UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 WASHINGTON,
D.C. 20549
 
 FORM
10-K
 
 [X]
                                        ANNUAL
      REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934For the fiscal year
      ended December 31,
      2008[  ]
                                        TRANSITION
      REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACTFor
      the transition period from _________ to ________Commission
      file number:000-52374
 
 IB3 Networks, Inc.(Exact
      name of registrant as specified in its
charter)
  Nevada
                          61-1433933(State
      or other jurisdiction of incorporation or organization)
                          (I.R.S.
      Employer Identification No.)10 South High Street, Canal Winchester,
      OH
                          43110(Address
      of principal executive offices)
                          (Zip
      Code)Registrant’s
      telephone number:  614.833.9713
      x235
  Securities
      registered under Section 12(b) of the Exchange Act:Title
      of each class
                                  Name
      of each exchange on which registerednone
                                  not applicableSecurities
      registered under Section 12(g) of the Exchange Act:Title
      of each class
                                  Name
      of each exchange on which registeredCommon Stock, par value
    $0.001
                                  not
applicable
 
 Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.  Yes
[  ]       No
[X]
 
 Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act. Yes
[  ]       No
[X]
 
 Check
whether the Issuer (1) filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90
days.  Yes
[X]       No
[   ]
 
 Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not
be contained, to the best of registrant’s knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. Yes
[  ]     No [X]
 
 Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
 
 Large
accelerated filer [  ] Accelerated filer [  ]
Non-accelerated filer [  ] Smaller reporting company [X]
 
 Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).   Yes
[  ]   No [X]
 
 State the
aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the common equity was
last sold, or the average bid and asked price of such common equity, as of the
last business day of the registrant’s most recently completed second fiscal
quarter. $15,774
 
 Indicate
the number of shares outstanding of each of the registrant’s classes of common
stock, as of the latest practicable date.  24,436,709as of January 6,
2009.
 
 Table of Contents
 
 TABLEOF
CONTENTS
 
 PagePART IItem 1.
                                                    Business
                                                    3Item 1A.
                                                    Risk Factors
                                                    11Item 1B.
                                                    Unresolved Staff Comments
                                                    11Item 2.
                                                    Properties
                                                    12Item 3.
                                                    Legal Proceedings
                                                    13Item 4.
                                                    Submission of Matters to a Vote of Security
      Holders
                                                    13PART IIItem 5.
                                                    Market for Registrant’s Common Equity and Related Stockholder
      Matters and Issuer Purchases of Equity Securities
                                                    13Item 6.
                                                    Selected Financial Data
                                                    16Item 7.
                                                    Management’s Discussion and Analysis of Financial Condition and
      Results of Operations
                                                    16Item 7A.
                                                    Quantitative and Qualitative Disclosures About Market
      Risk
                                                    20Item 8.
                                                    Financial Statements and Supplementary Data
                                                    20Item 9.
                                                    Changes In and Disagreements With Accountants on Accounting and
      Financial Disclosure
                                                    20Item 9A(T).
                                                    Controls and Procedures
                                                    21Item 9B.
                                                    Other Information
                                                    22PART IIIItem 10.
                                                    Directors, Executive Officers and Corporate
      Governance
                                                    23Item 11.
                                                    Executive Compensation
                                                    26Item 12.
                                                    Security Ownership of Certain Beneficial Owners and Management
      and Related Stockholder Matters
                                                    32Item 13.
                                                    Certain Relationships and Related Transactions, and Director
      Independence
                                                    33Item 14.
                                                    Principal Accountant Fees and Services
                                                    39PART
      IVItem 15.
                                                    Exhibits, Financial Statement Schedules
                                                    39
 
 2
 Table of Contents
  PART I
 
 Item1.   Business
 
 Company
Overview
 
 We were
originally incorporated as Global Institute for Gaming Innovation, Inc. in the
state of Nevada on December 31, 2002. We later changed our name to Language
Access Network, Inc. and engaged the business of selling language interpretation
products and services. On August 1, 2007, we acquired iBeam Solutions, LLC
(“iBeam”) and began to conduct computer-related business through iBeam. We sold
our language interpretation business in January, 2008. On September 23, 2008, we
changed our name to IB3 Networks, Inc. On December 10, 2008, we acquired NYC
Mags, Inc. (“NYC Mags”) through an Agreement and Plan of Merger. We are
currently engaged in the businesses of our wholly-owned subsidiaries, iBeam
Solutions and NYC Mags. Through iBeam Solutions, a Microsoft Gold Certified
Partner, we are engaged in delivering a variety of IT related solutions
including scalable hosting solutions, managed hosting, dedicated hosting and
Co-location, IT infrastructure, virtual help desk, managed services, staff
augmentation, design and implementation of networks, security and Internet
monitoring, technical support, web development, application development,
database development and support,  and wireless
solutions.  We are also a Cisco Certified Select Partner, and are
authorized resellers of most IT related hardware and software, including Dell,
APC, IBM, HP, 3COM, and many others.  Through NYC Mags, we are engaged
in the development, promotion, and operation of our online dating social
community MadisonAvenueMatch.com.
 
 Our
principal executive offices are located at 10 South High Street, Canal
Winchester, OH 43110. Our telephone number is (614) 833-9713.
 
 Eric
Schmidt is our President, Secretary, Chief Executive Officer, Chief Financial
Officer, and sole director.
 
 iBeam
Solutions
 
 Through
our wholly-owned subsidiary, iBeam, we are engaged in delivering a variety of IT
related solutions including scalable hosting solutions, managed hosting,
dedicated hosting and Co-location, IT infrastructure, virtual help desk, managed
services, staff augmentation, design and implementation of networks, security
and Internet monitoring, technical support, web development, application
development, database development and support,  and wireless
solutions.  We are also a Cisco Certified Select Partner and are
authorized resellers of most IT-related hardware and software including Dell,
APC, IBM, HP, 3COM and many others.  We serve businesses of all sizes
including large enterprises, small-to medium-sized businesses (“SMB”), and
public sector institutions in the United States and abroad. Our Products and
Services are intended to enable companies of all sizes to understand, manage,
and leverage technology efficiently and effectively, allowing them to focus on
their core business activities without the diversion of time and finances that
can result from an absence of technical proficiency and guidance.
  3
 Table of Contents
 
 We
realize revenues through the sale of hardware and software, by charging clients
for our IT consulting services and managed services, and through fees collected
for hosting client technology needs in our Tier 4 data center. We intend to grow
over the next twelve months through an expansion of our client base, and by the
acquisition of other companies engaged in similar or complementary businesses.
We feel that by focusing on our role as trusted advisors, we can provide the
best value to our clients while generating business for our technology sales.
This allows us to help accelerate attainment of our clients’ business
objectives, expand the range of products and services we sell to each of our
current clients, and attract new clients.
 
 Products
and Services
 
 The
rising demand for IT hardware, software, and services has resulted in a highly
receptive market for our Products and Services. Large enterprises, SMB’s, and
public sector institutions are in constant need of technology solutions. The
expanding role of technology in all aspects of business, in addition to the
rapidity of change within the IT industry, highlights the necessity of
comprehensive, state-of-the-art, and customized IT solutions services that we
feel are most effectively delivered within the context of close client
relationships.
 
 We are in
the process of establishing iBeam as a complete IT solutions company and a
premiere hosting provider in the United States and globally. We hope to expand
through the growth of our client base and through the acquisition similar or
complementary companies. We intend to refine and expand our Product offerings by
focusing on strengthening our relationships with our clients.
 
 Hardware
 
 We
currently offer our clients a broad selection of brand-name IT hardware
products. We offer products from hundreds of manufacturers, including
Hewlett-Packard (“HP”), Cisco, Lenovo, IBM, Toshiba, Sony, and American Power
Conversion Corporation (“APC”). We believe that offering multiple vendor choices
enables us to better serve our clients by providing a variety of product
solutions to best address their specific business needs. Utilizing multiple
vendors also allows us to consider other criteria, such as real-time best
pricing and availability, and compatibility with existing technology. This also
allows us to take advantage of manufacturers’ direct selling programs, without
being limited by them.
 
 Manufacturers
warrant most of the products we market, and it is our policy to request that
clients return their defective products directly to the manufacturer for
warranty service. This allows us to avoid most returns and the expensive
restocking fees and other associated costs. On selected products, or for
selected clients, we may accept returns directly from the client and then either
credit the client or ship a replacement product. We generally require clients to
pay for hardware and software at the time of purchase to avoid accumulating
large accounts receivable and the potential default risks associated with
extending short term credit.
  4
 Table of Contents
 
 Software
 
 Our
clients acquire software applications from us in the form of licensing
agreements with software publishers, boxed products, or through “Software as a
Service” (“SaaS”), a growing delivery model. Under SaaS, clients subscribe to
software that is hosted off-site and access the applications via the internet.
The majority of our clients, however, purchase their software applications
through licensing agreements. We believe this is a result of this method’s ease
of administration and cost-effectiveness. Licensing agreements, or right-to-copy
agreements, allow a client to either purchase a license for each of its users in
a single transaction or periodically report its software usage, paying a license
fee for each user. For most clients, the overall cost of acquiring software
through a licensing arrangement is substantially less than purchasing boxed
products for each user at their company.
 
 As
software publishers choose different procedures for implementing licensing
agreements, businesses are faced with a significant challenge in evaluating all
the alternatives available and procedures involved to ensure that they select
the appropriate agreements, comply with the publishers’ licensing terms, and
properly report and pay for their software licenses. A large, multinational
corporation may have over 100,000 users, increasing the complexity associated
with purchasing and managing their software assets. We work closely, either
locally or globally, with our clients to understand their requirements and
educate them regarding the options available to them under partner licensing
agreements.
 
 Many of
our clients who have elected to purchase software licenses through licensing
agreements have also entered into software maintenance agreements, which allow
clients to receive new versions, upgrades, or updates of software products
released during the maintenance period, in exchange for a specified annual fee.
These fees may be paid in monthly, quarterly or annual installments. Upgrades
and updates are revisions to previously published software that improve or
enhance certain features of the software and/or correct errors found in previous
versions. We assist our suppliers (the software publishers) and clients in
tracking and renewing these agreements.
 
 Consulting
Services
 
 We are
focused on understanding clients’ business needs through disciplined account
planning, data mining, and on-going research. By understanding the businesses of
our clients, we are able to provide consulting services and recommend specific
technology solutions to problems that clients are experiencing or may soon be
experiencing. Our policy is to provide the best solution at the best price
possible, for it is our clients’ trust in our consulting services that drives
our continued retention as consultants, as well as hardware and software
sales.
 
 Effectively
managing hardware and software assets is paramount to fully utilizing technology
investments. Just as our consulting and other technology Services lead to
Product sales, as we provide greater amounts of hardware and software to a given
client, their need for our consulting services in managing their technology
grows. We look for opportunities to complement our Product offerings in a given
market with a suite of professional service offerings. These Services require an
extensive team of field service personnel and, therefore, generally require that
we be broadly and deeply established in a market to support the financial
investment required of us. We currently offer these Services via our own field
service personnel, augmented by services partners to fill gaps in our geographic
coverage or capabilities. We expect to continue to develop these capabilities
internally or through targeted acquisitions over time in new geographic areas,
as our Service offerings are an essential element of our overall business
strategy.
  5
 Table of Contents
 
 Information
Technology Systems Services
 
 Our own
IT systems are at the center of our technology-based operations. To further
facilitate our business, we have implemented Alert, a software program from
Field Point Software to manage and improve our workflow by allowing clients to
access and schedule our technical services directly via the Internet. We are in
the process of introducing an increasing number of our clients to this software
in order to streamline their businesses as well as ours.
 
 We also
host internet sites, systems, and data for customers at our Tier4, N+1 data
center in Columbus, Ohio. We are able to host internet sites whether they have
been designed by us, our clients, or third party developers retained by us for
that purpose. We can also provide off-site backup or entire network systems for
our clients at our data center. Additionally, we provide related services to
support the sites, systems, and data housed here.
 
 Subsequent
to the end of the reporting period, on February 10, 2009, we expanded our
capacity to host internet sites, systems, and data for our customers by leasing
and agreeing to operate a 5,000 square foot Tier4, N+1 data center in downtown
Columbus, OH. As part of this expansion, we entered into a sublease agreement
with Data Center 101, LLC whereby we have subleased the 5,000 square foot
facility with an option to acquire an additional 5,000 square feet.
 
 We feel
that virtualization and green technology are a large part of the future of
IT.  We have implemented virtual servers in our data center, and have
began virtualization of desktops to allow customers to use their programs and
data from anywhere in the world via virtual desktops. We anticipate that this
initiative will hit its stride in 2009 and could lead to additional
growth.
 
 NYC
Mags, Inc.
 
 Through
our wholly-owned subsidiary, NYC Mags, we are currently engaged in the business
of developing, promoting, and operating our online website,
www.MadisonAvenueMatch.com. Our Site will be a social networking site designed
to help single professionals in New York meet other local single professionals
and upwardly mobile individuals for dating, romance, and possible marriage. In
addition to the Site itself, we intend to sell a discount card entitled Madison
Avenue Match Black Card to afford our premium paid members access to our
concierge service that provides discounts at restaurants, Broadway show
specials, travel, salons, and at other participating business and also offer
these premium members access to our hosted and sponsored social events designed
to bring single professionals together in a comfortable social setting. We are
also donating a portion of our profits derived by paid membership to a selected
and featured charity such as Operation Smile – saving children “One Smile at a
Time.” We hope to launch our Site by May 31, 2009.
  6
 Table of Contents
 
 We have
engaged iBeam’s in-house internet experts to work closely with NYC Mags’s
President, Michael Jacobson, to develop the Site to Mr. Jacobson’s
specifications. Mr. Jacobson is currently in the process of outlining the Site
structure and features. However, we expect that the Site will include the
following features: profile setup wizard, profile search according to a wide
variety of characteristics, text chat, audio chat, video chat, proprietary
email, black card members’ events, concierge service, account setup, and event
notifications.
 
 Competition
 
 iBeam
Solutions
 
 The IT
hardware, software and services industry is very fragmented and highly
competitive. Historically, competition in the industry had been based primarily
on price, product availability, speed of delivery, credit availability, quality
and breadth of product lines, and, increasingly, it is also based on the ability
to tailor specific solutions to client needs. We compete with manufacturers and
publishers, including manufacturers and publishers of products we sell, as well
as a large number and wide variety of marketers and resellers of IT hardware,
software and services. These companies enjoy brand recognition which exceeds
that of our brand name. In addition, some of these competitors may be able to
respond more quickly to new or changing opportunities, technologies, and client
requirements. Many competitors also engage in more extensive promotional
activities, offer more attractive terms to clients, and adopt more aggressive
pricing policies than we do. Additionally, some of our competitors have higher
margins and/or lower operating cost structures, allowing them to price more
aggressively.  We compete with a large number and wide variety of
established marketers and resellers of IT hardware, software, and services to
businesses, including:
 
 ·
              Product
      manufacturers, such as Dell, HP, IBM and
Lenovo
 ·
              Software
      publishers, such as IBM and
Microsoft
 ·
              Direct
      marketers, such as CDW Corporation
 ·
              Software
      resellers, such as SoftChoice
 ·
              Systems
      integrators, such as Sarcom Inc.
 ·
              National
      and regional resellers, including VARs, specialty retailers, aggregators,
      distributors, national computer retailers, computer superstores,
      Internet-only computer providers, consumer electronics and office supply
      superstores, and mass merchandisers
 ·
              National
      and global service providers, such as IBM Global Services, HP and
      EDS
 
 We
believe that we have two primary competitive weaknesses:
 1.
              Brand Awareness– The
      iBeam brand is relatively unknown compared to some of our primary
      competitors, and we believe our advertising expenditures are significantly
      lower than many of our competitors.
 2.
              Inconsistent Geographic
      Delivery Capabilities– Our ability to deliver across geographic
      areas varies considerably. Our most developed capabilities, network design
      and support, are strongest in Central Ohio. The balance of our footprint
      can currently deliver only products, hosting, and web
    design.
 
 7
 Table of Contents
  Product
manufacturers and publishers have programs to sell directly to business clients,
particularly larger corporate clients, and are thus a competitive threat to us.
In addition, the manner in which software products are distributed and sold and
the manner in which publishers compensate channel partners such as us are
continually changing. Software publishers may intensify their efforts to sell
their products directly to end-users, including our current and potential
clients, and may reduce the compensation to resellers or change the requirements
for earning these amounts. Other products and methodologies for distributing
software may be introduced by publishers, present competitors, or other third
parties. An increase in the volume of products sold through any of these
competitive programs or distributed directly electronically to end-users, a
decrease in the amount of referral fees paid to us, or increased competition for
providing services to these clients, could have a material adverse effect on our
business, results of operations and financial condition.
 
 We also
believe that our industry will see further consolidation as product resellers
and direct marketers combine operations or acquire or merge with other
resellers, service providers, and direct marketers to increase efficiency,
service capabilities, and market share. Moreover, current and potential
competitors have established or may establish cooperative relationships among
themselves or with third parties to enhance their product and service offerings.
Accordingly, it is possible that new competitors or alliances among competitors
may emerge and acquire significant market share. Generally, pricing is very
aggressive in the industry, and we expect pricing pressures to continue. There
can be no assurance that we will be able to negotiate prices as favorable as
those negotiated by our competitors or that we will be able to offset the
effects of price reductions with an increase in the number of clients, higher
net sales, cost reductions, greater sales of services, which are typically at
higher gross margins, or otherwise. Price reductions by our competitors that we
either cannot or choose not to match could result in an erosion of our market
share and/or reduced sales or, to the extent we match such reductions, could
result in reduced operating margins, any of which could have a material adverse
effect on our business, results of operations and financial
condition.
 
 We
compete primarily on the basis of quality, brand name recognition, and price. We
believe that our success will depend upon our ability to remain competitive in
our product areas. The failure to compete successfully in the future could
result in a material deterioration of customer loyalty and our image and could
have a material adverse effect on our business.
 
 NYC
Mags, Inc.
 
 We
compete with a number of established social networking and singles web sites.
These companies enjoy brand recognition which exceeds that of our brand name.
Many have significantly greater financial, distribution, advertising, and
marketing resources than we do, including:
 
 ·
              eHarmony.com
      - eHarmony is an online relationship service. eHarmony matches men and
      women with compatible singles of the opposite sex, taking into
      consideration what it considers key dimensions of personality. In addition
      to singles matching, eHarmony operates eHarmony Labs, a relationship
      research facility, and publishes eHarmony Advice, a growing relationship
      advice site. eHarmony launched its matching service for singles in 2000.
      Since then, the company has had about 20 million members. As of 2008,
      about 15,000 people take the eHarmony questionnaire each day. After
      finding a match on eHarmony, Harris Interactive reports that an average of
      236 eHarmony members marry every
day.
  8
 Table of Contents
  ·
              Match.com
      - Match.com is an online dating service. The company reportedly has more
      than 15 million members and Web sites serving 37 countries in more than 12
      different languages. Its headquarters are in Dallas, Texas and the company
      also has offices in London, Paris, Tokyo, Beijing, Munich, Stockholm, and
      Madrid. Match.com is owned by IAC/InterActiveCorp and employs more than
      340 people worldwide. Match.com's nearly $350 million in revenue and 1.35
      million paying subscribers place it atop the
  industry.
 ·
              Spark
      Networks, Inc. is the public parent company of Jdate, American Singles,
      Latin Singles Connection, Catholic Mingle, Black Singles, Christian
      Mingle, and other niche internet dating Sites. They generated $14 million
      in revenue in the third quarter of 2008, resulting in Net Income of $1.7
      million for the quarter.
 
 We
compete primarily on the basis of quality, brand name recognition, and price. We
believe that our success will depend upon our ability to remain competitive, and
that our local focus and promotional events will be key to our competitiveness
in this industry. The failure to compete successfully in the future could result
in a material deterioration of customer loyalty and our image and could have a
material adverse effect on our business.
 
 Intellectual
Property
 
 We do not
maintain a traditional research and development group in either of our
subsidiaries, but we do develop and seek to protect a range of intellectual
property, which may include trademarks, service marks, copyrights, domain name
rights, trade dress, trade secrets, applications we develop, and similar
intellectual property. We rely on applicable statutes and common law rights,
trade-secret protection and confidentiality and license agreements, as
applicable, with teammates, clients, partners, and others to protect our
intellectual property rights. We have registered a number of domain names, and
our principal trademark is a registered mark. We have also applied for
registration of other marks, in the U.S. and in select international
jurisdictions, and from time to time, we may file patent applications. We may
also license certain of our proprietary intellectual property rights to third
parties. We believe our trademarks and service marks, in particular, have
significant value and we continue to invest in the promotion of our trademarks
and service marks and in our protection of them.  We also have created
programs that we lease the use of to others, such as iMailer, which is a
significant asset to this company (through iBeam).
 
 We intend
to aggressively assert our rights under trade secret, unfair competition,
trademark and copyright laws to protect our intellectual property, including
product design, proprietary manufacturing processes and technologies, product
research and concepts and recognized trademarks. These rights are protected
through the acquisition of patents and trademark registrations, the maintenance
of trade secrets, the development of trade dress, and, where appropriate,
litigation against those who are, in our opinion, infringing these
rights.
  9
 Table of Contents
 
 While
there can be no assurance that registered trademarks or copyrights will protect
our proprietary information, we intend to assert our intellectual property
rights against any infringer. Although any assertion of our rights can result in
a substantial cost to, and diversion of effort by, our company, management
believes that the protection of our intellectual property rights is a key
component of our operating strategy.
 
 We may
not be able to protect our intellectual property adequately, and we may be
subject to intellectual property infringement claims. To protect our
intellectual property, we rely on copyright and trademark laws, unpatented
proprietary know-how, trade secrets and patents, as well as confidentiality,
invention assignment, non-solicitation and non-competition agreements. There can
be no assurance that these measures will afford us sufficient protection of our
intellectual property, and it is possible that third parties may copy or
otherwise obtain and use our proprietary information without authorization or
otherwise infringe on our intellectual property rights. The disclosure of our
trade secrets could impair our competitive position and could have a material
adverse effect on our business relationships, results of operations, financial
condition and future growth prospects. In addition, our registered trademarks
and trade names are subject to challenge by other rights owners. This may affect
our ability to continue using those marks and names. Likewise, many businesses
are actively investing in, developing and seeking protection for intellectual
property in the areas of search, indexing, e-commerce and other Web-related
technologies, as well as a variety of online business models and methods, all of
which are in addition to traditional research and development efforts for IT
products and application software. Additionally, as we increase the geographic
scope of our operations and the types of services provided under the iBeam
brand, there is a greater likelihood that we will encounter challenges to our
trade names, trademarks and service marks. We may not be able to use our
principal mark without modification in all of our operations for all of our
offerings, and these challenges may come from either governmental agencies or
other market participants. These types of claims could have a material adverse
effect on our business, results of operations, and financial
condition.
 
 Regulatory
Matters
 
 We are
unaware of and do not anticipate having to expend significant resources to
comply with any governmental regulations of the IT hardware, software and
services industry or the online dating industry. We are subject to the laws and
regulations of those jurisdictions in which we plan to sell our Products and
provide our Services, which are generally applicable to business operations,
such as business licensing requirements, income taxes and payroll taxes. In
general, the development, manufacture, sale, and delivery of our Products and
Services are not subject to special regulatory and/or supervisory
requirements.
 
 Employees
 
 Our
employees include our officers, directors, and Professional Services
Staff.  Eric Schmidt is our President, Julia Cooper is our Vice
President of Sales and Operations, and Trenton Argobright is our Chief
Technology Officer (CTO). We intend to expand our current management to retain
skilled directors, officers, and employees with experience relevant to our
business focus. Obtaining the assistance of individuals with and in-depth
knowledge of operations and markets will allow us to build market share more
effectively. Our future success will be largely dependent on the efforts of key
management personnel and certified staff. The loss of one or more of these
leaders could have a material adverse effect on our business, results of
operations and financial condition. We cannot offer assurance that we will be
able to continue to attract or retain highly qualified executive personnel or
that any such executive personnel will be able to increase stockholder value. We
also believe that our future success will be largely dependent on our continued
ability to attract and retain highly qualified management, sales, service and
technical personnel, but we cannot offer assurance that we will be able to
attract and retain such personnel. Increase in tenure is important to our
business. Our statistics show that staff productivity increases with experience,
stabilizing our relationships with our clients over time and solidifying our
role as a trusted advisor. Our inability to retain such personnel or to train
them either rapidly enough to meet our expanding needs or in an effective manner
for quickly changing market conditions could cause a decrease in the overall
quality and efficiency of our staff, which could have a material adverse effect
on our business, results of operations, and financial condition.
  10
 Table of Contents
 
 We
believe our personnel are the foundation of the iBeam experience. Accordingly,
we focus on knowledge development to promote personnel satisfaction, build our
personnel skill sets and motivate our people to ensure client
satisfaction.  We believe our Professional Services Staff relations
are in good standing. Our staff is not represented by any labor union, and we
have not experienced any work stoppages. We have invested in our staff’s future
and our future through an ongoing program of internal and external training.
Training programs include new hire orientation, technical training, specific
product training, and ongoing staff certification programs. We emphasize
on-the-job training. Many of our staff carries Microsoft, Cisco and other vendor
specific certifications that make up a part of our overall partnership and
certification qualifications.
 
 Currently
NYC Mags’s President, Michael Jacobson, is its only employee. His knowledge,
contacts, and business experience are vital to the success of this subsidiary.
We expect that he will hire additional personnel as necessary. However, we
currently plan to rely on Mr. Jacobson, iBeam, and other contract employees and
businesses to conduct the business of NYC Mags.
 
 Environmental
Laws
 
 We have
not incurred and do not anticipate incurring any expenses associated with
environmental laws.
 
 Research
and Development Expenditures
 
 We have
not incurred any research or development expenditures since our
incorporation.
 
 Subsidiaries
 
 We
conduct our operations through our wholly-owned subsidiaries, iBeam Solutions
and NYC Mags.
  Item 1A  Risk Factors
  A smaller
reporting company is not required to provide the information required by this
Item.
  Item 1B  Unresolved Staff Comments
  None.
  11
 Table of Contents
 
 Item2.   Properties
 
 Our principal executive offices are
located at 10 South High Street, Canal Winchester, OH 43110. We lease office
space on a month to month basis from PEBCO Partners LLC for $3,960 per
month.  We also lease data center space for $2,600 per month from Your
Colo LLC, we lease a 2005 Chevrolet Astro Van for work purposes from
GMAC, and we own equipment associated with our hosting services including
3 web servers, a Barracuda Spam Filter, SQL servers, AIT Backup Array, DNS
servers, redundant Cisco switches and firewalls, and mail servers worth
approximately $40,000. Subsequent to the end of the reporting period, on
February 10, 2009, iBeam entered into a sublease agreement with Data Center 101,
LLC, for 5,000 square feet located at 101 East Town Street, Columbus, Ohio
43215. The sublease provides the following:
 
 §
              There
      is a security deposit of $40,000.
 
 §
              The
      following is the annual base rent for years one through ten of the
      sublease: $360,000, $660,000, $756,300, $778,989, $802,358.67,
      $826,429.43, $851,222.31, $876,758.98, $903,061.75 and
      $930153.60.
 
 §
              The
      base rent shall be increased by 1) iBeam’s share of Data’s Additional
      Rent, 2) Percentage Rent 3) Third Floor CAM charges and 4) beginning with
      the third year of the lease, Customer Recurring Revenue
      Baseline.   It is estimated that the Additional Rent for
      2009 will be $1.22 per square foot.  Third floor CAM charges are
      also estimated at $1.22 per square foot. The Customer Recurring Revenue
      Baseline rent is contingent on third party revenue streams, but shall not
      exceed $6,375 per month.  The percentage rent will be an amount
      equal to 4% of iBeam’s gross
revenue.
 
 §
              The
      base rent shall be decreased by the rent credit received by Yourcolor,
      LLC, which as of the date of the lease agreement is
    $3,850.00.
 
 §
              The
      sublease has two five year options.  Each option shall be
      exercisable by iBeam giving notice 180 days prior to the expiration of its
      current rental term.  The base rent in each option year shall
      increase 3% annually from the prior
year.
 
 §
              Data
      Center has leased additional space in the premises beyond the portion that
      it leased to iBeam.  If Data Center receives an offer to
      sublease any portion of the additional space that it has a right to lease,
      then iBeam possesses a right of first refusal with respect to all or any
      part of the remainder of the building during the term of the
      sublease.
 
 The
leased premises currently has some tenants.  Data Center executed
lease agreements and service contracts (the “Lease Agreements” and “Service
Contracts” respectively) with these tenants.  On February 10, 2009,
Data Center assigned to iBeam the Lease Agreements and Service
Contracts.  The sublease provides that the current revenue generated
by these Lease Agreements and Service Contracts is $34,000.
  12
 Table of Contents
 
 iBeam
Solutions also owns some office furniture, and other equipment consistent with a
professional consulting business in the technology sector.
 
 NYC
Mags’s executive offices are located at 10 South High Street, Canal Winchester,
OH 43110, and their operations office is located at 217 Broadway, Suite 412, New
York, NY 10007. We pay $500 per month for the space, which expires at the end of
October, 2009. We anticipate exercising our option to extend the lease for an
additional year with the same terms.
 
 Item3.   Legal Proceedings
 
 We are
not a party to any pending legal proceeding. We are not aware of any pending
legal proceeding to which any of our officers, directors, or any beneficial
holders of 5% or more of our voting securities are adverse to us or have a
material interest adverse to us.
 
 Item4.   Submission of Matters to a Vote of Security
Holders
 
 No
matters were submitted to a vote of the Company's shareholders during the fourth
quarter of the fiscal year ended December 31, 2008.
 
 PART II
 
 Item5.    Market for Registrant’s Common Equity
and Related Stockholder Matters and Issuer Purchases of Equity
Securities
 
 Market
Information
 
 Our
common stock is currently quoted on the OTC Bulletin Board (“OTCBB”), which is
sponsored by FINRA. The OTCBB is a network of security dealers who buy and sell
stock. The dealers are connected by a computer network that provides information
on current "bids" and "asks", as well as volume information. Our shares are
quoted on the OTCBB under the symbol “IBNW.OB”
 
 The
following table sets forth the range of high and low bid quotations for our
common stock for each of the periods indicated as reported by the OTCBB. These
quotations reflect inter-dealer prices, without retail mark-up, mark-down or
commission and may not necessarily represent actual transactions.
  Fiscal
      Year Ending December 31, 2008Quarter
      Ended
                  
                  High
      $
                  
                  Low
      $March
      31, 2008
                  
                  0.11
                  
                  0.008June
      30, 2008
                  
                  0.02
                  
                  0.002September
      30, 2008
                  
                  0.6
                  
                  0.002December
      31, 2008
                  
                  1
                  
                  0.20
 
 Fiscal
      Year Ending December 31, 2007Quarter
      Ended
                  
                  High
      $
                  
                  Low
      $March
      31, 2007
                  
                  0
                  
                  0June
      30, 2007
                  
                  0
                  
                  0September
      30, 2007
                  
                  0
                  
                  0December
      31, 2007
                  
                  0.56
                  
                  0
 
 On March
11, 2009, the last sales price per share of our common stock was $0.05 per
share.
 
 13
 Table of Contents
 
 Penny
Stock
 
 The SEC
has adopted rules that regulate broker-dealer practices in connection with
transactions in penny stocks. Penny stocks are generally equity securities with
a market price of less than $5.00, other than securities registered on certain
national securities exchanges or quoted on the NASDAQ system, provided that
current price and volume information with respect to transactions in such
securities is provided by the exchange or system. The penny stock rules require
a broker-dealer, prior to a transaction in a penny stock, to deliver a
standardized risk disclosure document prepared by the SEC, that: (a) contains a
description of the nature and level of risk in the market for penny stocks in
both public offerings and secondary trading; (b) contains a description of the
broker's or dealer's duties to the customer and of the rights and remedies
available to the customer with respect to a violation of such duties or other
requirements of the securities laws; (c) contains a brief, clear, narrative
description of a dealer market, including bid and ask prices for penny stocks
and the significance of the spread between the bid and ask price; (d) contains a
toll-free telephone number for inquiries on disciplinary actions; (e) defines
significant terms in the disclosure document or in the conduct of trading in
penny stocks; and (f) contains such other information and is in such form,
including language, type size and format, as the SEC shall require by rule or
regulation.
 
 The
broker-dealer also must provide, prior to effecting any transaction in a penny
stock, the customer with (a) bid and offer quotations for the penny stock; (b)
the compensation of the broker-dealer and its salesperson in the transaction;
(c) the number of shares to which such bid and ask prices apply, or other
comparable information relating to the depth and liquidity of the market for
such stock; and (d) a monthly account statement showing the market value of each
penny stock held in the customer's account.
 
 In
addition, the penny stock rules require that prior to a transaction in a penny
stock not otherwise exempt from those rules, the broker-dealer must make a
special written determination that the penny stock is a suitable investment for
the purchaser and receive the purchaser's written acknowledgment of the receipt
of a risk disclosure statement, a written agreement as to transactions involving
penny stocks, and a signed and dated copy of a written suitability
statement.
 
 These
disclosure requirements may have the effect of reducing the trading activity for
our common stock. Therefore, stockholders may have difficulty selling our
securities.
  14
 Table of Contents
 
 Holders
of Our Common Stock
 
 As of
January 6, 2009, we had 24,436,709 shares of our common stock issued and
outstanding, held by 266 shareholders of record.
 
 Dividends
 
 There are
no restrictions in our articles of incorporation or bylaws that prevent us from
declaring dividends. The Nevada Statutes, however, do prohibit us from declaring
dividends where, after giving effect to the distribution of the
dividend:
 
 1.
              we
      would not be able to pay our debts as they become due in the usual course
      of business; or
 
 2.
              our
      total assets would be less than the sum of our total liabilities plus the
      amount that would be needed to satisfy the rights of shareholders who have
      preferential rights superior to those receiving the
      distribution.
 
 We have
not declared any dividends. We do not anticipate that the board of directors
will declare dividends in the foreseeable future. Our payment of any future
dividends will be at the discretion of our board of directors after taking into
account various factors, including but not limited to our financial condition,
operating results, cash needs, growth plans and the terms of any credit
agreements that we may be a party to at the time.
 
 Securities
Authorized for Issuance under Equity Compensation Plans
  We have
no outstanding options or warrants under any equity compensation
plans.
  15
 Table of Contents
 
 Item6.   Selected Financial Data
 
 A smaller
reporting company is not required to provide the information required by this
Item.
 
 Item7.  Management’s Discussion and Analysis of Financial
Condition and Results of Operations
 
 Forward-Looking
Statements
 
 Certain
statements, other than purely historical information, including estimates,
projections, statements relating to our business plans, objectives, and expected
operating results, and the assumptions upon which those statements are based,
are “forward-looking statements” within the meaning of the Private Securities
Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. These forward-looking
statements generally are identified by the words “believes,” “project,”
“expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,”
“will,” “would,” “will be,” “will continue,” “will likely result,” and similar
expressions. We intend such forward-looking statements to be covered by the
safe-harbor provisions for forward-looking statements contained in the Private
Securities Litigation Reform Act of 1995, and are including this statement for
purposes of complying with those safe-harbor provisions. Forward-looking
statements are based on current expectations and assumptions that are subject to
risks and uncertainties which may cause actual results to differ materially from
the forward-looking statements. Our ability to predict results or the actual
effect of future plans or strategies is inherently uncertain. Factors which
could have a material adverse affect on our operations and future prospects on a
consolidated basis include, but are not limited to: changes in economic
conditions, legislative/regulatory changes, availability of capital, interest
rates, competition, and generally accepted accounting principles. These risks
and uncertainties should also be considered in evaluating forward-looking
statements and undue reliance should not be placed on such statements. We
undertake no obligation to update or revise publicly any forward-looking
statements, whether as a result of new information, future events or otherwise.
Further information concerning our business, including additional factors that
could materially affect our financial results, is included herein and in our
other filings with the SEC.
 
 Results
of Operations for the years ended December 31, 2008 and 2007
 
 Revenues.
Revenues are generated through sales. We reported revenues of $1,205,469 for the
year ended December 31, 2008, compared with revenues of $936,476 for the year
ended December 31, 2007. The increase in revenue is the result of refining our
internal processes and an increased need for our services as businesses
outsource technology needs to enhance their balance sheets. Our cost of goods
sold for the year ended December 31, 2008 was $739,888, resulting in gross
profits of $465,581 or 38.6% of sales. Our cost of goods sold for the year ended
December 31, 2007 was $651,456 resulting in gross profits of $285,020 30.4% of
sales. We improved our gross profit percentage by increasing the fees we charged
for our services. We expect our revenues to increase in 2009 as a result of our
sub lease of the data center in Columbus, Ohio.
 
 Operating
Expenses. Our operating expenses were $635,657 for the year ended
December 31, 2008, compared to $1,556,178 for the year ended December 31, 2007.
The decrease in expenses for the year ended December 31, 2008 was largely
attributable to a decrease in options granted to our executive officers and our
focus on profitability. We recorded $1,025,268 for such options in 2007 compared
to $0 in 2008. Our operating expenses will increase in 2009 due to the sub lease
of the data center in Columbus, Ohio. We will pay $360,000 for the first year of
this sub lease.
 
 Other
Expenses. We recorded interest expenses of $276,741 for the year ended
December 31, 2008, compared with $772,550 for the year ended December 31, 2007.
Our interest expense decreased because we converted the majority of our
convertible notes payable to common stock in 2008. We expect that our interest
expense will decrease even further in 2009.
 
 Discontinued
Operations.On
January 16, 2008, pursuant to an acquisition agreement between the Company and
Interim Support, LLC, we sold Language Access Network, LLC. in exchange for the
assumption of certain liabilities contained in the Acquisition Agreement.
Accordingly, the assets, liabilities and operations of Language Access Network
LLC are reclassified as discontinued operations in the accompanying financial
statements. We recorded a gain from discontinued operations of $488,071 for the
year ended December 31, 2008, compared to a loss from discontinued operations of
$2,482,710 for the year ended December 31, 2007. The gain from discontinued
operations in 2008 was the result of the assumption of debts by the buyers of
Language Access Network LLC.
  16
 Table of Contents
 
 Net Income
(Loss). We reported a net loss from continuing operations of $446,774 for
the year ended December 31, 2008 compared with a loss of $2,043,708 for the year
ended December 31, 2007. Included in the net loss from continuing operations for
2008 and 2007 was the $201,519 and $1,834,559 for the value of options and the
value of the conversion feature of the convertible debt, respectively. Excluding
these non cash expenses we would have reported a net loss from continuing
operations of $245,255 and $209,149, respectively. Including discontinued
operations we reported a net income of $41,297 for the year ended December 31,
2008 compared with a loss of $4,526,418 for the year ended December 31,
2007.
 
 Liquidity
and Capital Resources
 
 As of
December 31, 2008, we had total current assets of $64,275. As of December 31,
2008, we had total current liabilities of $1,134,046. We thus had a working
capital deficit of $1,069,771 at December 31, 2008.
 
 Net cash
used by operating activities was $121,562 for the year ended December 31, 2008
compared to net cash used in operating activities of $1,351,557 for the year
ended December 31, 2007. Net cash used in investing activities amounted to
$1,049 for the year ended December 31, 2008 compared to net cash used in
investing activities of $345,136 for the year ended December 31,
2007.  Net cash flow provided by financing activities amounted to
$134,238 for the year ended December 31, 2008, compared to net cash provided by
financing activities of $1,525,329 for the year ended December 31,
2007.
 
 We have
issued convertible notes payable at December 31, 2008 in the face amount of
$100,000.  This note incurs interest at the rate of 10% per annum and
matures on February 6, 2011, three years after issuance and may be converted by
the holder at anytime within the first eighteen (18) months at the rates of
$0.75 per share.  Total interest accrued on convertible notes at
December 31, 2008 was $8,904.  During the year 2008, convertible notes
and accrued interest in the amount of $1,311,055 were converted to common stock
at an average of $0.07 per share for a total of 19,030,954 shares.  We
recorded $3,540 for the value of the conversion feature attached to the notes
issued during 2008.
 
 We had
cash on hand of $13,000 at December 31, 2008 which we do not believe will be
sufficient to meet our operating needs for the next twelve months. We anticipate
that we will be dependent, for the immediate future, upon additional investment
capital to fund operating expenses.
 
 Going
Concern
 
 As shown
in the accompanying financial statements, we realized net income of $44,837 in
the fiscal year ending December 31, 2008.  As of December 31, 2008 we
had an accumulated deficit of $14,931,589.  During the year ended
December, 31 2007 we incurred a net loss of $4,526,418.  The future of
our company is dependent upon its ability to obtain financing and upon future
profitable operations from the development of its business opportunities.
Management has plans to seek additional capital through a private placement and
public offering of our common stock. The financial statements do not include any
adjustments relating to the recoverability and classification of recorded
assets, or the amounts of and classification of liabilities that might be
necessary in the event we cannot continue in existence.
  17
 Table of Contents
 
 Off
Balance Sheet Arrangements
 
 As of
December 31, 2008, there were no off balance sheet arrangements.
 
 Recent
Accounting Pronouncements
 
 In
June 2008, the FASB issued FASB Staff Position EITF 03-6-1, Determining Whether Instruments
Granted in Share-Based Payment Transactions Are Participating Securities,
(“FSP EITF 03-6-1”). FSP EITF 03-6-1 addresses whether instruments granted in
share-based payment transactions are participating securities prior to vesting,
and therefore need to be included in the computation of earnings per share under
the two-class method as described in FASB Statement of Financial Accounting
Standards No. 128, “Earnings per Share.” FSP EITF 03-6-1 is effective for
financial statements issued for fiscal years beginning on or after
December 15, 2008 and earlier adoption is prohibited. We are not required
to adopt FSP EITF 03-6-1; neither do we believe that FSP EITF 03-6-1 would have
material effect on our consolidated financial positionand results of
operations if adopted.
 
 In May
2008, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 163,
“Accounting for Financial
Guarantee Insurance Contracts-and interpretation of FASB Statement No.
60”.SFAS
No. 163 clarifies how Statement 60 applies to financial guarantee insurance
contracts, including the recognition and measurement of  premium
revenue and claims liabilities. This statement also requires expanded
disclosures about financial guarantee insurance contracts. SFAS No. 163 is
effective for fiscal years beginning on or after December 15, 2008, and interim
periods within those years. SFAS No. 163 has no effect on the Company’s
financial position, statements of operations, or cash flows at this
time.
 
 In May
2008, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 162,
“The Hierarchy of Generally
Accepted Accounting Principles”.SFAS No. 162 sets forth
the level of authority to a given accounting pronouncement or document by
category. Where there might be conflicting guidance between
 two
categories, the more authoritative category will prevail. SFAS No. 162 will
become effective 60 days after the SEC approves the PCAOB’s amendments to AU
Section 411 of the AICPA Professional Standards. SFAS No. 162 has no effect on
the Company’s financial position, statements of operations, or cash flows at
this time.
 
 In March
2008, the Financial Accounting Standards Board, or FASB, issued SFAS No. 161,
Disclosures about Derivative
Instruments and Hedging Activities—an amendment of FASB Statement No.
133.This standard requires companies to provide enhanced
disclosures about (a) how and why an entity uses derivative instruments, (b) how
derivative instruments and related hedged items are accounted for under
Statement 133 and its related interpretations, and (c) how derivative
instruments and related hedged items affect an entity’s financial position,
financial performance, and cash flows. This Statement is effective for financial
statements issued for fiscal years and interim periods beginning after November
15, 2008, with early application encouraged. The Company has not yet adopted the
provisions of SFAS No. 161, but does not expect it to have a material impact on
its financial position, results of operations or cash flows.
  18
 Table of Contents
 
 In
December 2007, the SEC issued Staff Accounting Bulletin (SAB) No. 110 regarding
the use of a "simplified" method, as discussed in SAB No. 107 (SAB 107), in
developing an estimate of expected term of "plain vanilla" share options in
accordance with SFAS No. 123 (R), Share-Based
Payment.  In particular, the staff indicated in SAB 107 that it
will accept a company's election to use the simplified method, regardless of
whether the company has sufficient information to make more refined estimates of
expected term. At the time SAB 107 was issued, the staff believed that more
detailed external information about employee exercise behavior (e.g., employee
exercise patterns by industry and/or other categories of companies) would, over
time, become readily available to companies. Therefore, the staff stated in SAB
107 that it would not expect a company to use the simplified method for share
option grants after December 31, 2007. The staff understands that such detailed
information about employee exercise behavior may not be widely available by
December 31, 2007. Accordingly, the staff will continue to accept, under certain
circumstances, the use of the simplified method beyond December 31, 2007. The
Company currently uses the simplified method for “plain vanilla” share options
and warrants, and will assess the impact of SAB 110 for fiscal year 2009. It is
not believed that this will have an impact on the Company’s financial position,
results of operations or cash flows.
 
 In
December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements—an amendment of ARB No.
51.  This statement amends ARB 51 to establish accounting and
reporting standards for the noncontrolling interest in a subsidiary and for the
deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in
a subsidiary is an ownership interest in the consolidated entity that should be
reported as equity in the consolidated financial statements. Before this
statement was issued, limited guidance existed for reporting noncontrolling
interests. As a result, considerable diversity in practice existed. So-called
minority interests were reported in the consolidated statement of financial
position as liabilities or in the mezzanine section between liabilities and
equity. This statement improves comparability by eliminating that diversity.
This statement is effective for fiscal years, and interim periods within those
fiscal years, beginning on or after December 15, 2008 (that is, January 1, 2009,
for entities with calendar year-ends). Earlier adoption is prohibited. The
effective date of this statement is the same as that of the related Statement
141 (revised 2007). The Company will adopt this Statement beginning March 1,
2009. It is not believed that this will have an impact on the Company’s
financial position, results of operations or cash flows.
 
 In
December 2007, the FASB, issued FAS No. 141 (revised 2007), Business Combinations.’This
Statement replaces FASB Statement No. 141, Business Combinations, but
retains the fundamental requirements in Statement 141.  This
Statement establishes principles and requirements for how the acquirer: (a)
recognizes and measures in its financial statements the identifiable assets
acquired, the liabilities assumed, and any noncontrolling interest in the
acquiree; (b) recognizes and measures the goodwill acquired in the business
combination or a gain from a bargain purchase; and (c) determines what
information to disclose to enable users of the financial statements to evaluate
the nature and financial effects of the business combination. This statement
applies prospectively to business combinations for which the acquisition date is
on or after the beginning of the first annual reporting period beginning on or
after December 15, 2008. An entity may not apply it before that date. The
effective date of this statement is the same as that of the related FASB
Statement No. 160, Noncontrolling Interests in
Consolidated Financial Statements.  The Company will adopt this
statement beginning March 1, 2009. It is not believed that this will have an
impact on the Company’s financial position, results of operations or cash
flows.
  19
 Table of Contents
 
 In
February 2007, the FASB, issued SFAS No. 159,The Fair Value Option for Financial
Assets and Liabilities—Including an Amendment of FASB Statement No.
115.  This standard permits an entity to choose to measure many
financial instruments and certain other items at fair value. This option is
available to all entities. Most of the provisions in FAS 159 are elective;
however, an amendment to FAS 115 Accounting for Certain Investments
in Debt and Equity Securities applies to all entities with available for
sale or trading securities. Some requirements apply differently to entities that
do not report net income. SFAS No. 159 is effective as of the beginning of an
entities first fiscal year that begins after November 15, 2007. Early adoption
is permitted as of the beginning of the previous fiscal year provided that the
entity makes that choice in the first 120 days of that fiscal year and also
elects to apply the provisions of SFAS No. 157 Fair Value
Measurements.  The Company adopted SFAS No. 159 beginning March
1, 2008. The adoption of this pronouncement did not have an impact on the
Company’s financial position, results of operations or cash flows.
 
 In
September 2006, the FASB issued SFAS No. 157, Fair Value
Measurements  This statement defines fair value, establishes a
framework for measuring fair value in generally accepted accounting principles
(GAAP), and expands disclosures about fair value measurements. This statement
applies under other accounting pronouncements that require or permit fair value
measurements, the Board having previously concluded in those accounting
pronouncements that fair value is the relevant measurement attribute.
Accordingly, this statement does not require any new fair value measurements.
However, for some entities, the application of this statement will change
current practice. This statement is effective for financial statements issued
for fiscal years beginning after November 15, 2007, and interim periods within
those fiscal years. Earlier application is encouraged, provided that the
reporting entity has not yet issued financial statements for that fiscal year,
including financial statements for an interim period within that fiscal year.
The Company adopted this statement March 1, 2008. The adoption of this
pronouncement did not have an impact on the Company’s financial position,
results of operations or cash flows.
 
 Item7A.   Quantitative and Qualitative Disclosures
About Market Risk
 
 A smaller
reporting company is not required to provide the information required by this
Item.
 
 Item8.   Financial Statements and Supplementary
Data
 
 See the
financial statements annexed to this annual report.
 
 Item9.   Changes In and Disagreements with
Accountants on Accounting and Financial Disclosure
 
 No events
occurred requiring disclosure under Item 307 and 308 of Regulation S-K during
the fiscal year ending December 31, 2008.
  20
 Table of Contents
 
 Item9A(T).  Controls and Procedures
 
 We
carried out an evaluation of the effectiveness of the design and operation of
our disclosure controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) as of December 31, 2008.  This evaluation was
carried out under the supervision and with the participation of our Chief
Executive Officer and Chief Financial Officer, Mr. Eric
Schmidt.  Based upon that evaluation, our Chief Executive Officer and
Chief Financial Officer concluded that, as of December 31, 2008, our disclosure
controls and procedures are effective.  There have been no significant
changes in our internal controls over financial reporting during the quarter
ended December 31, 2008 that have materially affected or are reasonably likely
to materially affect such controls.
 
 Disclosure
controls and procedures are controls and other procedures that are designed to
ensure that information required to be disclosed in our reports filed or
submitted under the Exchange Act are recorded, processed, summarized and
reported, within the time periods specified in the SEC's rules and forms.
Disclosure controls and procedures include, without limitation, controls and
procedures designed to ensure that information required to be disclosed in our
reports filed under the Exchange Act is accumulated and communicated to
management, including our Chief Executive Officer and Chief Financial Officer,
to allow timely decisions regarding required disclosure.
 
 Limitations on the
Effectiveness of Internal Controls
 
 Our
management does not expect that our disclosure controls and procedures or our
internal control over financial reporting will necessarily prevent all fraud and
material error. Our disclosure controls and procedures are designed to provide
reasonable assurance of achieving our objectives and our Chief Executive Officer
and Chief Financial Officer concluded that our disclosure controls and
procedures are effective at that reasonable assurance level.  Further,
the design of a control system must reflect the fact that there are resource
constraints, and the benefits of controls must be considered relative to their
costs. Because of the inherent limitations in all control systems, no evaluation
of controls can provide absolute assurance that all control issues and instances
of fraud, if any, within our company have been detected. These inherent
limitations include the realities that judgments in decision-making can be
faulty, and that breakdowns can occur because of simple error or mistake.
Additionally, controls can be circumvented by the individual acts of some
persons, by collusion of two or more people, or by management override of the
internal control. The design of any system of controls also is based in part
upon certain assumptions about the likelihood of future events, and there can be
no assurance that any design will succeed in achieving its stated goals under
all potential future conditions. Over time, control may become inadequate
because of changes in conditions, or the degree of compliance with the policies
or procedures may deteriorate.
 
 Management’s
Annual Report on Internal Control over Financing Reporting
 
 Our
management is responsible for establishing and maintaining adequate control over
financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f)
under the Securities Exchange Act of 1934. Under the supervision and with the
participation of our principal executive and principal financial officer, we
conducted an evaluation of the effectiveness of our internal control over
financial reporting based on the framework in Internal Control - Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (the “COSO Framework”). Based on this evaluation under the COSO
Framework, management concluded that its internal control over financial
reporting was effective as of December 31, 2008.
 
 This
annual report does not include an attestation report of our registered public
accounting firm regarding internal control over financial
reporting.  Management’s report was not subject to attestation by our
registered public accounting firm pursuant to temporary rules of the Securities
and Exchange Commission that permit us to provide only management’s report in
this annual report.
  21
 Table of Contents
 
 Item9B.   Other Information
 
 On March
30, 2009, the board of directors appointed Ms. Julia Cooper to act as our Vice
President of Sales and Operations and Trenton Argobright to act as our Chief
Technology Officer.
 
 Trenton J Argobright serves as
the company’s Chief Technical Officer.  He brings over 10 years of IT
networking and infrastructure experience.  He holds numerous Cisco and
Microsoft certifications, as well as has expertise with Linux, VMWare, 3COM,
Nortel, Extreme and Foundry Networks solutions.  Security Solutions and
Network Design are the areas that Mr. Argobright focuses a great deal of his
training and research on, while also working with Routing and Switching,
Telephony and VoIP, Disaster Recovery and Data Center solutions.  He is
originally from Canal Winchester, Ohio and is a graduate of St. Charles
Preparatory in Columbus, Ohio.  He has taken courses from Microsoft and
Cisco, and studied at The Ohio State University and The United States Military
Academy at West Point.
 
 Julia Cooper is Vice President
of Sales and Operations for iBeam Solutions, a division of iB3 Networks, Inc.
Julia has been in the computing and technology industry since 1995 and brings
over 14 years of proven experience in strategic market planning, new market
penetration, exceptional consultative positioning and client relations, project
management, business operations and team leadership. Prior to her career at
iBeam Solutions, Julia was the Director of Sales and Marketing for a technology
company in central Ohio for 8 years. Earlier, she was the President/Owner of a
computer training company that focused on early childhood education. She has
been living in the Lancaster area for 12 years. Over the years she has served as
a Rotary member and Chairman of multiple committees, Small Business and
Technology Committees for Lancaster-Fairfield Chamber of Commerce, Pickerington
Chamber of Commerce and Canal Winchester Chamber of Commerce.
 
 There are
no family relationships between Ms. Cooper or Mr. Argobright and any of our
directors or executive officers.
 
 Neither
has had any material direct or indirect interest in any of our transactions or
proposed transactions over the last two years.  At this time, we do
not have any employment agreement with either Ms. Cooper or Mr.
Argobright.
 
 22
 Table of Contents
 
 PART III
 
 Item10.  Directors, Executive Officers and Corporate
Governance
 
 The
following information sets forth the names of our directors and executive
officers, their ages and present positions with us as of the date of this Annual
Report.
 
 Name
                          Age
                          Office(s)
      HeldEric
      Schmidt
                          44
                          President,
      CEO and DirectorMichael
      Jacobson
                          46
                          President
      of NYC Mags, our wholly-owned subsidiary and Director of our
      CompanyJulia
      Cooper
                          40
                          VP
      of Sales and OperationsTrenton
      Argobright
                          28
                          Chief
      Technology
Officer
 
 Set forth
below is a brief description of our current executive officers and directors.
The background and business experience of Ms. Cooper or Mr. Argobright are
contained in Part II, Item 9B. of this Annual Report.
 
 Eric Schmidt is our President,
Secretary, Treasurer, CEO, CFO and Director.  Mr. Schmidt has been in
the computing and technology industry since 1982. Prior to co-founding iBeam
Solutions, Mr. Schmidt was the Chief Information Officer for Bricker &
Eckler LLP for over seven years. Over the years he served in the United States
Marine Corps, two years in the healthcare industry and four years at The Ohio
State University as a director of the largest College at The Ohio State
University. Mr. Schmidt is originally from Lancaster, Ohio and is a graduate of
Berne Union High School in Sugar Grove, Ohio. He attended college at Ohio
University and Des Moines Area Community College in Des Moines,
Iowa.  He is a board member for Get IT Green Ohio, an entity helping
the IT industry understand green technology solutions and concerns; a 10-year
member of the Central Ohio CIO Leadership Forum; and is also President and board
member of MainStreet Canal Winchester, a national Main Street
Community.
 
 Eric has
appeared in numerous case studies over the years including a Microsoft
Advertorial that ran in 78 magazines around the globe, and a web site they
wrote, www.howericdidit.com.  Eric speaks nationally on technology
issues, and has received press in The Wall Street Journal, PC Week, Business
First and many other publications.
 
 Michael Jacobsonhas worked in
online and traditional publishing for over 18 years. In 2002, he entered into a
publishing agreement with Donald J. Trump & Trump Resorts and Casinos,
through which he developed a branded Trump magazine. In 2004, Mr. Jacobson
launched Trump Magazine nationally as the exclusive luxury-lifestyle publication
of the Trump brand, and Mr. Jacobson served as both Publisher and Editor until
2007. Upon departing from Trump Magazine that is now published by Niche Media
Holdings LLC in 2007, Mr. Jacobson created NYC Mags, and began development of
the online dating site and brand www.madisonavenuematch.com. Additionally, Mr.
Jacobson currently consults for DuPont Registry selling print media advertising
and event sponsorships.
 
 Prior to
his work on Trump Magazine, Mr. Jacobson rose through the publishing ranks on
the sales side of the industry working for The Village Voice newspaper
(1989-90), as Sales Manager at the pre-Conde Nast incarnation of Details
magazine (1991-93), as Vice President Sales and Promotions of Smoke Magazine, as
New Business Director for both Brill’s Content and its web portal
Contentville.com, as Advertising Director for the original American lad-mag Gear
(2002), as Marketing Manger at AOL (1993), and at Lockwood
(96-2001).
  23
 Table of Contents
 
 Directors
  Our
bylaws authorize no less than one (1) and no more than thirteen (13)
directors.  We currently have two (2) directors on the board, Mr. Eric
Schmidt, and Mr. Michael Jacobson.
 
 Term
of Office
 
 Our
Directors are appointed for a one-year term to hold office until the next annual
general meeting of our shareholders or until removed from office in accordance
with our bylaws.  Our officers are appointed by our board of directors
and hold office until removed by the board.
 
 Family
Relationships
 
 There are
no family relationships between or among the directors, executive officers or
persons nominated or chosen by us to become directors or executive
officers.
 
 Involvement
in Certain Legal Proceedings
 
 To  the
best of our knowledge, during the past five years, none of the
following  occurred  with  respect  to a
present or former director, executive officer, or  employee: (1) any
bankruptcy petition filed by or against any business  of which such
person was a general partner or executive officer either
at  the  time  of the bankruptcy or within two
years prior to that time; (2) any conviction in a
criminal  proceeding  or  being subject to a
pending criminal
proceeding  (excluding  traffic  violations and
other minor offenses); (3) being subject  to  any order,
judgment or decree, not subsequently reversed, suspended
or  vacated,  of  any  court  of  competent  jurisdiction,  permanently  or
temporarily enjoining, barring, suspending or otherwise limiting his or her
involvement in  any  type of business, securities or banking
activities; and (4) being found
by  a  court  of  competent  jurisdiction  (in  a  civil
action), the SEC or the
Commodities  Futures  Trading  Commission  to  have  violated
a federal or state securities or commodities law, and the judgment has not been
reversed, suspended or vacated.
 
 Audit
Committee
 
 We do not
have a separately-designated standing audit committee. The entire Board of
Directors performs the functions of an audit committee, but no written charter
governs the actions of the Board when performing the functions of what would
generally be performed by an audit committee. The Board approves the selection
of our independent accountants and meets and interacts with the independent
accountants to discuss issues related to financial reporting. In addition, the
board of directors reviews the scope and results of the audit with the
independent accountants, reviews with management and the independent accountants
our annual operating results, considers the adequacy of our internal accounting
procedures and considers other auditing and accounting matters including fees to
be paid to the independent auditor and the performance of the independent
auditor.
  24
 Table of Contents
 
 We do not
have an audit committee financial expert because of the size of our company and
our board of directors at this time. We believe that we do not require an audit
committee financial expert at this time because we retain outside consultants
who possess these attributes.
 
 For the
fiscal year ending December 31, 2008, the board of directors:
 
 ·
              Reviewed
      and discussed the audited financial statements with management,
      and
 
 ·
              Reviewed
      and discussed the written disclosures and the letter from our independent
      auditors on the matters relating to the auditor's
      independence.
 
 Based
upon the board of directors’ review and discussion of the matters above, the
board of directors authorized inclusion of the audited financial statements for
the year ended December 31, 2008 to be included in this Annual Report on Form
10-K and filed with the Securities and Exchange Commission.
 
 Section
16(a) Beneficial Ownership Reporting Compliance
 
 Section
16(a) of the Exchange Act requires our directors and executive officers and
persons who beneficially own more than ten percent of a registered class of the
Company’s equity securities to file with the SEC initial reports of ownership
and reports of changes in ownership of common stock and other equity securities
of the Company.  Officers, directors and greater than ten percent
beneficial shareholders are required by SEC regulations to furnish us with
copies of all Section 16(a) forms they file.  To the best of our
knowledge based solely on a review of Forms 3, 4, and 5 (and any amendments
thereof) received by us during or with respect to the year ended December 31,
2008, the following persons have failed to file, on a timely basis, the
identified reports required by Section 16(a) of the Exchange Act during fiscal
year ended December 31, 2008:
 
 Name
      and principal position
                                                Number
      of
                                                  late
      reports
                                                Transactions
      not
                                                  timely
      reported
                                                Known
      failures to
                                                  file
      a required formEric
      Schmidt, President
                                                1
                                                0
                                                0Michael
      Jacobson, President of NYC Mags
                                                1
                                                0
                                                0Julia
      Cooper, VP of Sales and Operations
                                                0
                                                0
                                                1Trenton
      Argobright, CTO
                                                0
                                                0
                                                1Michael
      Guirlinger, Former CEO
                                                0
                                                0
                                                1Andrew
      Panos, Former President
                                                0
                                                0
                                                1Laurence
      Sturtz, Former Chairman and Director
                                                0
                                                0
                                                1James
      Schilling, Former Director
                                                0
                                                0
                                                1Dr.
      John Perez, Former Director
                                                0
                                                0
                                                1Dr.
      Val Warhaft, Former Director
                                                0
                                                0
                                                1Dr.
      James Giner, Former Director
                                                0
                                                0
                                                1Steve
      Fellows, Former CFO
                                                0
                                                0
                                                1Risk
      Capital Management
                                                0
                                                0
                                                1Panos
      Industries, LLC
                                                1
                                                0
                                                0
 
 25
 Table of Contents
 
 Code
of Ethics
 
 As of
December 31, 2008, we had not adopted a Code of Ethics for Financial Executives,
which would include our principal executive officer, principal financial
officer, principal accounting officer or controller, or persons performing
similar functions.
 
 Item11.  Executive Compensation
 
 Summary
Compensation Table
 
 The table
below summarizes all compensation awarded to, earned by, or paid to our former
or current executive officers for each of the last two completed fiscal
years.
 
 Summary
      Compensation TableName
      and
                                  principal
      position
                                Year
                                Salary
                                  ($)
                                Bonus
                                  ($)
                                Stock
      Awards
                                  ($)
                                Option
                                  Awards
                                  ($)
                                Non-Equity
                                  Incentive
      Plan
                                  Compensation
                                  ($)
                                Nonqualified
                                  Deferred
                                  Compensation
                                  Earnings
      ($)
                                All
      Other
                                  Compensation
                                  ($)
                                Total
                                  ($)Eric
      Schmidt, President of iBeam Solutions, and CEO of  iB3 Network
      Inc.
                                2008
                                  2007
                                  2006
                                $23,807Michael
      Guirlinger former CEO & COO
                                2008
                                  2007
                                  2006
                                $115,000
                                  $72,916
                                -
                                  -
                                  -
                                -
                                  -
                                  -
                                -
                                  $358,002
                                  -
                                -
                                  -
                                  -
                                -
                                  -
                                  -
                                -
                                  -
                                  -
                                $115,000
                                  $430,918Andrew
      Panos, former President
                                2008
                                  2007
                                  2006
                                $110,000
                                  $90,500
                                -
                                  -
                                  -
                                -
                                  -
                                  -
                                -
                                  -
                                  $3,922,254
                                -
                                  -
                                  -
                                -
                                  -
                                  -
                                -
                                  -
                                  -
                                -
                                  $110,000
                                  $4,012,754Steven
      Fellows, former Treasurer and Chief Financial Officer
                                2008
                                  2007
                                  2006
                                -
                                  $16,000
                                  $28,500
                                -
                                  -
                                  -
                                -
                                  -
                                  -
                                -
                                  -
                                  $16,048
                                -
                                  -
                                  -
                                -
                                  -
                                  -
                                -
                                  -
                                  -
                                -
                                  $16,000
                                  $44,548
 26
 Table of
Contents
 
 Narrative
to Summary Compensation Table
 
 Effective
as of January 1, 2009, we entered into an employment agreement with our Chief
Executive Officer, Eric Schmidt (“Schmidt”).  The employment agreement
provides as follows:
 
 §
              Schmidt
      will serve as CEO of iB3. While employed by iB3, Schmidt will devote his
      entire business time and energy to iB3and use his best efforts to promote
      the success of the iB3; except for such time as he dedicates to iBeam
      Solutions, LLC which is the wholly owned subsidiary of
  iB3;
 
 §
              This
      employment agreement supplants the prior employment agreement between
      Schmidt and iBeam.  Upon the securing of $1,000,000 of
      financing, then all compensation due Schmidt under the previous employment
      agreement will be payable to
Schmidt;
 
 §
              Schmidt
      will receive 500,000, 250,000 and 250,000 shares of stock of iB3 for
      signing the employment agreement, for agreeing to remain as Chairman of
      the Board of iB3 and for past service as Chairman and CEO of iB3,
      respectively;
 
 §
              Schmidt
      will receive a stock bonus if iB3for has a certain amount of gross
      revenue;
 
 §
              Schmidt
      will have the option to purchase shares of stock of iB3 at $0.50 per share
      of iB3 stock at future dates if 1) iB3 has a certain gross revenue and/or
      2) he is employed by iB3;
 
 §
              Schmidt
      will be entitled to salary and other compensation of cash or shares of
      stock of iB3; and
 
 §
              Schmidt
      can be terminated for any reason upon 30 days notice by either Schmidt or
      iB3. Upon termination of Schmidt employment, Schmidt will only be due
      Schmidt prorated salary for the month in questions and any other
      compensation which had been earned but not yet
  paid.
 
 27
 Table of Contents
  Effective
December 10, 2008, NYC Mags entered into an employment agreement with Mr.
Michael Jacobson (“Jacobson”) to serve as President of NYC
Mags.  Pursuant to the terms and conditions of the employment
agreement:
 
 §
              Jacobson
      will serve as President of NYC Mags. While employed by NYC Mags, Jacobson
      will devote an appropriate amount of time and energy to NYC Mags and use
      his best efforts to promote the success of the NYC
  Mags;
 
 §
              Jacobson
      will receive a stock bonus for meeting certain criteria, including if NYC
      Mags has a 1) a functioning website within a certain time frame, 2) the
      website has a certain amount of paying members within a certain time frame
      and/or 3) if the website generates a certain amount of gross revenue
      within a certain time frame;
 
 §
              Jacobson
      will have the option to purchase our stock at $0.50 per share at future
      dates if 1) NYC Mags has a certain gross revenue and/or 2) Jacobson is
      employed by NYC Mags;
 
 §
              Jacobson
      will be entitled to salary and other compensation of cash or shares of
      stock of our company;
 
 §
              Jacobson
      will be reimbursed for certain business expenses by NYC
    Mags;
 
 §
              Jacobson
      will have the right to an appointment as a director to the board of
      directors; and
 
 §
              Jacobson
      can only be terminated for cause. Upon termination of Jacobson’s
      employment, Jacobson will only be due Jacobson’s prorated salary for the
      month in questions and any other compensation which had been earned but
      not yet paid.
 
 On June
1, 2006, we entered into an employment agreement with Mr. Michael Guirlinger to
serve as our Chief Executive Officer and Chief Operations Officer. We agreed to
pay Mr. Guirlinger $10,417 per month and provide salary increases based on
increases in our gross revenues starting January 31, 2007 capped at $225,000
during the first three-year term of the agreement. We also agreed to provide an
annual bonus payment starting the year beginning January 31, 2007 based upon a
percentage of earnings before interest expense, taxes, depreciation and
amortization (EBITDA) not to exceed $187,500 per year. Mr. Guirlinger was also
entitled to participate in any benefit plans, profit sharing, incentive
compensation, 401K plans and pension and retirement benefits available to other
officers of the company. As of January 16, 2008, Mr. Guirlinger resigned as an
officer of our company.  All obligations for his employment agreement
and severance have been assumed by Interim Support, LLC in connection with an
Acquisition Agreement.  Mr. Guirlinger further agreed to forfeit all
options held in our company.
 
 As of
January 16, 2008, Mr. Andrew Panos resigned as an officer and director of our
company.  All obligations for his employment agreement and severance,
if any, have been assumed by Interim Support, LLC in connection with an
Acquisition Agreement.  Mr. Panos further agreed to forfeit all
options held in our company.
 
 On August 31, 2006 we granted Mr.
Steven Fellows options to purchase 25,000 shares of common stock at the exercise
price of $4.15 per share with an expiration date of August 31,
2011.  Mr. Fellows resigned as our CFO on August 13, 2007 and all
25,000 unexercised options were returned to the company option pool on November
14, 2007.
  28
 Table of Contents
  Outstanding
Equity Awards
 
 The table
below sets forth information concerning unexercised options; stock that has not
vested; and equity incentive plan awards for our named executive officers as of
December 31, 2008.
  OUTSTANDING
      EQUITY AWARDS AT FISCAL YEAR-ENDOPTION
      AWARDS
                            STOCK
      AWARDSName
                            Number
      of
                              Securities
                              Underlying
                              Unexercised
                              Options
                              (#)
                              Exercisable
                            Number
      of
                              Securities
                              Underlying
                              Unexercised
                              Options
                              (#)
                              Unexercisable
                            Equity
                              Incentive
                              Plan
                              Awards:
                              Number
      of
                              Securities
                              Underlying
                              Unexercised
                              Unearned
                              Options
                              (#)
                            Option
                              Exercise
                              Price
                              ($)
                            Option
                              Expiration
                              Date
                            Number
                              of
                              Shares
                              or
      Units
                              of
                              Stock
      That
                              Have
                              Not
                              Vested
                              (#)
                            Market
                              Value
                              of
                              Shares
                              or
                              Units
                              of
                              Stock
                              That
                              Have
                              Not
                              Vested
                              ($)
                            Equity
                              Incentive
                              Plan
                              Awards:
                              Number
                              of
                              Unearned
                              Shares,
                              Units
      or
                              Other
                              Rights
                              That
      Have
                              Not
                              Vested
                              (#)
                            Equity
                              Incentive
                              Plan
                              Awards:
                              Market
      or
                              Payout
                              Value
      of
                              Unearned
                              Shares,
                              Units
      or
                              Other
                              Rights
                              That
                              Have
      Not
                              Vested
                              (#)Eric
      Schmidt
                            -
                            -
                            -
                            -
                            -
                            -
                            -
                            -
                            -Michael
      Guirlinger
                            0
                            0
                            0
                            0
                            0
                            0
                            0
                            0
                            0Andrew
      Panos
                            0
                            0
                            0
                            0
                            0
                            0
                            0
                            0
                            0Steve
      Fellows
                            0
                            0
                            0
                            0
                            0
                            0
                            0
                            0
                            0Richard
      Fitzpatrick
                            0
                            0
                            0
                            0
                            0
                            0
                            0
                            0
                            0
  29
 Table of Contents
 
 Summary of Stock
Awards
 
 Set forth
below is a summary of our stock awards to executive officers outstanding as of
December 31, 2008, our latest fiscal year end.
 
 STOCK
      AWARDS AT FISCAL YEAR END 2008Name
                                            Number
                                              of
      Shares
                                              or
      Units
                                              of
      Stock That
                                              Have
      Not
                                              Vested
                                              (#)
                                            Market
      Value
                                              of
      Shares
                                              or
      Units
                                              of
      Stock
                                              That
      Have
                                              Not
      Vested
                                              ($)
                                            Equity
                                              Incentive
                                              Plan
      Awards:
                                              Number
      of
                                              Unearned
                                              Shares,
      Units or Other
                                              Rights
      That Have Not
                                              Vested
                                              (#)Eric
      Schmidt
                                            -
                                            -
                                            -Michael
      Guirlinger
                                            0
                                            0
                                            0Andrew
      Panos
                                            0
                                            0
                                            0Steve
      Fellows
                                            0
                                            0
                                            0Richard
      Fitzpatrick
                                            0
                                            0
                                            0
  30
 Table of
Contents
 
 Compensation
to Directors
 
 The table
below summarizes all compensation awarded to, earned by, or paid to our
directors for our fiscal year ended December 31, 2008.
 
 DIRECTOR
      COMPENSATION 2008Name
                                  Fees
      Earned
                                    or
      Paid in
                                    Cash
                                    ($)
                                  Stock
      Awards
                                    ($)
                                  Option
      Awards
                                    ($)(3)
                                  Non-Equity
                                    Incentive
                                    Plan
                                    Compensation
                                    ($)
                                  Non-Qualified
                                    Deferred
                                    Compensation
                                    Earnings
                                    ($)
                                  All
                                    Other
                                    Compensation
                                    ($)
                                  Total
                                    ($)Michael
      Jacobson(1)
                                  -
                                  -
                                  -
                                  -
                                  -
                                  -
                                  -Laurence
      Sturtz(2)
                                  0
                                  0
                                  0
                                  0
                                  0
                                  0
                                  0Andrew
      Panos
                                  0
                                  0
                                  0
                                  0
                                  0
                                  0
                                  0James
      Schilling(3)
                                  0
                                  0
                                  0
                                  0
                                  0
                                  0
                                  0Dr.
      Jack Perez(4)
                                  0
                                  0
                                  0
                                  0
                                  0
                                  0
                                  0Dr.
      Val Warhaft(5)
                                  0
                                  0
                                  0
                                  0
                                  0
                                  0
                                  0Dr.
      James Ginter(6)
                                  0
                                  0
                                  0
                                  0
                                  0
                                  0
                                  0
  1.
                  Mr.
      Jacobson was appointed as a director of our Company on December 10,
      2008.  He is also the President of NYC Mags, Inc. our wholly-owned
      subsidiary.  In connection with his service as President of NYC Mags,
      Inc. we entered into an Employment Agreement with him which is set forth
      in the section entitled Narrative to Summary Compensation
  Table.2.
                  Mr.
      Laurence Sturtz was appointed as Chairman of the Board in May 1, 2006. As
      of January 16, 2008, Mr. Sturtz resigned as chairman and director of our
      company.  All obligations owed to him, if any, have been assumed
      by Interim Support, LLC in connection with the Acquisition
      Agreement.  Mr. Sturtz further agreed to forfeit all options
      held in our company.
 
 3.
              As
      of December 19, 2007, Mr. James Schilling resigned as a director of our
      company.  All obligations owed to him, if any, have been assumed
      by Interim Support, LLC in connection with the Acquisition
      Agreement.
 
 4.
              As
      of January 16, 2008, Dr. Jack Perez resigned as a director of our
      company.  All obligations owed to him, if any, have been assumed
      by Interim Support, LLC in connection with the Acquisition
      Agreement.  Dr. Perez further agreed to forfeit all options held
      in our company.
 
 5.
              As
      of January 16, 2008, Dr. Val Warhaft resigned as a director of our
      company.  All obligations owed to him, if any, have been assumed
      by Interim Support, LLC in connection with the Acquisition
      Agreement.  Dr. Warhaft further agreed to forfeit all options
      held in our company.
 
 6.
              As
      of January 16, 2008, Dr. James Ginter resigned as a director of our
      company.  All obligations owed to him, if any, have been assumed
      by Interim Support, LLC in connection with the Acquisition
      Agreement.  Dr. Ginter further agreed to forfeit all options
      held in our company.
 
 31
 Table of Contents
 
 Narrative
Disclosure to the Director Compensation Table
 
 We do not
pay any compensation to our directors at this time. However, we reserve the
right to compensate our directors in the future with cash, stock, options, or
some combination of the above.
 
 We have
not reimbursed our directors for expenses incurred in connection with attending
board meetings nor have we paid any directors fees or other cash compensation
for services rendered as a director in the year ended December 31,
2008.
 
 We have
no formal plan for compensating our directors for their services in their
capacity as directors.  In the future we may grant options to our
directors to purchase shares of common stock as determined by our Board of
Directors or a compensation committee that may be
established.  Directors are entitled to reimbursement for reasonable
travel and other out-of-pocket expenses incurred in connection with attendance
at meetings of our board of directors.  The board of directors may
award special remuneration to any director undertaking any special services on
behalf of iB3 Networks other than services ordinarily required of a
director.  No director received and/or accrued any compensation for
his or her services as a director, including committee participation and/or
special assignments.
   Item12.  Security Ownership of Certain Beneficial Owners
and Management and Related Stockholder
Matters
 
 The
following table sets forth, as of December 30, 2008, the beneficial ownership of
our common stock by each executive officer and director, by each person known by
us to beneficially own more than 5% of the our common stock and by the executive
officers and directors as a group. Except as otherwise indicated, all shares are
owned directly and the percentage shown is based on 24,436,491 shares of common
stock issued and outstanding on January 6, 2009.
 
 Beneficial
ownership is determined in accordance with the rules of the Securities and
Exchange Commission. Except as described in the footnotes to this table, and
subject to applicable community property laws, the persons named in the table
have sole voting and investment power with respect to all shares of common stock
held by them.
 
 Title
      of class
                          Name
      and address
                            of
      beneficial owner
                          Amount
      of
                            beneficial
      ownership
                          Percent
                            of
      class prior to offering(1)Executive
      Officers & Directors:Common
                          Eric
      Schmidt
                            10
      S. High Street
                            Canal-Winchester,
      OH
                            43110
                          1,186(2)
                          Less
      than 1%Common
                          Michael
      Jacobson
                            NYC
      Mags, Inc.
                            217
      Broadway, Suite 412
                            New
      York, NY 10007
                          150,000(3)
                          Less
      than 1%Total
      of All Directors and Executive Officers:
                          151,186
                          Less
      than 1%More
      Than 5% Beneficial Owners:Common
                          Panos
      Industries, LLC(4)
                            1350
      E. Flamingo, #77
                            Las
      Vegas, NV 89119
                          18,840,844
                          76.8%
  (1)
              As
      used in this table, "beneficial ownership" means the sole or shared power
      to vote, or to direct the voting of, a security, or the sole or shared
      investment power with respect to a security (i.e., the power to dispose
      of, or to direct the disposition of, a security). In addition, for
      purposes of this table, a person is deemed, as of any date, to have
      "beneficial ownership" of any security that such person has the right to
      acquire within 60 days after such
date.
  (2)
              Mr.
      Schmidt will receive 500,000, 250,000 and 250,000 shares of stock of our
      company for signing the employment agreement, for agreeing to remain as
      Chairman of the Board of iB3 and for past service as Chairman and CEO of
      iB3, respectively.  These shares have not been issued as of
      January 6, 2009.(3)
              These
      shares were issued in connection with a merger agreement with NYC Mags,
      Inc. and Mr. Michael Jacobson
 
 (4)
              Included
      in the calculation of beneficial ownership for Mr. Edward Panos are 40
      shares in his name, 18,839,804 shares of our common stock held by Panos
      Industries, LLC, 500 shares held in the name of his spouse, and 500 shares
      held in the name of his child..
  32
 Table of Contents
  Item13.   Certain Relationships and Related Transactions, and
Director Independence
 
 Except as
disclosed below, none of our directors or executive officers, nor any proposed
nominee for election as a director, nor any person who beneficially owns,
directly or indirectly, shares carrying more than 5% of the voting rights
attached to all of our outstanding shares, nor any members of the immediate
family (including spouse, parents, children, siblings, and in-laws) of any of
the foregoing persons has any material interest, direct or indirect, in any
transaction since the beginning of 2007 or in any presently proposed transaction
which, in either case, has or will materially affect us.
 
 1.
              Mr.
      Schmidt is a one third owner of PEBCO Partners LLC that owns the real
      estate and building that iBeam Solutions LLC leases for its primary
      offices located at 10 South High Street, Canal Winchester, Ohio. This
      lease is in the amount of $4,160.00 per month which includes utilities,
      insurance and maintenance.
 
 2.
              iBeam
      Solutions LLC has a Promissory Note for a loan from PEBCO Partners in the
      amount of $20,000 that began April 30th 2007, repayable at the rate of
      $1,000 per month with 10% interest.
 
 3.
              Mr.
      Schmidt holds a Promissory Note from iBeam Solutions LLC dated August 17,
      2006 in the amount of $43,000 repayable at a rate of $2,500 per month with
      10% interest.
 
 4.
              Interim
      Support, LLC: on October 11, 2007, a company known as Interim
      Support, LLC (“Interim”) entered into a demand line of credit loan with
      National City Bank under a promissory note agreement. The promissory note
      allows Interim to draw up to $1,000,000 until October 11, 2008 with a
      variable rate of interest at a margin of 2.000% added to the index rate
      (One Month LIBOR). Subsequently, we entered into an agreement with Interim
      to borrow any money that Interim draws under the terms of the promissory
      note. This agreement has been formalized in a promissory note (referred to
      herein as the “Language Access Note”) that we signed with Interim that
      essentially mirrors the terms of the promissory note Interim signed with
      National City Bank.
 
 The
members of Interim include Laurence E. Sturtz, Andrew Panos, James Schilling,
Dr. John “Jack” Perez, Dr. Val Warhaft, and Dr. James Ginter, all former members
of our board of directors, and Michael Guirlinger, our former CEO. These former
officers and directors of our company individually agreed to guarantee the
promissory note with National City Bank.
 
 5.
              Sale of
      Language Access Network, LLC to Interim Support, LLC:On January
      16, 2008, we executed an acquisition agreement (the “Acquisition
      Agreement”) by and among us, Interim Support, LLC (“Interim”), iBeam
      Solutions, LLC, a Nevada limited liability company and wholly-owned
      subsidiary of the Company (“iBeam”) and certain individuals, who are
      former officers and directors of our company. Pursuant to the Acquisition
      Agreement, we agreed to sell all interest in Language Access Network, LLC,
      an Ohio limited liability company and our wholly-owned subsidiary
      (“T-LAN”) to Interim in exchange for the assumption of certain liabilities
      contained in the Acquisition Agreement and other terms as explained
      below.
 
 33
 Table of Contents
  Pursuant
to the terms and conditions of the Acquisition Agreement, as consideration for
the Sale of T-LAN: (a) Interim would forgive all indebtedness of our company as
evidenced by that certain promissory note dated October 11, 2007 issued by us to
Interim relative to the credit facility between Interim and National City Bank
(approximately $1 million); and (b) Interim would assume the following
liabilities of our company (all such liabilities, the “Assumed
Liabilities”):
 
 (1)
$95,000 payable to Michael Guirlinger pursuant to: (i) that certain Promissory
Note issued by Parent dated May 24, 2007, in principal amount of $75,000; and
(ii) that certain Promissory Note issued by Parent dated October 1, 2007, in
principal amount of $20,000;
 
 (2) All
accrued but unpaid payroll liabilities associated with T-LAN
employees;
 
 (3)
Continuing responsibilities for healthcare benefits for T-LAN
employees;
 
 (4) All
rent and parking obligations pursuant to that certain Lease Agreement for the
T-LAN Premises dated April 25, 2007;
 
 (5) All
amounts payable to Shared Technologies for hardware provided by such company, in
an amount believed to be approximately $27,000;
 
 (6) All
amounts payable to InnovateIT for hardware provided by such company, in an
amount believed to be approximately $35,000;
 
 (7) All
amounts payable to AT&T for T-1 lines for December 2007, in an amounts
believed to be $27,000, and for AT&T equipment in the amount roughly of
$21,000;
 
 (8) All
amounts payable to AT&T for normal phone and fax lines for the office, in
amounts believed to be approximately $1,033.33;
 
 (9) All
amounts payable to Jerry Tishkoff/Tishkoff Enterprises for commissions on
account of T-LAN sales activities;
 
 (10) All
amounts payable to Clary Communications for MARTTI logo and trademark work, in
an amount believed to be $10,000;
 
 (11)
Ordinary course liabilities associated with copiers, hosting, UPS, utilities, at
T-1 lines for T-LAN’s business;
 
 (12) All
payment obligations to Focus Business Solutions, LLC solely for accounting and
financial reporting services associated with T-LAN from and after
Closing;
  34
 Table of Contents
 
 (13)
Severance obligations to employees of T-LAN (and or employees of Parent on
account of T-LAN service providers);
 
 (14) Any
and all agreements or contracts entered into with C2D, believed to be
approximately $720.00;
 
 (15)
Capital One believed to be approximately $7,300.22;
 
 (16)
Capitol Office Supply believed to be approximately $308.49;
 
 (17)
Global Solutions Installation believed to be approximately $400.00;
 
 (18)
Laurence E. Sturtz believed to be approximately $145.70 for travel
expenses;
 
 (19)
OneVision Solutions believed to be approximately $1,140.70;
 
 (20) Via
Language believed to be approximately $4,600.00;
 
 (21) VSGI
believed to be approximately $20,482.97;
 
 (22)
Yankovich & Associates believed to be approximately $1,230.00;
 
 (23) Any
and all agreements or contracts entered into with Radiant
Technologies;
 
 (24) Any
and all agreements or contracts entered into with SLA, believed to be
approximately $4,500 per month;
 
 (25) Any
and all agreements or contracts entered into with any sub-contractors for
interpretation services;
 
 (26) Any
and all agreements or contracts entered into with any companies for 800
numbers;
 
 (27)
Atlas Blueprint Supply believed to be approximately $54.00; and
 
 (28) All
other T-LAN liabilities or obligations that relate to past support or ongoing
support for the operations and/or equipment of T-LAN.
  35
 Table of Contents
 
 The
Acquisition Agreement further provides that the liabilities of our company and
iBeam Solutions, LLC, including the following liabilities, would be retained or
assumed by us (all such liabilities, the “Retained Liabilities”):
 
 (1) All
amounts payable to Parent, T-LAN or third parties by iBeam, in amounts believed
to be approximately $9,000;
 
 (2) All
liabilities associate with iBeam Solutions, LLC. believed to be approximately
$800,000
 
 (3) All
amounts payable on account of Convertible Debentures or other securities issued
by Parent, in amounts believed to be approximately $1,800,000;
 
 (4) All
amounts payable by the Company or its affiliates to the following third parties:
(a) Legal fees and expenses payable to Squire Sanders & Dempsey, LLP, in an
amount believed to be approximately $118,000; (b) J&J Consulting, in an
amount believed to be approximately $6,000; (c) Moore & Associates, in an
amount believed to be approximately $6,500; (d) Standard & Poor’s, in an
amount believed to be approximately $3,500, together with ongoing Blue Sky fees
to Standard & Poor’s in connection with Parent’s listing therewith; (e)
Legal fees and expenses payable to Cane Clark law firm, in an amount believed to
be $25,500 as of December 6, 2007; (f) Business Wire, in an amount believed to
be approximately $445 as of December 12, 2007; (g) CEO Cast, with respect to an
Agreement dated December, 2007, providing for payments in the amount of $5,000
per month; and (h) Focus Business Solutions for accounting and financial
reporting work provided by it prior to Closing, in amounts believed to be
$5,125.
 
 The
Acquisition Agreement further provides that Interim shall have the right, but
not the obligation, to offer to hire any persons who are both employees of our
company or T-LAN (but not employees of iBeam) who are primarily assigned to
T-LAN operations.
 The
Acquisition Agreement further provides that: (a) we agree to indemnify Interim
from and against any claims or expenses arising from or relating to any of the
Retained Liabilities and to indemnify the resigning officers and directors of
our company in connection with their involvement in the acquisition, and (b)
Interim agrees to indemnify us from any claims or expenses arising from or
relating to the Assumed Liabilities.
 
 The
Acquisition Agreement further provides that in the event of subsequent sale of
T-LAN by Interim: (a) the proceeds from such subsequent sale would be used to
pay the Assumed Liabilities, together with reasonable Interim transaction
expenses, closing expenses, reasonable deferred wages to officers and employees,
accounting fees, amounts properly payable to iBeam for future invoices, Interim
accounting fees and legal fees payable to Carlile Patchen & Murphy LLP; and
(b) all proceeds from such subsequent sale in excess of such amounts would be
paid to us to facilitate repayment of the Retained Liabilities.
 
 The
Acquisition Agreement further provides that our former officers and directors,
along with employees of our company or T-LAN assigned to T-LAN operations, agree
to forfeit their options, warrants, or convertible features of any debt in the
our company;
 
 The
Acquisition Agreement requires iBeam Solutions, LLC to render services to
Interim on account of T-LAN’s business at such times as reasonably requested by
Interim or T-LAN.
 
 Each of
the parties to the Acquisition Agreement provided customary representations and
warranties and closing conditions. The Closing of the Acquisition Agreement is
still pending review by the Securities and Exchange Commission, and will not be
effective until at least 20 days from when an amended 14C Information Statement
is filed and mailed to shareholders of our company evidencing shareholder
approval of the transaction.
  36
 Table of Contents
 
 6.
              Edward
      Panos/Panos Industries Notes: Effective June 6, 2008, Mr. Edward
      Panos, as sole owner and member of Panos Industries, LLC elected to
      convert $250,000 of the principal amount of his Convertible Promissory
      Note dated October 1, 2007, (the “Note”), along with all accrued interest
      into 66,666,000 shares of the Company’s common stock in accordance with
      the terms of the Note.
 
 Effective
August 27, 2008, Mr. Edward Panos and Panos Industries, LLC, controlled by Mr.
Panos, elected to convert $962,305.04 worth of principal and accrued interest
due on his Convertible Promissory Notes (the “Notes”) into 18,642,549 shares of
the Company's common stock in accordance with the terms of the
Notes.  The principal amounts and dates of these Convertible
Promissory Notes are as follows:
 
 1/12/2005
                  $
                  20,000.006/24/2005
                  $
                  20,000.006/30/2005
                  $
                  15,000.008/30/2005
                  $
                  5,000.0010/2/2005
                  $
                  50,000.0011/29/2005
                  $
                  20,000.0012/22/2005
                  $
                  25,000.0012/27/2005
                  $
                  2,000.0012/30/2005
                  $
                  10,000.001/10/2006
                  $
                  30,000.001/20/2006
                  $
                  500.001/26/2006
                  $
                  10,000.003/3/2006
                  $
                  93,000.003/14/2006
                  $
                  25,000.003/16/2006
                  $
                  20,000.003/17/2006
                  $
                  11,500.006/13/2006
                  $
                  150,000.006/14/2006
                  $
                  150,000.006/23/2006
                  $
                  2,500.0012/31/2006
                  $
                  120,000.00
  37
 Table of Contents
 
 7.
              Michael
      Jacobson:On December 10, 2008, the Company executed an Agreement
      and Plan of Merger (the “Merger Agreement”) by and between the Company and
      its wholly owned subsidiary, NYC Acquisition, Inc., a Nevada corporation
      (“Subsidiary”) on the one hand, and NYC Mags, Inc., a New York corporation
      (“NYC Mags”) and the sole shareholder of NYC Mags, Mr. Michael Jacobson
      (the “Shareholder”), on the other hand. Pursuant to the Merger Agreement,
      Subsidiary merged with NYC Mags, with NYC Mags surviving the merger and
      Subsidiary ceasing to exist (the
“Merger”).
 
 In
addition, pursuant to the terms and conditions of the Merger
Agreement:
 
 §
              The
      Company became the holder of all of the issued and outstanding shares of
      capital stock of NYC Mags, resulting in a parent/subsidiary relationship
      between the Company and NYC Mags;
and
 
 §
              The
      Shareholder of NYC Mags converted his outstanding shares into the right to
      receive 150,000 shares of the Company’s common stock (the “Merger
      Shares”).
 
 Employment
Agreement
 
 In
December 2008, we entered into an employment agreement, which is more fully
described in the section of this Annual Report titled “Narrative to Summary
Compensation Table.”
 
 Non-Competition
and Non-Solicitation Agreement
 
 Pursuant
to the terms of the non-competition and non-solicitation agreement
 
 §
              Shareholder
      shall not engage any in business that competes with the Company’s business
      in the United States of America during the two year period beginning with
      the execution of the non-competition and non-solicitation
      agreement.
 
 §
              Shareholder
      will not solicit any employee, customer or potential customer of NYC Mags
      or its affiliates that Shareholder comes in contact with during two year
      period beginning with the execution of the non-competition and
      non-solicitation agreement for Shareholder or another person’s
      benefit.
 
 A
full copy of the above documents are found on Form 8-K filed by the Company on
12/11/08 with the Securities and Exchange Commission, and available upon
request.
 
 8.
              Eric
      Schmidt:On January 1, 2008, we executed an Employment Agreement
      with Mr. Eric Schmidt, which is more fully described in the section of
      this Annual Report titled “Narrative to Summary Compensation
      Table.”
 
 38
 Table of Contents
 
 Item14.   Principal Accounting Fees and
Services
 
 Below is
the table of Audit Fees (amounts in US$) billed by our auditor in connection
with the audit of the Company’s annual financial statements for the years
ended:
 
 Financial
      Statements for the Year Ended December 31
                      Audit
      Services
                      Audit
      Related Fees
                      Tax
      Fees
                      Other
      Fees2008
                      $XXX
                      $0
                      $0
                      $02007
                      $XXX
                      $0
                      $0
                      $0
 
 PART IV
 
 Item15.   Exhibits, Financial Statements
Schedules
 
 Index to
Financial Statements Required by Article 8 of Regulation S-X:
 
 Audited
      Financial Statements:F-1
                            Report of Independent Registered Public Accounting
      FirmF-2
                            Consolidated Balance Sheets as of December 31,
      2008  and 2007;F-3
                            Consolidated Statements of Operations for the years ended
      December 31, 2008 and 2007;F-4
                            Consolidated Statement of Stockholders’ Equity for period
      December 31, 2006 to December 31, 2008;F-5
                            Consolidated Statements of Cash Flows for the years ended
      December 31, 2008 and 2007;F-6
                            Notes to Consolidated Financial
    Statements
  Exhibit
      Number
                                Description3.1
                                Articles
      of Incorporation, as amended (1)3.2
                                Bylaws,
      as amended (1)23.1
                                Consent of Moore and Associates31.1
                                Certification of Chief Executive Officer pursuant to
      Securities Exchange Act Rule 13a-14(a)/15d-14(a), as adopted pursuant to
      Section 302 of the Sarbanes-Oxley Act of 200231.2
                                Certification of Chief Financial Officer pursuant to
      Securities Exchange Act Rule 13a-14(a)/15d-14(a), as adopted pursuant to
      Section 302 of the Sarbanes-Oxley Act of 200232.1
                                Certification of Chief Executive Officer and Chief
      Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant
      to Section 906 of the Sarbanes-Oxley Act of
  2002
 
 1
              Incorporated
      by reference to the Registration Statement on Form 10-SB filed on December
      22, 2006.
 
 39
 Table of Contents
 
 SIGNATURES
 
 In
accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
 
 iB3
Networks, Inc.
 
 By:
              /s/
      Eric SchmidtEric
      Schmidt
                President,
      Chief Executive Officer, Principal Executive Officer,
                Chief
      Financial Officer, Principal Financial Officer, Principal Accounting
      Officer and DirectorApril
      15, 2009
 
 In accordance with Section 13 or 15(d)
of the Exchange Act, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the dates
indicated:
 
 By:
              /s/
      Eric SchmidtEric
      Schmidt
                President,
      Chief Executive Officer, Principal Executive Officer,
                Chief
      Financial Officer, Principal Financial Officer, Principal Accounting
      Officer and DirectorApril
      15, 2009
  By:
              /s/
      Michael JacobsonMichael
      Jacobson
                President
      of NYC Mags, Inc.
                and
      DirectorApril
      15, 2009


40
 Table of Contents


MOORE& ASSOCIATES, CHARTERED


ACCOUNTANTS AND
ADVISORS
 PCAOB REGISTERED
 
 
 REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
 
 
 To
the Board of Directors
 IB3
Networks, Inc.
 (formerly
Language Access Network, Inc.)
 
 We have
audited the accompanying balance sheets of IB3 Networks, Inc. as of December 31,
2008 and 2007, and the related statements of operations, stockholders’ equity
(deficit) and cash flows for the years ended December 31, 2008 and 2007. 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 audit in accordance with standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audits to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  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 IB3 Networks, Inc. as of December
31, 2008 and 2007, and the related statements of operations, stockholders’
equity (deficit) and cash flows for the years ended December 31, 2008 and 2007,
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 1b to the
financial statements, the Company has an accumulated deficit of $14,928,049 as
of December 31, 2008, which raises substantial doubt about its ability to
continue as a going concern.  Management’s plans concerning these
matters are also described in Note 1b.  The financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.
 
 
 /s/
Moore & Associates, Chartered
 
 Moore
& Associates Chartered
 Las
Vegas, Nevada
 April 13,
2009
 
 
 6490 West Desert Inn Rd, Las
Vegas, NV 89146 (702) 253-7499 Fax (702) 253-7501
 F-1
 Table of Contents


IB3
NETWORKS, INC. (FKA
LANGUAGE ACCESS NETWORK, INC.) Consolidated
Balance Sheets
 December
      31,
                                                                2008
                                                              
                                                              December
      31,
                                                                2007AssetsCurrent
      AssetsCash
      and equivalents
                                                              $
                                                              13,000
                                                              
                                                              $
                                                              1,373Accounts
      receivable, net
                                                              
                                                              39,410
                                                              
                                                              
                                                              62,622Inventory
                                                              
                                                              8,673
                                                              
                                                              
                                                              -Other
      current assets
                                                              
                                                              3,193
                                                              
                                                              
                                                              20,493Total
      Current Assets
                                                              
                                                              64,276
                                                              
                                                              
                                                              84,488Furniture
      and Equipment, net
                                                              
                                                              36,474
                                                              
                                                              
                                                              56,811Other
      AssetsNet
      assets of discontinued operations
                                                              
                                                              -
                                                              
                                                              
                                                              511,480Goodwill
                                                              
                                                              269,725
                                                              
                                                              
                                                              269,725Total
      Other Assets
                                                              
                                                              269,725
                                                              
                                                              
                                                              781,205Total
      Assets
                                                              $
                                                              370,475
                                                              
                                                              $
                                                              922,504Liabilities
      and Stockholders' Equity (Deficit)Current
      LiabilitiesAccounts
      payable and accrued expenses
                                                              $
                                                              1,001,573
                                                              
                                                              $
                                                              916,642Net
      liabilities of discontinued operations
                                                              
                                                              -
                                                              
                                                              
                                                              999,551Payable-related
      party
                                                              
                                                              40,741
                                                              
                                                              
                                                              250,000Notes
      payable-short term
                                                              
                                                              58,211
                                                              
                                                              
                                                              70,014Client
      deposits
                                                              
                                                              33,521
                                                              
                                                              
                                                              56,888Total
      Current Liabilities
                                                              
                                                              1,134,046
                                                              
                                                              
                                                              2,293,095Long
      Term LiabilitiesConvertible
      notes payable
                                                              
                                                              108,904
                                                              
                                                              
                                                              863,076Total
      Liabilities
                                                              
                                                              1,242,950
                                                              
                                                              
                                                              3,156,171Stockholders'
      Equity (Deficit)Common
      stock: $0.001 par value; 100,000,000 shares authorized, 24,436,491 and
                                                                105,537
      shares issued and outstanding at December 31, 2008 and 2007,
      respectively
                                                              
                                                              24,436
                                                              
                                                              
                                                              105Additional
      paid-in capital
                                                              
                                                              14,034,678
                                                              
                                                              
                                                              12,739,114Accumulated
      deficit
                                                              
                                                              (14,931,589)
                                                              
                                                              
                                                              (14,972,886)Total
      stockholders' equity (deficit)
                                                              
                                                              (872,475)
                                                              
                                                              
                                                              (2,233,667)Total
      Liabilities and Stockholders' Equity (Deficit)
                                                              $
                                                              370,475
                                                              
                                                              $
                                                              922,504
 F-2
 Table of Contents
 IB3NETWORKS, INC.
 (FKA
LANGUAGE ACCESS NETWORK, INC.)
 Statements
of Operations
 For
      the Year Ended
                                                                    December 31, 2008
                                                            
                                                            For
      the Year Ended
                                                                    December 31, 2007Net
      Revenue
                                                            $
                                                            1,205,469
                                                            
                                                            $
                                                            936,476Cost
      of Goods Sold
                                                            
                                                            739,888
                                                            
                                                            
                                                            651,456Gross
      profit (loss)
                                                            
                                                            465,581
                                                            
                                                            
                                                            285,020Operating
      ExpensesFair
      value of options granted
                                                            
                                                            -
                                                            
                                                            
                                                            1,025,769Depreciation
      and amortization
                                                            
                                                            21,386
                                                            
                                                            
                                                            20,231Selling,
      general and administrative
                                                            
                                                            614,271
                                                            
                                                            
                                                            510,178Total
      operating expenses
                                                            
                                                            635,657
                                                            
                                                            
                                                            1,556,178Operating
      Loss
                                                            
                                                            (170,076)
                                                            
                                                            
                                                            (1,271,158)Other
      Income and ExpensesInterest
      expense
                                                            
                                                            (276,741)
                                                            
                                                            
                                                            (772,550)Other
      income (expense)
                                                            
                                                            43
                                                            
                                                            
                                                            -Total
      other income and expenses
                                                            
                                                            (276,698)
                                                            
                                                            
                                                            (772,550)Net
      loss before income taxes
                                                            
                                                            (446,774)
                                                            
                                                            
                                                            (2,043,708)Income
      tax expense
                                                            
                                                            -
                                                            
                                                            
                                                            -Discontinued
      Operations
                                                            
                                                            488,071
                                                            
                                                            
                                                            (2,482,710)Net
      Income (Loss)
                                                            $
                                                            41,297
                                                            
                                                            $
                                                            (4,526,418)Basic
      Earnings (Loss) Per ShareContinuing
      operations
                                                            $
                                                            (0.05)
                                                            
                                                            $
                                                            (19.73)Discontinued
      operations
                                                            
                                                            0.05
                                                            
                                                            
                                                            (23.97)$
                                                            0.00
                                                            
                                                            $
                                                            (0.22)Weighted
      AverageCommon
      Shares Outstanding
                                                            
                                                            9,878,800
                                                            
                                                            
                                                            103,568
   F-3
 Table of Contents
 IB3NETWORKS, INC.
 (FKA
LANGUAGE ACCESS NETWORK, INC.)
 Statements
of Stockholders' Equity (Deficit)
 Common
      Stock
                                                                                  
                                                                                  Additional
                                                                                  
                                                                                  Accumulated
                                                                                  
                                                                                  Total
                                                                                    Stockholders'Shares
                                                                                  
                                                                                  Amount
                                                                                  
                                                                                  Paid-in
      Capital
                                                                                  
                                                                                  Deficit
                                                                                  
                                                                                  DeficitBalance,
      December 31, 2006
                                                                                  
                                                                                  100,163
                                                                                  
                                                                                  $
                                                                                  100
                                                                                  
                                                                                  $
                                                                                  10,350,416
                                                                                  
                                                                                  $
                                                                                  (10,446,468)
                                                                                  
                                                                                  $
                                                                                  (95,952)Notes converted to common stock at $155.27 per share
                                                                                  
                                                                                  3,056
                                                                                  
                                                                                  
                                                                                  3
                                                                                  
                                                                                  
                                                                                  474,497
                                                                                  
                                                                                  
                                                                                  --
                                                                                  
                                                                                  
                                                                                  474,497Beneficial
      conversion feature
                                                                                  
                                                                                  --
                                                                                  
                                                                                  
                                                                                  --
                                                                                  
                                                                                  
                                                                                  1,000,000
                                                                                  
                                                                                  
                                                                                  --
                                                                                  
                                                                                  
                                                                                  1,000,000Fair
      value of stock options granted
                                                                                  
                                                                                  --
                                                                                  
                                                                                  
                                                                                  --
                                                                                  
                                                                                  
                                                                                  1,025,268
                                                                                  
                                                                                  
                                                                                  --
                                                                                  
                                                                                  
                                                                                  1,025,268Shares
      issued for cash at $698.63 per share
                                                                                  
                                                                                  219
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  153,000
                                                                                  
                                                                                  
                                                                                  --
                                                                                  
                                                                                  
                                                                                  153,000Shares
      issued for cash at $384.68 per share
                                                                                  
                                                                                  1,644
                                                                                  
                                                                                  
                                                                                  2
                                                                                  
                                                                                  
                                                                                  632,417
                                                                                  
                                                                                  
                                                                                  --
                                                                                  
                                                                                  
                                                                                  632,419Acquisition
      of subsidiary
                                                                                  
                                                                                  456
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  (460,550)
                                                                                  
                                                                                  
                                                                                  --
                                                                                  
                                                                                  
                                                                                  (460,550)Stock
      offering costs
                                                                                  
                                                                                  --
                                                                                  
                                                                                  
                                                                                  --
                                                                                  
                                                                                  
                                                                                  (435,934)
                                                                                  
                                                                                  
                                                                                  --
                                                                                  
                                                                                  
                                                                                  (435,934)Net
      loss for the year ended December 31, 2007
                                                                                  
                                                                                  --
                                                                                  
                                                                                  
                                                                                  --
                                                                                  
                                                                                  
                                                                                  --
                                                                                  
                                                                                  
                                                                                  (4,526,418)
                                                                                  
                                                                                  
                                                                                  (4,526,418)Balance,
      December 31, 2007
                                                                                  
                                                                                  105,537
                                                                                  
                                                                                  
                                                                                  105
                                                                                  
                                                                                  
                                                                                  12,739,114
                                                                                  
                                                                                  
                                                                                  (14,972,886)
                                                                                  
                                                                                  
                                                                                  (2,233,667)Notes converted to common stock at $1.45 per share
                                                                                  
                                                                                  55,125
                                                                                  
                                                                                  
                                                                                  55
                                                                                  
                                                                                  
                                                                                  79,945
                                                                                  
                                                                                  
                                                                                  --
                                                                                  
                                                                                  
                                                                                  80,000Notes converted to common stock at $0.80 per share
                                                                                  
                                                                                  333,280
                                                                                  
                                                                                  
                                                                                  333
                                                                                  
                                                                                  
                                                                                  268,417
                                                                                  
                                                                                  
                                                                                  --
                                                                                  
                                                                                  
                                                                                  268,750Beneficial
      conversion feature
                                                                                  
                                                                                  --
                                                                                  
                                                                                  
                                                                                  --
                                                                                  
                                                                                  
                                                                                  3,540
                                                                                  
                                                                                  
                                                                                  --
                                                                                  
                                                                                  
                                                                                  3,540Shares
      issued for cash at $0.001 per share
                                                                                  
                                                                                  5,300,000
                                                                                  
                                                                                  
                                                                                  5,300
                                                                                  
                                                                                  
                                                                                  --
                                                                                  
                                                                                  
                                                                                  --
                                                                                  
                                                                                  
                                                                                  5,300Notes converted to common stock at $0.05 per share
                                                                                  
                                                                                  18,642,549
                                                                                  
                                                                                  
                                                                                  18,643
                                                                                  
                                                                                  
                                                                                  943,662
                                                                                  
                                                                                  
                                                                                  --
                                                                                  
                                                                                  
                                                                                  962,305Net
      income for the year ended December 31, 2008
                                                                                  
                                                                                  --
                                                                                  
                                                                                  
                                                                                  --
                                                                                  
                                                                                  
                                                                                  --
                                                                                  
                                                                                  
                                                                                  41,297
                                                                                  
                                                                                  
                                                                                  41,297Balance,
      December 31, 2008
                                                                                  
                                                                                  24,436,491
                                                                                  
                                                                                  $
                                                                                  24,436
                                                                                  
                                                                                  $
                                                                                  14,034,678
                                                                                  
                                                                                  $
                                                                                  (14,931,589)
                                                                                  
                                                                                  $
                                                                                  (872,475)
 
 F-4
 Table of Contents
 IB3NETWORKS, INC.
 (FKA
LANGUAGE ACCESS NETWORK, INC.)
 Statements
of Cash Flows
 For
      the Year Ended
                                                                            December 31, 2008
                                                                    
                                                                    For
      the Year Ended
                                                                            December 31, 2007OPERATING
      ACTIVITIES:Net
      income (loss)
                                                                    $
                                                                    41,297
                                                                    
                                                                    $
                                                                    (4,526,418)Discontinued
      operations
                                                                    
                                                                    (488,071)
                                                                    
                                                                    
                                                                    1,195,296Add
      back non-cash items:Depreciation
                                                                    
                                                                    21,386
                                                                    
                                                                    
                                                                    58,346Amortization
      of discount on convertible debt
                                                                    
                                                                    201,519
                                                                    
                                                                    
                                                                    809,291Fair
      value of stock options granted
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    1,025,268Adjustments
      to reconcile net loss to net
      cash used by operating activities:Change
      in accounts receivable
                                                                    
                                                                    38,335
                                                                    
                                                                    
                                                                    (49,239)Change
      in other assets
                                                                    
                                                                    (6,496)
                                                                    
                                                                    
                                                                    75,606Change
      in accounts payable and accrued liabilities
                                                                    
                                                                    93,835
                                                                    
                                                                    
                                                                    66,948Change
      in other liabilities
                                                                    
                                                                    (23,367)
                                                                    
                                                                    
                                                                    (6,655)Net
      cash used in operating activities
                                                                    
                                                                    (121,562)
                                                                    
                                                                    
                                                                    (1,351,557)INVESTING
      ACTIVITIES:Sale
      of fixed assets
                                                                    
                                                                    201
                                                                    
                                                                    
                                                                    -Purchase
      of fixed assets
                                                                    
                                                                    (1,250)
                                                                    
                                                                    
                                                                    (345,136)Net
      cash used in investing activities
                                                                    
                                                                    (1,049)
                                                                    
                                                                    
                                                                    (345,136)FINANCING
      ACTIVITIES:Cash
      proceeds from common stock issued
                                                                    
                                                                    5,300
                                                                    
                                                                    
                                                                    785,419Cash
      proceeds from notes payable
                                                                    
                                                                    100,000
                                                                    
                                                                    
                                                                    1,000,000Proceeds
      from related party loans
                                                                    
                                                                    40,741
                                                                    
                                                                    
                                                                    -Stock
      offering costs paid
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    (435,934)Repayment
      of notes payable
                                                                    
                                                                    (11,803)
                                                                    
                                                                    
                                                                    175,844Net
      cash provided by financing activities
                                                                    
                                                                    134,238
                                                                    
                                                                    
                                                                    1,525,329Net
      increase (decrease) in cash and cash equivalents
                                                                    
                                                                    11,627
                                                                    
                                                                    
                                                                    (171,364)Cash
      and cash equivalents at beginning of the year
                                                                    
                                                                    1,373
                                                                    
                                                                    
                                                                    172,737Cash
      and cash equivalents at end of the year
                                                                    $
                                                                    13,000
                                                                    
                                                                    $
                                                                    1,373SUPPLEMENTAL
      DISCLOSURE:Cash
      paid during the year for interest
                                                                    $
                                                                    48,359
                                                                    
                                                                    $
                                                                    20,376Cash
      paid during the year for income taxes
                                                                    $
                                                                    -
                                                                    
                                                                    $
                                                                    -Non
      Cash Financing ActivitiesCommon
      stock issued for convertible debt and accrued interest
                                                                    $
                                                                    1,311,055
                                                                    
                                                                    $
                                                                    474,500Common
      stock issued and debt assumed for subsidiary
                                                                    $
                                                                    -
                                                                    
                                                                    $
                                                                    1,000,000
 F-5
 Table of Contents


IB3NETWORKS, INC.


(FKA
THE LANGUAGE ACCESS NETWORK, INC.)
 NOTES
TO FINANCIAL STATEMENTS
 DECEMBER
31, 2008 and 2007
  1.
              NATURE
      OF OPERATIONS
 
 a)
              Organization
 
 Language
Access Network, Inc. (T-LAN or the “Company”) was incorporated on December 31,
2002 in Nevada. It was originally known as “Global Institute for Gaming
Innovation, Inc.” and was set up to provide information and assistance to
businesses and governments exploring new forms of remote, networked
gaming.  However the Company’s management saw the greater need for
using this new technology of remote video networking to assist individuals who
speak different Languages to better communicate.  Effective September
23, 2005, the Company merged with Preciss, LLC, an Ohio company specializing in
the Company’s primary activities. On September 25, 2008, the Company filed
Articles of Merger with the Secretary of State of Nevada in order to effectuate
a merger whereby the Company (as Language Access Network, Inc.) merged with its
wholly-owned subsidiary, IB3 Networks, Inc., as a parent/ subsidiary merger with
the Company as the surviving corporation. This merger became effective as of
September 25, 2008 whereupon the Company's name was  changed to "IB3
Networks, Inc." and the Company's Articles of Incorporation have been amended to
reflect this name change.
 
 b)
              Going
      Concern
 
 The
accompanying financial statements have been prepared assuming the Company will
continue as a going concern.
 
 As shown
in the accompanying financial statements, the Company realized net income of
$41,297 in the fiscal year ending December 31, 2008.  As of December
31, 2008 the Company had an accumulated deficit $14,928,049.  During
the year ended December, 31 2007 the Company incurred a net loss of
$4,526,418.  The future of the Company is dependent upon its ability
to obtain financing and upon future profitable operations from the development
of its business opportunities. Management has plans to seek additional capital
through a private placement and public offering of its common stock. The
financial statements do not include any adjustments relating to the
recoverability and classification of recorded assets, or the amounts of and
classification of liabilities that might be necessary in the event the Company
cannot continue in existence.
  3.
              SIGNIFICANT
      ACCOUNTING POLICIES
 
 The
financial statements of the Company have been prepared in accordance with
generally accepted accounting principles in the United States. Because a precise
determination of many assets and liabilities is dependent upon future events,
the preparation of financial statements for a period necessarily involves the
use of estimates. Actual results may vary from those estimates.
 
 The
financial statements have, in management’s opinion, been properly prepared
within reasonable limits of materiality, and within the framework of the
significant accounting policies summarized below:
 
 a)
              Research
      and Development Costs
 
 The
Company expenses all costs related to research and development in the period
incurred. The Company incurred no research and development costs during the
years ended December 31, 2008 and 2007, respectively.
 
 F-6
 Table of Contents
 
 3.
              SIGNIFICANT
      ACCOUNTING POLICIES (Continued)
 
 b)
              Revenue
      Recognition Policy
 
 Revenue
from service contracts is recorded as deferred revenue and subsequently
recognized over the term of the contract or when the service is
completed.  Revenue from product sales is recognized when shipped, FOB
shipping point. Shipping and handling charges billed to customers are included
in net sales, and shipping and handling costs incurred by the Company are
included in cost of goods sold. The Company has  a receivable of
$15,123 for services performed but not billed as of December 31, 2008 which is
included in other current assets. The Company also has a liability of $33,521
for amounts received from customers for which the services have not been
performed as of December 31, 2008 which is included in other current
liabilities.
 
 c)
              Fair
      Value of Financial Instruments
 
 Fair
value estimates discussed herein are based upon certain market assumptions and
pertinent information available to management at this time.  The
respective carrying value of certain on-balance-sheet financial instruments
approximated their fair values. These financial instruments include cash and
accounts payable. Fair values were assumed to approximate carrying values for
cash and payables because they are short term in nature and their carrying
amounts approximate fair values or they are payable on demand.
 
 d)
              Basic
      and Diluted Loss Per Share
 
 In
accordance with SFAS No. 128, “Earnings Per Share,” the basic loss per common
share is computed by dividing net loss available to common stockholders by the
weighted average number of common shares outstanding. Diluted loss per common
share is computed similar to basic loss per common share except that the
denominator is increased to include the number of additional common shares that
would have been
 outstanding
if the potential common shares had been issued and if the additional common
shares were dilutive. In 2008 and 2007, the Company’s common stock equivalents
were anti-dilutive and excluded in the earnings per share
computation.
  e)
              Depreciation
 
 Property,
plant and equipment are stated at the lower of cost or estimated net recoverable
amount.  The cost of property, plant and equipment is depreciated
using the straight-line method based on the lesser of the estimated useful lives
of the assets or the lease term based on the following life
expectancy:
 
 Computer
      equipment
                              5
      yearsVehicles
                              5
      yearsOffice
      furniture and fixtures
                              7
      years
  Repairs
and maintenance expenditures are charged to operations as
incurred.  Major improvements and replacements, which extend the
useful life of an asset, are capitalized and depreciated over the remaining
estimated useful life of the asset.  When assets are retired or sold,
the costs and related accumulated depreciation and amortization are eliminated
and any resulting gain or loss is reflected in operations.
 
 f)
              Accounts
      Receivable
 
 Accounts
receivable are carried at original invoice amount less an estimate made for
doubtful receivables based on a review of all outstanding amounts on a monthly
basis. Management determines the allowance for doubtful accounts by regularly
evaluating individual customer receivables and considering a customer’s
financial condition and credit history, and current economic conditions.
Accounts receivable are written off when deemed uncollectible. Recoveries of
accounts receivable previously written off are recorded when received. The
Company has an allowance for doubtful accounts of $78,139 as of December 31,
2008.
  F-7
 Table of Contents
 3.
              SIGNIFICANT
      ACCOUNTING POLICIES (Continued)
 
 g)
              Inventories
 
 Inventories
are stated at the lower of cost or market value, with cost being determined on a
weighted average basis.  Provisions made for inventory obsolescence
and declines in market value are included in cost of goods sold. The Company’s
inventory of $8,673 as of December 31, 2008 is comprised of computer components
held for resale.
 
 h)
              Advertising
 
 The
Company expenses all costs of advertising as incurred.  The Company
incurred advertising costs of $2,053 and $-0- during the years ended December
3,1 2008 and 2007, respectively.
 
 i)
              Income
      Taxes
 
 The
Company follows Statement of Financial Accounting Standard No. 109, “Accounting
for Income Taxes” (“SFAS No. 109”) for recording the provision for income
taxes.  Deferred tax assets and liabilities are computed based upon
the difference between the financial statement and income tax basis of assets
and liabilities using the enacted marginal tax rate applicable when the related
asset or liability is expected to be realized or settled.  Deferred
income tax expenses or benefits are based on the changes in the asset or
liability each period.  If available evidence suggests that it is more
likely than not that some portion or all of the deferred tax assets will not be
realized, a valuation allowance is required to reduce the deferred tax assets to
the amount that is more likely than not to be realized.  Future
changes in such valuation allowance are included in the provision for deferred
income taxes in the period of change.
 
 Deferred
income taxes may arise from temporary differences resulting from income and
expense items reported for financial accounting and tax purposes in different
periods.  Deferred taxes are classified as current or non-current,
depending on the classification of assets and liabilities to which they
relate.  Deferred taxes arising from temporary differences that are
not related to an asset or liability are classified as current or non-current
depending on the periods in which the temporary differences are expected to
reverse.
 
 As of
December 31, 2008, the Company had net operating loss carryovers of
approximately $4,467,000 which expire in 2028. The potential tax benefit of the
loss carryover of $1,742,000 has been offset in full by a valuation allowance
due to the uncertainty of future taxable earnings.
 
 The
income tax provision differs from the amount of income tax determined by
applying U.S. federal and state income tax rates of 39% to pretax income for the
years ended December 31, 2008 and 2007 due to the following:
  December
      31,2008
                                          
                                          2007Book
      income (loss)
                                          $
                                          16,106
                                          
                                          $
                                          (1,765,303)Fair
      value of stock options granted
                                          
                                          -
                                          
                                          
                                          399,855Amortization
      of discount on debt
                                          
                                          78,592
                                          
                                          
                                          315,623Valuation
      allowance
                                          
                                          (94,698)
                                          
                                          
                                          1,049,825$
                                          -
                                          
                                          $
                                          -
 
 F-8
 Table of Contents
 
 4.
              CONVERTIBLE
      NOTES PAYABLE
 
 The
Company has issued convertible notes payable at December 31, 2008 in the face
amount of $100,000.  This note incurs interest at the rate of 10% per
annum and matures on February 6, 2011, three years after issuance and may be
converted by the holder at anytime within the first eighteen (18) months at the
rates of $0.75 per share.  Total interest accrued on convertible notes
at December 31, 2008 was $8,904.  During the year 2008, convertible
notes and accrued interest in the amount of $1,311,055 were converted to common
stock at an average of $0.07 per share for a total of 19,030,954
shares.  The Company recorded $3,540 for the value of the conversion
feature attached to the notes issued during 2008.  At December 31,
2008 there is no current portion of the note.
 
 Convertible
notes payable consist of the following at:
  December
      31,2008
                                            
                                            2007Notes
      payable
                                            $
                                            10,000
                                            
                                            $
                                            869,500Accrued
      interest
                                            
                                            8,904
                                            
                                            
                                            176,809Unamortized
      discount for beneficial conversion feature
                                            
                                            -0-
                                            
                                            
                                            (183,233)Net
      Convertible Notes Payable
                                            $
                                            108,904
                                            
                                            $
                                            863,076
  5.
              EQUITY
 
 During
the year ending December 31, 2008, 5,300,000 shares of the Company’s common
stock were issued for cash at $0.001 per share.  Also during the year
ending December 31, 2008, 55,125, 333,280 and 18,642,549 shares of the Company’s
common stock were converted from convertible notes payable at $1.45, $0.80 and
$1.45 per share, respectively.
 
 During
the year ending December 31, 2007,43,715 shares of the Company’s common stock
were issued for cash at $3.50 per share.  Also during the year ending
December 31, 2007, 328,738 shares of the Company’s common stock were issued for
cash at $4.25 per share.
 
 6.
              COMMON
      STOCK PURCHASE OPTIONS
 
 Under
FASB Statement 123, the Company estimates the fair value of
each  stock  award at the  grant  date
by  using  the  Black-Scholes  option  pricing
model.  The
following  weighted  average  assumptions used for
grants in the year ended December 31, 2007:dividend yield of  zero
percent;  expected volatility of
185.59%;  risk-free  interest rates of 5.35% and expected
life of 1.0. During the year ended December 31, 2007, The Company granted common
stock purchase options to its employees and consultants which is amortized over
the term of the service. The options provide for exercise prices of between
$0.25 and $4.15 per share.  The Company granted no options during the
year ended December 31, 2008.  The Company recognized an expense of
$-0- and $1,205,268 for the fair value of the options during the years ended
December 31, 2008 and 2007, respectively.
 
 A summary
of the status of the Company’s stock option plans as of December 31, 2008 and
December 31, 2007 and the changes during the years are presented
below:
  2008
                          
                          2007Shares
                          
                          SharesUnexercised
      options, beginning of year
                          
                          2,544,280
                          
                          
                          8,404,505Stock
      options issued during the year
                          
                          -0-
                          
                          
                          48,500Stock
      options expired
                          
                          (0)
                          
                          
                          (5,908,725)Stock
      options exercised
                          
                          -
                          
                          
                          -Unexercised
      options, end of year
                          
                          2,544,280
                          
                          
                          2,544,280
 
 F-9
 Table of Contents
 
 7.
              FURNITURE
      AND EQUIPMENT
 
 Furniture
and equipment consist of the following:
 
 December
      31,
                              2008
                            
                            December
      31,
                              2007Computers,
      equipment and software
                            $
                            108,615
                            
                            $
                            107,365Vehicles
                            
                            20,091
                            
                            
                            20,091Furniture
      and fixtures
                            
                            9,048
                            
                            
                            9,461137,754
                            
                            
                            136,917Less
      accumulated depreciation
                            
                            (101,280)
                            
                            
                            (80,106)Total
                            $
                            36,474
                            
                            $
                            56,811
 
 Depreciation
expense totaled $21,386 and $20,231 for the years ended December 31, 2008 and
2007, respectively.
 
 8.   NOTES
PAYABLE-SHORT TERM
 
 At
December 31, 2008, notes payable to consist of the following:
  Capital
      lease payable; 11.65% interest; due December 2008
                                                            $
                                                            13,533Note
      Payable; 10% interest; due November 2008
                                                            
                                                            4,318Note
      payable to an unrelated party; Prime rate plus 2% interest; due April
      2009
                                                            
                                                            6,038Revolving
      line of credit with financial institution, 10.75%
      interest;  $500 minimum monthly payment.
                                                            
                                                            34,322Total
      Notes Payable
                                                            $
                                                            58,211
 9.     RECENTLY
ISSUED ACCOUNTING PROUNCEMENTS
 
 In
June 2008, the FASB issued FASB Staff Position EITF 03-6-1, Determining Whether Instruments
Granted in Share-Based Payment Transactions Are Participating Securities,
(“FSP EITF 03-6-1”). FSP EITF 03-6-1 addresses whether instruments granted in
share-based payment transactions are participating securities prior to vesting,
and therefore need to be included in the computation of earnings per share under
the two-class method as described in FASB Statement of Financial Accounting
Standards No. 128, “Earnings per Share.” FSP EITF 03-6-1 is effective for
financial statements issued for fiscal years beginning on or after
December 15, 2008 and earlier adoption is prohibited. We are not required
to adopt FSP EITF 03-6-1; neither do we believe that FSP EITF 03-6-1 would have
material effect on our consolidated financial positionand results of
operations if adopted.
 
 In May
2008, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 163,
“Accounting for Financial
Guarantee Insurance Contracts-and interpretation of FASB Statement No.
60”.SFAS
No. 163 clarifies how Statement 60 applies to financial guarantee insurance
contracts, including the recognition and measurement of  premium
revenue and claims liabilities. This statement also requires expanded
disclosures about financial guarantee insurance contracts. SFAS No. 163 is
effective for fiscal years beginning on or after December 15, 2008, and interim
periods within those years. SFAS No. 163 has no effect on the Company’s
financial position, statements of operations, or cash flows at this
time.
 
 In May
2008, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 162,
“The Hierarchy of Generally
Accepted Accounting Principles”.SFAS No. 162 sets forth
the level of authority to a given accounting pronouncement or document by
category. Where there might be conflicting guidance between
  F-10
 Table of Contents
  9.     RECENTLY
ISSUED ACCOUNTING PROUNCEMENTS (Continued)
 two
categories, the more authoritative category will prevail. SFAS No. 162 will
become effective 60 days after the SEC approves the PCAOB’s amendments to AU
Section 411 of the AICPA Professional Standards. SFAS No. 162 has no effect on
the Company’s financial position, statements of operations, or cash flows at
this time.
 
 In March
2008, the Financial Accounting Standards Board, or FASB, issued SFAS No. 161,
Disclosures about Derivative
Instruments and Hedging Activities—an amendment of FASB Statement No.
133.This standard requires companies to provide enhanced
disclosures about (a) how and why an entity uses derivative instruments, (b) how
derivative instruments and related hedged items are accounted for under
Statement 133 and its related interpretations, and (c) how derivative
instruments and related hedged items affect an entity’s financial position,
financial performance, and cash flows. This Statement is effective for financial
statements issued for fiscal years and interim periods beginning after November
15, 2008, with early application encouraged. The Company has not yet adopted the
provisions of SFAS No. 161, but does not expect it to have a material impact on
its financial position, results of operations or cash flows.
 
 In
December 2007, the SEC issued Staff Accounting Bulletin (SAB) No. 110 regarding
the use of a "simplified" method, as discussed in SAB No. 107 (SAB 107), in
developing an estimate of expected term of "plain vanilla" share options in
accordance with SFAS No. 123 (R), Share-Based
Payment.  In particular, the staff indicated in SAB 107 that it
will accept a company's election to use the simplified method, regardless of
whether the company has sufficient information to make more refined estimates of
expected term. At the time SAB 107 was issued, the staff believed that more
detailed external information about employee exercise behavior (e.g., employee
exercise patterns by industry and/or other categories of companies) would, over
time, become readily available to companies. Therefore, the staff stated in SAB
107 that it would not expect a company to use the simplified method for share
option grants after December 31, 2007. The staff understands that such detailed
information about employee exercise behavior may not be widely available by
December 31, 2007. Accordingly, the staff will continue to accept, under certain
circumstances, the use of the simplified method beyond December 31, 2007. The
Company currently uses the simplified method for “plain vanilla” share options
and warrants, and will assess the impact of SAB 110 for fiscal year 2009. It is
not believed that this will have an impact on the Company’s financial position,
results of operations or cash flows.
 
 In
December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements—an amendment of ARB No.
51.  This statement amends ARB 51 to establish accounting and
reporting standards for the noncontrolling interest in a subsidiary and for the
deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in
a subsidiary is an ownership interest in the consolidated entity that should be
reported as equity in the consolidated financial statements. Before this
statement was issued, limited guidance existed for reporting noncontrolling
interests. As a result, considerable diversity in practice existed. So-called
minority interests were reported in the consolidated statement of financial
position as liabilities or in the mezzanine section between liabilities and
equity. This statement improves comparability by eliminating that diversity.
This statement is effective for fiscal years, and interim periods within those
fiscal years, beginning on or after December 15, 2008 (that is, January 1, 2009,
for entities with calendar year-ends). Earlier adoption is prohibited. The
effective date of this statement is the same as that of the related Statement
141 (revised 2007). The Company will adopt this Statement beginning March 1,
2009. It is not believed that this will have an impact on the Company’s
financial position, results of operations or cash flows.
 
 In
December 2007, the FASB, issued FAS No. 141 (revised 2007), Business Combinations.’This
Statement replaces FASB Statement No. 141, Business Combinations, but
retains the fundamental requirements in Statement 141.  This
Statement establishes principles and requirements for how the acquirer: (a)
recognizes and measures in its financial statements the identifiable assets
acquired, the liabilities assumed, and any noncontrolling interest in the
acquiree; (b) recognizes and measures the goodwill acquired in the business
combination or a gain from a bargain purchase; and (c) determines what
information to disclose to enable users of the financial statements to evaluate
the nature and financial effects of the business combination. This statement
applies prospectively to business combinations for which the acquisition date is
on or after the beginning of the first annual reporting period beginning on or
after December 15, 2008. An entity may
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  9.     RECENTLY
ISSUED ACCOUNTING PROUNCEMENTS (Continued)
 not apply
it before that date. The effective date of this statement is the same as that of
the related FASB Statement No. 160, Noncontrolling Interests in
Consolidated Financial Statements.  The Company will adopt this
statement beginning March 1, 2009. It is not believed that this will have an
impact on the Company’s financial position, results of operations or cash
flows.
 
 In
February 2007, the FASB, issued SFAS No. 159,The Fair Value Option for Financial
Assets and Liabilities—Including an Amendment of FASB Statement No.
115.  This standard permits an entity to choose to measure many
financial instruments and certain other items at fair value. This option is
available to all entities. Most of the provisions in FAS 159 are elective;
however, an amendment to FAS 115 Accounting for Certain Investments
in Debt and Equity Securities applies to all entities with available for
sale or trading securities. Some requirements apply differently to entities that
do not report net income. SFAS No. 159 is effective as of the beginning of an
entities first fiscal year that begins after November 15, 2007. Early adoption
is permitted as of the beginning of the previous fiscal year provided that the
entity makes that choice in the first 120 days of that fiscal year and also
elects to apply the provisions of SFAS No. 157 Fair Value
Measurements.  The Company adopted SFAS No. 159 beginning March
1, 2008. The adoption of this pronouncement did not have an impact on the
Company’s financial position, results of operations or cash flows.
 
 In
September 2006, the FASB issued SFAS No. 157, Fair Value
Measurements  This statement defines fair value, establishes a
framework for measuring fair value in generally accepted accounting principles
(GAAP), and expands disclosures about fair value measurements. This statement
applies under other accounting pronouncements that require or permit fair value
measurements, the Board having previously concluded in those accounting
pronouncements that fair value is the relevant measurement attribute.
Accordingly, this statement does not require any new fair value measurements.
However, for some entities, the application of this statement will change
current practice. This statement is effective for financial statements issued
for fiscal years beginning after November 15, 2007, and interim periods within
those fiscal years. Earlier application is encouraged, provided that the
reporting entity has not yet issued financial statements for that fiscal year,
including financial statements for an interim period within that fiscal year.
The Company adopted this statement March 1, 2008. The adoption of this
pronouncement did not have an impact on the Company’s financial position,
results of operations or cash flows.
 
 10.   NOTES
PAYABLE-RELATED PARTY
 
 At
December 31, 2008, the Company had a note payable to a shareholder of $40,741.
The note payable is unsecured, accrues interest at 6% per annum and is due upon
demand.
 
 11.   SUBSEQUENT
EVENTS
 
 Sublease
Agreement
 
 On
February 10, 2009,the Company through  iBeam Solutions, LLC, a wholly
owned subsidiary and Data Center 101, LLC, (“Data”) entered into a sublease
agreement to lease 5,000 square feet of office space in Columbus,
Ohio.  The sublease commenced on February 10, 2009, and runs until
January 31, 2018.   The sublease was amended on March 3,
2009.  The sublease and the first amendment, among other things,
provide the following:
 
 §
              There
      is a security deposit of $40,000 for the
  premises.
 
 §
              The
      following is the annual base rent for years one through ten of the
      sublease: $360,000, $660,000, $756,300, $778,989, $802,359, $826,429,
      $851,222, $876,759, $903,062 and
$930154.
 
 §
              The
      base rent shall be increased by 1) iBeam’s share of Data’s Additional
      Rent, 2) Percentage Rent 3) Third Floor CAM charges and 4) beginning with
      the third year of the lease, Customer Recurring Revenue
      Baseline.   It is estimated that the Additional Rent for
      2009 will be $1.22 per square foot.  Third floor CAM charges are
      also estimated at $1.22 per square foot. The Customer Recurring Revenue
      Baseline rent is contingent on third party revenue streams, but shall not
      exceed $6,375 per month.  The percentage rent will be an amount
      equal to 4% of iBeam’s gross
revenue.
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  11.   SUBSEQUENT
EVENTS (CONTINUED)
 §
              The
      base rent shall be decreased by the rent credit received by Yourcolor,
      LLC, which as of the date of the Agreement is
  $3,850.
 
 §
              The
      Sublease has two five year options.  Each option shall be
      exercisable by iBeam giving notice 180 days prior to the expiration of its
      current rental term.  The base rent in each option year shall
      increase 3% annually from the prior
year.
 
 §
              Data
      has leased additional space in the premises beyond the portion that it
      leased to iBeam.  If Data receives an offer to sublease any
      portion of the additional space that it has a right to lease, then iBeam
      possesses a right of first refusal with respect to all or any part of the
      remainder of the building during the term of the
  sublease.
 
 Assignment
Agreement
 
 The
premises currently has some tenants.  Data executed lease agreements
and service contracts with the tenants of the Premises.  On February
10, 2009, Data assigned to iBeam the lease agreements and service
contracts.  The sublease and first amendment provide that the current
revenue generated by these lease agreements and service contracts is
$34,000.
  Employment
Agreement
 
 Effective
as of January 1, 2009, the Company, entered into an employment agreement with
its Chief Executive Officer, Eric Schmidt (“Schmidt”).  The employment
agreement provides as follows:
 
 §
              Schmidt
      will serve as CEO of the Company. While employed by the Company, Schmidt
      will devote his entire business time and energy to the Company and use his
      best efforts to promote the success of theCompany; except for such time as
      he dedicates to iBeam Solutions, LLC which is the wholly owned subsidiary
      of the Company;
 
 §
              This
      employment agreement supplants the prior employment agreement between
      Schmidt and iBeam.  Upon the securing of $1,000,000 of
      financing, then all compensation due Schmidt under the previous employment
      agreement will be payable to
Schmidt;
 
 §
              Schmidt
      will receive 500,000, 250,000 and 250,000 shares of stock of the Company
      for signing the employment agreement, for agreeing to remain as Chairman
      of the Board of the Company and for past service as Chairman and CEO of
      the Company, respectively;
 
 §
              Schmidt
      will receive a stock bonus if the Company has a certain amount of gross
      revenue;
 
 §
              Schmidt
      will have the option to purchase shares of stock of the Company at $0.50
      per share at future dates if 1) the Company has a certain gross revenue
      and/or 2) he is employed by the
Company;
 
 §
              Schmidt
      will be entitled to salary and other compensation of cash or shares of
      stock of the Company;
 
 §
              Schmidt
      can be terminated for any reason upon 30 days notice by either Schmidt or
      the Company. Upon termination of Schmidt employment, Schmidt will only be
      due Schmidt pro rated salary for the month in questions and any other
      compensation which had been earned but not yet
  paid.
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