**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**Form
      10-Q**





(Mark
      One)


x
            QUARTERLY
                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
                1934





**For
      the quarterly period ended June 30, 2008**





o
            TRANSITION
                REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE
                ACT





For
      the
      transition period from _______________ to _______________.





**Commission
      file number 0-30639**





**World
      Am, Inc.**


(Exact
      Name of Company as Specified in its Charter)




**Nevada**
              (State
                or other jurisdiction of
              incorporation
                or organization)
            **90-0142757**
              (I.R.S.
                Employer
              Identification
                No.)**4340
                Von Karman Avenue**
              **Suite
                200**
              **Newport
                Beach, CA**
              (Address
                of principal executive offices)
            **92660**
              (Zip
                Code)





**Issuer’s
      telephone number, including area code (949) 955-5355**





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





Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, a non-accelerated filer, or a smaller reporting company.
      See
      definitions of “large accelerated filer,” “accelerated filer” and “smaller
      reporting company” in Rule 12b-2 of the Exchange Act. (Check one):




Large
                accelerated filer o
            Accelerated
              filer oNon-accelerated
                filero
            Smaller
              reporting company x(Do
                not check if a smaller reporting
                company)




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





**Applicable
      only to issuers involved in bankruptcy proceedings during the preceding five
      years**





Check
      whether the registrant filed all documents and reports required to be filed
      by
      Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities
      under a plan confirmed by a court.


Yes o No
      o









**Applicable
      only to corporate issuers:**





Indicate
      the number of shares outstanding of each of the issuer’s classes of common
      stock, as of the latest practicable date. As of August 4, 2008, there were
      1,379,642,875 shares of common stock, par value $0.0001, issued and
      outstanding.









**WORLD
      AM, INC.**




**TABLE
      OF CONTENTS**





**PART
                  I - FINANCIAL INFORMATION**
              **2**ITEM1
              Financial
                  Statements (Unaudited)
              2ITEM2
              Management’s
                  Discussion and Analysis of Financial Condition and Results
                  ofOperations
              35ITEM3.
              Quantitative
                  and Qualitative Disclosures About Market Risk
              49ITEM4
              Controls
                  and Procedures
              49ITEM4T
              Controls
                  and Procedures
              51**PART
                  II - OTHER INFORMATION**
              **52**ITEM1
              Legal
                  Proceedings
              52ITEM
                  1A
              Risk
                  Factors
              54ITEM2
              Unregistered
                  Sales of Equity Securities and Use of Proceeds
              54ITEM3
              Defaults
                  Upon Senior Securities
              55ITEM4
              Submission
                  of Matters to a Vote of Security Holders
              55ITEM5
              Other
                  Information
              55ITEM6
              Exhibits
              56













**PART
      I-FINANCIAL INFORMATION**




This
      Quarterly Report includes forward-looking statements within the meaning of the
      meaning of Rule 175 under the Securities Act of 1933 and Rule 3b-6 under the
      Securities Exchange Act of 1934, and are subject to the safe harbor created
      by
      those rules. All statements, other than statements of fact, included in this
      Quarterly Report, including, without limitation, statements regarding our
      potential future plans and objectives, are forward-looking statements that
      involve risks and uncertainties. There can be no assurance that such statements
      will prove to be accurate and actual results and future events could differ
      materially from those anticipated in such statements. Technical complications
      that may arise could prevent the prompt implementation of any strategically
      significant plan(s) outlined above. We caution that these forward looking
      statements are further qualified by other factors including, but not limited
      to
      those, set forth in the World Am, Inc. Form 10-KSB filing and other filings
      with
      the United States Securities and Exchange Commission (available at www.sec.gov ).
      We
      undertake no obligation to publicly update or revise any statements in this
      Quarterly Report, whether as a result of new information, future events or
      otherwise.





**ITEM
      1.**  **Financial
      Statements** **(unaudited).**




2


**WORLD
      AM, INC.**


**CONDENSED
      CONSOLIDATED BALANCE SHEETS**





**June
                30, 2008**
            
            **December
                31, 2007**(unaudited)**ASSETS**Current
                assetsCash
                and cash equivalents
            
            $
            38,692
            
            $
            538,373Accounts
                receivable
            
            
            202,259
            
            
            77,167Unbilled
                revenues on uncompleted contracts
            
            
            61,635
            
            
            73,465Inventories
            
            
            185,342
            
            
            44,162Prepaid
                expenses and other current assets
            
            
            29,881
            
            
            32,156Advances
                to related party
            
            
            1,204
            
            
            3,259Total
                current assets
            
            
            519,013
            
            
            768,582Intangible
                assets
            
            
            205,548
            
            
            184,547Fixed
                assets, net
            
            
            58,727
            
            
            71,675Refundable
                deposit
            
            
            5,127
            
            
            5,127Total
                assets
            
            $
            788,415
            
            $
            1,029,931**LIABILITIES
                AND STOCKHOLDERS’ DEFICIT**Current
                liabilitiesAccounts
                payable and accrued liabilities
            
            $
            1,329,284
            
            $
            744,876Payroll
                taxes payable
            
            
            280,402
            
            
            192,177Deferred
                revenue
            
            
            205,984
            
            
            57,563Due
                to stockholders
            
            
            220,000
            
            
            321,884Due
                to related parties
            
            
            92,595
            
            
            186,901Notes
                payable - short term
            
            
            1,280
            
            
            1,193Related
                party notes payable, including accrued
                interest
            
            
            126,100
            
            
            --Convertible
                debenture and accrued interest, net of unamortized discount of $72,339
                and
                $118,548, respectively
            
            
            186,629
            
            
            157,687Total
                current liabilities
            
            
            2,442,274
            
            
            1,662,281Notes
                payable
            
            
            1,755
            
            
            2,239Derivative
                and warrant liabilities
            
            
            924,961
            
            
            2,056,313Total
                liabilities
            
            
            3,368,990
            
            
            3,720,833Commitments
                and contingenciesStockholders’
                deficit:Class
                A preferred stock, $0.0001 par value; liquidation preference of $1,700
                per
                share; 40,000,000 shares authorized, 1,369 shares issued and no shares
                outstanding
            
            
            --
            
            
            --




3




**WORLD
      AM, INC.**


**CONDENSED
      CONSOLIDATED BALANCE SHEET**


**(Continued)**





**June
                30, 2008**
            
            **December
                31, 2007**(unaudited)Class
                B preferred stock, $0.0001 par value; liquidation preference of
                $8,000,025; 40,000,000 shares authorized, 55 shares issued and
                outstanding
            
            
            --
            
            
            --Common
                stock; $0.0001 par value; 1,500,000,000 shares authorized, 1,376,678,589
                and 1,008,192,691 shares issued and outstanding
            
            
            137,668
            
            
            100,819Additional
                paid in capital
            
            
            4,608,990
            
            
            4,149,659Accumulated
                deficit
            
            
            (7,327,233
            )
            
            (6,941,380
            )Total
                stockholders’ deficit
            
            
            (2,580,575
            )
            
            (2,690,902
            )Total
                liabilities and stockholders’ deficit
            
            $
            788,415
            
            $
            1,029,931




See
      notes to the condensed consolidated financial
      statements.




4


**WORLD
      AM, INC.**


**CONDENSED
      CONSOLIDATED STATEMENTS OF OPERATIONS**


**(Unaudited)**




Three
                Months
              Ended
                June 30,
              2008
            
            Three
                months
              Ended
                June 30,
              2007
            
            Six
                months
              Ended
                June 30,
              2008
            
            Six
                months
              Ended
                June 30,
              2007Revenues:Contract
                research and development revenue
            
            $
            35,926
            
            $
            --
            
            $
            163,470
            
            $
            --Product
                sales
            
            
            390,405
            
            
            69,140
            
            
            577,511
            
            
            122,410426,331
            
            
            69,140
            
            
            740,981
            
            
            122,410Cost
                and expenses:Cost
                of contract research and development revenue
            
            
            123,935
            
            
            --
            
            
            251,479
            
            
            --Cost
                of product sales
            
            
            254,857
            
            
            50,063
            
            
            316,107
            
            
            62,801General
                and administrative expenses
            
            
            822,247
            
            
            960,979
            
            
            1,730,488
            
            
            1,547,876Loss
                from operations
            
            
            (774,708
            )
            
            (941,902
            )
            
            (1,557,093
            )
            
            (1,488,267
            )Other
                income (expense)Change
                in fair value of derivative and warrant liabilities
            
            
            946,161
            
            
            518,065
            
            
            1,131,352
            
            
            (298,580
            )Interest
                expense
            
            
            (28,944
            )
            
            (27,028
            )
            
            (63,075
            )
            
            (56,491
            )Interest
                income
            
            
            --
            
            
            29,996
            
            
            1,032
            
            
            29,996Lawsuit
                settlement
            
            
            101,884
            
            
            --
            
            
            101,884
            
            
            --Miscellaneous
                income (expense)
            
            
            330
            
            
            (141
            )
            
            47
            
            
            1,600Total
                other income (expense)
            
            
            1,019,431
            
            
            520,892
            
            
            1,171,240
            
            
            (323,475
            )Income
                (loss) before provision for income taxes
            
            
            244,723
            
            
            (421,010
            )
            
            (385,853
            )
            
            (1,811,742
            )Provision
                for income taxes
            
            
            --
            
            
            --
            
            
            --
            
            
            --Net
                income (loss)
            
            $
            244,723
            
            $
            (421,010
            )
            $
            (385,853
            )
            $
            (1,811,742
            )Basic
                income (loss) per common share
            
            $
            0.00
            
            $
            (0.00
            )
            $
            (0.00
            )
            $
            (0.00
            )Basic
                weighted average common shares outstanding
            
            
            1,235,225,595
            
            
            700,471,186
            
            
            1,147,475,765
            
            
            567,159,125Diluted
                income (loss) per common share
            
            $
            0.00
            
            $
            (0.00
            )
            $
            (0.00
            )
            $
            (0.00
            )Diluted
                weighted average common shares outstanding
            
            
            12,254,796,432
            
            
            700,471,186
            
            
            1,147,475,765
            
            
            567,159,125




See
      notes to the condensed consolidated financial
      statements.




5




**WORLD
      AM, INC.**




**CONDENSED
      CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT**


**FOR
      THE PERIOD FROM DECEMBER 31, 2006 THROUGH JUNE 30, 2008**





Class
                A Preferred Stock
            
            Class
                B Preferred Stock
            
            Common
                Stock
            
            Additional
                Paid-In
            
            Accumulated
            
            Total
                Stockholders’Shares
            
            Amount
            
            Shares
            
            Amount
            
            Shares
            
            Amount
            
            Capital
            
            Deficit
            
            DeficitBalance,
                December 31, 2006
            
            
            1,369
            
            $
            --
            
            
            55
            
            $
            --
            
            
            330,037,091
            
            $
            33,004
            
            $
            630,214
            
            $
            (4,976,646
            )
            $
            (4,313,428
            )Common
                stock issued to pay operating expenses
            
            
            --
            
            
            --
            
            
            --
            
            
            --
            
            
            197,617,357
            
            
            19,761
            
            
            955,304
            
            
            --
            
            
            975,065Common
                stock issued for cash
            
            
            --
            
            
            --
            
            
            --
            
            
            --
            
            
            480,000,000
            
            
            48,000
            
            
            3,477,000
            
            
            --
            
            
            3,525,000Cancellation
                of common stock issued to a consultant in 2006, subsequently
                replaced
            
            
            --
            
            
            --
            
            
            --
            
            
            --
            
            
            (4,103,136
            )
            
            (410
            )
            
            (20,590
            )
            
            --
            
            
            (21,000
            )Cancellation
                of common stock issued to an employee in 2005
            
            
            --
            
            
            --
            
            
            --
            
            
            --
            
            
            (100,000
            )
            
            (10
            )
            
            (870
            )
            
            --
            
            
            (880
            )Initial
                fair value of warrants reclassified to derivatives and warrant
                liabilities
            
            
            --
            
            
            --
            
            
            --
            
            
            --
            
            
            --
            
            
            --
            
            
            (607,875
            )
            
            --
            
            
            (607,875
            )Common
                stock issued to convert debt at calculated price of $0.00022 per
                share
            
            
            --
            
            
            --
            
            
            --
            
            
            --
            
            
            4,731,379
            
            
            473
            
            
            527
            
            
            --
            
            
            1,000Common
                stock issued for exercise of warrant
            
            
            --
            
            
            --
            
            
            --
            
            
            --
            
            
            10,000
            
            
            1
            
            
            9,999
            
            
            
            
            
            10,000Stock
                issuance costs
            
            
            --
            
            
            --
            
            
            --
            
            
            
            
            
            --
            
            
            --
            
            
            (324,750
            )
            
            --
            
            
            (324,750
            )Options
                vesting during the period
            
            
            --
            
            
            --
            
            
            --
            
            
            
            
            
            --
            
            
            --
            
            
            30,700
            
            
            --
            
            
            30,700




6




**WORLD
      AM, INC.**




**CONDENSED
      CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT**


**FOR
      THE PERIOD FROM DECEMBER 31, 2006 THROUGH JUNE 30, 2008**


**(continued)**




Class
                A Preferred Stock
            
            Class
                B Preferred Stock
            
            Common
                Stock
            
            Additional
                Paid-In
            
            Accumulated
            
            Total
                Stockholders’Shares
            
            Amount
            
            Shares
            
            Amount
            
            Shares
            
            Amount
            
            Capital
            
            Deficit
            
            DeficitNet
                Loss
            
            
            --
            
            
            --
            
            
            --
            
            
            
            
            
            --
            
            
            --
            
            
            
            
            
            (1,964,734
            )
            
            (1,964,734
            )Balance,
                December 31, 2007
            
            
            1,369
            
            
            --
            
            
            55
            
            
            --
            
            
            1,008,192,691
            
            
            100,819
            
            
            4,149,659
            
            
            (6,941,380
            )
            
            (2,690,902
            )Common
                stock issued to pay operating expenses (unaudited)
            
            
            --
            
            
            --
            
            
            --
            
            
            --
            
            
            149,899,391
            
            
            14,990
            
            
            229,240
            
            
            --
            
            
            244,230Common
                stock issued to convert debt at calculated price of $0.00009
                (unaudited)
            
            
            --
            
            
            --
            
            
            --
            
            
            --
            
            
            218,395,014
            
            
            21,840
            
            
            (2,691
            )
            
            --
            
            
            19,149Common
                stock issued for exercise of warrant at $1.00 per share (unaudited)
                (Note
                6)
            
            
            --
            
            
            --
            
            
            --
            
            
            --
            
            
            191,493
            
            
            19
            
            
            191,474
            
            
            --
            
            
            191,493Options
                vesting during the period (unaudited)
            
            
            --
            
            
            --
            
            
            --
            
            
            --
            
            
            --
            
            
            --
            
            
            41,308
            
            
            --
            
            
            41,308Net
                loss (unaudited)
            
            
            --
            
            
            --
            
            
            --
            
            
            --
            
            
            --
            
            
            --
            
            
            --
            
            
            (385,853
            )
            
            (385,853
            )Balance,
                June 30, 2008 (unaudited)
            
            
            1,369(1
            )
            $
            --
            
            
            55
            
            $
            --
            
            
            1,376,678,589
            
            $
            137,668
            
            $
            4,608,990
            
            $
            (7,327,233
            )
            $
            (2,580,575
            )





(1)
      In
      January 2006, the Company made the determination to cancel the 1,369 shares
      of
      Class A preferred stock based on non-performance under a related loan agreement.
      Therefore, the Company considers these shares to be issued, since they have
      not
      actually been cancelled yet, but not outstanding.





See
      notes
      to the condensed consolidated financial statements.




7




**WORLD
      AM, INC.**


**CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS**


**(Unaudited)**




Six
                Months Ended
              June
                30, 2008
            
            Six
                Months Ended
              June
                30, 2007Cash
                flows from operating activities:Net
                loss
            
            $
            (385,853
            )
            $
            (1,811,742
            )Adjustments
                to reconcile net loss to net cash used in operating
                activities:Change
                in fair value of derivative and warrant liability
            
            
            (1,131,352
            )
            
            298,580Depreciation
                and amortization
            
            
            60,658
            
            
            49,513Stock
                issued to pay operating expenses
            
            
            244,230
            
            
            697,632Options
                vesting during the period
            
            
            41,308
            
            
            14,059Lawsuit
                settlement
            
            
            (101,884
            )
            
            --Changes
                in operating assets and liabilities:Accounts
                receivable, net
            
            
            (125,092
            )
            
            (82,380
            )Unbilled
                revenues on uncompleted contracts
            
            
            11,830
            
            
            --Inventories
            
            
            (141,180
            )
            
            (11,084
            )Prepaid
                expenses and other current assets
            
            
            2,275
            
            
            (18,136
            )Accounts
                payable and accrued liabilities
            
            
            591,388
            
            
            (582,916
            )Payroll
                taxes payable
            
            
            88,225
            
            
            (23,582
            )Due
                to related parties
            
            
            (92,251
            )
            
            192,006Deferred
                revenue
            
            
            148,421
            
            
            96,314Net
                cash used in operating activities
            
            
            (789,277
            )
            
            (1,181,736
            )




8


**WORLD
      AM, INC.**


**CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS**


**(Unaudited)**


**(continued)**




Six
                Months Ended
              June
                30, 2008
            
            Six
                Months Ended
              June
                30, 2007Cash
                flows from investing activities:Purchase
                of fixed assets
            
            
            (1,500
            )
            
            (55,113
            )Purchase
                of intangible assets
            
            
            (21,001
            )
            
            (151,604
            )Net
                cash used in investing activities
            
            
            (22,501
            )
            
            (206,717
            )Cash
                flows from financing activities:Net
                proceeds from sale of common and preferred stock, net of issuance
                costs
            
            
            --
            
            
            3,197,500Proceeds
                from exercise of warrants
            
            
            191,493
            
            
            --Proceeds
                from related party note payable
            
            
            125,000
            
            
            --Principal
                payments on notes payable
            
            
            (4,396
            )
            
            (92,615
            )Net
                cash provided by financing activities
            
            
            312,097
            
            
            3,104,885Net
                change in cash
            
            
            (499,681
            )
            
            1,716,432Cash,
                beginning of period
            
            
            538,373
            
            
            122,008Cash,
                end of period
            
            $
            38,692
            
            $
            1,838,440Supplemental
                disclosure of cash flow informationCash
                paid for income taxes
            
            $
            --
            
            $
            --Cash
                paid for interest
            
            $
            3,074
            
            $
            11,366Schedule
                of non-cash investing and financing activities:Common
                stock issued for the conversion of debt
            
            $
            19,149
            
            $
            --










9




**WORLD
          AM, INC.**
 NOTES
          TO
          CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 **(Unaudited)**


**NOTE
      1 –
      ORGANIZATION AND BASIS OF PRESENTATION**




Organization.




World
      Am,
      Inc. (“World Am” or “the Company”) was incorporated in Florida in 1994. In 2002,
      World Am changed its domicile from Florida to Nevada. The Company currently
      has
      three wholly-owned subsidiaries: Technology Development International, Inc.
      (“TDI”), Isotec, Inc. (“Isotec”) and Senz-It, Inc. (“Senz-It”).




TDI
      is a
      Colorado corporation incorporated in 1997 and, at present, is
      dormant.





Isotec
      is
      a Colorado corporation incorporated in 1998 that develops, manufactures and
      distributes automated passage control and security devices to government and
      other commercial enterprises. At present, the majority of the Company’s revenue
      is generated by Isotec.





Senz-It
      is a California corporation incorporated on March 4, 2005 to develop,
      commercialize and market technology in the
      field of micro-sensor elements and sensor arrays to the homeland security,
      indoor air quality, food purity and processing and medical diagnostic
      industries.





Acquisition
      of Senz-It, Inc. and Reverse Acquisition Accounting.





On
      August
      31, 2005, the Company consummated an agreement to acquire 100% of the issued
      and
      outstanding capital stock of Senz-It, Inc. In exchange, the Company issued
      a
      warrant to purchase 18,000,000 shares of its common stock and 55 shares of
      its
      Series B convertible preferred stock to SUTI Holdings LP (“SUTI”), the owner of
      Senz-It at the time. The exercise price of the common shares under these
      warrants is $0.001 per share. The warrant vested immediately and expires in
      August 2010. Each share of Class B preferred stock is convertible into the
      greater of (i) 1% of the outstanding common shares of the Company at the time
      of
      conversion, including the common stock equivalents of all unexercised warrants,
      options and convertible securities, and (ii) 7,272,728 shares of common stock.
      The holders of the Series B preferred stock are entitled to the number of votes
      the holder would be entitled to had they converted the shares of Series B
      preferred stock at the time of the vote. In addition, SUTI has selected three
      directors to sit on the Company’s board of directors, constituting a majority of
      the board.





Due
      to
      the change in voting control and of senior management, the transaction was
      recorded as a “reverse-merger” whereby Senz-It was considered to be the acquirer
      for accounting purposes. The transaction is equivalent to the issuance of stock
      by Senz-It, a development stage company, for the net monetary assets of the
      Company, a public company, accompanied by a recapitalization. Prior to the
      transaction, World Am was a public company with assets of $88,656, liabilities
      totaling $1,075,978 and 66,570,285 shares of common stock issued and
      outstanding. Senz-It was a privately owned, non-operating development stage
      company. The accounting for the transaction is identical to that resulting
      from
      a reverse acquisition, except goodwill or other intangible assets were not
      recorded. Accordingly, these financial statements are the historical financial
      statements of Senz-It. The accompanying consolidated financial statements
      reflect activities from March 4, 2005, the date of inception of Senz-It and
      forward.




10




**WORLD
            AM, INC.**
 **NOTES
            TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(Unaudited)**


**NOTE
      1 – ORGANIZATION AND BASIS OF PRESENTATION** **(continued)**




On
      March
      7, 2006, SUTI Holdings, LP, the former stockholder of Senz-It, assigned the
      warrant to Select University Technologies, Inc., which then exercised the
      warrant in a cashless transaction that resulted in the issuance of 17,880,000
      restricted shares of common stock (the balance of 120,000 shares was withheld
      in
      the cashless exercise of the warrant).





Basis
      of Presentation.





The
      unaudited interim condensed consolidated financial statements present the
      condensed consolidated financial statements of the Company and its subsidiaries.
      All intercompany transactions and balances have been eliminated in
      consolidation.





The
      interim condensed financial information is unaudited. In the opinion of
      management, all adjustments necessary to present fairly the consolidated
      financial position as of June 30, 2008 and the results of operations for the
      three and six months ended June 30, 2008 and 2007 and cash flows for the six
      months ended June 30, 2008 and 2007 have been included in the consolidated
      financial statements. Interim results are not necessarily indicative of results
      of operations for the full year.





The
      accompanying unaudited condensed consolidated financial statements have been
      prepared in accordance with accounting principles generally accepted in the
      United States of America for interim financial information and pursuant to
      the
      instruction to Form 10-Q and Article 8 of Regulation S-X promulgated by the
      Securities and Exchange Commission (“SEC”). Therefore, they do not include all
      of the information and disclosures required by accounting principles generally
      accepted in the United States of America for complete financial statements.
      The
      consolidated financial statements should be read in conjunction with the
      Company’s Form 10-KSB for the year ended December 31, 2007.





Effective
      January 1, 2008, the Company is no longer in the development stage, as defined
      in Statement of Financial Accounting Standards (“SFAS”) No. 7, “Accounting and
      Reporting by Development Stage Enterprises.” The Company believes that the
      revenues generated from Senz-It and Isotec during the three and six months
      ended
      June 30, 2008 as well as the projected revenues for the remainder of 2008
      demonstrate that WDAM has emerged from the product development
      phase.




Going
      Concern.




The
      Company’s net losses and accumulated deficit were $7,327,233 through June 30,
      2008. The Company cannot provide assurance that it can achieve or sustain
      profitability on a quarterly or annual basis in the future. The Company
      anticipates it will continue to incur losses until it is able to establish
      significant levels of revenue while controlling its expenses. The Company’s
      success is dependent upon the successful development and marketing of its
      products, as to which there is no assurance. Any future success that the Company
      might experience will depend upon many factors, including factors out of its
      control or which cannot be predicted at this time. These factors may include
      changes in or increased levels of competition, including the entry of additional
      competitors and increased success by existing competitors, changes in general
      economic conditions,
      increases in operating costs, including costs of supplies, personnel and
      equipment, reduced margins caused by competitive pressures and other factors.
      These conditions may have a materially adverse effect upon the Company or may
      force it to reduce or curtail operations. In addition, the Company will require
      additional funds to sustain and expand its sales and marketing activities,
      particularly if a well-financed competitor emerges.




11




**WORLD
          AM, INC.**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(Unaudited)**


**NOTE
      1 – ORGANIZATION AND BASIS OF PRESENTATION** **(continued)**




In
      view
      of the matters described above, recoverability of a major portion of the
      recorded asset amounts shown in the accompanying condensed consolidated balance
      sheets 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 to succeed in its future operations. The condensed consolidated
      financial statements do not include any adjustments relating to the
      recoverability and classification of recorded asset amounts and classification
      of liabilities that might be necessary should the Company be unable to continue
      as a going concern.




**NOTE
      2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**




Use
      of
      Estimates.




The
      preparation of the condensed consolidated financial statements in conformity
      with accounting principles generally accepted in the United States of America
      requires management to make estimates and assumptions that affect the reported
      amounts of assets and liabilities, disclosure of contingent assets and
      liabilities at the date of the financial statements and the reported amounts
      of
      revenue and expenses during the reporting period. Significant estimates include
      the realization of accounts receivable and inventories, the realizability of
      long-lived assets, the value of shares and options issued for services and
      the
      amount of the deferred tax asset valuation allowance. Accordingly, actual
      results could differ from these estimates.




Concentration
      of Credit Risk.




Cash.




The
      Company maintains its cash balances at credit-worthy financial institutions
      that
      are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to
      $100,000. As of June 30, 2008 and December 31, 2007, the Company had cash
      balances in excess of the FDIC limit of $0 and $438,373,
      respectively.




Customers.




The
      Company had three customers that accounted for essentially all revenue during
      the three months ended June 30, 2008 and six customers that accounted for
      essentially all revenue during the six months ended June 30, 2008. One customer
      accounted for essentially all revenue for the three months ended June 30, 2007
      and two customers accounted for essentially all of the revenue for the six
      months ended June 30, 2007. As of June 30, 2008, two customers owed $196,406.
      As
      of December 31, 2007, two customers owed $64,820.




12




**WORLD
        AM, INC.**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(Unaudited)**


**NOTE
      2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
      (continued)**




Accounts
      Receivable.




Accounts
      receivable consists of amounts billed to customers upon performance of service
      or delivery of goods. The Company performs ongoing credit evaluations of
      customers and adjusts credit limits based upon payment history and the
      customers’ current creditworthiness, as determined by its review of their
      current credit information. The Company continuously monitors collections and
      payments from its customers and maintains a provision for estimated credit
      losses based upon its historical experience and any customer-specific collection
      issues that it has identified. The Company records specific reserve provisions
      for individual accounts when the Company becomes aware of a customer’s inability
      to meet its financial obligation to the Company.




Inventories.




Inventories
      are stated at the lower of cost or market. Cost is principally determined by
      using the average cost method. Inventories consist of raw materials,
      work-in-process and finished goods held for sale. The Company’s management
      monitors the inventories for excess and obsolete items and makes necessary
      valuation adjustments when required. Adjustments are considered to be a
      permanent reduction in the cost basis of the corresponding inventory.
      Inventories consist of raw materials used in product sales by Isotec at June
      30,
      2008. Certain raw materials used in Isotec’s products are only available from a
      few suppliers. If these sources of raw materials are lost, Isotec’s production
      could be significantly affected.




Estimated
      Costs to Complete and Accrued Loss on Contracts.




The
      Company reviews and reports on the performance of its contracts against the
      respective plans. These reviews are summarized in the form of estimates of
      costs
      to complete the contracts (“ETC”). ETCs include management’s current estimates
      of remaining amounts for direct labor, material, subcontract support and
      allowable indirect costs based on each contract’s completion status and either
      the current or adjusted future technical requirements under the contract. If
      an
      ETC indicates a potential overrun against budgeted program resources, management
      generally seeks to revise the program plan in a manner consistent with customer
      objectives to eliminate such overrun and to secure necessary customer agreement
      to such revision. To mitigate the financial risk of such revisions, the Company
      attempts to negotiate as much flexibility in deliverable dates as possible.
      When
      revisions to the contract do not appear possible within program budgets, an
      accrual for contract overrun is recorded based on the most recent ETC of the
      particular program. For the three months ended June 30, 2008, the Company
      estimates that there will be a cost overrun totaling $88,009. This cost overrun
      was included in cost of goods sold for the three and six months ended June
      30,
      2008. For the year ended December 31, 2007, the Company did not estimate any
      cost overruns on its contract.




13




**WORLD
        AM, INC.**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(Unaudited)**


**NOTE
      2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
      (continued)**




Fixed
      Assets.




Fixed
      assets are recorded at cost and are depreciated using the straight-line method
      over the estimated useful lives of the assets. The useful lives for the related
      assets range from three to seven years.




Maintenance
      and repairs are charged to expense as incurred. Renewals and improvements of
      a
      major nature are capitalized. At the time of retirement or other disposition
      of
      property and equipment, the cost and accumulated depreciation are removed from
      the accounts and any resulting gains or losses are reflected in the consolidated
      statement of operations.




Long-Lived
      Assets.




The
      Company accounts for its long-lived assets in accordance with SFAS No. 144,
      “Accounting for the Impairment or Disposal of Long-Lived Assets.” SFAS No. 144
      requires that long-lived assets be reviewed for impairment whenever events
      or
      changes in circumstances indicate that the historical cost carrying value of
      an
      asset may no longer be appropriate. The Company assesses recoverability of
      the
      carrying value of an asset by estimating the future net cash flows expected
      to
      result from the asset, including eventual disposition. If the future net cash
      flows are less than the carrying value of the asset, an impairment loss is
      recorded equal to the difference between the asset’s carrying value and fair
      value or disposable value. As of June 30, 2008 and December 31, 2007, the
      Company does not believe there has been any impairment of its long-lived assets.
      There can be no assurances, however, that demand for the Company’s products and
      services will continue, which could result in an impairment of long-lived assets
      in the future.




Convertible
      Debenture and Beneficial Conversion Feature.




If
      the
      conversion feature of conventional convertible debt provides for a rate of
      conversion that is below market value, this feature is characterized as a
      beneficial conversion feature (“BCF”). A BCF is recorded by the Company as a
      debt discount pursuant to Emerging Issues Task Force (“EITF”) Issue No. 98-5,
“Accounting for Convertible Securities with Beneficial Conversion Features or
      Contingency Adjustable Conversion Ratio,” and EITF Issue No. 00-27, “Application
      of EITF Issue No. 98-5 to Certain Convertible Instruments.” In those
      circumstances, the convertible debt will be recorded net of the discount related
      to the BCF. The Company amortizes the discount to interest expense over the
      life
      of the debt using the effective interest method.




Derivative
      Financial Instruments.




In
      accounting for non-conventional convertible debt, the Company bifurcates its
      embedded derivative instruments and records them under the provisions of SFAS
      No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as
      amended, and EITF Issue No. 00-19, “Accounting for Derivative Financial
      Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock.” The
      Company’s derivative financial instruments consist of embedded derivatives
      related to a non-conventional debenture entered into with Golden Gate Investors,
      Inc./La Jolla Cove Investors, Inc. (“La Jolla Cove”) (see Note 6). These
      embedded instruments related to the Debenture include the conversion feature,
      liquidated damages related to registration rights and default provisions. The
      accounting treatment of derivative financial instruments requires that the
      Company record the derivatives and related warrants at their fair value as
      of
      the inception date of the agreement and at fair value as of each subsequent
      balance sheet date. Any change in fair value will be recorded as non-operating,
      non-cash income or expense at each reporting period. If the fair value of the
      derivatives is higher at the subsequent balance sheet date, the Company will
      record a non-operating, non-cash charge. If the fair value of the derivative
      is
      lower at the subsequent balance sheet date, the Company will record
      non-operating, non-cash income.




14




**WORLD
        AM, INC.**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(Unaudited)**


**NOTE
      2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
      (continued)**




During
      the year ended December 31, 2006, the Company recorded the initial fair value
      of
      the conversion feature of $1,151,759 of which $876,759 was recorded as interest
      expense in the consolidated statement of operations and $275,000 was recorded
      as
      a discount on the debt and is being amortized to interest expense over the
      life
      of the debt. The Company also recorded the initial fair value of the attached
      warrants, related to the debt financing in 2006, of $2,075,694 as a component
      of
      interest expense in the consolidated statements of operations for the year
      ended
      December 31, 2006. The initial fair value of the conversion-related derivatives
      and warrants were valued primarily using the Black-Scholes pricing model with
      the following assumptions: dividend-yield of 0%, annual volatility of 127%
      and
      risk-free interest rate of 4.70% – 4.74%. At December 31, 2007, the fair value
      of the conversion feature and the warrants amounted to $1,788,376. At June
      30,
      2008, the fair value of the La Jolla Cove conversion feature and the warrants
      amounted to $834,616. The decrease in the fair value of the La Jolla Cove
      conversion features and warrants of $953,760 at June 30, 2008 and the increase
      in the fair value of the conversion features and warrants of $296,580 at June
      30, 2007 are included as other income (expense) in the accompanying condensed
      consolidated statements of operations.




As
      of
      December 31, 2007, the derivatives and warrants were valued primarily using
      the
      Black-Scholes pricing model with the following assumptions: dividend yield
      of
      0%, annual volatility of 133.2% – 161.8%, and risk free interest rate of
      3.07%–3.45%. The derivatives are classified as long-term liabilities in the
      accompanying condensed consolidated balance sheet.




As
      of
      June 30, 2008, the derivatives and warrants were valued primarily using the
      Black-Scholes pricing model with the following assumptions: dividend yield
      of
      0%, annual volatility of 143.6% – 172.8%, and risk free interest rate of
      2.36%–3.34%. The derivatives are classified as long-term liabilities in the
      accompanying condensed consolidated balance sheet.




In
      addition, under the provisions of EITF Issue No. 00-19, as a result of entering
      into the convertible debt, the Company is required to classify all other
      non-employee stock options and warrants as liabilities and mark them to market
      at each reporting date. Non-employee stock options and warrants were valued
      primarily using the Black-Scholes pricing model with the following assumptions:
      dividend yield of 0%, volatility of 138% and risk free interest rate of 4.54%.
      At December 31, 2007, the fair value of the non-employee warrant was $267,937.
      The decrease in the fair value of non-employee stock options in the amount
      of
      $425,938 since December 31, 2006 is included in other income in the December
      31,
      2007 consolidated statement of operations.




At
      June
      30, 2008, the fair value of the non-employee warrants was $90,345. The decrease
      in the fair value of non-employee stock options and warrants in the amount
      of
      $177,592 since December 31, 2007 and the increase of $44,000 since December
      31,
      2006 are included in other income (expense) in the accompanying condensed
      consolidated statements of operations.




15




**WORLD
        AM, INC.**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(Unaudited)**


**NOTE
      2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
      (continued)**




Fair
      Value of Financial Instruments.




The
      Company’s financial instruments consist of cash, accounts receivable, accounts
      payable, accrued expenses, amounts due to stockholders and related parties,
      notes payable and convertible debentures. Pursuant to SFAS No. 107, “Disclosures
      About Fair Value of Financial Instruments,” the Company is required to estimate
      the fair value of all financial instruments at the balance sheet date. The
      Company considers the carrying values of its financial instruments in the
      financial statements to approximate their fair values due to their short
      maturities and rates currently available to the Company for similar debt
      instruments, except for convertible debt, for which an equivalent instrument
      could not be located.




Stock-Based
      Compensation.




All
      issuances of the Company’s stock for non-cash consideration have been assigned a
      per share amount equaling either the market value of the shares issued or the
      value of consideration received, whichever is more readily determinable. The
      majority of the non-cash consideration received pertains to services rendered
      by
      consultants and others and have been valued at the amount billed by the
      consultant for services provided.




The
      Company’s accounting policy for equity instruments issued to consultants and
      vendors in exchange for goods and services follows the provisions of EITF Issue
      No. 96-18, “Accounting for Equity Instruments That are Issued to Other Than
      Employees for Acquiring, or in Conjunction with Selling, Goods or Services,” and
      EITF Issue No. 00-18, “Accounting Recognition for Certain Transactions Involving
      Equity Instruments Granted to Other Than Employees.” The measurement date for
      the fair value of the equity instrument issued is determined at the earlier
      of
      (a) the date at which a commitment for performance by the consultant or vendor
      is reached or (b) the date at which the consultant or vendor’s performance is
      complete. In the case of equity instruments issued to consultants, the fair
      value of the equity instrument is recognized over the term of the consulting
      agreement. In accordance with EITF Issue No. 00-18, an asset acquired in
      exchange for the issuance of fully vested, non-forfeitable equity instruments
      should not be presented or classified as an offset to equity on the grantor’s
      balance sheet once the equity instrument is granted for accounting purposes.
      Accordingly, the Company will record the fair value of the fully vested
      non-forfeitable common stock issued for future consulting services as prepaid
      expenses in the consolidated balance sheet.




The
      Company accounts for its employee stock-based compensation under the provisions
      of SFAS No. 123 (revised 2004), “Share-Based Payment,” (“SFAS No. 123(R)”). SFAS
      No. 123(R) requires a public entity to measure the cost of employee services
      received in exchange for an award of equity instruments, including stock
      options, based on the grant-date fair value of the award and to recognize it
      as
      compensation expense over the period the employee is required to provide service
      in exchange for the award, usually the vesting period. The Company has also
      applied the provisions of Staff Accounting Bulletin (“SAB”) No. 107 relating to
      SFAS No. 123(R).




16




**WORLD
        AM, INC.**
 NOTES
        TO
        CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 **(Unaudited)**


**NOTE
      2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
      (continued)**




SFAS
      No.
      123(R) requires companies to estimate the fair value of share-based payment
      awards on the date of grant using an option-pricing model. The value of the
      portion of the award that is ultimately expected to vest is recognized as
      expense over the requisite service periods in the Company’s consolidated
      statements of operations.




Stock-based
      compensation expense recognized during the period is based on the value of
      the
      portion of share-based payment awards that is ultimately expected to vest during
      the period. SFAS No. 123(R) requires forfeitures to be estimated at the time
      of
      grant and revised, if necessary, in subsequent periods if actual forfeitures
      differ from those estimates. The forfeiture rate that the Company presently
      uses
      is 0%.




SFAS
      No.
      123(R) requires the cash flows resulting from the tax benefits resulting from
      tax deductions in excess of the compensation cost recognized for those options
      to be classified as financing cash flows. Due to the Company’s loss position,
      there were no such tax benefits for the three and six months ended June 30,
      2008
      and 2007, respectively.




Net
      Earnings (Loss) Per Common Share.




The
      Company computes net income (loss) per common share in accordance with SFAS
      No.
      128, “Earnings per Share,” and SAB No. 98. Under the provisions of SFAS No. 128
      and SAB No. 98, basic net income (loss) per share is computed by dividing the
      net income (loss) available to common stockholders for the period by the
      weighted average number of shares of common stock outstanding during the period.
      The calculation of diluted net income (loss) per share gives effect to common
      stock equivalents; however, potential common shares are excluded if their effect
      is anti-dilutive. For the six months ended June 30, 2008 and for the three
      and
      six months ended June 30, 2007, basic and diluted loss per share were the same
      due to the net loss for these periods. Had such shares been included in diluted
      loss per share, they would have resulted in weighted-average common shares
      of
      12,169,688,415 for the six months ended June 30, 2008 and 2,558,336,472 and
      2,425,024,411 for the three and six months ended June 30, 2007.




Revenue
      Recognition.




The
      Company recognizes revenue in accordance with SAB No. 101, “Revenue Recognition
      in Financial Statements,” as revised by SAB No. 104. As such, the Company
      recognizes revenue when persuasive evidence of an arrangement exists, title
      transfer has occurred, the price is fixed or readily determinable and collection
      is probable.




The
      Company’s revenues were derived from product sales at Isotec, which primarily
      consisted of shipments of security portals. Revenue from product sales are
      recorded when products are shipped.




17




**WORLD
      AM, INC.**


NOTES
      TO
      CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


**(Unaudited)**




**NOTE
      2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
      (continued)**




Revenues
      derived from contracts to develop prototypes and provide research, development,
      design, testing and evaluation of complex detection and control defense systems
      were $35,926 and $-0- during the three months ended June 30, 2008 and 2007,
      respectively and $163,470 and $-0- during the six months ended June 30, 2008
      and
      2007, respectively. The Company’s research and development contract is cost
      reimbursement. The Company’s cost reimbursement research and development
      contracts require the Company’s good faith performance of a statement of work
      within overall budgetary constraints, but with some flexibility as it relates
      to
      scheduling and resources, both personnel and equipment. Revenues for research
      and development contracts are recognized as costs are incurred in the proportion
      that costs incurred bear to estimated final costs.




Costs
      and
      estimated earnings in excess of billings under government research and
      development contracts are accounted for as unbilled revenues on uncompleted
      contracts stated at estimated realizable value and expected to be realized
      in
      cash within one year.




As
      of
      June 30, 2008 and December 31, 2007, the Company recorded deferred revenue
      of
      $205,984 and $57,563, respectively, for customer deposits on ordered
      products.




The
      Company has contracts with various governments and governmental agencies.
      Government contracts are subject to audit by the applicable governmental agency.
      Such audits could lead to inquiries from the government regarding the
      acceptability of costs under applicable government regulations and potential
      adjustments of contract revenues. To date, the Company has not been involved
      in
      any such audits.




Income
      Taxes




The
      Company accounts for income taxes under the provisions of SFAS No. 109,
“Accounting for Income Taxes.” Under SFAS No. 109, deferred tax assets and
      liabilities are recognized for future tax benefits or consequences attributable
      to temporary differences between the financial statement carrying amounts of
      existing assets and liabilities and their respective tax bases. Deferred tax
      assets and liabilities are measured using enacted tax rates expected to apply
      to
      taxable income in the years in which those temporary differences are expected
      to
      be recovered or settled. A valuation allowance is provided for significant
      deferred tax assets when it is more likely than not that such assets will not
      be
      realized through future operations.




Recent
      Accounting Pronouncements.




In
      September 2006, the FASB adopted SFAS No. 157, “Fair Value Measurements.” SFAS
      No. 157 establishes a framework for measuring fair value and expands disclosure
      about fair value measurements. Specifically, this standard establishes that
      fair
      value is a market-based measurement, not an entity specific measurement. As
      such, the value measurement should be determined based on assumptions the market
      participants would use in pricing an asset or liability, including, but not
      limited to assumptions about risk, restrictions on the sale or use of an asset
      and the risk of non-performance for a liability. The expanded disclosures
      include disclosure of the inputs used to measure fair value and the effect
      of
      certain of the measurements on earnings for the period. SFAS No. 157 was
      effective for fiscal years beginning after November 15, 2007 and the FASB has
      issued a one-year deferral of fair value measurement requirements for
      non-financial assets and liabilities. The Company has not yet determined the
      effect adoption of SFAS No. 157 will have on its financial position or results
      of operations.




18




**WORLD
        AM, INC.**
 NOTES
        TO
        CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 **(Unaudited)**


**NOTE
      2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
      (continued)**




In
      February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
      Financial Assets and Financial Liabilities- Including an Amendment of FASB
      Statement No. 115.” SFAS No. 159 would create a fair value option of accounting
      for qualifying financial assets and liabilities under which an irrevocable
      election could be made at inception to measure such assets and liabilities
      initially and subsequently at fair value, with all changes in fair value
      reported in earnings. SFAS No. 159 is effective as of the beginning of the
      first
      fiscal year beginning after November 15, 2007. The Company is currently
      evaluating the impact that the adoption of SFAS No. 159 will have on its
      consolidated financial position, results of operations and cash
      flows.




In
      June
      2007, the FASB ratified a consensus opinion reached by the EITF on EITF Issue
      07-3, “Accounting for Nonrefundable Advance Payments for Goods or Services
      Received for Use in Future Research and Development Activities *”* (“EITF
      Issue 07-3”). The guidance in EITF Issue 07-3 requires the Company to defer and
      capitalize non-refundable advance payments made for goods or services to be
      used
      in research and development activities until the goods have been delivered
      or
      the related services have been performed. If the goods are no longer expected
      to
      be delivered nor the services expected to be performed, the Company would be
      required to expense the related capitalized advance payments. The consensus
      in
      EITF Issue 07-3 is effective for fiscal years, and interim periods within those
      fiscal years, beginning after December 15, 2007 and is to be applied
      prospectively to new contracts entered into on or after December 15, 2007.
      The
      Company has adopted EITF Issue 07-3 effective January 1, 2008. The impact of
      applying this consensus will apply to Senz-It’s research and development
      contractual arrangements entered into after January 1, 2008 did not have a
      material impact on its consolidated financial position, results of operations
      or
      cash flows.




In
      March
      2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments
      and Hedging Activities”. SFAS No. 161 is intended to improve financial reporting
      about derivative instruments and hedging activities by requiring enhanced
      disclosures to enable investors to better understand their effects on an
      entity’s financial position, results of operations and cash flows. SFAS No. 161
      requires that the enhanced disclosures include the objectives for using
      derivative instruments in terms of underlying risk and accounting designation.
      SFAS No. 161 also improves transparency about the location and amounts of
      derivative instruments in the company’s financial statements; how derivative
      instruments and related hedged items are accounted for under SFAS No. 133;
      and
      how derivative instruments and related hedged items affects the company’s
      financial position, results of operations and cash flows. SFAS No. 161 is
      effective for financial statements issued for fiscal years and interim periods
      beginning after November 15, 2008. The Company is currently evaluating the
      impact that the adoption of SFAS No. 161 will have on its consolidated financial
      position, results of operations and cash flows.




19




**WORLD
        AM, INC.**
 NOTES
        TO
        CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 **(Unaudited)**


**NOTE
      3 – INTANGIBLE ASSETS**




During
      the year ended December 31, 2006, Senz-It entered into a technology license
      agreement with the Research Foundation of SUNY (the “Foundation”) (the “License
      Agreement”). The Foundation granted an exclusive field of use license to Senz-It
      to facilitate the development and commercialization of certain technology
      developed at SUNY. Per the License Agreement, Senz-It will have the exclusive
      license to make, have made, use, sell and offer for sale certain licensed
      products over the term of the License Agreement of ten years. In exchange for
      this license, Senz-It paid an upfront fee of $25,000 which it recorded as an
      intangible asset, royalties of 3% of net sales with an annual minimum of
      $10,000, 35% of any defined sublicensing fees, reimburse the Foundation for
      certain defined patent costs for the licensed technologies, and provide
      additional research funding to SUNY, which the Company expenses, as
      follows:




March
                31, 2009
            
            $
            75,000March
                31, 2010
            
            $
            100,000March
                31, 2011
            
            $
            125,000





For
      the
      six months ended June 30, 2008 and June 30, 2007, the Company recorded royalty
      fee expense of $5,262 and $-0- and patent cost reimbursement of $21,001 and
      $151,604, respectively. As of June 30, 2008 and December 31, 2007, Senz-It
      has
      incurred a total of $205,548 and $184,547, respectively, related to certain
      items of the License Agreement and has recorded the costs as an intangible
      asset
      in the accompanying condensed consolidated financial statements. Upon
      commencement of sales of the licensed technologies, Senz-It will amortize the
      cost of the intangibles over the lesser of either their estimated useful life
      or
      the remaining term of the License Agreement. Amortizable intangible assets
      are
      tested for impairment based on undiscounted cash flows, and, if impaired,
      written down to fair value based on either discounted cash flows or appraised
      values.





**NOTE
      4 – DUE TO STOCKHOLDERS**





Due
      to
      stockholders was $220,000 as of June 30, 2008 and $321,884 as of December 31,
      2007. The balance consists of $70,000 payable related to a finder’s fee and
      other services provided by a consultant and $150,000 related to the settlement
      of a lawsuit with the former president and chief executive officer. See Note
      10
      for details regarding the lawsuit settlement. These amounts are non-interest
      bearing and due on demand.




**NOTE
      5 – PAYROLL TAXES PAYABLE**




As
      of
      June 30, 2008 and December 31, 2007, payroll taxes payable consists of late
      payroll taxes and estimated accrued interest and penalties for payroll and
      stock
      option activity totaling $280,402 and $192,177, respectively. A payment
      arrangement through 2008 has been agreed upon between the parties that will
      resolve this matter.




20




**WORLD
        AM, INC.**
 NOTES
        TO
        CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 **(Unaudited)**


**NOTE
      6 – WARRANTS AND CONVERTIBLE DEBENTURE**




The
      Company entered into a Securities Purchase Agreement with La Jolla Cove (see
      Note 2), a company under common control with Golden Gate Investors, Inc.
      (“Golden Gate”) dated June 19, 2006 (the “Agreement”) to replace the agreement
      dated January 23, 2006 with Golden Gate. Under the Agreement, La Jolla Cove
      agreed to provide funds to the Company in the form of a convertible debenture
      (the “Debenture”) in the aggregate principal amount of $500,000 with an annual
      interest rate of 6.25%. The conversion price is equal to the lesser of (i)
      $0.20, or (ii) 80% of the average of the three lowest volume weighted average
      prices during the 20 trading days prior to the election to convert, or (iii)
      80%
      of the volume weighted average price on the trading day prior to the election
      to
      convert. The number of common shares into which the Debenture may be converted
      is equal to the dollar amount of the Debenture being converted multiplied by
      eleven, minus the product of the conversion price multiplied by ten times the
      dollar amount of the Debenture being converted, and the entire foregoing result
      shall be divided by the conversion price. However, if the volume weighted
      average price is below $0.0005 per share during any ten consecutive trading
      days, La Jolla Cove may elect to convert the Debenture only, without exercising
      the related warrants (see below) (in such case, the number of common shares
      that
      the holder receives upon conversion of this Debenture will be the amount of
      the
      Debenture being converted divided by the conversion price). La Jolla Cove
      advanced a total of $275,000 in debentures under the Agreement.




The
      initial fair value assigned to the conversion feature was $1,151,759, of which
      $275,000 was recorded as a discount on convertible debt and $876,759 was
      included in interest expense in 2006 consolidated statement of operations.




The
      discount on convertible debt is amortized to interest expense over the life
      of
      the Debenture. Amortization expense charged to operations during the three
      and
      six months ended June 30, 2008 was $23,105 and $46,210, respectively.
      Amortization expense charged to operations during the three and six months
      ended
      June 30, 2007 was $22,851 and $45,702, respectively. Interest accrued on the
      Debenture and added to the principal balance was $4,274 for the three months
      ended June 30, 2008 and $8,955 for the six months ended June 30, 2008. Interest
      accrued on the Debenture and added to the principal balance was $1,150 for
      the
      three months ended June 30, 2007 and $5,827 for the six months ended June 30,
      2007. Interest payments totaling $3,074 and $11,366 were made in the second
      quarter 2008 and 2007, respectively. During the three months and six months
      ended June 30, 2008, 166,001,500 and 218,395,014 shares of common stock were
      issued to La Jolla Cove, respectively, in connection with the conversion of
      $11,850 for the three months ended June 30, 2008 and $19,149 for the six months
      ended June 30, 2008 of the Debenture at a calculated conversion price of
      $0.00009, as defined above. Additionally, the Company repaid $4,000 of the
      Debentures in the three months ended March 31, 2008. The balance on the
      debenture, including accrued interest payable (net of unamortized discount
      of
      $72,339 and $118,548 as of June 30, 2008 and December 31, 2007) was $186,629
      and
      $157,687, respectively.




If
      La
      Jolla Cove elects to convert a portion of the Debenture and, on the day that
      the
      election is made, the volume weighted average price is below $0.01 per share,
      the Company will have the right to prepay that portion of the Debenture that
      the
      holder elected to convert, plus any accrued and unpaid interest, at 125% of
      such
      amount. In the event that the Company elects to prepay that portion of the
      Debenture, La Jolla Cove will have the right to withdraw its conversion notice.
      If, at anytime during the month, the volume weighted average price is below
      $0.01 per share, weighted average price is below $0.01 per share, La Jolla
      Cove
      will not be obligated to convert any portion of the Debenture during that month.




21




**WORLD
        AM, INC.**
 NOTES
        TO
        CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 **(Unaudited)**


**NOTE
      6 – WARRANTS AND CONVERTIBLE DEBENTURE (continued)**




In
      conjunction with the Debenture, the Company issued to La Jolla Cove a warrant,
      dated June 19, 2006, to purchase 5,000,000 shares of common stock of the
      Company, exercisable at $1.00 per share. During the three and six months ended
      June 30, 2008, La Jolla Cove exercised 118,500 and 191,493 warrants at $1.00
      per
      share leaving a warrant balance of 4,798,507 shares at June 30, 2008 and
      4,990,000 shares at December 31, 2007. The Company received $118,500 and
      $191,493 in cash proceeds from the warrant exercise for the three and six months
      ended June 30, 2008. The Company also issued a warrant to La Jolla Cove, dated
      June 29, 2006, to purchase up to that number of shares of common stock equal
      to
      $2,750,000 divided by 120% of the average of the closing prices of the common
      stock for the 20 trading days prior to June 19, 2006, at a price per share
      equal
      to the 120% of the average of the current market price of the common stock
      for
      the 20 trading days prior to June 19, 2006, totaling 266,472,868 shares.




In
      connection with this transaction, the Company also granted to La Jolla Cove
      certain rights under a registration rights agreement, dated June 19, 2006,
      which
      requires that the Company register the shares into which the Debenture and
      the
      related warrants may be converted into.




Beginning
      in the first full calendar month after a registration statement is declared
      effective, La Jolla Cove is required to convert at least 10% of the face value
      of the Debenture and exercise 10% of the warrants in any particular calendar
      month, the Company’s remedy will be that La Jolla will not be entitled to
      collect interest on the Debenture for that month if the Company gives La Jolla
      written notice, at least five business days prior to the end of the month,
      of
      its failure to convert and/or exercise the minimum required amount for that
      month, of its failure to covert and/or exercise the minimum required amount
      for
      that month. In the event that La Jolla does not covert at least 10% of the
      Debenture or exercise 10% of the warrants for two consecutive calendar months,
      in addition to the penalty set forth in the previous sentence, the Company
      may
      repay, at par, an amount of the Debenture equal to two times the differential
      between 10% of the face value of the Debenture and the amount actually converted
      by La Jolla Cove.




Under
      a
      letter agreement, dated June 26, 2006, the parties agreed to enter into an
      additional Debenture and warrant to purchase common stock on the same terms
      and
      conditions as the Debenture and the 5,000,000 share warrant discussed above.
      The
      parties must enter into the additional debenture and warrant no later than
      thirty days after the principal amount of the Debenture is less than $100,000.
      Failure to enter into the additional debenture and warrant by either party
      will
      result in $100,000 of liquidated damages by that party. To date, the parties
      have not entered into an additional debenture.




The
      market value of the Company’s common stock significantly impacts the extent to
      which the Company maybe required or may be permitted to convert the unrestricted
      portion of the debenture into shares of the Company’s common stock. The lower
      the market price of the Company’s common stock at the respective times of
      conversion, the more shares the Company will need to convert the principal
      and
      interest payments then due on the Debenture. If the market price of the
      Company’s common stock falls below certain thresholds, the Company will be
      unable to convert any such repayments of principal and interest into equity,
      and
      the Company will be forced to make such repayments in cash. The Company’s
      operations could be materially impacted if the Company is forced to make
      repeated cash payments on the Debenture.




22




**WORLD
        AM, INC.**
 NOTES
        TO
        CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 **(Unaudited)**


**NOTE
      7 – STOCK COMPENSATION PLANS**




2005
      Non-Employee Directors and Consultants Retainer Stock Plan.




The
      World
      Am, Inc. Amended and Restated Non-Employee Directors and Consultants Retainer
      Stock Plan (“Non-Employee Plan”), dated December 22, 2005, is intended to enable
      the Company to promote the interests of the Company by attracting and retaining
      consultants and **** independent
      contractors capable of furthering the business of the Company and by aligning
      their economic interests more closely with those of the Company’s stockholders,
      and allow the Company to pay their retainer or fees in the form of shares of
      common stock or stock options. The maximum number of shares of stock that may
      be
      issued under this plan is 291,000,000 as of June 30, 2008.




During
      the three months ended June 30, 2008 2,161,277 shares of common stock were
      issued under the Non-Employee Plan leaving a balance of 0 shares left to be
      issued.




**2006
      Employee Stock Incentive Plan.**




The
      World
      Am, Inc. Amended and Restated Employee Stock Incentive Plan (“ESIP Plan”), dated
      February 7, 2006, is intended to allow designated officers and employees, and
      certain non-employees of the Company, to receive options to purchase common
      stock, and to receive common stock grants subject to certain restrictions.
      The
      purpose of this plan is to provide employees with equity-based compensation
      incentives to make significant and extraordinary contributions to the long-term
      performance and growth of the Company, and to attract and retain employees
      of
      exceptional ability. The purchase price of shares under the plan is $0.015
      per
      share. The option period begins on the date of grant and will not exceed ten
      years. The maximum number of shares of stock that may be issued under the
      amended ESIP Plan is 485,000,000 as of June 30, 2008.




During
      the three and six months ended June 30, 2008, a total of 60,270,196 and
      105,319,929 shares of common stock were awarded out of the ESIP Plan. As of
      June
      30, 2008, there were 0 shares of common stock remaining to be issued under
      the
      ESIP plan.




2007
      Stock Option Plan.




The
      World
      Am, Inc. Stock Option Plan, dated January 2, 2007, is intended to allow
      designated directors, officers and employees of the Company, to receive options
      to purchase restricted shares of common stock. The purpose of this plan is
      to
      provide directors, officers and employees with equity-based compensation
      incentives to make significant and extraordinary contributions to the long-term
      performance and growth of the Company and to attract and retain directors,
      officers and employees of exceptional ability. The purchase price of shares
      under the plan is $0.005 per share. The option period begins on the date of
      grant and will not exceed ten years. The maximum number of shares of stock
      that
      may be issued under this plan is 45,000,000. Options covering a total of
      44,500,000 shares have been granted through December 31, 2007 leaving a balance
      of 500,000 shares to be issued from this plan.




23




**WORLD
        AM, INC.**
 NOTES
        TO
        CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 **(Unaudited)**


**NOTE
      7 – STOCK COMPENSATION PLANS (continued)**




If
      the
      employee has been employed (or in the case of an independent director, been
      in
      such a position) for a period of one year from the date of the option grant,
      then the employee vests in 25% of the total number of shares covered by the
      option, and thereafter, 1/48th of the total number of shares covered by the
      option at the end of each full calendar month. If the employee leaves the
      Company prior to the expiration of the one-year period, then the employee does
      not have the right to purchase any shares under the option. The option remains
      valid only while the employee remains with the Company. Upon a termination
      of
      his or her relationship with the Company, the employee has a period of 90
      calendar days thereafter to purchase the amount of shares that are vested to
      date or they are forfeited. As of June 30, 2008, 16,687,500 of the options
      have
      vested and -0- shares vested as of December 31, 2007.





General
      Discussion.





The
      fair
      value of each stock-based award is estimated on the grant date using the
      Black-Scholes pricing model. Expected volatilities are based on the historical
      volatilities of comparable companies. The expected term of options granted
      is
      derived using the simplified method as defined in SAB No. 107. The risk-free
      rate for periods within the contractual life of the option is based on the
      U.S.
      Treasury interest rates in effect at the time of grant. The fair value of
      options granted was estimated using the following weighted-average
      assumptions:





2008
            2007Risk-free
                interest rate
            1.55
                – 2.36%
            3.34%
                – 4.48%Expected
                life of the options
            3
                years
            3-6
                yearsExpected
                volatility
            156
                – 173%
            127
                – 162%Expected
                dividend yield
            0%
            0%




24




**WORLD
        AM, INC.**
 NOTES
        TO
        CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 **(Unaudited)**


**NOTE
      7 – STOCK COMPENSATION PLANS (continued)**




The
      following is a summary of all stock option activity as of June 30, 2008 and
      changes during the six months ended June 30, 2008:




Number
                of Shares
            
            Weighted
                Average Exercise Price
            
            Weighted
                Average Remaining Contractual Term (Years)
            
            Aggregate
                Intrinsic ValueOptions
                outstanding at January 1, 2008
            
            
            73,619,991
            
            $
            0.009
            
            
            5.95
            
            $
            --Granted
            
            
            4,800,000
            
            $
            0.02Expired/forfeited
            
            
            (371,250
            )
            
            --Exercised
            
            
            --
            
            
            --Options
                outstanding at June 30, 2008
            
            
            78,048,741
            
            $
            0.009
            
            
            5.68
            
            $
            --Options
                exercisable at June 30, 2008
            
            
            50,236,241
            
            $
            0.012
            
            
            4.12
            
            $
            --Options
                expected to vest at June 30, 2008
            
            
            78,048,741
            
            $
            0.009
            
            
            5.68
            
            $
            --




The
      aggregate intrinsic values set forth in the above table represent the total
      pre-tax intrinsic values, based on the Company’s closing stock price of $0.0008
      as of June 30, 2008, which would have been paid by the optionee had all of
      them
      exercised their options as of that date.





Stock-based
      compensation expense for the three and six months ended June 30, 2008 were
      $9,675 and $41,308, respectively. Stock based compensation for the three and
      six
      months ended June 30, 2007 were $7,906 and $14,059, respectively. These amounts
      were included in general and administrative expenses in the accompanying
      consolidated statements of operations.




25




**WORLD
        AM, INC.**
 NOTES
        TO
        CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 **(Unaudited)**


**NOTE
      7 – STOCK COMPENSATION PLANS (continued)**




The
      following summarizes the activity of the Company’s non-vested
      options:




Weighted-AverageShares
            
            Grant-Date
                Fair Value
            
            Remaining
                Months to Vest
            
            Remaining
                Unrecognized Compensation CostNon-vested
                outstanding at January 1, 2008
            
            
            44,500,000
            
            $
            0.005
            
            
            49
            
            $
            127,722Granted
            
            
            4,800,000
            
            $
            0.02
            
            
            36
            
            
            7,036Vested
            
            
            (21,487,500
            )
            $
            0.008
            
            
            
            
            
            (41,308
            )Forfeited
            
            
            --
            
            
            --
            
            
            
            
            
            --Non-vested
                outstanding, related to the 2007 Stock Option Plan, at June 30,
                2008
            
            
            27,812,500
            
            $
            0.005
            
            
            43
            
            $
            93,450





The
      fair
      value of options granted in 2008 was $7,036 or $0.0015 per share.





**NOTE
      8 – STOCKHOLDERS’ DEFICIT**





Preferred
      Stock.





**Class
      A.**





The
      Company is authorized to issue up to 40 million shares of Class A convertible
      preferred stock with a par value of $0.0001 per share. Each share has a
      liquidation preference of $1,700 per preferred share. Such amounts shall be
      paid
      on all outstanding Class A preferred shares before any payment shall be made
      or
      any assets distributed to the holders of the common stock or any other stock
      of
      any other series or class-ranking junior to the shares as to dividends or
      assets. Each preferred share is convertible into 1,000,000 shares of the
      Company’s common stock at the option of the holder. Each holder of Class A
      preferred stock is entitled to 1,000,000 votes and is entitled to such dividends
      as may be declared by the board of directors from time to time.





During
      June 2004, the Company entered into a loan agreement with a lender whereby
      the
      lender agreed to use its best efforts to provide the Company a loan in the
      maximum amount of 2,000,000 subject to certain terms and conditions. The Company
      agreed to issue 1,370 shares of Class A preferred stock as collateral on the
      loan. The shares were issued in June 2004. The lender did not fund the loan
      and
      accordingly, the Company provided a written demand for the return of the shares;
      the certificate for 1,370 shares were returned to the Company and
      cancelled.





During
      May 2005, the lender assigned all rights set forth in the loan agreement to
      Coldwater Capital Partners, LLC. On this basis, a certificate for 1,370 shares
      of Class A preferred stock was issued on June 4, 2005. On July 21, 2005, the
      Company authorized that one share of the Class A preferred stock be converted
      into 1,000,000 restricted shares of common stock. The Company never received
      any
      funding under this loan agreement. Therefore, in January 2006 the Company made
      the determination to cancel the balance of 1,369 shares of Class A preferred
      stock (such shares have not yet been cancelled). The Company is analyzing its
      alternatives with regard to the 1,000,000 share conversion.




26




**WORLD
        AM, INC.**
 NOTES
        TO
        CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 **(Unaudited)**
  **NOTE
          8 – STOCKHOLDERS’ DEFICIT (continued)**


**Class
      B.**





The
      Company is authorized to issue up to 40 million shares of Class B preferred
      stock with a par value of $0.0001 per share. To the extent assets are available,
      holders of Class B preferred shares have a liquidation preference equal to
      the
      original issue price of the shares of $145,455 per share plus all declared
      but
      unpaid dividends on the Series B preferred shares. Such amounts shall be paid
      on
      all outstanding Class B preferred shares before any payment shall be made or
      any
      assets distributed to the holders of common stock or of any other stock of
      any
      series or class junior to the shares as to dividends or assets, but junior
      to
      Class A preferred shareholders. Each share of Class B preferred stock is
      convertible into the greater of (i) 1% of the shares of common stock outstanding
      on the date of conversion, after giving consideration to shares issued as a
      result of the conversion and any options, warrants or other convertible
      securities outstanding and (ii) 7,272,728 shares of common stock. The holders
      of
      these preferred shares shall have the right to vote and cost that number of
      votes which the holder would have been entitled to cast had such holder
      converted the shares immediately prior to the record date for such
      vote.





On
      August
      31, 2005, the Company completed a Share Exchange Agreement with Senz-It. Under
      this agreement, Senz-It became a wholly owned subsidiary of the Company in
      exchange for 55 shares of Class B convertible preferred stock that were issued
      to SUTI Holdings, LP among other consideration (see Note 1).





**Common
      Stock.**





The
      holders of the Company’s common stock are entitled to one vote per share of
      common stock held.





The
      following summarizes the common stock activity for the six months ended June
      30,
      2008:





Shares
                issued under the ESIP Plan
            
            
            105,319,929Shares
                issued for conversion of Debenture
            
            
            218,395,014Exercise
                of warrants
            
            
            191,493Shares
                issued under the Non-Employee Directors and Consultants
                Plan
            
            
            2,161,277Shares
                issued under separate S-8 filing (a)
            
            
            42,418,185Total
                net shares issued
            
            
            368,485,898




27




**WORLD
        AM, INC.**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(Unaudited)**


**NOTE
      8 – STOCKHOLDERS’ DEFICIT (continued)**





(a)
      On
      July 31, 2008, the Company filed a Form S-8 to register the issuance of these
      shares. These shares were issued during the three months ended June 30, 2008
      and
      were in excess of the available shares that were contained in the 2005
      Non-Employee Directors and Consultants Retainer Stock Plan as well as the 2006
      Employee Stock Incentive Plan.




A
      summary
      of the warrant activity for the six months ended June 30, 2008 is as
      follows:




Warrants
            
            Weighted-Average
                Exercise Price
            
            Weighted-Average
                Remaining Contractual LifeBalance,
                December 31, 2007
            
            
            449,891,816
            
            $
            0.023
            
            
            35
                monthsWarrants
                issued
            
            
            18,578,948
            
            $
            0.0026
            
            
            12
                monthsWarrants
                exercised
            
            
            (191,493
            )
            $
            1.00Warrants
                expired
            
            
            (18,078,948
            )
            $
            0.0025Balance,
                June 30, 2008
            
            
            450,200,323
            
            $
            0.0230
            
            
            29
                months





In
      February 2008, the Company issued a warrant to G. Raymond Pironti, Jr. to
      purchase 18,078,948 shares of its common stock at the lowest reported bid price
      of the Company’s common stock from February 4, 2008 to March 31, 2008, which was
      $0.0017, for a period of twelve months in exchange for consulting services.
      The
      fair value of the warrant was determined to be $4,642 at June 30, 2008 and
      is
      included in derivative and warrant liabilities in the accompanying condensed
      consolidated balance sheets.





In
      February 2008, the Company issued a warrant to an individual to purchase 500,000
      shares of its common stock at $0.005 per share for a period of twelve months
      in
      exchange for consulting services. The fair value of the warrant was determined
      to be $67 at June 30, 2008 and is included in derivative and warrant liabilities
      in the accompanying condensed consolidated balance sheets .





**NOTE
      9 – RELATED PARTY TRANSACTIONS**





G.
      Raymond Pironti, Jr.





See
      Note
      8 (above) for a description of the warrant that was issued to Mr. Pironti in
      February 2008.





In
      connection with the factoring agreement, the Company issued to JJ Ellis a
      warrant to purchase $60,000 of the Company’s common stock and has been recorded
      as a warrant liability in the accompanying consolidated balance sheet. The
      calculation of the number of shares underlying this warrant is based on the
      lowest bid price recorded ($0.0025) over a 365-day look back period or a 20%
      discount at time of execution, whichever is lower. Based on this calculation,
      the number of shares fixed for this warrant on April 25, 2006 was 24,000,000.
      This warrant is exercisable for a period of five years from the grant date
      of
      April 25, 2005 at the lower of $0.0025 per share or 80% of the closing price
      on
      the date of exercise and no warrants have been exercised as of June 30,
      2008.




28


**WORLD
        AM, INC.**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(Unaudited)**


**NOTE
      9 – RELATED PARTY TRANSACTIONS (continued)**





David
      J. Barnes.





On
      June
      19, 2008, Isotec, Inc. received $125,000 in the form of a secured promissory
      note from David Barnes. The purpose of these monies is to provide funds
      necessary to fulfill an order for the delivery of 20 security portals to a
      distributor. The secured promissory note contains a financing fee of 2.4%/month
      on the unpaid note balance. Additionally, there is a security agreement that
      covers all accounts, inventory and proceeds from all sales of security portals.
      Upon receipt of payment from the distributor, Mr. Barnes will be paid $6,250
      for
      each unit paid for. The secured promissory note and the accrued interest expense
      is included in the condensed consolidated balance sheet. Interest expense
      related to this note totaled $1,100 for the three months ended June 30, 2008
      and
      is included in the condensed consolidated statements of operations. No payments
      of interest or principal have been made as of June 30, 2008.





Select
      University Technologies, Inc.





**Venture
      Acceleration Agreement.**





A
      Venture
      Acceleration Agreement, (“Venture Agreement”) was entered into between Senz-It
      and Select University Technologies, Inc., the general partner of SUTI, dated
      June 20, 2005. Under the terms of the Venture Agreement, Senz-It appointed
      Select University Technologies, Inc. to provide certain services, personnel
      and
      property for consideration of a management fee and a performance fee through
      October 2009.





The
      management fee calls for a one-time payment of $100,000, payable in $50,000
      of
      common stock and $50,000 of cash, at such time when the Company has the
      financial capability to pay in cash and an annual management fee of $930,000
      payable in monthly installments of $77,500. Of the monthly management fee,
      $25,000 is payable in cash and the remainder is payable in common stock. For
      the
      three and six months ended June 30, 2008 and June 30, 2007, the Company recorded
      $465,000 in management fees. As of June 30, 2008 and December 31, 2007, the
      amount owed to Select University Technologies Inc. was $92,595 and $186,901
      respectively, which consists of amounts due under the terms of the Venture
      Agreement and amounts due for rent and reimbursement of operating
      expenses.





The
      performance fee is 6% of gross revenue for the first three years of the Venture
      Agreement. Thereafter, the performance fee is to be calculated at 15% of
      quarterly operating profit (as defined in the Valuation Agreement). To date,
      $17,452 has been expensed related to the performance fee.





**Office
      Space.**





The
      Company shares office space with Select University Technologies, Inc. The
      Company is charged $800 per month, plus operating and administrative expenses.
      The total rent and operating expenses charged to the Company for the three
      and
      six months ended June 30, 2008 was $0 and $4,800, respectively. The total rent
      and operating expenses charged to the Company for the three and six months
      ended
      June 30, 2007 was $2,427 and $4,840, respectively.




29


**WORLD
        AM, INC.**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(Unaudited)**


**NOTE
      9 – RELATED PARTY TRANSACTIONS (continued)**





SUTI
      Holdings, LP.





On
      May
      18, 2006, the Company’s subsidiary, Isotec, issued a demand promissory note in
      favor of the Company’s controlling stockholder, SUTI. Under the terms of the
      promissory note, the Company may borrow up to $100,000 to assist in the ongoing
      operations of the Company.





Principal
      and interest are due no later than 30 days following the commencement date
      of
      May 2006. The outstanding principal amount bears simple interest through the
      maturity date at the rate of 8% of the loan amount. After an Event of Default
      (as defined in the promissory note), all past due principal and, to the extent
      permitted by applicable law, interest upon this note is to bear interest at
      the
      rate per annum equal to 12%. As of June 30, 2008 and December 31, 2007, the
      Company did not owe any monies related to this note.





**NOTE
      10 – COMMITMENTS AND CONTINGENCIES**





Litigation





(a)
      On
      August 2, 2006, a complaint was filed against the Company and certain
      individuals by Karen Alexander. The complaint principally alleges that World
      Am,
      Inc. breached an employment agreement with the plaintiff by not paying her
      certain amounts allegedly owing.





On
      February 29, 2008, the Bolder County District Court (“the Court”) entered a
      judgment against the Company and found that the Company owed Karen Alexander
      a
      total of $39,000 plus reasonable attorney fees to be determined by the Court.
      Accordingly, the Company has recorded $39,000 as accounts payable


and
      accrued liabilities in the accompanying condensed consolidated balance sheets
      as
      of June 30, 2008 and December 31, 2007; and has not accrued an additional amount
      for attorney fees as they cannot be reasonably estimated at June 30,
      2008.





(b)
      On
      September 20, 2006, a complaint was filed against the Company by James
      Alexander, the Company’s former president and chief executive officer. The
      complaint principally alleges that World Am breached an employment agreement
      with the plaintiff by not paying him certain amounts allegedly owing and seeks
      damages in the amount of $714,718. The Company then filed a counterclaim against
      Mr. Alexander seeking damages for breach of fiduciary duty and breach of the
      duty of loyalty to the Company .





This
      matter was settled in June 2008 and on June 10, 2008, a judgment was entered
      by
      the United States District Court for the District of Colorado dismissing, with
      prejudice, the lawsuit and the counterclaim between James Alexander and the
      Company because a settlement had been reached. Under the terms of the
      settlement, the Company agreed to pay the sum of $150,000 to James Alexander.
      The settlement will be paid in the form of twelve convertible notes. Six of
      the
      convertible notes, each valued at $16,667, will be issued to Jim Alexander
      and
      six of the convertible notes, each valued at $8,333, will be issued to Mr.
      Alexander’s attorney. Each note will have at least a six month holding period
      with a stated conversion date. Beginning with the conversion date on the first
      convertible note, the conversion date for each subsequent note will be on the
      date exactly one month after the conversion date on the preceding note. On
      the
      conversion date, the note shall convert into a determined number of shares
      of
      restrictive WDAM stock where the number of shares determined shall be equal
      to
      the market value of the face amount of the note. Market value shall be
      determined by averaging the high and low prices of WDAM free trading stock
      on
      the day preceding the conversion date. Additionally, the Company agrees to
      indemnify James Alexander for all unpaid federal income tax withholdings,
      including penalties and interest, that the Company presently owes the Internal
      Revenue Service. The settlement amount $150,000, is included in due to
      stockholders in the accompanying condensed consolidated balance sheets. The
      excess monies previously accrued as being owed James Alexander, $101,884, are
      shown in other income in the accompanying condensed consolidated statements
      of
      operations.




30




**WORLD
        AM, INC.**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(Unaudited)**


**NOTE
      10 – COMMITMENTS AND CONTINGENCIES (continued)**




(c )
      On
      October 25, 2004, a complaint was filed against the Company by Mitchell Vince.
      The complaint alleges that Isotec terminated Mr. Vince without cause prior to
      the expiration of the term of an alleged employment agreement. The complaint
      sought monetary damages of $240,000. This matter was settled in December 2006.
      Under this settlement, Mr. Vince will be paid $6,000 per month in cash or shares
      of free trading common stock for a period of 20 months commencing January 1,
      2007. The remaining balance on the settlement of $10,735 is included in accounts
      payable in the accompanying consolidated balance sheet as of June 30,
      2008.





(d) On
      or
      about October 10, 2007, one of the Company’s former consultants filed a
      complaint against the Company alleging breach of contract, failure to pay monies
      owed and other common counts. The former consultant is seeking to recover
      $30,108. The Company is in settlement discussions with the former
      consultant.




(e) On
      January 30, 2004, a complaint was filed against the Company by Robert Hainey
      and
      Internet Marketing Solutions, Inc. The complaint, which has causes of action
      for
      breach of contract and unjust enrichment, alleges that the defendants failed
      to
      pay the plaintiffs for certain consulting and public relations and related
      work,
      reimbursement of certain business expenses incurred on behalf of the defendants,
      and to repay a loan made by the plaintiffs to the defendants. The complaint
      sought total monetary damages of approximately $308,000.




In
      March
      2008, the Company agreed to settle this matter. Under the terms of the
      settlement, the Company agreed to pay Robert Hainey and Internet Marketing
      Solutions, Inc. the sum of $116,000, which was recorded in general and
      administrative expense in 2007. The Company has paid $12,000 in 2008 per the
      settlement and monthly payments in the amount of $5,000, in stock or cash,
      will
      begin in April 2008 through April 2010. In the event that the Company fails
      to
      make any of the aforementioned payments, the Company agrees to pay to Robert
      Hainey and Internet Marketing Solutions, Inc. a penalty of $1,000 for each
      occurrence. The remaining balance owed as of June 30, 2008 is $88,000 and is
      included in accounts payable in the accompanying condensed consolidated balance
      sheets.




31




**WORLD
        AM, INC.**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(Unaudited)**


**NOTE
      10 – COMMITMENTS AND CONTINGENCIES (continued)**





Operating
      Leases.





Isotec
      leases a 4,800 square foot facility in Westminster, Colorado with a monthly
      rent
      and common area expense of $4,061 through December 31, 2011. Rent and common
      area expense totaled $13,352 and $25,908 for the three and six months ended
      June
      30, 2008, respectively. Rent and common area expense totaled $8,598 and $20,313
      for the three and six months ended June 30, 2007, respectively.





Senz-It
      leases a 934 square foot facility in Newport Beach, California. The lease
      commenced October 22, 2007 through October 21, 2008. Upon expiration, the lease
      terms will continue for successive thirty-day periods until cancelled by either
      party in writing. Rent and common area expense totaled $5,231 and $7,846 for
      the
      three and six months ended June 30, 2008.





Consulting
      Agreement.





On
      March
      10, 2008, the Company renewed its consulting agreement with its chief executive
      officer, Robert Hovee, through an agreement with RAH Consulting Group, Inc.
      This
      agreement covers his services to be rendered for this Company in that position
      for the period of January 1, 2008 through December 31, 2008. In consideration
      of
      the services rendered, the Company will pay Mr. Hovee a fee of $8,000 per month,
      in cash or stock, at the Company’s discretion. Mr. Hovee is eligible to
      participate in the Company’s Stock Option Plan. The Company will reimburse Mr.
      Hovee for all reasonable business expenses incurred while performing services
      for the Company. In addition, healthcare insurance premiums for Mr. Hovee will
      be paid by the Company. This agreement is to remain in effect until terminated
      by either party as of the date set forth in a written notice to the other party
      delivered in accordance with the notice provisions of the agreement at least
      30
      days prior to such date. In the event of the termination of this agreement,
      any
      accrued but unpaid fees will be paid within ten days of the effective date
      of
      such termination. As of June 30, 2008, the Company owed $8,000 under this
      agreement.





An
      advance of $3,259 on the consulting fees owed Robert Hovee was made during
      2007.
      The remaining advance to related party as of June 30, 2008 is
      $1,204.





Distributor
      Agreements





The
      Company has entered into several distributor agreements for distribution of
      the
      Company’s products in the United States. These agreements call for the provision
      of services to the distributors in exchange for the promotion of the Company’s
      products. The products are sold to the distributor at a discount from the list
      price of 15% to 25%.





In
      addition, the Company has alliance agreements to assist the Company in
      establishing international distributorships. The agreements have one-year terms
      and may be renewed with the mutual consent of both parties. The alliance
      agreements specify a commission of 10% of license fees and 5% of product sales
      made pursuant to the alliance agreements.




32


**WORLD
      AM, INC.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**(Unaudited)**




**NOTE
      10 – COMMITMENTS AND CONTINGENCIES (continued)**





On
      May 1,
      2007, the Company entered into a distributor agreement for the purpose of
      appointing a distributor responsible for the worldwide, excluding Singapore,
      sales and marketing of the Senz-It product line for a period of forty-eight
      months unless sooner terminated as specified in the agreement. In addition
      the
      distributor provides sales and marketing consulting services for an initial
      term
      of twelve months. As payment for these consulting fees, the Company agreed
      to
      the following compensation arrangement: (a) 10,000,000 shares (50% of the shares
      in the form of S-8 shares and 50% of the shares were in the form of Rule 144
      shares) were issued totaling $60,000 (valued at the closing price of $0.006
      on
      the date issued), and (b) World Am stock options, fully vested, issued monthly
      in the amount of 1,200,000 through November 2007 and 1,000,000 through May
      2008
      at an exercise price of $0.02 per share. The stock option shares remain
      exercisable for a period of thirty-six months from the date of issuance. No
      additional compensation or expense reimbursement shall be made to distributor
      for their efforts in this matter. As of June 30, 2008, a total of 13,200,000
      fully vested options have been issued, valued at $30,806. This amount has been
      recorded in general and administrative expenses in the accompanying condensed
      consolidated statements of operations. This amount is also included in the
      options vesting during the period (unaudited) in the accompanying condensed
      consolidated statements of stockholders’ deficit.





License
      Agreement




Through
      June 30, 2008, the Company has incurred $205,548 related to certain terms in
      the
      License Agreement, which the Company has recorded as an intangible asset in
      the
      accompanying condensed consolidated financial statements (see Note 3). Upon
      commencement of sales of the licensed technologies, Senz-It will amortize the
      cost of the intangibles over the lesser of their estimated useful lives or
      over
      the remaining term of the License Agreement. Amortizable intangible assets
      are
      tested for impairment based on undiscounted cash flows, and, if impaired,
      written down to fair value based on either discounted cash flows or appraised
      values.





In
      connection with the License Agreement (see Note 3), Senz-It issued 100,000
      restricted shares of its common stock in January 2007, and will issue additional
      such shares to SUNY pursuant to the terms of a Stock Purchase Agreement dated
      December 1, 2006,  so
      that
      it will maintain a minimum ownership of 10% in Senz-It. Finally, Senz-It entered
      into a Stockholders Agreement dated  December
      1, 2006 with SUNY that covers the rights of stockholders of Senz-It. At such
      time as Senz-It earns a profit, the minority interest will be allocated to
      SUNY.
      In connection with these agreements, the Company entered into confidentiality
      and non-disclosure agreements with SUNY as to certain specific terms of the
      agreements.




33




**WORLD
      AM, INC.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**(Unaudited)**




**NOTE
      10 – COMMITMENTS AND CONTINGENCIES*(continued)***





Indemnities
      and Guarantees.





During
      the normal course of business, the Company has made certain indemnities and
      guarantees under which it may be required to make payments in relation to
      certain transactions. These indemnities include certain agreements with the
      Company’s officers under which the Company may be required to indemnify such
      persons for liabilities arising out of their employment relationship, lease
      agreements where the Company may be required to indemnify landlords for damages
      arising from non-compliance with environmental laws, contracts where the Company
      may be required to indemnify the other party from liabilities resulting from
      claimed infringements of the proprietary rights of third parties or
      confidentiality provisions and the La Jolla Cove agreement where the Company
      may
      be required to indemnify La Jolla Cove for breach of representation or warranty.
      The duration of these indemnities and guarantees varies, and in certain cases,
      is indefinite.





The
      majority of these indemnities and guarantees do not provide for any limitation
      of the maximum potential future payments the Company would be obligated to
      make.
      Historically, the Company has not been obligated to make significant payments
      for these obligations and no liability has been recorded for these indemnities
      in the accompanying consolidated balance sheets.





**NOTE
      11 – SUBSEQUENT EVENTS**





(a)
      The
      Company issued 2,964,286 shares of its common stock on July 31, 2008 to pay
      operating expenses totaling $3,557.





(b)
      On
      July 10, 2008, the Company’s Board of Directors approved the 2008 Non-Qualified
      Stock Grant and Option Plan, which , is
      intended to allow designated directors, officers and employees of the Company,
      to receive options to purchase restricted shares of common stock. The purpose
      of
      this plan is to provide directors, officers and employees with equity-based
      compensation incentives to make significant and extraordinary contributions
      to
      the long-term performance and growth of the Company and to attract and retain
      directors, officers and employees of exceptional ability. The purchase price
      of
      shares under the plan is 85% of the fair market value of the company stock
      on
      the date that the stock option is granted. The option period begins on the
      date
      of grant and will not exceed ten years. The maximum number of shares of stock
      that may be issued under this plan is 120,000,000. On July 31, 2008, the Company
      filed a registration statement on Form S-8 registering the shares underlying
      the
      2008 Non-Qualified Company Stock Grant and Option Plan. As of August 11, 2008,
      the Company has issued 56,314,640 shares of its common stock to eligible
      employees and consultants under this plan.  No
      options have been granted under this plan.





(c)
      On
      July 15, 2008, Isotec, Inc. received and additional $75,000 from David Barnes
      under the same terms and conditions as the initial $125,000 loan.




34




**ITEM
              2.**
            **Management’s
                Discussion and Analysis o****f
                Financial Condition and Results of
                Operations.**





Overview





All
      of
      the operations are conducted through our majority-owned subsidiary, Senz-It
      and
      our wholly owned subsidiary, Isotec, Inc.




Senz-It,
      Inc. (“Senz-It”)




Senz-It,
      Inc. is developing innovative advancements in the field of chemical and
      biochemical sensing devices. These sensing devices have broad applications
      in
      Food Safety and Protection, Homeland Security and Indoor Air Quality Monitoring.
      Our highly robust systems are designed to rapidly and selectively detect
      analytes of interest in liquids and gases for significantly less cost than
      current available technologies. Engineering and development efforts have been
      primarily focused on two benchmark projects:




In
      November 2007, Senz-It was awarded a United States Air Force biological
      development contract worth up to $417,000. Under this contract, Senz-It will
      develop protein imprinted microarrays for bovine serum albumin (“BSA”)
      sensing
      applications. Upon introduction of BSA into the sensing platform, fluorescent
      reporter molecules will emit light wherein the emission intensity is directly
      proportional to the BSA concentration. The Senz-It R&D team is placing
      considerable effort on improving the sensitivity, selectivity and
      reproducibility of PIXIES technology originally licensed from the University
      at
      Buffalo in order to produce a platform that is ultimately more conducive to
      the
      detection of proteins other than BSA and increase commercial applicability.




Senz-It
      has obtained a contract extension with the Air Force and the Jackson Foundation,
      which will push the final delivery date of the contract to September 30, 2008.
      Upon completion of this Phase 1 contract, the Air Force plans to look for
      funding opportunities for a Phase 2 project with Senz-It, which entails the
      detection of the proteinaceous toxins Botulinum toxins A, B and E and
      Enterotoxin B.




In
      January 2008, Senz-It partnered with BioMedix, a biotech product management
      and
      distribution company, to develop a sensor that will detect and quantify levels
      of harmful biogenic amines in fish and other types of seafood. Biogenic amines
      are chemical byproducts specifically associated with the level of decomposition
      in fish, and their levels are presently tested in a purely qualitative and
      subjective manner that is highly prone to error. This system will be integrated
      in various points throughout the supply chain to ensure that the public is
      receiving the freshest product possible.




This
      biogenic amine detector is based on a chemiluminescent technique; although
      the
      concept of chemiluminescence is not novel, the application of this technique
      to
      a product for biogenic amine detection in seafood is novel. The system will
      consist of a base unit housing the sample holder and the corresponding
      electronics, hardware and software. Sample collection and preparation will
      be
      performed using disposable test kits containing the appropriate sensing
      chemistry.




Senz-It’s
      current full time staff has grown to include individuals with expertise in
      electrical engineering, chemistry, biochemistry, mechanical engineering,
      manufacturing, software engineering and marketing.




35




Isotec,
      Inc. (“Isotec,
      Inc.”)





Isotec
      developments, integrates and manufactures Automated Security Portal products,
      broadly categorized as Access Control, Weapons Control, or Materials Control
      Systems. These structures Protect, not just Detect, by rigorously controlling
      passage of people and materials into and out of a facility based on specific
      security rules, while reducing the need for security personnel. Applications
      of
      the technology have been delivered to the commercial, retail and government
      sectors. Isotec’s experience in this field allows it to provide high quality,
      code compliant, feature-rich application-optimized solutions at the lowest
      cost
      in the shortest timeframe.




Isotec
      has installed systems for high security United States Department of Energy
      facilities such as Los Alamos Labs, Lawrence Livermore Labs, and Sandia Labs,
      and military installations for the United States Air Force and Navy. Commercial
      installations include a growing number of commercial banking facilities, and
      various retail facilities such as jewelry stores.




We
      believe that Isotec’s planned growth and profitability will depend in large part
      on the ability to promote its products, expand its relationship with current
      and
      new distributors, and gain new clients. Accordingly, Isotec intends to focus
      its
      attention and investment of resources in marketing, strategic partnerships,
      and
      development of its client base. If the company is not successful in promoting
      its products and expanding its client and distributor base, this may have a
      material adverse effect on its financial condition and our ability to continue
      to operate the business.




Isotec’s
      revenue in the second quarter continued the upward trend over prior quarters.
      We
      expect this trend to continue through the third quarter. It should be noted
      that
      Isotec’s revenue continues to fluctuate due to the effect of large contracts,
      and due to seasonality, and we continue to see that occur, although with growing
      sales and distribution channels, the effect is somewhat reduced from historical
      levels.




Much
      of
      our sales development effort in the second quarter was focused on continued
      training and education of the distributor sales force to increase their
      effectiveness, and that effort will continue in the third quarter. New printed
      materials as well as web-based tools have been introduced, and our quotation
      level continues to increase on a quarter-to-quarter basis. Providing three
      dimensional CAD renderings with each product proposal has allowed the customer
      to visualize their product in simulation, and provides a significant
      differentiator relative to competitive offerings. The ability to customize
      our
      already leading edge software and operator interface has allowed the
      introduction of Data Output capability, which in turn allows our customers
      to
      remotely monitor multiple portals from a central security station, and to
      provide printed reports of events and statistics.




36




**Results
      of Operations for the Three Months Ended June 30, 2008 compared to the Three
      Months Ended June 30, 2007.**





Three
                Months
              Ended
              June
                30, 2008
            
            Three
                Months
              Ended
              June
                30, 2007Revenues:Contract
                research anddevelopment
            
            $
            35,926
            
            $
            --Product
                sales
            
            
            390,405
            
            
            69,140426,331
            
            
            69,140Cost
                and expenses:Cost
                of contract researchand
                development
            
            
            123,935
            
            
            --Cost
                of product sales
            
            
            254,857
            
            
            50,063General
                and administrativeexpenses
            
            
            822,247
            
            
            960,979Loss
                from operations
            
            
            (744,708
            )
            
            (941,902
            )Other
                income (expense), net
            
            
            1,019,431
            
            
            520,892Net
                income (loss)
            
            $
            244,723
            
            $
            (421,010
            )





Revenue





Our
      revenue for the three months ended June 30, 2008 was $426,331, compared to
      revenues of $69,140 for the three months ended June 30, 2007, which was an
      increase of $357,191. The increase in revenue for the three months ended June
      30, 2008 was due to the increase in sales of Isotec’s security portals to
      financial institutions through a primary distributor as well as contract
      research and development revenue recognized by Senz-It based on their Phase
      One
      United States Air Force biological development contract.





Cost
      of revenue





Our
      total
      cost of revenues were $378,792 for the three months ended June 30, 2008 compared
      to our total cost of revenues of $50,063 for the three months ended June 30,
      2007, which was an increase of $328,729. Our increased cost of revenues for
      the
      three months ended June 30, 2008 was due to the increase in production costs
      associated with the increased level of sales at Isotec and the Department of
      Air
      Force biological development contract is a cost reimbursement contract which
      was
      not in existence during the three months ended June 30, 2007. Additionally,
      in
      the second quarter 2008, we recognized the cost overrun related to the Air
      Force
      in the amount of $88,009. Our gross profit percentage was 11% for the three
      months ended June 30, 2008, compared to 28% for the three months ended June
      30,
      2007. The decrease in the gross profit percentage is related to: (a) Isotec’s
      lower profit margin contracts being awarded, (b) the Department of Air Force
      contract is cost reimbursement only, and (c) we recognized Senz-It’s forecasted
      contract overrun of $88,009.




37




General
      and administrative expenses





We
      incurred general and administrative expenses of $822,247 for the three months
      ended June 30, 2008 compared to general administrative expenses of $960,979
      for
      the three months ended June 30, 2007, which was a decrease of $138,732. The
      major general and administrative expense categories for the three months ended
      June 30, 2008 and 2007 were as follows:





Three
                Months
              Ended
              June
                30, 2008
            
            Three
                Months
              Ended
              June
                30, 2007Professional
                fees
            
            $
            213,415
            
            $
            252,859Payroll
                expenses
            
            
            145,872
            
            
            185,706Engineering
                salaries
            
            
            125,701
            
            
            --Rent
            
            
            17,275
            
            
            13,399Advertising
                and promotions
            
            
            --
            
            
            60,000Management
                fees
            
            
            232,500
            
            
            232,500





Our
      decreased expenses for the three months ended June 30, 2008 compared to the
      three months ended June 30, 2007 were primarily the result of an decrease in
      advertising and promotions as well as a general reduction in the level of
      expenses for the three months ended June 30, 2008.





Other
      Income (Expense), Net





Our
      total
      other income of $1,019,431 for the three months ended June 30, 2008 compared
      to
      our total other income of $520,892 for the three months ended June 30, 2007,
      which was a increase of $498,539. This increase was primarily the result of
      the
      decrease in the fair value of the derivative and warrant liabilities that were
      caused primarily by the decreased stock price throughout the second quarter
      of
      2008 and the favorable settlement of a lawsuit in the amount of $101,884 in
      the
      second quarter 2008.





Net
      Income (Loss)





We
      had
      net income of $244,723 for the three months ended June 30, 2008 compared to
      net
      loss of ($421,010) for the three months ended June 30, 2007, an increase of
      $665,733. The net income for the three months ended June 30, 2008 was primarily
      the result of a decrease in general and administrative expense levels, the
      decrease in the fair value of derivatives and warrant liabilities, and the
      income recognized from the settlement of a lawsuit.




38




**Results
      of Operations for the Six Months Ended June 30, 2008 compared to the Six Months
      Ended June 30, 2007.**





Six
                Months
              Ended
              June
                30, 2008
            
            Six
                Months
              Ended
              June
                30, 2007Revenues:Contract
                research anddevelopment
            
            $
            163,470
            
            $
            --Product
                sales
            
            
            577,511
            
            
            122,410740,981
            
            
            122,410Cost
                and expenses:Cost
                of contract researchand
                development
            
            
            251,479
            
            
            --Cost
                of product sales
            
            
            316,107
            
            
            62,801General
                and administrativeexpenses
            
            
            1,730,488
            
            
            1,547,876Loss
                from operations
            
            
            (1,557,093
            )
            
            (1,488,267
            )Other
                income (expense), net
            
            
            1,171,240
            
            
            (323,475
            )Net
                loss
            
            $
            (385,853
            )
            $
            (1,811,742
            )




Revenue





Our
      revenue for the six months ended June 30, 2008 was $740,981, compared to
      revenues of $122,410 for the six months ended June 30, 2007, which was an
      increase of $618,571. The increase in revenue for the six months ended June
      30,
      2008 was due to the increase in sales of Isotec’s security portals to financial
      institutions through a primary distributor as well as contract research and
      development revenue recognized by Senz-It based on their Phase One United States
      Air Force biological development contract.





Cost
      of revenue





Our
      total
      cost of revenues were $567,586 for the six months ended June 30, 2008 compared
      to our total cost of revenues of $62,801 for the six months ended June 30,
      2007,
      which was an increase of $504,785. Our increased cost of revenues for the six
      months ended June 30, 2008 was due to the increase in production costs
      associated with the increased level of sales at Isotec and the Department of
      Air
      Force biological development contract is a cost reimbursement contract which
      was
      not in existence during the six months ended June 30, 2007. Additionally, in
      the
      second quarter 2008, we recognized the cost overrun related to the Air Force
      in
      the amount of $88,009. Our gross profit percentage was 23% for the six months
      ended June 30, 2008, compared to 49% for the six months ended June 30, 2007.
      The
      decrease in the gross profit percentage is related to: (a) Isotec’s lower profit
      margin contracts being awarded, (b) the Department of Air Force contract is
      cost
      reimbursement only, and (c) we recognized Senz-It’s forecasted contract overrun
      of $88,009.




39





General
      and administrative expenses





We
      incurred general and administrative expenses of $1,730,488 for the six months
      ended June 30, 2008 compared to general administrative expenses of $1,547,876
      for the six months ended June 30, 2007, which was a increase of $182,612. The
      major general and administrative expense categories for the three months ended
      June 30, 2008 and 2007 were as follows:





Six
                Months
              Ended
              June
                30, 2008
            
            Six
                Months
              Ended
              June
                30, 2007Professional
                fees
            
            $
            576,942
            
            $
            387,920Payroll
                expenses
            
            
            254,257
            
            
            302,421Engineering
                salaries
            
            
            248,431
            
            
            --Rent
            
            
            38,554
            
            
            25,113Advertising
                andpromotions
            
            
            --
            
            
            90,750Management
                fees
            
            
            465,000
            
            
            465,000Director
                Fees
            
            
            13,500
            
            
            --





Our
      increased expenses for the six months ended June 30, 2008 compared to the six
      months ended June 30, 2007 were primarily the result of an increased level
      of
      professional fees, particularly legal fees related to our litigation,
      engineering salaries and director fees.




Other
      Income (Expense), Net





Our
      total
      other income of $1,171,240 for the six months ended June 30, 2008 compared
      to
      our total other expense of $323,475 for the six months ended June 30, 2007,
      which was a increase of $1,494,715. This increase was primarily the result
      of
      the decrease in the fair value of the derivative and warrant liabilities that
      were caused primarily by the decrease in our common stock price throughout
      the
      first six months and the favorable settlement of a lawsuit in the amount of
      $101,884 in the second quarter 2008.





Net
      Income (Loss)





We
      had a
      net loss of $(385,853) for the six months ended June 30, 2008 compared to a
      net
      loss of ($1,811,742) for the six months ended June 30, 2007, a decrease of
      $1,425,889. The net loss for the six months ended June 30, 2008 were primarily
      the result of an increase in general and administrative expense levels offset
      by
      a decrease in the fair value of derivatives and warrant liabilities as well
      as
      the income recognized from the settlement of a lawsuit.





**Liquidity
      and Capital Resources.**





Introduction





As
      of
      June 30, 2008, we had total current assets of $519,013 and total current
      liabilities of $2,442,274, resulting in a working capital deficit of $1,923,261.
      As of June 30, 2008, our current assets consisted primarily of accounts
      receivable ($202,259), inventory ($185,342), unbilled revenues of uncompleted
      contracts ($61,635), prepaid expenses and other assets ($29,881) and cash and
      cash equivalents ($38,692). We had an accumulated deficit of $7,327,233 as
      of
      June 30, 2008.




40





Our
      ability to continue as a going concern on a long-term basis is dependent upon
      our ability to generate sufficient cash flow from operations to meet our
      obligations on a timely basis, and our ability to obtain additional financing
      and ultimately attain profitability.





Although
      we have been successful in the past in raising capital, no assurance can be
      given that sources of financing will continue to be available and/or that demand
      for our equity/debt instruments will be sufficient to meet our capital needs,
      or
      that financing will be available on favorable terms. Our condensed consolidated
      financial statements do not include any adjustments relating to the
      recoverability and classification of assets and liabilities that might be
      necessary should we be unable to continue as a going concern.





If
      funding is insufficient at any time in the future, we may not be able to take
      advantage of business opportunities or respond to competitive pressures or may
      be required to reduce the scope of our planned product development and marketing
      efforts, any of which could have a negative impact on business and operating
      results. In addition, insufficient funding may have a material adverse effect
      on
      our financial condition, which could require us to:





·
            curtail
                operations significantly;


·
            sell
                significant assets;


·
            seek
                arrangements with strategic partners or other parties that may require
                us
                to relinquish significant rights to products, technologies or markets;
                or


·
            explore
                other strategic alternatives including a merger or
                sale.





To
      the
      extent that we raise additional capital through the sale of equity or
      convertible debt securities, dilution of the interests of existing shareholders
      may occur. If we raise additional funds through the issuance of debt securities,
      these securities may have rights, preferences and privileges senior to holders
      of common stock and the terms of such debt could impose restrictions on our
      operations. Regardless of whether our assets prove to be inadequate to meet
      our
      operational needs, we may seek to compensate providers of services by issuance
      of stock in lieu of cash, which may also result in dilution to existing
      shareholders.




41




Our
      cash,
      accounts receivable, inventories, prepaid expenses, total current assets,
      primary current liabilities, and total current liabilities as of June 30, 2008,
      compared to the end of our last fiscal year were:




As
                of
              June
                30, 2008
            
            As
                of
              December
                31, 2007
            
            ChangeCash
                and cash equivalents
            
            $
            38,692
            
            $
            538,373
            
            $
            (499,681
            )Accounts
                receivable
            
            
            202,259
            
            
            77,167
            
            
            125,092Unbilled
                revenues on uncompleted contracts
            
            
            61,635
            
            
            73,465
            
            
            (11,830
            )Inventories
            
            
            185,342
            
            
            44,162
            
            
            141,180Prepaid
                expenses and other current assets
            
            
            31,085
            
            
            35,415
            
            
            (4,330
            )Total
                current assets
            
            
            519,013
            
            
            768,582
            
            
            (249,569
            )Accounts
                payable and accrued expenses
            
            
            1,329,284
            
            
            744,876
            
            
            584,408Due
                to related party
            
            
            92,595
            
            
            186,901
            
            
            (94,306
            )Due
                to stockholders
            
            
            220,000
            
            
            321,884
            
            
            (101,884
            )Payroll
                taxes payable
            
            
            280,402
            
            
            192,177
            
            
            88,225Total
                current liabilities
            
            $
            2,442,274
            
            $
            1,662,281
            
            $
            799,993








Cash
      Requirements





We
      intend
      to use our available funds as well as our working capital and our borrowing
      ability to expand the operations of Senz-It and Isotec.




Sources
      and Uses of Cash




*Operating
      Activities*





Our
      net
      cash used in operating activities was $789,277 for the six months ended June
      30,
      2008 and $1,181,736 for the six months ended June 30, 2007, a decrease of
      $392,459. The principal components of the decrease net cash used in operations
      for the six months ended June 30, 2008 were: (a) an increase in deferred revenue
      of $148,421, (b) an increase in payroll taxes payable of $88,225; (c) an
      increase in accounts payable and accrued expenses of $591,388; (d) an increase
      in unbilled revenue of $11,830; (e) depreciation and amortization of $60,658;
      (f) an increase in stock issued to pay operating expenses of $244,230; which
      were offset by (g) a net loss of $385,853: (h) change in fair value of
      derivative and warrant liabilities of $1,131,352; (i) lawsuit settlement of
      $101,884; (j) increase in accounts receivable $125,092; (k) an increase in
      inventories of $141,180; and (l) a decrease in due to related parties of
      $92,251.




42





*Investing
      Activities*




Our
        net
        cash used in investing activities was $22,501 for the six months ended June
        30,
        2008 and was used for acquisition of intangible assets of $21,001 and purchase
        of fixed assets totaling $1,500, compared to our net cash used in investing
        activities of $206,717 for the six months ended June 30, 2007 which was used
        for
        the acquisition of fixed and intangible assets of $55,113 and $151,604,
        respectively.





*Financing
      Activities*





Our
      net
      cash provided by financing activities of $312,097 for the six months ended
      June
      30, 2008, resulted from proceeds from the exercise of warrants totaling $191,493
      and the proceeds from related party borrowings totaling $125,000, offset by
      repayments of notes payable of $4,396. Our net cash provided by financing
      activities was $3,104,885 for the six months ended June 30, 2007, which resulted
      from proceeds, net of issuance costs, from sales of common stock to investors
      in
      a private stock offering of $3,197,500 which were offset by repayments of note
      payable of $92,615.





**Contractual
      Obligations.**





Operating
      Leases





Isotec
      leases a 4,800 square foot facility in Westminster, Colorado with a monthly
      rent
      and common area expense of $4,061 through December 31, 2011. Rent and common
      area expense totaled $13,352 and $25,908 for the three and six months ended
      June
      30, 2008, respectively. Rent and common area expense totaled $8,598 and $20,313
      for the three and six months ended June 30, 2007, respectively.





As
      of
      June 30, 2008, future minimum non-cancelable facility rental payments required
      under the operating lease are as follows:





2008
                (last six months)
            
            $
            24,4412009
            
            
            51,1832010
            
            
            53,2322011
            
            
            55,362$
            184,218





Senz-It
      leases a 934 square foot facility in Newport Beach, California. The lease
      commenced October 22, 2007 through October 21, 2008. Upon expiration, the lease
      terms will continue for successive thirty-day periods until cancelled by either
      party in writing. Rent and common area expense totaled $5,231 and $7,846 for
      the
      three and six months ended June 30, 2008. There were no rent and common area
      expenses associated with this lease for the three and six months ended June
      30,
      2007. As of June 30, 2008 future minimum non-cancellable facility rental payment
      required under the operating lease for 2008 are $4,990.




43





Consulting
      Agreement





On
      March
      10, 2008, we renewed our consulting agreement with our chief executive officer,
      Robert Hovee, through an agreement with RAH Consulting Group, Inc. This
      agreement covers his services to be rendered for us in that position for the
      period of January 1, 2008 through December 31, 2008. In consideration of the
      services rendered, we will pay Mr. Hovee a fee of $8,000 per month, in cash
      or
      stock, at the Company’s discretion. Mr. Hovee is eligible to participate in the
      Company’s Stock Option Plan. We will reimburse Mr. Hovee for all reasonable
      business expenses incurred while performing services for us. In addition,
      healthcare insurance premiums for Mr. Hovee will be paid by us. This agreement
      is to remain in effect until terminated by either party as of the date set
      forth
      in a written notice to the other party delivered in accordance with the notice
      provisions of the agreement at least 30 days prior to such date. In the event
      of
      the termination of this agreement, any accrued but unpaid fees will be paid
      within ten days of the effective date of such termination. As of June 30, 2008,
      we owed Mr. Hovee $8,000 under the agreement.




An
      advance of $3,259 on the consulting fees owed Robert Hovee was made during
      2007.
      The remaining advance to related party as of June 30, 2008 is
      $1,204.





Distributor
      Agreements





We
      have
      entered into several distributor agreements for distribution of our products
      in
      the United States. These agreements call for the provision of services to the
      distributors in exchange for the promotion of our products. The products are
      sold to the distributor at a discount from the list price of 15% to
      25%.





In
      addition, we have alliance agreements to assist us in establishing international
      distributorships. The agreements have one-year terms and may be renewed with
      the
      mutual consent of both parties. The alliance agreements specify a commission
      of
      10% of license fees and 5% of product sales made pursuant to the alliance
      agreements.





On
      May 1,
      2007, we entered into a distributor agreement for the purpose of appointing
      a
      distributor responsible for the worldwide, excluding Singapore, sales and
      marketing of the Senz-It product line for a period of forty-eight months unless
      sooner terminated as specified in the agreement. In addition the distributor
      provides sales and marketing consulting services for an initial term of twelve
      months. As payment for these consulting fees, we agreed to the following
      compensation arrangement: (a) 10,000,000 million shares (50% of the shares
      in
      the form of S-8 shares and 50% of the shares were in the form of Rule 144
      shares) were issued totaling $60,000 (valued at the closing price of $0.006
      on
      the date issued), and (b) World Am stock options, fully vested, issued monthly
      in the amount of 1,200,000 through November 2007 and 1,000,000 through May
      2008
      at an exercise price of $0.02 per share. The stock option shares remain
      exercisable for a period of thirty-six months from the date of issuance. No
      additional compensation or expense reimbursement shall be made to distributor
      for their efforts in this matter. As of June 30, 2008, a total of 13,200,000
      fully vested options had been issued, valued at $30,806. This amount has been
      recorded in general and administrative expenses (see Note 10).




44





License
      Agreement





Through
      June 30, 2008, we have incurred a total of $205,548 related to certain items
      in
      the License Agreement, which we have recorded as an intangible asset in the
      accompanying condensed consolidated financial statements (see Note 3). Upon
      commencement of sales of the licensed technologies, Senz-It will amortize the
      cost of the intangibles over the lesser of their estimated useful lives or
      over
      the remaining term of the License Agreement. Amortizable intangible assets
      are
      tested for impairment based on undiscounted cash flows, and, if impaired,
      written down to fair value based on either discounted cash flows or appraised
      values.





In
      connection with the License Agreement (see Note 3), Senz-It issued 100,000
      restricted shares of its common stock in January 2007, and will issue additional
      such shares to SUNY pursuant to the terms of a Stock Purchase Agreement dated
      December 1, 2006,  so
      that
      it will maintain a minimum ownership of 10% in Senz-It. Finally, Senz-It entered
      into a Stockholders Agreement dated  December
      1, 2006 with SUNY that covers the rights of stockholders of Senz-It. At such
      time as Senz-It earns a profit, the minority interest will be allocated to
      SUNY.
      In connection with these agreements, we entered into confidentiality and
      non-disclosure agreements with SUNY as to certain specific terms of the
      agreements.





Indemnities
      and Guarantees





During
      the normal course of business, we have made certain indemnities and guarantees
      under which we may be required to make payments in relation to certain
      transactions. These indemnities include certain agreements with our officers
      under which we may be required to indemnify such party for liabilities arising
      out of their employment relationship, lease agreements where we maybe required
      to indemnify the landlord for damages arising out of non-compliance with
      environmental laws, contracts where we may be required to indemnify the other
      party from damages resulting from claimed infringements of the propriety rights
      of third parties or confidentiality provisions and the La Jolla Cove agreement
      where we may be required to indemnify La Jolla Cove for breach of representation
      or warranty. The duration of these indemnities and guarantees varies, and in
      certain cases, is indefinite.





The
      majority of these indemnities and guarantees do not provide for any limitation
      of the maximum potential future payments we would be obligated to make.
      Historically, we have not been obligated to make significant payments for these
      obligations and no liability has been recorded for these indemnities in the
      accompanying consolidated balance sheets.





Off
      Balance Sheet Arrangements





Other
      than our operating lease, we do not engage in any off balance sheet arrangements
      that are reasonably likely to have a current or future effect on our
      consolidated financial condition, revenues, and results of operations, liquidity
      or capital expenditures.





Inflation





The
      impact of inflation on our costs and the ability to pass on cost increases
      to
      our customers over time is dependent upon market conditions. We are not aware
      of
      any inflationary pressures that have had any significant impact on our
      operations over the past quarter, and we do not anticipate that inflationary
      factors will have a significant impact on future operations.




45




**Critical
      Accounting Policies.**





The
      SEC
      has issued Financial Reporting Release No. 60, “Cautionary Advice Regarding
      Disclosure About Critical Accounting Policies” (“FRR 60”), suggesting companies
      provide additional disclosure and commentary on their most critical accounting
      policies. In FRR 60, the SEC has defined the most critical accounting policies
      as the ones that are most important to the portrayal of a company’s financial
      condition and operating results and require management to make its most
      difficult and subjective judgments, often as a result of the need to make
      estimates of matters that are inherently uncertain. Based on this definition
      and
      in consultation with our Board of Directors, we have identified the following
      accounting policies that we believe are critical to an understanding of our
      financial statements. These are important accounting policies that require
      management’s most difficult, subjective judgments, and include: (a) valuation of
      stock-based compensation arrangements; (b) revenue recognition; (c)
      realizability of long-lived assets; (d) valuation of derivative financial
      instruments; and (e) valuation of income taxes. The methods, estimates and
      judgments the Company uses in applying these most critical accounting policies
      have a significant impact on the results the Company reports in its consolidated
      financial statements.





Valuation
      of Stock-Based Compensation Arrangements





All
      issuances of our stock for non-cash consideration have been assigned a per
      share
      amount equaling either the market value of the shares issued or the value of
      consideration received, whichever is more readily determinable. The majority
      of
      the non-cash consideration received pertains to services rendered by consultants
      and others and have been valued at the amount billed by the consultant for
      services provided.




Our
      accounting policy for equity instruments issued to consultants and vendors
      in
      exchange for goods and services follows the provisions of EITF Issue No. 96-18,
      “Accounting for Equity Instruments That are Issued to Other Than Employees for
      Acquiring, or in Conjunction with Selling, Goods or Services,” and EITF Issue
      No. 00-18, “Accounting Recognition for Certain Transactions Involving Equity
      Instruments Granted to Other Than Employees.” The measurement date for the fair
      value of the equity instrument issued is determined at the earlier of (a) the
      date at which a commitment for performance by the consultant or vendor is
      reached or (b) the date at which the consultant or vendor’s performance is
      complete. In the case of equity instruments issued to consultants, the fair
      value of the equity instrument is recognized over the term of the consulting
      agreement. In accordance with EITF Issue No. 00-18, an asset acquired in
      exchange for the issuance of fully vested, non-forfeitable equity instruments
      should not be presented or classified as an offset to equity on the grantor’s
      balance sheet once the equity instrument is granted for accounting purposes.
      Accordingly, we will record the fair value of the fully vested non-forfeitable
      common stock issued for future consulting services as prepaid expenses in the
      consolidated balance sheet.




We
      accounts for our employee stock-based compensation under the provisions of
      SFAS
      No. 123 (revised 2004), “Share-Based Payment,” (“SFAS No. 123(R)”). SFAS No.
      123(R) requires a public entity to measure the cost of employee services
      received in exchange for an award of equity instruments, including stock
      options, based on the grant-date fair value of the award and to recognize it
      as
      compensation expense over the period the employee is required to provide service
      in exchange for the award, usually the vesting period. We have also applied
      the
      provisions of Staff Accounting Bulletin (“SAB”) No. 107 relating to SFAS No.
      123(R).




46




SFAS
      No.
      123(R) requires companies to estimate the fair value of share-based payment
      awards on the date of grant using an option-pricing model. The value of the
      portion of the award that is ultimately expected to vest is recognized as
      expense over the requisite service periods in our consolidated statements of
      operations.




Stock-based
      compensation expense recognized during the period is based on the value of
      the
      portion of share-based payment awards that is ultimately expected to vest during
      the period. SFAS No. 123(R) requires forfeitures to be estimated at the time
      of
      grant and revised, if necessary, in subsequent periods if actual forfeitures
      differ from those estimates. The forfeiture rate that the Company presently
      uses
      is 0%.




SFAS
      No.
      123(R) requires the cash flows resulting from the tax benefits resulting from
      tax deductions in excess of the compensation cost recognized for those options
      to be classified as financing cash flows. Due to our loss position, there were
      no such tax benefits for the three and six months ended June 30, 2008 and 2007,
      respectively.




Revenue
      Recognition





We
      recognize revenue in accordance with SAB No. 101, “Revenue Recognition in
      Financial Statements,” as revised by SAB No. 104. As such, we recognize revenue
      when persuasive evidence of an arrangement exists, title transfer has occurred,
      the price is fixed or readily determinable and collection is probable.




Our
      revenues were derived from product sales at Isotec, which primarily consisted
      of
      shipments of security portals. Revenue from product sales are recorded when
      products are shipped.




Revenues
      derived from contracts to develop prototypes and provide research, development,
      design, testing and evaluation of complex detection and control defense systems
      were $35,926 and $163,470 during the three and six months ended June 30, 2008,
      respectively. Our research and development contract is cost reimbursement.
      Our
      cost reimbursement research and development contracts require our good faith
      performance of a statement of work within overall budgetary constraints, but
      with some flexibility as it relates to scheduling and resources, both personnel
      and equipment. Revenues for research and development contracts are recognized
      as
      costs are incurred in the proportion that costs incurred bear to estimated
      final
      costs.




Costs
      and
      estimated earnings in excess of billings under government research and
      development contracts are accounted for as unbilled revenues on uncompleted
      contracts stated at estimated realizable value and expected to be realized
      in
      cash within one year.




As
      of
      June 30, 2008 and December 31, 2007, we recorded deferred revenue of $205,984
      and $57,563, respectively, for customer deposits on ordered
      products.




We
      have
      contracts with various governments and governmental agencies. Government
      contracts are subject to audit by the applicable governmental agency. Such
      audits could lead to inquiries from the government regarding the acceptability
      of costs under applicable government regulations and potential adjustments
      of
      contract revenues. To date, we have not been involved in any such
      audits.




47




Realizability
      of Long-Lived Assets





The
      third
      critical accounting policy relates to realizability of long-lived assets. We
      account for long-lived assets in accordance with Statement of Financial
      Accounting Standards (“SFAS”) No. 144, “Accounting for the Impairment or
      Disposal of Long-Lived Assets.” SFAS No. 144 requires that long-lived assets be
      reviewed for impairment whenever events or changes in circumstances indicate
      that the historical cost carrying value of an asset may no longer be
      appropriate. We assess recoverability of the carrying value of an asset by
      estimating the future net cash flows expected to result from the asset,
      including eventual disposition. If the future net cash flows are less than
      the
      carrying value of the asset, an impairment loss is recorded equal to the
      difference between the asset’s carrying value and fair value or disposable
      value. As of June 30, 2008, we do not believe there have been any impairment
      of
      our long-lived assets. There can be no assurances, however, that demand for
      our
      products and services will continue, which could result in an impairment of
      long-lived assets in the future.





**Valuation
      of Derivative Financial Instruments**





In
      accounting for non-conventional convertible debt, we bifurcates our embedded
      derivative instruments and records them under the provisions of SFAS No. 133,
      “Accounting for Derivative Instruments and Hedging Activities,” as amended, and
      EITF Issue No. 00-19, “Accounting for Derivative Financial Instruments Indexed
      to, and Potentially Settled in, a Company’s Own Stock.” Our derivative financial
      instruments consist of embedded derivatives related to a non-conventional
      debenture entered into with Golden Gate Investors, Inc./La Jolla Cove Investors,
      Inc. (“La Jolla Cove”) (see Note 6). These embedded instruments related to the
      Debenture include the conversion feature, liquidated damages related to
      registration rights and default provisions. The accounting treatment of
      derivative financial instruments requires that we record the derivatives and
      related warrants at their fair value as of the inception date of the agreement
      and at fair value as of each subsequent balance sheet date. Any change in fair
      value will be recorded as non-operating, non-cash income or expense at each
      reporting period. If the fair value of the derivatives is higher at the
      subsequent balance sheet date, the Company will record a non-operating, non-cash
      charge. If the fair value of the derivative is lower at the subsequent balance
      sheet date, we will record non-operating, non-cash income.




During
      the year ended December 31, 2006, we recorded the initial fair value of the
      conversion feature of $1,151,759 of which $876,759 was recorded as interest
      expense in the consolidated statement of operations and $275,000 was recorded
      as
      a discount on the debt and is being amortized to interest expense over the
      life
      of the debt. We also recorded the initial fair value of the attached warrants,
      related to the debt financing in 2006, of $2,075,694 as a component of interest
      expense in the consolidated statements of operations for the year ended December
      31, 2006. The initial fair value of the conversion-related derivatives and
      warrants were valued primarily using the Black-Scholes pricing model with the
      following assumptions: dividend-yield of 0%, annual volatility of 127% and
      risk-free interest rate of 4.70% - 4.74%. At December 31, 2007, the fair value
      of the conversion feature and the warrants amounted to $1,788,376. At June
      30,
      2008, the fair value of the La Jolla Cove conversion feature and the warrants
      amounted to $834,616. The decrease in the fair value of the La Jolla Cove
      conversion features and warrants of $953,760 at June 30, 2008 and the increase
      in the fair value of the conversion features and warrants of $296,580 at June
      30, 2007 are included as other income (expense) in the accompanying condensed
      consolidated statements of operations.




48




As
      of
      December 31, 2007, the derivatives and warrants were valued primarily using
      the
      Black-Scholes pricing model with the following assumptions: dividend yield
      of
      0%, annual volatility of 133.2% - 161.8%, and risk free interest rate of
      3.07%-3.45%. The derivatives are classified as long-term liabilities in the
      accompanying condensed consolidated balance sheet.




As
      of
      June 30, 2008, the derivatives and warrants were valued primarily using the
      Black-Scholes pricing model with the following assumptions: dividend yield
      of
      0%, annual volatility of 143.6% - 172.8%, and risk free interest rate of
      2.36%-3.34%. The derivatives are classified as long-term liabilities in the
      accompanying condensed consolidated balance sheet.




In
      addition, under the provisions of EITF Issue No. 00-19, as a result of entering
      into the convertible debt, the Company is required to classify all other
      non-employee stock options and warrants as liabilities and mark them to market
      at each reporting date. Non-employee stock options and warrants were valued
      primarily using the Black-Scholes pricing model with the following assumptions:
      dividend yield of 0%, volatility of 138% and risk free interest rate of 4.54%.
      At December 31, 2007, the fair value of the non-employee warrant was $267,937.
      The decrease in the fair value of non-employee stock options in the amount
      of
      $425,938 since December 31, 2006 is included in other income in the December
      31,
      2007 consolidated statement of operations.




At
      June
      30, 2008, the fair value of the non-employee warrants was $90,345. The decrease
      in the fair value of non-employee stock options and warrants in the amount
      of
      $177,592 since December 31, 2007 and the increase of $44,000 since December
      31,
      2006 are included in other income (expense) in the accompanying condensed
      consolidated statements of operations.




**Valuation
      of Income Taxes**





The
      fifth
      critical accounting policy relates to valuation of income taxes. We account
      for
      income taxes under the provisions of SFAS No. 109, “Accounting for Income
      Taxes.” Under SFAS No. 109, deferred tax assets and liabilities are recognized
      for future tax benefits or consequences attributable to temporary differences
      between the financial statement carrying amounts of existing assets and
      liabilities and their respective tax bases. Deferred tax assets and liabilities
      are measured using enacted tax rates expected to apply to taxable income in
      the
      years in which those temporary differences are expected to be recovered or
      settled. A valuation allowance is provided for significant deferred tax assets
      when it is more likely than not that such assets will not be realized through
      future operations.





**ITEM
              3.**
            **Quantitative
                and Qualitative Disclosures About Market
                Risk.**





As
      a
      smaller reporting company we are not required to provide the information
      required by this Item.





**ITEM
              4.**
            **Controls
                and Procedures****.**





**Evaluation
      of Disclosure Controls and Procedures**





We
      conducted an evaluation, with the participation of our Chief Executive Officer
      and Chief Financial Officer, of the effectiveness of the design and operation
      of
      our disclosure controls and procedures, as defined in Rules 13a-15(e) and
      15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange
      Act, as of June 30, 2008, to ensure that information required to be disclosed
      by
      us in the reports filed or submitted by us under the Exchange Act is recorded,
      processed, summarized and reported, within the time periods specified in the
      Securities Exchange Commission's rules and forms, including to ensure that
      information required to be disclosed by us in the reports filed or submitted
      by
      us under the Exchange Act is accumulated and communicated to our management,
      including our principal executive and principal financial officers, or persons
      performing similar functions, as appropriate to allow timely decisions regarding
      required disclosure. Based on that evaluation, our Chief Executive Officer
      and
      Chief Financial Officer have concluded that as of June 30, 2008, our disclosure
      controls and procedures were not effective at the reasonable assurance level
      due
      to the material weaknesses described below.




49





In
      light
      of the material weaknesses described below, we performed additional analysis
      and
      other post-closing procedures to ensure our financial statements were prepared
      in accordance with generally accepted accounting principles. Accordingly, we
      believe that the consolidated financial statements included in this report
      fairly present, in all material respects, our financial condition, results
      of
      operations and cash flows for the periods presented.





A
      material weakness is a control deficiency (within the meaning of the Public
      Company Accounting Oversight Board (PCAOB) Auditing Standard No. 5) or
      combination of control deficiencies, such that there is a reasonable possibility
      that a material misstatement of the annual or interim financial statements
      will
      not be prevented or detected. Management has identified the following two
      material weaknesses which have caused management to conclude that, as of June
      30, 2008, our disclosure controls and procedures were not effective at the
      reasonable assurance level:





1.  We
      do not
      have written documentation of our internal control policies and procedures.
      Written documentation of key internal controls over financial reporting is
      a
      requirement of Section 404 of the Sarbanes-Oxley Act. Management evaluated
      the
      impact of our failure to have written documentation of our internal controls
      and
      procedures on our assessment of our disclosure controls and procedures and
      has
      concluded that the control deficiency that resulted represented a material
      weakness.





2.  We
      do not
      have sufficient segregation of duties within accounting functions, which is
      a
      basic internal control. Due to our size and nature, segregation of all
      conflicting duties may not always be possible and may not be economically
      feasible. However, to the extent possible, the initiation of transactions,
      the
      custody of assets and the recording of transactions should be performed by
      separate individuals. Management evaluated the impact of our failure to have
      segregation of duties on our assessment of our disclosure controls and
      procedures and has concluded that the control deficiency that resulted
      represented a material weakness.





To
      address these material weaknesses, management performed additional analyses
      and
      other procedures to ensure that the financial statements included herein fairly
      present, in all material respects, our financial position, results of operations
      and cash flows for the periods presented.





**Remediation
      of Material Weaknesses**




To
      remediate the material weaknesses in our disclosure controls and procedures
      identified above, we have continued to refine our internal procedures to begin
      to implement segregation of duties and to reduce the number of audit
      adjustments.




50





**Changes
      in Internal Control over Financial Reporting**




Except
      as
      noted above, there were no changes in our internal control over financial
      reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act,
      during our most recently completed fiscal quarter that have materially affected,
      or are reasonably likely to materially affect, our internal control over
      financial reporting .





**ITEM
              4T.**
            **Controls
                and Procedures****.**





At
      the
      end of the period covered by this report, we carried out the above evaluation,
      under the supervision and with the participation of our management, including
      our Chief Executive Officer and Chief Financial Officer, of the effectiveness
      of
      the design and operation of our disclosure controls and procedures pursuant
      to
      Securities Exchange Act Rule 13a-14.




Based
      upon that evaluation, the Chief Executive Officer and Chief Financial Officer
      concluded that, based on the above factors, our disclosure controls and
      procedures were not effective (1) to provide reasonable assurance that
      information required to be disclosed by us in the reports filed or submitted
      by
      us under the Securities Exchange Act were recorded, processed, summarized and
      reported within the time periods specified in the SEC’s rules and forms, and
      (2) to provide reasonable assurance that information required to be
      disclosed by us in such reports is accumulated and communicated to our
      management, including its Chief Executive Officer and Chief Financial Officer,
      as appropriate to allow for timely decisions regarding required
      disclosure.




**MANAGEMENT’S
      REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING**





Management
      is responsible for establishing and maintaining adequate internal control over
      financial reporting for the Company. Our internal control over financial
      reporting is a process designed under the supervision of our Chief Executive
      Officer and Chief Financial Officer to provide reasonable assurance regarding
      the reliability of financial reporting and the preparation of our financial
      statements for external reporting purposes in accordance with U.S. generally
      accepted accounting principles. Management made a comprehensive review,
      evaluation and assessment of our internal control over financial reporting
      as of
      December 31, 2007, and it is included in our Annual Report on Form 10-KSB
      filed with the Commission on April 15, 2008. In making its assessment of
      internal control over financial reporting, management used the criteria issued
      by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”)
      in Internal Control−−Integrated Framework.





There
      were no changes to our internal control over financial reporting identified
      in
      connection with the evaluation set forth in our last Annual Report during our
      fiscal quarter ended June 30, 2008 that has materially affected, or is
      reasonably likely to materially affect, our internal control over financial
      reporting.




51




**PART
      II – OTHER
      INFORMATION**




**ITEM
              1.**
            **Legal
                Proceedings****.**





Other
      than as set forth below, we are not a party to any material pending legal
      proceedings and, to the best of our knowledge, no such action by or against
      us
      has been threatened.





(a)  On
      August
      2, 2006, a complaint was filed in the District Court of Boulder County,
      Colorado: *Karen
      Alexander v. World Am, Inc., Isotec, Inc., Robert A. Hovee, David J. Barnes,
      James R. Largent and Ken Jochim* . The
      lawsuit was based on an alleged employment contract between us and a former
      employee, the wife of our former CEO and Chairman who is also suing us over
      his
      employment contract (see below).  When this lawsuit was originally filed,
      there were seven causes of action involving three additional named
      defendants, including two of our current Board members.  By the time
      of trial, the three additional named defendants had been dismissed and the
      only
      remaining causes of action were breach of contract, intentional interference
      with contract, libel and slander, and a Colorado Wage Act claim.  The libel
      and slander claim was dismissed during trial and, at the close of evidence,
      the
      former employee demanded $1,000,000 in damages.   On February 29,
      2008, the jury returned a verdict in our favor, finding that there was no breach
      of contract or intentional interference with contract.  The jury did
      find that we owed plaintiff back wages, which is a claim we never
      disputed.  The former employee was awarded $39,000 for these back
      wages, a portion of which was a statutory penalty, and
      reasonable attorney’s fees in an amount yet to be determined.  We
      also
      have claims pending for certain of our attorneys fees incurred on a discovery
      matter. We
      accrued $39,000 in the 2007 consolidated financial statements and have not
      accrued an additional amount for attorney fees as they cannot be reasonably
      estimated at this time.





(b)  On
      September 20, 2006, a complaint was filed in the District Court of Adams County,
      Colorado: *James
      H. Alexander v. World Am, Inc* .
      The
      complaint principally alleges that we breached an employment agreement with
      the
      plaintiff by not paying him certain amounts allegedly owing and seeks damages
      in
      the amount of $714,718.




On
      June
      9, 2008, we entered into a Settlement Agreement (the “Agreement”) with
      James H. Alexander (“Alexander”) for the purpose of settling the
      above-mentioned pending lawsuit (the “Lawsuit”). Under the terms of the
      Agreement, we agreed to pay Alexander the total sum of $150,000 (“Settlement
      Payment”) to be paid as follows: (i) issuing six (6) convertible notes to
      Alexander, one per month for six (6) consecutive months beginning June 9, 2008,
      with each note in the principal amount of $16,667 and having a six (6) month
      maturity date; and (ii) issuing six (6) convertible notes to Denis H. Mark,
      one
      per month for six (6) consecutive months beginning June 9, 2008, with each
      note
      in the principal amount of $8,333 and having a six (6) month maturity date.
      Under the terms of the notes, they are to be converted on their maturity date
      at
      a price per share equal to the market value of our common stock on the trading
      day immediately prior to conversion, and if we do not convert them, or are
      unable to convert them, then we immediately owe the principal amount in cash.
      The notes are interest-free.





Under
      the
      Agreement, in exchange for the Settlement Payment, Alexander agreed to dismiss
      the Lawsuit, with prejudice, and fully release us from any and all claims and
      liabilities, known and unknown, that Alexander may have, or has ever had,
      against us.




52




(c)  On
      or
      about November 7, 2007, PR/DNA filed a Complaint for Breach of Contract,
      Account Stated and Other Common Counts against World-Am in Superior Court of
      California, Los Angeles County, Case No. 07CC11731 to recover $30,108.25,
      claiming that timely notice of termination was not given to PR/DNA under the
      terms of a written agreement and further claiming that PR/DNA is entitled to
      reimbursement of certain costs incurred during the term of the agreement.




We
      filed
      an answer to the complaint on or about December 28, 2007 and have commenced
      settlement discussions with PR/DNA’s counsel. This matter is set to go to trial
      in late 2008. We do not believe the
      outcome of this lawsuit will be material.




(d)  On
      January 30, 2004, a complaint was filed in the District Court of Adams County,
      Colorado: *Robert
      Hainey and Internet Marketing Solutions, Inc. v. World Am Communications, Inc.
      and Isotec, Inc* .
      The
      complaint, which has causes of action for breach of contract and unjust
      enrichment, alleges that the defendants failed to pay the plaintiffs for certain
      consulting and public relations and related work, reimbursement of certain
      business expenses incurred on behalf of the defendants, and to repay a loan
      made
      by the plaintiffs to the defendants. The complaint sought total monetary damages
      of approximately $308,000.





On
      July
      27, 2005, the matter was settled. Under the terms of this settlement, we were
      obligated to pay the sum of $116,000 over a period of four years in semi-annual
      installments, beginning on October 1, 2005. The plaintiffs were obligated to
      pay
      us the sum of $2,000 per installment payment to reimburse it for administrative
      costs in connection with the payment of such sum in the form of S-8 stock.
      Accordingly, we assumed a settlement liability of $116,000 on August 31, 2005,
      with $29,000 recorded as short-term or amounts due within one year and $87,000
      recorded as long-term.





Management
      was previously advised by local legal counsel that the settlement was
      unenforceable in the State of Colorado because the action dismissed the
      plaintiff with prejudice, and cannot be presented in any other jurisdiction.
      In
      addition, this legal counsel advised that a new action cannot be re-filed since
      the relevant statute of limitations on this matter has expired. Accordingly,
      we
      eliminated the settlement liability and recorded a settlement gain of $116,000
      as of December 31, 2005.




The
      plaintiff subsequently filed a Motion to Reopen Case and Application for Entry
      of Judgment against World Am. On October 29, 2007, the District Court entered
      a
      judgment against us and found that we breached the previous settlement agreement
      by not paying any portion of the $116,000. The Court did not address the issue
      that the plaintiff never paid the $2,000 per installment fee. On November 9,
      2007, we filed a Motion for Reconsideration of Judgment Entered on October
      29,
      2007 requesting the judgment for $116,000 be withdrawn pending the Plaintiff’s
      request and payment of $2,000 for an installment; alternatively that said
      judgment be amended to $50,000 and no future installment need be made by us
      until a proper tender of $2,000 is made; or alternatively, for vacating said
      judgment pending a hearing to be set on notice by either party on Plaintiffs
      motion.





In
      March
      2008, we settled this matter. Under the terms of the settlement, we agreed
      to
      pay to Robert Haney and Internet Marketing Solutions, Inc., the sum of $116,000.
      Payments will be made as follows: a payment of $6,000 was made in January 2008,
      and another payment of $6,000 was made upon execution of the agreement, March
      4,
      2008. In the second quarter 2008, $16,000 has been paid to Mr. Haney and
      Internet Marketing Solutions. As of June 30, 2008, the balance owed is $88,000.
      Monthly payments in the amount of $5,000, in stock or cash, are set to begin
      on
      April 5, 2008 and continuing in the same amount on the fifth day of each month
      thereafter until fully paid in April 2010. The April 2010 payment will be
      $4,000, in cash or stock. In the event that we fail to make any of the
      aforementioned payments, we agree to pay Robert Haney and Internet Marketing
      Solutions, Inc., a penalty of $1,000 per occurrence.




53




**ITEM
              1A.**
            **Risk
                Factors.**





As
      a
      smaller reporting company we are not required to provide the information
      required by this Item.





**ITEM
              2.**
            **Unregistered
                Sales of Equity Securities and Use of Proceeds****.**





On
      April
      16, 2008, we issued an aggregate of 22,035,256 shares of our common stock to
      La
      Jolla Cove Investors, Inc. We issued 22,010,256 of these shares pursuant to
      a
      conversion request submitted to us by La Jolla to convert $2,500 of the
      outstanding amount due under that certain 63⁄4% Convertible Debenture dated June
      8, 2006. We issued the additional 25,000 shares pursuant to a mandatory exercise
      provision under a Warrant issued with the Convertible Debenture. Under the
      Warrant the exercise price is $1.00 per share, so we received $25,000 as a
      result of this exercise. The
      issuance was exempt from registration pursuant to Section 4(2) of the Securities
      Act of 1933, and the investor was accredited.





On
      April
      29, 2008, we issued an aggregate of 15,468,750 shares of our common stock to
      La
      Jolla Cove Investors, Inc. We issued 15,455,250 of these shares pursuant to
      a
      conversion request submitted to us by La Jolla to convert $1,350 of the
      outstanding amount due under that certain 63⁄4% Convertible Debenture dated June
      8, 2006. We issued the additional 13,500 shares pursuant to a mandatory exercise
      provision under a Warrant issued with the Convertible Debenture. Under the
      Warrant the exercise price is $1.00 per share, so we received $13,500 as a
      result of this exercise. The
      issuance was exempt from registration pursuant to Section 4(2) of the Securities
      Act of 1933, and the investor was accredited.





On
      May 2,
      2008, we issued an aggregate of 22,916,667 shares of our common stock to La
      Jolla Cove Investors, Inc. We issued 22,896,667 of these shares pursuant to
      a
      conversion request submitted to us by La Jolla to convert $2,000 of the
      outstanding amount due under that certain 63⁄4% Convertible Debenture dated June
      8, 2006. We issued the additional 20,000 shares pursuant to a mandatory exercise
      provision under a Warrant issued with the Convertible Debenture. Under the
      Warrant the exercise price is $1.00 per share, so we received $20,000 as a
      result of this exercise. The
      issuance was exempt from registration pursuant to Section 4(2) of the Securities
      Act of 1933, and the investor was accredited.





On
      May
      12, 2008, we issued an aggregate of 24,774,775 shares of our common stock to
      La
      Jolla Cove Investors, Inc. We issued 24,754,775 of these shares pursuant to
      a
      conversion request submitted to us by La Jolla to convert $2,000 of the
      outstanding amount due under that certain 63⁄4% Convertible Debenture dated June
      8, 2006. We issued the additional 20,000 shares pursuant to a mandatory exercise
      provision under a Warrant issued with the Convertible Debenture. Under the
      Warrant the exercise price is $1.00 per share, so we received $20,000 as a
      result of this exercise. The
      issuance was exempt from registration pursuant to Section 4(2) of the Securities
      Act of 1933, and the investor was accredited.




54





On
      May
      22, 2008, we issued an aggregate of 27,363,184 shares of our common stock to
      La
      Jolla Cove Investors, Inc. We issued 27,343,184 of these shares pursuant to
      a
      conversion request submitted to us by La Jolla to convert $2,000 of the
      outstanding amount due under that certain 63⁄4% Convertible Debenture dated June
      8, 2006. We issued the additional 20,000 shares pursuant to a mandatory exercise
      provision under a Warrant issued with the Convertible Debenture. Under the
      Warrant the exercise price is $1.00 per share, so we received $20,000 as a
      result of this exercise. The
      issuance was exempt from registration pursuant to Section 4(2) of the Securities
      Act of 1933, and the investor was accredited.





On
      June
      6, 2008, we issued an aggregate of 22,132,797 shares of our common stock to
      La
      Jolla Cove Investors, Inc. We issued 22,122,797 of these shares pursuant to
      a
      conversion request submitted to us by La Jolla to convert $1,000 of the
      outstanding amount due under that certain 63⁄4% Convertible Debenture dated June
      8, 2006. We issued the additional 10,000 shares pursuant to a mandatory exercise
      provision under a Warrant issued with the Convertible Debenture. Under the
      Warrant the exercise price is $1.00 per share, so we received $10,000 as a
      result of this exercise. The
      issuance was exempt from registration pursuant to Section 4(2) of the Securities
      Act of 1933, and the investor was accredited.





On
      June
      18, 2008, we issued an aggregate of 31,428,571 shares of our common stock to
      La
      Jolla Cove Investors, Inc. We issued 31,418,571 of these shares pursuant to
      a
      conversion request submitted to us by La Jolla to convert $1,000 of the
      outstanding amount due under that certain 63⁄4% Convertible Debenture dated June
      8, 2006. We issued the additional 10,000 shares pursuant to a mandatory exercise
      provision under a Warrant issued with the Convertible Debenture. Under the
      Warrant the exercise price is $1.00 per share, so we received $10,000 as a
      result of this exercise. The
      issuance was exempt from registration pursuant to Section 4(2) of the Securities
      Act of 1933, and the investor was accredited.





**ITEM
              3.**
            **Defaults
                Upon Senior Securities****.**





There
      have been no events required to be reported under this Item.





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





There
      have been no events required to be reported under this Item.





**ITEM
              5.**
            **Other
                Information****.**





During
      June 2008, we issued a total of 42,418,185 shares of our common stock to eight
      different consultants and employees. At the time these shares were issued we
      intended that the shares be issued pursuant to our 2007 Stock Option Plan (the
      “2007 Plan”) and registered pursuant to a Registration Statement on Form S-8
      that was in effect at the time. As a result, these shares were issued without
      restrictive legend. However, we later determined that there were not sufficient
      authorized shares under our 2007 Plan to issue these shares. As a result, we
      issued these shares under separate agreements with each individual and
      registered these shares in our Registration Statement on Form S-8 filed with
      the
      Commission on August 1, 2008.




55





**ITEM**
            **6.****Exhibits****.**





(a)
            Exhibits


2.1
            Agreement
                and Plan of Merger between the Company and Allmon Corporation, dated
                May
                11, 2000 (incorporated by reference to Exhibit 2.1 of the Form 8-K12g-3
                filed on May 16, 2000).2.2
            Stock
                Purchase Agreement between the Company, Isotec, Incorporated, and
                selling
                shareholders, dated February 22, 2000 (incorporated by reference
                to
                Exhibit 2.2 of the Form 10-QSB filed on May 21, 2001).2.3
            Share
                Exchange Agreement between the Company and World Am Security Venture
                Company, Ltd., dated May 18, 2004 (incorporated by reference to Exhibit
                2
                of the Form 8-K filed on May 26, 2004).3.1
            Articles
                of Incorporation, dated July 5, 2002 (incorporated by reference to
                Exhibit
                3.1 of the Form 10-QSB/A filed on February 5, 2004).3.2
            Certificate
                of Amendment to Articles of Incorporation, dated August 20, 2002
                (incorporated by reference to Exhibit 3.2 of the Form 10-QSB/A filed
                on
                February 5, 2004).3.3
            Certificate
                of Amendment to Articles of Incorporation, dated December 20, 2002
                (incorporated by reference to Exhibit 3.3 of the Form 10-QSB/A filed
                on
                February 5, 2004).3.4
            Certificate
                of Amendment to Articles of Incorporation, dated August 2, 2004
                (incorporated by reference to Exhibit 3.4 of the Form 10-QSB filed
                on
                August 20, 2004).3.5
            Certificate
                of Amendment of Articles of Incorporation, dated November 8, 2004
                (incorporated by reference to Exhibit 3.1 of the Form 8-K filed on
                November 16, 2004).3.6
            Certificate
                of Amendment of Articles of Incorporation, dated December 1, 2004
                (incorporated by reference to Exhibit 3.2 of the Form 8-K filed on
                November 16, 2004).3.7
            Bylaws,
                dated August, 2000 (incorporated by reference to Exhibit 3.2 of the
                Form
                8-K12g-3 filed on May 16, 2000).4.1
            Employee
                Stock Incentive Plan, dated January 22, 2001 (incorporated by reference
                to
                Exhibit 4.1 of the Form S-8 filed on January 29, 2001).4.2
            Non-Employee
                Directors and Consultants Retainer Stock Plan, dated January 5, 2001
                (incorporated by reference to Exhibit 4.2 of the Form S-8 filed on
                January
                29, 2001).




56




4.3
            Common
                Stock Purchase Agreement between us and Four Way Associates, Inc.,
                dated
                June 1, 2001 (incorporated by reference to Exhibit 4.3 of the Form
                SB-2
                filed on August 28, 2001).4.4
            Amended
                and Restated Employee Stock Incentive Plan, dated November 20, 2001
                (incorporated by reference to Exhibit 4.1 of the Form S-8 POS filed
                on
                January 31, 2002).4.5
            Amended
                and Restated Non-Employee Directors and Consultants Retainer Stock
                Plan,
                dated November 20, 2001 (incorporated by reference to Exhibit 4.2
                of the
                Form S-8 POS filed on January 31, 2002).4.6
            2002
                Non-Employee Directors and Consultants Retainer Stock Plan, dated
                September 12, 2002 (incorporated by reference to Exhibit 4 of the
                Form S-8
                filed on September 18, 2002).4.7
            2002
                Stock Compensation Plan, dated December 16, 2002 (incorporated by
                reference to Exhibit 4 of the Form S-8 filed on December 23,
                2002).4.8
            2003
                Consultants Stock Compensation Plan dated August 19, 2003 (incorporated
                by
                reference to Exhibit 4 of the Form S-8 filed on August 22,
                2003).4.9
            2003
                Non-Qualified Stock Option Plan, dated September 29, 2003 (incorporated
                by
                reference to Exhibit 4 of the Form S-8 filed on October 1,
                2003).4.10
            Amended
                and Restated Non-Employee Directors and Consultants Retainer Stock
                Plan
                (Amendment No. 2), dated February 10, 2004 (incorporated by reference
                to
                Exhibit 4 of the Form S-8 POS filed on February 13,
                2004).4.11
            Amended
                and Restated Non-Employee Directors and Consultants Retainer Stock
                Plan
                (Amendment No. 3), dated June 1, 2004 (incorporated by reference
                to
                Exhibit 4 of the Form S-8 POS filed on June 10, 2004).4.12
            Amended
                and Restated Employee Stock Incentive Plan (Amendment No. 2), dated
                July
                15, 2004 (incorporated by reference to Exhibit 4 of the Form S-8
                POS filed
                on August 6, 2004).4.13
            Amended
                and Restated Non-Employee Directors and Consultants Retainer Stock
                Plan
                (Amendment No. 4), dated October 12, 2004 (incorporated by reference
                to
                Exhibit 4 of the Form S-8 POS filed on October 19,
                2004).4.14
            Amended
                and Restated Non-Employee Directors and Consultants Retainer Stock
                Plan
                (Amendment No. 5), dated December 1, 2004 (incorporated by reference
                to
                Exhibit 4 of the Form S-8 POS filed on December 13,
                2004).4.15
            Amended
                and Restated Employee Stock Incentive Plan (Amendment No. 3), dated
                October 17, 2005 (incorporated by reference to Exhibit 4 of the Form
                S-8
                POS filed on December 6, 2005).




57




4.16
            Amended
                and Restated Non-Employee Directors and Consultants Retainer Stock
                Plan
                (Amendment No. 6), dated December 22, 2005 (incorporated by reference
                to
                Exhibit 4 of the Form S-8 POS filed on January 6,
                2006).4.17
            Securities
                Purchase Agreement between the Company and Golden Gate Investors,
                Inc.,
                dated January 23, 2006 (incorporated by reference to Exhibit 4.1
                of the
                Form 8-K filed on February 10, 2006).4.18
            63⁄4%
                Convertible Debenture issued to Golden Gate Investors, Inc., dated
                January
                23, 2006 (incorporated by reference to Exhibit 4.2 of the Form 8-K
                filed
                on February 10, 2006).4.19
            Warrant
                to Purchase Common Stock (due January 6, 2009) issued to Golden Gate
                Investors, Inc., dated January 23, 2006 (incorporated by reference
                to
                Exhibit 4.3 of the Form 8-K filed on February 10,
                2006).4.20
            Warrant
                to Purchase Common Stock (due January 6, 2011) issued to Golden Gate
                Investors, Inc., dated January 23, 2006 (incorporated by reference
                to
                Exhibit 4.4 of the Form 8-K filed on February 10,
                2006).4.21
            Registration
                Rights Agreement between the Company and Golden Gate Investors, Inc.,
                dated January 23, 2006 (incorporated by reference to Exhibit 4.5
                of the
                Form 8-K filed on February 10, 2006).4.22
            Addendum
                to Convertible Debenture and Warrant To Purchase Common Stock, dated
                February 7, 2006 (incorporated by reference to Exhibit 4.6 of the
                Form 8-K
                filed on February 10, 2006).4.23
            Amended
                and Restated Employee Stock Incentive Plan (Amendment No. 4), dated
                February 7, 2006 incorporated by reference to Exhibit 4 of the Form
                S-8
                POS filed on February 14, 2006).4.24
            Cancellation
                Letter between the Company and Golden Gate Investors, Inc., dated
                June 14,
                2006 (incorporated by reference to Exhibit 4.7 of the Form 8-K/A
                filed on
                June 27, 2006).4.25
            Securities
                Purchase Agreement between the Company and La Jolla Cove Investors,
                Inc.,
                dated June 19, 2006 (incorporated by reference to Exhibit 4.8 of
                the Form
                8-K/A filed on June 27, 2006).4.26
            63⁄4%
                Convertible Debenture issued to La Jolla Cove Investors, Inc., dated
                June
                19, 2006 (incorporated by reference to Exhibit 4.9 of the Form 8-K/A
                filed
                on June 27, 2006).4.27
            Warrant
                to Purchase Common Stock (due June 19, 2009) issued to La Jolla Cove
                Investors, Inc., dated June 19, 2006 (incorporated by reference to
                Exhibit
                4.10 of the Form 8-K/A filed on June 27, 2006).4.28
            Warrant
                to Purchase Common Stock (due June 19, 2011) issued to La Jolla Cove
                Investors, Inc., dated June 19, 2006 (incorporated by reference to
                Exhibit
                4.11 of the Form 8-K/A filed on June 27,
                2006).




58




4.29
            Registration
                Rights Agreement between the Company and La Jolla Cove Investors,
                Inc.,
                dated June 19, 2006 (incorporated by reference to Exhibit 4.12 of
                the Form
                8-K/A filed on June 27, 2006).4.30
            Additional
                Transaction Letter between the Company and La Jolla Cove Investors,
                Inc.,
                dated June 22, 2006 (incorporated by reference to Exhibit 4.13 of
                the Form
                8-K/A filed on June 27, 2006).4.31
            2007
                World Am, Inc. Stock Option Plan, dated January 2, 2007 (incorporated
                by
                reference to Exhibit 4.31 of the Form 10-KSB filed on April 15,
                2008).4.32
            Certificate
                of Designation ofSeries
                B Convertible Preferred Stock of World Am, Inc., filed on August
                16, 2005
                (incorporated by referenceto
                Exhibit 10.1 of the Form 8-K/A filed on September 7,
                2005).4.33
            World
                Am, Inc. 2008 Non-Qualified Company Stock Grant and Option Plan (the
                “Plan”) (incorporated by reference to Exhibit 4.33 of the Registration
                Statement on Form S-8 filed on August 1, 2008)4.34
            Form
                of Non Statutory Stock Option Agreement relating to options granted
                under
                the Plan(incorporated
                by reference to Exhibit 4.34 of the Registration Statement on Form
                S-8
                filed on August 1, 2008)4.35
            Form
                of Common Stock Purchase Agreement relating to stock granted under
                the
                Plan(incorporated
                by reference to Exhibit 4.35 of the Registration Statement on Form
                S-8
                filed on August 1, 2008)10.1
            Employment
                Agreement between the Company and James Alexander, dated February
                20, 2002
                (incorporated by reference to Exhibit 10.4 of the Form 10-QSB filed
                on May
                14, 2002).10.2
            Amendment
                A to Employment Agreement between the Company and James Alexander,
                dated
                as of February 20, 2002 (incorporated by reference to Exhibit 10.1
                of the
                Form 10-KSB filed on April 11, 2003).10.3
            Amendment
                B to Employment Agreement between the Company and James Alexander,
                dated
                January 15, 2004 (incorporated by reference to Exhibit 10.3 of the
                Form
                10-KSB filed on April 20, 2004).




59




10.4
            Share
                Exchange Agreement between the Company, on the one hand, and Senz-It,
                Inc.
                and the stockholder of Senz-It, on the other hand, dated June 10,
                2005
                (including the following: Exhibit A: Shares to be Issued; Exhibit
                B:
                Warrant; Exhibit C Series B Preferred Stock Certificate of Designation;
                and Exhibit I:Funding
                Schedule) (not including the following: Exhibit D: World Am, Inc.
                Officer’s Certificate; Exhibit E: Senz It, Inc. Officer’s Certificate;
                Exhibit F: Senz It Financial Statements; Exhibit G: Senz It Contracts;
                Exhibit H: World Am Contracts; Exhibit J: Form 8-K; Exhibit K: Press
                Release; Schedule 5.7: Taxes; and Schedule 5.9: Legal Proceedings)
                (incorporated by reference to Exhibit 10.1 of the Form 8-K/A filed
                on
                September 7, 2005).10.5
            Promissory
                Note issued by the Company in favor of Torrey Peaks Ventures, dated
                June
                13, 2005(incorporated
                by reference to Exhibit 10.1 of the Form 8-K filed on March 21,
                2006).10.6
            Amendment
                “A” to Promissory Note, dated July 14, 2005 (incorporated by reference
                to
                Exhibit 10.2 of the Form 8-K filed on March 21, 2006).10.7
            First
                Amendment to Share Exchange Agreement between the Company,
                on the one hand, and Senz-It, Inc. and the stockholder of Senz-It,
                on the
                other hand, dated August 31, 2005 (incorporated by reference to Exhibit
                10.2 of the Form 8-K/A filed on September 7, 2005).10.9
            Venture
                Acceleration Agreement between Senz-It, Inc. and Select University
                Technologies, Inc., dated June 20, 2005 (incorporated by reference
                to
                Exhibit 10.4 of the Form 8-K/A filed on November 28,
                2005).10.10
            Demand
                Promissory Note issued by the Company in favor of SUTI Holdings,
                LP, dated
                May 18, 2006 (incorporated by reference to Exhibit 10.10 of the Form
                10-KSB filed on April 2, 2007).10.11
            $75,000
                Factoring Agreement between the Company and JJ Ellis, LLC, dated
                April 25,
                2005, and attached warrant (incorporated by reference to Exhibit
                10.11 of
                the Form 10-KSB filed on April 2, 2007).10.12
            Addendum
                to Factoring Agreement, dated August 8, 2005 (incorporated by reference
                to
                Exhibit 10.12 of the Form 10-KSB filed on April 2,
                2007).10.13
            Consulting
                Agreement between the Company and Robert Hovee, dated February 21,
                2007
                (incorporated by reference to Exhibit 10.13 of the Form 10-KSB filed
                on
                April 2, 2007).10.14
            Consulting
                Agreement between the Company and Robert Hovee, dated February 19,
                2008
                (incorporated by reference to Exhibit 10.14 of the Form 10-KSB filed
                on
                April 15, 2008).10.15*
            Cost
                Reimbursement Subcontract dated November 1, 2007 (incorporated by
                reference to Exhibit 10.1 of the Form 8-K filed on December 12,
                2007).




60




10.16
            Settlement
                Agreement with James H. Alexander dated June 9, 2008 (incorporated
                by
                reference to Exhibit 10.1 of the Form 8-K filed on June 11,
                2008).10.17
            Form
                of Promissory Note for Settlement Agreement with James H. Alexander
                dated
                June 9, 2008 (incorporated by reference to Exhibit 10.2 of the Form
                8-K
                filed on June 11, 2008).14
            Code
                of Business Conduct and Ethics, adopted by the Company’s board of
                directors (incorporated by reference to Exhibit 14 of the Form 10-KSB
                filed on April 20, 2004).16.1
            Letter
                on Change in Certifying Accountant (incorporated by reference to
                Exhibit
                16 of the Form 8-K/A filed on August 3, 2006).21
            Subsidiaries
                of the Company (incorporated by reference to Exhibit 21 of the Form
                10-KSB/A filed on June 30, 2006).31.1
            Rule
                13a-14(a)/15d-14(a) Certification of Robert A. Hovee (filed
                herewith).31.2
            Rule
                13a-14(a)/15d-14(a) Certification of C. Robert Kline (filed
                herewith).32.1
            Section
                1350 Certification of Robert A. Hovee (filed herewith).32.2
            Section
                1350 Certification of C. Robert Kline (filed herewith).99.1
            Confirmation
                of Provisional Patent Application, dated September 2, 2004 (incorporated
                by reference to Exhibit 99.3 of the Form 10-KSB filed on April 21,
                2005).99.2
            Confirmation
                of Provisional Patent Application, dated September 2, 2004 (incorporated
                by reference to Exhibit 99.4 of the Form 10-KSB filed on April 21,
                2005).





*
            Portions
                of the exhibit have been omitted pursuant to a request for confidential
                treatment filed with the
                Commission.




61




**SIGNATURES**





In
      accordance with the requirements of the Exchange Act, the registrant caused
      this
      amended report to be signed on its behalf by the undersigned, thereunto duly
      authorized.




World
              Am, Inc.Dated:August
                14, 2008
            /s/
              Robert A. HoveeBy:
            Robert
                A. HoveeIts:
            Chief
                Executive Officer,
              and
                Director




62