**UNITED
        STATES**
 **SECURITIES
        AND EXCHANGE COMMISSION**
 **Washington,
        D.C. 20549**
 
 **FORM
        10-KSB**
 
 **Annual
        Report Pursuant to Section 13 or 15 (d)**
 **of
        the Securities Exchange Act of 1934**
 
 **For
        the fiscal year ended December 31, 2006**
 **Commission
        file number 0-52266**
 
 **BROWNSHIRE
        HOLDINGS, INC.**
 
 (Name
        of
        Small Business Issuer in its charter)
 
 
 Nevada
              
              20-4617652(State
                  or other jurisdiction of incorporation or organization)
              
              (I.R.S.
                  Employer Identification No.)
 
 660
                  LaSalle Place, Suite 200, Highland Park, Illinois
              
              60035(Address
                  of principal executive offices)
              
              (Zip
                  Code)
 
 Issuer’s
        telephone number: (847) 780-1006
 
 Securities
        registered under to Section 12(b) of the Exchange
        Act:   None
 
  Securities
                    registered under Section 12(g) of the Exchange
                    Act:
                
                Common
                    Stock, $0.001 par value(Title
                    of class)
  
 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 o   No
        x
 
 Check
        if there is no disclosure of
        delinquent filers in response to Item 405 of Regulation S-B contained in
        this
        form, and no disclosure will be contained, to the best of registrant’s
        knowledge, in definitive proxy or information statements incorporated by
        reference in Part III of this Form 10-KSB or any amendment to this Form
        10-KSB.  o
 
 Indicate
        by check mark whether the
        registrant is a shell company (as defined in Rule 12b-2 of the Exchange
        Act).  Yes x   No
        o
 
 The
        registrant had no revenue for the
        fiscal year ended December 31, 2006.
 
 The
        registrant is unable to determine
        aggregate market value of the voting and non-voting common equity held by
        non-affiliates of the registrant as of December 31, 2006 due to the lack
        of any
        current market for or significant trading of its common equity.
 
 As
        of December 31, 2006,
        there were 10,002,400 shares of registrant’s common stock, $0.001 par value,
        outstanding.
 
 Documents
        incorporated by
        reference:  None
 
 Transitional
        Small Business Disclosure
        Format (Check one):  Yes o   No
        x
  
 
  **BROWNSHIRE
        HOLDINGS, INC.**
 **FORM
        10-KSB**
 **TABLE
        OF CONTENTS**
 
 **Page**PART
                  IITEM
                  1.
              DESCRIPTION
                  OF BUSINESS
              1ITEM
                  2.
              DESCRIPTION
                  OF PROPERTY
              4ITEM
                  3.
              LEGAL
                  PROCEEDINGS
              4ITEM
                  4.
              SUBMISSION
                  OF MATTERS TO A VOTE OF SECURITY
                  HOLDERS
              4PART
                  IIITEM
                  5.
              MARKET
                  FOR COMMON EQUITY AND RELATED STOCKHOLDER
                  MATTERS
              4ITEM
                  7.
              FINANCIAL
                  STATEMENTS
              10ITEM
                  8.
              CHANGES
                  IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
                  FINANCIAL DISCLOSURES
              10ITEM
                  8A.
              CONTROLS
                  AND PROCEDURES
              10ITEM
                  8B.
              OTHER
                  INFORMATION
              10PART
                  IIIITEM
                  9.
              DIRECTORS,
                  EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS AND
                  CORPORATE GOVERNANCE; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE
                  ACT
              11ITEM
                  10.
              EXECUTIVE
                  COMPENSATION
              12ITEM
                  11.
              SECURITY
                  OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
                  AND RELATED STOCKHOLDER MATTERS
              12ITEM
                  12.
              CERTAIN
                  RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
                  INDEPENDENCE
              13ITEM
                  13.
              EXHIBITS
              14ITEM
                  14.
              PRINCIPAL
                  ACCOUNTANT FEES AND SERVICES
              14SIGNATURES
              15INDEX
                  TO FINANCIAL STATEMENTS
              F-1
 
 _____________________
  ***Forward-Looking
        Statements***
  This
        Annual Report on Form 10-KSB includes statements that constitute
“forward-looking statements” under the federal securities laws.  These
        forward-looking statements often are characterized by the terms “may,”
“believes,” “projects,” “expects,” or “anticipates,” and do not reflect
        historical facts.  Specific forward-looking statements contained in
        this Annual Report include, but are not limited to, (a) our ability to acquire
        or to be acquired by an operating company, and (b) our ability to sell or
        otherwise derive any revenue from certain software assets that we
        own.
  Forward-looking
        statements involve risks, uncertainties, and other factors that may cause
        our
        actual results, performance or achievements to be materially different from
        those expressed or implied by such forward-looking
        statements.  Factors and risks that could affect our results and
        achievements and cause them to materially differ from those contained in
        the
        forward-looking statements include those identified throughout this Annual
        Report, including those factors identified in Part II, Item 6, “Management’s
        Discussion and Analysis or Plan of Operation – Certain Risk Factors Affecting
        Our Business,” below, as well as other factors that we currently are unable to
        identify or quantify, but that may exist in the future.  In addition,
        the various risk factors may affect generally our business, results of
        operations, and financial position.  Forward-looking statements speak
        only as of the date the statement was made.  We do not undertake and
        specifically decline any obligation to update any forward-looking statements
        included in this Annual Report on Form 10-KSB.
  i
 *Table
            of Contents*
  **PART
        I**
  **Item
                  1.**
              **Description
                  of
                  Business.**
  **General**
  Brownshire
        Holdings, Inc. was incorporated on October 16, 2002, in the State of
        Nevada.  Our company is the successor to Gateway Data Sciences
        Corporation (“GDSC”) pursuant to a reorganization under Chapter 11 of the United
        States Bankruptcy Code (“Chapter 11”) that was approved by the United States
        Bankruptcy Court in December 2002.
  Our
        company has assets of nominal value and no revenue.  We are a “shell
        company” as defined pursuant to Rule 12b-2 under the Securities Exchange Act of
        1934 (the “Exchange Act”).  We intend to seek to acquire the assets or
        voting securities of one or more other companies that are actively engaged
        in a
        business that generates revenues in exchange for securities of our company,
        or
        to be acquired by such a company.  As of the date of this Annual
        Report, we have not identified a particular acquisition target or entered
        into
        any negotiations regarding any such acquisition.
  Our
        company currently intends to remain a shell company until a merger or
        acquisition is consummated.  We currently anticipate that our
        company’s cash requirements will be minimal until we complete such a merger or
        acquisition and that our directors, officers, controlling stockholder, or
        their
        affiliates will provide the financing that may be required for our limited
        operations prior to completing such a transaction.  We currently have
        no employees.  Our directors and officers have agreed to allocate a
        portion of their time to the activities of our company, without cash
        compensation.  Our directors and officers anticipate that we can
        implement our business plan by devoting a portion of their available time
        to our
        business affairs.
  **Background**
  *Formation
        and Early History of GDSC*
  GDSC
        was
        founded as an Arizona corporation in 1985, and GDSC initially conducted business
        as a systems integrator in the IBM midrange computer market.  GDSC’s
        initial business strategy was to combine IBM midrange computer systems
        (initially System/36 and System/38, and later the AS/400) with off-the-shelf
        software products and consulting services to deliver a complete “turnkey”
solution to customers’ business automation problems.  GDSC’s
        consulting services included custom software modifications, software
        implementation services, and training.
  In
        1991,
        GDSC began developing its own software products.  Due to its heritage
        in supporting IBM platforms, GDSC focused on the IBM AS/400 and the IBM 46XX
        family of retail store systems products.  Over the next few years,
        GDSC gradually narrowed its software focus, reduced the number of third-party
        software products that it resold and the breadth of its customer industry
        coverage, and increased its portfolio of, and focus on, its own software
        products.  During the early and mid-1990s, GDSC engaged in custom
        software development projects and expanded its line of systems products to
        include specialized peripherals required for its projects in retail store
        operations and warehouse automation.  GDSC also continued to provide
        complete turnkey systems to its customers when requested.
  GDSC’s
        revenues fluctuated as its mix of products and services shifted.  In
        the early 1990s, GSDC was selected by IBM as one of only three development
        partners for IBM’s advanced, next-generation object-oriented retail
        point-of-sale system, known as StorePlace.  GDSC’s customers at that
        time included TJ Maxx, The Disney Store, Authentic Fitness (Speedo), Ingram
        Micro-D, Allergan International, Illinois Consolidated Telephone Company,
        Brookstone, ZCMI, and Allen Edmonds Shoe Corporation.
  1
 *Table
            of Contents*
  *GDSC’s
        Business After 1996*
  GDSC
        completed its initial public offering on the Nasdaq National Market System
        in
        March 1996, raising approximately $7.0 million at a share price of
        $6.75.  Shortly before its public offering, GDSC’s management decided
        to transition away from reselling equipment and to adopt a more traditional
        software company business model.  Under this model, GDSC expected that
        revenue from equipment sales would decrease while revenue from software license
        fees and consulting services would increase, which would result in an
        anticipated decrease in total revenue but an overall increase in gross margins,
        operating margins, and net margins.  GDSC’s management expected that
        as it completed this transition, the equity markets would reward GDSC with
        a
        price-to-earnings multiple more in line with those typical of growing software
        companies.  In conjunction with GDSC’s shift to a more traditional
        software company model, GDSC’s management expected that its reseller agreement
        with IBM would not be renewed at its expiration in July 1997.  This
        strategy change was disclosed in GDSC’s filings with the Securities and Exchange
        Commission.
  In
        January 1997, GDSC introduced its next-generation point of sale system, the
        TransactTM Point-of-Sale System (“Transact”), based on the Java programming
        language and environment.  Other software developed by GDSC in 1996
        and 1997 included a retail customer relationship management product called
        MarketBuilderTM Relationship and Database Marketing System (“MarketBuilder”),
        which was announced in January 1997 as a C++ product for Unix and Windows
        NT,
        and then re-announced as a Java and web-based system in May 1997.  By
        the end of 1997, GDSC also had developed MPowerTM software, a retailing
        management system designed to work with AS/400 products
        (“MPower”).  Transact, MarketBuilder, the Gift RegistryTM System (“Gift
        Registry”), and MPower are collectively referred to in this Registration
        Statement as the “GDSC Software.”  During 1997, GDSC ceased marketing
        all but one of its AS/400-based software products, the KineticsTM warehouse
        management system (“Kinetics”), and sharply reduced development resources
        committed to vendor-specific technologies.
  GDSC’s
        financial position worsened throughout 1997.  In April 1997, GDSC’s
        principal lender declared GDSC in default of the collateral requirements
        of its
        $3.0 million revolving credit facility.  The credit facility was
        secured by a blanket lien in substantially all of GDSC’s
        assets.  GDSC’s financial situation deteriorated sharply when the
        company became involved in litigation with a significant customer in June
        1997.  The customer refused to make payments totaling $3.8 million,
        which GDSC claimed had become due under its contract with the
        customer.  As anticipated, GDSC’s reseller agreement with IBM
        terminated in July 1997, which adversely affected GDSC’s revenue stream and
        working capital position.  In August 1997, GDSC laid off nearly 25% of
        its employees, canceled plans to occupy a new headquarters facility, negotiated
        deferred payment terms with major trade creditors, and began seeking new
        equity
        financing.
  In
        January 1998, GDSC sold its Kinetics software for $500,000 and used the net
        proceeds to pay its secured lender.  Unable to continue to operate or
        to raise capital, GDSC’s Board of Directors authorized it to file a
        Chapter 11 bankruptcy petition on February 23, 1998.
  *Bankruptcy
        Proceedings*
  On
        February 23, 1998, GDSC filed a voluntary petition under Chapter 11 in the
        United States Bankruptcy Court for the District of Arizona (Case No.
        B-98-02021-PHX-JMM).  On June 19, 1998, the Bankruptcy Court entered
        an order that directed the immediate appointment of an independent Chapter
        11
        Trustee with full powers (the “Trustee”).  Between June 1998 and March
        2002, the Trustee (a) liquidated certain of GDSC’s assets and used the proceeds
        to satisfy certain claims against GDSC; (b) managed various litigation matters
        involving GDSC and its affiliates; and (c) participated with various creditors
        of GDSC and other interested parties to draft, negotiate, and finalize a
        plan of
        reorganization.  The Trustee submitted a plan of reorganization to the
        Court on March 22, 2002 (the “Plan”), which was approved and mailed to GDSC’s
        creditors and stockholders on June 26, 2002.  The Trustee filed a
        motion to modify the Plan on November 6, 2002.  The Bankruptcy Court
        confirmed the modified Plan by order dated December 5, 2002.  The
        substantive provisions of the Plan were as follows:
  ·
              Certain
                  outstanding litigation involving GDSC’s former directors and officers, the
                  insurance company that issued GDSC’s director and officer insurance
                  policy, and third parties was settled pursuant to a “Global Settlement
                  Agreement.”
  2
 *Table
            of Contents*
  ·
              A
                  pool of assets was created as the sole source of all cash payments
                  and
                  distributions to be made to holders of certain allowed
                  claims.  This “creditors’ pool” was funded
                  with
  o
              cash
                  paid by a new stockholder group known as GDSC Acquisitions,
                  LLC;
  o
              a
                  cash payment by GDSC’s former Chief Executive Officer and
                  President;
  o
              a
                  cash payment by the insurance company pursuant to the Global Settlement
                  Agreement described above;
  o
              the
                  stock of GDSC’s wholly owned subsidiaries and a minority interest in
                  another company;
  o
              cash
                  in possession or control of the Trustee;
                  and
  o
              certain
                  other assets.
  The
        creditors’ pool of assets was or will be used to satisfy any claims against GDSC
        that were not transferred to our company, as described below.
  ·
              As
                  of the effective date of the Plan, (i) GDSC was reconstituted as
                  our
                  company; (ii) all of the assets of GDSC (including the GDSC Software),
                  other than the creditors’ pool, vested in our company; (iii) all equity
                  interests in GDSC were cancelled and our company issued 500,120
                  shares of
                  its common stock to the former stockholders of GDSC; and (iv) our
                  company
                  issued 9,502,280 shares of common stock to GDSC Acquisitions,
                  LLC.  As a result, immediately following the
                  reorganization:
  o
              our
                  company’s assets consisted primarily of (1) a litigation claim receivable
                  associated with GDSC’s ongoing litigation with a former customer, and (2)
                  the GDSC Software; and
  o
              our
                  company’s liabilities consisted primarily of accounts payable related to
                  the litigation claim receivable.
  *Settlement
        of Litigation*
  On
        February 23, 2005, we settled all of
        our outstanding litigation claims and counterclaims with the former customer
        of
        GDSC.  Under the terms of the settlement, the customer paid our
        company $2,750,000.  We used the proceeds of this settlement to pay a
        total of approximately $1,705,000 in legal fees and other expenses incurred
        in
        connection with the settlement and other related litigation.
  **Software
        Assets and Proprietary Rights**
  After
        the
        Bankruptcy Court approved the Plan in December 2002, we attempted to resume
        development of our software products, especially Transact and MarketBuilder,
        and
        to reintroduce these products to the market.   Our efforts in
        this area included attempts to partner with other companies in the retail
        software industry.  Due to our limited financial resources and the
        amount of time and effort consumed by the post-confirmation litigation with
        the
        former customer of GDSC, however, we were not successful in these
        efforts.  After the settlement of the litigation, we determined that
        our company would be better served by acquiring an operating company and
        we
        ceased our efforts to reintroduce our software products. We currently are
        not
        making any effort to develop, commercialize, sell, or license these assets.
        We
        may from time to time in the future explore opportunities to sell or develop,
        commercialize, and license the software assets if we identify such opportunities
        or if third parties approach us with such opportunities. We can provide no
        assurance, however, that we will ever derive meaningful revenue from these
        assets in the future.
  We
        consider our software to be proprietary and we have attempted to protect
        it with
        a combination of copyright, trademark, and trade secret laws, nondisclosure
        and
        other contractual agreements with former employees and third parties, and
        technical measures designed to protect our proprietary
        technology.  Despite these precautions, however, there can be no
        assurance that the steps we have taken in the past or that we may take in
        the
        future will be adequate to prevent misappropriation of our proprietary rights
        or
        that third parties will not independently develop equivalent or superior
        technology.
  3
 *Table
            of Contents*
  **Employees**
  We
        currently have no
        employees.  Our executive officers serve on a part-time, as needed
        basis without cash compensation.  We currently do not anticipate that
        we will have any employees until we acquire, or are acquired by, an operating
        company.
  **Item
                  2.**
              **Description
                  of
                  Property.**
  Our
        offices currently are housed within the offices of Norman S. Lynn, our Vice
        President, Secretary, Treasurer, and a director of our company.  See
        Part III, Item 12, “Certain Relationships and Related Transactions, and Director
        Independence.”
  **Item
                  3.**
              **Legal
                  Proceedings.**
  Not
        applicable.
  **Item
                  4.**
              **Submission
                  of Matters to a Vote of Security
                  Holders.**
 
 Effective
        October 10, 2006, GSDC Acquisitions, LLC, which owns 95% of our outstanding
        common stock, executed a written consent to re-elect Steven A. Rothstein
        and
        Norman S. Lynn as directors of our company.  Pursuant to the written
        consent, Messrs. Rothstein and Lynn will serve as directors until their
        successors are duly elected and qualified or until their earlier resignation
        or
        removal.  Under Nevada law, this action by written consent of the
        majority stockholder of our company was sufficient to re-elect Messrs. Rothstein
        and Lynn as directors.
  **PART
        II**
  **Item
                  5.**
              **Market
                  for Common Equity and Related Stockholder
                  Matters.**
  Our
        company’s common stock has never been listed or traded on any securities
        exchange or trading market.  GDSC was delisted from the Nasdaq
        National Market System in October 1997.  Information regarding trading
        in GDSC’s common stock has been limited for the two years ended December
        31, 2006 due to the delisting from Nasdaq and discontinuance of reporting
        on GDSC’s common stock on the over-the-counter market.
  **Record
        Holders**
  As
        of
        December 31, 2006, there were 10,002,400 shares of common stock outstanding
        and
        approximately 145 holders of record of our common stock.
  **Dividends**
  On
        February 23, 2005, we settled certain litigation with a former customer of
        GDSC
        for $2,750,000.  Our company received $1,045,000 of the settlement
        proceeds after paying expenses associated with the
        litigation.  Effective February 28, 2005, our Board of Directors
        declared a dividend of $0.10 per share to all holders of our common stock
        on
        March 1, 2005.  This represented an aggregate dividend of
        approximately $1.0 million, to be paid from the proceeds of the litigation
        settlement.  In May 2005, we distributed $950,228 to GDSC
        Acquisitions, LLC, in connection with this dividend.  In July 2006, we
        distributed $50,012 to our remaining stockholders in connection with this
        dividend.
  We
        may
        pay dividends in the future on our common stock if, as, and when declared
        by our
        Board of Directors out of funds legally available therefor.  The
        current policy of our Board of Directors is to retain any available earnings
        for
        use in the recapitalization and expansion of our business.  Therefore,
        the payment of cash dividends on our common stock is unlikely in the foreseeable
        future.  Any future determination to pay cash dividends will be at the
        discretion of the Board of Directors and will depend upon our company’s
        earnings, capital requirements, financial condition, and any other factors
        deemed relevant by the Board of Directors.
  4
 *Table
            of Contents*
  **Recent
        Sales of Unregistered Securities**
  On
        September 28, 2006, our company
        issued warrants to acquire an aggregate of 500,000 shares of common stock
        to our
        directors and officers.  See Item 10, “Executive
        Compensation.”  We issued the warrants pursuant to the exemption from
        registration provided by Rule 701 under the Securities Act of 1933, as
        amended.
  **Equity
        Compensation Plan Information**
  We
        currently do not maintain any equity compensation plans and there are no
        shares
        of common stock currently authorized for issuance under any equity compensation
        plans.  On September 28, 2006, our company issued warrants to acquire
        an aggregate of 500,000 shares of common stock to our directors and
        officers.  See Item 10, “Executive Compensation.”
  **Item
                  6.**
              **Management’s
                  Discussion and Analysis or Plan of
                  Operation.**
  *This
        Management’s Discussion and Analysis or Plan of Operation is presented to assist
        in understanding our financial condition for the fiscal years ended December
        31,
        2006  and 2005.  You should read our audited financial
        statements for the years ended December 31, 2006 and 2005, including the
        related
        notes thereto, beginning on page F-1 of this Annual Report  in
        conjunction with this Management’s Discussion and Analysis or Plan of
        Operation.  In particular, you should read Note 3 to our audited
        financial statements for a description of our significant accounting
        policies.  This discussion contains predictions, estimates, and other
        forward-looking statements that involve a number of risks and uncertainties,
        including those discussed elsewhere in this Annual Report.  These
        risks could cause our actual results to differ materially from those anticipated
        in these forward-looking statements.*
  **Plan
        of Operation**
  As
        a
        shell company, we currently have no operations and nominal
        assets.  Nevertheless, we believe we possess a stockholder base that
        will make us an attractive merger or acquisition candidate to an operating
        privately held company seeking to become publicly held.  We intend to
        locate and combine with an existing privately held company that has profitable
        operations or, in our management’s view, potential for earnings and appreciation
        of value of its equity securities, irrespective of the industry in which
        it is
        engaged.  A combination may be structured as a merger, consolidation,
        exchange of our common stock for stock or assets of the operating company,
        or
        any other form that will result in the combined companies becoming an operating
        publicly held corporation.  We have not identified a particular
        acquisition target as of the date of filing of this Annual Report, and we
        currently are not engaged in any negotiations regarding such an
        acquisition.  We intend to provide our stockholders with complete
        disclosure documentation concerning the structure of a proposed business
        combination prior to consummation of such a transaction.
  We
        intend
        to remain a shell company until a merger or acquisition is consummated, and
        we
        anticipate that our cash requirements will be minimal during that time
        frame.  We do not anticipate that we will have to raise equity capital
        during the next 12 months.  One of the minority members of our
        controlling stockholder provided the financing that we required to successfully
        settle the lawsuit with the former customer of GDSC.  Subsequent to
        the settlement of that litigation, our officers and our controlling stockholder
        have provided financing for our limited operating expenses, which consist
        primarily of legal, accounting, and related expenses to enable us to prepare
        and
        file our reports with the Securities and Exchange Commission, or
“SEC.”  See Item 12, “Certain Relationships and Related Transactions,
        and Director Independence.”  We currently anticipate that our
        directors, officers, controlling stockholder, and/or their affiliates in
        the
        future will provide the financing that may be required for our limited
        operations prior to the time that we complete a merger or acquisition
        transaction.  We also anticipate that such financing will be in the
        form of loans to our company that will have to be repaid or refinanced in
        connection with a merger or acquisition transaction.  Our directors,
        officers, controlling stockholder, and their affiliates, however, are under
        no
        obligation to provide us with any amount of financing or to continue to provide
        financing to our company if they provide financing to us at a given time
        or from
        time to time.  Accordingly, we cannot provide any assurance that we
        will have access to a sufficient amount of capital to enable us to seek and
        locate a merger or acquisition candidate or to successfully negotiate and
        consummate a merger or acquisition transaction.
  5
 *Table
            of Contents*
  Pending
        negotiation and consummation of a business combination, we anticipate that
        we
        will have, aside from carrying on our search for a combination partner, no
        business activities and, accordingly, we will have no source of
        revenue.  Should we incur any significant liabilities prior to a
        combination with a private company, we may not be able to satisfy such
        liabilities as they are incurred.  If our management pursues one or
        more combination opportunities beyond the preliminary negotiations stage
        and
        those negotiations are subsequently terminated, it is possible that such
        efforts
        will exhaust our ability to continue to seek such combination opportunities
        before any successful combination can be consummated.
  In
        our
        pursuit for a business combination partner, our management intends to consider
        only combination candidates that are profitable or, in management’s view, have
        growth potential.  Our management does not intend to pursue any
        combination proposal beyond the preliminary negotiation stage with any
        combination candidate that does not furnish us with audited financial statements
        for its historical operations or that cannot demonstrate to our management’s
        satisfaction that it can furnish audited financial statements in a timely
        manner.  We may engage attorneys and accountants to investigate a
        combination candidate and to consummate a business combination.  We
        may require payment of fees by such merger candidate to fund all or a portion
        of
        such expenses.  We may incur enhanced risks that any combined business
        combination will be unsuccessful to the extent we are unable to obtain the
        advice or reports from experts.
  We
        intend
        to seek to carry out our business plan as discussed herein.  In order
        to do so, we will need to pay ongoing expenses, including particularly legal
        and
        accounting fees incurred in conjunction with future compliance with our ongoing
        reporting obligations under the Exchange Act.  Except as described
        above, we currently do not intend to raise funds, either debt or equity,
        from
        investors while our company is a shell company, and we currently do not intend
        to borrow any funds to make any payments to our management or
        affiliates.
  We
        have
        no employees and do not expect to hire any prior to effecting a business
        combination.  Our officers have agreed to allocate a portion of their
        time to our company’s activities, without cash
        compensation.  Directors and our officers anticipate that our business
        plan can be implemented by their devoting a portion of their available time
        to
        our business affairs.
  We
        are
        not registered and we do not propose to register as an investment company
        under
        the Investment Company Act of 1940.  We intend to conduct our business
        activities so as to avoid application of the registration and other provisions
        of the Investment Company Act of 1940 and the related regulations
        thereunder.
  We
        have
        no operating history (apart from that of our predecessor, GDSC), nominal
        cash,
        no other assets, and our business plan has significant business risks, as
        described elsewhere in this Annual Report.  Because of these factors,
        our independent registered public accounting firm has issued an audit opinion
        on
        our financial statements that includes a statement that, in our auditor’s
        opinion, there is substantial doubt about our ability to continue as a going
        concern.
  **Lack
        of Revenue**
  On
        February 23, 2005, we settled certain litigation with a former customer of
        GDSC
        for $2,750,000.  After paying expenses related to the litigation, our
        company received net proceeds of $1,045,000 from the settlement
        amount.  Effective February 28, 2005, our Board of Directors declared
        a dividend of $0.10 per share to all holders of our common stock on March
        1,
        2005.  This represented an aggregate dividend of approximately $1.0
        million, which we paid from the proceeds of the litigation
        settlement.  In May 2005, we distributed $950,228 to GDSC
        Acquisitions, LLC, in connection with this dividend.  In July 2006, we
        distributed $50,012 to our remaining stockholders in connection with this
        dividend.  Except for the litigation settlement described above, we
        have not generated any revenue from any source through December 31,
        2006.  We do not expect to generate any measurable revenue within the
        foreseeable future and may never be able to do so.
  **Liquidity
        and Capital Resources**
  Pursuant
        to a 4.0% Multiple Advance Credit Note dated February 28, 2005, GDSC
        Acquisitions, LLC has agreed to advance our company up to $100,000 to finance
        our working capital needs.  GDSC Acquisitions currently owns 95% of
        our outstanding common stock.  The promissory note bears interest at
        the rate of 4.0% per annum, payable at maturity.  The note matures on
        the earlier to occur of (a) a “liquidity event” with respect to our company, as
        that term is defined in the note, or (b) February 28, 2008.  In
        addition, Norman Lynn, our Vice President and a director of our company,
        advanced funds to pay certain of our operating expenses during 2005 and 2006.
        Our aggregate outstanding balance of principal and accrued interest under
        the
        promissory note with GDSC Acquisitions and advances by Mr. Lynn was $53,679
        at
        December 31, 2006.
  6
 *Table
            of Contents*
  We
        currently have no operations and we anticipate that we will not generate
        any
        revenue until we consummate a business combination.  We will need
        funds to support our operation and implementation of our plan of operation
        and
        to comply with the periodic reporting requirements of the Exchange
        Act.  We believe GDSC Acquisitions, LLC or our directors, officers,
        and/or their respective affiliates will provide us with sufficient working
        capital for at least the next 12 months to support and preserve the integrity
        of
        our corporate entity, to fund the implementation of our business plan, and
        to
        comply with the periodic reporting requirements of the Exchange
        Act.  Those persons, however, are under no obligation to provide
        financing to our company and we cannot provide assurance that they will do
        so.  If adequate funds are not available to us, we may be unable to
        complete our plan of operation.
  We
        have
        no current plans, proposals, arrangements or understandings with respect
        to the
        sale or issuance of additional securities prior to the identity of a merger
        or
        acquisition candidate and we do not anticipate that we will incur any
        significant debt, other than debt incurred to finance our ongoing expenditures
        for legal, accounting, and administrative expenses, prior to the consummation
        of
        a business combination.
  **Income
        Taxes**
  As
        a
        shell company that has not generated revenues, we have not earned taxable
        income
        to date.  Therefore no taxation has been paid nor is any payable at
        present, and no provision for taxation is necessary.
  **Off-Balance
        Sheet Arrangements**
  At
        December 31, 2006, we did not have any off-balance sheet
        arrangements.
  **Certain
        Risk Factors Affecting Our Business**
  Potential
        investors should carefully consider the risks and uncertainties described
        below
        and the other information in this Annual Report before deciding whether to
        invest in shares of our common stock.  If any of the following risks
        actually occur, our business, financial condition, and results of operations
        could be materially and adversely affected.  This could cause the
        value of our common stock to decline, with the loss of part or all of an
        investment in the common stock.
  ***Our
        independent auditors have substantial doubt about our ability to continue
        as a
        going concern***.  Since emerging from bankruptcy, we have
        not generated any revenue from operations.  Although our historical
        financial statements were prepared assuming that we would continue as a going
        concern, in the view of our independent auditors there is substantial doubt
        about our ability to continue as a going concern.  We cannot predict
        whether or when we will ever sell or otherwise derive a meaningful amount
        of
        revenue from the GDSC Software or from any other source.  Since we do
        not expect to generate any significant revenues for the foreseeable future,
        our
        ability to continue as a going concern will depend, in large part, on our
        ability to acquire or to be acquired by an operating company or otherwise
        to
        raise additional capital through equity or debt financing
        transactions.  We currently do not have any readily available source
        of significant financing other than our directors and officers, our significant
        stockholder, GDSC Acquisitions LLC, and their respective
        affiliates.  Our financial statements do not include any adjustments
        that might result should our company be unable to continue as a going
        concern.
  ***Our
        ability to generate revenue is uncertain***.  Accordingly,
        potential investors should evaluate our company in light of the expenses,
        delays, uncertainties, and complications typically encountered by early-stage
        businesses, many of which will be beyond our control.  These risks
        include (a) a lack of sufficient capital, and (b) unanticipated problems,
        delays, and expenses relating to acquisitions of other businesses or product
        development and implementation.  Our company’s historical financial
        data are of limited value in anticipating future revenue, capital requirements,
        and operating expenses.  Our planned capital requirements and expense
        levels will be based in part on our expectations concerning potential
        acquisitions, capital investments, and future revenue, all of which are
        difficult to forecast accurately due to our company’s current stage of
        development.  We may be unable to adjust spending in a timely manner
        to compensate for any unexpected shortfall in revenue.  Product
        development and marketing expenses may increase significantly as we expand
        operations.  To the extent that these expenses precede or are not
        rapidly followed by a corresponding increase in revenue or additional sources
        of
        financing, our business, operating results, and financial condition may be
        materially and adversely affected.
  7
 *Table
            of Contents*
  ***We
        will face a variety of risks associated with new business operations that
        we may
        acquire or that may acquire our company in the
        future***.  We cannot provide assurance that we will be
        able to
  ·
              identify
                  suitable operating businesses to acquire or that will be able to
                  acquire
                  our company;
  ·
              make
                  acquisitions or be acquired on commercially acceptable
                  terms;
  ·
              effectively
                  integrate and manage the combined operations of the businesses
                  we acquire
                  or that acquire us; or
  ·
              achieve
                  operating and growth strategies with respect to the operating businesses
                  that we acquire or that acquire us.
  The
        integration of the management, personnel, operations, products, services,
        technologies, and facilities of any businesses that we acquire or that acquire
        us in the future could involve unforeseen difficulties.  These
        difficulties could disrupt ongoing businesses, distract management and
        employees, and increase operating expenses, which could have a material adverse
        affect on our company’s business, financial condition, and operating
        results.
  ***If
        we acquire or are acquired by an operating company, the persons who control
        that
        company will likely be able to control our company
        indefinitely***.  Generally, in transactions where a shell
        company such as our company acquires or is acquired by an operating company,
        the
        persons who own and control the operating company receive securities that
        represent a significant majority of our outstanding voting securities following
        the acquisition.  As a result, the owners and management of an
        operating company that we acquire or that acquires our company likely will
        be
        able to control the management and affairs of our company and all matters
        requiring stockholder approval, including the election of directors and approval
        of significant corporate transactions, for an indefinite period of time after
        the closing of such a transaction.  This concentration of ownership
        might adversely affect the market value of our common stock in the future
        and
        the voting and other rights of our company’s other stockholders.
  ***We
        will face significant risks if we decide to develop and commercialize the
        GDSC
        Software in the future***.  These risks include, but are
        not limited to, the following:
  ·
              We
                  would require significant infusions of additional capital to develop
                  and
                  commercialize the GDSC Software.
  ·
              There
                  is no assurance that our products and services would work as expected
                  or
                  would be accepted in the marketplace, or that we would be able
                  to sustain
                  any market acceptance that we do
                  achieve.
  ·
              If
                  we develop and commercialize the GDSC Software, defects and errors
                  could
                  be found in our products or upgrades.  Software defects could
                  result in delays in market acceptance or unexpected reprogramming
                  costs,
                  which could materially and adversely affect our operating
                  results.
  ·
              Even
                  if we successfully develop and commercialize the GDSC Software,
                  we would
                  be required to anticipate and respond to rapid technological
                  changes.  We may not be successful in developing and marketing
                  enhancements or new products and services that respond to competitive
                  and
                  technological developments and changing customer needs.  We
                  could experience a material adverse effect on our operating results
                  and
                  financial condition if the industries in which we compete adopt
                  systems
                  and applications different from those used in our products and
                  services,
                  if we fail to anticipate or respond adequately to technological
                  developments or customer requirements, or if any significant delays
                  in
                  product development or introduction
                  occur.
  8
 *Table
            of Contents*
  ·
              Our
                  software products would likely face stiff
                  competition.
  ·
              We
                  may not be able to adequately protect our intellectual property
                  rights,
                  prevent our competitors from gaining access to our intellectual
                  property
                  and proprietary information, or prevent third parties from infringing
                  or
                  misappropriating our proprietary
                  rights.
  ***There
        is a limited market for our company’s common
        stock***.  There has been no active market for our common
        stock for many years.  We may seek one or more “market makers” who
        will make a market in our company’s common stock on the OTC Bulletin Board and
        we may do other things to enhance the market liquidity for our common
        stock.  We cannot provide assurance, however, that a market for our
        common stock will ever develop.  Consequently, an investor may not be
        able to liquidate an investment in shares of our company’s common stock in the
        event of an emergency or for any other reason.  The purchase of our
        company’s common stock, therefore, should be considered only as a long-term
        investment.
  ***Our
        common stock may be subject to the “penny stock” rules as promulgated under the
        Exchange Act***.  In the event that no exclusion from the
        definition of “penny stock” under the Exchange Act is available, then any broker
        engaging in a transaction in our company’s common stock will be required to
        provide its customers with a risk disclosure document, disclosure of market
        quotations, if any, disclosure of the compensation of the broker-dealer and
        its
        sales person in the transaction, and monthly account statements showing the
        market values of our company’s securities held in the customer’s
        accounts.  The bid and offer quotation and compensation information
        must be provided prior to effecting the transaction and must be contained
        on the
        customer’s confirmation of sale.  Certain brokers are less willing to
        engage in transactions involving “penny stocks” as a result of the additional
        disclosure requirements described above, which may make it more difficult
        for
        holders of our company’s common stock to dispose of their shares.
  ***Failure
        to achieve and maintain effective internal controls in accordance with Section
        404 of the Sarbanes-Oxley Act could have a material adverse effect on our
        business and stock price***.  Pursuant to Section 404 of
        the Sarbanes-Oxley Act of 2002, beginning with our Annual Report on Form
        10-KSB
        for the fiscal year ending December 31, 2007, we will be required to furnish
        a
        report by our management on our internal control over financial
        reporting.  The internal control report must contain (i) a statement
        of management’s responsibility for establishing and maintaining adequate
        internal control over financial reporting, (ii) a statement identifying the
        framework used by management to conduct the required evaluation of the
        effectiveness of our internal control over financial reporting, and (iii)
        management’s assessment of the effectiveness of our internal control over
        financial reporting as of the end of our most recent fiscal year, including
        a
        statement as to whether or not internal control over financial reporting
        is
        effective.
  In
        order
        to achieve compliance with Section 404 of the Sarbanes-Oxley Act within the
        prescribed period, we will need to engage in a process to document and evaluate
        our internal control over financial reporting, which will be both costly
        and
        challenging.  In this regard, management will need to dedicate
        internal resources, engage outside consultants, and adopt a detailed work
        plan
        to (i) assess and document the adequacy of internal control over financial
        reporting, (ii) take steps to improve control processes where appropriate,
        (iii)
        validate through testing that controls are functioning as documented, and
        (iv)
        implement a continuous reporting and improvement process for internal control
        over financial reporting.  We can provide no assurance as to our
        conclusions at December 31, 2007, with respect to the effectiveness of our
        internal control over financial reporting under Section 404 of the
        Sarbanes-Oxley Act.  There is a risk that we will not be able to
        conclude at December 31, 2007, that our internal controls over financial
        reporting are effective as required by Section 404 of the Sarbanes-Oxley
        Act.
  During
        the course of our testing we may identify deficiencies that we may not be
        able
        to remediate in time to meet the deadline imposed by the Sarbanes-Oxley Act
        for
        compliance with the requirements of Section 404.  In addition, if we
        fail to achieve and maintain the adequacy of our internal controls, as such
        standards are modified, supplemented or amended from time to time, we may
        not be
        able to ensure that we can conclude on an ongoing basis that we have effective
        internal controls over financial reporting in accordance with Section 404
        of the
        Sarbanes-Oxley Act.  Moreover, effective internal controls,
        particularly those related to revenue recognition, are necessary for us to
        produce reliable financial reports and are important to help prevent financial
        fraud.  If we cannot provide reliable financial reports or prevent
        fraud, our business and operating results could be harmed, investors could
        lose
        confidence in our reported financial information, and the trading price of
        our
        stock could drop significantly.
  9
 *Table
            of Contents*
  **Item
                  7.**
              **Financial
                  Statements.**
 
 The
        financial statements included in this report under this item are set forth
        beginning on Page F-1 of this report, immediately following the signature
        pages.
  **Item
                  8.**
              **Changes
                  in and Disagreements with Accountants on Accounting and
                  Financial Disclosures.**
  Not
        applicable.
  **Item
                  8A.**
              **Controls
                  and
                  Procedures.**
  Disclosure
        controls are procedures that are designed with an objective of ensuring that
        information required to be disclosed in our company’s periodic reports filed
        with the SEC, such as this report on Form 10-KSB, is recorded, processed,
        summarized, and reported within the time periods specified by the
        SEC.  Disclosure controls also are designed with an objective of
        ensuring that such information is accumulated and communicated to our company’s
        management, including our chief executive officer and chief financial officer,
        in order to allow timely consideration regarding required
        disclosures.  Our company carried out an evaluation, with the
        participation of its chief executive officer and chief financial officer,
        of the
        effectiveness, as of December 31, 2006, of its disclosure controls and
        procedures (as defined in Rules 13a-14(c) and 15d-14(c) of  the
        Exchange Act).  Based upon that evaluation, made at the end of the
        period, our chief executive officer and chief financial officer concluded
        that
        our company’s disclosure controls and procedures are effective in alerting them
        on a timely basis to material information required to be disclosed in our
        periodic reports to the SEC, and that there has been no significant change
        in
        such internal control or other factors that could significantly affect such
        controls, including any corrective actions with regard to significant
        deficiencies or material weaknesses, since the evaluation.
 
 Our
        management is aware that there is a lack of segregation of duties due to
        the
        small number of employees dealing with general administrative and financial
        matters.  Our management, however, has determined that, considering
        the employees involved and the control procedures in place, the risks associated
        with such lack of segregation are insignificant and the potential benefits
        of
        adding employees to clearly segregate duties does not justify the expenses
        associated with such increases. There was no change in our company’s internal
        control over financial reporting  during our most recently completed fiscal
        quarter that has materially affected, or is reasonably likely to materially
        affect, our internal control over financial reporting.
 
 **Item
        8B. Other Information.**
 
 Not
        applicable.
  10
 *Table
            of Contents*
  **PART
        III**
  **Item
                  9.**
              **Directors,
                  Executive Officers, Promoters, Control Persons and
                  Corporate Governance; Compliance with Section 16(a) of the Exchange
                  Act.**
  The
        following table sets forth certain information regarding our directors and
        executive officers:
  **Name**
              
              **Age**
              
              **Position**Steven
                  A. Rothstein
              
              56
              
              President
                  and DirectorNorman
                  S. Lynn
              
              56
              
              Vice
                  President, Corporate Secretary, Treasurer, and
                  Director
 
 *Steven
        A. Rothstein* has served as President and a director of our company since
        October 2002.  Mr. Rothstein has been a self-employed consultant since
        January 2002 and currently serves as an associated person with InterOcean
        Financial in Chicago, Illinois.  Mr. Rothstein served as a
“non-registered person” with Gunn Allen Holdings from April 2006 until August
        2006.  From January 2002 until April 2006, Mr. Rothstein held
        positions as a “registered person” with National Securities Corporation,
        Advanced Equities, and Salomon Grey Financial, as a member of Shampan Lamport
        Financial, LLC, and as a “non-registered person” with Skye
        Holdings.  From 1995 to December 2001, Mr. Rothstein was Chairman of
        the Board of National Securities Corporation and Chairman and President of
        Olympic Cascade Financial Corporation (now known as National Holdings), which
        is
        the parent of National Securities Corporation.  Mr. Rothstein serves
        as a director of Vita Foods Products, Inc., which is listed on the American
        Stock Exchange.  Mr. Rothstein was Chairman of the Board of National
        Securities Corporation, the underwriter of GDSC’s initial public offering
        (“IPO”), at the time of GDSC’s IPO.  Mr. Rothstein served as a
        director of GDSC from March 1996 until June 1998.  Mr. Rothstein is a
        graduate of Berkshire School in Sheffield, Massachusetts, and Brown University
        in Providence, Rhode Island.
  *Norman
        S. Lynn*has served as Vice President, Secretary, Treasurer, and a director
        of our company since October 2002.  Mr. Lynn also currently serves as
        the Chief Operating Officer of N.D. Management Co., Inc., an investment and
        asset management firm in Highland Park, Illinois, a position he has held
        since
        January 1997.  In addition, Mr. Lynn serves as Manager and General
        Counsel of BLN Capital Fundings LLC, and GSL of Ill, LLC, which are commercial
        finance companies.  Mr. Lynn also has other part-time business
        interests.  Mr. Lynn also is an attorney admitted to practice in the
        state of Illinois.
  **Section
        16(a) Beneficial Ownership Reporting Compliance**
 
 Section
        16(a) of the Exchange Act requires our directors, executive officers, and
        persons who own more than 10% of a registered class of our company’s equity
        securities to file reports disclosing ownership and changes in ownership
        with
        the SEC.  Based solely on our review of the copies of such forms that
        we received during the year ended December 31, 2006, we believe that during
        such year our directors, executive officers, and persons who own more than
        10%
        of our common stock complied with such filing requirements, except that each
        of
        Steven A. Rothstein, Norman S. Lynn, and GDSC Acquisitions, LLC filed a late
        report on Form 3 to disclose their respective beneficial ownership of our
        company’s common stock as of the date our common stock became registered under
        the Exchange Act.
 
 **Code
        of Ethics**
 
 Our
        company has not yet adopted a code of ethics that applies to our principal
        executive officer and principal financial and accounting officer due to (a)
        our
        lack of resources, and (b) the limited nature of our business activities
        and
        financial and accounting transactions.  We intend to adopt a code of
        ethics as soon as the size and nature of our company’s business activities
        dictate that it would be prudent to do so.
  **Audit
        Committee Financial Expert**
  Our
        Board
        of Directors currently serves as our audit committee although it is not required
        to as a result of the fact that our common stock is not considered a “listed
        security,” as defined in Rule 10A-3 of the Exchange Act.  We have not
        identified an “audit committee financial expert,” as defined under Item
        407(d)(5)(ii) of Regulation S-B.  Once a qualified independent member
        of our Board of Directors is retained, we intend to appoint that individual
        as
        our audit committee financial expert.
  11
 *Table
            of Contents*
  **Item
                  10.**
              **Executive
                  Compensation.**
  Our
        company did not pay any cash compensation to Mr. Rothstein, our President,
        or
        Mr. Lynn, our other executive officer, during 2005 or 2006.  We
        currently do not have employment contracts or other compensatory arrangements
        with Mr. Rothstein or Mr. Lynn.  On September 28, 2006, our company
        granted warrants to acquire 250,000 shares of common stock at an exercise
        price
        of $0.01 per share to each of Messrs. Rothstein and Lynn as compensation
        for
        their services as directors and officers of our company.  The warrants
        are fully vested and exercisable and expire on September 28,
        2016.   Except for those warrants, as of December 31, 2006, there
        were no outstanding stock options and no long-term incentive plans or pension
        plans were in effect with respect to any of our officers or
        directors.  We also did not pay any cash compensation to Mr.
        Rothstein or Mr. Lynn for their services as directors of our company during
        2005
        or 2006.
  **Item
                  11.**
              **Security
                  Ownership of Certain Beneficial Owners and Management
                  and Related Stockholder
                  Matters.**
 
 The
        following table sets forth certain information regarding the beneficial
        ownership of our common stock as of December 31, 2006, with respect to (a)
        each
        of our directors and executive officers, (b) all of the directors and executive
        officers as a group, and (c) any other person known by us to beneficially
        own
        more than five percent of our common stock:
  **Shares
                  Beneficially Owned****Name**
              
              **Number(1)**
              
              
              **Percentage(1)****Directors
                  and Officers:**Steven
                  A. Rothstein(2)(4)
              
              
              9,752,528
              
              
              
              95.1
              %Norman
                  S. Lynn(3)(4)
              
              
              9,752,280
              
              
              
              95.1
              %All
                  directors and executive officers as a group (2 persons)
              
              
              10,002,528
              
              
              
              95.2
              %**Non-Management
                  5% Beneficial Owners:**GDSC
                  Acquisitions, LLC(4)
              
              
              9,502,280
              
              
              
              95.0
              %
 _____________________________
 *
        Less
        than 1% of the outstanding common stock.
 
 (1)
              The
                  numbers and percentages shown include the shares of common stock
                  actually
                  owned as December 31, 2006, and the shares of common stock that
                  the
                  identified person had the right to acquire within 60 days of such
                  date
                  upon the exercise of warrants.  In calculating the percentage of
                  ownership, all shares of common stock that the identified person
                  had the
                  right to acquire within 60 days of December 31, 2006, upon the
                  exercise of
                  warrants are deemed to be outstanding for the purpose of computing
                  the
                  percentage of the shares of common stock owned by such person,
                  but are not
                  deemed to be outstanding for the purpose of computing the percentage
                  of
                  the shares of common stock owned by any other
                  person.
 (2)
              Represents
                  (i) 248 shares of common stock and warrants to acquire 250,000
                  shares of
                  common stock held by Mr. Rothstein, and (ii) 9,502,280 shares held
                  by GDSC
                  Acquisitions, LLC. Mr. Rothstein is a managing member of GDSC
                  Acquisitions, LLC, and therefore may be deemed to be the beneficial
                  owner
                  of shares held by GDSC Acquisitions, LLC.  Mr. Rothstein
                  disclaims beneficial ownership of shares held by GDSC Acquisitions,
                  LLC,
                  except to the extent of his ownership interest in GDSC Acquisitions,
                  LLC.  See footnote 4.  Mr. Rothstein’s address is 2737
                  Illinois Road, Wilmette, Illinois
                  60091.
 (3)
              Represents
                  (i) warrants to acquire 250,000 shares of common stock held by
                  Mr. Lynn,
                  and (ii) 9,502,280 shares held by GDSC Acquisitions, LLC. Mr. Lynn
                  is a
                  managing member of GDSC Acquisitions, LLC, and therefore may be
                  deemed to
                  be the beneficial owner of shares held by GDSC Acquisitions,
                  LLC.  Mr. Lynn disclaims beneficial ownership of shares held by
                  DGSC Acquisitions, LLC, except to the extent of his ownership interest
                  in
                  GDSC Acquisitions, LLC.  See footnote 4.  Mr. Lynn’s
                  address is 660 LaSalle Place, Suite 200, Highland Park, Illinois
                  60035.
 (4)
              The
                  address of GDSC Acquisitions, LLC is 660 LaSalle Place, Suite 200,
                  Highland Park, Illinois 60035.  Each of Steven A. Rothstein and
                  Norman S. Lynn owns approximately 19% of the equity interests in
                  GDSC
                  Acquisitions, LLC and is a managing member of GDSC Acquisitions,
                  LLC.  See Item 12, “Certain Relationships and Related
                  Transactions, and Director Independence,” below.  Each of
                  Messrs. Rothstein and Lynn disclaims beneficial ownership of shares
                  of
                  common stock held by GDSC Acquisitions, LLC, except to the extent
                  of his
                  respective ownership interest in GDSC Acquisitions,
                  LLC.
  12
 *Table
            of Contents*
  **Item
                  12.**
              **Certain
                  Relationships and Related Transactions, and Director
                  Independence.**
 
 *Certain
        Relationships and Related Transactions*
 
 Each
        of
        Steven A. Rothstein, our President and one of our directors, and Norman S.
        Lynn,
        our other executive officer and a director, owns approximately 19% of the
        equity
        interests of our majority stockholder, GDSC Acquisitions, LLC, which owns
        95% of
        our issued and outstanding common stock.  Pursuant to a 4.0% Multiple
        Advance Credit Note dated February 28, 2005, GDSC Acquisitions has agreed
        to
        advance our company up to $100,000 to finance our working capital
        needs.  The promissory note bears interest at the rate of 4.0% per
        annum, payable at maturity.  The note, as amended, matures on the
        earlier to occur of (a) a “liquidity event” with respect to our company, as that
        term is defined in the note, or (b) February 28, 2008.  In addition,
        Norman Lynn, our Vice President and a director of our company, advanced funds
        to
        pay certain of our operating expenses during 2005 and 2006. Our aggregate
        outstanding balance of principal and accrued interest under the promissory
        note
        with GDSC Acquisitions and advances by Mr. Lynn was $53,679 at December 31,
        2006.
  Prior
        to
        the settlement of the litigation with the former customer of GDSC, Thunder
        Road
        Capital, LLC advanced an aggregate of approximately $303,000 on behalf of
        our
        company for various expenses incurred by our company in connection with the
        litigation.  Pursuant to an arrangement between Thunder Road and our
        company, upon the settlement of the litigation we repaid to Thunder Road
        the
        $303,000 advanced by Thunder Road on behalf of our company and paid to Thunder
        Road an additional $225,862 from the settlement proceeds.  Thunder
        Road is an affiliate of the former Chief Executive Officer of GDSC and is
        a
        minority member of GDSC Acquisitions, LLC.
  *Director
        Independence*
  We
        currently do not have any
        independent members on our board of directors.  We anticipate that,
        after our company acquires or is acquired by an operating company, we will
        seek
        one or more individuals who satisfy established criteria for “independence” from
        our company to serve as members of our board of directors.  We cannot
        provide assurance, however, that we will be able to add members to our board
        of
        directors who meet any standards of “independence” from our
        company.
  13
 *Table
            of Contents*
  **Item
        13. Exhibits.**
  The
        following exhibits are filed as
        part of this Annual Report:
  Exhibit
                  Number
              
              Description3.1
              
              Articles
                  of Incorporation of Brownshire Holdings, Inc.*3.2
              
              By-Laws
                  of Brownshire Holdings, Inc.*4.1
              
              Form
                  of Stock Certificate*4.2
              
              Common
                  Stock Purchase Warrant dated September 28, 2006, issued to Steven
                  A.
                  Rothstein*4.3
              
              Common
                  Stock Purchase Warrant dated September 28, 2006, issued to Norman
                  S.
                  Lynn*10.1
              
              Indemnification
                  Agreement dated December 5, 2002, between Brownshire Holdings,
                  Inc. and
                  Steven A. Rothstein*10.2
              
              Indemnification
                  Agreement dated December 5, 2002, between Brownshire Holdings,
                  Inc. and
                  Norman S. Lynn*10.3
              
              4.0%
                  Multiple Advance Credit Note dated February 28, 2005, issued by
                  Brownshire
                  Holdings, Inc. in favor of GDSC Acquisitions, LLC in the principal
                  amount
                  of $100,000*31.1
              
              Certifications
                  pursuant to SEC Release No. 33-8238, as adopted pursuant to Section
                  302 of
                  the Sarbanes-Oxley Act of 200232.1
              
              Certifications
                  pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
                  906 of
                  the Sarbanes Oxley Act of 200299.1
              
              Trustee’s
                  Plan of Reorganization dated March 22, 2002*99.2
              
              Order
                  Confirming Trustee’s Plan of Reorganization dated March 22,
                  2002*99.3
              
              Order
                  Confirming Trustee’s Modified Plan of Reorganization*99.4
              
              Notice
                  of Entry of Order Confirming Modified Plan of Reorganization and
                  Notice of
                  Effective Date*
 **_____________________**
 *****
              Incorporated
                  by reference to the corresponding exhibit to the registrant’s Form 10-SB
                  filed with the Securities and Exchange Commission on October 17,
                  2006
                  (File No. 000-52266).
 
 **Item
                  14.**
              **Principal
                  Accountant Fees and
                  Services.**
 
 The
        firm
        ofSherb & Co.,
        LLP (“Sherb & Co.”) audited our consolidated financial statements for the
        years ended December 31, 2006 and December 31, 2005.  The following
        table sets forth the amounts we have paid or expect to pay to Sherb & Co. in
        connection with the following services:
 
 **2006**
              
              
              **2005****Audit
                  Fees**
              
              $
              12,500
              
              
              $
              15,000**Audit
                  Related Fees**
              
              
              --
              
              
              
              --**Tax
                  Fees**
              
              
              --
              
              
              
              --**All
                  Other Fees**
              
              
              --
              
              
              
              --
  Audit
        fees include fees for services that normally would be provided by the accountant
        in connection with statutory and regulatory filings or engagements and that
        generally only the independent accountant can provide.  In addition to
        fees for an audit or review in accordance with generally accepted auditing
        standards, this category contains fees for assistance with and review of
        documents filed with the SEC.
 
 Our
        board
        of directors currently performs the duties of an audit committee.  The
        Board of Directors evaluates and approves in advance the scope and cost of
        the
        engagement of an auditor before the auditor renders audit and non-audit
        services.  We currently do not rely on pre-approval policies and
        procedures.
  14
 *Table
            of Contents*
  **SIGNATURES**
 
 In
        accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
        this report to be signed on its behalf by the undersigned, thereunto duly
        authorized.
 
 BROWNSHIRE
                  HOLDINGS, INC.Dated:
                  September 25, 2007
              By:
              /s/
                  *Steven A. Rothstein*Steven
                  A. RothsteinPresident
 
 In
        accordance with the Exchange Act, this report has been signed below by the
        following persons on behalf of the registrant and in the capacities and on
        the
        dates indicated.
 
 Signature
              
              Capacity
              
              Date*/s/
                  Steven A. Rothstein*
              
              President
                  and Director
              
              September
                  25, 2007Steven
                  A. Rothstein
              
              (Principal
                  Executive Officer)*/s/
                  Norman S. Lynn*
              
              Vice
                  President, Corporate Secretary,
              
              September
                  25, 2007Norman
                  S. Lynn
              
              Treasurer,
                  and Director (Principal Financial and Accounting Officer)
  15
 *Table
            of Contents*
  **INDEX
        TO FINANCIAL STATEMENTS**
 **Page**Report
                  of Independent Registered Public Accounting Firm
              F-2Balance
                  Sheet as of December 31, 2006
              F-3Statements
                  of Operations for the years ended December 31, 2006 and
                  2005
              F-4Statements
                  of Stockholders’ Equity (Deficit) for the years ended December 31, 2006
                  and 2005
              F-5Statements
                  of Cash Flows for the years ended December 31, 2006 and
                  2005
              F-6Notes
                  to Financial Statements
              F-7
  F-1
 *Table
            of Contents*
  REPORT
        OF
        INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
  To
        the
        Board of Directors
 Brownshire
        Holdings, Inc.
 Highland
        Park, Illinois
 
 
 We
        have
        audited the accompanying balance sheet of Brownshire Holdings, Inc. as of
        December 31, 2006 and the related statements of operations, changes in
        stockholders’ equity (deficit) and cash flows for the years ended December 31,
        2006 and 2005. These financial statements are the responsibility of the
        Company’s management. Our responsibility is to express an opinion on these
        financial statements based on our audits.
 
 We
        conducted our audits in accordance with the standards of the Public Company
        Accounting Oversight Board (United States). Those standards require that
        we plan
        and perform the audit to obtain reasonable assurance about whether the financial
        statements are free of material misstatement. The Company is not required
        to
        have, nor were we engaged to perform, an audit of its internal control over
        financial reporting.  Our audit included consideration of internal
        control over financial reporting as a basis for designing audit procedures
        that
        are appropriate in the circumstances, but not for the purpose of expressing
        an
        opinion on the effectiveness of the Company’s internal control over financial
        reporting.  Accordingly, we express no such opinion.  An
        audit includes examining, on a test basis, evidence supporting the amounts
        and
        disclosures in the financial statements. An audit also includes assessing
        the
        accounting principles used and significant estimates made by management,
        as well
        as evaluating the overall financial statement presentation. We believe that
        our
        audits provide a reasonable basis for our opinion.
 
 In
        our
        opinion, the financial statements referred to above present fairly, in all
        material respects, the financial position of Brownshire Holdings, Inc. as
        of
        December 31, 2006 and the results of its operations and its cash flows for
        the
        years ended December 31, 2006 and 2005 in conformity with accounting principles
        generally accepted in the United States of America.
 
 The
        accompanying financial statements have been prepared assuming that the Company
        will continue as a going concern. As discussed in Note 2 to the financial
        statements, the Company has incurred losses from operations of $75,539 and
        $118,326, respectively, for the years ended December 31, 2006 and 2005. These
        matters raise substantial doubt about the company’s ability to continue as a
        going concern. Management’s plans in regards to these matters are also described
        in Note 2. The financial statements do not include any adjustments that might
        result from the outcome of this uncertainty.
  /s/
                  Sherb & Co., LLPCertified
                  Public Accountants
 
 Boca
        Raton, Florida
 September
        20, 2007
  F-2
 *Table
            of Contents*
  **BROWNSHIRE
        HOLDINGS, INC.**
 **BALANCE
        SHEET**
 **DECEMBER
        31, 2006**
 
 **Assets**Cash
                  and equivalents
              
              $
              33,934Prepaid
                  expenses
              
              
              1,220Total
                  current assets
              
              $
              35,154**Liabilities
                  and Stockholders’ Equity (Deficit)**Accounts
                  payable
              
              $
              17,362Due
                  to stockholders
              
              
              53,679Total
                  current liabilities
              
              
              71,041Commitments
                  and contingencies
              
              
              --Stockholders’
                  Equity (Deficit)Preferred
                  Stock, $0.001 par value, 20,000,000 shares authorized, no shares
                  issued or
                  outstanding
              
              
              --Common
                  stock, $0.001 par value, 80,000,000 shares authorized, 10,002,400
                  shares
                  issued and outstanding
              
              
              10,002Additional
                  paid-in capital
              
              
              (300,173
              )Retained
                  earnings
              
              
              254,284Total
                  stockholders’ equity (deficit)
              
              
              (35,887
              )Total
                  liabilities and stockholders’ equity (deficit)
              
              $
              35,154
 
 See
        accompanying notes to financial statements.
  F-3
 *Table
            of Contents*
  **BROWNSHIRE
        HOLDINGS, INC.**
 **STATEMENTS
        OF OPERATIONS**
 **FOR
        THE YEARS ENDED DECEMBER 31, 2006 AND 2005**
 
 **Year
                    Ended December 31,****2006**
              
              
              **2005**Revenues
              
              $
              --
              
              
              $
              --Operating
                  expenses:General
                  and administrative
              
              
              45,377
              
              
              
              5,854Legal
                  fees
              
              
              30,162
              
              
              
              109,929Litigation-related
                  expenses
              
              
              --
              
              
              
              2,543Total
                  operating expenses
              
              
              75,539
              
              
              
              118,326Operating
                  loss
              
              
              (75,539
              )
              
              
              (118,326
              )Other
                  income (expense)Gain
                  on litigation settlement
              
              
              --
              
              
              
              2,750,000Interest
                  income
              
              
              1,559
              
              
              
              --Interest
                  expense
              
              
              (1,293
              )
              
              
              (220
              )Total
                  income (expense)
              
              
              266
              
              
              
              2,749,780Income
                  (loss) before income taxes
              
              
              (75,273
              )
              
              
              2,631,454Income
                  tax provision
              
              
              --
              
              
              
              --Net
                  income (loss)
              
              
              (75,273
              )
              
              $
              2,631,454Net
                  income (loss) per share (basic and diluted)
              
              $
              (0.01
              )
              
              $
              0.26Weighted
                  average common shares outstanding (basic and diluted)
              
              
              10,002,400
              
              
              
              10,002,400
 
 See
        accompanying notes to financial statements.
  F-4
 *Table
            of Contents*
  **BROWNSHIRE
        HOLDINGS, INC.**
 **STATEMENTS
        OF STOCKHOLDERS’ EQUITY (DEFICIT)**
 **FOR
        THE YEARS ENDED DECEMBER 31, 2006 AND 2005**
 **Retained****Additional**
                
                
                **Earnings****Common
                    Stock**
                
                
                **Paid
                    in**
                
                
                **(Accumulated****Shares**
                
                
                **Amount**
                
                
                **Capital**
                
                
                **Deficit)**
                
                
                **Total****Balance
                    at January 1, 2005**
                
                
                10,002,400
                
                
                $
                10,002
                
                
                $
                (312,073
                )
                
                $
                (1,301,657
                )
                
                $
                (1,603,728
                )Net
                    income
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                2,631,454
                
                
                
                2,631,454Common
                    stock dividends
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                (1,000,240
                )
                
                
                (1,000,240
                )**Balance
                    at December 31, 2005**
                
                
                10,002,400
                
                
                
                10,002
                
                
                
                (312,073
                )
                
                
                329,557
                
                
                
                27,486Net
                    loss
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                (75,273
                )
                
                
                (75,273
                )Issuance
                    of warrants to officers and directors
                
                
                --
                
                
                
                --
                
                
                
                11,900
                
                
                
                --
                
                
                
                11,900**Balance
                    at December 31, 2006**
                
                
                10,002,400
                
                
                $
                10,002
                
                
                $
                (300,173
                )
                
                $
                254,284
                
                
                $
                (35,887
                )
  See
        accompanying notes to financial statements.
  F-5
 *Table
            of Contents*
  **BROWNSHIRE
        HOLDINGS, INC.**
 **STATEMENTS
        OF CASH FLOWS**
 **FOR
        THE YEARS ENDED DECEMBER 31, 2006 AND 2005**
 
 **Year
                    Ended December 31,****2006**
              
              
              **2005**CASH
                  FLOWS FROM OPERATING ACTIVITIES:Net
                  income (loss)
              
              $
              (75,273
              )
              
              $
              2,631,454Adjustments
                  to reconcile net income (loss) to net cash flows from operating
                  activities:Stock
                  based compensation
              
              
              11,900
              
              
              
              --Changes
                  in assets and liabilities:Prepaid
                  expenses
              
              
              (1,220
              )
              
              
              --Accounts
                  payable
              
              
              16,162
              
              
              
              (1,602,528
              )Net
                  cash (used in) provided by operating activities
              
              
              (48,431
              )
              
              
              1,028,926CASH
                  FLOWS FROM INVESTING ACTIVITIES
              
              
              --
              
              
              
              --CASH
                  FLOWS FROM FINANCING ACTIVITIESDue
                  to stockholders
              
              
              37,605
              
              
              
              16,074Dividends
                  paid
              
              
              (50,012
              )
              
              
              (950,228
              )Net
                  cash used in financing activities
              
              
              (12,407
              )
              
              
              (934,154
              )NET
                  INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
              
              
              (60,838
              )
              
              
              94,772CASH
                  AND CASH EQUIVALENTS, beginning of year
              
              
              94,772
              
              
              
              --CASH
                  AND CASH EQUIVALENTS, end of year
              
              $
              33,934
              
              
              $
              94,772SUPPLEMENTAL
                  INFORMATION:Cash
                  paid for interest
              
              $
              --
              
              
              $
              --Cash
                  paid for taxes
              
              $
              --
              
              
              $
              --
 
 See
        accompanying notes to financial statements.
  F-6
 *Table
            of Contents*
  **NOTES
        TO THE FINANCIAL STATEMENTS**
 **BROWNSHIRE
        HOLDINGS, INC.**
 **DECEMBER
        31, 2006**
 
 **NOTE
        1: BACKGROUND AND BASIS OF PRESENTATION**
 
 Brownshire
        Holdings, Inc., a Nevada corporation (the “Company”), is a shell company with
        limited activities.  The Company was formerly known as Gateway Data
        Sciences Corporation (“GDSC” or the “Predecessor Company”).  In 1998,
        the Predecessor Company filed a voluntary petition to reorganize under Chapter
        11 of the U.S. Bankruptcy Code.  On June 26, 2002, the Bankruptcy
        Court confirmed the Trustee’s Plan of Reorganization (the
“Plan”).  The Plan was subsequently modified and became effective on
        December 5, 2002.
  The
        substantive provisions of the Plan were as follows:
  ·
              Certain
                  outstanding litigation claims involving the Predecessor Company’s former
                  directors and officers, the insurance company that issued the Predecessor
                  Company’s director and officer insurance policy, and third parties were
                  settled pursuant to a “Global Settlement
                  Agreement.”
  ·
              A
                  pool of assets was created as the sole source of all cash payments
                  and
                  distributions to be made to holders of certain allowed
                  claims.  The “creditors’ pool” was funded
                  with:
  o
              cash
                  paid by a new stockholder group (see Note
                  6);
  o
              a
                  cash payment by the Predecessor Company’s former Chief Executive Officer
                  and President;
  o
              a
                  cash payment by the insurance company pursuant to the Global Settlement
                  Agreement described above;
  o
              the
                  stock of the Predecessor Company’s wholly owned subsidiaries and a
                  minority interest in another
                  company;
  o
              cash
                  in possession or control of the bankruptcy trustee;
                  and
  o
              certain
                  other assets.
  The
        creditors’ pool of assets was and will be used to satisfy any claims against the
        Predecessor Company that were not transferred to the Company, as described
        below.
  ·
              As
                  of the effective date, (i) the Predecessor Company was reconstituted
                  as
                  the Company; (ii) all of the assets of the Predecessor Company,
                  other than
                  the creditor’s pool, vested in the Company; (iii) all equity interests in
                  the Predecessor Company were cancelled and the Company issued 500,120
                  shares of its common stock to the former stockholders of the Predecessor
                  Company; and (iv) the Company issued 9,502,280 shares of common
                  stock to
                  the new stockholder group.  See Note 6.  As a result,
                  immediately following the
                  reorganization:
  o
              The
                  Company’s assets consisting primarily of a litigation claim receivable
                  and
                  intangible assets consisting of proprietary technology developed
                  by the
                  Predecessor Company (see Note 3);
                  and
  o
              the
                  Company’s liabilities consisted primarily of accounts payable related to
                  the litigation claim receivable (see Note
                  4).
  On
        December 5, 2002, the Company adopted fresh start reporting in accordance
        with
        Statement of Position 90-7, “Financial Reporting by Entities in Reorganization
        under the Bankruptcy Code” (“SOP 90-7”) of the American Institute of Certified
        Public Accountants.  See Note 4.
  **NOTE
        2: GOING CONCERN**
  The
        accompanying financial statements have been prepared on the basis of accounting
        principles applicable to a going concern, which contemplate the realization
        of
        assets and extinguishment of liabilities in the normal course of
        business.
  F-7
 *Table
            of Contents*
  **NOTES
        TO THE FINANCIAL STATEMENTS**
 **BROWNSHIRE
        HOLDINGS, INC.**
 **DECEMBER
        31, 2006**
  Since
        its
        emergence from bankruptcy, the Company has not generated any revenues from
        operations and has incurred losses from operations of $75,539 and $118,236,
        respectively, for the years ended December 31, 2006 and 2005.  While
        it has limited ongoing cash requirements, this lack of revenue generation
        raises
        substantial doubt about the entity’s ability to continue to operate as a going
        concern.  Management intends to seek acquisition or merger
        opportunities that would substantially increase future operating cash
        flows.  To the extent that such opportunities are not realized, the
        Company’s future financial position could be adversely affected.
  **NOTE
        3: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**
  ***Emergence
        from Bankruptcy***
  The
        Company has applied the provisions of SOP 90-7 in accounting for its emergence
        from bankruptcy.  The application of these provisions is described in
        Note 4.
  ***Use
        of Estimates***
  The
        preparation of financial statements in conformity with generally accepted
        accounting principles requires management to make estimates and assumptions
        that
        affect the reported amounts of assets and liabilities and disclosure of
        contingent assets and liabilities at the date of the financial statements
        and
        reported amounts of revenues and expenses during the reporting
        period.  Actual results could differ from those
        estimates.
  ***Reclassification***
  The
        Company has reclassified certain captions in its 2005 statement of cash flows
        to
        conform it to its 2006 financial presentation.
  ***Cash
        and Cash Equivalents***
  The
        Company considers all highly liquid investments with maturities from date
        of
        purchase of three months or less to be cash equivalents.  Cash
        consists of cash on deposit with banks.  The Company had no cash
        equivalents at December 31, 2006.
  ***Litigation
        Claim***
  The
        Company had a litigation claim against a former customer of the Predecessor
        Company that was settled during fiscal 2005. The Company recognizes gains
        associated with contingencies in accordance with the provisions of Statement
        of
        Financial Accounting Standards No. 5.  See Note 8.
  ***Intangible
        Assets***
  The
        Company maintains intangible assets consisting of certain proprietary technology
        developed by the Predecessor Company.  However, as there are no
        estimated future cash flows or other realizable benefits expected from this
        technology, no value has been assigned to these assets in the accompanying
        financial statements.
  ***Revenue
        Recognition***
  The
        Company had no revenue generating activities during the periods
        presented.
  ***Income
        Taxes***
  The
        Company has adopted the provisions of SFAS No. 109, “Accounting for Income
        Taxes,” which requires recognition of deferred tax liabilities and assets for
        the expected future tax consequences of events that have been included in
        the
        financial statements or tax returns.  Under this method, deferred tax
        liabilities and assets are determined based on the difference between the
        financial statements and the tax basis of assets and liabilities using enacted
        tax rates in effect for the year in which the differences are expected to
        reverse.  As the Company has incurred net losses since its emergence
        from bankruptcy, a valuation allowance has been created for all deferred
        tax
        assets as of December 31, 2006.
  F-8
 *Table
            of Contents*
  **NOTES
        TO THE FINANCIAL STATEMENTS**
 **BROWNSHIRE
        HOLDINGS, INC.**
 **DECEMBER
        31, 2006**
  ***Income
        (Loss) Per Common Share***
  Income
        (loss) per common share is computed based on the weighted average number
        of
        common shares outstanding during each period.  No convertible equity
        instruments were outstanding during fiscal 2005, so the basic and diluted
        shares
        outstanding are the same for that year.  Warrants to purchase 500,000
        shares were excluded from the computation of income (loss) per share during
        fiscal 2006 as the Company generated a net loss during the period, thereby
        making such warrants anti-dilutive.
  ***Stock-Based
        Compensation***
  The
        Company’s stock based compensation consists of warrants granted to officers and
        directors.  Such grants were recorded based on the grant date fair
        value using a Black-Scholes valuation model.  These grants were
        expensed immediately as they were fully vested at the date of
        grant.
  **NOTE
        4: FRESH START ACCOUNTING**
  On
        December 5, 2002, in connection with its emergence from bankruptcy, the Company
        adopted fresh start reporting in accordance with SOP 90-7.  As the
        Company has no substantial ongoing operations, the fresh start reporting
        common
        equity value was determined based on the estimated fair value of all assets
        and
        liabilities that were retained by the Company upon its emergence from
        bankruptcy.
  Under
        fresh start reporting, the reorganization value of the entity has been allocated
        to the Company’s assets and liabilities on a basis substantially consistent with
        purchase accounting.  At December 5, 2002, the following values were
        assigned to the assets and liabilities of the Company:
  Accounts
                  payable
              
              $
              (302,701
              )Net
                  assets
              
              $
              (302,701
              )
 
 **NOTE
        5: INCOME TAXES**
  Deferred
        income taxes reflect the net tax effects of temporary differences between
        the
        carrying amounts of assets and liabilities for financial reporting purposes
        and
        the amounts used for income tax purposes.  The deferred tax
        consequences of temporary differences in reporting items for financial statement
        and income tax purposes are recognized, if appropriate.
  Realization
        of the future tax benefits related to the deferred tax assets will depend
        on
        many factors, including the Company’s ability to generate taxable income within
        the net operating loss period.  The Company has considered these
        factors in reaching its conclusion as to the valuation allowance for financial
        reporting purposes.
  Income
        taxes are summarized as follows for the following periods:
 
 **Year
                    ended December 31,****2006**
              
              
              **2005**Current
                  benefit
              
              $
              21,547
              
              
              $
              40,306Deferred
                  benefit (provision)
              
              
              (21,547
              )
              
              
              (40,306
              )Net
                  income tax benefit
              
              $
              --
              
              
              $
              --
  F-9
 *Table
            of Contents*
  **NOTES
        TO THE FINANCIAL STATEMENTS**
 **BROWNSHIRE
        HOLDINGS, INC.**
 **DECEMBER
        31, 2006**
  Deferred
        tax assets as of December 31, 2006 and 2005 were comprised of the
        following:
  **Year
                    ended December 31,****2006**
              
              
              **2005**Net
                  operating loss carryforwards
              
              $
              504,416
              
              
              $
              482,869Less:  Valuation
                  allowance
              
              
              (504,416
              )
              
              
              (482,869
              )Net
                  deferred tax assets
              
              $
              --
              
              
              $
              --
 
  During
        the year ended December 31, 2006, the valuation allowance increased by
        $21,547.
  A
        reconciliation for the differences between the effective and statutory income
        tax rates is as follows:
  **Year
                    ended December 31,****2006**
              
              
              **2005****Amount**
              
              
              **%**
              
              
              **Amount**
              
              
              **%**Federal
                  statutory rates
              
              $
              (25,593
              )
              
              
              (34.0%
              )
              
              $
              (894,694
              )
              
              
              (34.0%
              )Permanent
                  difference
              
              
              4,046
              
              
              
              5.3%
              
              
              
              935,000
              
              
              
              36.0%Increase
                  in valuation allowance for operating loss carry forwards
              
              
              21,547
              
              
              
              28.7%
              
              
              
              (40,306
              )
              
              
              (2.0%
              )Effective
                  rate
              
              $
              --
              
              
              
              --%
              
              
              $
              --
              
              
              
              --%
 
 The
        permanent difference in the year ended December 31, 2005 relates to the
        non-taxable nature of a gain recorded by the Company resulting from the
        settlement of litigation.  As the taxable basis of the assets subject
        to this litigation upon emergence from bankruptcy exceeded the settlement
        amount, the proceeds received by the Company were deemed non-taxable and
        as a
        result no tax liability has been recorded by the Company.
 
 At
        December 31, 2006, the Company had approximately $14,000,000 in net operating
        loss carryforwards, including pre-bankruptcy net operating losses of $12.5
        million.  A full valuation allowance has been established for all
        deferred tax assets related to these net operating losses as there is
        substantial doubt as to the ability of the Company to utilize these deferred
        tax
        assets given certain rules limiting the use of these net operating losses
        following bankruptcy and changes in ownership and the Company’s historical lack
        of taxable income.  The Company has not valued the pre-bankruptcy net
        operating losses.  The operating losses expire through
        2026.
 
 **NOTE
        6: STOCKHOLDERS’ EQUITY**
 
 ***Capitalization***
 
 The
        Company was incorporated on October 16, 2002.  The Company is
        authorized to issue (a) 80,000,000 shares of common stock, par value $.001
        per
        share, and (b) 20,000,000 shares of preferred stock, par value $.001 per
        share,
        under terms and conditions to be established by the Board of Directors in
        the
        future.  Pursuant to the Plan and in connection with its emergence
        from bankruptcy, effective December 5, 2002 the Company issued (i) 500,120
        shares of common stock to the former stockholders of the Predecessor Company,
        whose ownership interests in the Predecessor Company were cancelled pursuant
        to
        the Plan, and (ii) 9,502,280 shares of common stock to a new stockholder
        group
        in exchange for $250,000 payable by the new stockholder group to the creditors’
pool that was created through the bankruptcy process.
  ***Dividends***
  During
        2005, the Company declared a $0.10 dividend payable to all common stockholders
        for an aggregate dividend payment of $1,000,240.  As of December 31,
        2005, $950,228 of these dividends were paid.  The remaining balance of
        $50,012 to be paid was reflected as a current liability in the balance sheet
        for
        the year ended December 31, 2005.  On July 24, 2006, the Company paid
        the remaining $50,012 dividend to common stockholders.
  F-10
 *Table
            of Contents*
  **NOTES
        TO THE FINANCIAL STATEMENTS**
 **BROWNSHIRE
        HOLDINGS, INC.**
 **DECEMBER
        31, 2006**
  ***Warrants***
 
 On
        September 28, 2006, the Company granted warrants to acquire an aggregate
        of
        500,000 shares of common stock at an exercise price of $0.01 per share to
        its
        directors and officers as compensation for their services to the
        Company.  The warrants are fully vested and expire on September 28,
        2016.
 
 The
        Company expensed these warrants immediately based on the aggregate grant
        date
        fair value of $11,900 computed using a Black-Scholes pricing model using
        the
        following assumptions:  risk free rate of 4.6%, volatility of 188%,
        stock price of $0.03, and expected life of 10 years.
 
 **NOTE
        7: RELATED PARTY TRANSACTIONS**
  Pursuant
        to a 4.0% Multiple Advance Credit Note dated February 28, 2005, the Company’s
        majority stockholder has agreed to advance the Company up to $100,000 to
        finance
        its working capital needs.  The promissory note bears interest at the
        rate of 4.0% per annum, payable at maturity.  The note, as amended,
        matures on the earlier to occur of (a) a “liquidity event” with respect to the
        Company, as that term is defined in the note, or (b) February 28,
        2008.  In addition, a director and officer of the Company advanced
        funds to pay certain of the Company’s operating expenses during fiscal 2006. The
        aggregate outstanding balance of principal and accrued interest under the
        promissory note and advances by the director and officer was $53,679 at December
        31, 2006.  These amounts are reflected as a current liability in the
        accompanying balance sheet.
  On
        September 28, 2006, the Company granted warrants to acquire an aggregate
        of
        500,000 shares of common stock to its directors and officers as compensation
        for
        their services to the Company.  See Note 6.
 
 **NOTE
        8: COMMITMENTS AND CONTINGENCIES**
  ***Litigation***
  The
        Predecessor Company and one of its former customers were parties to various
        claims and counterclaims that arose prior to the Company’s emergence from
        bankruptcy.  On February 23, 2005, the Company settled all of its
        outstanding litigation claims and counterclaims with the former customer
        of the
        Predecessor Company.  Under the terms of the settlement, the customer
        paid $2,750,000 to the Company, which was recorded as a gain during the year
        ended December 31, 2005.  In connection with the settlement and
        related litigation, the Company incurred legal and other related expenses
        of
        $1,705,000 during the years ended December 31, 2002 through December 31,
        2005,
        which were paid in full with the proceeds of this settlement.
  **Operating
        Leases**
  The
        Company currently has no significant non-cancelable operating
        leases.
  F-11
 *Table
            of Contents*
  **EXHIBIT
        INDEX**
 
 Exhibit
                  Number
              
              Description31.1
              
              Section
                  302 Certifications of Steven A. Rothstein and Norman S.
                  Lynn.32.1
              
              Certifications
                  pursuant to 18 U.S.C. Section 1350 of Steven A. Rothstein and Norman
                  S.
                  Lynn.