      October 14, 2004, we entered into a common stock purchase agreement with Fusion
      Capital Fund II, LLC pursuant to which Fusion Capital agreed to purchase on
      each
      trading an aggregate of $6.0 million. The $6.0 million of common stock is to
      be
      purchased over a 30 month period. The purchase price of the shares of common
      stock will be equal to a price based upon the future market price of the common
      stock without any fixed discount to the market price.





The
      Company has authorized the sale and issuance of 6,000,000 shares of our common
      stock to Fusion Capital under the common stock purchase agreement of which
      we
      have registered 6,000,000. We estimate that the maximum number of shares we
      will
      sell to Fusion Capital under the common stock purchase agreement will be
      6,000,000 shares.





Under
      the
      common stock purchase agreement, on each trading day Fusion Capital is obligated
      to purchase a specified dollar amount of our common stock. Subject to our right
      to suspend such purchases at any time, and our right to terminate the agreement
      with Fusion Capital at any time, each as described below, Fusion Capital shall
      purchase on each trading day during the term of the agreement $10,000 of our
      common stock. This daily purchase amount may be decreased by us at any time.
      We
      also have the right to increase the daily purchase amount at any time, provided
      however, we may not increase the daily purchase amount above $10,000 unless
      our
      stock price is above $0.50 per share for five consecutive trading
      days.




3




**Revenue
      by Sectors** **.** Revenues
      from our subsidiaries during 2004, 2005 and 2006 are as follows:





2004
            
            2005
            
            2006KingThomason,
                Inc.
            
            $
            73,231
            
            $
            57,301
            
            $
            36,526KingThomason
                Financial Services
            
            $
            710
            
            $
            614
            
            $
            427KingThomason
                Credit Card Services
            
            $
            0
            
            $
            0
            
            $
            0





**Competition** **.**





Our
      Medical Accounts Receivable Credit Card Program was created by us and - to
      our
      knowledge - is unique and has no direct competition. Our HealthNext Basics
      Major
      Medical Plan is targeted to an underserved market of uninsured or underinsured
      people and competes with numerous other companies offering major medical
      insurance coverage.





**Distribution
      Methods** **.**





We
      distribute, or in some instances plan to distribute, our healthcare products
      through existing retail broker networks. We operate as a Master General
      Insurance Agency that wholesales insurance products to retail insurance agencies
      that ultimately sell to the consumer. The agencies and their respective agents
      and brokers are independent contractors that sell and promote our products
      and
      services as they feel appropriate for their clients. The agencies are paid
      a
      commission directly from the insurance company as they complete sales. The
      insurance companies take the responsibility to license and maintain proper
      documentation for the agents that sell our products, which means that we do
      not
      have the responsibility to do so.





**Dependence
      on Major Customers or Suppliers** **.**





We
      are
      not dependent on one or a few customers.





**Patents,
      Trademarks and Licenses** **.**





We
      have a
      Trademark pending for the name *SpectraOne* ,
      the
      name of our Basic Major Medical Plan and a Copyright Use Mark for *TotalCare* and *TotalRecovery* ,
      our
      Medical Credit Card Program. We do not license any of the products we sell
      that
      are owned by other companies.





**Government
      Approval of Principal Products or Services** **.**





Because
      other companies provide the actual insurance that we incorporate into the
      products we sell, we are only required to be approved as an Agent in Good
      Standing by the insurance commissions where we sell these products. This
      approval process is taken care of by insurance companies, not their agents.




4




**Government
      Regulations** **.**





The
      annuities we offer are underwritten by other companies. Any annuities or other
      estate planning products we offer must comply with certain provisions of the
      Internal Revenue Code or regulations thereunder if they are to qualify for
      tax-exempt treatment.





**Research
      and Development** **.**





We
      have
      spent approximately $1,500,000 over the last five years in development and
      implementation activities of our products and services. We have worked to
      establish our agreements for the sale of the TotalCare medical accounts
      receivable program and the distribution of the wholesale insurance products.
      None of this has been borne by our customers.





**Environmental
      Laws and Controls** **.**





We
      have
      no direct costs with regard to complying with environmental laws and
      regulations.





**Employees** **.**





At
      present we have only one full-time company officer. Thomas King is the President
      and CEO of KingThomason Group, Inc. and runs its day-to-day operations.





**Seasonality** **.**





There
      is
      no seasonal aspect to our business.





**ITEM
      2.**  **DESCRIPTION
      OF PROPERTY.**





We
      own no
      plants or manufacturing equipment, only office furniture, computers and related
      equipment.





**ITEM
      3.**  **LEGAL
      PROCEEDINGS.**





Neither
      our company nor any of our property is a party to, or the subject of, any
      material pending legal proceedings other than ordinary, routine litigation
      incidental to our business.





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





There
      were no matters submitted to a vote of the stockholders of our company during
      2006 through the solicitation of proxies or otherwise.




5






**PART
      II**





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





KingThomason’s
      Common Stock presently trades on the OTC Bulletin Board under the symbol KGTH,
      having been added to the OTC Bulletin Board on March 11, 2002. The high and
      low
      bid and asked prices, as reported by the OTC Bulletin Board, are as follows
      for
      2005 and 2006. The quotations reflect inter-dealer prices, without retail
      mark-up, mark-down or commission and may not represent actual
      transactions.


2005:
              
              High
              
              Low1st
                  Qtr
              
              $
              0.44
              
              $
              0.252nd
                  Qtr
              
              $
              0.30
              
              $
              0.083rd
                  Qtr
              
              $
              0.15
              
              $
              0.034th
                  Qtr
              
              $
              0.08
              
              $
              0.032006:1st
                  Qtr
              
              $
              0.04
              
              $
              0.0252nd
                  Qtr
              
              $
              0.04
              
              $
              0.013rd
                  Qtr
              
              $
              0.04
              
              $
              0.0154th
                  Qtr
              
              $
              0.04
              
              $
              0.015





**Holders** **.**





There
      are
      approximately 536 holders of record of our company’s common stock.





**Dividends** **.**





We
      have
      declared no cash dividends on our common stock since inception. There are no
      restrictions that limit our ability to pay dividends on our common stock or
      that
      are likely to do so in the future other than the restrictions set forth in
      Nevada Revised Statutes, 78.288. These restrictions provide that no distribution
      may be made to our shareholders if, after giving effect to the distribution,
      (1)
      we would not be able to pay our debts as they mature or (2) our total assets
      would be less than our total liabilities plus any amounts needed, were we to
      be
      dissolved at the time of the distribution, to satisfy the preferential rights
      upon dissolution of any shareholders over the rights of the common stock
      shareholders.





**Securities
      Authorized for Issuance Under Equity Compensation Plans** **.**





We
      have
      no compensation plans under which equity securities are authorized for
      issuance.




6





**Recent
      Sales of Unregistered Securities.**





During
      2006, we issued the following shares of common stock to the following persons
      in
      transactions exempt from registration pursuant to the provisions of Regulation
      D, Rule 506:





Date
            
            Person
            
            No.
                of
              Shares
            
            Value
                of
              Consideration
            
            Nature
                of Consideration07-11-06
            
            
            Michelle
                Chambers
            
            
            1,000,000
            
            $
            20,000
            
            
            Legal
                Services Performed07-11-06
            
            
            William
                Walker
            
            
            750,000
            
            $
            15,000
            
            
            Investment
                Banking Consulting Services07-11-06
            
            
            Patrick
                Sheedy
            
            
            50,000
            
            $
            1,000
            
            
            Consulting
                about Market Trading Conditions07-11-06
            
            
            T.E.
                King Jr.
            
            
            300,000
            
            $
            6,000
            
            
            Investor
                Relations Services10-02-06
            
            
            Ralph
                Mele
            
            
            1,500,000
            
            $
            30,000
            
            
            Management
                of CBSI Merger10-02-06
            
            
            Arthur
                Mele
            
            
            500,000
            
            $
            10,000
            
            
            Management
                of CBSI Merger





All
      of
      the above purchasers were accredited investors, had a pre-existing relationship
      with the company and had an opportunity to ask questions of our management
      and
      to inspect documents reasonably available.





**ITEM
      6.**  **MANAGEMENT’S
      DISCUSSION AND ANALYSIS.**





*The
      following discussion and analysis should be read in conjunction with the
      financial statements and the accompanying notes thereto and is qualified in
      its
      entirety by the foregoing and by more detailed financial information appearing
      elsewhere. See "Financial Statements."*





The
      following table presents, as a percentage of sales, certain selected financial
      data for each of fiscal years December 31, 2005 and December 31,
      2006:





Fiscal
                Year Ended12-31-2005
            
            12-31-2006Sales
            
            
            100
            %
            
            100
            %Operating
                expenses
            
            
            (469
            )%
            
            (608
            )%Income
                (loss) from operations
            
            
            (369
            )%
            
            (508
            )%Non-operating
                income (expense)
            
            
            142
            %
            
            624
            %Net
                income (loss) after taxes
            
            
            (1,300
            )%
            
            (659
            )%





**Results
                of Operations - Year ending 12/31/06 Compared to Year ending
                12/31/05**





KingThomason’s
      revenue was $36,953 for the year ended December 31, 2006, a decrease of $21,218
      or 36%, compared to the revenue of $58,171 for the year ended December 31,
      2005.
      The reason for the decrease in revenue was a decrease in the insurance services
      revenue.





Operating
      expenses decreased during the year ended December 31, 2006 as compared with
      the
      year ended December 31, 2005. Operating expenses decreased by $48,231 or 18%
      from $214,900 in 2005 to $187,887 in 2006.




7





**Balance
      sheet items**





Current
      assets of $5,326 on December 31, 2006, compares unfavorably with current
      liabilities of $1,106,386 at that time, an unfavorable current ratio of
      0.004.





**Outlook**





The
      Company is in the process of restructuring its debt and seeking new business
      opportunities that will provide the ability to leverage its assets and increase
      shareholder value.





**Liquidity
      and Capital Resources**





We
      are
      not liquid with $5,326 cash on hand at fiscal 2006 year-end. The $9,585 in
      current liabilities owed to officers is attributable to two promissory notes,
      the principal amounts of which are as follows:





**Lender**
            
            **Relationship
                to KingThomason**
            
            **Principal
                Amount**
            
            **Interest
                Rate**
            
            **Maturity
                Date**T.E.
                King III
            
            
            President
                and Director
            
            $
            6,047
            
            
            6
            %
            
            05-31-04Hume
                A. “Tom” Thomason
            
            
            
            
            $
            3,543
            
            
            6
            %
            
            05-31-04





It
      is
      believed that neither of the above lenders will be pressing demands for
      immediate payment of amounts owed to them.





**Off-Balance
      Sheet Arrangements**





Our
      company has not entered into any transaction, agreement or other contractual
      arrangement with an entity unconsolidated with us under which we have





·
            an
                obligation under a guarantee
                contract,





·
            a
                retained or contingent interest in assets transferred to the
                unconsolidated entity or similar arrangement that serves as credit,
                liquidity or market risk support to such entity for such
                assets,





·
            an
                obligation, including a contingent obligation, under a contract that
                would
                be accounted for as a derivative instrument,
                or





·
            an
                obligation, including a contingent obligation, arising out of a variable
                interest in an unconsolidated entity that is held by, and material
                to, us
                where such entity provides financing, liquidity, market risk or credit
                risk support to, or engages in leasing, hedging, or research and
                development services with, us.




8




**Contractual
      obligations**





The
      following table sets forth, as of the end of the latest fiscal year-end balance
      sheet, information with respect to our known contractual
      obligations.





**Payments
                Due-by Period****Contractual**
              **Obligations**
            
            **Total**
            
            **Less
                Than**
              **1
                Year**
            
            **1-3
                Years**
            
            **3-5
                Years**
            
            **More
                Than**
              **5
                Years**Long-Term
                Debt Obligations
            
            $
            0Capital
                Lease Obligations
            
            $
            0Operating
                Lease Obligations
            
            $
            0Other
                Long-Term Liabilities Reflected on Our Balance Sheet under
                GAAP
            
            $
            0Total
            
            $
            0





*KingThomason's
      future results of operations and the other forward-looking statements contained
      in this report, in particular the statements regarding projected operations
      in
      the present fiscal year, involve a number of risks and uncertainties. In
      addition to the factors discussed above, among the other factors that could
      cause actual results to differ materially are the following: the loss of any
      of
      several key personnel; unexpected costs in establishing branch offices; the
      emergence of competition not now detected; and a general economic
      turndown.*





**ITEM
      7.**  **FINANCIAL
      STATEMENTS.**


**Page****KingThomason
                  Group, Inc. and Subsidiaries:**Consolidated
                  Balance Sheet (Unaudited) December 31, 2006
              
              10Consolidated
                  Statements of Operations (Unaudited) for the Years EndedDecember
                  31, 2006 and 2005
              
              11Consolidated
                  Statement of Stockholders’ Equity (Deficit) (Unaudited) for
                  theYears
                  Ended December 31, 2006 and 2005
              
              12Consolidated
                  Statements of Cash Flows (Unaudited) for the YearsEnded
                  December 31, 2006 and 2005
              
              13Notes
                  to Consolidated Financial Statements
              
              14





9


**KING
          THOMASON, INC. AND SUBSIDIARIES**
 **CONSOLIDATED
          BALANCE SHEET**
 **DECEMBER
          31, 2006**
 ******ASSETS****CURRENT
                  ASSETS:**Cash
                  & cash equivalent
              
              $
              5,3265,326**PROPERTY
                  AND EQUIPMENT, NET**
              
              
              185$
              5,511******LIABILITIES
                  AND STOCKHOLDERS' DEFICIT****CURRENT
                  LIABILITIES:**Accounts
                  payable and accrued expenses
              
              $
              968,157Accrued
                  interest
              
              
              74,459Note
                  payable - officers
              
              
              9,590Note
                  payable- others
              
              
              54,180Total
                  current liabilities
              
              
              1,106,386**STOCKHOLDERS'
                  DEFICIT**Preferred
                  stock, $100 par value; 10,000,000 shares authorized;4,544
                  shares issued and outstanding
              
              
              454,400Common
                  stock, $0.001 par value; 40,000,000 shares authorized;21,771,636
                  shares issued and outstanding
              
              
              21,772Additional
                  paid in capital
              
              
              1,281,157Less:
                  Unamortized prepaid expenses
              
              
              (37,540
              )Accumulated
                  deficit
              
              
              (2,820,664
              )Total
                  stockholders' deficit
              
              
              (1,100,875
              )$
              5,511
 The
          accompanying notes are an integral part of these consolidated financial
          statements.
  10
 **KING
            THOMASON, INC. AND SUBSIDIARIES**
 **CONSOLIDATED
            STATEMENTS OF OPERATIONS**
 **FOR
            THE TWO YEARS ENDED DECEMBER 31, 2006 & 2005**
  **2006**
                  
                  **2005****Net
                      Revenues**Commission
                      Income
                  
                  $
                  36,953
                  
                  $
                  58,171**Operating
                      Expenses**Consulting
                      Expense
                  
                  
                  6,250
                  
                  
                  123,669General
                      & Administrative Expense
                  
                  
                  218,590
                  
                  
                  149,402Total
                      Operating Expenses
                  
                  
                  224,840
                  
                  
                  273,071**Loss
                      From Operations**
                  
                  
                  (187,887
                  )
                  
                  (214,900
                  )**Non-operating
                      Income (Expense):**Interest
                      Expense
                  
                  
                  (52,536
                  )
                  
                  (76,388
                  )Gain
                      on Extinguishment of Debt
                  
                  
                  -
                  
                  
                  362,894Total
                      Non-operating Income (Expense)
                  
                  
                  (52,536
                  )
                  
                  286,506**Income
                      (Loss) Before Income Taxes**
                  
                  
                  (240,423
                  )
                  
                  71,606Provision
                      For Income Taxes
                  
                  
                  (3,200
                  )
                  
                  (3,200
                  )**Net
                      Income (Loss) Before Extraordinary Item**
                  
                  
                  (243,623
                  )
                  
                  68,406**Extraordinary
                      Item - Loss on Settlement of Debt**
                  
                  
                  -
                  
                  
                  (825,002
                  )**Net
                      Loss**
                  
                  $
                  (243,623
                  )
                  $
                  (756,596
                  )**Basic
                      & Diluted Loss Per Share Before Extraordinary
                      Item**
                  
                  $
                  (0.010
                  )
                  $
                  0.000**Extraordinary
                      Item Per Share**
                  
                  $
                  0.000
                  
                  $
                  (0.020
                  )**Basic
                      & Diluted Net Loss Per Share**
                  
                  $
                  (0.010
                  )
                  $
                  (0.020
                  )**Basic
                      & Diluted Weighted Average Shares Outstanding***
                  
                  
                  25,115,020
                  
                  
                  39,166,405
  *
          Weighted average number of shares used to compute basic and diluted loss
          per
          share for the years ended December 31, 2005 & 2006 are the same since there
          is no dilutive effect
  The
          accompanying notes are an integral part of these consolidated financial
          statements.
  11
  **KING
            THOMASON GROUP, INC. AND SUBSIDIARIES**
 **CONSOLIDATED
            STATEMENT OF STOCKHOLDERS' DEFICIT**
 **FOR
            THE TWO YEARS ENDED DECEMBER 31, 2006 & 2005**
 **Common
                        stock**
                    
                    **Preferred
                        stock****Number
                        of********shares**
                    
                    **Amount**
                    
                    **Number
                        of********shares**
                    
                    **Amount**
                    
                    **Additional********paid in capital**
                    
                    **Unamortized********prepaid expenses**
                    
                    **Accumulated********deficit**
                    
                    **Total
                        stockholders'********deficit****Balance
                        as of January 1, 2005**
                    
                    
                    20,808,084
                    
                    $
                    20,808
                    
                    
                    -
                    
                    $
                    -
                    
                    $
                    1,537,976
                    
                    $
                    (309,464
                    )
                    $
                    (1,820,443
                    )
                    $
                    (571,123
                    )Shares
                        issued for cash
                    
                    
                    50,294
                    
                    
                    50
                    
                    
                    -
                    
                    
                    -
                    
                    
                    39,950
                    
                    
                    -
                    
                    
                    -
                    
                    
                    40,000Shares
                        issued for consulting and legal services
                    
                    
                    62,500
                    
                    
                    63
                    
                    
                    -
                    
                    
                    -
                    
                    
                    14,688
                    
                    
                    -
                    
                    
                    -
                    
                    
                    14,751Shares
                        issued for forbearance agreement
                    
                    
                    60,000
                    
                    
                    60
                    
                    
                    -
                    
                    
                    -
                    
                    
                    5,940
                    
                    
                    -
                    
                    
                    -
                    
                    
                    6,000Shares
                        canceled
                    
                    
                    (1,309,242
                    )
                    
                    (1,309
                    )
                    
                    -
                    
                    
                    -
                    
                    
                    1,309
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -Preferred
                        stock issued for settlement of debt
                    
                    
                    -
                    
                    
                    -
                    
                    
                    4,544
                    
                    
                    454,400
                    
                    
                    (346,006
                    )
                    
                    -
                    
                    
                    -
                    
                    
                    108,394Amortization
                        of prepaid expenses
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    140,636
                    
                    
                    -
                    
                    
                    140,636Net
                        loss for the year
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    (756,596
                    )
                    
                    (756,596
                    )**Balance
                        as of December 31, 2005**
                    
                    
                    19,671,636
                    
                    
                    19,672
                    
                    
                    4,544
                    
                    
                    454,400
                    
                    
                    1,253,857
                    
                    
                    (168,828
                    )
                    
                    (2,577,040
                    )
                    
                    (1,017,940
                    )Shares
                        issued for consulting and legal services
                    
                    
                    2,100,000
                    
                    
                    2,100
                    
                    
                    -
                    
                    
                    -
                    
                    
                    27,300
                    
                    
                    -
                    
                    
                    -
                    
                    
                    29,400Amortization
                        of prepaid expenses
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    131,288
                    
                    
                    -
                    
                    
                    131,288Net
                        loss for the year
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    -
                    
                    
                    (243,623
                    )
                    
                    (243,623
                    )**Balance
                        as of December 31, 2006**
                    
                    
                    21,771,636
                    
                    $
                    21,772
                    
                    
                    4,544
                    
                    $
                    454,400
                    
                    $
                    1,281,157
                    
                    $
                    (37,540
                    )
                    $
                    (2,820,664
                    )
                    $
                    (1,100,875
                    )
 The
            accompanying notes are an integral part of these consolidated financial
            statements.
  12
  **KINGTHOMASON
          GROUP, INC. AND SUBSIDIARIES**
 **CONSOLIDATED
          STATEMENTS OF CASH FLOWS**
 **FOR
          THE TWO YEARS ENDED DECEMBER 31, 2006 & 2005**
 **2006**
                
                **2005****CASH
                    FLOWS FROM OPERATING ACTIVITIES:**Net
                    loss
                
                $
                (243,623
                )
                $
                (756,596
                )Adjustments
                    to reconcile net loss to net cash provided by (used in)operating
                    activities:Depreciation
                
                
                4,539
                
                
                5,635Amortization
                    of prepaid consulting expenses
                
                
                131,288
                
                
                140,636Loss
                    on extinguishment of debt
                
                
                -
                
                
                (362,894
                )Loss
                    on settlement of debt
                
                
                -
                
                
                825,002Shares
                    issued for legal fees
                
                
                29,400
                
                
                20,751(Increase)
                    / decrease in current assets:Commission
                    receivable
                
                
                255
                
                
                (255
                )Prepaid
                    expenses
                
                
                -
                
                
                3,975Increase
                    in current liabilities:Accounts
                    payable, accrued expenses, and accrued interest
                
                
                78,677
                
                
                55,666Net
                    cash provided (used) in operating activities
                
                
                536
                
                
                (68,081
                )**CASH
                    FLOWS FROM FINANCING ACTIVITIES:**Payment
                    of loans
                
                
                -
                
                
                (3,000
                )Proceeds
                    from issuance of common stock
                
                
                -
                
                
                40,000Net
                    cash provided by financing activities
                
                
                -
                
                
                37,000**NET
                    INCREASE (DECREASE) IN CASH & CASH
                    EQUIVALENTS**
                
                
                536
                
                
                (31,081
                )**CASH
                    & CASH EQUIVALENTS, BEGINNING BALANCE**
                
                
                4,790
                
                
                35,871**CASH
                    & CASH EQUIVALENTS, ENDING BALANCE**
                
                $
                5,326
                
                $
                4,790
  The
          accompanying notes are an integral part of these consolidated financial
          statements.
  13
 **KINGTHOMASON
        GROUP, INC. AND SUBSIDIARIES**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
  **1.**
              **DESCRIPTION
                  OF BUSINESS AND BASIS OF
                  PRESENTATION**
 
 The
        KingThomason Group, Inc. (KTGI) was organized in accordance with the General
        Corporation Act of the State of Nevada on November 8, 2000, for the purpose
        of
        merging with KingThomason, Inc. (KT), a Nevada corporation and subsidiaries.
        KTGI had no business operation through December 31, 2001 and was a
        development-stage company through December 7, 2001, organized for the merger.
        KTGI effected a merger on December 7, 2001 with KingThomason, Inc. pursuant
        to
        approving votes of the shareholders of both corporations.
 
 King
        Thomason, Inc. (KT) was incorporated in the state of Nevada on July 21, 2000.
        KT’s activities from inception until December 31, 2000 consisted primarily of
        reviewing possible business opportunities and developing the business model.
 
 Pursuant
        to reorganization agreement dated December 31, 2000, the Company acquired
        one
        hundred percent (100%) of the common shares of following
        subsidiaries:
 
 (1)
              King
                  Thomason, Inc. CA (KTI):
 
 KTI
        was
        incorporated in the state of California on September 11, 1998 to market and
        sell
        the cash security retirement plan and personal lines of insurance including
        homeowners and automobile. KTI’s activities consisted primarily of acting as a
        broker for insurance companies working on commission.
 
 (2)
              King
                  Thomason Financial Services, Inc.
                  (KTFS):
 
 KTFS
        was
        incorporated in the state of California on April 7, 1999, to market and sell
        the
        financial and estate planning service, assets management services and the
        sell
        of stocks, bond and mutual funds.
 The
        Company did not have any activity since end of 2004.
 
 (3)
              King
                  Thomason Insurance Marketing, Inc.
                  (KTIM):
 
 KTIM
        was
        incorporated in the state of California on January 28, 2000 to market and
        sell
        insurance policies. The Company began its operations in the period ended
        June
        30, 2001. KTIM’s activities consisted primarily of acting as a broker for dental
        insurance companies working on commission.
 
 (4)
              King
                  Thomason Credit Card Services, Inc.
                  (KTCC):
 
 KTCC
        was
        incorporated in the state of California on January 28, 2000 to underwrite
        and
        issue a private label credit card for use with its medical and dental insurance
        products.
 
 To
        date
        the Company has realized no revenues from this business.
 
 (5)
              King
                  Thomason Franchising, Inc. (KTFI):
 
 KTFI
        was
        incorporated in the state of California on August 17, 2000 to franchise a
        “Financial Center” to offer and sell various financial and insurance products.
        The Company did not have any activity since its inception.
  14
  **KINGTHOMASON
        GROUP, INC. AND SUBSIDIARIES**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
  **Principles
        of Consolidation & Recapitalization**
 
 The
        accompanying consolidated financial statements for the years ended December
        31,
        2006 and 2005 include the accounts of KTGI and its wholly owned subsidiaries,
        KTI, KTFS, KTFI, KTCC & KTIM. (collectively the “Company”). All significant
        inter-company accounts and transactions have been eliminated in consolidation.
 
 **2.**
              **SUMMARY
                  OF SIGNIFICANT ACCOUNTING
                  POLICIES**
 
 **Cash
        and cash equivalents**
 
 The
        Company considers all liquid investments with a maturity of three months
        or less
        from the date of purchase that are readily convertible into cash to be cash
        equivalents.
 
 **Use
        of estimates**
 
 The
        preparation of financial statements in conformity with generally accepted
        accounting principles requires management to make estimates and assumptions
        that
        affect the reported amounts of assets and liabilities and disclosure of
        contingent assets and liabilities at the date of the financial statements
        and
        the reported amounts of revenues and expenses during the reporting period.
        Actual results could differ from those estimates.
 
 **Property
        & equipment**
 
 Property
        and equipment are recorded at cost. Depreciation is computed using the
        straight-line method over useful lives of 1.5 to 7 years. The cost of assets
        sold or retired and the related amounts of accumulated depreciation are removed
        from the accounts in the year of disposal. Any resulting gain or loss is
        reflected in current operations. Assets held under capital leases are recorded
        at the lesser of the present value of the future minimum lease payments or
        the
        fair value of the leased property. Expenditures for maintenance and repairs
        are
        charged to operations as incurred.
 
 **Impairment
        of long-lived assets**
 
 Effective
        January 1, 2002, the Company adopted Statement of Financial Accounting Standards
        No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets"
        ("SFAS
        144"), which addresses financial accounting and reporting for the impairment
        or
        disposal of long-lived assets and supersedes SFAS No. 121, "Accounting for
        the
        Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
        Of,"
        and the accounting and reporting provisions of APB Opinion No. 30, "Reporting
        the Results of Operations for a Disposal of a Segment of a Business." The
        Company periodically evaluates the carrying value of long-lived assets to
        be
        held and used in accordance with SFAS 144. SFAS 144 requires impairment losses
        to be recorded on long-lived assets used in operations when indicators of
        impairment are present and the undiscounted cash flows estimated to be generated
        by those assets are less than the assets' carrying amounts. In that event,
        a
        loss is recognized based on the amount by which the carrying amount exceeds
        the
        fair market value of the long-lived assets. Loss on long-lived assets to
        be
        disposed of is determined in a similar manner, except that fair market values
        are reduced for the cost of disposal.
 
  15
  **KINGTHOMASON
        GROUP, INC. AND SUBSIDIARIES**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
  **Basic
        and diluted net loss per share**
 
 Net
        loss
        per share is calculated in accordance with the Statement of financial accounting
        standards No. 128 (SFAS No. 128), “Earnings per share”. SFAS No. 128 superseded
        Accounting Principles Board Opinion No.15 (APB 15). Net loss per share for
        all
        periods presented has been restated to reflect the adoption of SFAS No. 128.
        Basic net loss per share is based upon the weighted average number of common
        shares outstanding. Diluted net loss per share is based on the assumption
        that
        all dilutive convertible shares and stock options were converted or exercised.
        Dilution is computed by applying the treasury stock method. Under this method,
        options and warrants are assumed to be exercised at the beginning of the
        period
        (or at the time of issuance, if later), and as if funds obtained thereby
        were
        used to purchase common stock at the average market price during the period.
 
 **Stock-based
        compensation**
 
 The
        Company has adopted the disclosure provisions only of SFAS 123 and continues
        to
        account for stock based compensation using the intrinsic value method prescribed
        in accordance with the provisions of APB No. 25, Accounting for Stock Issued
        to
        Employees, and related interpretations. Common stock issued to employees
        for
        compensation is accounted for based on the market price of the underlying
        stock,
        generally the average low bid price.
 
 The
        Company accounts for stock-based compensation issued to non-employees and
        consultants in accordance with the provisions of SFAS 123 and the Emerging
        Issues Task Force consensus in Issue No. 96-18 ("EITF 96-18"), "Accounting
        for
        Equity Instruments that are Issued to Other Than Employees for Acquiring
        or in
        Conjunction with Selling, Goods or Services". Common stock issued to
        non-employees in exchange for services is accounted for based on the fair
        value
        of the services received.
 
 **Fair
        value of financial instruments**
 
 Statement
        of financial accounting standard No. 107, Disclosures about fair value of
        financial instruments, requires that the Company disclose estimated fair
        values
        of financial instruments. The carrying amounts reported in the statements
        of
        financial position for current assets and current liabilities qualifying
        as
        financial instruments are a reasonable estimate of fair value.
 
 **Revenue
        recognition**
 
 The
        Company's revenue recognition policies are in compliance with Staff accounting
        bulletin (SAB) 104. Revenue, including consulting income is recognized when
        earned. Commission income is recognized as of the effective date of the policy.
        Any adjustments to commissions are recognized in the year in which they occur.
 
 **Allowance
        for doubtful accounts**
 
 In
        determining the allowance to be maintained, management evaluates many factors
        including industry and historical loss experience. The allowance for doubtful
        accounts is maintained at an amount management deems adequate to cover estimated
        losses.
 
 **Advertising**
 
 The
        Company expenses advertising costs as incurred. Advertising costs for the
        years
        ended December 31, 2006 and 2005 were $1,137 and $4,137
        respectively.
  16
 **KINGTHOMASON
          GROUP, INC. AND SUBSIDIARIES**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **Income
        taxes**
 
 Deferred
        income tax assets and liabilities are computed annually for differences between
        the financial statements and tax basis of assets and liabilities that will
        result in taxable or deductible amounts in the future based on enacted laws
        and
        rates applicable to the periods in which the differences are expected to
        affect
        taxable income (loss). Valuation allowance is established when necessary
        to
        reduce deferred tax assets to the amount expected to be realized.
 
 **Shares
        issued to acquire goods and services from non-employees**
 
 The
        Company accounts for the issuance of equity instruments to acquire goods
        and
        services based on the fair value of the goods and services or the fair value
        of
        the equity instrument at the time of issuance, whichever is more reliably
        measurable.
 
 **Research
        and development costs**
 
 Expenditures
        for research & development are expensed as incurred. Such costs are required
        to be expensed until the point that technological feasibility is established.
        The period between achieving technological feasibility and the general
        availability of such development is short. Consequently, costs otherwise
        capitalizable after technological feasibility is achieved are generally expensed
        because they are insignificant. The Company did not incur any research and
        development cost during the years ended December 31, 2006 and 2005.
 
 **Reclassifications**
 
 Certain
        items in the prior year financial statements have been reclassified for
        comparative purposes to conform to the presentation in the current period’s
        presentation. These reclassifications have no effect on the previously reported
        income (loss).
 
 **3.**
              **RECENT
                  PRONOUNCEMENTS**
 
 In
        February 2007, FASB issued FASB Statement No. 159, The Fair Value Option
        for
        Financial Assets and Financial Liabilities. FAS 159 is effective for fiscal
        years beginning after November 15, 2007. Early adoption is permitted subject
        to
        specific requirements outlined in the new Statement. Therefore, calendar-year
        companies may be able to adopt FAS 159 for their first quarter 2007 financial
        statements.
 
 The
        new
        Statement allows entities to choose, at specified election dates, to measure
        eligible financial assets and liabilities at fair value that are not otherwise
        required to be measured at fair value. If a company elects the fair value
        option
        for an eligible item, changes in that item's fair value in subsequent reporting
        periods must be recognized in current earnings. FAS 159 also establishes
        presentation and disclosure requirements designed to draw comparison between
        entities that elect different measurement attributes for similar assets and
        liabilities.
 
 In
        September 2006, FASB issued SFAS 158 ‘Employers’ Accounting for Defined Benefit
        Pension and Other Postretirement Plans—an amendment of FASB Statements No. 87,
        88, 106, and 132(R)’ This Statement improves financial reporting by requiring an
        employer to recognize the over funded or under funded status 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 improves financial reporting
        by
        requiring 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. An
        employer with publicly traded equity securities is required to initially
        recognize the funded status of a defined benefit postretirement plan and
        to
        provide the required disclosures as of the end of the fiscal year ending
        after
        December 15, 2006. An employer without publicly traded equity securities
        is
        required to recognize the funded status of a defined benefit postretirement
        plan
        and to provide the required disclosures as of the end of the fiscal year
        ending
        after June 15, 2007. However, an employer without publicly traded equity
        securities is required to disclose the following information in the notes
        to
        financial statements for a fiscal year ending after December 15, 2006, but
        before June 16, 2007, unless it has applied the recognition provisions of
        this
        Statement in preparing those financial statements:
  17
 **KINGTHOMASON
          GROUP, INC. AND SUBSIDIARIES**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
  a.
              A
                  brief description of the provisions of this Statement
  b.
              The
                  date that adoption is required
  c.
              The
                  date the employer plans to adopt the recognition provisions of
                  this
                  Statement, if earlier.
  The
        requirement to measure plan assets and benefit obligations as of the date
        of the
        employer’s fiscal year-end statement of financial position is effective for
        fiscal years ending after December 15, 2008. The management is currently
        evaluating the effect of this pronouncement on financial
        statements.
 
 In
        September 2006, FASB issued SFAS 157 ‘Fair Value Measurements’. This Statement
        defines fair value, establishes a framework for measuring fair value in
        generally accepted accounting principles (GAAP), and expands disclosures
        about
        fair value measurements. This Statement applies under other accounting
        pronouncements that require or permit fair value measurements, the Board
        having
        previously concluded in those accounting pronouncements that fair value is
        the
        relevant measurement attribute. Accordingly, this Statement does not require
        any
        new fair value measurements. However, for some entities, the application
        of this
        Statement will change current practice. This Statement is effective for
        financial statements issued for fiscal years beginning after November 15,
        2007,
        and interim periods within those fiscal years. The management is currently
        evaluating the effect of this pronouncement on financial
        statements.
  In
        March
        2006 FASB issued SFAS 156 'Accounting for Servicing of Financial Assets'
        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:
  1.
        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.
  2.
        Requires all separately recognized servicing assets and servicing liabilities
        to
        be initially measured at fair value, if practicable.
  3.
        Permits an entity to choose 'Amortization method' or 'Fair value measurement
        method' for each class of separately recognized servicing assets and servicing
        liabilities.
  4.
        At its
        initial adoption, permits a one-time reclassification of available-for-sale
        securities to trading securities by entities with recognized servicing rights,
        without calling into question the treatment of other available-for-sale
        securities under Statement 115, provided that the available-for-sale securities
        are identified in some manner as offsetting the entity's exposure to changes
        in
        fair value of servicing assets or servicing liabilities that a servicer elects
        to subsequently measure at fair value.
  18
 **KINGTHOMASON
            GROUP, INC. AND SUBSIDIARIES**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**
 5.
        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.
  This
        Statement is effective as of the beginning of the Company's first fiscal
        year
        that begins after September 15, 2006. Management believes that this statement
        will not have a significant impact on the consolidated financial
        statements.
  In
        February 2006, FASB issued SFAS No. 155, "Accounting for Certain Hybrid
        Financial Instruments". SFAS No. 155 amends SFAS No 133, "Accounting for
        Derivative Instruments and Hedging Activities", and SFAF No. 140, "Accounting
        for Transfers and Servicing of Financial Assets and Extinguishments of
        Liabilities".  SFAS No. 155, permits fair value remeasurement for any
        hybrid financial instrument that contains an embedded derivative that otherwise
        would require bifurcation, clarifies which interest-only strips and
        principal-only strips are not subject to the requirements of SFAS No. 133,
        establishes a requirement to evaluate interest in securitized financial assets
        to identify interests that are freestanding derivatives or that are hybrid
        financial instruments that contain an embedded derivative requiring bifurcation,
        clarifies that concentrations of credit risk in the form of subordination
        are
        not embedded derivatives, and amends SFAS No. 140 to eliminate the prohibition
        on the qualifying special-purpose entity from holding a derivative financial
        instrument that pertains to a beneficial interest other than another derivative
        financial instrument.  This statement is effective for all financial
        instruments acquired or issued after the beginning of the Company's first
        fiscal
        year that begins after September 15, 2006.  The Company has not evaluated
        the impact of this pronouncement its financial statements.
 
 In
        May
        2005, the FASB issued SFAS No. 154, "Accounting Changes and Error Corrections."
        This statement applies to all voluntary changes in accounting principle and
        requires retrospective application to prior periods’ financial statements of
        changes in accounting principle, unless this would be impracticable. This
        statement also makes a distinction between "retrospective application" of
        an
        accounting principle and the "restatement" of financial statements to reflect
        the correction of an error. This statement is effective for accounting changes
        and corrections of errors made in fiscal years beginning after December 15,
        2005. We are evaluating the effect the adoption of this interpretation will
        have
        on its financial position, cash flows and results of operations.
 
 **4.**
              **PROPERTY
                  AND EQUIPMENT**
 
 Property
        and equipment consisted of following on December 31, 2006:
 Furniture,
                    fixture and Equipment
                
                $
                64,641Less:
                    Accumulated depreciation
                
                
                (64,456
                )$
                185
 
 Depreciation
        expenses amounted to $4,539 and $5,635 for the years ended December 31, 2006
        and
        2005, respectively.
  19
 **KINGTHOMASON
          GROUP, INC. AND SUBSIDIARIES**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 
 **5.**
              **ACCOUNTS
                  PAYABLE & ACCRUED
                  EXPENSES**
  Accounts
        payable and accrued expenses consisted of the following on December 31,
        2006:
 Accounts
                    payable
                
                $
                53,070Accrued
                    expenses
                
                
                78,084Accrued
                    expenses (recovery of debt)
                
                
                825,003Accrued
                    taxes
                
                
                12,000$
                968,157
  **6.**
              **NOTE
                  PAYABLE - OTHER**
 
 The
        Company has a note payable to a vendor with a principal of $54,180 as of
        December 31, 2006. The note was due last December 15, 2005 and has not been
        paid
        as of December 31, 2006. As of December 31, 2006, accrued interest recorded
        relative to this note is $25,065.
 
 **7.**
              **NOTES
                  PAYABLE - OFFICERS**
 
 The
        company has two notes payables to officers amounting $6,047 and $3,543
        respectively. Both of them are due on demand, unsecured and bear interest
        rates
        of 6% per year. The interest expenses accrued on these notes for the years
        ended
        December 31, 2006 and 2005 were both $575. As of December 31, 2006, accrued
        interest for these notes amounted to $3,955.
 
 **8.**
              **GAIN
                  ON SETTLEMENT OF DEBT**
 
 On
        July
        15, 2002, the Company issued $90,000 worth of 12%, 18-month term, Convertible
        Debentures (the “Debentures”), on July 18, 2002, the Company issued an
        additional $100,000 worth of the Debentures with 12%, 18 month term and on
        October 30, 2002, the Company issued an additional $20,000 worth of the
        Debentures with 12%, 18 month term.
 
 The
        holder may extend the term for an additional 18 months with a written notice
        at
        least 30 days before the end of the term. The extended note will bear 12.5%
        interest rate per year. When the note is extended, two additional extension
        options may be made by the holder with a written notice. Each extension of
        the
        note will increase its interest rate by 0.5%. Therefore, effective interest
        rate
        will be as follows; Term one-12%, Term two-12.5%, Term three-13%, and Term
        four-13.5%. The interests are payable quarterly starting October 2002. Interest
        for the years ended December 31, 2005 and 2004 amounted to $ 28,350 and $26,250
        respectively.
 
 Attached
        to the Debentures, the Company granted non-transferable Warrants to purchase,
        at
        a purchase price of $0.25 a share, four shares of common stock of the Company
        for each dollar of the principal amount of the note. The warrants expire
        on the
        due dates of the notes. The fair value of the warrants was calculated using
        Black Schole module was zero at the date of issuance using the following
        assumptions:
 
 Volatility
        0
 Interest
        rate: 5 %
 Expected
        life: 18 months
 Dividend:
        zero
 
 Accordingly
        no proceeds were allocated to the warrants.
  20
 **KINGTHOMASON
            GROUP, INC. AND SUBSIDIARIES**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**
 The
        above
        mentioned $210,000 convertible debentures were converted to 3,046 shares
        of
        preferred stock on December 31, 2005. Each share of preferred stock has par
        value of $100 and each share would be eligible to be converted into 1,000
        shares
        of common stock. A gain of $250,394 for the conversion was
        recorded.
 
 Notes
        payable of $88,000 was settled by issuing 1,498 shares of preferred stock
        on
        December 31, 2005. Each share of preferred stock has a par value of $100
        and
        each share would be eligible to be converted into 1,000 shares of common
        stock.
        A gain of $112,500 for the settlement of debt was recorded.
 
 **9.**
              **STOCKHOLDERS’
                  DEFICIT**
 
 On
        March
        31, 2005, the Company issued 50,294 shares of common stock for cash for $40,000
        in relation to the stock purchase agreement with Fusion Capital
        LLC.
 
 On
        May
        17, 2005, the Company issued 37,500 shares of common stock to an officer
        in lieu
        of interest accrued on a note payable of $3,000. The shares were valued at
        $7,500 based on the market price of $0.20 per share at the date of issuance.
        Interest expense of $7,500 was booked accordingly.
 
 On
        July
        7, 2005, the Company issued 25,000 shares of common stock to a consulting
        company in lieu of consulting service provided from January 1, 2005 to June
        30,
        2005. The shares were valued at $7,250 based on the average market price
        of
        $0.29 per share during the period when the service was provided.
 
 On
        August
        16, 2005, the Company issued 60,000 shares of common stock to a consulting
        company according to a Forbearance Agreement. The consulting company provided
        service to the Company in 2002. Disputes arose between the two parties with
        respect to the exchange for consideration. Per the Forbearance Agreement,
        the
        consulting company will dismiss and forbear from re-filing for a period of
        six
        months from and including the date of execution of the Forbearance Agreement.
        The shares were valued at $6,000 based on the market price of $0.10 per share
        at
        the date of issuance.
 
 At
        August
        21, 2006, 2,100,000 shares of Common Stock were issued for services performed
        for the Company. 1,000,000 shares of common stock were issued for legal
        services. 750,000 shares of common stock were issued for investment banking
        services; 300,000 shares of common stock were issued for Investor relation
        services; 50,000 shares of Common Stock were issued for business combination
        consulting services. The shares were valued at $29,400 based on the market
        price
        of $0.014 per share at the date of issuance.
 
 **11.**
              **UNAMORTIZED
                  PREPAID EXPENSES**
 
 Unamortized
        Prepaid Expenses consisted of following on December 31, 2006:
 Unamortized
                    Prepaid Consulting Expenses
                
                $
                1,018Unamortized
                    Prepaid Funding Expenses
                
                
                36,522$
                37,540
 
 Amortization
        expenses for prepaid funding expenses amounted to $125,217 for the years
        ended
        December 31, 2006 and 2005, respectively.
 
 Amortization
        expenses for prepaid consulting expenses amounted to $6,071 and $15,419 for
        the
        years ended December 31, 2006 and 2005, respectively.
 
 21
 **KINGTHOMASON
          GROUP, INC. AND SUBSIDIARIES**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
  Amortization
        expenses for the next five years are as follows:
 One
                    year after 2006
                
                
                37,540Two
                    years after 2006
                
                
                0Three
                    years after 2006
                
                
                0Four
                    years after 2006
                
                
                0Five
                    years after 2006
                
                
                0
 **12.**  **EARNING
        (LOSS) PER SHARE**
 
 Earnings
        (loss) per share for the years ended December 31, 2006 and 2005 were determined
        by dividing net income (loss) for the periods by the weighted average number
        of
        both basic and diluted shares of common stock and common stock equivalents
        outstanding. Stocks to be issued are regarded as common stock equivalents
        and
        are considered in diluted earnings per share calculations. Basic and diluted
        losses per share were $0.008 and $0.020 for the years ended December 31,
        2006
        and 2005, respectively. Weighted average number of shares used to compute
        basic
        and diluted loss per share for the years ended December 31, 2005 & 2006 are
        the same since there is no dilutive effect.
 
 **13.**  **STOCK-BASED
        COMPENSATION PLAN** ****
 
 In
        2002
        and 2003, the Company issued 725,253 options to three executive officers.
        The
        options vest over a period of twelve months and have a term of five years.
        Prior
        to January 1, 2006, the Company measured stock compensation expense using
        the intrinsic value method of accounting in accordance with Accounting
        Principles Board (APB) Opinion No. 25, “Accounting for Stock Issued to
        Employees,” and related interpretations (APB No. 25). There were no stock
        compensation expenses under intrinsic value method prior to January 1,
        2006.
 
 The
        company adopted SFAS No. 123-R effective January 1, 2006 using the
        modified prospective method. Under this transition method, stock compensation
        expense includes compensation expense for all stock-based compensation awards
        granted on or after January 1,2006, based on the grant-date fair value
        estimated in accordance with the provisions of SFAS No. 123-R.
 
 Following
        is a summary of the stock option activity:
 
 Options
                  outstanding
              
              Weighted
                  Average Exercise Price
              
              Aggregate
                  Intrinsic ValueOutstanding,
                  December 31, 2005
              
              
              725,253
              
              $
              0.18
              
              $
              0Granted
              
              
              -
              
              
              -
              
              
              -Forfeited
              
              
              -
              
              
              -
              
              
              -Exercised
              
              
              -
              
              
              -
              
              
              -Outstanding
                  December 31, 2006
              
              
              725,253
              
              $
              0.18
              
              $
              0
 
  22
  **KINGTHOMASON
        GROUP, INC. AND SUBSIDIARIES**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
  Following
        is a summary of the status of options outstanding at December 31, 2006:
 
 Outstanding
                  Options
              
              Exercisable
                  OptionsExercise
                Price
              
              Number
              
              Average
                  Remaining Contractual Life
              
              Average
                  Exercise Price
              
              Number
              
              Average
                  Remaining Contractual Life$0.25
              
              
              200,000
              
              
              0.50
              
              $
              0.25
              
              
              200,000
              
              
              0.50$0.15
              
              
              500,000
              
              
              1.50
              
              $
              0.15
              
              
              500,000
              
              
              1.50$0.10
              
              
              25,253
              
              
              1.83
              
              $
              0.10
              
              
              25,253
              
              
              1.83
 
 There
        were no unvested stock options as of December 31, 2005.
 
 During
        the year ended December 31, 2006, there were no options granted by the Company.
 
 **14.**
              **EXTRAORDINARY
                  ITEM - GAIN (LOSS) ON EXTINGUISHMENT OF DEBT AND DUE TO
                  CONSULTANT**
 
 On
        February 1, 2002 the Company entered into a consulting agreement for 36-month
        period with a consultant to provide debt management, collections, capital
        markets, financial and related advice. The Company paid $75,000 pursuant
        to the
        consulting agreement in 2002 and accrued $825,002 through July 31, 2004.
        In
        August 25, 2004, the Company amended the consulting agreement with the
        consultant. The amended agreement provides for the waiver of all accrued
        consulting fees. This amount had been carried on the balance sheet as part
        of
        accrued liabilities. The waiver of the accrued liabilities has been reflected
        in
        the accompanying financial statements as "Extraordinary item - Gain (loss)
        on
        extinguishment of debt" amounting to $825,002 for the year ended 2004. The
        amended agreement also provides for payment of $30,000 payable by August
        25,
        2004 followed by payments equal to $5,000 per month beginning on October
        1, 2004
        and continuing each month through June 31, 2011, and issuance of 500,000
        shares
        of common stock of the Company to be issued no later than October 1, 2004.
        The
        Company paid $30,000 to the consultant and issued 500,000 shares of common
        stock
        of the Company valued at $130,000, as agreed under the amended agreement.
        As of
        December 31, 2004, accrued consulting fees for this consultant amounts to
        $15,000. The company stops paying the consultant from February 2005 and
        cancelled the 500,000 shares issued to the consultant. According to the debt
        restoration agreement, once the payment is past due, the debt that has been
        forgiven will be restored immediately. Accordingly, the Company has incurred
        "Extra ordinary item - Gain (loss) on extinguishment of debt" amounting to
        $825,002 for the years ended 2005 and has recorded an amount due to consultant
        amounting $825,002.
 
 **15.**
              **SUPPLEMENTAL
                  DISCLOSURE OF CASH FLOWS**
 
 The
        Company prepares its statements of cash flows using the indirect method as
        defined under the Financial Accounting Standard No. 95.
 
 The
        Company paid $0 for income tax and $0 for interest during the twelve month
        period ended December 31, 2006. The Company paid $0 for income tax and $137,240
        interest (by issuance of preferred stock) for the year ended December 31,
        2005.
  23
 **KINGTHOMASON
          GROUP, INC. AND SUBSIDIARIES**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **16.**
              **GOING
                  CONCERN**
 
 The
        accompanying consolidated financial statements have been prepared in conformity
        with generally accepted **** accounting
        principles which contemplate continuation of the company as a going concern.
        However, the Company has an accumulated deficit of $2,820,664 as of December
        31,
        2006 including losses of $243,623 and $756,596 for the years ended December
        31,
        2006 and 2005. The Company’s total liabilities exceed its total assets by
        $1,100,875. In view of the matters described above, recoverability of a major
        portion of the recorded asset amounts shown in the accompanying consolidated
        balance sheet is dependent upon continued operations of the company, which
        in
        turn is dependent upon the Company’s ability to raise additional capital, obtain
        financing and succeed in its future operations. The financial statements
        do not
        include any adjustments relating to the recoverability and classification
        of
        recorded asset amounts or amounts and classification of liabilities that
        might
        be necessary should the Company be unable to continue as a going
        concern.
 
 Management
        has taken the following steps to revise its operating and financial
        requirements, which it believes are sufficient to provide the Company with
        the
        ability to continue as a going concern. The Company is actively pursuing
        additional funding and potential merger or acquisition candidates and strategic
        partners, which would enhance stockholders’ investment. Management believes that
        the above actions will allow the Company to continue operations through the
        next
        fiscal year.
  24


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





During
      the two most recent fiscal years or any later interim period, our principal
      independent accountant has not resigned, declined to stand for reelection or
      been dismissed.





**ITEM
        8A(T).** **CONTROLS
        AND PROCEDURES.**




**Evaluation
      of disclosure controls and procedures** .
      The
      Company carried out an evaluation, under the supervision and with the
      participation of the Company's management, including the Company's Chief
      Executive Officer and Chief Financial Officer, of the effectiveness of the
      design and operation of the Company's disclosure controls and procedures as
      of
      the end of the period covered by this report. Based upon that evaluation, the
      Chief Executive Officer and Chief Financial Officer concluded that the Company's
      disclosure controls and procedures are effective and provide reasonable
      assurances that the information the Company is required to disclose in the
      reports it files or submits under the Securities Exchange Act of 1934 is
      recorded, processed, summarized and reported within the time period required
      by
      the Commission's rules and forms. Further, the Company’s officers
      concluded that its disclosure controls and procedures are also effective to
      ensure that information required to be disclosed in the reports that it files
      or
      submits under the Exchange Act is accumulated and communicated to its
      management, including its chief executive officer and chief financial officer,
      to allow timely decisions regarding required disclosure.  There
      were no significant changes in the Company's internal control over financial
      reporting during the period covered by this report that have materially
      affected, or are reasonably likely to materially affect our internal controls
      over financial reporting.





**ITEM
      8B.**  **OTHER
      INFORMATION**





There
      is
      no information that was required to be disclosed on Form 8-K during the fourth
      quarter of 2006 that was not reported.





**PART
      III**





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





**Directors,
      Executive Officers and Significant Employees** **.**





Set
      forth
      below are the names and terms of office of each of the directors, executive
      officers and significant employees of the KingThomason Group and of its
      subsidiaries and a description of the business experience of each. The directors
      of the company are elected annually by the shareholders. The officers serve
      at
      the pleasure of the board of directors. The directors do not presently receive
      fees or other remuneration for their services.




25





**The
      KingThomason Group, Inc. (the Nevada holding company)**





**Person**
            
            **Office**
            
            **Office
                Held**
              **Since**
            
            **Term
                of**
              **Office**Thomas
                King III, 39
            
            
            President,
              Chief
                Financial Officer
              andDirector
            
            
            7-00
              7-00
              7-00
            
            
            12-07
              12-07
              12-07T.E.
                King Jr., 71
            
            
            Director
            
            
            1-06
            
            
            12-07William
                T. Walker, Jr., 71
            
            
            Director
            
            
            4-02
            
            
            12-07




**KingThomason,
      Inc. (California)**





**Person**
            
            **Office**
            
            **Office
                Held**
              **Since**
            
            **Term
                of**
              **Office**T.E.
                King III, 39
            
            
            Chief
                Financial Officer,
              Secretary
                and
              Director
            
            
            9-98
              9-98
              9-98
            
            
            12-07
              12-07
              12-07




**KingThomason
      Financial Services, Inc.**





**Person**
            
            **Office**
            
            **Office
                Held**
              **Since**
            
            **Term
                of**
              **Office**T.E.
                King III, 39
            
            
            Chief
                Financial Officer,
              Secretary
                and
              Director
            
            
            4-99
              4-99
              4-99
            
            
            12-07
              12-07
              12-07




**KingThomason
      Credit Cards Services, Inc.**





**Person**
            
            **Office**
            
            **Office
                Held**
              **Since**
            
            **Term
                of**
              **Office**T.E.
                King III, 39
            
            
            President,
              Secretary
                and
              Director
            
            
            1-00
              1-00
              1-00
            
            
            12-07
              12-07
              12-07




**Business
      Experience:**





**Thomas
      “Tim” King** *.* Mr.
      King
      received a bachelor-of-science degree in business administration in 1990 at
      the
      University of Southern California. From July 1990 until January 1992 he was
      a
      representative of Amplicon Financial, Inc. of Santa Ana, California, a company
      that leased high-tech hardware and software systems. From January 1992 until
      July 1992 he was a representative of his father’s investment banking company,
      King & Associates of Los Angeles. From July 1992 until September 1993 he was
      a foreign exchange department manager of Tokyo International Investments, Ltd.
      of San Francisco, California. From September 1993 until April 1996 he was a
      co-founder, director and vice president of G-5 Global Investments of San
      Francisco, California, a private hedge fund active in the currency markets.
      From
      April 1996 until May 1998 he was a district manager of SunAmerica Securities,
      Inc. of Concord, California, a securities market financial consulting firm.
      In
      May 1998 he co-founded KingThomason, Inc. of San Ramon, California and has
      served as a director and its president since its inception. Mr. King devotes
      100
      percent of his time to the business of KingThomason.




26





**William
      T. Walker Jr. - Board of Directors.** Bill
      Walker is an outside director with extensive experience in the investment
      banking and corporate management arena. During his career he has run his own
      investment-banking firm, Walker Associates. Additionally, he has served as
      Executive Vice President, Manager Investment Banking, Member of the Board and
      Executive Committee, Chairman of the Underwriting Committee at BATEMAN EICHLER,
      HILL RICHARDS, Partner, Manager of the Syndicate Department and Supervisor
      of
      the Institutional Department in the New York headquarters for GLORE FORGAN,
      WILLIAM R. STAATS & CO. He has been directly involved with and responsible
      for the financial planning, direction and performance of both the Corporate
      Finance Departments and the Syndicate Departments. He has consulted with
      corporations in preparation for public and private offerings and private
      financing as well as assisted public companies with their financial public
      relations. He holds a degree from Stanford University, Palo Alto California
      and
      Culver Military Academy, Culver Indiana. He also served in the United States
      Air
      Force and California Air National Guard.




**T.E.
      King Jr. - Director.** Mr. King
      received a bachelor of arts degree in finance in 1958 from Northwestern
      University and attended the J.L. Kellogg Graduate School of Management in
      1958-1959. He was employed during 1959-1960 as a floor specialist trainee by
      Cruttenden & Co., a Midwest Stock Exchange firm, in Chicago, Illinois and in
      1960-1961 as an investment analyst for Cruttenden Podesta in Chicago. He was
      employed during the period 1961-1963 in San Francisco, California, first as
      vice
      president of research and corporate finance for Walter C. Gorey & Co. and
      then as the senior vice president of research for Henry F. Swift & Co. From
      1963 to 1966 he was employed in Chicago by Dempsey Tegeler & Co. as vice
      president of investment research for its Midwest region and as a position
      over-the-counter trader. From 1966 to 1967 he was employed in San Francisco
      as
      the Bay area director of research for a New York-headquartered national
      brokerage firm. From 1967 to 1974 he was the executive vice president and member
      of the board of directors of Financial Relations Board, Inc. in Chicago,
      Illinois and Los Angeles, California. From 1974 until the present he has served
      as the president of King & Assoc. in Los Angeles, California. King &
Assoc. is a full-service financial community/shareholder relations/corporate
      finance consulting firm for public companies.





**Audit
      Committee and Audit Committee Financial Expert**





Our
      directors serve as our audit committee. There is no audit committee financial
      expert serving on the audit committee. However, the audit committee has the
      authority to hire a financial expert any time it has the need for expert
      financial advice.




27





**Code
      of Ethics**





We
      have
      adopted a Code of Ethics that applies to our chief executive officer, chief
      financial officer, and - should we acquire such - principal accounting officer
      or controller or persons performing similar functions. A copy of the Code of
      Ethics was filed as an exhibit to Form 8-K Current Report for 10-14-02 (Exhibit
      14 incorporated herein by reference).





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





Our
      securities are not registered with the Securities and Exchange Commission under
      Section 12(b) or 12(g) of the Exchange Act. Accordingly, our officers, directors
      and beneficial owners of 10 percent or more of any class of stock are not
      subject to Section 16(a) of the Exchange Act.





**ITEM
      10.**  **EXECUTIVE
      COMPENSATION.**





The
      following information concerns the compensation of the named executive officers
      for each of the last two completed fiscal years:





SUMMARY
      COMPENSATION TABLE





**Name
                and Principal Position**
            
            **Year**
            
            **Salary**
            
            **Bonus**
            
            **Total**T.E.
                King III, CEO
            
            
            2006
              2005
            
            $
              $
            0
              16,000
            
            $
              $
            0
              0
            
            $
              $
            0
              16,000





The
      following information concerns unexercised stock options, stock that has not
      vested, and equity incentive plan awards for each named officer outstanding
      at
      the end of the last fiscal year:





OUTSTANDING
      EQUITY AWARDS AT FISCAL YEAR-END





**Option
                Awards****Name**
            
            **Number
                of**
              **Securities**
              **Underlying**
              **Unexercised**
              **Options
                (#)**
              **Exercisable**
            
            **Number
                of**
              **Securities**
              **Underlying**
              **Unexercised**
              **Options
                (#)**
              **Unexercisable**
            
            **Equity**
              **Incentive**
              **Plan**
              **Awards:**
              **Number
                of**
              **Securities**
              **Underlying**
              **Unexercised**
              **Unearned**
              **Options
                (#)**
            
            **Option**
              **Exercise**
              **Price
                ($)**
            
            **Option**
              **Expiration**
              **Date**T.E.
                King III
            
            
            100,000
            
            
            100,000
            
            
            0
            
            $
            0.25
            
            
            01-01-2007T.E.
                King III
            
            
            200,000
            
            
            200,000
            
            
            0
            
            $
            0.15
            
            
            01-01-2008




28




**Compensation
      of Directors**





The
      directors of KingThomason Group and its subsidiaries received the following
      compensation in 2006 for their services as directors.





DIRECTOR
      COMPENSATION





**Name**
            
            **Fees**
              **Earned**
              **or
                Paid**
              **in
                Cash**
              **($)**
            
            **Stock**
              **Awards**
              **($)**
            
            **Option**
              **Awards**
              **($)**
            
            **Non-Equity**
              **Incentive**
              **Plan**
              **Compensa-**
              **tion
                ($)**
            
            **Nonqualified**
              **Deferred**
              **Compensation**
              **Earnings
                ($)**
            
            **All
                Other**
              **Compensa-**
              **tion
                ($)**
            
            **Total**
              **($)**Thomas
                King III
            
            
            0
            
            $
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            $
            0T.E.
                King Jr.
            
            
            0
            
            $
            15,000
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            $
            15,000William
                T. Walker
            
            
            0
            
            $
            6,000
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            $
            6,000





**Employment
      Contracts** **.**





We
      have
      no employment contracts.





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





The
      following table shows information as of March 16, 2007 with respect to each
      beneficial owner of more than five percent of each class of voting stock of
      KingThomason Group, and to each of the officers and directors of KingThomason
      Group individually and as a group:





No.
                of Shares
            
            %
                of ClassT.E.
                King III
              309
                Avenue H, Suite C
              Redondo
                Beach, CA 90277
            
            
            6,393,464
            (1)
            
            29.4
            %Hume
                A. (“Tom”) Thomason
              2248
                Merrimack Valley Avenue
              Henderson,
                NV 89044
            
            
            5,793,463
            (1)
            
            26.6
            %William
                T. Walker, Jr.
              P.
                O. Box 10684
              Beverly
                Hills, CA 90213
            
            
            900,000
            (2)
            
            4
            %Ralph
                Mele
              4228
                W. Ruby Hill Drive
              Pleasanton,
                CA 94566
            
            
            1,500,000
            
            
            7
            %T.E.
                King Jr.
              520
                The Village Dr. #208
              Redondo
                Beach,CA,90277
            
            
            712,500
            
            
            5.5
            %Officers
                and Directors as a Group (5 persons)
            
            
            13,049,427
            (1)(2)
            
            54.9
            %





(1)
            Includes
                300,000 shares which this person could purchase through the exercise
                of
                warrants.




29




(2)
            Includes
                100,000 shares which this person could purchase through the exercise
                of
                warrants.


*
            Less
                than 1 percent.





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





There
      have been no transactions during the last two years, or proposed transactions,
      to which we were or are to be a party in which any of the following persons
      had
      or is to have a direct or indirect material interest:





·
            the
                officers and directors;





·
            any
                nominees for election as a
                director;





·
            any
                beneficial owners of more than 5 percent of our voting
                securities;





·
            any
                member of the immediate family of any of the above
                persons.





**ITEM
      13.**  **EXHIBITS.**





The
      following exhibits are filed, by incorporation by reference, as part of this
      Form 10-KSB:





3.1
            -
            Articles
                of Incorporation of The KingThomason Group, Inc.*3.1.1
            -
            Certificate
                of Amendment to Articles of Incorporation pursuant to NRS 78.385
                and
                78.390 (increasing the authorized capital and designating Series
                A
                Convertible, Voting Preferred Stock)*+3.2
            -
            Bylaws
                of The KingThomason Group, Inc.*10.3
            -
            Royalty
                Agreement for Association Program between KingThomason Financial
                Services,
                Inc., a California corporation, and California Restaurant Association,
                a
                California not-for-profit corporation.*10.4
            -
            Payor
                Agreement between KingThomason, Inc., a California corporation, and
                California Foundation for Medical Care.*10.5
            -
            Executive
                General Agent Agreement between KingThomason Insurance Company, Inc.
                and
                Jefferson Pilot Life Insurance Company.*10.6
            -
            Payor
                Agreement between KingThomason, Inc. (National Limo Group) and California
                Foundation for Medical Care.*10.7
            -
            2001
                Stock Option Plan adopted by The KingThomason Group,
                Inc.**




30




10.8
            -
            Strategic
                Marketing Agreement of January 1, 2004, between KingThomason Credit
                Card
                Services, Inc. and Debt Alliance Services, LLC.***10.9
            -
            Common
                Stock Purchase Agreement between registrant and Fusion Capital Fund
                II,
                LLC dated October 14, 2005.+10.10
            -
            Registration
                Rights Agreement between registrant and Fusion Capital Fund II, LLC
                dated
                October 14, 2005.+14
            -
            Code
                of Ethics for the Chief Executive Officer and Senior Financial
                Officers.++19
            -
            Letter
                to the Shareholders.++20.1
            -
            Audit
                Committee Charter.++20.2
            -
            Compensation
                Committee Charter.++20.3
            -
            Governance
                and Nominating Committee Charter.++20.4
            -
            Corporate
                Governance Principles.++31
            -
            Certification
                of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as
                adopted
                pursuant to Section 302 of the Sarbanes-Oxley Act of
                2002.31.1
            -
            Certification
                of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as
                adopted
                pursuant to Section 302 of the Sarbanes-Oxley Act of
                2002.32
            -
            Certification
                of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as
                adopted
                pursuant to Section 906 of the Sarbanes-Oxley Act of
                2002.32.1
            -
            Certification
                of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as
                adopted
                pursuant to Section 906 of the Sarbanes-Oxley Act of
                2002.99.1
            -
            Registrant’s
                press release dated October 18,
                2005.+




*
            Previously
                filed with Amendment No. 1 on Form S-4 to Form SB-2, Commission File
                #333-60980, EDGAR Accession #0001060830-01-500046 on May 22, 2001;
                incorporated herein.





**
            Previously
                filed with Form 10-QSB 09-30-01, Commission File #333-60880, EDGAR
                Accession #0001060830-01-500136 on November 13, 2001; incorporated
                herein.




31




***
            Previously
                filed with Form 10-KSB 12-31-02, Commission File #333-60880, EDGAR
                Accession #0001060830-03-000065 on March 31, 2004; incorporated
                herein.





+
            Previously
                filed with Form 8-K 10-14-04, Commission File #333-60880, EDGAR Accession
                #0001060830-04-000344 on October 20, 2005; incorporated
                herein.





*+
            Previously
                filed with Form 8-K 11-16-04, Commission File #333-60880, EDGAR Accession
                #0001060830-04-000405 on December 01, 2005; incorporated
                herein.





++
            Previously
                filed with Form 8-K 02-14-05, Commission File #333-60880, EDGAR Accession
                #0001060830-05-000090- on February 24, 2005; incorporated
                herein.





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





**Audit
      Fees** .
      Our
      principal independent accountant billed us, for each of the last two fiscal
      years, the following aggregate fees for its professional services rendered
      for
      the audit of our annual financial statements and review of financial statements
      included in our Form 10-QSB reports or other services normally provided in
      connection with statutory and regulatory filings or engagements for those two
      fiscal years:





Fiscal
                Year ended December 31, 2006
            
            $
            32,000Fiscal
                Year ended December 31, 2005
            
            $
            32,000





**Audit-Related
      Fees.** Our
      principal independent accountant billed us, for each of the last two fiscal
      years, the following aggregate fees for assurance and related services
      reasonably related to the performance of the audit or review of our financial
      statements and not reported above under “Audit Fees”:





Fiscal
                Year ended December 31, 2006
            
            $
            -0-Fiscal
                Year ended December 31, 2005
            
            $
            -0-





**Tax
      Fees** .
      Our
      principal independent accountant billed us, for each of the last two fiscal
      years, the following aggregate fees for professional services rendered for
      tax
      compliance, tax advice and tax planning:





Fiscal
                Year ended December 31, 2006
            
            $
            -0-Fiscal
                Year ended December 31, 2005
            
            $
            -0-





**All
      Other Fees** .
      Our
      principal independent accountant billed us, for each of the last two fiscal
      years, the following aggregate fees for products and services provided by it,
      other than the services reported in the above three categories:





Fiscal
                Year ended December 31, 2006
            
            $
            -0-Fiscal
                Year ended December 31, 2005
            
            $
            -0-




32




**Pre-Approval
      of Audit and Non-Audit Services.**  The
      Audit
      Committee charter requires that the committee pre-approve all audit, review
      and
      attest services and non-audit services before such services are
      engaged.




**SIGNATURES**





In
      accordance with Section 13 or 15(d) of the Exchange Act, the Registrant caused
      this report to be signed on its behalf by the undersigned, thereunto duly
      authorized.


Date:
              April 16, 2007
            The
              KingThomason
              Group, Inc.By
            */s/
                Thomas E. King III*T.E.
                King III, President





In
      accordance with the Exchange Act, this report has been signed below by the
      following persons on behalf of the registrant and in the capacities and on
      the
      dates indicated.


Date:
              April 16, 2007
            
            */s/
                Thomas E. King III*T.E.
                King III, President, Chief Financial Officer and
                Director Date:
              April 16, 2007
            
            */s/ T.E. King Jr.*T.E.
                King Jr., Director Date:
              April 16, 2007
            
            */s/
                William T. Walker, Jr.*William
                T. Walker, Jr., Director


33


**The
      KingThomason Group, Inc.**


**Commission
      File No. 333-60880**





**EXHIBIT
      INDEX**





**Form
      10-KSB**


**For
      the Fiscal Year Ended 12-31-06**





The
      following exhibits are filed, by incorporation by reference, as part of this
      Form 10-KSB:





3.1
            -
            Articles
                of Incorporation of The KingThomason Group, Inc.*3.1.1
            -
            Certificate
                of Amendment to Articles of Incorporation pursuant to NRS 78.385
                and
                78.390 (increasing the authorized capital and designating Series
                A
                Convertible, Voting Preferred Stock).*+3.2
            -
            Bylaws
                of The KingThomason Group, Inc.*10.3
            -
            Royalty
                Agreement for Association Program between KingThomason Financial
                Services,
                Inc., a California corporation, and California Restaurant Association,
                a
                California not-for-profit corporation.*10.4
            -
            Payor
                Agreement between KingThomason, Inc., a California corporation, and
                California Foundation for Medical Care.*10.5
            -
            Executive
                General Agent Agreement between KingThomason Insurance Company, Inc.
                and
                Jefferson Pilot Life Insurance Company.*10.6
            -
            Payor
                Agreement between KingThomason, Inc. (National Limo Group) and California
                Foundation for Medical Care.*10.7
            -
            2001
                Stock Option Plan adopted by The KingThomason Group,
                Inc.**10.8
            -
            Strategic
                Marketing Agreement of January 1, 2004, between KingThomason Credit
                Card
                Services, Inc. and Debt Alliance Services, LLC.***10.9
            -
            Common
                Stock Purchase Agreement between registrant and Fusion Capital Fund
                II,
                LLC dated October 14, 2005.+




1




10.10
            -
            Registration
                Rights Agreement between registrant and Fusion Capital Fund II, LLC
                dated
                October 14, 2005.+14
            -
            Code
                of Ethics for the Chief Executive Officer and Senior Financial
                Officers.++19
            -
            Letter
                to the Shareholders.++20.1
            -
            Audit
                Committee Charter.++20.2
            -
            Compensation
                Committee Charter.++20.3
            -
            Governance
                and Nominating Committee Charter.++20.4
            -
            Corporate
                Governance Principles.++31
            -
            Certification
                of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as
                adopted
                pursuant to Section 302 of the Sarbanes-Oxley Act of
                2002.31.1
            -
            Certification
                of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as
                adopted
                pursuant to Section 302 of the Sarbanes-Oxley Act of
                2002.32
            -
            Certification
                of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as
                adopted
                pursuant to Section 906 of the Sarbanes-Oxley Act of
                2002.32.1
            -
            Certification
                of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as
                adopted
                pursuant to Section 906 of the Sarbanes-Oxley Act of
                2002.99.1
            -
            Registrant’s
                press release dated October 18,
                2005.+




*
            Previously
                filed with Amendment No. 1 on Form S-4 to Form SB-2, Commission File
                #333-60980, EDGAR Accession #0001060830-01-500046 on May 22, 2001;
                incorporated herein.





**
            Previously
                filed with Form 10-QSB 09-30-01, Commission File #333-60880, EDGAR
                Accession #0001060830-01-500136 on November 13, 2001; incorporated
                herein.





***
            Previously
                filed with Form 10-KSB 12-31-02, Commission File #333-60880, EDGAR
                Accession #0001060830-03-000065 on March 31, 2004; incorporated
                herein.




2





+
            Previously
                filed with Form 8-K 10-14-02, Commission File #333-60880, EDGAR Accession
                #0001060830-04-000344 on October 20, 2005; incorporated
                herein.





*+
            Previously
                filed with Form 8-K 11-16-04, Commission File #333-60880, EDGAR Accession
                #0001060830-04-000405 on December 01, 2005; incorporated
                herein.





++
            Previously
                filed with Form 8-K 02-14-05, Commission File #333-60880, EDGAR Accession
                #0001060830-05-000090- on February 24, 2005; incorporated
                herein.





3