UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549




FORM 10-K




x
            
            ANNUAL
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934For
      the fiscal year ended June 30, 2008oro
            
            TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
      EXCHANGE ACT OF 1934For
      the transition period from
                       
      to
                       .




Commission
File Number 000-52488






OPTICON
SYSTEMS, INC


(Exact
name of registrant as specified in its charter)




Nevada
            
            20-2583185(State
      or other jurisdiction of incorporation or organization)
            
            (I.R.S.
      Employer Identification No.)




First
floor, 1701 West Northwest Highway


Grapevine,
TX 76051


(Address
of principal executive offices)




817-305-0628


(Registrant’s
telephone number, including area code)




Securities
registered pursuant to Section 12(b) of the Act:




Title
      of Each Class
            
            Name
      of Each Exchange on Which RegisteredNone
            
            NoneSecurities
      registered pursuant to section 12(g) of the Act:
              Common
      Stock, $0.001 par value




Indicate
      by check mark if the registrant is a well-known seasoned issuer, as
      defined in Rule 405 of the Securities Act.
            oYes
            xNoIndicate
      by check mark if the registrant is not required to file reports pursuant
      to Section 13 or Section 15(d) of the Act.
            oYes
            xNo


Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
      during the preceding 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.
            xYes
            oNoIndicate
      by check mark if disclosure of delinquent filers pursuant to Item 405 of
      Regulation S-K (§ 229.405 of this chapter) is not contained herein, and
      will not 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-K or any amendment to this Form
    10-K.
            xYes
            oNoIndicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated
filer.




o  Large
      accelerated filer
            o  Accelerated
      filer
            x
      Non-accelerated filerIndicate
      by check mark whether the registrant is a shell company (as defined in
      Rule 12b-2 of the Act).
            oYes
            xNo




The
aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the common equity was
last sold, or the average bid and asked price of such common equity, as of the
last business day of the registrant’s most recently completed second fiscal
quarter:




Voting Common Equity
            
            Non-voting Common EquityNone
            
            None





The
number of shares outstanding of each of the registrant’s classes of common
stock, as of August 30,  2008:




Common
      stock, par value $0.001 per share
            71,053,946Other
            None




DOCUMENTS
INCORPORATED BY REFERENCE




The
following documents (or portions thereof) are incorporated by reference into the
Parts of this Form 10-K noted:NONE










OPTICON
SYSTEMS, INC




Annual
Report on Form 10-K




For the
Fiscal Year Ended June 30, 2008




INDEX




Page
              NumberPART IItem
      1.
            Business
            3Item
      1A.
            Risk
      Factors
            14Item
      1B.
            Unresolved
      Staff Comments
            omittedItem
      2.
            Properties
            15Item
      3.
            Legal
      Proceedings
            15Item
      4.
            Submission
      of Matters to a Vote of Security Holders
            15PART IIItem
      5.
            Market
      for Registrant’s Common Equity, Related Stockholder Matters and Issuer
      Purchases of Equity Securities
            16Item
      6.
            Selected
      Financial Data
            17Item
      7.
            Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
            17Item
      8.
            Financial
      Statements and Supplementary Data
            21Item
      9.
            Changes
      in and Disagreements with Accountants on Accounting and Financial
      Disclosure
            39Item
      9A.
            Controls
      and Procedures
            omittedItem
      9A(T)
            Controls
      and Procedures
            39Item
      9B.
            Other
      Information.
            39PART IIIItem
      10.
            Directors,
      Executive Officers and Corporate Governance
            40Item
      11.
            Executive
      Compensation
            41Item
      12.
            Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters
            41Item
      13.
            Certain
      Relationships and Related Transactions, and Director
      Independence
            42Item
      14.
            Principal
      Accountant Fees and Services
            42PART IVItem
      15.
            Exhibits
      and Financial Statement Schedules
            43Signatures
            
            44




- 2
-


Forward-Looking
Statements





This
Annual Report on Form 10-K contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934, including, without limitation, statements
regarding our expectations, beliefs, intentions or future strategies that are
signified by the words “expects,” “anticipates,” “intends,” “believes,”
“estimates” or similar language, and among other things:  (i) events
that may occur in the future, (ii) implementation of our business model;
development and marketing of our products and services and (iii) prospects for
revenues and profitability.  All forward-looking statements included
in this document are based on information available to us on the date
hereof.  We caution investors that our business and financial
performance and the matters described in these forward-looking statements are
subject to substantial risks and uncertainties.  Because of these
risks and uncertainties, some of which may not be currently ascertainable and
many of which are beyond our control, actual results could differ materially
from those projected in the forward-looking statements. Deviations between
actual future events and our estimates and assumptions could lead to results
that are materially different from those expressed in or implied by the forward
looking statements. We do not intend to update these forward looking statements
to reflect actual future events.




Item
1.  Business




Background
information





OUR
HISTORY





“We”,
“us” and “our” refer to OptiCon Systems, Inc., a Nevada
corporation.




The
history of our incorporation and our ownership, in chronological order, is as
follows:




●
            We
      were incorporated in Nevada on October 22, 2004.●
            J.
      Marshall Batton, Jeffrey A. Hoke, Jacques Laurin and Douglass W. Wright
      were our founders and original stockholders, each then owning twenty-five
      percent of our common stock.●
            On
      July 29, 2005, FutureTech Capital LLC, a company entirely owned by Saed
      Talari, acquired eighty percent of our common stock as a result of our
      acquisition of the Opticon Network Manager software (see below) from
      FutureTech and the stock ownership of each of our founders was reduced to
      five percent.●
            Also
      on July 29, 2005, following our acquisition of the Opticon Network Manager
      software, FutureTech and our founders exchanged all of our issued and
      outstanding common stock for an aggregate of sixty-six percent of Isys
      Medical’s (formerly Hathaway Corporation) issued and outstanding common
      and all of its preferred stock; and, as a result of the exchange, we
      became a wholly owned subsidiary of Isys Medical.●
            Before
      the exchange of our shares for Isys Medical’s shares, Mr. Talari legally
      and beneficially owned eighty-eight percent of Isys Medical’s common stock
      and beneficially owned through FutureTech eighty percent of our common
      stock.●
            After
      the exchange, our founders each owned directly four percent of Isys
      Medical’s common stock and Mr. Talari, directly and indirectly, owned
      eighty percent of Isys Medical’s common stock.●
            On
      April 4, 2006, we consolidated (reverse split) our issued and outstanding
      common stock by a factor of 0.30107143.●
            In
      connection with Isys Medical announcement to spin off OptiCon Systems, our
      Board of Directors approved a stock dividend of 99,118 of our common stock
      payable to Isys Medical.●
            On
      July 31, 2007, Mr. Batton and Mr. Wright, our founders, accepted 35,000
      (post-split) shares of our common stock in lieu of deferred compensation
      and in cancellation their respective, non-expiring rights under their
      employment agreements to maintain their individual ownership of our common
      stock to a level of four percent of our issued and outstanding
      shares.●
            On
      August 31, 2007, Isys Medical paid a stock dividend to its stockholders
      consisting of 100% of our outstanding common.  As of this date,
      we ceased being a subsidiary of Isys Medical.●
            On
      June 10, 2008, we consolidated (reverse split) our issued and outstanding
      common stock by a factor of 0.05.  Statement of all share amounts,
      whether before of after June 10, 2008, in this annual report have been
      adjusted for the share consolidation.●
            On
      July 1, 2008 and August 7, 2008, Mr. Talari converted the principal amount
      and accrued interest of two convertible debentures into 56,326,560 and
      12,003,734 shares of our common stock respectively.  After these
      conversions, Mr. Talari legally and beneficially owned eighty-nine percent
      of our common stock.





- 3
-


Before
our acquisition of the Opticon Network Manager software, both Isys Medical
(formerly Hathaway) and FutureTech were under the direct, common control of Mr.
Talari. Prior to our acquisition of the Opticon Network Manager software, Mr.
Talari had no control over us. With that acquisition, however, we also came
under Mr. Talari’s indirect control. Although Mr. Talari may be deemed to have
determined or had a controlling influence on the terms of the exchange of stock
between our stockholders and Isys Medical, because he owned (a) all the stock of
FutureTech which was our then eighty-percent stockholder and (b) eighty-eight
percent of Isys Medical’s common stock, Mr. Talari did not control the decision
of our founders who owned twenty percent of our common stock and who have
advised us they made independent, individual decisions to enter into the
exchange of their stock in us for Isys Medical common stock. See the following
table which details the aggregate of Mr. Talari’s direct and indirect stock
ownership of each entity at each stage of the history described
above:




Mr.
      Talari’s stock ownership percentageTransaction
      Stage
            Neuworld
      Communications
            Isys
      Medical
            FutureTech
            Opticon
      SystemsOur
      incorporation
            100
            88
            100
            
            
            NoneOur
      acquisition of the Opticon Network Manager
            100
            88
            100
            
            
            80Our
      acquisition by Isys Medical
            100
            80
            100
            
            
            80Conversion
      of 2 Debentures
            100
            80
            100
            
            
            89





The
address of our executive offices is First Floor, 1701 West Northwest Highway,
Grapevine, Texas 76051 and our telephone number at that address is 817-305-0628.
The address of our web site is www.opticonsystemsinc.com The information at our
web site is for general information and marketing purposes and is not part of
this annual report for purposes of liability for disclosures under the federal
securities laws.






OUR
ACQUISITION OF THE OPTICON NETWORK MANAGER SOFTWARE




The
history of our acquisition of the Opticon Network Manager software and related
assets, in chronological order, is as follows:




●
            We
      signed a pre-incorporation agreement dated as of August 19, 2004 with
      FutureTech to purchase the Opticon Network Manager software and
      assets.●
            FutureTech
      did not own or have a contract to purchase the Opticon Network Manager
      software and assets at that time.●
            The
      stated purchase price was $42 million.●
            FutureTech
      signed an agreement on July 26, 2005 with Corning Cable Systems, Inc., a
      subsidiary of Corning Incorporated, to purchase the Opticon Network
      Manager software and assets for a cash purchase price of
      $100,000.●
            The
      agreement between FutureTech and Corning Cable was identical in all
      respects, other than price, to our existing agreement with
      FutureTech.●
            FutureTech’s
      purchase from Corning Cable was completed on July 29,
  2005.●
            We
      amended our agreement with FutureTech on July 29, 2005, changing our
      purchase price to 1,264,500 shares (or eighty percent) of our common
      stock.●
            We
      completed our acquisition of the Opticon Network Manager software from
      FutureTech on July 29, 2005.






OUR
LICENSES OF THE OPTICON NETWORK MANAGER SOFTWARE FROM CORNING CABLE





We were
informed by Corning Cable that it had licensed the R3 version of the Opticon
Network Manager software to approximately sixty operators of multiple cable
television systems (“MSOs”). We believe those licensees




- 4
-


installed
the Opticon Network Manager software on about 150 individual cable television
systems. Corning Cable’s licensees included ten of the twenty-five largest cable
providers at that time, among others. Corning Cable’s licensees for the R3
Opticon Network Manager software included:




●
            Comcast
      Corporation;●
            Comcast
      Corporation;●
            Charter
      Communications.





We
understand that those licenses involved a non-exclusive, perpetual, paid-up,
right to use the Opticon Network Manager software as it existed at the time of
the license. Corning Cable’s licensees did not obtain, however, the ability to
maintain, modify or upgrade the software themselves, because they received only
the part of software program that runs on their computer systems (“object code”)
and did no receive, have a right to receive or have access to the computer code
on which the object code is based (“source code”) and is essential to
maintenance, modification and upgrading the object code. We purchased the sole
and exclusive right and title to source code for the R3 version of the Opticon
Network Manager (as well as all the documentation for the partially developed R4
version). We do not have any obligation to support, maintain or upgrade the
software under Corning Cable’s licenses, nor do we have any liability associated
with its performance. Those licenses exist without any impact on our ownership
of the Opticon Network Manager software, which includes both the source code and
the object code, and our right and ability to as the sole owner to license the
Opticon Network Manager software to others.





We
believe a substantial number of the approximately 150 installations of the R3
Opticon Network Manager software are still in use, including those on the cable
systems of Comcast, TimeWarner and Charter Communications. We believe the MSOs
who are still using the R3 Opticon Network Manager represent an opportunity for
us to sell support and maintenance services, which they do not now have and
cannot provide for themselves. We believe they also represent a market for our
R4 version, if and when we complete development of it (of which there is no
assurance). There is no assurance, however, that Corning Cable’s licensees will
have an interest in buying support and maintenance services from us, or that
they will have an interest in buying licenses to the R4 version from us. We
believe that even if we are unable to sell service and support services to
Corning Cable’s licensees, the MSOs who have not licensed from Corning Cable, as
well as other types of fiber cable system operators described below, provide us
with a substantial, potential market for the Opticon Network Manager
software.







CORNING
CABLE’S TERMINATION OF ITS BUSINESS RELATED TO THE OPTICON NETWORK MANAGER
SOFTWARE





Corning
Cable developed the Opticon Network Manager software, beginning in 1995 as an
outgrowth of its fiber optic cable business. Corning Cable developed three
versions of the Opticon Network Manager software, concluding in March 2003 with
the R3 version. Corning Cable also began development of the next-generation R4
version of the Opticon Network Manager software, up to the point at which
writing the source code and testing the object code were the next and final
development steps. According to software development standards, this point of
development constitutes seventy-five percent completion. We believe the Opticon
Network Manager software was the most widely used fiber optic network management
software in use at that time. Corning Cable decided in 2003 to terminate its
involvement in the fiber optic cable network management software industry.
Corning disclosed in its annual report on Form 10-K for 2002 filed with the U.S.
Securities and Exchange Commission that “During 2002 Corning continued the
restructuring efforts that began in the second quarter of 2001. The
telecommunications industry continued to decline over the course of the year as
the trends exhibited in 2001, such as softness in demand, excess capacity,
increased intensity of competition and growing pressure on price and profits
have persisted.” The notice sent by Corning Cable to its licensees dated May 27,
2003 stated that its reason for terminating its Opticon Network Manager
operations was “Due to the extended downturn in the telecom industry there has
been a significant reduction in demand for these products and services.”
Corning’s annual report on Form 10-K for 2003 filed with the Commission
disclosed that “We have been able to reduce the loss in the Telecommunications
segment in 2003 by closing plants and reducing costs”. We believe that
terminating support for and continued development of the Opticon Network Manager
software was one of these cost reducing measures enacted by
Corning.






- 5
-


WHAT WE
PURCHASED FROM CORNING CABLE





As noted
above, we purchased the Opticon Network Manager software (both the operational
Release 3.x and proposed Release 4.x, as identified in the agreements)
indirectly from Corning Cable, with FutureTech as a temporary, intermediary
owner. Our contract to purchase the Opticon Network Manager from FutureTech was,
in all material respects, a mirror image of FutureTech’s agreement with Corning
Cable. Both agreements provided for purchase and sale of “substantially all of
the assets that are used by [Corning Cable] to conduct OptiCon related
business”. The agreements provided for the “[sale], transfer, [assignment and
delivery]” of the assets “in perpetuity, free and clear of all encumbrances” and
“all right, title and interest”. The assets included the “brand name”, all
“tangible personal property”, “all Federal, state, local and foreign
governmental licenses, consents, approvals, authorizations, permits, orders,
decrees and other compliance agreements”, “all OptiCon Intellectual Property
Rights and Licensed Software, and the goodwill associated therewith, licenses
and sublicenses granted in respect thereto and rights there under”, “all
customer, supplier, advertiser and mailing lists”, “all business and financial
records, books, ledgers, files, plans, documents, correspondence, lists, plats,
architectural plans, drawings, notebooks, specifications, creative materials,
advertising and promotional materials, marketing materials, studies, and reports
relating in any manner to, or used in connection with the operation of, OptiCon
or to the Acquired Assets, in whatever media they exist”, “all goodwill” and
“all inventory”. The agreements specifically provide that the purchaser
(FutureTech and subsequently us) do not assume, discharge or perform any
liabilities, as defined, “related to Opticon”, which we maintain includes
liabilities under the existing licenses. At each closing, the purchaser received
a bill of sale for tangible assets, an assignment of intangible personal
property, a trademark assignment and a general assignment of intellectual
property assets. And, the seller in each case undertakes to “execute and deliver
such other instruments of sale, transfer, conveyance, assignment and
confirmation, and will take such further action, as may be reasonably requested
in order to more effectively transfer, convey and assign to, and to confirm [the
buyer’s] title”. The foregoing is a summary of the things acquired first by
FutureTech from Corning Cable and second by us from FutureTech. The agreements
contain other provisions necessarily related to the transactions. Reference is
made to full agreements which are filed as exhibits to this annual report. All
summaries of selected provisions of the agreements in this annual report are
subject to the actual agreements.






OUR
BUSINESS




What
Our Technology Does





The
Opticon Network Manager software is designed to manage large fiber optic cable
networks more efficiently, as compared to Excel spread sheets which were the
medium of network management in use at the time the original version of the
Opticon Network manager was introduced. The R3 Opticon Network Manager software
significantly reduces the time and expense required to install, manage, maintain
and repair a fiber optic cable system. These reductions are principally the
result of:




●
            The
      ability to map and determine the status of each strand in a fiber optic
      cable,●
            The
      ability to automatically determine when a cut, break or fault has
      occurred, and●
            The
      ability to identify the actual physical location of a cable cut, break or
      fault within five feet.




Based on
our review of the fiber optic management software against which the Opticon
Network Manager now competes, we believe that none of them provide these
features. See “Competition”, below.





The
OptiCon R4 system of the Opticon Network Manager software will not only have all
the features of the OptiCon R3 system, but also is designed for use
on:




●
            An
      entirely fiber optic network, just like the OptiCon R3 system,
      and●
            A
      network which has a combination of fiber optic cable and copper wire
      cable.




Based on
our review of the fiber optic management software against which the Opticon
Network Manager now competes, none of them function across an entire hybrid
system composed of fiber optic and copper wire cables. Development of the
OptiCon R4 system is seventy-five percent complete, according to software
development industry standards. The OptiCon R4 system is not ready for
commercial sale.





The
length of a fiber optic cable is limited only by the delivery requirements of
the particular installation. Unlike the loss of signal strength in copper wire
cable which limits the length of each copper wire cable segment to three
thousand feet between amplification points, there is no loss of signal strength
in fiber optic cable, regardless of the length of the cable. Fiber optic cable
may be hundreds or thousands of miles in length. The ability to quickly detect
and repair cable cuts, breaks and faults is critical to the quality of service
(QoS) provided by a cable system operator to its customers.




- 6
-


As cable
operators move into voice services they move into a QoS which requires a 99.999%
“uptime” (the standard for telephony service providers). While subscribers to
cable television and the Internet on a fiber optic cable system may accept
service outages of up to hours and even days as an inconvenience or irritation,
interruption of telephone service (voice) of even much shorter duration is
unacceptable to consumers. This is particularly true with respect to emergency
911 service. Providing telephone service over fiber optic cable becomes
commercially feasible only with the ability to (a) provision (provide service
to) new customers promptly, (b) reduce service interruptions by effective
management and maintenance, (c) quickly restore service when interruptions occur
due to cable cuts, breaks and faults and (d) reduce the cost of maintenance,
service and repair to a level comparable to copper wire cable. Based on the
experience of our former chief executive officer at Lucent Technologies’ NetCare
division in sales, installation and management of copper wire cable systems,
these types of service interruptions in copper wire cable require an average of
1.6 service crews (“truck rolls”), as compared to the experience of fiber cable
system which, based on information we obtained from Corning Cable, require
an average eight truck rolls for each cut, break or fault in a fiber optic
cable.





The
Advantages of Our Technology





The
Opticon Network Manager software, among other things described
below,




●
            Isolates
      cable cuts, breaks and faults, service degradation and other “optical
      events” to within plus or minus five feet of the event;
  and●
            Produces
      a GPS (global positioning system) location for the outage to an
      approximate five foot section of cable (GPS location can be better or
      worse, depending upon the accuracy of the data supplied to the
      system).





Based
upon our analysis of products against which we compete, the Opticon Network
Manager software is the only commercially available fiber optic management
software offering these features. The Opticon Network Manager software takes
into account all of the physical variables in the installation of fiber optic
cable. Other systems now in use determine the location of the cut, break or
fault (optical event) based on the length of the cable from the test point. They
do not identify the actual geographic location of the cut, break or fault. They
provide a distance to a fault determined by a reflectometer (a ping, like radar,
is put on the line and the amount of time it takes for the ping to return
determines the distance) which may differ as much as thirty percent from the
geographic location of the actual fault, as a result of cable twist and other
factors in the physical installation of the cable, such as deviations from a
straight line caused by obstacle avoidance, grade change, slack between
attachment points and ground versus overhead deployment.




When the
Opticon Network Manager software detects a significant optical event, it sends
an alarm to any type of communications device in use by the cable system
operator, which, in turn, alerts management. The Opticon Network Manager
software can automatically print a work order and dispatch a repair crew to the
correct location, using its mapping capability. Identifying the precise location
of a cable cut, break or fault to within plus or minus five feet reduces the
time needed to locate and repair the cable. The corollary of reduction in time
to locate and repair is reduction in personnel and equipment cost and an
increase in QoS to an equivalency to copper wire cable networks. Rather than
hours spent locating a cut, break or fault in long runs of fiber optic cable
with an average of up to eight crews on the road for a single occurrence,
personnel time and equipment cost is materially reduced to an average of 1.6
crews and trucks on the road. This feature of the Opticon Network Manager
software brings maintenance and repair costs of fiber optic cable into line with
those costs for wireline where cuts, faults and breaks can be isolated between
amplification points - a maximum of three thousand feet.





Additional
features of the Opticon Network Manager software include the ability
to:




●
            Track
      fiber strands in use,●
            Track
      fiber strands available for use (that is, attached to equipment, but not
      in use), and●
            Track
      fiber strands in inventory (available, but not attached to any equipment,
      or dark).





Our
product





We can
begin licensing the OptiCon R3 system immediately, subject to funding for
marketing and for capacity for support and maintenance. This is the same system
that had been licensed by Corning Cable. It provides




- 7
-


a
complete management structure for a physical fiber optic cable network. The
OptiCon R3 system can be used by both cable providers and telephone systems that
have deployed or are in the process of deploying fiber optic cable. It can be
used both (a) during the installation process of the fiber optic cable and (b)
during the operation of the fiber optic cable network.





The
OptiCon R3 system provides a single repository for all data which documents the
fiber optic cable network.During installation, the
OptiCon R3 system interfaces with the operator’s work order system to ensure the
accurate collection of all data relevant to the ongoing management of the
network. For example, it tracks all of the components of the system, it maps
both outside locations and inside equipment and their layouts, it maps and
tracks all network connections and all customers served.





After
installation of the fiber optic network, the OptiCon R3 system provides these
additional four capabilities:




●
            It
      improves the circuit assignment process and provisioning of new customers
      during the implementation phase;●
            It
      automates the network management and maintenance
  functions;●
            It
      complements a carrier’s existing systems and databases;
  and●
            It
      is accessible to personnel at all
levels.





During
the implementation phase, the location and paths all fiber strands are captured
in an Oracle data base and are identified as they are moved from dark, to
inactive, to active status during the provisioning process. The OptiCon system
also displays for the operator selected fiber paths to customers or fiber paths
available for new customers. It also displays all relevant information about
that fiber path, including its current status, the service type being provided
and relevant wavelength. All of these capabilities reduce the time and cost
necessary for fiber provisioning for and assignment of circuits to customers.
The current method of provisioning service to a new fiber optic cable customer
is manually finding an available fiber optic route to the customer’s
premises.




In
network management using the Opticon system, all relevant network information is
available to the operator online. Drawing on information in the Oracle data
base, the OptiCon system automatically displays network connections, provides
access to historical outage records, generates detailed work orders and provides
a variety of other network information and reports essential to operating a
complex fiber optic cable network.




Use of
the OptiCon R3 system requires a data base by Oracle Corporation to store
network data and requires a graphical information system by MapInfo Corporation
to display and manipulate data, which is graphically highlighted on maps to
provide easy use with a Windows interface requiring minimal user training. The
OptiCon R3 system will not function without both an Oracle database and MapInfo
software. At the present time, users of the Opticon R3 system must license the
data base software directly from Oracle and display software directly from
MapInfo, because we do not have reseller licenses covering either of those
softwares. It is our intent to obtain reseller licenses from both companies,
which will then enable us to directly license all of the software needed to
utilize the Opticon R3 system and the R4 system, if any, when development of the
R4 system is completed for commercial licensing.





The
OptiCon R3 system is customizable, allowing users to specify unique reporting
options to reflect specific needs. These features both reduce the cost of
implementation by extending the functionality of the operator’s existing
systems, while reducing response times and allowing immediate access to critical
data.





In order
to provide a GPS location within plus or minus five feet, the OptiCon R3
system:




●
            Accepts
      cable system design data to determine the distance between two points in a
      network;●
            Accepts
      inputs from the installing field crew, such as a variety of local data
      points (such as point to point sheath lengths, GPS coordinates, elevations
      and slack in the cable at any point);●
            Stores
      all of the specific information on fiber cable manufacturer’s product
      number and specific characteristics (each product line within a
      manufacturer’s product offering can have different specifications);
      and●
            Manages
      all network information in a single data base and GIS
    system.




- 8
-


When a
cut, break or fault is detected, the OptiCon R3 system issues a work order for
repair services. The technician goes to a starting point identified in the work
order and uses a reflectometer (OTDR) to determine the distance from the
starting point to the optical event. The technician updates the work order with
the OTDR reading and the Opticon Network Manager software adjusts the distance
using the information it has regarding the specifics of the cable used, slack,
elevations and other factors, and presents both GPS coordinates and a map of the
outage to the work crew.





Our
next-generation product




The
OptiCon R4 system is our next generation of fiber optic network management
software, which requires an estimated twenty-five percent final development
before it can be commercially licensed. The OptiCon R4 system is being designed
to address two major deficiencies in the OptiCon R3 system. These
are:




●
            It
      will manage both fiber optic cable and copper wire cable in a hybrid cable
      system; and●
            It
      will have an interface that will enable it to work with other software
      applications, for example, to easily give and receive information from a
      client’s existing work order
system.




And, it
also has an easy-to-use web-browser user interface.





We have
established the following schedule to complete the commercial development of the
OptiCon R4 system.




●
            A
      demonstration system within ninety days after funding;●
            A
      beta version of the software in 180 days after funding;
  and●
            General
      availability release in twelve months after
  funding.




We
purchased all of the documentation for the Opticon R4 system from Corning Cable.
As noted above, by industry standards, this documentation constitutes
approximately seventy-five percent completion of the Opticon R4 system when we
acquired it from Corning Cable. To complete commercial development of the R4
system, we must write the source code for the Opticon R4 system and test the
resulting object code (the code that actually runs on the computer), including
the debugging process, before we can offer the Opticon R4 system for licensing.
We have not done any development work on the Opticon R4 system after we
purchased it from Corning Cable, nor do we have the funding available at the
present time to hire programmers and purchase computer equipment needed to write
the source code and test the object code. See, Plan of Operations and Liquidity
and Capital Resources. Without adequate funding, we will not be able to produce
a marketable Opticon R4 system. There is no assurance we will be able to obtain
any or adequate funding to complete the development of and market the R4 Opticon
Network Manager. In the event we are able to obtain adequate funding, we believe
writing the source code based on Corning Cable’s documentation (which itself has
been developed from the operational R3 version) will be a straight-forward
undertaking without any unexpected complications. With adequate funding, we
estimate that writing the source code and testing the object code will require
less than three months to complete.




How
We Will Deliver The Opticon Network Manager Software





We plan
to deliver the Opticon Network Manager software to our licensees on compact
disks that we will produce and manufacture.





Who
Uses Our Technology





Every
business with a fiber optic cable network is a potential customer for the
Opticon Network Manager software. These companies deliver voice, data and video
to customers. These companies include:




●
            Telephone
      companies who install and maintain their own network;
  and●
            Cable
      television system operators.





Both of
these industries are vying to provide high speed Internet connectivity to their
customers. In addition, the telephone companies are providing television and the
cable operators are providing voice (telephone) service in an expanding number
of markets. Both industries have installed and are continuing to install fiber
optic cable and require a software system to maintain and repair the cable. Many
companies have a combination of copper wire cable and fiber optic cable, which
we plan to be addressed by the OptiCon R4 system.





- 9
-


Potential
Customers and Marketing





We view
the principal customers for the Opticon Network Manager software to
be:




●
            Independent
      operating companies (IOC),●
            Independent
      local exchange carriers (ILEC),●
            Regional
      Bell operating companies (RBOC), and●
            MSOs
      who are not licensees of Corning Cable represent additional customers for
      the Opticon Network Manager
software.





We
believe the IOCs, ILECs, RBOCs and the MSOs who are not Corning Cable’s
licensees represent a far greater market and greater potential customer base for
the Opticon Network Manager in the United States alone that the customer base of
which we may be viewed as being deprived by Corning Cable’s existing licenses.
As noted above, even Corning Cable’s licensees represent a market opportunity
for maintenance and support services, as well as upgrade to the R4 version, if
and when it is ready for commercial licensing.




We plan
to target seven regional consulting firms who dominate the IOC marketplace to
become resellers of the Opticon Network Manager software.





Our
marketing strategy has three basic phases.




The first
phase will be contacting all of Corning Cable’s licensees of the OptiCon R3
software - potentially sixty different companies with about 150 potential,
existing installations. We believe many of these companies may continue to use
the R3 software as their network management system, but without the ability to
maintain it themselves. We plan to contact these companies to see if they would
be interested in upgrades, re-installations, service, maintenance and technical
support.





The
second phase will be marketing to the small telephone and cable television
companies who have installed fiber optic cable systems but are not licensees of
Corning Cable, both domestically and internationality.





The third
phase will be marketing to the large telephone and cable television companies
who are not using the Opticon Network Manager software, both domestically and
internationality.





We
believe that we will not be driving the timeline for the purchase and
implementation of a core network management system like the Opticon Network
Manager software. We believe the time line will be dictated by the executive
management of the operators who we understand have mandated that a solution to
network management will be accomplished by mid 2008. Operational management must
provide the solutions to implement that directive from executive management. As
a result of this mandate for a solution to network management, we believe the
decision to utilize the Opticon Network Manager software will be put on a fast
track at many firms, at the point we are able to market and support the R3
version. The challenge we expect to face is to ramp up our capacity to market to
and service the needs of these potential customers, some of whom are huge
telephone companies and cable system operators.





The
network management system is the key management tool in any optic fiber-based
network. We believe the following criteria will be important in the review of
our products:




●
            The
      degree to which any solution meets the user’s needs.●
            The
      ability of the user to modify any solution to meet internal
      needs.●
            The
      ability of any solution to communicate with the user’s existing
      systems.●
            The
      ability of the vendor to technically support the
  solution.●
            The
      ability of the vendor to provide services that will be needed to implement
      the solution.





We
believe we can satisfy the first three of these criteria. Although we do not
currently have the resources to compete with Lucent and others, we believe we
have some advantages in that (a) our consulting team (who are expected to join
management on a full time basis in the event we obtain funding) has over eight
years of experience




- 10
-


in this
specific field where the RBOC’s have little, if any experience and (b) the
Opticon Network Manager software has already been installed on over 150 fiber
optic systems that were and many may still be operational and provide a resource
to show actual performance as opposed to projected performance.





Another
of the challenges that we expect to face is the creation of a credible and
mature services organization that will involve personnel who already have
credibility in the RBOC community. We believe we have the ability to identify
and recruit experienced professionals. These personnel will provide the basis
for the Build, Operate and Transfer Model we will be proposing to the RBOC’s.
The Build, Operate and Transfer Model is common in the service provider
marketplace. Our service model can be fixed-price based or time-and-materials
based and is preferred when deploying new technologies or entering new
markets.





In the
build phase of the model - we will secure all of the hardware and software
to meet the needs of the project:




1.
            We
      will install the hardware in the facilities designated in the statement of
      work.2.
            We
      will manage the process of building the data needed for the
      project.3.
            We
      will create and manage the process of collecting and validating the
      data.




Then, we
will manage the operations:




1.
            We
      will create the organizational structure and appropriate job definitions
      for the operations center (this includes all management
      structure).2.
            We
      will assist in the selection of staff from internal or external
      sources.3.
            We
      will train all staff on the solution.4.
            We
      will help establish the performance metrics and best business practices
      for the center.5.
            We
      will manage the operational process until the customer is satisfied that
      the center is fully operational.





Once the
network management center is operating to the customer’s satisfaction, we will
transfer the operation to the customer.





Other
organizations that we expect to compete with may already have the professional
services organization, but we believe they do not have the solution or the
operational knowledge.





Our
Business Strategy





To our
knowledge, the Opticon Network Manager software provides the only available
network management system that solves fiber optic system service and
provisioning issues at a cost comparable to a copper wire cable system. We
believe that network management systems are “core” systems. In general, a core
system is acquired from a single vendor and is deployed network-wide by a
service provider.





In
addition, the decision of the Federal Communications Commission in March 2004
declaring the “last mile in fiber” (that is the cable from street to the user’s
home or premises) will to be a “private asset”. What this means is that this
“last mile” is not required to be shared on a discount basis with competing
service providers.





As a
result of these factors, core system and “last mile” decisions, we believe a
strong demand for the Opticon Network Manager software exists and will grow in
the short term. We believe our business strategy of concentrating on the fault
isolation, detection and correction and the capacity planning element of being
able to inventory and manage the dark fiber, as well as the active and inactive
fiber, addresses the existing need and a growing demand. Based on our estimated
comparisons of maintaining fiber optic network systems with and without the
OptiCon Network Manager and information about the costs of maintaining copper
wire cable systems, we believe the OptiCon Network Manager software can reduce
maintenance costs by as much as four fold bringing it in line with the
maintenance cost of copper wire cable systems.





We have a
single focus on development and sales of and service and support for the Opticon
Network Manager software. We understand that Corning Cable, in contrast, spread
responsibilities for the Opticon Network Manager software over a number of
departments in a loosely organized structure with externally imposed and




- 11
-


arbitrary
operational constraints. We understand Corning Cable restricted the selling of
the Opticon Network Management software to MSOs, while ignoring the rest of the
potential user categories.





In April
2006, we appointed Marketing Solutions International, Inc. as our non-exclusive
agent to sell our Opticon Network Manager software to customers in Europe and
the Arabian peninsula on a best efforts basis. The appointment is for one year,
and automatically renews for an additional six months, unless terminated by
either party in writing thirty days prior to the expiration of the initial term.
MSI will receive a commission of ten percent of amounts collected for sales it
facilitates. We do not intend to restrict MSI to the territories identified in
the agreement, but to permit it to market worldwide. At the date of this annual
report, MSI has informed us that they intend to market the Opticon Network
Manager software in India, Pakistan, England, Norway, Germany, Cameroon and
Gabon. No sales have been made under the agreement. Information about MSI can be
found on the Internet at www.marketingsolutionsintl.com.




In
September 2006, we entered into a one-year Joint Distribution Agreement with
Anritsu Corporation of Japan. Under this agreement we grant to Anritsu and
Anritsu grants to us the non-exclusive right to sell to our respective end-user
customers a remote fiber test system that is comprised in part or in whole of
Anritsu’s remote test units (RTU). Our agreement with Anritsu terminated. No
sales have been made under the agreement.





Our
Intellectual Property and Its Protection





Our
intellectual property consists of all of Corning Cable’s intellectual property
related to the Opticon Network Manager software. Our rights by purchase in our
intellectual property are equivalent to that of any developer or creator of
intellectual property. We have exclusive ownership of the Opticon Network
Manager software, with the exclusive right to license it to others. See,
“Licensing of the Opticon Network Manger Software by Corning Cable” and “What We
Purchased From Corning Cable”. Corning Cable’s existing licenses to use the
Opticon Network Manager software do not have any impact on our right and title
to Opticon Network Manager software. Those licenses are analogous to selling
copies of a book, which have no impact on the ownership of the copyright or
intellectual property that is embodied in the book and the right to sell
additional copies of the book.





We regard
our Opticon software and its documentation as proprietary and the source code
for the software as a trade secret. We intend to implement confidentiality
procedures, contractual arrangements, physical security systems and other
measures to protect our proprietary and trade secret information when be begin
to hire employees. As part of our confidentiality procedures, we plan generally
enter into non-disclosure agreements with our employees, and our license
agreement will include provisions for protection of our proprietary information.
We also plan to educate our employees on trade secret protection and employ
measures to protect our facilities and equipment. We plan to license the Opticon
software under signed license agreements that impose restrictions on the
licensee’s ability to utilize the software and do not permit the re-sale,
sublicense or other transfer of the software.




We
acquired the name Opticon and the design associated with it from FutureTech. The
trademark was acquired by FutureTech from Corning Cable. The trademark is not
registered. At the present time, two other companies have trademark
registrations for “Opticon”, one for bar code scanners and another for
educational seminars in computer software. There is no assurance one of these
companies, or others may not claim that our corporate and product name infringe
their registered trademarks.





We do not
have any issued patents and pending patent applications covering the Opticon R3
Network Manager Software. We may file applications for one or more patents, in
the event we determine that features of the Opticon R4 system may be
patentable.





Our
Opticon software is protected under U.S. and international copyright laws and
laws related to the protection of intellectual property and proprietary
information. Neither we, nor to our knowledge Corning Cable, has filed a U.S.
copyright registration. We may file a registration for the Opticon R4 system
when it is complete. We take measures to label our product with the
appropriate proprietary rights notices, and we plan to actively enforce such
rights in the U.S. and abroad. We believe that our ability to maintain and
protect our intellectual property rights is important to the success of our
business. Our intellectual property is at this time our only asset that will
enable us to engage in our planned business. The measures for its protection
described in this section may not provide




- 12
-


sufficient
protection, and our intellectual property rights may be challenged. Efforts to
enforce our intellectual property rights in litigation, or defend suits brought
against us for copyright infringement, which we do not have reason to expect,
would be expensive and consume substantial amounts of our management’s time. Our
ability to pursue remedies against person who we believe may infringe our
intellectual property rights will depend on our financial condition from time to
time.




Competition




Our
competitions’ OSS systems cannot provide, at the present time, most of the
features and functionality of the Opticon Network Manager software.




The
Opticon Network Manager software starts at a vastly different level of
granularity compared to competing OSS suites. OSS suites are element managers,
managing logical, not physical, network configurations. They manage the hardware
(primarily, switches and routers) on the network and identify circuits by the
hardware ports to which the fiber is hook up. We manage the physical network at
the fiber strand level in the fiber optic cable. This is the reason we
can inventory to the fiber strand level whether the strand is hooked up to a
port or not. This is the reason why we can apply metrics to the cable and our
competitors’ OSS Systems cannot do so at the present time. OSS suites are
dealing with a logical representation of the network based on the equipment on
the network. We are dealing with the physical characteristics of the
network.





We
compete against a number of companies who provide OSS/network management
solutions. Those companies presently provide only a small part of the solution
that must be integrated by the user into a total solution, or the competitor’s
solution was built for a copper network and doesn’t have the capabilities to
provide effective management of a fiber optic system.




Telcordia
is our only competitor in the core RBOC marketplace. Telcordia supports the
wireline (copper) system as it exists today in the ILEC/RBOC marketplace. It
does not support a fiber optic system. It is IBM Mainframe based, written in
COBOL, has a very difficult time interfacing with the present legacy systems and
is extremely structured and procedural. We believe Telcordia would have to
design and write any support program for fiber optic cable systems from scratch.
What is now known as Telcordia was actually the software development arm of
AT&T prior to the breakup of the Bell System. They were chartered to build
the network management systems for the core network. We believe that Telcordia
by culture and by the nature of their technological pool of talent is not
positioned to create an operational fiber optic management system in the
three-year time frame required by the RBOCs.




We
provide the only solution that we are aware of that can provide support across
the fiber optic life cycle and has the scalability to meet the operational needs
of the RBOC community. Once a fiber optic cable system operator selects a
solution for their core network we believe it will be unlikely the will revisit
the solution selection unless it fails. Once we make a sale, we expect recurring
revenues from annual licensing fees and sales of maintenance and technical
support.




We
believe that none of our competitors can match our reliability and economic
viability in a fiber optic environment. They all believe that a two dimensional
(GIS) or logical (OSS) solution can provide the appropriate support level. We
believe they are mistaken, as their products were developed for the MSO that has
not had to deal with the QoS issues associated with providing telephone service.
Based on the length of time we understand that it took Corning Cable to develop
the R4 system to the seventy-fiver percent completion point, we believe that it
will take any potential competitor starting from scratch thirty to thirty-six
months to field a system to compete with the OptiCon system. We believe the
market requires delivery of this solution in less than thirty-six
months.





Our
Employees





At the
date of this annual report, we have no full-time and two part-time executive
employees. Also, Jeffrey A. Hoke and Jacques Laurin, both current or former
Corning Cable employees, are providing consulting services and are expected to
join us on a full-time basis when we have funding at a minimum level of
$1,000,000. Also, if we are successful in obtaining this minimum funding amount
and licensing the Opticon Network Manager software to




- 13
-


at least
ten customers, of which there is no assurance in either case, we expect to have
a need to employ a total of forty-four personnel in the following
positions:





Individual Employees
            
            Departments and
FunctionsPresident
      and Chief Executive Officer
            
            Human
      Resources Department (2)Chief
      Technical Officer
            
            Accounting
      Department (2)Senior
      Vice President of Sales
            
            Sales
      Department (5)Senior
      Vice President for Professional Services
            
            Development
      Programmers (6)Vice
      President of Development
            
            Training
      (3)Director
      of Systems Engineering
            
            Professional
      Services (7)System
      Engineers (5)Administration
      (4)Information
      Technology




The numbers in parenthesis following
certain positions indicate the number of personnel in the respective
position.




Item
1A.  Risk factors




We wish
to caution you that there are risks and uncertainties that could cause our
actual results to be materially different from those indicated by forward
looking statements that we make from time to time in filings with the U.S.
Securities and Exchange Commission, news releases, reports, proxy statements,
registration statements and other written communications as well as oral forward
looking statements made from time to time by our representatives. These risks
and uncertainties include, but are not limited to, those risks described below
that we are presently aware of. Additional risks and uncertainties that we
currently deem immaterial may also impair our business operations, and
historical results are not necessarily an indication of the future results. The
cautionary statements below discuss important factors that could cause our
business, financial condition, operating results and cash flows to be materially
adversely affected.




An
investment in our common stock involves a high degree of risk. Therefore, if you
are considering buying our common stock, you should consider all of the risk
factors discussed below, as well as the other information contained in this
registration statement. You should not invest in our common stock unless you can
afford to lose your entire investment and you are not dependent on the funds you
are investing in order to pay your monthly expenses.





WITHOUT
MINIMUM FUNDING OF $5 MILLION AND ADDITIONAL FUNDING OF UP TO $20 MILLION, WE
MAY NOT BE ABLE TO ESTABLISH, MAINTAIN AND GROW OUR BUSINESS.


At the
date of this registration statement, we do not have the funding we require to
maintain our business. Furthermore, we do not have any existing or ongoing
arrangement, understandings, commitments or agreements for additional
funding.  Failure to raise additional debt or equity funding would
prevent us from completing development of the Opticon R4 system and possibly
cease operations. There is no assurance that we will be able to obtain
sufficient debt or equity funding, or that the terms of available funding will
be acceptable to us. Failure to raise additional debt or equity funding would
most probably result in a complete loss of their investment by purchasers of our
common stock.





WE HAVE
NOT BEGUN TO MARKET THE OPTICON SYSTEM, HAVE NOT MADE ANY SALES OR EARNED ANY
REVENUES AND HAVE NO CUSTOMERS, AND OUR NEXT-GENERATION SOFTWARE IS NOT
COMPLETE


We have
not begun any marketing, have not made any sales and have no customers. There is
no assurance we will be able to sell licenses to our Opticon Network Manager
software and sell related service contracts. If we are not able to do so, we
will be unable to remain in business. Our next-generation Opticon R4 software is
approximately seventy-five percent complete and cannot be marketed in its
current state of development.





WE DO NOT
HAVE ANY PERSONNEL WITH PRIOR EXPERIENCE IN OUR BUSINESS, WHICH MAY HINDER OUR
SUCCESS


At the
date of this annual report, we do no have any employees who have prior
experience with our business. Accordingly, we may be unable to achieve success
in our business.





- 14
-


“PENNY
STOCK” RULES MAY MAKE BUYING OR SELLING OUR COMMON STOCK DIFFICULT


Trading
in our securities is expected to be subject, at least initially, to the “penny
stock” rules. The SEC has adopted regulations that generally define a penny
stock to be any equity security that has a market price of less than $5.00 per
share, subject to certain exceptions, none of which apply to our common stock.
These rules require that a broker-dealer who recommends our common stock to
persons other than its existing customers and accredited investors, must, prior
to the sale:




●
            Make
      a suitability determination prior to selling a penny stock to the
      purchaser;●
            Receive
      the purchaser’s written consent to the transaction;●
            Provide
      certain written disclosures to the purchaser;●
            Deliver
      a disclosure schedule explaining the penny stock market and the risks
      associated with trading in the penny stock market;●
            Disclose
      commissions payable to both the broker-dealer and the registered
      representative; and●
            Disclose
      current quotations for the common
stock.





The
additional burdens imposed upon broker-dealers by these requirements may
discourage broker-dealers from effecting transactions in our common stock, which
could severely limit the market price and liquidity of our common stock. These
requirements may restrict the ability of broker-dealers to sell our common stock
and may affect your ability to resell our common stock.





THE PRICE
OF OUR COMMON STOCK MAY FLUCTUATE SIGNIFICANTLY AND YOU MAY FIND IT DIFFICULT TO
SELL YOUR SHARES AT OR ABOVE THE PRICE YOU PAID FOR THEM


We do not
know the extent to which the market for our shares of common stock may be
volatile. Therefore, your ability to resell your shares may be limited. Actions
or announcements by our competitors and economic conditions, as well as
period-to-period fluctuations in our financial results and other factors, may
have significant effects on the price of our common stock and prevent you from
selling your shares at or above the price you paid for them.





Item
1B.   Unresolved staff comments




None.




Item
2.     Properties




Our
executive office and computer center is now located in an “office suite” under
an annual lease, beginning August 1, 2007, at a monthly rent of $625, plus sales
tax and ancillary services. Our lease provides us with one office of
approximately500 square feet and reception services, as well as, access as
needed to a conference room and office support services.  The facility
will not be adequate for our operational needs in the event we obtain funding
and acquire customers.





Item
3.     Legal proceedings





(a)  We
are not engaged in any legal proceedings at the date of this report, nor are we
aware of any demands or claims against us that may result in
litigation.  We may be involved in legal proceedings from time to time
in the normal course of our business.





(b)  We
did not terminate any legal proceedings during the fourth quarter of our 2008
fiscal year.




Item
4.     Submission of matters to a vote of security
holders




We did
not submit any matter to a vote of our security holders, through the
solicitation of proxies or otherwiseduring the fourth quarter
of our 2008 fiscal year.






- 15
-


PART II




Item
5.     Market for registrant’s common equity, related
stockholder matters and issuer purchases of equity securities





Our common stock is
quoted on OTC Bulletin Board under the symbol “OPCN”.





Price
History of our common stock.




The
following table sets forth high and low bid quotations for the quarters
indicated and trading volume data for our common stock for the period
indicated.  These quotations reflect inter-dealer prices, without
retail mark-up, mark-down or commission, and may not necessarily represent
actual transactions.





High Bid
            
            Low BidFiscal
      2008:Fourth
      Quarter
            
            $
            .13
            
            $
            .05Third
      Quarter
            
            $
            .90
            
            $
            .80Second
      Quarter
            (1)
            $
            N/A
            
            $
            N/AFirst
      Quarter
            (1)
            $
            N/A
            
            $
            N/AFiscal
      2007:Fourth
      Quarter
            (1)
            $
            N/A
            
            $
            N/AThird
      Quarter
            (1)
            $
            N/A
            
            $
            N/ASecond
      Quarter
            (1)
            $
            N/A
            
            $
            N/AFirst
      Quarter
            (1)
            $
            N/A
            
            $
            N/A


(1)  OptiCon
began trading in the OTC Bulletin Board on January 11, 2008.





As of
August 30, 2008, we had 57 shareholders of record and approximately 985
beneficial shareholders, and we had 71,053,946 shares of $0.001 par value common
stock outstanding.





Dividend
Policy




We have
never declared or paid any cash dividends on our capital stock. We do not have
earnings out of which to pay cash dividends.  Our board of directors
has the authority to declare cash dividends when and if we have earning
sufficient for that purpose.





Equity
Compensation Plan




See
description our Stock Option Plan in Item 12.




Transfer
Agent




We have
engaged Island Stock Transfer, Inc. to serve as our stock register and transfer
agent.  Island’s address is Suite 705N, 100 Second Avenue South, St.
Petersburg, Florida 33701.




Sales of
Unregistered Securities




The
following table sets forth information about our unregistered sales of
securities during the fiscal year ended June 30, 2008.





Date
            Title
      of Security
            Amount
            Purchaser
            
            Price
            Exemption2008
            Common
      stock
            500
            Island
      Stock Transfer, Inc
            (1)
            Fees
            Section
      4(2)2008
            Common
      stock
            6,000
            Cristino
      L. Perez
            (2)
            Services
            Section
      4(2)2008
            Common
      stock
            56,326,560
            Saed
      (Sam) Talari
            (3)
            Conversion
            Section
      4(2)2008
            Common
      stock
            12,003,734
            Saed
      (Sam) Talari
            (4)
            Conversion
            Section
      4(2)




- 16
-


(1)
Issued to our stock transfer agent in payment for set up fees.


(2)
Issued to our chief financial officer in payment for services under a one-year
consulting agreement.


(3)
Issued Mr. Talari, one of our directors, in conversion of a 5% Subordinated
Convertible Debenture issued December 15, 2007 and due December 31, 2008.. Mr.
Talari assigned the issuance of these shares to NeuWorld Communications, Inc., a
company owned entirely by Mr. Talari.


(4)
Issued Mr. Talari, one of our directors, in conversion of a 5% Subordinated
Convertible Debenture issued July 2, 2008 and due December 31,
2008.  Mr. Talari assigned the issuance of these shares to NeuWorld
Communications, Inc., a company owned entirely by Mr. Talari.





We have
agreed to issue Jackson L. Morris, our securities counsel, 2,500 shares of our
common stock in partial payment of his legal fees pursuant to a registration
statement on Form S-8, to be filed.





We did
not pay and no one acting on our behalf or to our knowledge paid any commissions
or other compensation with respect to the sale of any of the shares listed in
the tables above.  Mr. Morris agreed to accept our common stock in
partial payment after he became thoroughly familiar with our proposed business
in the course of rendering services to us as our securities counsel. Both Mr.
Perez and Mr. Talari are thoroughly familiar with our proposed business in their
respective positions as chief financial offier and director , None of these
transactions involved a public offering. A legend was placed on each certificate
that has been issued, prohibiting public resale of the shares, except subject to
an effective registration statement under the Securities Act of 1933, as amended
(the “Act”) or in compliance with Rule 144. We claim exemption from the
registration requirement of the Act by reason of Section 4(2) of the Act and the
rules and regulations there under, on grounds that none of the sales listed
above involve a public offering within the meaning of the Act. Furthermore,
although the value of the shares we have issued and agreed to issue is
uncertain, we believe we may also rely on Rule 504 under Regulation D as an
exemption from registration.





Item
6.   Selected financial data(Unaudited)








Item 7.   Management’s discussion and
analysis of financial condition and results of operations





Our
significant accounting policies are more fully described in Note 1 to the
financial statements. However, certain accounting policies are particularly
important to the portrayal of our financial position and results of operations
and require the application of significant judgment by our management; as a
result they are subject to an inherent degree of uncertainty. In applying these
policies, our management uses their judgment to determine the appropriate
assumptions to be used in the determination of certain estimates. Those
estimates are based on knowledge of our industry, historical operations, terms
of existing contracts, our observance of trends in the industry, information
provided by our customers and information available from other outside sources,
as appropriate.





Our critical
accounting policies include:





·
            Long-Lived Assets - We
      depreciate property and equipment and amortize intangible assets,
      including software development costs over the respective assets’ estimated
      useful life and periodically review the remaining useful lives of our
      assets to ascertain that our estimate is still valid. If we determine a
      useful life has materially changed, we either change the useful life or
      write the asset down or if we determine the asset has exhausted its useful
      life, we write the asset off
completely.





·
            Capitalized Software
      Development Costs - We capitalize software development costs
      incurred subsequent to the establishment of technological feasibility and
      amortize them over the estimated lives of the related products. We
      discontinue capitalization of software when the software product is
      available to be sold, leased, or otherwise marketed. Amortization of
      software costs begins when the developed product is available for release
      to customers. We anticipate amortizing software development costs over the
      estimated economic life of the
product.





·
            Stock Based
      Compensation - We account forstockbasedcompensation
      using the provisions of SFAS No. 123R “Share-Based Compensation.” Under
      the fair value recognition provisions of SFAS 123R, we recognizestock-basedcompensation
      expense net of an estimated forfeiture rate and therefore only recognize
      compensation cost for those shares expected to vest over the service
      period of the award.Calculatingstock-basedcompensation expense requires the input of
      subjective assumptions, including the expected term of the option grant,
      stock price volatility, and the pre-vesting option forfeiture rate. We
      estimate the expected life of options granted based on historical exercise
      patterns. We estimate stock price volatility based on historical implied
      volatility in our stock. In addition, we are required to estimate the
      expected forfeiture rate and only recognize expense for those shares
      expected to vest. We estimate the forfeiture rate based on historical
      experience of our stock-based awards that are granted, exercised, or
      cancelled.


- 17
-


Recent Accounting Pronouncements:
  In September 2006, the Financial Accounting Standards
Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) 157
Fair Value Measurements. SFAS 157 defines fair value, establishes a framework
for measuring fair value in generally accepted accounting principles (“GAAP”)
and expanded disclosures about fair value measurements. This Statement is
effective for financial statements issued for fiscal years beginning after
November 15, 2007.
  In February 2008, the FASB issued FASB Staff Position
No. 157-2 ("FSP 157-2"), which delayed the effective date by which companies
must adopt the provisions of SFAS 157.  FSP 157-2 defers the effective
date of SFAS 157 to fiscal years beginning after November 15, 2008, and interim
periods within those fiscal years. The adoption of this standard is not
anticipated to have a material impact on our financial position, results of
operations, or cash flows.
  In September 2006, the Securities and Exchange
Commission issued Staff Accounting Bulletin (SAB No. 108), Considering the
Effects of Prior Year Misstatements When Quantifying Current Year
Misstatements.  SAB No. 108 requires analysis of misstatements using both
an income statement (rollover) approach and a balance sheet (iron curtain)
approach in assessing materiality and provides a one-time cumulative effect
transition adjustment.  SAB No. 108 is effective for the Company’s June 30,
2007 financial statements.  The adoption of SAB No. 108 does not impact the
Company's financial statements.
  In February 2007, the FASB issued SFAS No. 159,
“The Fair Value Option for Financial Assets and Financial Liabilities -
Including an Amendment of FASB Statement No. 115.” SFAS No. 159
permits an entity to choose to measure many financial instruments and certain
other items at fair value. SFAS No. 159 was effective for the Company at
the beginning of 2008. The Company’s adoption of the provisions of
SFAS No. 159 does not impact our financial
statements.
  In December 2007, the
FASB issued SFAS No. 141R,Business
Combinations, which
establishes principles andrequirements for
how the acquirer of a business recognizes and measures in its financial
statements the identifiable assets acquired, the liabilities assumed, and any
non-controlling interest in the acquiree.  SFAS 141R also provides
guidance for recognizing and measuring the goodwill acquired in the business
combination and determines what information to disclose to enable users of the
financial statements to evaluate the nature and financial effects of the
business combination.  SFAS 141R is effective for fiscal years
beginning after December 15, 2008.  Early adoption is not
permitted.  We are currently evaluating the effect of the adoption of
SFAS 141R, but do not presently anticipate it will have a material impact on our
financial position or results of operations.
  In December 2007, the FASB issued SFAS No. 160,
Non-controlling Interests in Consolidated Financial Statements-an amendment of
ARB No. 51, which establishes accounting and reporting standards for the
non-controlling interest in a subsidiary and for the deconsolidation of a
subsidiary. It clarifies that a non-controlling interest in a subsidiary is an
ownership interest in the consolidated entity that should be reported as equity
in the consolidated financial statements. SFAS 160 is effective for fiscal years
beginning after December 15, 2008.  The Company is currently
evaluating the effect of the adoption of SFAS 160, but do not presently
anticipate it will have a material effect on our consolidated financial position
or results of operations.
  In March 2008, the FASB issued SFAS No. 161, Disclosures
about Derivative Instruments and Hedging Activities ("SFAS
161").  This statement is intended to enhance required disclosures
regarding derivatives and hedging activities, including enhanced disclosures
regarding how: (a) an entity uses derivative instruments; (b) derivative
instruments and related hedged items are accounted for under FASB No. 133,
Accounting for Derivative Instruments and Hedging Activities; and (c) derivative
instruments and related hedged items affect an entity's financial position,
financial performance, and cash flows. SFAS 161 is effective for fiscal years
and interim periods beginning after November 15, 2008. We are currently
evaluating the effect of adoption of SFAS 161, but do not presently believe that
it will have a material effect on our consolidated financial position or results
of operations.


PLAN OF
OPERATIONS




As more
fully described in “LIQUIDITY AND CAPITAL RESOURCES”, we had $0 in cash at June
30, 2008, and $281,592 remaining on the line of credit from Mr. Talari with
which to satisfy our future cash requirements. Our management believes our cash
and credit line will support only limited activities for the next twelve months.
We are attempting to secure other sources of financing to develop our business
plan, and to implement our sales and marketing plan. We believe full
implementation of our plan of operations and completion of development of the R4
system will cost approximately $5 million. We have no assurance we will be able
to obtain additional funding to sustain even limited operations beyond twelve
months based on the available cash and balance of our line of credit with Mr.
Talari. If we do not obtain additional funding, we may need to cease operations
until we do so and, in that event, may consider a sale of our technology. Our
plan of operations set forth below depends entirely upon obtaining additional
funding.





We do not
have any ongoing discussions, arrangements, understandings, commitments or
agreements for additional funding. We will consider equity funding, either or
both of a private sale or a registered public offering of our common stock;
however, it seems unlikely that we can obtain an underwriter. We will consider a
joint venture in which the joint venture partner provides funding to the
enterprise. We will consider debt financing, both unsecured and secured by a
pledge of our technology. As noted above, we may be forced to cease operations
without additional funding, after our limited cash and line of credit with Mr.
Talari are exhausted.




- 18
-


Our Marketing
Plan





The first
phase in our plan of operations, subject to adequate funding, will be
implementation of our sales and marketing plan. We plan to initially contact
those companies to which Corning Cable licensed the Opticon Network Manager
software to offer maintenance and professional services with respect to the R3
software they continue to utilize. Since Corning Cable stopped supporting the R3
software, these companies have been without a means to maintain and support the
software. We would be able to provide them with seamless integration with other
programs or newer version of programs being used, and provide them with full
maintenance and support.





We also
plan to begin marketing to the MSO (cable companies) market. In
parallel with this activity we plan to contact the seven consulting firms
servicing the ISO market. These firms act as a technical staff for this market,
as it is too costly for the individual ISOs to keep a full time technical staff.
The consulting firms also provide strategic technical analysis for this
market segment as the ISOs do not have the resources or staff to provide
this function on their own.





Product Research and
Development





Our
OptiCon R4 software system is still under development and not ready for
commercial licensing; we estimate it is seventy-five percent complete. We have
budgeted $2.2 million to complete the development of the R4 system. We do not
have financial or other resources to undertake this development. Without
additional funding sufficient to cover this budgeted amount, we will not have
the resources to conduct this development.




We
anticipate that as funding is received, of which there is no assurance, we will
begin hiring the appropriate technical staff who will be able to handle support
requirements for this market segment. We anticipate a need for up to forty-four
employees by the end of the first year of full operation after funding. The
number of employees we hire during the next twelve months will depend upon the
level of funding and sales achieved.





Funding





To
support our activities and provide the initial sales and support for entry into
the large service provider and cable company marketplace, as noted above, we
will require an initial investment of approximately $5 million. We expect this
level of funding to carry us into the MSO and ISO marketplaces and provide the
capital necessary to complete the development of OptiCon R4 system, our next
generation product which is not now ready for commercial licensing. The
following table depicts the areas of development, assuming attainment of
different level of funding.





Level
      of Funding
              $1,000,000
            
            Level
      of Funding
              $2,500,000
            
            Level
      of Funding
              $5,000,000Securing
      adequate facilities (approximately 12,500 square feet of
      space)
            
            N/A
            
            Securing
      an additional 12,500 to 25,000 square feet facilityHiring
      approximately 12 product support, marketing, and administrative
      staff
            
            Hiring
      an additional 12 product support and marketing staff, 3 product
      development staff, and additional administrative staff.
            
            Hiring
      additional 12 product support, marketing and administrative support
      staff.Acquiring
      furniture and fixtures for the facilities and staff, acquire computer
      systems
            
            Acquire
      additional furniture and equipment for staff, and acquire additional
      computers and upgrade present system.
            
            Upgrade
      computer systems to accommodate handling large MSO and ISO
      companiesHiring
      of product support and development department heads.
            
            N/A
            
            N/AN/A
            
            Commence
      the development of OptiCon R4 software system.
            
            Complete
      the development of the OptiCon R4
system.




Our
previous efforts to secure funding have been unsuccessful.





- 19
-


On
October 8, 2004, we engaged Abacus Capital, LLC to be our non-exclusive agent,
on a best efforts basis, to obtain equity or other funding acceptable to us and
to identify acquisition targets, joint venturers and strategic partners.
 We have given verbal notice of cancellation for non-performance, but do
not have a current address for Abacus to which to send a written notice. We
agreed to pay Abacus a monthly retainer of $10,000 beginning with the first
funding, which has never occurred, and a success fee ranging between two and ten
percent (less retainer paid), depending upon the amount of the funding, plus
common stock purchase warrants exercisable for two years in an amount equal to
two percent of the cash fees based on the selling price of the common shares on
the public market as of the day of closing of any transaction. We also agreed to
issue Abacus non-restricted common shares equal to twenty percent of our issued
and outstanding common stock upon acceptance of a minimum of $500,000 in
aggregate consideration or upon acceptance of an agreement to merge with a
target introduced to us by Abacus. Abacus has not performed any services which
entitle it to compensation under the agreement or provided us with any
funding.





We
engaged Bentley Securities Corporation beginning November 11, 2005 as our
exclusive financial advisor and placement agent on a best efforts basis to
arrange equity funding or other financing or commitments for financing as we
deem appropriate. We terminated the agreement for non-performance on
September 30, 2006. During the year the agreement was in force, we paid
Bentley’s principals a non-refundable retainer aggregating 1,651 common stock
purchase warrants exercisable at $73 per share (which were recorded as
compensation in the aggregate amount of $34,499) and were obligated to pay
Bentley a success fee in cash equal to 6.5 percent of any total gross financing
it arranged. As of June 30, 2006, the Company issued 541 warrants to the
principals of Bentley, and recorded compensation for services in the amount of
$17,999. We also agreed to indemnify and hold harmless Bentley from losses,
claims, damages, expenses, actions, proceedings or investigations, or threats
thereof based upon, relating to or arising out the agreement, unless such
losses, etc., were the result of Bentley’s willful misconduct, bad faith or
gross negligence.





LIQUIDITY
AND CAPITAL RESOURCES





For the
year ended June 30, 2008





For the
year ended June 30, 2008, we incurred a net loss of $372,042. Of this loss,
$198,698,
consisting of depreciation of ($3,031) and deferred compensation to our officers
($168,667),
as well as issuance of common stock in exchange for services ($27,000) did not
require the use of cash. Increases in prepaid and other expenses, offset by
increases in accounts payable, payroll, salary, and other accruals brought the
total cash used in operations to $167,023.


On
September 6, 2005, we obtained a loan commitment from Mr. Talari, one of
our director and controlling person in the aggregate amount of $350,000 under a
master promissory note, due on demand, with interest at the rate of five percent
per annum. We have been receiving advances on this note on an as needed basis
and have drawn a total of $333,107 as of June 30, 2008.  On December
15, 2007, advances of $264,699 plus accrued interest of $16,702 were converted
into a 5% Convertible Debenture.  On July 1, 2008, Mr. Talari
converted the debenture into our common stock.  At June 30, 2008 the
balance due Mr. Talari on the promissory note is $68,408, so that we have
effectively a line of credit available of $281,592 available to us on an as
needed basis.  On July 2, 2008, a portion of the debt plus accrued
interest of $60,019 was converted into a second 5% Convertible Debenture, and
then, on August 7, 2008, Mr. Talari converted the second debenture into our
common stock.




As of
June 30, 2008, we had $0 in cash, along with $281,592 remaining on the line of
credit from Mr. Talari to pay normal operating expenses, while we attempt to
secure other sources of financing to develop our business plan, and to start
implementation of our marketing plan.




At June
30, 2008, we had no contractual obligation or material commercial commitments
for capital expenditures.





Off-Balance
Sheet Arrangements




We do not
participate in transactions that generate relationships with unconsolidated
entities or financial partnerships, such as special purpose entities or variable
interest entities, which have been established for the purpose of facilitating
off-balance sheet arrangements or other limited purposes.




Item 7A.  Quantitative and Qualitative
Disclosures About Market Risk.





Omitted





- 20
-
 
 Item
8.     Financial statements and supplementary
data
      OptiCon
Systems, Inc.
 2008
Annual Report
 Index to
Financial Statements and Financial Statement Schedules
  PageReport
      of Independent Registered Public Accounting Firm
                
                22Balance
      Sheets
                
                23Statements
      of Operations
                
                24Statements of Changes in Stockholders’
      Defict
                
                25Statements
      of Cash Flows
                
                26Notes
      to Consolidated Financial Statements
                
                27Financial
      Statement Schedule
  
     - 21
-






REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
 
 
 To the
Board of Directors and Stockholders of
 OptiCon
Systems, Inc.
 Tampa,
Florida
 
 We have
audited the accompanying consolidated balance sheet of OptiCon Systems, Inc as
of June 30, 2008 and 2007 and the related consolidated statement of operations,
stockholders’ deficit, and cash flows for the years ended June 30, 2008 and 2007
and for the period from October 22, 2004 (inception) to June 30, 2008. 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 audits 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 audits 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 also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, 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 consolidated financial statements referred to above present fairly,
in all material respects, the financial position of Opticon Systems, Inc. as of
June 30, 2008 and 2007, and the results of their operations, changes in
their stockholders deficit and their cash flows for the years ended June 30,
2008 and 2007 and period from October 22, 2004 (inception) to June 30, 2008, in
conformity with accounting principles generally accepted in the United States of
America.
 
 The
accompanying consolidated financial statements have been prepared assuming that
the Company will continue as agoingconcern. As shown in the financial statements and discussed in Note 3 of the
accompanying financial statements, the Company has incurred significant
recurring losses from operations since inception and is dependent on outside
sources of financing for continuation of its operations. These factors raise
substantial doubt about the Company’s ability to
continue as a going concern.
 
 
 
 
 
 
 Tampa,
Florida
 October
14, 2008
   - 22
-
 OptiCon
Systems, Inc.
 (A
Development Stage Enterprise)
 Balance
Sheets
  June
      30,2008
              
              
              2007ASSETSCurrent
      assetsCash
      and cash equivalents
              
              $
              —
              
              
              $
              3,579Prepaid
      expenses
              
              
              9,600
              
              
              
              —Total
      current assets
              
              
              9,600
              
              
              
              3,579Property
      and equipment, net
              
              
              5,354
              
              
              
              3,869Intangible
      assets, net
              
              
              213,112
              
              
              
              213,112Other
      assets
              
              
              625
              
              
              
              —Total
      assets
              
              $
              228,691
              
              
              $
              220,560LIABILITIES
      AND STOCKHOLDERS’ DEFICITCurrent
      liabilitiesBank
      overdraft
              
              $
              6,425
              
              
              $
              —Accounts
      payable
              
              
              15,319
              
              
              
              27,404Accrued
      expenses
              
              
              391,257
              
              
              
              1,243,838Note
      payable
              
              
              6,000
              
              
              
              —Debenture
      payable - related party
              
              
              281,401
              
              
              
              —Loan
      and note payable - related parties
              
              
              77,033
              
              
              
              196,197Total
      current liabilities
              
              
              777,435
              
              
              
              1,467,439Stockholders’
      DeficitPreferred
      stock, $.001 par value50,000,000
      shares authorized, none issued
              
              
              —
              
              
              
              —Common
      stock, $.001 par value, 250,000,000 sharesauthorized,
      1,723,808 and 1,580,625, respectively, issued and
    outstanding
              
              
              1,724
              
              
              
              1,581Additional
      paid-in capital
              
              
              1,224,301
              
              
              
              153,917Subscription
      receivable
              
              
              (350
              )
              
              
              —Deficit
      accumulated during the development stage
              
              
              (1,774,419
              )
              
              
              (1,402,377
              )Total
      stockholders’ deficit
              
              
              (548,744
              )
              
              
              (1,246,879
              )Total
      liabilities and stockholders’ deficit
              
              $
              228,691
              
              
              $
              220,560
  The
accompanying notes are an integral part of these financial
statements.
   - 23
-
 OptiCon
Systems, Inc.
 (A
Development Stage Enterprise)
 Statements
of Operations
  Period
      October22,
      2004For
      theYears Ended
              
              
              (inception)
      toJune
      30,
              
              
              June
      30,2008
              
              
              2007
              
              
              2008(unaudited)Net
      sales
              
              $
              —
              
              
              $
              —
              
              
              $
              —Cost
      of goods sold
              
              
              —
              
              
              
              —
              
              
              
              —Gross
      profit
              
              
              —
              
              
              
              —
              
              
              
              —Operating
      expensesSalaries
      and benefits
              
              
              184,618
              
              
              
              642,000
              
              
              
              1,465,118Consulting
      services
              
              
              130,800
              
              
              
              5,999
              
              
              
              201,298Other
      general and administrative
              
              
              10,419
              
              
              
              28,315
              
              
              
              102,850Allocable
      software costs
              
              
              —
              
              
              
              (22,779
              )
              
              
              (115,111
              )Legal
      and accounting
              
              
              30,500
              
              
              
              62,863
              
              
              
              93,363Operating
      loss
              
              
              356,337
              
              
              
              716,398
              
              
              
              1,747,518Non
      operating income (expense)Interest
      expense
              
              
              (15,705
              )
              
              
              (8,094
              )
              
              
              (27,103
              )Miscellaneous
      income
              
              
              —
              
              
              
              —
              
              
              
              202(15,705
              )
              
              
              (8,094
              )
              
              
              (26,901
              )Loss
      from operations before income taxes
              
              
              (372,042
              )
              
              
              (724,492
              )
              
              
              (1,774,419
              )Provision
      for income taxes
              
              
              —
              
              
              
              —
              
              
              
              —Net
      loss
              
              $
              (372,042
              )
              
              $
              (724,492
              )
              
              $
              (1,774,419
              )Net
      loss per shareBasic
              
              $
              (0.22
              )
              
              $
              (0.46
              )
              
              $
              (1.33
              )Diluted
              
              $
              (0.22
              )
              
              $
              (0.46
              )
              
              $
              (1.33
              ).Weighted
      average common shares outstandingBasic
              
              
              1,679,471
              
              
              
              1,580,625
              
              
              
              1,333,640Diluted
              
              
              1,679,471
              
              
              
              1,580,625
              
              
              
              1,333,640
  The
accompanying notes are an integral part of these financial
statements.
  - 24
-
 OptiCon
Systems, Inc.
 (A
Development Stage Enterprise)
 Statements
of Changes in Stockholders’ Deficit
  AccumulatedDeficit
      DuringtheCommon
              
              
              Additional
              
              
              Subscription
              
              
              DevelopmentShares
              
              
              Stock
              
              
              Paid-in Capital
              
              
              Receivable
              
              
              Stage
              
              
              TotalBalance
      at October 22, 2004
              
              
              —
              
              
              $
              —
              
              
              $
              —
              
              
              $
              —
              
              
              $
              —
              
              
              $
              —Issuance
      of common shares in exchange fororganization
      efforts
              
              
              240,857
              
              
              
              241
              
              
              
              15,759
              
              
              
              —
              
              
              
              —
              
              
              
              16,000Issuance
      of common shares inexchange for services
              
              
              75,268
              
              
              
              75
              
              
              
              4,925
              
              
              
              —
              
              
              
              —
              
              
              
              5,000Net
      (loss)
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              (21,000
              )
              
              
              (21,000
              )Balance
      at June 30, 2005
              
              
              316,125
              
              
              
              316
              
              
              
              20,684
              
              
              
              —
              
              
              
              (21,000
              )
              
              
              —Issuance
      of common shares in exchange forOpticon software and other
      assets
              
              
              1,264,500
              
              
              
              1,265
              
              
              
              98,736
              
              
              
              —
              
              
              
              —
              
              
              
              100,000Issuance
      of common stock purchasewarrants in exchange for
      services
              
              
              —
              
              
              
              —
              
              
              
              17,999
              
              
              
              —
              
              
              
              —
              
              
              
              17,999Net
      (loss)
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              
              
              
              
              (656,885
              )
              
              
              (656,885
              )Balance
      at June 30, 2006
              
              
              1,580,625
              
              
              
              1,581
              
              
              
              137,418
              
              
              
              —
              
              
              
              (677,885
              )
              
              
              (538,886
              )Issuance
      of common stock purchasewarrants in exchange for
      services
              
              
              —
              
              
              
              —
              
              
              
              16,499
              
              
              
              —
              
              
              
              —
              
              
              
              16,499Net
      (loss)
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              
              
              
              
              (724,492
              )
              
              
              (724,492
              )Balance
      at June 30, 2007
              
              
              1,580,625
              
              
              
              1,581
              
              
              
              153,917
              
              
              
              —
              
              
              
              (1,402,377
              )
              
              
              (1,246,879
              )Stock
      dividend
              
              
              99,118
              
              
              
              99
              
              
              
              (99
              )
              
              
              —
              
              
              
              —
              
              
              
              —Issuance
      of common shares in exchangefor services
              
              
              3,000
              
              
              
              3
              
              
              
              2,997
              
              
              
              —
              
              
              
              —
              
              
              
              3,000Contribution
      to capital
              
              
              —
              
              
              
              —
              
              
              
              1,042,827
              
              
              
              —
              
              
              
              —
              
              
              
              1,042,827Sale
      of stock for cash
              
              
              17,500
              
              
              
              18
              
              
              
              332
              
              
              
              —
              
              
              
              —
              
              
              
              350Subscription
      receivable
              
              
              17,500
              
              
              
              17
              
              
              
              333
              
              
              
              (350
              )
              
              
              —
              
              
              
              —Issuance
      of common shares in exchangefor services
              
              
              6,000
              
              
              
              6
              
              
              
              23,994
              
              
              
              —
              
              
              
              —
              
              
              
              24,000Discount
      on conversion feature of debenture
              
              
              —
              
              
              
              —
              
              
              
              281,401
              
              
              
              —
              
              
              
              —
              
              
              
              281,401Amortization
      of conversion feature of debenture
              
              
              —
              
              
              
              —
              
              
              
              (281,401
              )
              
              
              —
              
              
              
              —
              
              
              
              (281,401
              )Fractional
      shares issued
              
              
              65
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —Net
      (loss)
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              (372,042
              )
              
              
              (372,042
              )Balance
      at June 30, 2008
              
              
              1,723,808
              
              
              $
              1,724
              
              
              $
              1,224,301
              
              
              $
              (350
              )
              
              $
              (1,774,419
              )
              
              $
              (548,744
              )
  The
accompanying notes are an integral part of these financial
statements.
  - 25
-
 OptiCon
Systems, Inc.
 (A
Development Stage Enterprise)
 Statements
of Cash Flows
  For
      the PeriodFor
      the Years Ended,
              
              
              October
      22, 2004June
      30,
              
              
              (inception)
      to2008
              
              
              2007
              
              
              June
      30, 2008(Unaudited)Cash
      Flows From Operating ActivitiesNet
      (Loss) from continuing operations
              
              $
              (372,042
              )
              
              $
              (724,492
              )
              
              $
              (1,774,419
              )Adjustments
      to reconcile earnings from continuingoperations to net cash
      provided by operating activities:Depreciation
      and amortization
              
              
              3,031
              
              
              
              2,222
              
              
              
              7,106Issuance
      of common stock in exchange for services
              
              
              27,000
              
              
              
              16,499
              
              
              
              77,498Change
      in working capital components:Prepaid
      expenses
              
              
              (9,600
              )
              
              
              —
              
              
              
              (9,600
              )Bank
      overdraft
              
              
              6,425
              
              
              
              —
              
              
              
              6,425Accounts
      payable
              
              
              (12,085
              )
              
              
              24,724
              
              
              
              15,319Accrued
      expenses
              
              
              190,246
              
              
              
              620,012
              
              
              
              1,434,084Net
      cash (used) by operating activities
              
              
              (167,025
              )
              
              
              (61,035
              )
              
              
              (243,587
              )Cash
      Flows From Investing ActivitiesPurchase
      of property and equipment
              
              
              (4,516
              )
              
              
              (995
              )
              
              
              (7,460
              )Capitalization
      of software development costs
              
              
              —
              
              
              
              (25,780
              )
              
              
              (113,112
              )Decrease
      (increase) in other assets
              
              
              (625
              )
              
              
              1,356
              
              
              
              (625
              )Net
      cash (used) in investing activities
              
              
              (5,141
              )
              
              
              (25,419
              )
              
              
              (121,197
              )Cash
      Flows From Financing ActivitiesLoan
      payable
              
              
              12,000
              
              
              
              —
              
              
              
              12,000Repayment
      of loan payable
              
              
              (6,000
              )
              
              
              
              
              
              
              (6,000
              )Proceeds
      from the sale of common stock
              
              
              350
              
              
              
              —
              
              
              
              350Loan
      payable – Related parties
              
              
              162,237
              
              
              
              88,647
              
              
              
              358,434Net
      cash provided by investing activities
              
              
              168,587
              
              
              
              88,647
              
              
              
              364,784Net
      increase (decrease) in cash and cash equivalents
              
              
              (3,579
              )
              
              
              2,193
              
              
              
              —Cash
      And Cash EquivalentsBeginning
      of period
              
              
              3,579
              
              
              
              1,386
              
              
              
              —End
      of the period
              
              $
              —
              
              
              $
              3,579
              
              
              $
              —SUPPLEMENTAL
      DISCLOSURES ON INTERESTAND INCOME TAXES
PAID:Interest
      paid for the period
              
              $
              —
              
              
              $
              —
              
              
              $
              —Income
      taxes paid for the period
              
              $
              —
              
              
              $
              —
              
              
              $
              —SUPPLEMENTAL
      SCHEDULE OF NONCASH INVESTINGAND FINANCING
      ACTIVITIES:Issuance
      of common stock for software and other assets
              
              $
              —
              
              
              $
              105,000
              
              
              $
              105,000Sale
      of stock subscription
              
              $
              350
              
              
              $
              —
              
              
              $
              350
  The
accompanying notes are an integral part of these financial
statements.
  - 26
-
 OptiCon
Systems, Inc.
 (A
Development Stage Enterprise)
 Notes
to Financial Statements
 For
the Years Ended June 30, 2008 and 2007 and the Period October 22,
2004
 (Date
of Inception) through June 30, 2008 (Unaudited)
 
 1.
History of the Company and Basis of Presentation
 
 The
nature of the business and a summary of the significant accounting policies in
conformity with accounting principles generally accepted in the United States of
America, and consistently applied in the preparation of the accompanying
financial statements are as follows:
 
 (a) History of the
Company
 
 OptiCon
Systems, Inc. (“the Company”) was formed as a Nevada corporation on October 22,
2004.  On July 29, 2005, the stockholders of the Company entered into
an agreement to exchange 100% of the outstanding common stock of the Company,
for common and preferred stock of Isys Medical, Inc., (formerly Hathaway
Corporation), a publicly traded company, at which time, the Company became a
wholly owned subsidiary of Isys Medical.
 
 Isys
Medical, Inc. (“Isys Medical”), OptiCon Systems’ parent company, announced its
intention to spin off OptiCon through by the payment of a stock
dividend.  In connection with the proposed spin off, Opticon’s board
of directors approved a stock dividend of 1,982,356 shares (99,118 shares after
the reverse stock split of June 10, 2008), or approximately 1.06 for 1shares, to
Isys Medical, its sole shareholder.
 
 On August
31, 2007, Isys Medical paid a stock dividend to its stockholders, consisting of
100% of the outstanding common stock of the Company, at the rate of one share of
Opticon Systems stock for every two shares they own of Isys
Medical.  As of this date, Opticon Systems ceased being a subsidiary
of Isys Medical.
 
 (b) Development Stage
Enterprise
 
 Since its
inception, the Company has been in the development stage, dedicated to selling
and/or licensing a fiber optic management software system under the name OptiCon
Network Manager, originally developed, and acquired from Corning Cable System,
Inc. through a related company, FutureTech Capital, LLC.  The Company
expects to continue to incur significant operating losses and to generate
negative cash flow from operating activities while developing its customer base
and establishing itself in the marketplace
 
 The
Company’s ability to eliminate operating losses and to generate positive cash
flow from operations in the future will depend upon a variety of factors, many
of which it is unable to control.  If the Company is unable to
implement the Company’s business plan successfully, it may not be able to
eliminate operating losses, generate positive cash flow, or achieve or sustain
profitability, which would materially adversely affect its business, operations,
and financial results, as well as its ability to make payments on its debt
obligations.
 
 2.  Summary
of Significant Accounting Policies
 
 (a)
Basis of Accounting
 
 The
Company maintains its financial records and financial statements on the accrual
basis of accounting, in conformity with generally accepted accounting principles
in the United States of America. The accrual basis of accounting provides for
matching of revenues and expenses in the period they were earned and
incurred.
 
 - 27
-
 (b) Revenue
Recognition
 
 The
Company is principally in the business of licensing fiber optic management
software, OptiCon Network Manager.  In accordance with Statement of
Position 97-2 – Software
Revenue Recognition, revenue from licensing the software will be
recognized upon installation and acceptance of the software by
customers.  When a software sales arrangement includes rights to
customer support, the portion of the license fee allocated to such support is
recognized ratably over the term of the arrangement, normally one
year.  Revenue from professional services arrangements will be
recognized in the month in which services are rendered over the term of the
arrangement.
 
 (c)
Cash and Cash Equivalents
 
 For
purposes of reporting cash flows, the Company considers all highly liquid
investments with a maturity of three months or less when purchased to be cash
equivalents.  The Company classifies outstanding checks in excess of
funds on deposit as bank overdraft and reduces cash and cash equivalents when
these checks clear the bank on which they were drawn. Outstanding checks in
excess of funds on deposit recorded as bank overdraft were $6,425 at June 30,
2008, none at June 30, 2007. The Company believes it is not exposed to any
significant credit risk on cash and cash equivalents.
 
 (d)
Fair Value of Financial Instruments
 
 Financial
instruments that potentially subject the Company to credit risks consist
primarily of cash equivalents, trade payables and loan payable approximates
their respective fair value at June 30, 2008 and 2007 because of the short
maturity of these instruments.
 
 (e)
Property & Equipment and Depreciation
 
 Property
and equipment are recorded at historical cost. Depreciation is computed on the
straight-line method over estimated useful lives of the respective assets,
ranging from three to five years. The carrying amount of all long-lived assets
is evaluated periodically to determine if adjustment to the depreciation and
amortization period or the unamortized balance is warranted. Based upon the
Company’s most recent analysis, management believes that no impairment of
property and equipment exists at June 30, 2008 and 2007.
 
 (f)   Capitalized
Software Development Costs
 
 The
Company capitalizes software development costs in accordance with Statement of
Financial Accounting Standards No. 86, Accounting for Costs of Computer
Software to be Sold, Leased or Otherwise Marketed, under which certain
software development costs incurred subsequent to the establishment of
technological feasibility may be capitalized and amortized over the estimated
lives of the related products.  Capitalization of computer software
costs is discontinued when the computer software product is available to be
sold, leased, or otherwise marketed.  Amortization begins when the
product is available for release to customers. Software development costs will
be amortized based on the estimated economic life of the
product.  Capitalized software costs at June 30, 2008 and 2007
amounted to $213,112 for each period respectively.
 
 (g) Impairment of Intangible
Assets
 
 Periodically,
the Company assesses the recoverability of the Company’s intangible assets,
consisting of the OptiCon Network Manager software and its trademark, and record
an impairment loss to the extent that the carrying amounts of the assets exceed
its fair value.  Based upon management’s most recent analysis, the
Company believes that no impairment of the Company’s tangible or intangible
assets exist at June 30, 2008 and 2007.
 
 - 28
-
 (h) Stock Based
Compensation
 
 On
January 1, 2006, the Company adopted Statements of Financial Accounting
Standards No. 123 (revised 2004), “Share-Based Payment,” (“SFAS
123(R)”.  In March 2005, the Securities and Exchange Commission
issued Staff Accounting Bulletin No. 107 (“SAB 107”) relating to SFAS
123(R). The Company has applied the provisions of SAB 107 in its adoption of
SFAS 123(R).
 
 The
Company adopted SFAS 123(R) using the modified prospective transition method.
The Company’s financial statements as of and for the years ended June 30, 2008
and 2007 reflect the impact of SFAS 123(R). In accordance with the modified
prospective transition method, the Company’s financial statements for prior
periods have not been restated to reflect, and do not include, the impact of
SFAS 123(R).  Stock-based compensation expense recognized under SFAS
123(R) for employee and directors for the years ended June 30, 2008 and 2007 was
$-0- and $16,500 respectively.
 
 SFAS
123(R) requires companies to estimate the fair value of share-based payment
awards to employees and directors on the date of grant using an option-pricing
model. For stock-based awards issued to employees and directors, stock-based
compensation is attributed to expense using the straight-line single option
method, which is consistent with how the prior-period pro-forma were
provided.   Stock-based compensation expense recognized in the
Statements of Operations for the years ended June 30, 2008 and 2007 included
compensation expense for share-based payment awards granted prior to, but not
yet vested based on the grant date fair value estimated in accordance with the
pro-forma provisions of SFAS 123 and compensation expense for the share-based
payment awards granted subsequent to January 1, 2006 based on the grant
date fair value estimated in accordance with the provisions of SFAS
123(R).
 
 The
Company’s determination of fair value of share-based payment awards to employees
and directors on the date of grant using the Black-Scholes model, which is
affected by the Company’s stock price as well as assumptions regarding a number
of highly complex and subjective variables. These variables include, but are not
limited to our expected stock price volatility over the term of the awards, and
actual and projected employee stock option exercise behaviors.
 
 (i) Use of
Estimates
 
 The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts, and disclosures of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting
period.  Actual results could differ from those
estimates.
 
 (j) Income Taxes
 
 The
Company records federal and state income tax liability in accordance with
Statement of Financial Accounting Standards (“SFAS”) No. 109 – Accounting for Income
Taxes.  Deferred income taxes are provided on the liability
method whereby deferred tax assets are recognized for deductible temporary
differences and operating loss and tax credit carry forwards, and deferred tax
liabilities are recognized for taxable temporary
differences.  Temporary differences are the differences between the
reported amounts of assets and liabilities and their tax
bases.  Deferred tax assets are reduced by a valuation allowance when,
in the opinion of management, it is more likely than not that some portion or
all of the deferred tax assets will not be realized.  Deferred tax
assets and liabilities are adjusted for the effects of changes in tax laws and
rates on the date of enactment.
 
 In July
2006, the Financial Accounting Standards Board (“FASB”) issued FASB
Interpretation (“FIN”) No. 48, Accounting for Uncertainty in Income
Taxes, which clarifies the accounting for uncertainty in income taxes
recognized in the financial statements in accordance with
SFAS No. 109, Accounting for Income Taxes.
FIN No. 48 provides that a tax benefit from an uncertain tax position
may be recognized in
  - 29
-
 the
financial statements when it is more likely than not that the position will be
sustained upon examination, including resolutions of any related appeals or
litigation processes, based on the technical merits. Income tax positions must
meet a more-likely-than-not recognition threshold at the effective date to be
recognized upon the adoption of FIN No. 48 and in subsequent periods.
This interpretation also provides guidance on measurement, de-recognition,
classification, interest and penalties, accounting in interim periods,
disclosure and transition.
 
 In May
2007, the FASB issued FASB Staff Position FIN 48-1, Definition of a Settlement in FASB
Interpretation No. 48 (“FSP FIN 48-1”). FSP FIN 48-1
provides guidance on how an entity should determine whether a tax position is
effectively settled for the purpose of recognizing previously unrecognized tax
benefits. In determining whether a tax position has been effectively settled,
entities must evaluate (i) whether taxing authorities have completed their
examination procedures; (ii) whether the entity intends to appeal or litigate
any aspect of a tax position included in a completed evaluation; and (iii)
whether it is remote that a taxing authority would examine or re-examine any
aspect of a taxing position. FSP FIN 48-1 is to be applied upon the initial
adoption of FIN 48.
 
  The
Company adopted the provisions of FIN No. 48 on January 1, 2007
with no cumulative effect adjustment required. The Company believes that their
income tax filing positions and deductions will be sustained upon examination
and, accordingly, have not recorded any reserves, or related accruals for
interest and penalties, at June 30, 2008 or 2007 for uncertain income tax
positions pursuant to FIN No. 48. In accordance with
FIN No. 48, the Company adopted a policy under which, if required to
be recognized in the future, they will classify interest related to the
underpayment of income taxes as a component of interest expense and will
classify any related penalties in selling, engineering, general and
administrating expenses in the statement of operations.
 
 (k)
Advertising Costs
 
 Advertising
costs are charged to operations as incurred.
 
 (l)
Earnings (Loss) Per Share
 
 Basic EPS
is calculated by dividing earnings (loss) available to common shareholders by
the weighted average number of common shares outstanding during each
period.  Diluted EPS is similarly calculated, except that the
denominator includes common shares that may be issued subject to existing rights
with dilutive potential, except when their inclusion would be
anti-dilutive.
 
 Based on
an estimated current value of the Company’s stock being equal to or less than
the exercise price of the warrants, none of the shares assumed issued upon
conversion of the warrants, nor any of the stock assumed issued under the
Company’s 2004 Non statutory Stock Option Plan, are included in the computation
of fully diluted loss per share, since their inclusion would be
anti-dilutive.
 
 Effective
June 10, 2008, the Board of Directors approved a 1-for-20 reverse stock
split.  All references to common shares have been retroactively
adjusted for the reverse stock split.
 
 (m)Impact of Recently Issued Accounting
Pronouncements
 
 In
September 2006, the Financial Accounting Standards Board (“FASB”) issued
Statement of Financial Accounting Standards (“SFAS”) 157 Fair Value Measurements. SFAS
157 defines fair value, establishes a framework for measuring fair value in
generally accepted accounting principles (“GAAP”) and expanded disclosures about
fair value measurements. This Statement is effective for financial statements
issued for fiscal years beginning after November 15, 2007.
 
 In
February 2008, the FASB issued FASB Staff Position No. 157-2 (“FSP 157-2”),
which delayed the effective date by which companies must adopt the provisions of
SFAS 157.  FSP 157-2 defers the effective date of SFAS 157 to fiscal years
beginning after November 15, 2008, and interim periods within
  - 30
-
 those
fiscal years. The adoption of this standard is not anticipated to have a
material impact on our financial position, results of operations, or cash
flows.
 
 In
September 2006, the Securities and Exchange Commission issued Staff Accounting
Bulletin (SAB No. 108),
Considering the Effects of
Prior Year Misstatements When Quantifying Current Year
Misstatements.  SAB No. 108 requires analysis of misstatements using
both an income statement (rollover) approach and a balance sheet (iron curtain)
approach in assessing materiality and provides a one-time cumulative effect
transition adjustment.  SAB No. 108 is effective for the Company’s June 30,
2007 financial statements.  The adoption of SAB No. 108 does not impact the
Company’s financial statements.
 
 In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial
Assets and Financial Liabilities - Including an Amendment of FASB Statement
No. 115.” SFAS No. 159 permits an entity to choose to measure
many financial instruments and certain other items at fair value. SFAS
No. 159 was effective for the Company at the beginning of 2008. The
Company’s adoption of the provisions of SFAS No. 159 does not impact
our financial statements.
 
 In
December 2007, the FASB issued SFAS No. 141R, Business Combinations, which
establishes principles and requirements for how the acquirer of a business
recognizes and measures in its financial statements the identifiable assets
acquired, the liabilities assumed, and any non-controlling interest in the
acquiree.  SFAS 141R also provides guidance for recognizing and
measuring the goodwill acquired in the business combination and determines what
information to disclose to enable users of the financial statements to evaluate
the nature and financial effects of the business combination.  SFAS
141R is effective for fiscal years beginning after December 15,
2008.  Early adoption is not permitted.  We are currently
evaluating the effect of the adoption of SFAS 141R, but do not presently
anticipate it will have a material impact on our financial position or results
of operations.
 
 In
December 2007, the FASB issued SFAS No. 160, Non-controlling Interests in
Consolidated Financial Statements-an amendment of ARB No. 51, which establishes
accounting and reporting standards for the non-controlling interest in a
subsidiary and for the deconsolidation of a subsidiary. It clarifies that a
non-controlling interest in a subsidiary is an ownership interest in the
consolidated entity that should be reported as equity in the consolidated
financial statements. SFAS 160 is effective for fiscal years beginning after
December 15, 2008.  The Company is currently evaluating the effect of
the adoption of SFAS 160, but do not presently anticipate it will have a
material effect on our consolidated financial position or results of
operations.
 
 In March
2008, the FASB issued SFAS No. 161, Disclosures about Derivative
Instruments and Hedging Activities (“SFAS 161”).  This
statement is intended to enhance required disclosures regarding derivatives and
hedging activities, including enhanced disclosures regarding how: (a) an entity
uses derivative instruments; (b) derivative instruments and related hedged items
are accounted for under FASB No. 133, Accounting for Derivative
Instruments and Hedging Activities; and (c) derivative instruments and
related hedged items affect an entity’s financial position, financial
performance, and cash flows. SFAS 161 is effective for fiscal years and interim
periods beginning after November 15, 2008. We are currently evaluating the
effect of adoption of SFAS 161, but do not presently believe that it will have a
material effect on our consolidated financial position or results of
operations.
 
 3.  Going
Concern
 
 For the
year ended June 30, 2008, the Company incurred a loss of
$372,042.  For the period October 22, 2004 (date of inception) through
June 30, 2008, the Company incurred a cumulative net loss of
$1,774,419.  At of June 30, 2008, the Company had negative working
capital of $767,835, and $0 in cash with which to satisfy any future cash
requirements. These conditions raise substantial doubt about the Company’s
ability to continue as a going concern. The Company depends upon capital to be
derived from future financing activities such as loans from its officers and
directors, subsequent offerings of its common stock or debt financing in order
to operate and grow the business. There can be no assurance that
  - 31
-
 the
Company will be successful in raising such capital. The key factors that are not
within the Company’s control and that may have a direct bearing on operating
results include, but are not limited to, acceptance of the Company’s business
plan, the ability to raise capital in the future, to continue receiving funding
from its officers, directors and shareholders, the ability to expand its
customer base, and the ability to hire key employees to grow the business. There
may be other risks and circumstances that management may be unable to
predict
 
 4.   
Purchase of Assets
 
 Effective
July 26, 2005, the Company consummated an agreement with FutureTech, LLC to
purchase all rights title and interest in the OptiCon Network Manager, a fiber
optic network management software system, certain computer equipment and the
OptiCon trademark (“Acquired Assets”) in exchange for the issuance of 1,264,500
shares (after the reverse stock splits of April 4, 2006 and June 10, 2008) of
its common stock.  After the exchange, FutureTech owned eighty-four
percent of the Company’s issued and outstanding common stock.  The
agreement became effective upon FutureTech purchasing the Acquired Assets from
Corning Cable Systems, LLC in exchange for $100,000 in cash.
 
 The
Company recorded the purchase of the Acquired Assets at $100,000, in accordance
with SFAS No. 153 - Exchanges
of Non-monetary Assets, and SEC Staff Accounting Bulletin No. 48 Topic
5-G, which generally requires that non-monetary assets exchanged by promoters or
shareholders for all or part of a company’s common stock be recorded at the
transferor’s historical cost basis determined under generally accepted
accounting principles. The purchase price was allocated as follows:
 
 OptiCon
      fiber optic management software
              
              $
              89,000Computer
      equipment
              
              
              5,000Collateral
      documentation related to the software
              
              
              5,000Trademarks
              
              
              1,000$
              100,000
  5.  Property
and Equipment
  Property
and equipment at June 30, 2008 and 2007 consist of the following:
  2008
              
              
              2007Computer
      equipment
              
              $
              8,587
              
              
              $
              6,949Software
              
              
              3,873
              
              
              
              99512,460
              
              
              
              7,944Accumulated
      depreciation
              
              
              7,106
              
              
              
              4,075Net
              
              $
              5,354
              
              
              $
              3,869
  For the
years ended June 30, 2008 and 2007, and for the period from October 22, 2004
(inception) to June 30, 2008, the total depreciation expense charged to
operations totaled $3,031, $2,222, and $7,106, respectively.
  6.   Intangible
Assets
 
 Intangible
assets consist of the following at June 30, 2008 and 2007 are summarized as
follows:
 
 2008
              
              
              2007Opticon
      fiber optic management software
              
              $
              212,112
              
              
              $
              212,112Trademarks
              
              
              1,000
              
              
              
              1,000$
              213,112
              
              
              $
              213,112
 
 - 32
-
 On July
26, 2005, the Company purchased the OptiCon Network Manager software system
which consisted of version R3 and R4.  At the time of the purchase,
the software system was out of date and had to be updated and integrated with
other current business software systems, before it could be distributed to
customers.  The development of R3 software system was completed during
the quarter ended December 31, 2006, and is available for distribution to
customers, although no sales have been made.
 
 During
the years ended June 30, 2008 and 2007, the Company allocated direct labor
costs, and indirect costs and expenses of $-0- and $22,779 respectively,
relating to this effort.  Amortization of the capitalized software
costs will begin when the software is actually sold to customers.  At
June 30, 2008, the R4 software system was not yet completed.
 
 7.   Accrued
Expenses
 
 Accrued
expenses at June 30, 2008 and 2007 were as follows:
 
 2008
              
              
              2007Accrued
      Salaries
              
              $
              269,167
              
              
              $
              1,096,750Accrued
      Vacations
              
              
              25,374
              
              
              
              80,500Payroll
      Tax Liabilities
              
              
              29,982
              
              
              
              53,190Accrued
      Consulting
              
              
              56,400
              
              
              
              2,000Accrued
      Interest
              
              
              10,334
              
              
              
              11,398$
              391,257
              
              
              $
              1,243,838
 
 On July
31, 2007, Mr. Batton and Mr. Wright agreed to cancel and contribute to capital
$1,042,828 in amounts owed to them in exchange for an option to purchase shares
in the Company (see Note 7).
 
 8.   Related
Parties Disclosures
 
 (a) Accrued Salaries – Former
Officers and Director
 
 The
Company accrued compensation payable under employment agreements with J.
Marshall Batton, its former president, Douglass D. Wright, its former senior
vice president of sales, and Mr. Saed Talari, one of the Company’s directors, in
the aggregate amount of $50,000 per month, based on their respective employment
agreements commencing August 1, 2005.
 
 Mr.
Batton’s and Mr. Douglas’ employment agreements terminated July 31, 2007, and
were not renewed.  In connection with the termination of their
respective employment agreements on July 31, 2007, Mr. John M. Batton and Mr.
Douglass W. Wright, were given the option to purchase 17,500 shares (after the
reverse stock split of June 10, 2008) of the Company’s common stock each at
$0.001 per share, in lieu of monies owed to them (including but not limited to,
salaries, benefits, vacation pay and any and all compensation), and in
cancellation their respective, non-expiring rights under their employment
agreements to maintain/restore their individual ownership of our common stock to
a level of four percent of our issued and outstanding shares whenever our total
issued and outstanding shares of common stock exceeded 100 million
shares.  Mr. Batton and Mr. Wright agreed to cancel and contribute to
capital $1,042,828 in amounts owed to them.  Mr. Talari’s agreement
was renewed for an additional one-year period.
 
 On
October 1, 2007, the Company entered into a one-year Employment Agreement with
Mr. Sadruddin Currimbhoy, our Chief Executive Officer. The Agreement was
automatically extended for an additional one-year period. The Agreement provides
for (a) a base salary of $5,000 per month, (b) eight weeks vacation within one
year the starting date, and (c) all group insurance plans and other benefit
plans and programs made available to the Company’s management
employees.
 
 - 33
-
 As of
June 30, 2008 and 2007, the accrued compensation amount was $269,167 and
$1,096,750 respectively, and as of June 30, 2008 and 2007, the Company also
accrued vacation pay under employment agreements in the amount of $17,374 and
$80,500 respectively.
 
 (b) Loan from Related
Parties
 
 On
September 6, 2005, Mr. Talari, one of the Company’s directors agreed to make
advances to the Company as an interim unsecured loan for operational capital up
to a maximum of $350,000, evidenced by a master promissory note, with interest
at the rate of 5% per annum, based on amounts advanced from time to time,
payable annually.
 
 On
December 15, 2007, the Company agreed to convert the outstanding amount of the
note of $264,699 and accrued interest thereon of $16,702 into a 5% convertible
debenture due December 31, 2008 in the aggregate amount of
$281,401.  The Company also accrued interest on the debenture in the
amount of $7,633 at June 30, 2008.  The debenture was convertible into
shares of the Company’s common stock at the rate of $0.05 per
share.  The Company recorded a discount due to the beneficial
conversion feature of the debenture in the amount of $281,401, and a
corresponding amortization of the discount in the same amount. On July 1, 2008,
the Company agreed to change the conversion feature of the debenture to 50%
discount to the lowest recorded year closing price or $0.005 per
share.
 
 Subsequent
to the conversion of his outstanding debt to a debenture, Mr. Talari made
additional advances to the Company on the unsecured $350,000 loan, in the
aggregate amount of $68,408 which remains outstanding at June 30,
2008.  In addition, the Company accrued interest on these loans in the
amount of $1,257 at June 30, 2008.
 
 During
the year ended June 30, 2008, Isys Medical, OptiCon’s former parent company,
paid expenses on behalf of the Company and made cash advances.  Most of
these expenses were paid, and the advances made, by Isys Medical at the time
OptiCon was still a subsidiary, are included in Loan & Note Payable – Related
Partieson the balance sheet.  At June 30, 2008, the amount
owed to Isys Medical was $8,625.
 
 9.   Change
in Management
 
 On July
17, 2007 in an action by written consent, the sole shareholder, and by written
consent the Board of Directors; (1) to removed John M. Batton as Director and
Chief Executive Officer of the corporation, and (2) to elect Mr. Sadruddin
Currimbhoy as director and Interim Chief Executive
Officer.
  10.   Stock
Issuances
 
 During
the period October 22, 2004 (inception) to June 30, 2005, the Company issued
240,857 and 75,268 respectively (after the reverse stock split of June 10, 2008)
of the Company’s common shares (post split) to its founders in exchange for
organizing efforts and services. The estimated value of the services was $16,000
and $5,000, respectively.
 
 On July
26, 2006, the Company issued 1,264,500 shares (after the reverse stock split of
June 10, 2008) of the Company’s common shares to FutureTech in exchange for
the OptiCon Network Manager software originally developed, and acquired from
Corning Cable System, Inc. by FutureTech along with other assets.  The
value of the software and other assets was recorded based on the original cash
purchase price of $100,000 paid by FutureTech.
 
 - 34
-
 On July
3, 2007 and July 20, 2007, the Company issued 2,500 and 500 shares (after the
reverse stock split of June 10, 2008) of its common stock in exchange for
services.  The Board of Directors agreed that the value of these
services were $1,000 and $2,000 respectively.
 
 11.   Consulting
Agreement and Stock Issuance
 
 On
October 1, 2007, the Company entered into a one-year consulting agreement with
the Company’s Chief Financial Officer in exchange for a cash payment of $2,000
per month, and 6,000 shares (after the reverse stock split of June 10, 2008) of
the Company’s common stock valued at $24,000.  The Board approved the
value of the stock issued.
 
 On May 9,
2008, the Company entered into a six-month consulting agreement with Keith
Jablon, an unrelated individual, in exchange for a cash payment of
$12,000.   The Consultant has the option to receive the cash
payment under the Agreement in the form of common stock, subject to an S-8
registration, at a 20% discount to the five average closing bid price, prior to
his notice to exercise the option.
 
 The
Consultant was also granted the option to purchase $12,000 per month worth of
common stock, subject to an S-8 registration at a 40% discount to the average
10-day closing bid price prior to his notice to exercise.  The options
are cumulative and expire, if not exercised within six months of the date of the
last option received.
 
 The
Consultant is also receive 10% commission on all products through channels he
introduced to the Company during the term of the agreement, and for one year
after the termination of the Agreement, and 5% in kind on all consideration paid
by the Company for any mergers or acquisitions that the Consultant is
instrumental in finding or facilitating.
 
 12.   Stock
Options and Warrants
 
 On
December 2, 2005, the Company granted Series A Warrants to two unrelated
individuals, (see “Bentley Securities Agreement”), to purchase 2,192 shares, at
an adjusted average exercise price of $34.60.  All of the Warrants
expire on November 11, 2011.  All of the Warrants granted during the
year were non-qualified fixed price warrants.
 
 The
following table summarizes the activity related to the stock purchase warrants
for the years ended June 30, 2008 and 2007 and for the period from October 22,
2004 (inception) to June 30, 2008:
  (a)
              
              
              
              Weighted
      AverageShares
              
              
              
              Exercise
      Price
              
              
              
              Exercise
      PriceStock
              
              
              
              per
      Share
              
              
              
              per
      ShareWarrants
              
              
              
              Options
              
              
              
              Warrants
              
              
              
              Options
              
              
              
              Warrants
              
              
              
              OptionsBalance
      at October 22, 2004
              
              
              –
              
              
              
              –
              
              
              
              –
              
              
              
              –
              
              
              
              –
              
              
              
              –Granted
              
              
              –
              
              
              
              –
              
              
              
              –
              
              
              
              –
              
              
              
              –
              
              
              
              –Exercised
              
              
              –
              
              
              
              –
              
              
              
              –
              
              
              
              –
              
              
              
              –
              
              
              
              –
 Canceled
      or expired
              
              
              –
              
              
              
              –
              
              
              
              –
              
              
              
              –
              
              
              
              –
              
              
              
              –Outstanding
      at June 30, 2005
              
              
              –
              
              
              
              –
              
              
              
              –
              
              
              
              –
              
              
              
              –
              
              
              
              –Granted
              
              
              541
              
              
              
              –
              
              
              $
              73.07
              
              
              
              –
              
              
              $
              34.60
              
              
              
              –Exercised
              
              
              –
              
              
              
              –
              
              
              
              –
              
              
              
              –
              
              
              
              –
              
              
              
              –Canceled
      or expired
              
              
              –
              
              
              
              –
              
              
              
              –
              
              
              
              –
              
              
              
              –
              
              
              
              –Outstanding
      at June 30, 2006
              
              
              541
              
              
              
              –
              
              
              $
              73.07
              
              
              $
              –
              
              
              $
              34.60
              
              
              $
              –Granted
              
              
              1,651
              
              
              
              
              
              
              $
              22.00
              
              
              $
              –
              
              
              $
              34.60
              
              
              $
              –Exercised
              
              
              –
              
              
              
              –
              
              
              
              –
              
              
              
              –
              
              
              
              –
              
              
              
              –Canceled
      or expired
              
              
              –
              
              
              
              –
              
              
              
              –
              
              
              
              –
              
              
              
              –
              
              
              
              –
  - 35
-
  Outstanding
      at June 30, 2007
              
              
              2,192
              
              
              
              
              
              
              $
              –
              
              
              $
              –
              
              
              $
              34.60
              
              
              $
              –Exercisable
      at June 30, 2005
              
              
              –
              
              
              
              –
              
              
              $
              –
              
              
              $
              –
              
              
              $
              –
              
              
              $
              –Exercisable
      at June 30, 2006
              
              
              541
              
              
              
              –
              
              
              $
              73.07
              
              
              $
              –
              
              
              $
              73.07
              
              
              $
              –Exercisable
      at June 30, 2007
              
              
              1,651
              
              
              
              –
              
              
              $
              22.00
              
              
              $
              –
              
              
              $
              22.00
              
              
              $
              –Granted
              
              
              –
              
              
              
              1,134,365
              
              
              
              –
              
              
              
              .02
              
              
              
              –
              
              
              
              .02Exercised
              
              
              –
              
              
              
              –
              
              
              
              –
              
              
              
              –
              
              
              
              –
              
              
              
              –Canceled
      or expired
              
              
              –
              
              
              
              –
              
              
              
              –
              
              
              
              –
              
              
              
              –
              
              
              
              –Exercisable
      at June 30, 2008
              
              
              2,192
              
              
              
              1,134,365
              
              
              $
              –
              
              
              $
              .02
              
              
              $
              34.60
              
              
              $
              .02
 
 (a) As
described in, Mr. Keith Jablon was granted the option to purchase $12,000 per
month worth of common stock, subject to an S-8 registration at a 40% discount to
the average 10-day closing bid price prior to his notice to
exercise.    Using the Black-Scholes-Merton option pricing
model, management determined that the grant-date value of was $12,000 per month,
which was recorded as consulting expense, and have estimated the number of
shares underlying these grants.
 
 Management
determined that it was not possible to reasonably estimate the grant-date fair
value of the warrants because there was no market for the Company’s stock, and
none has been issued recently, and the Company was not been able to identify a
similar publicly held company that can be used as a
benchmark.  Instead, the Company the expected price and range of the
Company’s stock, and have assessed volatility at maximum.  Using the
Black-Scholes-Merton option pricing model, management determined that the
warrants originally issued had a calculated value of $0.50 per
share.
 
 Total
compensation costs associated with the warrants issued for the years ended June
30, 2008 and 2007 was $-0- and $16,500 respectively, which was
recognized over the service period.  The following are the weighted
average assumptions for warrants granted:  Dividend rate of zero
percent; risk-free interest rate of five percent; expected lives of five years;
and expected price volatility of 400 percent.
 
 13.  Stock
Option Plan
 
 On
October 22, 2004, the Company adopted a 2004 Non statutory Stock Option Plan
(“Option Plan”) for the benefit of its key employees (including officers and
employee directors), consultants and affiliates. The Option Plan is intended to
provide those persons who have substantial responsibility for the management and
growth of the Company with additional incentives and an opportunity to obtain or
increase their proprietary interest in the Company, encouraging them to continue
in employment.
 
 The Board
of Directors authorized 60,214 shares (after the reverse stock split of April 4,
2006 and June 10, 2008) of the Company’s common stock to be set aside, which may
be issued under the Option Plan.  As of June 30, 2008 and 2007, no
shares have yet been issued under the Option Plan.
 
 14.  Income
Taxes
 
 There is
no current or deferred income tax expense or benefit allocated to continuing
operations for the years ended June 30, 2008 and 2007 or for the period October
22, 2004 (date of inception) through June 30, 2008.
 
 The
income tax provision differs from the amount of tax determined by applying the
federal statutory rate as follows:
  Year
      Ended
                June
      30, 2008
              
              
              Year
      Ended
                June 30, 2007
              
              
              Period October 22,
                2004
      (inception) through
                June 30, 2008Income
      tax benefit at statutory rate
              
              $
              (126,495
              )
              
              $
              (246,327
              )
              
              $
              (603,303
              )Increase
      (decrease) in income taxes due to:Change
      in valuation allowance
              
              
              126,495
              
              
              
              246,327
              
              
              
              603,303$
              0
              
              
              $
              0
              
              
              $
              0
  - 36
-
 Net
deferred tax assets and liabilities were comprised of the
following:
  Year Ended June 30, 2008
              
              
              Year Ended June 30, 2007
              
              
              Period October 22, 2004 (inception) through June
      30, 2008Deferred
      tax asset (liability), current:Accrued
      salaries
              
              $
              92,858
              
              
              $
              372,895
              
              
              $
              92,858Accrued
      vacation pay
              
              
              26,915
              
              
              
              49,330
              
              
              
              26,915Payroll
      tax liabilities
              
              
              4,329
              
              
              
              12,220
              
              
              
              4,329Prepaid
      expenses
              
              
              3,264
              
              
              
              0
              
              
              
              3,264Valuation
      allowance
              
              
              (127,367
              )
              
              
              (434,445
              )
              
              
              (127,367
              )$
              0
              
              
              $
              0
              
              
              $
              0Deferred
      tax asset (liability), non-currentNet
      operating loss
              
              $
              ( 107
              )
              
              $
              (187,692
              )
              
              $
              476,701Property
      and equipment
              
              
              (765
              )
              
              
              (425
              )
              
              
              (765
              )Valuation
      allowance
              
              
              872
              
              
              
              188,117
              
              
              
              (475,936
              )$
              0
              
              
              $
              0
              
              
              $
              0
 
 The
Company has not recognized an income tax benefit for its operating losses
generated through June 30, 2008 or 2007 based on uncertainties concerning the
Company’s ability to generate taxable income in future periods.  The tax
benefit is offset by a valuation allowance established against deferred tax
assets arising from operating losses and other temporary differences, the
realization of which could not be considered more likely than not.  In
future periods, tax benefits and related deferred tax assets will be recognized
when management considers realization of such amounts to be more likely than
not.
 
 For
financial statements purposes, the Company has accumulated losses of $1,774,419
from inception through June 30, 2008, which can be used to offset future income
though 2023.
 
 For
income tax purposes the Company has available a net operating loss carry-forward
of $353,479 from inception to June 30, 2008, which will expire, unless used to
offset future federal taxable income through 2023.
 
 15.  Commitments
and Contingencies
 
 (a)
Employment Agreements
 
 On
December 1, 2004, the Company entered into a two-year Employment Agreement,
effective August 1, 2005, with Mr. Saed (Sam) Talari, one of the Company’s
Directors and major shareholder. The Agreement was automatically extended for an
additional one-year period.  The Agreement provides for (a) a base
salary of $7,000 per month, (b) a signing bonus equal to one month salary, (c)
four weeks vacation within one year the starting date, and (d) all group
insurance plans and other benefit plans and programs made available to the
Company’s management employees.
 
 On
October 1, 2007, the Company entered into a one-year Employment Agreement with
Mr. Sadruddin Currimbhoy, our Chief Executive Officer. The Agreement provides
for (a) a base salary of $5,000 per month, (b) eight weeks vacation within one
year the starting date, and (c) all group insurance plans and other benefit
plans and programs made available to the Company’s management
employees.
 
 (b)
Operating Leases
 
 Since
inception through August 2005, the Company was inactive and therefore did not
require office space. On August 25, 2005, the Company entered into a 6-month
lease agreement for office space at
  - 37
-
 $1,813
per month, plus taxes and ancillary services.  Since the termination
of the lease, Mr. Batton, the president of the Company has provided office space
at no cost to the Company.
 
 On August
1, 2007, the Company entered into a lease agreement for executive offices at a
monthly rental of $625, plus sales taxes and ancillary services.  The
offices consist of approximately 500 square feet and reception services, and
access to conference room and office support services.
 
 Rent
expense for years ended June 30, 2008 and 2007 and for the period October 22,
2004 (date of inception) through June 30, 2008 was $8,528, $-0-, and $21,986
respectively.
 
 16.  Subsequent
Events
 
 On July
1, 2008, Sam Talari exercised the principal amount of his convertible debenture
of $281,632, dated December 15, 2007, into 56,326,560 shares of the Company’s
common stock at $0.005 per share.  The convertible price of $.005
represents a 50% discount over the quote market price of the stock at that
date.
 
 On July
2, 2008, the Company agreed to convert the accrued interest of the debenture
dated December 15, 2007 and a portion of outstanding amount of the promissory
note and accrued interest due to Mr. Talari in the aggregate amount of $60,019
into a 5% convertible debenture due December 31, 2008.  The debenture
was convertible into shares of the Company’s common stock at the rate 50%
discount to the lowest recorded year closing or $.005 per share.
 
 On August
7, 2008, Mr. Talari exercised the principal amount of his convertible debenture
of $60,019, dated July 2, 2008 into 12,003,734 shares of the Company’s common
stock at $0.005 per share.
 
 On July
31, 2008, the Company entered into a six-month consulting agreement with First
Level Capital, Inc., an unrelated company, to provide investment banking
services in exchange for a 2,000,000 shares of the Company’s restricted common
stock.  One-half of the shares are to be paid 14 days, and 60 days
after execution of the Agreement, respectively.
  On
September 19, 2008, the Company agreed to convert accrued consulting fees of
$5,850 due to Cristino L. Perez, the Company's CFO into 400,000 shares of the
Company's common stock at the rate of $.014625 per shares which corresponds to a
40% discount to the average bid and ask market price over the previous 5
days.
 
 On
September 30, 2008, the Company agreed to convert accrued salaries of $189,000
and accrued vacation pay of $14,000 due to Sam Talari, one of the Company's
directors, into a 5% convertible promissory note due June 30,
2009.  The note is convertible into shares of the Company's common
stock at the rate of $0.005 per share.
    - 38
-


Item
9.     Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure





NONE




Item
9A.  Controls and Procedures.





Not
applicable.





Item
9A(T).  Controls and Procedures





As of
June 30, 2008, we carried out an evaluation of the effectiveness of the design
and operation of our disclosure controls and procedures pursuant to Exchange Act
Rule 13a-15. This evaluation was done under the supervision and with the
participation of our management, including our President and Chief Financial
Officer. Based on this evaluation of our disclosure controls and procedures (as
defined in the Exchange Act Rule 13a-15e), our President and Chief Financial
Officer have concluded that as of June 30, 2008 such disclosure controls and
procedures were not effective.





Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting for the company. Internal control over
financial reporting is a process to provide reasonable assurance regarding the
reliability of our financial reporting for external purposes in accordance with
accounting principles generally accepted in the United States of America.
Internal control over financial reporting includes maintaining records that in
reasonable detail accurately and fairly reflect the transactions and
dispositions of our assets; provide reasonable assurance that transactions are
recorded as necessary for preparation of our financial statements; provide
reasonable assurance that receipts and expenditures of company assets are made
in accordance with management authorization; and provide reasonable assurance
that unauthorized acquisition, use or disposition of company assets that could
have a material effect on our financial statements would be prevented or
detected on a timely basis. Because of its inherent limitations, internal
control over financial reporting is not intended to provide absolute assurance
that a misstatement of our financial statements would be prevented or
detected.





Pursuant
to Rule 13a-15d of the Exchange Act, management conducted an evaluation of the
effectiveness of our internal control over financial reporting based on the
framework in Internal Control
- Integrated Framework (1992) and Internal Control Over Financial
Reporting Guidance for Smaller Public Companies (2006), issued by the
Committee of Sponsoring Organizations of the Treadway Commission. Based on this
evaluation, management concluded that our internal control over financial
reporting was not effective as of June 30, 2008.





This
annual report does not include an attestation report of the company’s registered
public accounting firm regarding internal control over financial reporting.
Management’s report was not subject to attestation by the company’s registered
public accounting firm pursuant to temporary rules of the Securities and
Exchange Commission that permit the company to provide only management’s report
in this annual report.





Changes
in Controls and Procedures





There
were no significant changes made in our internal controls over financial
reporting during the quarter ended June 30, 2008 that have materially affected
or are reasonably likely to materially affect these controls. Thus, no
corrective actions with regard to significant deficiencies or material
weaknesses were necessary.





Limitations
on the Effectiveness of Internal Control





Our
management, including the President, does not expect that our disclosure
controls and procedures or our internal control over financial reporting will
necessarily prevent all fraud and material errors. An internal control system,
no matter how well conceived and operated, can provide only reasonable, not
absolute, assurance that the objectives of the control system are met. Further,
the design of a control system must reflect the fact that there are resource
constraints, and the benefits of controls must be considered relative to their
costs. Because of the inherent limitations on all internal control systems, no
evaluation of controls can provide absolute assurance that all control issues
and instances of fraud, if any, have been detected. These inherent limitations
include the realities that judgments in decision-making can be faulty, and that
breakdowns can occur because of simple error or mistake. Additionally, controls
can be circumvented by the individual acts of some persons, by collusion of two
or more people, and/or by management override of the control. The design of any
system of internal control is also based in part upon certain assumptions about
the likelihood of future events, and there can be no assurance that any design
will succeed in achieving its stated goals under all potential future
conditions. Over time, controls may become inadequate because of changes in
circumstances, and/or the degree of compliance with the policies and procedures
may deteriorate. Because of the inherent limitations in a cost-effective
internal control system, financial reporting misstatements due to error or fraud
may occur and not be detected on a timely basis.





Item
9B.  Other Information




Not
applicable.


- 39
-


PART III




Item
10.   Directors, Executive Officers and Corporate Governance




The
following table identifies our directors and executive officers, their ages, the
positions each holds and, if a director, the first year he became a
director.





Name
            
            Age
            
            Position(s)
            
            Director
      sinceSadruddin
      Currimbhoy
            
            47
            
            Chief
      Executive Officer and Director
            
            2007Cristino
      L. Perez
            
            64
            
            Chief
      Financial Officer
            
            Not
      applicableSaed
      (Sam) Talari
            
            46
            
            Director
            
            2004





Sadruddin Currimbhoy became
our Chairman and Chief Executive Officer on a part-time basis, beginning July
18, 2007. Mr. Currimbhoy’s employment during the five year period prior to this
annual report, and for certain years before that period, is as
follows:




·
            March
      2007 to present - Mr. Currimbhoy is the chief operating officer of Isys
      Medical, formerly Hathaway, Corporation., our  former parent
      company.·
            2004
      to March 2007 - He was the general manager at the Deccan Pacific group of
      companies in Fremont, California. In this capacity, Mr. Currimbhoy was
      responsible for healthcare and real estate operations.·
            1999
      to 2004 - Mr. Currimbhoy was employed as an internal auditor by East Gate
      Capital in “Silicon Valley”. East Gate was a $60 million fund that
      invested in early stage semiconductors, communications and software
      companies.




In 1989,
Mr. Currimbhoy founded Solar Tech Industries, Ltd., a Hong Kong-based export
house which achieved annual revenues of $5 million. His other international
business activities have included manufacturing and supplying, through a Dutch
premiums company, Reebok brand watches, to Pepsico Benelux promotion, in 1995,
establishing an alarm clock assembling factory in China and co-founding Dynabyte
Pacific Ltd., a hardware and software solutions provider in Hong Kong (1992 -
1997). Mr. Currimbhoy attended the University of San Diego, where he studied
business administration and computer sciences.





Cristino L. Perez our Chief
Financial Officer, beginning January 1, 2007, on a part time basis.




·
            October
      1999 to June 2002 – Mr. Perez was employed by Baumann, Raymondo &
      Company, P.A., Certified Public Accountants, with primary responsibilities
      for development of accounting and auditing services to small publicly held
      enterprises.·
            October
      2001 to September 2003 – Mr. Perez was on part-time basis a Chief
      Financial Officer, Secretary, Treasurer and Director of Resolve Staffing,
      Inc., a publicly traded company.·
            September
      2002 until the present – Mr. Perez has been self-employed as an
      independent consultant on a part-time basis and full-time
      basis.




Mr. Perez
earned a bachelor of arts degree in accounting from the University of South
Florida.





Saed (“Sam”) Talari is one of
our directors.




·
            1985
      to 1994 – He ran PrymServ Inc., a retail service integration company that
      provided product solutions and integration for major retail outlets. His
      customers included K-Mart, Toys-R-Us, Sears and Wal-Mart. As chief
      executive officer of PrymServ, his primary duties were to market products
      and services to “Fortune 500” clients.·
            1994
      to 1999 – Mr. Talari ran Compusite Corporation, one of the first Internet
      solutions providers in the nation to offer large spectrum of value added
      services to companies seeking greater presence on the Internet. He
      assisted Compusite to grow from no revenue to a multi-million dollar
      company.·
            1999
      to present – He founded Isys Medical, Inc., (formerly Hathaway
      Corporation) and serves since inception as one of Isys Medical’s
      directors. Isys Medical  develops and acquires undervalued
      companies that bring a shift in how medical technologies are delivered and
      serviced globally.·
            2001
      to present – Mr. Talari founded and manages FutureTech, a venture capital
      firm that invests in high technology start up
  enterprises.




Mr.
Talari attended the University of New Hampshire, where he studied computer
science and mathematics. He earned a bachelor’s degree from the University of
Massachusetts at Lowell in computer science, engineering and mathematics and
took master studies in finance.





Section
16(a) Beneficial Ownership Reporting Compliance.





No person
who at any time during the fiscal year, was a director, officer, beneficial
owner of more than ten percent of our common stock has furnished to us Forms 3,
4 and 5, and amendments thereto, or filed such reports and amendments with the
U.S. Securities and Exchange Commission, during our 2008 or 2007 fiscal
year.




Code
of ethics.





In 2005,
we adopted the Code of Ethics governing all employees, officers and
directors.  During 2008, no amendments to or waivers of the provisions
of the Code of Ethics were made with respect to any of our directors or
executive officers.  We will provide a copy of the Code of Ethics to
shareholders without charge upon written request to Mr. Sadruddin Currimbhoy,
Chief Executive Officer, 1701 West Northwest Highway, First Floor, Grapevine, TX
76051.  We have posted our Code of Ethics on our website at
http://www.opticonsysteminc.com/investors/html, and will disclose future
amendments to, or waivers from, the Code of Ethics on our website within four
business days following the date of such amendment or waiver.





Audit
committee.





We do not
have an audit committee.





Procedures
for stockholders to nominate directors.





We have
not adopted any procedures whereby stockholders may nominate persons for
election as directors.


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-


Item 11.  Executive
Compensation




The
following table sets forth the compensation we have paid to (i) our current and
former chief executive officers during the last fiscal year, (ii) our two most
highly compensated other executive offers who were executive officers at the end
of the last fiscal year whose compensation exceeded $100,000 and (iii) our two
most highly compensated other executive officers who were not executive officers
at the end of the last fiscal year whose compensation exceeded
$100,000.





Name and principal
      position
            
            Year
            
            Salary
            
            Bonus
            
            Stock
    Award
            
            All other
              compensation
            
            TotalSadruddin
      Currimbhoy
            
            2008
            
            $ 
      41,667
            (6)
            
            -0-
            
            -0-
            
            -0-
            
            $
      41,667Chief
      Executive Officer
            
            2007
            
            -0-
            (6)
            
            -0-
            
            -0-
            
            -0-
            
            -0-J.
      Marshall Batton
            
            2007
            
            $225,000
            (1)(5)
            
            -0-
            
            -0-
            
            -0-
            
            $225,000Former
      Chief Executive Officer
            
            2006
            
            $300,000
            (2)
            
            -0-
            
            -0-
            
            -0-
            
            $300,000Douglass
      W. Wright
            
            2007
            
            $162,000
            (3)(5)
            
            -0-
            
            -0-
            
            -0-
            
            $162,000Former
      Senior Vice President
            
            2006
            
            $216,000
            (4)
            
            -0-
            
            -0-
            
            -0-
            
            $216,000




1. Mr.
Batton’s compensation consists of $17,500 cash and $207,500 deferred
compensation.


2. Mr.
Batton’s compensation consists of $35,800 cash and $264,200 deferred
compensation.


3. Mr.
Wright’s compensation consists of $17,000 cash and $145,000 deferred
compensation.


4. Mr.
Wright’s compensation consists of $32,950 cash and $183,050 deferred
compensation.


5. Mr.
Batton and Mr. Wright, in connection with the termination of their respective
employment agreements on July 31,
2007, each accepted 17,500 shares of our common stock in lieu of deferred
compensation and in cancellation their respective, non-expiring rights under
their employment agreements to maintain/restore their individual ownership of
our common stock to a level of four percent of our issued and outstanding shares
whenever our total issued and outstanding shares of common stock exceeded 100
million shares.


6. Mr.
Currimbhoy’s compensation consists of $24,500 cash and $17,167 accrued
compensation.





Item
12.  Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters




The
following table sets forth the number of our shares of common stock owned
by:




—
            each
      of our directors and executive officers, at August 30,
    2008;—
            our
      directors and executive officers as a group, at August 30, 2008;
      and—
            other
      persons, including their addresses, and groups, if any, we have learned
      own or control more than five percent of our issued and outstanding common
      stock as of a recent date.




The
address of our directors and executive officers is our address. Except as noted
in the following table, we are not aware of any other person or “group”, as
defined in the Regulation S-K, who owned five percent or more of our common
stock at August 30, 2008.  We have no reason to believe that each
person identified in the table does not have sole voting and investment power
over the shares he owns, except as noted.





Name
            
            Number of shares
      (1)
            
            
            PercentageSadruddin
      Currimbhoy
            
            -0-
            
            
            .00%Cristino
      L. Perez
            
            308,500
            
            
            .43%Saed
      (Sam) Talari
            
            79,338
            (2)
            
            .11%All
      directors and officers as a group (2 persons)
            
            62,230,397
            
            
            87.58%FutureTech
      Capital, LLC.
            
            647,425
            (2)
            
            .91%475
      Central Avenue, Suite B100, St. Petersburg, FL 33701Neuworld
      Communications, Inc.
            
            62,195,134
            (2)
            
            87.53%475
      Central Avenue, Suite B100, St. Petersburg, FL 33701




(1) The
shares reflect a 1-for-20 reverse stock split effective June 10, 2008, and the
issuance of additional shares reflecting the conversion by Mr. Talari of two
convertible debentures on July 1, 2008 and August 2, 2008 into 56,326,560 and
12,003,734 shares respectively, and the assignment of most of those shares to
Neuwold Communications.


(2) Mr. Talari will own 79,338
of our shares both legally and beneficially, 647,425 of our shares beneficially,
the legal ownership being held by FutureTech, and 62,195,134 of our shares
beneficially, the legal ownership being held by Neuworld Communications, both
companies being owned entirely by Mr. Talari.





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-


Employment
Agreements





We have a
two-year agreement with Mr. Talari, effective August 1, 2005, one of our
directors. This agreement automatically extends for an additional one-year
period through July 31, 2008 without further action by either party. The
Agreement provides for (a) a base salary of $7,000 per month, (b) a signing
bonus equal to one month salary, (c) four weeks vacation within one year the
starting date, and (d) all group insurance plans and other benefit plans and
programs made available to our management employees.




On
October 1, 2007, the Company entered into a one-year Employment Agreement with
Mr. Sadruddin Currimbhoy, our Chief Executive Officer. The Agreement was
automatically extended for an additional one-year period. The Agreement provides
for (a) a base salary of $5,000 per month, (b) eight weeks vacation within one
year the starting date, and (c) all group insurance plans and other benefit
plans and programs made available to the Company’s management
employees.





We have
adopted a 2004 Non Statutory Stock Option Plan to reward and provide incentives
to our key employees, who may include our directors who are also employees and
our officers, as well as consultants and affiliates. The following table
provides certain information about the plan.





Plan
      category
            
            Number
      of securities to
              be
      issued upon exercise
              of
      outstanding options,
              warrants
      and rights
            
            Weighted-
      average
              exercise
      price of
              outstanding
      options,
              warrants
      and rights
            
            Number
      of securities
              remaining
      available for
              future
      issuance under
              equity
      compensation
              plans
      (excluding
              securities
      reflected
              in
      column (a)(a)
            
            (b)
            
            (c)Equity
      compensation plan approved by security holders
            
            None
            
            Not
      applicable
            
            NoneEquity
      compensation plan not approved by security holders
            
            None
            
            Not
      applicable
            
            60,214








Item
13.  Certain Relationships and Related Transactions, and Director
Independence




During
the 2007 and 2008 fiscal years and 2009 to date, we have not entered into any
transactions with our directors and executive officers, outside of normal
employment transactions, or with their relatives and entities they control;
except the following:




●
            We
      have borrowed $333,107 for working capital through June 30, 2008 from Mr.
      Talari at five percent interest per annum on a written $350,000 line of
      credit agreement he extended to us on September 1, 2005. A portion of this
      debt plus accrued interest was converted into two convertible debentures
      of $281,401 and $60,019, respectively.  Subsequent to the end of
      the year, both these debentures were exchanged for 56,326,400 and
      12,003,734 shares our common stock, respectively.  Accrued
      interest through June 30, 2008, is $8,889. We believe the terms of
      this line of credit are more favorable than we could have obtained from an
      unrelated third party, if we could have obtained a line of credit from a
      third party at all.




We do not
anticipate entering into any future transactions with our directors, officers
and affiliates.




Item
14.  Principal Accountant Fees and Services




The
following table sets forth amounts we have been billed with respect to 2008 and
2007 for certain services provided by our independent accountants, KBL, LLP,
CPAs:





Service
            
            2008
            
            
            2007Audit
            
            $
            0
            
            
            $
            15,000Review
      of unaudited financial statements
            
            $
            6,000
            
            
            $
            6,000Audit-related
      fees
            
            $
            0
            
            
            $
            0Tax
      compliance, tax advice and tax planning
            
            $
            0
            
            
            $
            0All
      other services
            
            $
            2,500
            
            
            $
            0




- 42
-


PART IV






Item
15.  Exhibits and Financial Statement Schedules




(a)(1)  FINANCIAL
      STATEMENTS(a)(2)  FINANCIAL
      STATEMENT SCHEDULES(a)(3)  OTHER
      EXHIBITS





(b)  EXHIBITS:31.1
            Certification
      of Chief Executive Officer Pursuant to Section 302 of the Sarbanes−Oxley
      Act.31.2
            Certification
      of Principal Accounting Officer Pursuant to Section 302 of the
      Sarbanes−Oxley Act.32.1
            Certification
      of Chief Executive Officer Pursuant to Section 906 of the Sarbanes−Oxley
      Act.32.2
            Certification
      of Principal Accounting Officer Pursuant to Section 906 of the
      Sarbanes−Oxley Act.




(c) FINANCIAL
      STATEMENT SCHEDULES:















- 43
-


SIGNATURES





Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.






Opticon
      Systems, Inc.Date:      
      October 14, 2008
              By:
              /s/ Sadruddin
      CurrimbhoySadruddin
      Currimbhoy, Principal Executive Officer












Pursuant
to the requirements of the Securities Exchange Act of 1934, 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, Name and
      Position:
            
            Date:/s/
      Saddrudin Currimbhoy
            
            October
      14, 2008Saddrudin
      Currimbhoy, Principal Executive Officer and Director/s/
      Cristino L. Perez
            
            October
      14, 2008Cristino
      L. Perez, Principal Accounting Officer/s/
      Saed (Sam) Talari
            
            October
      14, 2008Saed
      (Sam) Talari, Director

































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