Report of Independent Registered Public Accounting Firm



|Admiralty Holding CompanyAtlanta, Georgia
|-----------------------------------------

We have audited the accompanying consolidated balance sheets of Admiralty Holding Company and Subsidiaries (A Development Stage Enterprise), (the Company), as of December 31, 2005 and 2004, and the related consolidated
statements of operations, changes in stockholders deficit and cash flows for the years then ended, and the inception period from April 15, 1988 to December 31, 2005. These financial statements are the responsibility of the Companys
management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Admiralty Holding Company and Subsidiaries as of December 31, 2005 and 2004 and the results
of its operations and its cash flows for the years ended December 31, 2005 and 2004, and for the inception period from April 15, 1988 to December 31, 2005, in conformity with accounting principles generally accepted in the United States of
America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.  As discussed in Note 1 to the financial statements, the Company will require substantial additional
funds to sustain research and development and commence and continue operating activities until such time as the Company can generate positive cash flows from operations.  This condition raises substantial doubt about the Companys ability to
continue as a going concern. Managements plans to raise additional funds and begin operations are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this
uncertainty.



|/S/ Cherry, Bekaert & Holland, L.L.P.
|-------------------------------------



|Atlanta, GeorgiaApril 10, 2006
|------------------------------

---

|ADMIRALTY HOLDING COMPANY AND SUBSIDIARIES                                 |  |   |  |             
|-------------------------------------------------------------------------- |  | - |  | ------------
|(A Development Stage Enterprise)                                           |  |   |  |             
|                                                                          
|Consolidated Balance Sheets                                                |  |   |  |             
|December 31, 2005 and 2004                                                 |  |   |  |             
|                                                                          
|Assets                                                                     |  |   |  |             
|                                                                           |  |   |  | 2005        
|                                                                           |  |   |  |             
|Current Assets                                                             |  |   |  |             
|Cash in bank                                                               |  | $ |  | 972,028     
|Expense and employee receivables                                           |  |   |  | 22,000      
|Other current assets                                                       |  |   |  | 159,032     
|                                                                           |  |   |  |             
|                                                                          
|Total current assets                                                       |  |   |  | 1,153,060   
|                                                                          
|Furniture, fixtures, computer equipment and leasehold                      |  |   |  |             
|improvements, less accumulated depreciation of $2,843                      |  |   |  |             
|and $137,010, respectively                                                 |  |   |  | 24,247      
|New World Legacy-vessel, less accumulated                                  |  |   |  |             
|depreciation of $88,436 and $37,901, respectively                          |  |   |  | 709,484     
|Investment                                                                 |  |   |  | 405,000     
|Other assets                                                               |  |   |  | 224,061     
|                                                                           |  |   |  |             
|                                                                          
|Total assets                                                               |  | $ |  | 2,515,852   
|                                                                           |  |   |  |             
|                                                                          
|Liabilities and Stockholders Deficit                                      |  |   |  |             
|Liabilities                                                                |  |   |  |             
|Current liabilities                                                        |  |   |  |             
|Accounts payable                                                           |  | $ |  | 165,775     
|Accrued compensation and consulting fees                                   |  |   |  | 405,800     
|Short-term advances                                                        |  |   |  | 328,951     
|Nonconvertible debentures, net of unamortized discount of                  |  |   |  |             
|$228,185                                                                   |  |   |  | 2,271,815   
|Interest Payable                                                           |  |   |  | 1,805,670   
|                                                                           |  |   |  |             
|                                                                          
|Total current liabilities                                                  |  |   |  | 4,978,011   
|                                                                          
|Convertible three year debt                                                |  |   |  | 2,477,500   
|Nonconvertible debentures, net of unamortized discount of                  |  |   |  |             
|$376,834 and $1,051,301, respectively                                      |  |   |  | 2,123,166   
|Interest payable                                                           |  |   |  | 1,654,302   
|                                                                           |  |   |  |             
|                                                                          
|Total liabilities                                                          |  |   |  | 11,232,979  
|                                                                           |  |   |  |             
|                                                                          
|Stockholders Deficit                                                      |  |   |  |             
|                                                                          
|Preferred stock; 50,000,000 shares authorized, none                        |  |   |  | -           
|issued                                                                     |  |   |  |             
|Common stock; $.001 par value, 300,000,000 shares                          |  |   |  |             
|authorized; 56,092,190 and 55,340,890 shares issued                        |  |   |  |             
|and outstanding at December 31, 2005 and 2004,                             |  |   |  |             
|respectively                                                               |  |   |  | 56,092      
|Additional paid-in capital                                                 |  |   |  | 12,285,279  
|Subscribed shares                                                          |  |   |  | 0           
|Development stage deficit                                                  |  |   |  | (21,058,498)
|                                                                           |  |   |  |             
|                                                                          
|Total stockholders deficit                                                |  |   |  | (8,717,127) 
|                                                                           |  |   |  |             
|                                                                          
|Total liabilities and stockholders deficit                                |  | $ |  | 2,515,852   
|                                                                           |  |   |  |             
|                                                                          
|The accompanying notes are an integral part of these financial statements. |  |   |  |             

F-2

---

|ADMIRALTY HOLDING COMPANY AND SUBSIDIARIES                         
|-------------------------------------------------------------------
|(A Development Stage Enterprise)                                   
|                                                                   
|Consolidated Statements of Operations                              
|Since inception and for the years ended December 31, 2005, and 2004
|                                                                   
|                                                                   
|Inception to                                                       
|                                                                   
|                                                                   
|                                                                   
|Revenues                                                           
|                                                                   
|                                                                   
|Operating expenses                                                 
|Compensation and employee benefits                                 
|Forgiveness of salaries                                            
|Research and development                                           
|General and administrative                                         
|Depreciation and amortization                                      
|Professional fees                                                  
|Exploration expense                                                
|                                                                   
|Total expenses                                                     
|                                                                   
|                                                                   
|Operating loss                                                     
|                                                                   
|Other income (expenses)                                            
|Interest expense (net of int. income)                              
|                                                                   
|                                                                   
|Net (loss)                                                         
|                                                                   
|                                                                   
|(Loss) per basic and diluted share                                 
|                                                                   

The accompanying notes are an integral part of these financial statements.

F-3

---

|ADMIRALTY HOLDING COMPANY AND SUBSIDIARIES                                 |  |   |  |             
|-------------------------------------------------------------------------- |  | - |  | ------------
|(A Development Stage Enterprise)                                           |  |   |  |             
|                                                                          
|Consolidated Statements of Cash Flows                                      |  |   |  |             
|Since inception and for the years ended December 31, 2005 and 2004         |  |   |  |             
|                                                                          
|                                                                           |  |   |  | Inception to
|                                                                           |  |   |  | 2005        
|                                                                           |  |   |  |             
|Operating activities                                                       |  |   |  |             
|Net loss                                                                   |  | $ |  | (21,058,498)
|Adjustments to reconcile net loss                                          |  |   |  |             
|to net cash used in operating                                              |  |   |  |             
|activities:                                                                |  |   |  |             
|Depreciation and amortization                                              |  |   |  | 324,537     
|Discount amortization                                                      |  |   |  | 2,490,839   
|Beneficial conversion feature                                              |  |   |  | 202,417     
|Write off employee/expense receivable                                      |  |   |  | 239,488     
|Stock issued for professional services                                     |  |   |  | 1,108,960   
|Increase in accounts payable                                               |  |   |  | 927,091     
|Increase in interest payable                                               |  |   |  | 3,482,841   
|Increase in expense receivable                                             |  |   |  | 23,038      
|Other, net                                                                 |  |   |  | 432,103     
|                                                                           |  |   |  |             
|                                                                          
|Net cash used in operating activities                                      |  |   |  | (11,827,184)
|                                                                           |  |   |  |             
|                                                                          
|Investing activities                                                       |  |   |  |             
|Advances under expense receivable                                          |  |   |  | (148,478)   
|Investment in stock                                                        |  |   |  | (110,000)   
|Purchases of furniture, fixtures and computer                              |  |   |  |             
|equipment                                                                  |  |   |  | (623,983)   
|                                                                           |  |   |  |             
|                                                                          
|Net cash used in investing activities                                      |  |   |  | (882,461)   
|                                                                           |  |   |  |             
|                                                                          
|                                                                          
|Financing activities                                                       |  |   |  |             
|Issuance of common stock and warrants                                      |  |   |  | 8,761,202   
|Short-term advances                                                        |  |   |  | 898,995     
|Issuance of non-convertible debentures                                     |  |   |  | 1,904,142   
|Issuance of convertible, three year debt                                   |  |   |  | 2,117,334   
|                                                                           |  |   |  |             
|                                                                          
|Net cash provided by financing activities                                  |  |   |  | 13,681,673  
|                                                                           |  |   |  |             
|                                                                          
|                                                                          
|Net increase (decrease) in cash and cash                                   |  |   |  |             
|equivalents                                                                |  |   |  | 972,028     
|                                                                          
|Cash and cash equivalents at the beginning                                 |  |   |  |             
|of period                                                                  |  |   |  | -           
|                                                                           |  |   |  |             
|                                                                          
|Cash and cash equivalents at the end of period                             |  | $ |  | 972,028     
|                                                                           |  |   |  |             
|                                                                          
|                                                                          
|                                                                          
|The accompanying notes are an integral part of these financial statements. |  |   |  |             

F-5

---

|                                |  | ADMIRALTY HOLDING COMPANY AND SUBSIDIARIES                             |  |         |  |                                  |  |         |  |                       
|------------------------------- |  | ---------------------------------------------------------------------- |  | ------- |  | -------------------------------- |  | ------- |  | ----------------------
|                                |  |                                                                        |  |         |  | (A Development Stage Enterprise) |  |         |  |                       
|                                |  | Consolidated Statements of Changes in Stockholders Deficit            |  |         |  |                                  |  |         |  |                       
|                                |  | Since Inception and for the years ended December 31, 1988 through 2005 |  |         |  |                                  |  |         |  |                       
|                               
|                                |  | Common Stock                                                           |  | Paid-in |  | Treasury                         |  | Note    |  | Subscribed Development
|                                |  |                                                                        |  |         |  |                                  |  | Capital |  | stock                 
|                                |  |                                                                        |  |         |  |                                  |  |         |  |                       
|                                |  |                                                                        |  |         |  |                                  |  |         |  |                       
|                                |  | Shares                                                                 |  |         |  | Amount                           |  |         |  |                       
|                                |  |                                                                        |  |         |  |                                  |  |         |  |                       
|Balance as of April 15, 1988    |  | -                                                                      |  | $       |  | -                                |  | $       |  | -                     
|                               
|Issuance of common stock        |  | 68,500                                                                 |  |         |  | 685                              |  |         |  | 34,315                
|Net loss                        |  | -                                                                      |  |         |  | -                                |  |         |  | -                     
|                                |  |                                                                        |  |         |  |                                  |  |         |  |                       
|                               
|Balance as of December 31, 1988 |  | 68,500                                                                 |  |         |  | 685                              |  |         |  | 34,315                
|                               
|Stock repurchase                |  | -2,000                                                                 |  |         |  | -                                |  |         |  | -                     
|Net loss                        |  | -                                                                      |  |         |  | -                                |  |         |  | -                     
|                                |  |                                                                        |  |         |  |                                  |  |         |  |                       
|                               
|Balance as of December 31, 1989 |  | 66,500                                                                 |  |         |  | 685                              |  |         |  | 34,315                
|                               
|Issuance of common stock        |  | 5,000                                                                  |  |         |  | 50                               |  |         |  | 59,950                
|Net loss                        |  | -                                                                      |  |         |  | -                                |  |         |  | -                     
|                                |  |                                                                        |  |         |  |                                  |  |         |  |                       
|                               
|Balance as of December 31, 1990 |  | 71,500                                                                 |  |         |  | 735                              |  |         |  | 94,265                
|                               
|Issuance of common stock        |  | 1,750                                                                  |  |         |  | 18                               |  |         |  | 37,482                
|Net loss                        |  | -                                                                      |  |         |  | -                                |  |         |  | -                     
|                                |  |                                                                        |  |         |  |                                  |  |         |  |                       
|                               
|Balance as of December 31, 1991 |  | 73,250                                                                 |  | $       |  | 753                              |  | $       |  | 131,747               

F-7

---

|ADMIRALTY HOLDING COMPANY AND SUBSIDIARIES                             
|-----------------------------------------------------------------------
|(A Development Stage Enterprise)                                       
|Consolidated Statements of Changes in Stockholders Deficit (Continued)
|Since Inception and for the years ended December 31, 1988 through 2005 
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Balance as of December 31, 1991                                        
|                                                                       
|Issuance of common stock                                               
|Net loss                                                               
|                                                                       
|                                                                       
|Balance as of December 31, 1992                                        
|                                                                       
|Issuance of common stock                                               
|Stock repurchase                                                       
|Stock record adjustments                                               
|Adjusted loss  Expense R & D                                          
|Net loss                                                               
|                                                                       
|                                                                       
|Balance as of December 31, 1993                                        
|                                                                       
|Issuance of common stock                                               
|Net loss                                                               
|                                                                       
|                                                                       
|Balance as of December 31, 1994                                        
|                                                                       
|Issuance of common stock                                               
|Net loss                                                               
|                                                                       
|                                                                       
|Balance as of December 31, 1995                                        
|                                                                       
|Issuance of common stock                                               
|Stock repurchase                                                       
|Net loss                                                               
|                                                                       
|                                                                       
|Balance as of December 31, 1996                                        

F-8

---

|                                |  | ADMIRALTY HOLDING COMPANY AND SUBSIDIARIES                              |  |           |  |                                                 |  |              |  |              |  |              
|------------------------------- |  | ----------------------------------------------------------------------- |  | --------- |  | ----------------------------------------------- |  | ------------ |  | ------------ |  | -------------
|                                |  | (A Development Stage Enterprise)                                        |  |           |  |                                                 |  |              |  |              |  |              
|                                |  | Consolidated Statements of Changes in Stockholders Deficit (Continued) |  |           |  |                                                 |  |              |  |              |  |              
|                                |  | Since Inception and for the years ended December 31, 1988 through 2005  |  |           |  |                                                 |  |              |  |              |  |              
|                               
|                               
|                               
|                                |  | Common Stock                                                            |  | Paid-in   |  | Treasury Note receivable Subscribed Development |  |              |  | Total       
|                                |  |                                                                         |  |           |  |                                                 |  | Capital      |  | stock        |  | from         
|                                |  |                                                                         |  |           |  |                                                 |  |              |  |              |  | Stockholders'
|                                |  | Shares                                                                  |  |           |  | Amount                                          |  |              |  |              |  |              
|                                |  |                                                                         |  |           |  |                                                 |  |              |  |              |  |              
|                               
|Balance as of December 31, 1996 |  | 773,860                                                                 |  | $         |  | 7,739                                           |  | $ 1,695,695  |  | $ -270,000 $ |  | -            
|                               
|Issuance of common stock        |  | 47,324                                                                  |  |           |  | 473                                             |  | 1,357,827    |  | -            |  | -            
|Stock split- 20 for 1, 5-25-97  |  | 15,648,396                                                              |  |           |  | 156,484                                         |  | -156,484     |  | -            |  | -            
|Stock repurchase                |  | -500                                                                    |  |           |  | -5                                              |  | 5            |  | -10,000      |  | -            
|Net loss                        |  | -                                                                       |  |           |  | -                                               |  | -            |  | -            |  | -            
|                                |  |                                                                         |  |           |  |                                                 |  |              |  |              |  |              
|                               
|Balance as of December 31, 1997 |  | 16,469,080                                                              |  |           |  | 164,691                                         |  | 2,897,043    |  | -280,000     |  | -            
|                               
|Issuance of common stock        |  | 501,772                                                                 |  |           |  | 5,018                                           |  | 1,424,284    |  | -            |  | -            
|Loan to stockholder             |  | -                                                                       |  |           |  | -                                               |  | -            |  | -            |  | -            
|Net loss                        |  | -                                                                       |  |           |  | -                                               |  | -            |  | -            |  | -            
|Gain from forgiveness of debt   |  | -                                                                       |  |           |  | -                                               |  | -            |  | -            |  | -            
|                                |  |                                                                         |  |           |  |                                                 |  |              |  |              |  |              
|                               
|Balance as of December 31, 1998 |  | 16,970,852                                                              |  |           |  | 169,709                                         |  | 4,321,327    |  | -280,000     |  | -            
|                               
|Issuance of common stock        |  | 310,428                                                                 |  |           |  | 3,104                                           |  | 542,397      |  | -            |  | -            
|Capital adjustment              |  | -                                                                       |  |           |  | -                                               |  | -67,941      |  | -            |  | -            
|Net loss                        |  | -                                                                       |  |           |  | -                                               |  | -            |  | -            |  | -            
|                                |  |                                                                         |  |           |  |                                                 |  |              |  |              |  |              
|                               
|Balance as of December 31, 1999 |  | 17,281,280                                                              |  |           |  | 172,813                                         |  | 4,795,783    |  | -280,000     |  | -            
|                               
|Issuance of common stock        |  | 329,035                                                                 |  |           |  | 3,290                                           |  | 414,064      |  | -            |  | -            
|Net loss                        |  | -                                                                       |  |           |  | -                                               |  | -            |  | -            |  | -            
|                                |  |                                                                         |  |           |  |                                                 |  |              |  |              |  |              
|                               
|Balance as of December 31, 2000 |  | 17,610,315                                                              |  | $ 176,103 |  | $ 5,209,847                                     |  | $ -280,000 $ |  | -            |  | $            

F-9

---



|ADMIRALTY HOLDING COMPANY AND SUBSIDIARIES(A Development Stage Enterprise)Consolidated Statements of Changes in Stockholders Deficit (Continued)Since Inception and for the years ended December 31, 1988 through 2004
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                 |  | Common Stock |  | Paid-in  |  | Treasury Note receivable Subscribed Development |  |              |  | Total
|-------------------------------- |  | ------------ |  | -------- |  | ----------------------------------------------- |  | ------------ |  | -----
|                                 |  |              |  |          |  | Capital                                         |  | stock        |  |      
|                                 |  |              |  |          |  |                                                 |  |              |  |      
|                                 |  | Shares       |  | Amount   |  |                                                 |  |              |  |      
|                                 |  |              |  |          |  |                                                 |  |              |  |      
|                                
|Balance as of December 31, 2000  |  | 17,610,315 $ |  | 176,103  |  | $ 5,209,847                                     |  | $ -280,000 $ |  | -    
|                                
|Stock effect of reverse merger   |  | 2,230,000    |  | 2,230    |  | 33,270                                          |  | -            |  |      
|Retirement of treasury stock     |  | -            |  | -        |  | -280,000                                        |  | 280,000      |  |      
|Issuance of common stock         |  | 2,225,933    |  | 2,226    |  | 860,672                                         |  | -            |  |      
|Issuance of warrants             |  | -            |  | -        |  | 88,688                                          |  | -            |  |      
|Capital effect of reverse merger |  | -            |  | -158,493 |  | 158,493                                         |  | -            |  |      
|Adj. Development state deficit   |  | -            |  | -        |  | -                                               |  | -            |  |      
|Net loss                         |  | -            |  | -        |  | -                                               |  | -            |  |      
|                                 |  |              |  |          |  |                                                 |  |              |  |      
|                                
|Balance as of December 31, 2001  |  | 22,066,248   |  | 22,066   |  | 6,070,970                                       |  | -            |  |      
|                                
|Issuance of common stock         |  | 7,700,000    |  | 7,700    |  | 856,833                                         |  | -            |  |      
|Subscribed stock                 |  | -            |  | -        |  | -                                               |  | -            |  |      
|Issuance of warrants             |  | -            |  | -        |  | 61,036                                          |  | -            |  |      
|Stock record adjustment          |  | 53,921       |  | 54       |  | -                                               |  | -            |  |      
|Notes receivable for exercised   |  | -            |  | -        |  | -                                               |  | -            |  |      
|options                          |  |              |  |          |  |                                                 |  |              |  |      
|Net loss                         |  | -            |  | -        |  | -                                               |  | -            |  |      
|                                 |  |              |  |          |  |                                                 |  |              |  |      
|                                
|Balance as of December 31, 2002  |  | 29,820,169   |  | 29,820   |  | 6,988,839                                       |  | -            |  |      
|                                
|Issuance of common stock         |  | 16,145,975   |  | 16,146   |  | 1,234,193                                       |  | -            |  |      
|Subscribed stock                 |  | -            |  | -        |  | -                                               |  | -            |  |      
|Notes receivable for exercised   |  | -            |  | -        |  | -                                               |  | -            |  |      
|options                          |  |              |  |          |  |                                                 |  |              |  |      
|Net loss                         |  | -            |  | -        |  | -                                               |  | -            |  |      
|                                 |  |              |  |          |  |                                                 |  |              |  |      
|                                
|Balance as of December 31, 2003  |  | 45,966,144 $ |  | 45,966   |  | $ 8,223,032                                     |  | $ -          |  | $    

F-10

---

|                                       |  | ADMIRALTY HOLDING COMPANY AND SUBSIDIARIES                              |  |                         |  |           |  |                          |  |            |  |            
|-------------------------------------- |  | ----------------------------------------------------------------------- |  | ----------------------- |  | --------- |  | ------------------------ |  | ---------- |  | -----------
|                                       |  | (A Development Stage Enterprise)                                        |  |                         |  |           |  |                          |  |            |  |            
|                                       |  | Consolidated Statements of Changes in Stockholders Deficit (Continued) |  |                         |  |           |  |                          |  |            |  |            
|                                       |  | Since Inception and for the years ended December 31, 1988 through 2005  |  |                         |  |           |  |                          |  |            |  |            
|                                      
|                                      
|                                       |  | Common Stock                                                            |  | Paid-in                 |  |           |  | Treasury Note receivable |  | Subscribed |  | Development
|                                       |  |                                                                         |  |                         |  | Capital   |  |                          |  | stock      |  |            
|                                       |  |                                                                         |  |                         |  |           |  |                          |  |            |  |            
|                                       |  | Shares                                                                  |  | Amount                  |  |           |  |                          |  |            |  |            
|                                       |  |                                                                         |  |                         |  |           |  |                          |  |            |  |            
|Balance as of December 31, 2003        |  | 45,966,144 $                                                            |  | 45,966 $                |  | 8,223,032 |  | $                        |  | -          |  | $          
|                                      
|Issuance of common stock               |  | 9,374,746                                                               |  | 9,375                   |  | 2,713,280 |  |                          |  | -          |  |            
|Subscribed stock                       |  | -                                                                       |  | -                       |  | -         |  |                          |  | -          |  |            
|Issuance of warrants                   |  | -                                                                       |  | -                       |  | 420,000   |  |                          |  | -          |  |            
|Notes receivable for exercised options |  | -                                                                       |  | -                       |  | -         |  |                          |  | -          |  |            
|Net loss                               |  | -                                                                       |  | -                       |  | -         |  |                          |  | -          |  |            
|                                       |  |                                                                         |  |                         |  |           |  |                          |  |            |  |            
|                                      
|Balance as of December 31, 2004        |  | 55,340,890 $                                                            |  | 55,341 $ 11,356,312     |  | $         |  | -                        |  | $          |  | -          
|                                      
|                                      
|Issuance of common stock               |  | 751,300                                                                 |  | 751                     |  | 266,816   |  |                          |  | -          |  |            
|Subscribed stock                       |  | -                                                                       |  | -                       |  | -         |  |                          |  | -          |  |            
|Issuance of warrants                   |  | -                                                                       |  | -                       |  | 459,735   |  |                          |  | -          |  |            
|Beneficial conversion feature          |  | -                                                                       |  | -                       |  | 202,417   |  |                          |  | -          |  |            
|Net loss                               |  | -                                                                       |  | -                       |  | -         |  |                          |  | -          |  |            
|                                       |  |                                                                         |  |                         |  |           |  |                          |  |            |  |            
|                                      
|Balance as of December 31, 2005        |  | 56,092,190 $                                                            |  | 56,092 $ 12,285,280 $ - |  | $         |  | -                        |  | $          |  | -          
|                                       |  |                                                                         |  |                         |  |           |  |                          |  |            |  |            

Note A- See Schedule of Stock Issuances below

The accompanying notes are an integral part of these financial statements.

F-11

---

|Note A Schedule of Stock Issuances |  |                                                                        |  |                            
|----------------------------------- |  | ---------------------------------------------------------------------- |  | ---------------------------
|                                    |  | ADMIRALTY HOLDING COMPANY AND SUBSIDARIES                             
|                                    |  | (A Development Stage Enterprise)                                      
|                                    |  |                                                                        |  | Schedule of Stock Issuances
|                                    |  | Since Inception and for the years ended December 31, 1988 through 2005
|Date                                |  | Year                                                                   |  | # of Shares                
|                                    |  |                                                                        |  |                            
|Balance as of April 15, 1988        |  |                                                                        |  | 0                          
|                                    |  | Year 1988                                                              |  | 68,500                     
|Balance as of December 31, 1988     |  |                                                                        |  | 68,500                     
|                                    |  | Year 1989                                                              |  | (2,000)                    
|Balance as of December 31, 1989     |  |                                                                        |  | 66,500                     
|                                    |  | Year 1990                                                              |  | 5,000                      
|Balance as of December 31, 1990     |  |                                                                        |  | 71,500                     
|                                    |  | Year 1991                                                              |  | 1,750                      
|Balance as of December 31, 1991     |  |                                                                        |  | 73,250                     
|                                    |  | Year 1992                                                              |  | 538,950                    
|Balance as of December 31, 1992     |  |                                                                        |  | 612,200                    
|                                    |  | Year 1993                                                              |  | 15,946                     
|                                    |  | Year 1993                                                              |  | (500)                      
|                                    |  | Year 1993                                                              |  | 30                         
|Balance as of December 31, 1993     |  |                                                                        |  | 627,676                    
|                                    |  | Year 1994                                                              |  | 11,869                     
|Balance as of December 31, 1994     |  |                                                                        |  | 639,545                    

F-12

---

|                                |  | ADMIRALTY HOLDING COMPANY AND SUBSIDARIES                             
|------------------------------- |  | ----------------------------------------------------------------------
|                                |  |                                                                       
|                                |  |                                                                       
|                                |  | Since Inception and for the years ended December 31, 1988 through 2005
|Date                            |  | Year                                                                  
|                                |  |                                                                       
|Balance as of December 31, 1994 |  |                                                                       
|                                |  | Year 1995                                                             
|Balance as of December 31, 1995 |  |                                                                       
|                                |  | Year 1996                                                             
|                                |  | Year 1996                                                             
|Balance as of December 31, 1996 |  |                                                                       
|                                |  | May 25, 1997                                                          
|                                |  | Year 1997                                                             
|                                |  | Year 1997                                                             
|Balance as of December 31, 1997 |  |                                                                       
|                                |  | Year 1998                                                             
|Balance as of December 31, 1998 |  |                                                                       
|                                |  | Year 1999                                                             
|Balance as of December 31, 1999 |  |                                                                       
|                                |  | Year 2000                                                             
|Balance as of December 31, 2000 |  |                                                                       

F-13

---

|                                |  | ADMIRALTY HOLDING COMPANY AND SUBSIDARIES                          
|------------------------------- |  | -------------------------------------------------------------------
|                                |  |                                                                    
|                                |  |                                                                    
|                                |  | Since Inception and for the years ended December 31, 1988 thru 2005
|                               
|                               
|Date                            |  | Year                                                               
|                                |  |                                                                    
|                               
|Balance as of December 31, 2000 |  |                                                                    
|                               
|                                |  | May 25, 2001                                                       
|                                |  | Various                                                            
|                                |  | March 9, 2001                                                      
|                                |  | May 25, 2001                                                       
|                                |  | August 21, 2001                                                    
|                                |  | September 20, 2001                                                 
|                                |  | November 20, 2001                                                  
|                               
|Balance as of December 31, 2001 |  |                                                                    
|                               
|                                |  | Various                                                            
|                                |  | January 23, 2002                                                   
|                                |  | June 18, 2002                                                      
|                                |  | September 4, 2002                                                  
|                                |  | December 31, 2002                                                  
|                               
|Balance as of December 31, 2002 |  |                                                                    

F-14

---

|                                |  | ADMIRALTY HOLDING COMPANY AND SUBSIDARIES                          
|------------------------------- |  | -------------------------------------------------------------------
|                                |  |                                                                    
|                                |  |                                                                    
|                                |  | Since Inception and for the years ended December 31, 1988 thru 2005
|                               
|Date                            |  | Year                                                               
|                                |  |                                                                    
|                               
|Balance as of December 31, 2002 |  |                                                                    
|                               
|                                |  | Various                                                            
|                                |  | Various                                                            
|                                |  | Various                                                            
|                                |  | February 26, 2003                                                  
|                                |  | October 2, 2003                                                    
|                                |  | November 18, 2003                                                  
|                                |  | November 20, 2003                                                  
|                                |  | November 20, 2003                                                  
|                                |  | November 21, 2003                                                  
|                                |  | December 2, 2003                                                   
|                                |  | December 2, 2003                                                   
|                               
|Balance as of December 31, 2003 |  |                                                                    
|                               
|                                |  | Various                                                            
|                                |  | Various                                                            
|                                |  | Various                                                            
|                                |  | February 25, 2004                                                  
|                                |  | March 23, 2004                                                     
|                                |  | April 2, 2004                                                      
|                                |  | April 2, 2004                                                      
|                                |  | July 16, 2004                                                      
|                                |  | July 18, 2004                                                      
|                                |  | August 18, 2004                                                    
|                                |  | September 7, 2004                                                  
|                                |  | December 31, 2004                                                  
|                                |  | December 22, 2004                                                  
|                               
|Balance as of December 31, 2004 |  |                                                                    

F-15

---

|                                |  | ADMIRALTY HOLDING COMPANY AND SUBSIDARIES                          
|------------------------------- |  | -------------------------------------------------------------------
|                                |  |                                                                    
|                                |  |                                                                    
|                                |  | Since Inception and for the years ended December 31, 1988 thru 2005
|                               
|Date                            |  | Year                                                               
|                               
|                                |  | January 11, 2005                                                   
|                                |  | January 26, 2005                                                   
|                                |  | January 24, 2005                                                   
|                                |  | March 25, 2005                                                     
|                                |  | June 13, 2005                                                      
|                                |  | June17, 2005                                                       
|                                |  | December 23, 2005                                                  
|                               
|Balance as of December 31, 2005 |  |                                                                    

F-16

---

ADMIRALTY HOLDING COMPANY AND SUBSIDIARIES (A Development Stage Enterprise)



|Notes to Financial StatementsDecember 31, 2005 and 2004
|-------------------------------------------------------

Note 1  Nature of Business and Summary of Significant Accounting Policies



|Nature of Business
|------------------

Admiralty Holding Company, (formerly Ruby Mining Company), (the Company), and its wholly owned subsidiaries, Admiralty Corporation, and Admiralty Marine Operations, Ltd., are a development stage
enterprise.  The Companys primary offices are operated primarily as a virtual Company, with a domicile located in Douglasville, Georgia. During the second quarter of 2001, the Company reorganized by entering into a stock purchase agreement
with Admiralty Corporation whereby the Company issued shares of its common stock in exchange for all of the outstanding common stock of Admiralty Corporation. The reorganization was accounted for as a recapitalization of Admiralty because the
shareholders of Admiralty controlled the Company immediately after the acquisition. Accordingly, there was no adjustment to the carrying value of the assets or liabilities of Admiralty resulting from the recapitalization. Admiralty is now a wholly
owned subsidiary of the Company. The Company is the acquiring entity for legal purposes and Admiralty is the surviving entity for accounting purposes. The primary business of Admiralty is now that of the Company.

Admiralty Corporation was incorporated in the State of Georgia in 1988.  Since inception, Admiralty has undertaken to fund and conduct research to develop a remote sensing nonferrous metal detection device referred to
by Admiralty as ATLIS .  Upon completion of research, development and testing, the Company intends to use the device to locate, identify, and quantify gold and silver bullion, coins, and artifacts located on and beneath the ocean floor.  The Company
believes that much of these artifacts are located in waters governed by foreign countries. Accordingly, the Company is developing relationships with these countries to permit the Company to seek historical shipwreck sites in these waters.

During 2004, the Company organized Admiralty Marine Operations, Ltd., as a wholly owned subsidiary.  Admiralty Marine Operations, Ltd., through capitalization from the Company, acquired the New World Legacy, a research
vessel, for cash consideration of $447,921 and for equity instruments of the Company valued at $350,000.

The Company is a development stage enterprise and is primarily funding and conducting research to develop ATLIS. As of the Companys current year-end, the Company does have sufficient funds to complete
development of the ATLISätechnology, fund administrative expenses and conduct initial explorations, which may result in starting recoveries but may not be enough to
recognize revenues. Management believes that sufficient capital to continue research, development and operating activities can be obtained through private and public placements of equity and debt securities. Management recognizes that additional
capital will be needed to pay debt, continue research, development and operations and is working with various financial advisors to facilitate private placements and a public offering of the Companys common stock.  In addition, the Company is
proceeding with opportunities for partnering or forming alliances with other exploration companies. The success of the Company is dependent upon managements ability to implement this plan.

F-17

---

ADMIRALTY HOLDING COMPANY AND SUBSIDIARIES (A Development Stage Enterprise)



|Notes to Financial Statements - continuedDecember 31, 2005 and 2004
|-------------------------------------------------------------------

Note 1  Nature of Business and Summary of Significant Accounting Policies-continued



|Nature of Business continued
|-----------------------------

During 2004 and 2005, the Company began surveys of several sites and discovered a number of historic wrecks on Company permitted and controlled sites. A partial recovery was started on a site granted to the Company by
a US Federal District Court (an arrested site). The Company intends to continue recovery operations at this site in 2006. The Company also has sought to utilize its ship to perform surveys for other entities for both a percentage and/or
for hire in order to generate revenues and defray the ships operating expenses.

The Company may face serious liquidity issues in 2006, if those issues are successfully resolved, again in 2007 as a result of the maturity of certain debentures issued by the Company in 1996 and 1997. One of two
senior and junior debentures issued by the Company will be due and payable on September 30, 2006 (with the remaining senior and junior debentures to be due and payable on August 22, 2007). The total amount of principal and interest which will be due
and payable under the debentures maturing on September 30, 2006 is $3,978,630 and the total amount of principal and interest which will be due and payable under the debentures maturing on August 20, 2007 is $4,000,000. These debentures were
issued as senior nonconvertible 6% debentures to an Austrian investment bank in the aggregate principal amount of $4,000,000 and as substantially identical junior 6% nonconvertible debentures to the financial organization responsible for
introducing the bank to the Company in the aggregate principal amount of $1,000,000. Management is currently considering several alternative contingency plans in order to avoid defaulting in the repayment of these debentures and it is confident
that an arrangement can be made which will prevent an incident of default, although no such arrangement has yet been finalized. Management has been in discussions with the holders of the senior debentures in an effort to negotiate an accommodation
by such holders regarding the maturity date and a restructuring of the terms of the indebtedness by the parties. Accommodation and restructuring plans being considered involve several possibilities, including, but not limited to, a cash payment or
the addition of specific collateral to secure repayment in return for an extension of the maturity dates, conversion of some or all of the indebtedness into common and/or preferred stock or some other equity security or debt instrument, or
acceptance by the holders of a lesser amount of cash than the total due as payment in full. No assurance is or can be given that the debentures will not go into default, which in turn would have an extremely adverse effect on the Company,
particularly so because such a default would also trigger a default of the callable secured convertible notes held by The NIR Group, which in turn could result in the holders of those notes exercising their rights under their blanket security and
pledge agreements entered into with the Company.

F-18

---

ADMIRALTY HOLDING COMPANY AND SUBSIDIARIES (A Development Stage Enterprise)



|Notes to Financial Statements - continuedDecember 31, 2005 and 2004
|-------------------------------------------------------------------



|Summary of Significant Accounting Policies
|------------------------------------------



|Method of Accounting
|--------------------

The accompanying financial statements include the accounts of Admiralty Holding Company, Admiralty Corporation, and Admiralty Marine Operations, Ltd., and have been prepared on the accrual basis of accounting. Under
the accrual method, revenues are recognized when earned and expenses are recognized when the related goods or services are received.  Significant intercompany accounts are eliminated in consolidation.



|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 amounts reported
in the financial statements and accompanying notes. Actual results may differ from those estimates, and such differences may be material to the financial statements.



|Cash in Bank
|------------

Cash in bank consists of demand deposits and cash equivalents. The Company considers all highly liquid investments with maturities of three months or less when purchased to be cash equivalents.



|Equipment  Exploration Vessel
|------------------------------

Furniture, fixtures, computer equipment, and exploration assets are recorded at cost and depreciated using the straight-line method over the estimated useful lives of the assets, which range from five to fifteen years.
Leasehold improvements are amortized over the lesser of the estimated useful life of the asset or the lease term.



|Income Taxes
|------------

The Company accounts for income taxes using the asset and liability approach in accordance with Statement of Financial Accounting Standard No. 109.  Under the asset and liability approach deferred tax assets and
liabilities are recognized for the future tax benefit and expense which is expected to arise from differences between asset and liability amounts reported for financial statement and tax purposes. Tax assets may also be recognized for net operating
loss and tax credit carryforwards. 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.

F-19

---

ADMIRALTY HOLDING COMPANY AND SUBSIDIARIES

(A Development Stage Enterprise)



|Notes to Financial Statements - continuedDecember 31, 2005 and 2004
|-------------------------------------------------------------------

Note 1  Nature of Business and Summary of Significant Accounting Policies-continued

Summary of Significant Accounting Policies - continued



|Research and Development
|------------------------

The Companys research and development expenses represent payments and amounts due to Larsen Laboratory for development of the ATLISÔnonferrous metal detection device. Larsen Laboratory is solely owned by a stockholder and former director of the Company. In 2005, the Company paid directly most of the costs associated with the production of the ATLISÔfield detection device. At December 31, 2005 and 2004, amounts payable to Larsen Laboratory for these services were $85,000 and $85,000, respectively.  The Company paid to Larson
Laboratories $42,188 and $250,000 in 2005 and 2004, respectively, for development of the ATLIS field unit.

The Company expenses research and development costs, including the cost of materials used in pre-operating prototypes, when incurred.



|Financial Instruments
|---------------------

Financial instruments include cash in bank, accounts payable, accrued compensation and consulting fees, convertible debt, non-convertible debentures and interest payable.  These amounts are recorded at historical cost
basis, which approximates fair value. Cash balances in financial institutions periodically exceed insured amounts. These balances are held by national financial institutions and management believes any credit risk of loss related to these amounts is
remote.



|Stock-Based Compensation
|------------------------

The Company accounts for stock-based compensation utilizing the intrinsic value method. See Note 5 for additional information regarding the Companys stock based compensation. Presented below is certain financial
information of the Company with comparative proforma information determined as if the Company had accounted for the stock-based compensation utilizing the fair-value method.

F-20

---

ADMIRALTY HOLDING COMPANY AND SUBSIDIARIES (A Development Stage Enterprise)



|Notes to Financial Statements - continuedDecember 31, 2005 and 2004
|-------------------------------------------------------------------

Note 1  Nature of Business and Summary of Significant Accounting Policies-continued

|Stock-Based Compensation  continued      |  |   |  |             |  |   |  |            
|----------------------------------------- |  | - |  | ----------- |  | - |  | -----------
|                                         
|                                          |  |   |  | 2005        |  |   |  | 2004       
|                                          |  |   |  |             |  |   |  |            
|Net Loss as reported                      |  | $ |  | (3,251,943) |  | $ |  | (2,960,451)
|Basic and diluted loss per share          |  |   |  |             |  |   |  |            
|as reported                               |  | $ |  | (0.06)      |  | $ |  | (0.06)     
|Stock-based employee compensation         |  |   |  |             |  |   |  |            
|cost included in net loss as reported     |  | $ |  | -           |  | $ |  | -          
|Stock based employee compensation         |  |   |  |             |  |   |  |            
|cost based on fair-value method           |  | $ |  | -           |  | $ |  | -          
|Proforma net loss including stock-based   |  |   |  |             |  |   |  |            
|compensation cost based on fair-value     |  |   |  |             |  |   |  |            
|method                                    |  | $ |  | (3,251,943) |  | $ |  | (2,960,451)
|Proforma basic and diluted loss per share |  |   |  |             |  |   |  |            
|including stock-based compensation cost   |  |   |  |             |  |   |  |            
|based on fair-value method                |  | $ |  | (0.06)      |  | $ |  | (0.06)     
|                                         
|New Accounting Pronouncements             |  |   |  |             |  |   |  |            

In December 2004, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 123R, Share-Based Payment. SFAS No. 123R establishes standards for
the accounting for transactions in which an entity exchanges its equity instruments for goods or services.  It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of
the entitys equity instruments or that may be settled by the issuance of those equity instruments. The primary focus of this Statement is on accounting for transactions in which an entity obtains employee services in exchange for share-based
payment transactions. This Statement is effective for the beginning of the first interim or annual reporting period that begins after December 15, 2005. SFAS No. 123R will be adopted by the Company January 1, 2006.
The Company expects that the adoption of this Statement will not have a material impact on the financial statements of the Company.

In December 2004, the FASB issued SFAS No. 153, Exchanges of Nonmonetary Assets. This Statement amends APB Opinion No. 29, Accounting for Nonmonetary Transactions, and is based on the principle that exchanges of
nonmonetary assets should be measured based on the fair value of the assets exchanged. The provisions of this statement are effective for nonmonetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. The adoption of FAS No.
153 is not expected to have a material impact on the financial statements of the Company.

In May 2005, the FASB issued SFAS No. 154, Accounting Changes and Error Corrections -- a replacement of APB Opinion No. 20 and FASB Statement No. 3. SFAS No. 154 changes the requirements for the accounting for
and reporting of a change in accounting principle. It applies to all voluntary changes in accounting principle and to changes required by an accounting pronouncement that does not include specific transition provisions. This Statement
requires

F-21

---

ADMIRALTY HOLDING COMPANY AND SUBSIDIARIES (A Development Stage Enterprise)



|Notes to Financial Statements -- continuedDecember 31, 2005 and 2004
|--------------------------------------------------------------------

Note 1  Nature of Business and Summary of Significant Accounting Policies-continued



|New Accounting Pronouncements - continued
|-----------------------------------------

retrospective application to prior period financial statements of changes in accounting principle, unless it is impractical to determine either the period-specific or cumulative effects of the change. SFAS No. 154 is
effective for accounting changes made in fiscal years beginning after December 15, 2005. The adoption of this standard is not expected to have a material impact on the financial statements of the Company.

In February 2006, the FASB issued SFAS No. 155, Accounting for Certain Hybrid Financial Instruments, an amendment of FASB Statements No. 133 and 140. This Statement amends SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, and SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities and resolves issues in Statement No. 133 Implementation Issue No. D1, Application of Statement 133 to
Beneficial Interests in Securitized Financial Assets. The provisions of this statement are effective for all financial instruments acquired or issued after the beginning of an entitys first fiscal year that begins after September 15, 2006. The
adoption of FAS No. 155 is not expected to have a material impact on the financial statements of the Company.

Note 2  Nonconvertible Debentures and Convertible Notes

In 1996, the Company issued a senior nonconvertible 6% debenture to an Austrian bank in the amount of $2,000,000 and a substantially identical junior nonconvertible 6% debenture in the amount of $500,000 to the
financial organization, which identified the Austrian Bank as a potential investor in the Company.  In 1997, the Company issued identical senior and junior debentures. Total net proceeds from the issuance of the debentures were $1,760,000. The
excess of the $5,000,000 aggregate value of the debentures over the $1,760,000 of proceeds represents a discount on the debenture and fees charged by the parties for the investment. This discount and the related fees are being amortized over
the life of the debentures.  At December 31, 2005 and 2004 the unamortized discount and fees were $605,019 and $1,051,301. The approximate effective interest rate of the debentures is 12%.

In 2005, the Company issued a total of $2,500,000 three year notes, bearing interest at 8%, to a total of four funds collectively known as the NIR Group of Roslyn, NY. Interest is payable quarterly. Eight months of
interest was prepaid at the time of the issuance of each note in three different tranches each during the last three quarters of 2005. The notes are convertible into common stock of the Company under a registration statement declared effective
December 23, 2005. The conversion of the debt to the common stock of the Company is at the option of the holder and may be exercised at any time. The debt is convertible at a per-share price of the lesser of $0.15, or the average of the lowest
intra-day trading prices of the Companys common stock on the 20 days prior to the conversion. The Company has determined that a beneficial conversion feature exists with respect to the conversion as the conversion price at the commitment date
(date the debt was issued) was less than the market price of the stock. The Company recorded a charge to interest expense of $202,417 for the beneficial conversion feature. The Company also issued 9,615,385 five year

F-22

---

ADMIRALTY HOLDING COMPANY AND SUBSIDIARIES  (A Development Stage Enterprise)



|Notes to Financial Statements - continuedDecember 31, 2005 and 2004
|-------------------------------------------------------------------

Note 2  Nonconvertible Debentures and Convertible Notes - continued

warrants exercisable at $0.25 a share to the note holders and 961,539 of the same warrants to the designees of the underwriters as part of the agreements associated with this financing. The agreements also pledge
the assets of the Company to the note holders. Additionally, the CEO and CFO of the Company agreed to pledge their share holdings to the note holders as additional collateral. The notes may be prepaid at any time for a premium of 150% of the
outstanding principal at the time of prepayment. The agreement also requires that Keyman life insurance be issued, with the Company as named beneficiary, for the CEO and CFO. The debt matures in 2008. During 2005 the note holders converted
$22,500 of the debt for the issuance of 500,000 shared of common stock.

The debentures and interest are due and payable on September 30, 2006 and August 22, 2007, with $2.5 million plus accrued interest due on each date to the extent payment has not been made by the Company previously.
The lender of the senior subordinated debenture is entitled to receive 1% of the Companys reported net income, payable quarterly; at such time net income is reported, for each $100,000 of principal amount of the debt which is outstanding.
In addition, 50% of the outstanding principal amount is required to be repaid in the event the Company completes an initial public offering. In the event and to the extent that prepayments occur as required by the agreements, the unamortized
discount will be recalculated using the interest method and a pro rata portion of the discount will be expensed at the time of the prepayment.

All interest incurred during 2005 and 2004 was expensed.



|Note 3  Investment in Nova Ray, Inc.
|-------------------------------------

In 2004, the Company entered into a Stock Purchase Agreement (the Agreement) with another entity, Nova Ray, Inc. (Nova), under which the Company would issue 1,050,000 shares of the Companys common
stock in exchange for 140,000 shares of Nova common stock. The transaction was executed in December 2004.  The shares issued by the Company were restricted shares. The Agreement also provides that the Company may acquire an additional 210,000 shares
of common stock of Nova for additional consideration.  During 2005 the Company acquired additional shares of common stock of Nova for $90,000.

The 140,000 shares of Nova, non-voting common stock acquired by the Company represents an approximate 10% interest in Nova. The Company is accounting for this investment at cost, and based the initial cost valuation on
the fair value of the Company stock issued in exchange for the Nova stock at the transaction date.

The Company believes that the investment relationship established by the Agreement will create a synergistic relationship amongst the parties in which they would cooperate going forward on exploration projects and
would be able to jointly utilize the technologies and capabilities of both companies.

F-23

---



|ADMIRALTY HOLDING COMPANY AND SUBSIDIARIES(A Development Stage Enterprise)
|--------------------------------------------------------------------------



|Notes to Financial Statements - continuedDecember 31, 2005 and 2004
|-------------------------------------------------------------------



|Note 4  Short-Term Advances and Notes Payable
|----------------------------------------------

At December 31, 2005 and 2004, the Company had outstanding $328,951 and $369,758, respectively, of short-term interest bearing advances and notes payable, primarily from related parties. During 2004, the
Company settled or exchanged for stock all prior year notes payable, with the exception of $17,400 due to a related party who performs legal services for the Company. For the amounts outstanding at December 31, 2005, $50,000 bears an
interest rate of 6.75% and matures in 2011, which was loaned to the Company by a shareholder during 2004. Additionally, during 2004 the same shareholder loaned the Company $150,000, which was outstanding as of December 31, 2004, bears interest
at 6.75% and matures in 2011. An additional $128,950 of the amount outstanding at December 31, 2005, was loaned to the Company by an executive officer and bears interest at 6.75% and matures in 2011.



|Note 5 - Stock Options and Warrants
|-----------------------------------

The Company may grant stock options to the Companys officers, directors, key employees, and consultants to purchase the Companys common stock.  Options are granted to purchase common stock shares at a price
not less than fair market value of the stock at the date of grant as established by the Board of Directors.  The Company may grant either incentive or nonqualified stock options to employees of the Company, but only nonqualified options may be
granted to non-employee directors or consultants. Options expire not later than 10 years after the grant date, and have a maximum 10-year vesting term.

The Company made available 1,448,700 shares for issuance of stock options as of December 31, 2001. During 2002, the Company made available an additional 4,500,000 stock options under its 2002 Stock Option Plan. During
2005 the Company made available an additional 5,000,000 shares of common stock for issuance of stock options. The Board of Directors of the Company establishes to whom options shall be granted and determines exercise prices, vesting requirements and
the number of shares covered by each option.  The Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based Compensation, in October 1995.  The Company has adopted
SFAS No. 123 and as permitted by that Statement has elected to present pro forma fair-value stock-based compensation information as notes to the financial statements. The proforma presentation is presented in Note 1 to the financial
statements.

The following table summarizes stock option activity over the past two years for options issued:

|                                       |  |           |  | Weighted-     
|-------------------------------------- |  | --------- |  | --------------
|                                       |  | Number of |  | Average       
|                                       |  | Shares    |  | Exercise Price
|                                      
|Options outstanding at January 1, 2004 |  | 768,200   |  | $ 1.46        
|Granted                                |  | -         |  | -             
|Exercised                              |  | -         |  | -             
|Canceled or Expired                    |  | 290,700   |  | 2.03          

F-24

---

|ADMIRALTY HOLDING COMPANY AND SUBSIDIARIES      |  |           |  |               
|----------------------------------------------- |  | --------- |  | --------------
|(A Development Stage Enterprise)               
|                                               
|Notes to Financial Statements - continued       |  |           |  |               
|December 31, 2005 and 2004                     
|                                               
|Note 5 - Stock Options and Warrants - continued |  |           |  |               
|                                               
|                                               
|                                                |  |           |  | Weighted-     
|                                                |  | Number of |  |               
|                                                |  | Shares    |  | Exercise Price
|                                               
|Options outstanding at December 31, 2004        |  | 477,500   |  | $             
|Granted                                         |  | -         |  |               
|Exercised                                       |  | -         |  |               
|Canceled or Expired                             |  | -         |  |               
|                                               
|Options outstanding at December 31, 2005        |  | 477,500   |  |               
|                                               
|Options exercisable at December 31, 2004        |  | 477,500   |  |               
|                                               
|Options exercisable at December 31, 2005        |  | 477,500   |  |               

For options outstanding and exercisable at December 31, 2005, the exercise prices and average remaining lives were:

|Options Outstanding |  |                |  |                |  |           |  | Options Exercisable |  |                 
|------------------- |  | -------------- |  | -------------- |  | --------- |  | ------------------- |  | ----------------
|                    |  |                |  |                |  |           |  |                     |  |                 
|                   
|                    |  |                |  | Weighted-      |  |           |  |                     |  |                 
|                    |  |                |  | Average        |  |           |  |                     |  |                 
|Range of            |  | Number         |  | Remaining Life |  | Weighted- |  | Number              |  | Weighted-Average
|Exercise            |  | Outstanding at |  | in             |  | Average   |  | Exercisable at      |  | Exercise Price  
|Prices              |  | 12/31/05       |  | Years          |  | Exercise  |  | 12/31/05            |  |                 
|                    |  |                |  |                |  | Price     |  |                     |  |                 
|                   
|$ 1.00              |  | 450,000        |  | 1.42           |  | $         |  | 1.00                |  | 450,000         
|$ 3.00              |  | 27,500         |  | .64            |  | $         |  | 3.00                |  | 27,500          
|                    |  |                |  |                |  |           |  |                     |  |                 
|                   
|                    |  | 477,500        |  | 1.37           |  | $         |  | 1.12                |  | 477,500         
|                    |  |                |  |                |  |           |  |                     |  |                 

At December 31, 2005, the Company had 32,260,900 outstanding warrants to purchase one share of common stock per warrant at prices ranging $.05 per share to $7.00 per share. The warrants were issued in
connection with the Company obtaining short-term notes payable, various and multiple financing arrangements, and in connection with the 2001 reorganization of the Company.

F-25

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ADMIRALTY HOLDING COMPANY AND SUBSIDIARIES (A Development Stage Enterprise)



|Notes to Financial Statements - continuedDecember 31, 2005 and 2004
|-------------------------------------------------------------------



|Note 6  Preferred Stock
|------------------------

During 2005 the Company authorized 50,000,000 shares of preferred stock that may be issued by the Company. The Board of Directors may issue this stock at its discretion, and the terms of the issuance of the preferred
stock may include a liquidation preference, a dividend preference, or other terms as determined by the Board.



|Note 7  Loss Per Share
|-----------------------

The computation of basic and diluted earnings (loss) per share is based on the weighted average number of shares outstanding during the period presented, plus, when their effect is dilutive, additional shares assuming
the exercise of certain vested stock options and warrants, in accordance with Statement of Financial Accounting Standards No. 128, Earnings Per Share. Diluted per share amounts have not been presented in the accompanying statements of
operations as their effect is anti-dilutive. The Companys loss from operations as presented on the Statement of Operations was used in the loss per share calculation.  The weighted average number of shares outstanding for 2005 was 55,716,540
and for 2004 were 50,951,007.



|Note 8  Income taxes
|---------------------

The Company has available unused operating loss carryforwards of approximately $21million resulting in a deferred tax-asset of approximately $4 million which may be applied against future taxable income and
which expires in various years from 2006 to 2020.  The amount of and ultimate realization of the benefits from the operating loss carryforwards for income tax purposes is dependent, in part, upon the tax laws in effect, the future earnings of the
Company, and other future events, the effects of which cannot be determined. Because of the uncertainty surrounding the realization of the loss carryforwards, the Company has established a valuation allowance equal to the amount of the recognized
benefit for the loss carryforwards and, therefore, no deferred tax asset has been recognized for the loss carryforwards.



|Note 9  Related party transactions
|-----------------------------------

At times the Company may enter into transactions with related parties.  During 2005, these transactions included the issuance of 1,052,451 three year warrants to employees and consultants, in exchange for $102,745
in expenses and consulting fees payable, and are exercisable at prices between $0.35 to $0.36 a share. This includes the issuance of 226,310 three year warrants exercisable at $0.35 per share issued to Paul Collingwood, our web master,
who is the son G. Howard Collingwood, our CEO. In addition, the Company paid $7,032 to Paul Collingwood for his webmaster services.

Subsequent to the end of 2005, the company settled a lawsuit against Herbert C. Leeming, former CEO and director of the Company. As a consequence, at December 31, 2005, the Company wrote off a note receivable of
approximately $73,000 from this executive officer of the Company. Also, the Company had an expense advance receivable of approximately $155,000 from the same former executive officer of the Company as well as salary payable to him of
$50,000 and miscellaneous cash advance amounts due the Company, all of which were written off in respect to the settlement of the lawsuit.

F-26

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ADMIRALTY HOLDING COMPANY AND SUBSIDIARIES (A Development Stage Enterprise)



|Notes to Financial Statements - continuedDecember 31, 2005 and 2004
|-------------------------------------------------------------------



|Note 9  Related party transactions - continued
|-----------------------------------------------

At December 31, 2005, the Company expensed legal fees of $41,750 against a retainer recorded the previous year. For the year ended December 31, 2004 the Company issued 157,857 shares of restricted unregistered
common stock of the Company as retainer payment for future services to be provided for the Company, valued at approximately $110,500. Of these shares, 142,857 shares were issued to a related party for legal work, and issuances were at $0.70
per share.



|Note 10 - Leases
|----------------

In June 2002, the Company entered into an operating lease for an office facility through July 31, 2005.  In July 2003, this lease was amended to reduce the square footage rented by the Company. When the lease matured
at the end of July, 2005, the Company elected not to renew its lease in favor of becoming a virtually run Company. At December 31, 2005, the Company maintained nominal short-term leases for records storage and other corporate purposes.



|Note 11 - Subsequent Events
|---------------------------

In the first quarter of 2006, the Company received $96,000 of revenue from survey operations. The Companys ship, the R/V New World Legacy has begun to survey several different sites off Florida.
Additionally, as mentioned in Note 9 above, the lawsuit against a former executive officer and director was settled.



|Note 12  Commitments and Contingencies
|---------------------------------------

In the normal course of business the Company is subject to various matters of litigation.

The company has entered into numerous equity and debt financing arrangements, some of which mature during 2006, and in the near future. The Companys liquidity position presently does not provide sufficient funds
to satisfy these obligations.



|Note 13  Non-cash Investing and Financing Activities
|-----------------------------------------------------

In connection with the issuance of the three year convertible debt, the Company incurred the

|following non-cash financing activities: |  |         
|---------------------------------------- |  | --------
|Prepaid interest                         |  | $132,666
|Debt issuance costs                      |  | $250,000

F-27

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