**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**





**FORM
      10-KSB**





(Mark
      One)





[X]
      ANNUAL REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT
      OF


1934
      FOR
      THE FISCAL YEAR ENDED DECEMBER 31, 2006.





[
      ]
      TRANSITION REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
      ACT


OF
      1934
      FOR THE TRANSITION PERIOD FROM ______ TO ________





COMMISSION
      FILE NO. 333-34308





**COMMERCE
      PLANET, INC.**


(Exact
      name of issuer as specified in its charter)




**UTAH**
            
            **87-0520575**(State
                or other jurisdiction
              of
                incorporation or
                organization)
            
            (I.R.S.
                Employer
              Identification
                No.)**30
                S. LaPatera Lane, Suite 8 Goleta,
                CA**
            
            **93117**(Address
                of principal executive
                offices)
            
            (Zip
                Code)




Registrant's
      telephone number, including area code: (805) 964-9126




Securities
      registered under Section 12(b) of the Exchange Act:




Securities
      registered under Section 12(g) of the Exchange Act:





$0.001


(Title
      of
      Class)





[
      ] Check
      whether the issuer is not required to file reports pursuant to Section 13 or
      15(d) of the Exchange Act.





Check
      whether the issuer (1) filed all reports required to be filed by Section 13
      or
      15(d) of the Exchange Act during the past twelve months (or 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. [X] Yes [ ] No





[
      ] Check
      if there is no disclosure of delinquent filers in response to Item 405 of
      Regulation S-B contained in this form, and no disclosure will be contained,
      to
      the best of registrant's knowledge, in definitive proxy or information
      statements incorporated by reference in Part III of this Form 10-KSB or any
      amendment to this Form 10-KSB.





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





State
      issuer's revenues for its most recent fiscal year: $ 27,488,134





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
      December 31, 2006: $33,321,266 (based on a total of 23,139,768 shares of our
      common stock held by non-affiliates on December 31, 2006, at the closing price
      on December 29, 2006 of $1.44 per share.)





State
      the
      number of shares outstanding of each of the registrant's classes of common
      stock
      as of December 31, 2006: 47,193,839





Transitional
      Small Business Disclosure Format (Check one): Yes [ ]; No [X]










COMMERCE
      PLANET, INC.


10-KSB





TABLE
      OF
      CONTENTS




PART I
            PAGEITEM 1. DESCRIPTION OF
              BUSINESS.
            1ITEM 2. DESCRIPTION OF
              PROPERTY.
            8ITEM 3. LEGAL PROCEEDINGS.
            8ITEM 4. SUBMISSION OF
              MATTERS TO
              A VOTE OF SECURITY HOLDERS.
            8PART IIITEM 5. MARKET FOR COMMON
              EQUITY
              AND RELATED STOCKHOLDER MATTERS.
            9ITEM 6. MANAGEMENT'S DISCUSSION
              AND ANALYSIS AND RESULTS OF OPERATIONS.
            10ITEM 7. FINANCIAL STATEMENTS.
            22ITEM
              8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTINGAND
              FINANCIAL DISCLOSURE.
            38ITEM 8A. CONTROLS AND
              PROCEDURES.
            38ITEM 8B. OTHER
              INFORMATION.
            38PART IIIITEM
                9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;COMPLIANCE
                WITH SECTION 16(a) OF THE EXCHANGE ACT.
            39ITEM 10. EXECUTIVE
              COMPENSATION.
            40ITEM
                11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS ANDMANAGEMENT
                AND RELATED STOCKHOLDER MATTERS.
            42ITEM 12. CERTAIN RELATIONSHIPS
              AND RELATED TRANSACTIONS.
            43ITEM 13. EXHIBITS.
            46ITEM 14. PRINCIPAL ACCOUNTANT
              FEES AND SERVICES.
            53










PART
      I





**ITEM
      1. DESCRIPTION OF BUSINESS.**





OVERVIEW





We
      are a
      publicly traded media company that trades on the Over-the-Counter Bulletin
      Board
      of the National Quotation Service under the ticker symbol "CPNE." We offer
      media
      products, lead generation services and marketing tools to our client partners
      through a turnkey media solution that utilizes our network of wholly-owned
      subsidiaries, Consumer Loyalty Group, Inc., Legacy Media, Inc., OS Imaging,
      Inc., and Interaccurate, Inc.





Each
      subsidiary specializes in a specific niche of the media industry. Their combined
      services are designed to address all the needs of their client partners
      including, membership loyalty offers, consumer marketing data management,
      affiliate list management, printing and fulfillment services, and Web/Data
      hosting and software development.





The
      Consumer Loyalty Group offers a suite of revenue generating consumer loyalty
      based products. These products encompass home based business opportunities,
      e-commerce retail sales, educational programs, financial programs and other
      high
      yield revenue producing offers. The products are utilized by our client partners
      on a per acquisition, revenue share or licensed (private branded) basis. Each
      offer has specifically been designed to generate a significant revenue stream
      for our client partners while simultaneously satisfying the consumer’s need for
      high quality products.





Legacy
      Media is a full service marketing company designed to address all of our client
      partner needs. There are four operating divisions of Legacy that focus on the
      four main components of lead generation and order acquisition: media placement;
      list management; affiliate network management; and marketing tools. Legacy
      Media
      leverages relationships with the other subsidiary companies to create and
      implement highly productive marketing campaigns on behalf of their client
      partners.





OS
      Imaging offers a full range of services including graphic design, printing
      services, data merge, mailing and finishing. Graphic design and printing
      capabilities allow OS Imaging to assist their client partners in defining,
      developing, and creating the most powerful marketing message possible.
      Additionally, OS Imaging offers a wide array of fulfillment services including:
      assembly; pick and pack; mailing and warehousing and inventory management
      services.





Interaccurate,
      Inc. designs and implements cutting-edge technology for secure electronic
      payment modules, advanced content search tools, and secure data hosting.
      Additionally, Interaccurate provides co-location services in its secure, state
      of the art data center.





The
      address of our principal executive office is 30 S. LaPatera Lane, Suite 8,
      Goleta, CA 93117. Our telephone number is (805) 964-9126. Our website address
      is
      www.commerceplanet.com. Information contained on our website does not constitute
      part of this report and our address should not be used as a hyperlink to our
      website.




-
          1
          -




HISTORY
 
 We
        incorporated in the State of Utah on March 1, 1994 as Utah Clay Technology,
        Inc.
        From our formation until January 15, 2004, our business plan
        included:
 
 -
        locating kaolin deposits in Utah;
 -
        obtaining the legal rights to these deposits;
 -
        conducting exploratory operations;
 -
        testing
        the extracted minerals in the laboratory; and
 -
        selling
        samples of the processed form of our kaolin to a commercial company for market
        evaluation.
 
 Although
        we did obtain certain legal rights to properties possibly containing kaolin,
        due
        to a lack of capital, we never commenced mining operations. As a result,
        we had
        no revenues since our inception.




On
      January 15, 2004, we abandoned the business plan for Utah Clay Technologies.
      On
      the same date, pursuant to an Agreement and Plan of Reorganization with NeWave,
      Inc., a Utah corporation, Utah Clay Technologies, Inc. changed its name to
      NeWave, Inc. and OnlineSupplier.com became our wholly-owned subsidiary. We
      own
      and operate an online membership club that offers a comprehensive line of
      products and services at wholesale prices through our membership program. As
      a
      result of this change in our focus and direction, the entire former management
      team and board of directors resigned and we employed a new management team
      and
      appointed a new board of directors.





On
      January 30, 2004, we changed our name to NeWave, Inc. We acquired our operating
      subsidiary, Onlinesupplier.com on
      January 15, 2004.In April, 2004, we organized Discount Online Warehouse
      as a wholly-owned subsidiary to offer heavily discounted products purchased
      in
      bulk to consumers. We organized our subsidiary, Auction Liquidator, Inc., in
      September 2004 and it began to generate immaterial revenues in October 2004.





During
      2005, we decided to cease operations at Auction Liquidator, Inc. and Discount
      Online Warehouse in order to focus our efforts and resources on
      Onlinesupplier.com. Discontinued operations did not have a material effect
      on
      the financial statements.





On
      June
      1, 2006, we acquired all of the assets, both fixed and intangible, of Onesource
      Imaging, a California corporation. We acquired the assets in exchange for our
      assumption of certain liabilities. On June 20, 2006, we established three
      wholly-owned subsidiaries, OS Imaging, Inc., Legacy Media, Inc., and Consumer
      Loyalty Group, Inc. Effective June 22, 2006, we changed our name from NeWave,
      Inc. to Commerce Planet, Inc. On October 3, 2006, we acquired the assets of
      Interaccurate, Inc. including software, intellectual properties and a web
      hosting facility. On October 11, 2006, our subsidiary, Consumer Loyalty Group,
      executed an agreement with Datascension, Inc. to establish a Costa Rican call
      center. The call center began operations on November 27, 2006.





On
      November 28, 2006, we announced a common stock repurchase program whereby we
      plan to buy back up to $2,000,000 of our outstanding common stock to be
      repurchased from time to time. The buyback program will be effective through
      December 31, 2007. The plan was initiated because our Board of Directors
      believed our common stock was undervalued in relation to other industry
      competitors and wanted to provide value to our existing shareholders based
      on
      our past financial performance. As of January 31, 2007, we have bought back
      243,500 shares of common stock for a total of $364,323.





eCOMMERCE
      INDUSTRY BACKGROUND





We
      participate in the online retail industry by offering a myriad of consumer
      products at discount prices through our online memberships. Additionally, we
      provide tools to facilitate the resale of these products in this space. Business
      partners purchase online advertising as well as supporting tools, technologies
      and services to succeed in the online retail and related spaces. Our success
      is
      driven by trends in the online retail industry, the online advertising industry,
      and our ability to capture market share in these industries and provide
      supporting technologies and products.




Online
        shopping continues to be a large and rapidly growing channel for consumers
        and
        merchants to buy and sell goods and services. According to the U.S. Census
        Bureau 2007 Statistical Abstract, U.S. online retail sales will grow to $329
        billion in 2010. Reaching this number requires a compound average growth
        rate,
        or “CAGR” of 13% between 2006 and 2010 with growth rates in consumer electronics
        slightly higher at 14%. Similar research provided by Forrester Research,
        Inc.
        indicates that the total number of U.S. online shopping households will reach
        55
        million in 2010.
 
 While
        price-driven consumers dominated the landscape of online retail for years,
        Forrester sees a more lucrative value proposition for online retail in making
        life easier for time-starved consumers. Forrester reported that nearly 40%
        of
        Web shoppers say they are pressed for time, and more than 70% find shopping
        online easier than through other channels. We believe that the key forces
        driving the growth of online shopping will continue to be convenience, selection
        and savings. The Internet offers around-the-clock access to millions of products
        and thousands of stores, unlike in-store shopping. It contains shopping
        information from a wide variety of sources, including merchant websites,
        manufacturer websites and other online content providers. Consumers utilize
        this
        convenience, selection and information to save time and money.




-
          2
          -




Online
      advertising spending is projected to have strong growth over the next several
      years as well. According to JupiterResearch, online ad spending was $15.7
      billion in 2006 and will grow to $25.9 billion by 2011 resulting in a compound
      annual growth rate of 11%. Their research indicates that search, will dominate
      online ad spending for the next five years growing from about 41% of spending
      in
      2006 to 43% of spending in 2011. Display advertising contributed 37% of total
      online ad spending and will decline to about 35% in 2011, while classified
      advertising spending contributed 22% of the total and will hold that level
      through 2011.





We
      believe that individuals and businesses desire an integrated package that is
      inexpensive, comprehensive and easily navigable. We believe current electronic
      commerce applications in the market do not generally include complete
      functionality such as webstore generation, merchant processing capabilities,
      customer management, online training modules, domain name registration and
      an
      array of wholesale products. Accordingly, we believe there will continue to
      be a
      large demand for a complete electronic commerce product for individuals and
      businesses and that demand is not being fully met. Additionally, as the online
      retail sales industry continues to show strong growth and online advertising
      spending grows, demand for our marketing services, supporting technology and
      product offerings has increased.





OUR
      WEBSITE, PRODUCTS AND SERVICES




We
        are a
        progressive internet-based direct marketing company and provider of product
        fulfillment solutions headquartered in Goleta, CA. We bring value to consumers
        by designing and implementing membership programs that offer the services
        and
        discounts needed to stay competitive in today's online marketplace. As a
        consumer-driven organization, we offer a program that can fit the needs of
        today's multi-faceted customer. From payment solutions to product distribution,
        we give our customers access to every major area of e-commerce and provide
        a
        one-stop portal into the world of internet-driven business
        solutions.
 
 Our
        membership-based website Onlinesupplier.com provides our customers access
        to an
        array of products and services designed to create or enhance their shopping
        experience and to promote our customer’s own ecommerce solution. Our services
        and capabilities include:
 
 -
        Automated Webstore Generation and Customization;
 -
        Merchant Processing Capabilities;
 -
        Domain
        Name Registration;
 -
        Online
        Training Modules (includes online auction training); and
 -
        Web
        hosting.
 
 As
        of
        December 31, 2005, we stored approximately 450 unique products in our warehouse
        for distribution to our customers. As of February 28, 2006, we curtailed
        operations at our warehouse and decided to focus exclusively on providing
        products to our members by drop shipping the products from third party suppliers
        when they are ordered. We provide access to over 30,000 products from our
        third
        party suppliers. Our website wholesales products in many categories,
        including:
 
 -
        Consumer Electronics;
 -
        Audio/Video Equipment;
 -
        Software;
 -
        Home/Small Office Electronic Equipment;
 -
        Automobile Accessories;
 -
        Travel
        Accessories; and
 -
        Networking Equipment.




-
          3
          -




We
        generate revenues by:
 
 -
        Charging our members a monthly fee for the tools and services needed to create
        and run a successful Internet auction business.





- Offering
      our customers access to coaching services provided through a third party
      arrangement with 20-20 Advisors for a monthly fee. We began to offer this
      service in February 2005.





-
      Offering our customers access to discounted value-added services such as:
      prescription drug plans, roadside assistance, tax and legal services, real
      estate listing services, and discounted entertainment packages for a monthly
      fee. These services are currently offered to our customers through third party
      arrangements with suppliers such as My Computer Club, Inc., West, Inc. and
      InQ.





-
      Product
      sales via our website.





-
      Providing our customer information to third parties who compensate us with
      a fee
      for each customer contact information acquired, or by sharing the revenues
      generated from contacting our customer. Revenues generated by the sale of our
      customer information have been related to offers made to customers in a wide
      variety of industries. Revenues generated from sharing arrangements have
      primarily been related to the sale of extended business coaching products and
      services.





- Providing
      businesses with graphic design and printing services, data merge, mailing and
      finishing.





- Offering
      clients fulfillment services including: assembly; pick and pack; mailing;
      and warehousing and inventory management services.





-
      Design
      and implementation of cutting-edge technology for secure electronic payment
      modules, advanced content search tools, and secure data hosting.




STRATEGIC
      RELATIONSHIPS AND ALLIANCES




Our
        wholly-owned subsidiary, Consumer Loyalty Group, Inc., executed a cost plus
        agreement on October 11, 2006 with Datascension, Inc., an unrelated party,
        that
        enables Consumer Loyalty Group to operate a state-of-the-art call center.
        The
        call center became operational on November 27, 2006, and is utilized to support
        Consumer Loyalty Group customer service and sales efforts at dramatically
        lowered costs in comparison to their U.S. based counterparts. An additional
        benefit to the cost savings is the highly developed and well-educated Costa
        Rican labor pool that Consumer Loyalty Group has access to in support of
        their
        campaigns. The combination of cost savings and elevated labor resources allows
        Consumer Loyalty Group to launch higher end sales and support initiatives
        that
        we anticipate will generate increased revenue and profits.





CUSTOMERS





As
      of
      December 31, 2006, we had approximately 120,000 current members for our core
      membership product, Onlinesupplier.com, although we have serviced about 600,000
      paid members since our inception. Additionally, many of these customers
      participated in one or more add-on membership programs resulting in
      approximately another 25,000 memberships for these products current as of
      December 31, 2006. Customers for these products consist primarily of individuals
      desiring assistance with organizing their own internet-based
      business.





We
      also
      sell products and services to businesses that require lead generation and/or
      customer acquisition services, graphic design, printing, fulfillment or secure
      data hosting. We provided products and/or services to about 50 business clients
      in these areas.





No
      single
      customer comprised more than 10% of revenues during 2006.




-
          4
          -




SALES
        AND
        MARKETING
 
 We
          primarily identify, sell and market to our membership customers through
          the
          internet. We generate traffic to our website using click though campaigns,
          online search engines, and opt-in e-mail marketing to offer customers the
          opportunity to become members. At December 31, 2006, we also employed 8
          telephone representatives and used third-party partners to sell add-on
          products
          to existing customers. In addition, we employed 50 customer service
          representatives and use the subcontract services of our Costa Rica call
          center
          to address any issues that may arise while a customer is utilizing a product
          or
          service.





We
      market
      our lead generation and customer acquisition services, graphic design, printing,
      fulfillment, and secure data hosting through our respective subsidiary websites.
      In addition, we advertise and market in industry magazines, news publications,
      online search engines, and network marketing.





We
      primarily market our products throughout the United States.





SUPPLIERS





Although
      we continue to increase our direct purchasing from manufacturers, we source
      a
      significant amount of inventory from relatively few vendors. However, no vendor
      accounts for 10% or more of our inventory purchases. We do not have long-term
      contracts or arrangements with most of our vendors to guarantee the availability
      of merchandise, particular payment terms, or the extension of credit limits.
      If
      our current vendors were to stop selling merchandise to us on acceptable terms,
      we may not be able to acquire merchandise from other suppliers in a timely
      and
      efficient manner and on acceptable terms.





COMPETITION





The
      environment for our products and services is intensely competitive. Our current
      and potential competitors include:





-
            physical-world
                retailers, catalog retailers, publishers, distributors and manufacturers
                of the same products that we sell, many of which possess significant
                brand
                awareness, sales volume, and customer bases, and some of which sell
                products or services through the Internet, mail order, or direct
                marketing, such as: Wal-Mart Stores, Target Corporation, Kmart
                Corporation, Costco Wholesale Corporation, Sam's Club, BJ's Wholesale
                Club, Inc., and Best Buy, Inc.;




-
              other
                  online eCommerce sites such as: Amazon, Sam's Club Online, Wal-Mart.com
                  USA, LLC;


-
            a
                number of indirect competitors, including media companies, Web portals,
                and Web search engines that are involved in online commerce, either
                directly or in collaboration with other retailers, such as Yahoo!,
                AOL and
                Google; and





-
            companies
                that provide eCommerce services, including website developers and
                third-party fulfillment and customer-service providers, such as Yahoo!,
                Go-Daddy, MSN, Network Solutions, Register.com, and
                Buydomains.




We
        believe that the principal competitive factors in our market segments include
        selection, price, availability, convenience, information, discovery, brand
        recognition, personalized services, accessibility, customer service,
        reliability, speed of fulfillment, ease of use, and ability to adapt to changing
        conditions, as well as our customers' overall trust in the entire experience
        in
        transactions with us or facilitated by us on behalf of third-party sellers.
        For
        services we offer to businesses and individual sellers, additional competitive
        factors include the quality of our services and tools, and the speed of
        performance for our services. As the market segments in which we operate
        continue to grow, other companies may also enter into business combinations
        or
        alliances that strengthen their competitive positions.
 
 Our
        overall market is intensely competitive, and there are a number of other
        competitors that are much larger than us and have significantly greater
        resources at their disposal. We believe that our product offerings are
        competitive with others in the marketplace; however, we do not have a dominant
        market share.


-
            5
            -


INTELLECTUAL
        PROPERTY
 
 We
        have
        received trademarks for Onlinesupplier.com (date of use: August 18, 2003),
        Tomorrow's Innovations, Today (date of use: August 18, 2003), and Auction
        Liquidator (date of use: September 1, 2004), and Stop, Drop, n' Cash (date
        of
        use: September 1, 2004). We have also filed a trademark for MyOnlineChat.,
        (date
        of use: February 14, 2007) which is still pending registration. We regard
        our
        trademarks, copyrights, domain names, trade dress, trade secrets, proprietary
        technologies, and similar intellectual property as important to our success,
        and
        we rely on trademark and copyright law, trade-secret protection, and
        confidentiality and/or license agreements with our employees, customers,
        partners, and others to protect our proprietary rights. We have licensed
        in the
        past, and expect that we may license in the future,
        certain proprietary rights, technologies or copyrighted materials, from third
        parties and we rely on those third parties to defend their proprietary rights,
        copyrights and technologies.





We
      also
      may not be able to acquire or maintain appropriate domain names in all countries
      in which we intend to do business. Furthermore, regulations governing domain
      names may not protect our trademarks and similar proprietary rights. We may
      be
      unable to prevent third parties from acquiring domain names that are similar
      to,
      infringe upon, or diminish the value of our trademarks and other proprietary
      rights.





Policing
      unauthorized use of our proprietary rights is inherently difficult, and we
      may
      not be able to determine the existence or extent of any unauthorized use. The
      protection of our intellectual property may require the expenditure of
      significant financial and managerial resources. Moreover, we cannot be certain
      that the steps we take to protect our intellectual property will adequately
      protect our rights or that others will not independently develop or otherwise
      acquire equivalent or superior technology or other intellectual property
      rights.





TECHNOLOGY





Using
      a
      combination of our own technologies and commercially available, licensed
      technologies, we have implemented numerous features that simplify and improve
      the customer shopping experience, enable third parties to generate customized
      eCommerce solutions on our platform, and facilitate our fulfillment and customer
      service operations. Our current strategy is to focus our development efforts
      on
      creating and enhancing the specialized, proprietary software that is unique
      to
      our business, and to license or acquire commercially-developed technology for
      other applications where available and appropriate.





OPERATIONS


We
        sublease approximately 20,000 square feet of office space in Goleta and Santa
        Barbara, California, consisting of three separate locations. These locations
        house our production, sales, customer services and administrative
        activities.
 
 Our
        wholly-owned subsidiary, Consumer Loyalty Group, Inc., executed a cost plus
        agreement with Datascension, Inc. that enables Consumer Loyalty Group to
        operate
        a state-of-the-art call center. The call center is utilized to support Consumer
        Loyalty Group customer service and sales efforts at dramatically lowered
        costs
        in comparison to their U.S.-based counterparts. An additional benefit to
        the
        cost savings is the highly developed and well educated Costa Rican labor
        pool
        that Consumer Loyalty Group has access to in support of their campaigns.
        The
        combination of cost savings and elevated labor resources allows Consumer
        Loyalty
        Group to launch higher end sales and support initiatives that generate increased
        revenue and profits.


We
      have
      no significant need for warehouse space since we decided to focus exclusively
      on
      providing products to our members by drop shipping the products from third
      party
      suppliers when they are ordered. Accordingly, we curtailed our warehouse
      operations as of February 28, 2006. The change enables us to provide a wider
      selection of products while eliminating the need to invest in inventory or
      incur
      carrying costs. We provide access to over 30,000 products from our third party
      suppliers. When we receive an order from our customer, we place a purchase
      order
      on our supplier to drop ship the products ordered to the end
      customer.





Some
      of
      the products we sell may expose us to product liability claims relating to
      personal injury, death, or property damage caused by these products, and may
      require us to take actions such as product recalls. Certain businesses and
      individuals also sell products using our eCommerce platform that may increase
      our exposure to product liability claims, such as if these sellers do not have
      sufficient resources to protect themselves from these claims. Although we
      maintain liability insurance, we cannot be certain that our coverage will be
      adequate for liabilities actually incurred or that insurance will continue
      to be
      available to us on economically reasonable terms, or at all. In addition, some
      of our vendor agreements with our suppliers and third party sellers do not
      indemnify us from product liability.


-
            6
            -
  EMPLOYEES
 
 As
        of
        December 31, 2006, we employ 96 employees, including customer service
        representatives, telephone sales representatives, production personnel, and
        administrative and management personnel. We have never experienced
        work stoppages, and we are not a party to any collective bargaining agreement.
        We anticipate that our business will continue to grow and that we will be
        required to hire additional employees to service our customer
        demand.





In
      addition to our direct employees, we have access to labor resources through
      our
      cost plus agreement with Datascension. The Costa Rican call center operated
      under this agreement employs 61 employees including sales agents, customer
      service representatives, and supervisory personnel.




REGULATORY
      RESTRICTIONS ON OUR BUSINESS





We
      are
      subject to general business regulations and laws, as well as regulations and
      laws specifically governing the Internet, telecommunication sales and eCommerce.
      These existing and future laws and regulations may impede the growth of the
      Internet or other online services. These regulations and laws may cover
      taxation, user privacy, data protection, pricing, content, copyrights,
      distribution, electronic contracts and other communications, consumer
      protection, the provision of online payment services, broadband residential
      Internet access, and the characteristics and quality of products and
      services.




It
        is not
        clear how existing laws governing issues such as property ownership, sales
        and
        other taxes, libel, and personal privacy apply to the Internet, eCommerce
        and
        our Company. Unfavorable resolution of these issues may harm our business.
        Specifically, our inbound telephone center is regulated by the Federal Trade
        Commission and Federal Communication Commission. Under the Federal Trade
        Commission's Telemarketing Sales Rule and the Federal Communication Commission's
        Telephone Consumer Protection Act, we are subject to the Do Not Call Registry,
        limited in the use of pre-acquired account information, required to get certain
        authorizations and consents with regard to billing, required to make certain
        disclosure statements, prohibited from making misrepresentations, limited
        to
        when we may call consumers, required to transmit Caller ID information,
        restricted in the trafficking of data, required to keep certain records,
        prohibited from abandoning certain outbound calls, and are subject to fines
        for
        unlawful activity. Furthermore, some of our merchant, advertising and marketing
        efforts are regulated by the same organizations and statutes, such as the
        CAN-SPAM Act limiting the transmission of unsolicited commercial electronic
        mail
        via the Internet, California Online Privacy Protection Act of 2003 requiring
        owners of commercial websites or online services to post a privacy policy,
        the
        Fair and Accurate Credit Transaction Act of 2003 ensuring that everyone is
        treated fairly when applying for credit and protecting consumers against
        identity theft, California Financial Information Privacy Act prohibiting
        the
        sharing of nonpublic personal information of a consumer with nonaffiliated
        third
        parties without the explicit prior consent of the consumer, California Civil
        Code Section 1798.82 requiring businesses to notify customers if an unauthorized
        person may have obtained access to their personal information and California
        Civil Code Section 1798.83 requiring disclosure of sharing for marketing
        purposes.





While
      we
      believe that we maintain all requisite licenses and permits and are in
      compliance with all applicable federal, state, local and foreign regulations,
      we
      may not be able to maintain all requisite licenses and permits. The failure
      to
      satisfy those and other regulatory requirements could have a material adverse
      effect on our business' financial condition and results of
      operations.




-
          7
          -




**ITEM
        2. DESCRIPTION OF PROPERTY.**
 
 The
        address of our principal executive office is 30 S. LaPatera Lane, Suite 8,
        Goleta, CA 93117.
 
 We
        sublease approximately 20,000 square feet of office space in Goleta and Santa
        Barbara, California consisting of three separate locations. These locations
        house our production, sales, customer services and administrative activities.
        The combined base rent for these locations is $24,470 per month plus expenses,
        estimated at $0.22 per square foot, plus a pro rata share of utilities payable
        monthly in advance on the first day of each calendar month of the term of
        the
        sublease. The subleases expire in April and November of 2009.
 
 We
        operate, through a cost plus agreement, a Costa Rican call center which
        currently houses 61 sales agents, customer service representatives, and
        supervisory personnel. We do not own or lease this property but have a two-year
        obligation to reimburse lease related costs and own all furniture and equipment
        housed within the location.




In
      February 2006, we terminated our lease for 10,500 square feet of warehouse
      and
      office space in Signal Hill, California. This space was no longer required
      to
      support our growth because we ceased operations of our subsidiaries, Auction
      Liquidator, Inc. and Discount OnlineWarehouse.





We
      believe our existing leased facilities are adequate for our current
      requirements. We evaluate our facility requirements as business needs change.
      Should additional space be required to support growth we would be able to
      acquire property as needed through lease or purchase since no shortages of
      available properties exist.





**ITEM
      3. LEGAL PROCEDINGS.**





We
      believe that there are no claims or litigation pending against the company
      or
      our officers and directors in their roles as such, the outcome of which could
      have a material adverse effect on our financial condition or operating
      results.








**ITEM
      4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
      HOLDERS.**





At
      the
      Annual Meeting of Stockholders held on October 10, 2006, stockholders elected
      three directors to serve until the 2007 annual meeting and until their
      successors are duly elected and qualified. The votes for each director are
      as
      follows:




For
            
            WithheldMichael Hill
            
            25,870,590
            
            131,455Charlie Gugliuzza
            
            25,870,590
            
            131,455David Foucar
            
            25,870,590
            
            131,455




-
          8
          -





**PART
      II**





**ITEM
      5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
      MATTERS.**





Bid
      and
      ask quotations for our common shares are routinely submitted by registered
      broker dealers who are members of the National Association of Securities Dealers
      on the NASD Over-the-Counter Electronic Bulletin Board. These quotations reflect
      inner-dealer prices, without retail mark-up, mark-down or commission and may
      not
      represent actual transactions. The high and low bid information for our shares
      for each quarter for the last two years, so far as information is reported,
      through the quarter ended December 31, 2006, as reported by the Bloomberg
      Financial Network, are as follows:


High
              
              Low2005 FISCAL YEAR *First Quarter
              
              $1.93
              
              $1.29Second Quarter
              
              $1.78
              
              $1.35Third Quarter
              
              $1.27
              
              $0.75Fourth Quarter
              
              $0.90
              
              $0.162006 FISCAL YEARFirst Quarter
              
              $0.40
              
              $0.16Second Quarter
              
              $0.61
              
              $0.21Third Quarter
              
              $1.44
              
              $0.43Fourth Quarter
              
              $1.80
              
              $0.97*Price adjusted for 1:3
                split on
                February 18, 2005





SHAREHOLDERS


As
      of
      December 31, 2006, there were approximately 132 holders of record of our common
      stock.





DIVIDEND
      POLICY





We
      have
      never declared a cash dividend on our common stock and our Board of Directors
      does not anticipate that we will pay cash dividends in the foreseeable future.
      Any future determination to pay cash dividends will be at the discretion of
      our
      board of directors and will depend upon our financial condition, operating
      results, capital requirements, restrictions contained in our agreements and
      other factors which our Board of Directors deems relevant.





SECURITIES
      AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS





The
      following table summarizes securities authorized for issuance under equity
      compensation plans:





**Equity
                Compensation Plan Information**Plan
                Category
            
            Number
                of shares of securities to be issued upon exercise of outstanding
                options,
                warrants and rights
            
            Weighted-average
                exercise price of outstanding options, warrants and rights
            
            Number
                of securities remaining available for future issuance under equity
                compensation plans (excluding securities reflected in column
                (a))(a)
            
            (b)
            
            (c
                )Equity
                compensation plans approved by security holders
            
            0
            
            0
            
            0Equity
                compensation plans not approved by security holders
            
            7,733,634
            
            $
                0.10
            
            1,225,639Total
            
            7,733,634
            
            $
                0.10
            
            1,225,639




RECENT
      SALES OF UNREGISTERED SECURITIES





We
        did
        not sell any securities in the quarter ended December 31, 2006.





PURCHASES
      OF EQUITY SECURITIES BY THE SMALL BUSINESS ISSUER AND AFFILIATED
      PURCHASERS





The
      table
      below details our repurchases of common stock under the stock buyback program
      we
      announced on November 28, 2006. The table shows the number of shares purchased
      as of December 31, 2006. The program is in effect through December 31, 2007.
      Under the program we may buy back up to $2,000,000 of our common stock.




**SMALL
                BUSINESS ISSUER'S PURCHASES OF EQUITY
                SECURITIES**Period
            
            (a)
                Total Numbers of Shares Purchased
            
            (b)
                Average Price Paid per Share
            
            (c)
                Total Number of Shares Purchased as Part of Publicly Announced Plans
                or
                Programs
            
            (d)
                Maximum Number (or Approximate Dollar Value) of Shares (or Units)
                that May
                Yet Be Purchased Under the Plans or ProgramsOctober
                1, 2006 through October 31, 2006
            
            0
            
            0
            
            0
            
            0November
                1, 2006 through November 30, 2006
            
            0
            
            0
            
            0
            
            0December
                1, 2006 through December 31, 2006
            
            226,500
            
            $1.50
            
            226,500
            
            $1,660,726Total
            
            226,500
            
            $1.50
            
            226,500
            
            $1,660,726




-
          9
          -




**ITEM
      6. MANAGEMENT'S DISCUSSION AND ANALYSIS AND RESULTS OF
      OPERATION.**





You
      should read this section together with our consolidated financial statements
      and
      related notes thereto included elsewhere in this report.





CAUTIONARY
      STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS





This
      report contains forward-looking statements that involve risks and uncertainties.
      We generally use words such as "believe," "may," "could," "will," "intend,"
      "expect," "anticipate," "plan," and similar expressions to identify
      forward-looking statements, including statements regarding our expansion plans.
      You should not place undue reliance on these forward-looking statements. Our
      actual results could differ materially from those anticipated in the
      forward-looking statements for many reasons, including the risks described
      in
      our "Risk Factor" section and elsewhere in this report. Although we believe
      the
      expectations reflected in the forward-looking statements are reasonable, they
      relate only to events as of the date on which the statements are made, and
      our
      future results, levels of activity, performance or achievements may not meet
      these expectations. We do not intend to update any of the forward-looking
      statements after the date of this document to conform these statements to actual
      results or to changes in our expectations, except as required by
      law.





OVERVIEW




Commerce
        Planet is a publicly traded media company which trades on the Over-the-Counter
        Bulletin Board of the National Quotation Service under the ticker symbol
        "CPNE."
        We offer media products, lead generation services and marketing tools to
        our
        client partners. We offer a turnkey media solution through our network of
        wholly-owned subsidiaries, Consumer Loyalty Group, Inc., Legacy Media, Inc.,
        OS
        Imaging, Inc., and Interaccurate, Inc.
 
 Each
        subsidiary specializes in a specific niche of the media industry. Their combined
        services are designed to address all the needs of their client partners
        including: membership loyalty offers, consumer marketing data management,
        affiliate list management, printing and fulfillment services and Web/Data
        hosting and software development.




-
          10
          -




CRITICAL ACCOUNTING POLICIES


We
      have
      identified the policies below as critical to our business operations and the
      understanding of our results of operations. The impact and any associated risks
      related to these policies on our business operations are discussed throughout
      this section where such policies affect our reported and expected financial
      results. Our preparation of our Consolidated Financial Statements requires
      us to
      make estimates and assumptions that affect the reported amounts of assets and
      liabilities, disclosure of contingent assets and liabilities at the date of
      our
      financial statements, and the reported amounts of revenue and expenses during
      the reporting period. There can be no assurance that actual results will not
      differ from those estimates.





Our
      accounting policies that are the most important to the portrayal of our
      financial condition and results, and which require the highest degree of
      management judgment relate to revenue recognition, the provision for
      uncollectible accounts receivable, property and equipment, advertising and
      issuance of shares for service.





We
      estimate the likelihood of customer payment based principally on a customer's
      credit history and our general credit experience. To the extent our estimates
      differ materially from actual results, the timing and amount of revenues
      recognized or bad debt expense recorded may be materially misstated during
      a
      reporting period.





Property
      and equipment are stated at cost. Depreciation is provided using the
      straight-line method over the estimated useful lives of the related assets,
      e.g.
      computers (5 years), software (3 years), office equipment and furniture (3-7
      years).





Leasehold
      improvements are amortized over the remaining lease term at the date of
      installation. Expenditures for maintenance and repairs are charged to expense
      as
      incurred.





We
      expense the media costs of advertising the first time the advertising takes
      place, except for direct-response advertising that is contracted with our
      advertising partners on a cost per customer acquired basis, which is capitalized
      and amortized over its expected period of future benefits. Direct-response
      advertising consists primarily of on line advertising that includes unique
      reference codes and URL tracking that are used for purchasing our products
      and
      services. The capitalized costs of the advertising are amortized over the
      three-month period following the receipt of a trial order for our products
      and
      services.





At
      December 31, 2006, and December 31, 2005, capitalized direct-response
      advertising costs of $1,962,466 and $159,182, respectively, were included in
      "Prepaid Expenses" in the accompanying Balance Sheets. Advertising expense
      was
      $6,055,104 in 2006. Advertising expense was $3,098,204 in 2005.





We
      account for the issuance of equity instruments to acquire goods and services
      based on the fair value of the goods and services or the fair value of the
      equity instrument at the time of issuance, whichever is more reliably
      measurable.





We
      recognize income when the products are shipped, and when the service is
      provided. We apply the provisions of the SEC Staff Accounting Bulletin No.
      104,
      "Revenue Recognition in Financial Statements" which provides guidance on the
      recognition, presentation and disclosure of revenue in financial statements.
      Our
      revenues earned from membership setup fees and monthly charges are recorded
      when
      the credit card transaction is processed. Current terms on membership agreements
      stipulate that the customer pays a nonrefundable
      fee ranging from $1.95 to $9.95 to setup an account. The customer then has
      a
      fourteen day period to review our offerings. If the customer does not cancel
      the
      service within the fourteen day window, a charge of $29.95 to $59.95 is billed
      to the customer's credit card on a monthly basis. The membership terms are
      agreed to under a negative option and we will continue to bill the customer
      on a
      monthly basis until they cancel their account. Bulletin No. 104 outlines the
      basic criteria that must be met to recognize revenue and provides guidance
      for
      the disclosure of revenue recognition policies. Our revenue recognition policy
      for sale of products is in compliance with Bulletin No. 104. Revenue from the
      sale of products is recognized when a formal arrangement exists, the price
      is
      fixed, or determinable, the delivery is completed and collectibility is
      reasonably assured. Generally, we extend credit to our customers and do not
      require collateral. We perform ongoing credit evaluations of our customers
      and
      historic credit losses have been within management's expectations.




-
          11
          -




YEAR ENDED DECEMBER 31, 2006, AS COMPARED TO YEAR ENDED
      DECEMBER 31, 2005




Segment
      Results




During
        2006, we structured the company into several distinct business entities.
        Each
        entity is separately incorporated and a wholly- owned subsidiary of Commerce
        Planet. Each subsidiary, Consumer Loyalty Group, Inc., Legacy Media, Inc.,
        OS
        Imaging, Inc., and Interaccurate, Inc., specializes in a specific niche of
        the
        media industry. Their combined services are designed to address all the needs
        of
        their client partners including: membership loyalty offers; consumer marketing
        data management; affiliate list management; printing and fulfillment services;
        and Web/Data hosting and software development. We provide management and
        administrative services, as well as accounting, finance, and information
        technology support to the subsidiary companies.





The
      structure enables the subsidiaries to support each other as well as continue
      to
      develop third party revenues and profits. The subsidiary companies have operated
      since the third quarter of 2006 and generated combined segment revenues of
      $34,800,283 with the single operating company existing in the first half of
      the
      year included.




**Commerce
                  Planet**
              
              **Consumer
                  Loyalty Group**
              
              **Legacy
                  Media**
              
              **OS
                  Imaging**
              
              **Inter-accurate**
              
              **Combined
                  Segments****Revenue**
              
              $
              13,161,238
              
              $
              14,645,907
              
              $
              5,317,437
              
              $
              1,480,226
              
              $
              195,475
              
              $
              34,800,283**Cost
                  of Goods Sold**
              
              
              1,669,915
              
              
              1,900,520
              
              
              3,769,298
              
              
              1,145,744
              
              
              45,600
              
              
              8,531,077**Gross
                  Profit**
              
              
              11,491,323
              
              
              12,745,387
              
              
              1,548,139
              
              
              334,482
              
              
              149,875
              
              $
              26,269,206**Operating
                  Expense**
              
              
              8,085,069
              
              
              6,204,679
              
              
              1,095,848
              
              
              644,938
              
              
              238,293
              
              
              16,268,827**Other
                  (Income) Expense**
              
              
              1,233,363
              
              
              2,459
              
              
              18,471
              
              
              4,981
              
              
              
              
              
              1,259,274**Income/(Loss)
                  Before Income Taxes**
              
              
              2,172,891
              
              
              6,538,249
              
              
              433,820
              
              
              (315,437
              )
              
              (88,418
              )
              
              8,741,105




Consolidating
      adjustments




**Favorable/(Unfavorable)****Revenue**
              
              
              **COGS**
              
              
              **Expenses/
                  Other**
              
              
              **Net
                  Income****Combined**
              
              $
              34,800,283
              
              
              (8,531,077
              )
              
              (17,528,101
              )
              $
              8,741,105**Intersegment
                  Adjustments**
              
              $
              (7,312,149
              )
              $
              4,155,316
              
              $
              3,156,833
              
              $
              -**Consolidated**
              
              $
              27,488,134
              
              $
              (4,375,761
              )
              $
              (14,371,268
              )
              $
              8,741,105




Revenues




We
        generated net revenues of $27,488,134 for the year ended December 31, 2006,
        as
        compared to $7,340,399 for the year ended December 31, 2005. The increase
        year-over-year resulted in growth of 274.5%.





**Year
                Ended December 31****2006**
            
            
            **2005**
            
            
            **%
                Change****Revenue****Membership
                Revenue**
            
            $
            22,410,394
            
            $
            5,493,609
            
            
            307.9
            %**Upsell
                Revenue**
            
            
            2,598,936
            
            
            415,592
            
            
            525.4
            %**Lead
                Revenue**
            
            
            1,211,526
            
            
            991,058
            
            
            22.2
            %**Fulfillment/Other
                Revenue**
            
            
            1,267,278
            
            
            440,140
            
            
            187.9
            %**Total
                Revenue**
            
            
            27,488,134
            
            
            7,340,399
            
            
            274.5
            %




Membership
        revenues contributed 81.5% to total revenues while increasing by 307.9% over
        2005. At the end of 2006, we had approximately 120,000 current members for
        our
        core membership product, Onlinesupplier, versus about 30,000 current members
        at
        the end of 2005. The increase in membership year-over-year was the primary
        contributor to the growth in revenues for membership generating approximately
        85.0% of the total growth. New product offerings and price increases introduced
        late in the year contributed approximately 7.0% and 8.0%, respectively, to
        the
        total growth in membership revenues.
 
 During
        the last quarter of 2005, we changed our advertising to direct the majority
        of
        our potential customers to our web site to purchase our products and services
        rather than directing customers to contact us via phone at our call center.
        This
        strategy was very successful and resulted in higher new member activations
        in
        the fourth quarter of 2005 than any other previous quarter. Our success with
        this changed strategy has continued into 2006 and combined with robust growth
        in
        the online retail sales industry drove significant growth in
        memberships.
  Upsell
          revenues contributed 9.5% to total revenues while increasing by 525.4%
          over
          2005. We provide access to business partners’ product offerings though our
          website for which they pay fees. The growth in memberships in 2006 increased
          revenues for existing offers dramatically and spurred the addition of new
          affers
          as well.
  Lead
        revenues contributed 4.4% of revenues while increasing by 22.2% over 2005.
        Our
        increasing membership base and website traffic increases the quantity of
        leads
        available resulting in higher revenues.
 
 Printing,
        fulfillment and other revenues contributed 4.6% to total revenue while
        increasing by 187.9% over 2005. The increases in revenue in this category
        were
        driven by the addition of printing and fulfillment services through the
        acquisition of One Source Imaging.
 
 Costs
        Of Goods Sold
 
 We
        incurred costs of sales of $4,375,361 for the year ended December 31, 2006,
        as
        compared to $1,744,866 for the year ended December 31, 2005. Costs of sales
        increased by 150.7% over 2005 which was a much lower rate than the growth
        of
        revenues. On a percentage basis, cost of goods sold decreased from 23.7%
        to
        15.9% of revenues. The overall mix of membership revenues to total revenues
        is
        improved at 81.5% in 2006 compared to 74.8% in 2005. Additionally, our increase
        in membership volume has provided economies of scale related to our webstore
        costs driving costs per unit down while our fulfillment costs have improved
        on a
        per unit basis with the acquisition of One Source Imaging. These improvements
        are slightly offset by an increase in transactional fees for merchant card
        transactions.
 
 Operating
        Expenses
 
 We
        incurred costs of $13,915,202 for the year ended December 31, 2006 as compared
        to $10,230,994 for the year ended December 31, 2005. While operating expenses
        increased by 36.0% over the prior year these expenses were spread over much
        higher revenue resulting in a reduction in operating expenses as a percentage
        of
        revenue to 50.6% in 2006 from 139.3% in 2005.


**Year
                Ended December 31****2006**
            
            **2005**
            
            **%
                Change****Expense****Salaries**
            
            $
            3,120,927
            
            $
            3,179,427
            
            
            -1.8
            %**Stock
                Compensation**
            
            
            619,363
            
            
            305,687
            
            
            102.6
            %**Advertising**
            
            
            6,055,104
            
            
            3,098,204
            
            
            95.4
            %**Other
                Expenses**
            
            
            4,119,808
            
            
            3,647,676
            
            
            12.9
            %**Total
                Operating Expense**
            
            $
            13,915,202
            
            $
            10,230,994
            
            
            36.0
            %




Expenses
        for salaries fell slightly by 1.8% during the year ended December 31, 2006
        as
        compared to the prior year. During 2006, we increased the depth of our
        management team, and our administrative staff. We entered an agreement with
        Datascension to operate a call center in Costa Rica which enables us to perform
        customer service activities more efficiently. Additionally, in conjunction
        with
        our move to direct customers to our web site we reduced our sales force.




Expenses
      for stock compensation increased by 102.6% during 2006 as compared to the prior
      year. The increase in this non cash expense is due to the issue of stock to
      management staff as well as the implementation of our stock option plan for
      salaried staff.





Advertising
      expense increased by 95.4% from the year earlier period. In conjunction with
      our
      move to direct customers to our web site our internet and e-mail advertising
      expenses increased resulting in higher gross costs of advertising but a lower
      cost as a percentage of revenue at 22.0% compared to 42.2% last year.





Other
      expenses grew 12.9% as compared to the prior year period. We increased our
      expenses for outside services including legal and professional fees to support
      our business growth, as well as travel, facilities, and depreciation expense.
      These increases were slightly offset by a reduction in investor relation
      expenses.





Other
      Income And Expense





Other
      income and expense totaled $456,066 compared to $1,630,464 from the prior year
      period. Included in these costs were $1,373,668 in interest expense compared
      to
      $1,630,464 last year. Interest expense includes expenses related to beneficial
      conversion and the amortization of the discounts on notes issued. During the
      year we retired all of our debt allowing us to recover $837,191 of the
      beneficial conversion expense taken in 2004 and 2005 which was included in
      other
      income. Additionally, we received $80,411 in interest and other income further
      offsetting the interest expense for the year.





Net
      Income




We
        had
        net income of $8,741,105 for the year ended December 31, 2006 compared to
        a net
        loss of $6,265,924 for the year ended December 31, 2005. Non-cash charges
        to
        income comprised $1,267,652 and $2,836,132 for the years ended December 31,
        2006
        and 2005, are summarized as follows:





**Year
                Ended December 31****2006**
            
            **2005****Stock
                issued for services**
            
            $
            128,103
            
            $
            563,647**Depreciation
                and amortization**
            
            
            208,938
            
            
            173,609**Allowance
                  for doubtful accounts**
            
            
            96,675
            
            
            50,000**Issuance
                of warrants**
            
            
            619,363
            
            
            341,238**Amortization
                of debt interest**
            
            
            1,014,353
            
            
            630,865**Debt
                conversion feature expense**
            
            
            (837,191
            )
            
            754,238**Debt
                inducement expense**
            
            
            37,411
            
            
            322,535$
            1,267,652
            
            $
            2,836,132




-
          12
          -




Basic
        And Diluted Loss Per Share
  Our
          basic
          income per share for the year ended December 31, 2006 was $0.20 as compared
          to
          ($0.17) for the year ended December 31, 2005. Basic net earnings (loss)
          per
          common share is computed by dividing net earnings (loss) applicable to
          common
          shareholders by the weighted-average number of common shares outstanding
          during
          the period. Diluted net earnings per common share was $0.18 and is determined
          using the weighted-average number of common shares outstanding during the
          period, adjusted for the dilutive effect of common stock equivalents, consisting
          of shares that might be issued upon exercise of common stock warrants and
          conversion of convertible debt. In periods where losses are reported, the
          weighted-average number of common shares outstanding excludes common stock
          equivalents, because their inclusion would be anti-dilutive. At December
          31,
          2005, the total amount of outstanding convertible debentures was $4,203,698
          which might be converted into 35,030,817 shares of our common stock, based
          on
          the closing price of our common shares on December 31, 2005. At December
          31,
          2005, there were 4,148,750 warrants outstanding that were eligible for
          conversion into shares of our common stock. All convertible debentures
          have been
          retired as of December 31, 2006 and we had 9,996,722 warrants outstanding
          that
          were eligible for conversion into shares of our common
          stock.




Liquidity
      And Capital Resources




As
        of
        December 31, 2006, our Total Current Assets were $9,475,493 and our Total
        Current Liabilities were $3,546,413. Our Stockholders' Equity at December
        31,
        2006 was $7,254,026.




During
      2006, all of our promissory notes and convertible debt were repaid as more
      fully
      described in the financing section below. At December 31, 2006, we financed
      an
      insurance policy with a balance of $69,681 which constituted our entire debt
      at
      year end.





We
      believe that cash generated from operations will be sufficient to fund
      operations and capital requirements as presently planned over the next twelve
      months. We anticipate putting a line of credit in place to assist with short
      term cash needs should we identify acquisition opportunities.





Seasonality





Our
      business is not susceptible to significant seasonal factors.





Financings





On
      January 5, 2004, we issued convertible debentures of $250,000 to Dutchess
      Private Equities Fund LP. The debentures convert on January 15, 2009. The holder
      of the debentures can convert the face value of the debenture plus accrued
      interest into shares of our common stock at the lesser of (i) 75% of the lowest
      closing bid price during the 15 full trading days prior to the conversion date
      or (ii) 100% of the average of the five lowest closing bid prices for the 30
      trading days immediately following the first reverse split in stock price.
      The
      convertible debentures shall pay 6% cumulative interest, payable in cash or
      stock at our option, at the time of conversion. At December 31, 2006 the
      debenture was completely repaid.





On
      January 19, 2004, we issued convertible debentures of $305,000 to eFund Capital
      Partners, LLC. The debentures convert on January 19, 2009. The holder of the
      debentures can convert the face value of the debenture plus accrued interest
      into shares of our common stock at the lesser of (i) 75% of the lowest closing
      bid price during the 15 full trading days prior to the conversion date or (ii)
      100% of the average of the five lowest closing bid prices for the 30 trading
      days immediately following the first reverse split in stock price. The
      convertible debentures shall pay 6% cumulative interest, payable in cash or
      stock at our option, at the time of conversion. At December 31, 2006, the
      debenture was completely repaid.





On
      January 25, 2004, we issued convertible debentures of $50,000 to Dutchess
      Private Equities Fund LP. The debentures convert on January 25, 2009. The holder
      of the debentures can convert the face value of the debenture plus accrued
      interest into shares of our common stock at the lesser of (i) 75% of the lowest
      closing bid price during the 15 full trading days prior to the conversion date
      or (ii) 100% of the average of the five lowest closing bid prices for the 30
      trading days immediately following the first reverse split in stock price.
      The
      convertible debentures shall pay 6% cumulative interest, payable in cash or
      stock at our option, at the time of conversion. At December 31, 2006, the
      debenture was completely repaid.





On
      January 25, 2004, we issued convertible debentures of $50,000 to eFund Capital
      Partners, LLC. The debentures convert on January 25, 2009. The holder of the
      debentures can convert the face value of the debenture plus accrued interest
      into shares of our common stock at the lesser of (i) 75% of the lowest closing
      bid price during the 15 full trading days prior to the conversion date or (ii)
      100% of the average of the five lowest closing bid prices for the 30 trading
      days immediately following the first reverse split in stock price. The
      convertible debentures shall pay 6% cumulative interest, payable in cash or
      stock at our option, at the time of conversion. At December 31, 2006, the
      debenture was completely repaid.


-
          13
          -




On
      March
      3, 2004, we issued convertible debentures of $28,000 to Preston Capital
      Partners, LLC. The debentures convert on March 3, 2009. The holder of the
      debentures can convert the face value of the debenture plus accrued interest
      into shares of our common stock at the lesser of (i) 75% of the lowest closing
      bid price during the 15 full trading days prior to the conversion date or (ii)
      100% of the average of the five lowest closing bid prices for the 30 trading
      days immediately following the first reverse split in stock price. The
      convertible debentures shall pay 6% cumulative interest, payable in cash or
      stock at our option, at the time of conversion. At December 31, 2006, the
      debenture was completely repaid.





On
      April
      1, 2004, we issued convertible debentures of $90,000 to Dutchess Private
      Equities Fund, II. The debentures convert on April 1, 2009. The holder of the
      debentures can convert the face value of the debenture plus accrued interest
      into shares of our common stock at the lesser of (i) 75% of the lowest closing
      bid price during the 15 full trading days prior to the conversion date or (ii)
      100% of the average of the five lowest closing bid prices for the 30 trading
      days immediately following the first reverse split in stock price. The
      convertible debentures shall pay 8% cumulative interest, payable in cash or
      stock at our option, at the time of conversion. The debenture was issued at
      a
      discount of $15,000. On July 9, 2004, we issued a warrant to Dutchess Private
      Equities Fund, II, to purchase 225,000 of our common shares at an exercise
      price
      at $1.42 per share. At December 31, 2006, the debenture was completely
      repaid.





On
      April
      1, 2004, we issued convertible debentures of $90,000 to eFund Capital Partners,
      LLC. The debentures convert on April 1, 2009. The holder of the debentures
      can
      convert the face value of the debenture plus accrued interest into shares of
      our
      common stock at the lesser of (i) 75% of the lowest closing bid price during
      the
      15 full trading days prior to the conversion date or (ii) 100% of the average
      of
      the five lowest closing bid prices for the 30 trading days immediately following
      the first reverse split in stock price. The convertible debentures shall pay
      8%
      cumulative interest, payable in cash or stock at our option, at the time of
      conversion. The debenture was issued at a discount of $15,000. On July 9, 2004,
      we issued a warrant to eFund Capital Partners, LLC, to purchase 225,000 of
      our
      common shares at an exercise price at $1.42 per share. At December 31, 2006,
      the
      debenture was completely repaid.





On
      May 5,
      2004, we issued convertible debentures of $90,000 to Dutchess Private Equities
      Fund, II. The debentures convert on May 5, 2009. The holder of the debentures
      can convert the face value of the debenture plus accrued interest into shares
      of
      our common stock at the lesser of (i) 75% of the lowest closing bid price during
      the 15 full trading days prior to the conversion date or (ii) 100% of the
      average of the five lowest closing bid prices for the 30 trading days
      immediately following the first reverse split in stock price. The convertible
      debentures shall pay 8% cumulative interest, payable in cash or stock at our
      option, at the time of conversion. The debenture was issued at a discount of
      $15,000. On July 9, 2004, we issued a warrant to Dutchess Private Equities
      Fund,
      II, to purchase 225,000 of our common shares at an exercise price at $1.42
      per
      share. At December 31, 2006, the debenture was completely repaid.





On
      May 5,
      2004, we issued convertible debentures of $90,000 to eFund Capital Partners,
      LLC. The debentures convert on May 5, 2009. The holder of the debentures can
      convert the face value of the debenture plus accrued interest into shares of
      our
      common stock at the lesser of (i) 75% of the lowest closing bid price during
      the
      15 full trading days prior to the conversion date or (ii) 100% of the average
      of
      the five lowest closing bid prices for the 30 trading days immediately following
      the first reverse split in stock price. The convertible debentures shall pay
      8%
      cumulative interest, payable in cash or stock at our option, at the time of
      conversion. The debenture was issued at a discount of $15,000. On July 9, 2004,
      we issued a warrant to eFund Capital Partners, LLC, to purchase 225,000 of
      our
      common shares at an exercise price at $1.42 per share. At December 31, 2006,
      the
      debenture was completely repaid.





On
      July
      9, 2004, we issued convertible debentures of $180,000 to Dutchess Private
      Equities Fund, II. The debentures convert on July 9, 2009. The holder of the
      debentures can convert the face value of the debenture plus accrued interest
      into shares of our common stock at the lesser of (i) 75% of the lowest closing
      bid price during the 15 full trading days prior to the conversion date or (ii)
      100% of the average of the five lowest closing bid prices for the 30 trading
      days immediately following the first reverse split in stock price. The
      convertible debentures shall pay 8% cumulative interest, payable in cash or
      stock at our option, at the time of conversion. The debenture was issued at
      a
      discount of $30,000. On July 9, 2004, we issued a warrant to Dutchess Private
      Equities Fund, II, to purchase 450,000 of our common shares at an exercise
      price
      at $1.17 per share. At December 31, 2006, the debenture was completely
      repaid.


-
          14
          -




On
      August
      15, 2004, we issued convertible debentures of $144,000 to Dutchess Private
      Equities Fund, II. The debentures convert on August 15, 2009. The holder of
      the
      debentures can convert the face value of the debenture plus accrued interest
      into shares of our common stock at the lesser of (i) 75% of the lowest closing
      bid price during the 15 full trading days prior to the conversion date or (ii)
      100% of the average of the five lowest closing bid prices for the 30 trading
      days immediately following the first reverse split in stock price. The
      convertible debentures shall pay 8% cumulative interest, payable in cash or
      stock at our option, at the time of conversion. This debenture was issued at
      a
      discount of $24,000. On August 18, 2004, we issued a warrant to Dutchess Private
      Equities Fund, II, to purchase 360,000 of our common shares at an exercise
      price
      at $1.03 per share. At December 31, 2006, the debenture was completely
      repaid.





On
      August
      15, 2004, we issued convertible debentures of $60,000 to eFund Small Cap Fund,
      LP. The debentures convert on August 15, 2009. The holder of the debentures
      can
      convert the face value of the debenture plus accrued interest into shares of
      our
      common stock at the lesser of (i) 75% of the lowest closing bid price during
      the
      15 full trading days prior to the conversion date or (ii) 100% of the average
      of
      the five lowest closing bid prices for the 30 trading days immediately following
      the first reverse split in stock price. The convertible debentures shall pay
      8%
      cumulative interest, payable in cash or stock at our option, at the time of
      conversion. This debenture was issued at a discount of $10,000. On August 18,
      2004, we issued a warrant to eFund Capital Partners, to purchase 150,000 of
      our
      common shares at an exercise price at $1.03 per share. At December 31, 2006,
      the
      debenture was completely repaid.





On
      September 25, 2004, we issued convertible debentures of $222,000 to Dutchess
      Private Equities Fund. The debentures convert on September 25, 2009. The holder
      of the debentures can convert the face value of the debenture plus accrued
      interest into shares of our common stock at the lesser of (i) 75% of the lowest
      closing bid price during the 15 full trading days prior to the conversion date
      or (ii) 100% of the average of the five lowest closing bid prices for the 30
      trading days immediately following the first reverse split in stock price.
      The
      convertible debentures shall pay 8% cumulative interest, payable in cash or
      stock at our option, at the time of conversion. This debenture was issued at
      a
      discount of $37,000. On September 25, 2004, we issued a warrant to Dutchess
      Private Equities Fund, to purchase 540,000 of our common shares at an exercise
      price at $1.25 per share. At December 31, 2006, the debenture was completely
      repaid.





On
      September 25, 2004, we issued convertible debentures of $60,000 to eFund Small
      Cap Fund, LP. The debentures convert on September 24, 2009. The holder of the
      debentures can convert the face value of the debenture plus accrued interest
      into shares of our common stock at the lesser of (i) 75% of the lowest closing
      bid price during the 15 full trading days prior to the conversion date or (ii)
      100% of the average of the five lowest closing bid prices for the 30 trading
      days immediately following the first reverse split in stock price. The
      convertible debentures shall pay 8% cumulative interest, payable in cash or
      stock at our option, at the time of conversion. This debenture was issued at
      a
      discount of $10,000. On September 25, 2004, we issued a warrant to eFund Capital
      Partners, to purchase 150,000 of our common shares at an exercise price at
      $1.25
      per share. At December 31, 2006, the debenture was completely
      repaid.





On
      October 25, 2004, we issued convertible debentures of $60,000 to Dutchess
      Private Equities Fund, II, LP. The debentures convert on October 25, 2009.
      The
      holder of the debentures can convert the face value of the debenture plus
      accrued interest into shares of our common stock at the lesser of (i) 75% of
      the
      lowest closing bid price during the 15 full trading days prior to the conversion
      date or (ii) 100% of the average of the five lowest closing bid prices for
      the
      30 trading days immediately following the first reverse split in stock price.
      The convertible debentures shall pay 8% cumulative interest, payable in cash
      or
      stock at our option, at the time of conversion. This debenture was issued at
      a
      discount of $10,000. On October 25, 2004, we issued a warrant to Dutchess
      Private Equities Fund, II, to purchase 150,000 of our common shares at an
      exercise price at $1.53 per share. At December 31, 2006, the debenture was
      completely repaid.





On
      November 11, 2004, we issued convertible debentures of $162,000 to Dutchess
      Private Equities Fund, II, LP. The debentures convert on November 11, 2009.
      The
      holder of the debentures can convert the face value of the debenture plus
      accrued interest into shares of our common stock at the lesser of (i) 75% of
      the
      lowest closing bid price during the 15 full trading days prior to the conversion
      date or (ii) 100% of the average of the five lowest closing bid prices for
      the
      30 trading days immediately following the first reverse split in stock price.
      The convertible debentures shall pay 8% cumulative interest, payable in cash
      or
      stock at our option, at the time of conversion. This debenture was issued at
      a
      discount of $27,000. On November 11, 2004, we issued a warrant to Dutchess
      Private Equities Fund, II, to purchase 480,000 of our common shares at an
      exercise price at $1.25 per share. At December 31, 2006, the debenture was
      completely repaid.


-
          15
          -




On
        December 28, 2004, we issued convertible debentures of $240,000 to Dutchess
        Private Equities Fund, II, LP. The debentures convert on December 28, 2009.
        The
        holder of the debentures can convert the face value of the debenture plus
        accrued interest into shares of our common stock at the lesser of (i) 75%
        of the
        lowest closing bid price during the 15 full trading days prior to the conversion
        date or (ii) 100% of the average of the five lowest closing bid prices for
        the
        30 trading days immediately following the first reverse split in stock price.
        The convertible debentures shall pay 8% cumulative interest, payable in cash
        or
        stock at our option, at the time of conversion. This debenture was issued
        at a
        discount of $40,000. On December 28, 2004, we issued a warrant to Dutchess
        Private Equities Fund, II, to purchase 720,000 of our common shares at an
        exercise price at $1.25 per share. At December 31, 2006, the debenture was
        completely repaid.
 
 On
        February 11, 2005, we issued a Note to Dutchess Private Equities Fund, II,
        in
        the amount of $360,000, at a discount of $60,000. The Note had a 0% interest
        rate and was repaid during 2005.
 
 On
        April
        18, 2005, we issued a Note to Dutchess Private Equities Fund, II, in the
        amount
        of $132,000, at a discount of $22.000. The Note had a 0% interest rate and
        was
        repaid on during 2005.
 
 On
        April
        18, 2005, we issued a Note to eFund Capital Partners, in the amount of $132,000,
        at a discount of $22,000. The Note had a 0% interest rate and was repaid
        during
        2005.
 
 On
        May
        20, 2005, we issued a Note to Dutchess Private Equities Fund, II, in the
        amount
        of $402,750, at a discount of $52,750. The Note had a 0% interest rate and
        $112,500 was repaid prior to December 18, 2005. The remaining amount was
        exchanged into a four year, convertible debenture bearing interest of 10%
        effective December 18, 2005. At December 31, 2006, the Note was completely
        repaid.
 
 On
        June
        2, 2005, we issued a Note to Dutchess Private Equities Fund, II, in the amount
        of 540,000, at a discount of $80,000. The Note had a 0% interest rate and
        was
        exchanged into a four year, convertible debenture bearing interest of 10%
        effective December 18, 2005. At December 31, 2006, the Note was completely
        repaid.
 
 On
        July
        22, 2005, we issued a Note to Dutchess Private Equities Fund, II, in the
        amount
        of $258,000, at a discount of $33,000. The Note had a 0% interest rate and
        was
        exchanged into a four year, convertible debenture bearing interest of 10%
        effective December 18, 2005. At December 31, 2006 the Note was completely
        repaid.
 
 On
        August
        4, 2005, we issued a Note to Dutchess Private Equities Fund, II, in the amount
        of $162,000, at a discount of $17,000. The Note had a 0% interest rate and
        was
        exchanged into a four year, convertible debenture bearing interest of 10%
        effective December 18, 2005. At December 31, 2006, the Note was completely
        repaid.
 
 On
        August
        17, 2005, we issued a Note to Dutchess Private Equities Fund, II, in the
        amount
        of $247,200, at a discount of $41,200. The Note had a 0% interest rate and
        was
        exchanged into a four year, convertible debenture bearing interest of 10%
        effective December 18, 2005. At December 31, 2006, the Note was completely
        repaid.
 
 On
        August
        18, 2005, we issued Notes to eFund, in the amount of $221,000, at a total
        discount of $37,000. The notes had a 0% interest rate and $18,211 was repaid
        prior to December 18, 2005. The remaining outstanding amount was exchanged
        into
        a four year, convertible debenture bearing interest of 10% effective December
        18, 2005. At December 31, 2006, the Notes were completely repaid.
 
 On
        August
        18, 2005, we issued a Note to a Barrett Evans, a member of our Board of
        Directors, in the amount of $84,000, at a total discount of $14,000. The
        notes
        had a 0% interest rate and were exchanged into a four year, convertible
        debenture bearing interest of 10% effective December 18, 2005. At December
        31,
        2006, the Note was completely repaid.
 
 On
        September 16, 2005, we issued a Note to Dutchess Private Equities Fund, L.P.,
        in
        the amount of $192,000, at a discount of $32,000. The Note has a 0% interest
        rate and $162,752 was repaid during 2005, and the remaining $29,248 was
        outstanding at December 31, 2005. This amount was due and payable on March
        15,
        2006, and was repaid on March 1, 2006. At December 31, 2006, the Note was
        completely repaid.


-
          16
          -




On
        September 30, 2005, we issued a Note to Dutchess Private Equities Fund, LP,
        in
        the amount of $276,000, at a discount of $46,000. The Note has a 0% interest
        rate and is due and payable on March 30, 2006. At December 31, 2006, the
        Note
        was completely repaid.
 
 On
        October 11, 2005, we issued a Note to Dutchess Private Equities Fund, LP,
        in the
        amount of $30,000, at a discount of $5,000. The Note has a 0% interest rate
        and
        is due and payable on April 11, 2006. At December 31, 2006, the Note was
        completely repaid.
 
 Effective
        November 1, 2005, we agreed to issue a convertible debenture to eFund Capital
        Partners, in the amount of $180,000, at a discount of $176,200. The debenture
        has a 10% interest rate and is due and payable November 1, 2009. The debentures
        are convertible into shares of our common stock at a price equal to the lesser
        of; (i) seventy-five percent of the average of the closing bid price of the
        stock for the five days prior to conversion or (ii) the average of the closing
        bid price of the stock on the five days immediately preceding the date of
        the of
        debenture agreement. At December 31, 2006, the debenture was completely
        repaid.
 
 Effective
        December 18, 2005, we entered into a Convertible Debenture Exchange Agreement
        with majority shareholders to exchange the unpaid balance of promissory notes
        issued in 2005 worth $1,784,239 into 10%, 4-year term, Convertible Debentures.
        The debentures are convertible at the lesser of (i) 75% of the average of
        the
        lowest closing bid price during fifteen immediately preceding the conversion
        date or (ii) 100% of the average of the closing bid price of the stock for
        the
        twenty days immediately preceding the closing date of the debenture agreement.
        At December 31, 2006, the debenture was completely repaid.





Commitments





Minimum
      future rental payments under non-cancelable operating leases as of December
      31,
      2005 for each of the next five years and in the aggregate are as
      follows:




2007
            
            $
            285,8072008
            
            $
            293,2292009
            
            $
            120,976TOTAL
            
            $
            700,012




We
        entered a two year cost plus agreement on October 11, 2006, with Datascension,
        Inc. that enables our subsidiary, Consumer Loyalty Group, to operate a state
        of
        the art call center. The call center became operational on November 27, 2006
        and
        is utilized to support Consumer Loyalty Group customer service and sales
        efforts
        at dramatically lowered costs in comparison to their U.S. based counterparts.
        An
        additional benefit to the cost savings is the highly developed and well educated
        Costa Rican labor pool that Consumer Loyalty Group has access to in support
        of
        their campaigns. The combination of cost savings and elevated labor resources
        allows Consumer Loyalty Group to launch higher end sales and support initiatives
        that generate increased revenue and profits.





ADDITIONAL
      FACTORS THAT MAY AFFECT FUTURE RESULTS





The
      following risk factors and other information included in this Annual Report
      should be carefully considered. The risks and uncertainties described below
      are
      not the only ones we face. Additional risks and uncertainties not presently
      known to us or that we currently deem immaterial also may impair our business
      operations. If any of the following risks occur, our business, financial
      condition, operating results, and cash flows could be materially adversely
      affected.




-
          17
          -




RISKS ABOUT OUR BUSINESS




WE
      FACE
      INTENSE COMPETITION, WHICH MAY REDUCE OUR SALES, OPERATING PROFITS, OR
      BOTH.





The
      market segments in which we compete are rapidly evolving and intensely
      competitive. We have many competitors in different industries, including both
      the retail and eCommerce services industries.





Many
      of
      our current and potential competitors have longer operating histories, larger
      customer bases, greater brand recognition, and significantly greater financial,
      marketing, and other resources than we have. They may be able to secure
      merchandise from vendors on more favorable terms and may be able to adopt more
      aggressive pricing policies. Competitors in both the retail and eCommerce
      service industries also may be able to devote more resources to technology
      development and marketing than we do.





Competition
      in the eCommerce channel may intensify. Other companies in the retail and
      eCommerce service industries may enter into business combinations or alliances
      that strengthen their competitive positions. As various internet market segments
      obtain large, loyal customer bases, participants in those segments may expand
      into the market segments in which we operate. In addition, new and expanded
      Web
      technologies may further intensify the competitive nature of online retail.
      The
      nature of the internet as an electronic marketplace facilitates competitive
      entry and comparison shopping and renders it inherently more competitive than
      conventional retailing formats. This increased competition may reduce our sales,
      operating profits, or both.




WE
      DEPEND
      ON OUR RELATIONSHIPS WITH THIRD PARTIES, THE LOSS OF WHICH MAY RESULT IN LOSS
      OF
      CUSTOMERS.





We
      depend
      on our merchant and banking relationships, as well as strategic relationships
      with third parties, who provide payment processing to all our customers. Failure
      of these financial institutions and third parties to continue to provide
      services in a satisfactory way to our customers could result in our loss of
      the
      business of the merchants to whom we sell products and services. If these
      financial institutions and third parties do not continue to provide services
      to
      our customers, we may not be able to find other third party service providers.
      In that instance, our customers may terminate their agreements with us and
      move
      their business to our competitors, which could adversely affect on our revenues
      and earnings.





IF
      WE
      CANNOT PASS ALONG INCREASED FEES FROM VISA AND MASTERCARD TO OUR CUSTOMERS,
      WE
      WILL HAVE TO ABSORB THE INCREASES WHICH WOULD INCREASE OUR OPERATING COSTS
      AND
      REDUCE OUR PROFIT MARGIN.





From
      time
      to time, VISA and MasterCard increase the fees that they charge processors.
      We
      may attempt to pass these increases along to our merchant customers, but this
      might result in the loss of those customers to our competitors who do not pass
      along the increases. Our revenues from merchant account processing are dependant
      upon our continued merchant relationships which are highly sensitive and can
      be
      canceled if customer charge-backs escalate and generate concern that the company
      has held back sufficient funds in reserve accounts to cover these charge-backs.
      Cancellation by our merchant providers would most likely result in the loss
      of
      new customers and lead to a reduction in our revenues.




We
        depend
        on credit card processing for a majority of our membership programs, to include
        but not be limited to Visa, Mastercard, American Express, and Discover.
        Significant changes to the merchant operating regulations, merchant rules
        and
        guidelines, card acceptance methods and or card authorization methods could
        significantly impact our revenues. Additionally our membership programs are
        accepted under a negative option billing term, change in regulation of negative
        option billing could significantly impact our revenue.





WE
      RELY
      ON CO-MARKETING ALLIANCES TO GENERATE ADDITIONAL REVENUE FROM OUR EXISTING
      CUSTOMERS. IF WE CANNOT MAINTAIN THESE ALLIANCES OUR REVENUES MAY DECLINE.





We
      have
      co-marketing arrangements with strategic partners in which we agree to market
      their services to our existing customers. For the year ended December 31, 2006,
      these "upsell" services accounted for approximately 9.4% of our total current
      revenue. If these partners either fail to provide adequate services to our
      customers or decline to renew our agreements, our gross revenue could decline
      which would affect our overall financial stability.




-
          18
          -




WE
        MAY
        EXPERIENCE BREAKDOWNS IN OUR HOSTING SERVICES, INFRASTRUCTURE OR PAYMENT
        PROCESSING SYSTEMS, WHICH MAY EXPOSE US TO LIABILITIES AND CAUSE CUSTOMERS
        TO
        ABANDON OUR PRODUCTS AND SERVICES.
 
 We
        may
        experience interruption in hosting service due to upgrades being implemented
        into hosting software. In addition interruption in service, transmission
        downtime, and or outages may be cause at the wholesale
        communication distribution level (i.e. Verizon). This may expose us to
        liability, which may cause customers to abandon our service.





We
      would
      be unable to deliver our payment processing services or hosting services if
      our
      system infrastructures break down or are otherwise interrupted. Events that
      could cause system interruptions are:





-
      Acts of
      God, such as fire or earthquakes,


-
      power
      loss,


-
      terrorist attacks,


-
      telecommunications failure,


-
      unauthorized entry by hackers, or


-
      other
      events.





Although
      we regularly back up data from operations and take other measures to protect
      against loss of data, there is still some risk that our services may breakdown
      or we will lose data. Despite the security measures we maintain, our
      infrastructure may be vulnerable to computer viruses, hackers, rogue employees
      or other sources of disruption. Any problem of this nature could result in
      significant liability to customers or financial institutions and also may deter
      potential customers from using our services. We attempt to limit this sort
      of
      liability through back-up systems, contractual provisions, insurance, and other
      security measures. However, these contractual limitations on liability may
      not
      be enforceable, and our insurance coverage may not be adequate to cover all
      liabilities we might sustain. Also, a breach of our e-commerce security measures
      could reduce demand for our services. The e-commerce industry is intensely
      focused on the need for Internet security, particularly with respect to the
      transmission and storage of confidential personal and financial data. Any
      compromise or elimination of our security could erode customer confidence in
      our
      systems and could result in lower demand for our services or possible
      litigation.





IF
      WE ARE
      UNSUCCESSFUL IN MAKING, INTEGRATING, AND MAINTAINING COMMERCIAL AGREEMENTS,
      STRATEGIC ALLIANCES, AND OTHER BUSINESS RELATIONSHIPS, OUR BUSINESS COULD
      SUFFER.





Our
      business plan contemplates that we will enter into commercial agreements,
      strategic alliances, and other business relationships with third parties. We
      have entered into agreements to provide eCommerce services to other businesses
      and we plan to enter into similar agreements in the future. Under these
      agreements, we may perform services such as: providing our technology services
      such as search, browse, and personalization; permitting other businesses and
      individuals to offer products or services through our websites; and powering
      third-party websites, either with or without providing accompanying fulfillment
      services. These arrangements are complex and require substantial personnel
      and
      resource commitments by us, which may constrain the number of agreements we
      are
      able to enter into and may affect our ability to integrate and deliver services
      under the relevant agreements. If we fail to implement, maintain, and
      successfully develop the various components of these commercial relationships,
      which may include fulfillment, customer service, inventory management, tax
      collection, payment processing, licensing of third party software, hardware,
      and
      content, and engaging third parties to perform hosting and other services,
      these
      initiatives may not be viable and cause the company to be in default of
      agreement or planned compensation. The amount of compensation we receive under
      certain of these agreements is dependent on the volume of sales that the other
      company makes. Therefore, if the other business's website or product or services
      offering is not successful, we may not receive all of the compensation we are
      otherwise due under the agreement, which may cause substantial loss of revenue,
      or may not be able to maintain the agreement. Moreover, we may not be able
      to
      succeed in our plans to enter into additional commercial relationships and
      strategic alliances on favorable terms, which will not enable us to stay
      competitive within the industry.





As
      our
      commercial agreements expire or otherwise terminate, we may be unable to renew
      or replace these agreements on comparable terms, or at all. In the past, we
      amended several of our commercial agreements to reduce future cash proceeds
      to
      be received by us, shorten the term of our commercial agreements, or both.
      Some
      of our agreements involve high margin services, such as marketing and
      promotional agreements, and as these agreements expire they may be replaced,
      if
      at all, by agreements involving lower margin services. In addition, several
      past
      commercial agreements were with companies that experienced business failures
      and
      were unable to meet their obligations to us. We may in the future enter into
      further amendments of these agreements or encounter other parties that have
      difficulty meeting their contractual obligations to us, which could adversely
      affect our operating results.


-
          19
          -


IF
      WE
      LOSE KEY SENIOR MANAGEMENT PERSONNEL OUR BUSINESS COULD BE NEGATIVELY
      AFFECTED.




We
        depend
        on the continued services and performance of our senior management and other
        key
        personnel, particularly Michael Hill, our Chief Executive Officer and
        Director ,
        Charlie
        Gugliuzza, our President and Director, Ethan Brooks, our Chief Technology
        Officer, David Foucar, our Chief Financial Officer and Director, Aaron Gravitz,
        our Chief Operations Officer. We do
        not have "key person" life insurance policies. The loss of any of our executive
        officers or other key employees could harm our business.





IF
      OUR
      WEBSITES ARE NOT CONTINUALLY AVAILABLE TO OUR CUSTOMERS AND THE PUBLIC OR THERE
      IS LACK OF INTEGRATION AND REDUNDANCY IN OUR SYSTEMS, OUR SALES MAY
      DECREASE.





Customer
      access to our websites directly affects the volume of goods we sell and the
      services we offer and thus affects our net sales. We experience occasional
      system interruptions that make our websites unavailable or prevent us from
      efficiently fulfilling orders or providing services to third parties, which
      may
      reduce our net sales and the attractiveness of our products and services. If
      we
      are unable to continually add additional software and hardware and upgrade
      in an
      effective manner our systems and network infrastructure, it could cause system
      interruptions that adversely affect our operating results.





Our
      websites could be damaged or interrupted by fire, flood, power loss,
      telecommunications failure, acts of war or terrorism, acts of God, computer
      viruses, physical or electronic break-ins, and similar events or disruptions.
      Any of these events could result in website interruption and delays that could
      prevent us from accepting and fulfilling customer orders.





If
      our
      websites are not continually available to our customers and the public or there
      is a lack of integration and redundancy in our system, our sales may decrease.
      We may experience interruption in hosting service due to upgrades, communication
      downtime, and or outages at the wholesale communication distribution level
      (i.e.
      Verizon). This may expose us to liability, which may cause customers to abandon
      our service. Some of our customers are acquired via Internet advertising and
      interruption in service may extend a decrease in gross sales.





Should
      these problems occur, it would make our product offerings less attractive to
      our
      customers and our service offerings less attractive to third parties. While
      we
      do have backup systems for certain aspects of our operations, our systems are
      not fully redundant and our disaster recovery planning may not be sufficient
      for
      all eventualities. In addition, we may have inadequate insurance coverage or
      insurance limits to compensate us for losses from a major interruption. If
      any
      of this were to occur, it could damage our reputation and be expensive to
      remedy.





WE
      COULD
      BE LIABLE IF WE FAIL TO MITIGATE BREACHES OF SECURITY ON OUR WEBSITE AND
      FRAUDULENT ACTIVITIES OF USERS OF OUR PAYMENTS PROGRAM, WHICH COULD INCREASE
      OUR
      EXPENSES AND LOWER OUR OPERATING RESULTS.





A
      fundamental requirement for eCommerce is the secure transmission of confidential
      information over public networks. Although we have developed systems and
      processes that are designed to protect consumer information and prevent
      fraudulent credit card transactions and other security breaches, failure to
      mitigate fraud or breaches may adversely affect our operating results. The
      law
      relating to the liability of providers of online payment services is currently
      unsettled. We guarantee payments made through our payments program available
      to
      sellers on Marketplace and certain other programs up to certain limits for
      buyers, and we may be unable to prevent users from fraudulently collecting
      payments when goods may not be shipped to a buyer. As our payments program
      grows, our liability risk will increase. Any costs we incur as a result of
      liability because of our payments program's guarantee or otherwise could harm
      our business. In addition, the functionality of our payments program depends
      on
      certain third-party vendors delivering services. If these vendors are unable
      or
      unwilling to provide services, our payments program and our businesses that
      use
      it may not be viable.





We
      could
      be liable if we fail to mitigate breaches of security on our website and
      fraudulent activities of users of our payments program, which could increase
      our
      expenses and lower our operating results. If an individual or group were to
      take
      unauthorized control of our hosting servers to generate "spam" or any other
      example of fraudulent activity, this could cause situation-specific Internet
      service providers "ISP(s)" to block communications with our Internet service
      provider not allowing for communications with customers being serviced by the
      "ISP(s)".


-
          20
          -




IF
      GOVERNMENT REGULATION OF THE INTERNET AND ECOMMERCE RESULTS IN UNFAVORABLE
      CHANGES, OUR BUSINESS COULD BE HARMED.





We
      are
      subject to general business regulations and laws, as well as regulations and
      laws specifically governing the Internet and eCommerce. Existing and future
      laws
      and regulations may impede the growth of the Internet or other online services.
      These regulations and laws may cover taxation, user privacy, data protection,
      pricing, content, copyrights, distribution, electronic contracts and other
      communications, consumer protection, the provision of online payment services,
      broadband residential Internet access, and the characteristics and quality
      of
      products and services. It is not clear how existing laws governing issues such
      as property ownership, sales and other taxes, libel, and personal privacy apply
      to the Internet and eCommerce. Unfavorable resolution of these issues may harm
      our business. On November 11, 2004 the Federal Communications Commission ruled
      that providers of Internet-based phone call services fall under jurisdiction
      of
      the federal government and cannot be regulated by states.





WE
      MAY BE
      SUBJECT TO LIABILITY FOR PAST SALES, THEREFORE DECREASING OUR FUTURE
      SALES





In
      accordance with current industry practice, we do not collect sales taxes or
      other taxes with respect to shipments of most of our goods into states other
      than California. Our fulfillment center and customer service center networks,
      and any future expansion of those networks, along with other aspects of our
      evolving business, may result in additional sales and other tax obligations.
      One
      or more states or foreign countries may seek to impose sales or other tax
      collection obligations on out-of-jurisdiction companies that engage in
      eCommerce. A successful assertion by one or more states or foreign countries
      that we should collect sales or other taxes on the sale of merchandise or
      services could result in substantial tax liabilities for past sales, decrease
      our ability to compete with traditional retailers, and otherwise harm our
      business.





Currently,
      decisions of the U.S. Supreme Court restrict the imposition of obligations
      to
      collect state and local sales and use taxes with respect to sales made over
      the
      Internet. However, a number of states, as well as the U.S. Congress, have been
      considering various initiatives that could limit or supersede the Supreme
      Court's position regarding sales and use taxes on Internet sales. If any of
      these initiatives addressed the Supreme Court's constitutional concerns and
      resulted in a reversal of its current position, we could be required to collect
      sales and use taxes in states other than California. The imposition by state
      and
      local governments of various taxes upon Internet commerce could create
      administrative burdens for us and could increase our costs and decrease our
      future sales.





IF
      WE DO
      NOT ADAPT QUICKLY ENOUGH TO CHANGING CUSTOMER REQUIREMENTS AND INDUSTRY
      STANDARDS, OUR EXISTING WEBSITES MAY BECOME OBSOLETE.





Technology
      in the eCommerce industry changes rapidly. We may not be able to adapt quickly
      enough to changing customer requirements and preferences and industry standards.
      Competitors often introduce new products and services with new technologies.
      These changes and the emergence of new industry standards and practices could
      render our existing websites and proprietary technology
      obsolete.


-
          21
          -




**ITEM
      7. FINANCIAL STATEMENTS.**




COMMERCE
      PLANET, INC.




TABLE OF CONTENTS
              PAGEINDEPENDENT AUDITORS'
                REPORT
              F-1BALANCE
                SHEETS
              F-2STATEMENTS
                OF
                OPERATIONS
              F-3STATEMENTS OF
                CASH
                FLOWS
              F-4STATEMENTS OF STOCKHOLDERS'
                EQUITY (DEFICIT)
              F-5NOTES TO FINANCIAL
                STATEMENTS
              F-7
                  - F-23




-
          22
          -


JASPERS
      + HALL, PC


CERTIFIED
      PUBLIC ACCOUNTANTS


9175
      Kenyon Avenue, Suite 100


Denver,
      CO 80237


303-796-0099





Report
      of
      Independent Registered Public Accounting Firm





To
      the
      Board of Directors


Commerce
      Planet, Inc.





We
      have
      audited the accompanying consolidated balance sheet of Commerce Planet, Inc.
      as
      of December 31, 2006, and the related consolidated income statements, and the
      consolidated statements of cash flows and changes in stockholders' equity
      (deficit) for the year then ended. 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 audit.





We
      conducted our audit in accordance with auditing 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
      audit provides a reasonable basis for our opinion.





In
      our
      opinion, the consolidated financial statements referred to above present fairly,
      in all material respects, the consolidated financial position of Commerce
      Planet, Inc. at December 31, 2006, and the results of its operations and its
      cash flows for the year then ended in conformity with accounting principles
      generally accepted in the United States.





/s/
      Jaspers + Hall, PC


Jaspers
      +
      Hall PC


February
      28, 2007




F-1






**COMMERCE
                PLANET, INC.****CONSOLIDATED
                BALANCE SHEETS****AS
                OF DECEMBER 31, 2006 AND DECEMBER 31, 2005****Year
                Ended December 31****2006**
            
            
            **2005****ASSETS****Current
                Assets****Cash**
            
            $
            3,659,316
            
            $
            253,856**Accounts
                Receivable, net of allowances**
            
            
            1,567,526
            
            
            251,419**Other
                Receivables**
            
            
            1,901,470
            
            
            76,906**Prepaid
                Expenses**
            
            
            2,347,181
            
            
            278,343**Inventory**
            
            
            -
            
            
            2,590**Total
                Current Assets**
            
            
            9,475,493
            
            
            863,114**Fixed
                Assets****Equipment**
            
            
            792,564
            
            
            578,493**Furniture
                & Fixtures**
            
            
            101,091
            
            
            75,627**Computers
                & Software**
            
            
            789,628
            
            
            240,677**Leasehold
                Improvements**
            
            
            121,168
            
            
            103,124**Total
                Fixed Assets**
            
            
            1,804,451
            
            
            997,921**Accumulated
                Depreciation**
            
            
            (498,659
            )
            
            (292,311
            )**Net
                Fixed Assets**
            
            
            1,305,792
            
            
            705,610**Other
                Assets****Deposits**
            
            
            19,154
            
            
            16,392**Total
                Other Assets**
            
            
            19,154
            
            
            16,392**TOTAL
                ASSETS**
            
            $
            10,800,439
            
            $
            1,622,116**LIABILITIES
                & EQUITY****Liabilities****Current
                Liabilities****Accounts
                Payable and Accrued Expenses**
            
            $
            2,459,372
            
            $
            723,364**Notes
                Payable**
            
            
            69,681
            
            
            295,998**Deferred
                Revenue**
            
            
            1,017,360
            
            
            336,001**Total
                Current Liabilities**
            
            
            3,546,413
            
            
            1,355,363**Long
                Term Liabilities****Bank
                Loans**
            
            
            -
            
            
            -**Convertible
                Debentures**
            
            
            -
            
            
            3,084,017**Total
                Long Term Liabilities**
            
            
            -
            
            
            3,084,017**Total
                Liabilities**
            
            
            3,546,413
            
            
            4,476,380**Equity****Preferred
                stock, 100 shares authorized**
              **shares
                at $.001 par value, 15 shares issued**
              **and
                outstanding at December 31, 2006****Common
                stock, 100,000,000 shares authorized**
              **shares
                at $0.001 par value, 47,193,839 shares issued and**
              **outstanding
                at December 31, 2006, 39,094,633 shares**
              **issued
                and outstanding at December 31, 2005**
            
            
            47,420
            
            
            39,096**Additional
                Paid in Capital**
            
            
            9,327,597
            
            
            8,230,224**Deferred
                Compensation**
            
            
            -
            
            
            (71,853
            )**Shares
                to be issued**
            
            
            -
            
            
            1,843**Shares
                to be returned**
            
            
            (227
            )
            
            (1,805
            )**Deferred
                Compensation**
            
            
            -
            
            
            -**Stock
                subscription receivable**
            
            
            -
            
            
            (189,900
            )**Accumulated
                deficit**
            
            
            (2,120,764
            )
            
            (10,861,869
            )**Total
                Equity**
            
            
            7,254,026
            
            
            (2,854,264
            )**TOTAL
                LIABILITIES & EQUITY**
            
            $
            10,800,439
            
            $
            1,622,116





See
      accompanying notes to financial statements




F-2





**COMMERCE
                PLANET, INC.****CONSOLIDATED
                INCOME STATEMENT****FOR
                THE YEARS ENDED DECEMBER 31, 2006 AND 2005****Year
                Ended December 31****2006**
            
            
            **2005****Revenue****Membership
                Revenue**
            
            $
            22,410,394
            
            $
            5,493,609**Upsell
                Revenue**
            
            
            2,598,936
            
            
            415,592**Lead
                Revenue**
            
            
            1,211,526
            
            
            991,058**Fulfillment/Other
                Revenue**
            
            
            1,267,278
            
            
            440,140**Total
                Revenue**
            
            
            27,488,134
            
            
            7,340,399**Cost
                of Goods Sold**
            
            
            4,375,761
            
            
            1,744,865**Gross
                Profit**
            
            
            23,112,373
            
            
            5,595,534**Expense****Salaries**
            
            
            3,120,927
            
            
            3,179,427**Stock
                Compensation**
            
            
            619,363
            
            
            305,687**Advertising**
            
            
            6,055,104
            
            
            3,098,204**Other
                Expenses**
            
            
            4,119,808
            
            
            3,647,676**Total
                Operating Expense**
            
            
            13,915,202
            
            
            10,230,994**Net
                Ordinary Income**
            
            
            9,197,171
            
            
            (4,635,460
            )**Other
                Income/Expense**
            
            
            456,066
            
            
            1,630,464**Income/(Loss)
                before Income taxes**
            
            $
            8,741,105
            
            $
            (6,265,924
            )**Provision
                for Income Taxes**
            
            
            -
            
            
            -**Net
                Income/(Loss)**
            
            
            8,741,105
            
            
            (6,265,924
            )**Basic
                Net Income/(Loss) Per Common Share**
            
            $
            0.20
            
            $
            (0.17
            )**Diluted
                Net Income/(Loss) Per Common Share**
            
            $
            0.17
            
            $
            (0.17
            )**Basic
                Weighted Average****Number
                of Common Shares**
            
            
            44,211,254
            
            
            36,644,281**Diluted
                Weighted Average****Number
                of Common Shares**
            
            
            50,688,288
            
            
            36,644,281





See
      accompanying notes to financial statements




F-3




**COMMERCE
                  PLANET, INC****.****CONSOLIDATED
                  STATEMENT OF CASH FLOWS****FOR
                  THE YEARS ENDED DECEMBER 31, 2006 AND 2005****Year
                  Ended December 31****2006**
              
              
              **2005****CASH
                  FLOWS FROM OPERATING ACTIVITIES:****Net
                  Income/(Loss)**
              
              
              8,741,105
              
              
              (6,265,924
              )**Adjustment
                  to reconcile net loss to net cash****(used
                  in) operating activities:****Stock
                  issued for services**
              
              
              128,103
              
              
              563,647**Write-off
                  of Inventory**
              
              
              2,590**Depreciation
                  and amortization**
              
              
              206,348
              
              
              173,609**Allowance
                  for Doubtful Accounts**
              
              
              96,675
              
              
              50,000**Stock
                  Compensation**
              
              
              619,363
              
              
              341,238**Amortization
                  of debt interest**
              
              
              1,014,353
              
              
              630,865**Debt
                  conversion feature expense**
              
              
              (837,191
              )
              
              754,238**Debt
                  inducement expense**
              
              
              37,411
              
              
              322,535**CHANGES
                  IN OPERATING ASSETS/LIABILITIES****Accounts
                  receivable**
              
              
              (1,317,127
              )
              
              (5,125
              )**Other
                  receivables**
              
              
              (1,853,219
              )
              
              724,865**Inventory**
              
              
              
              
              
              37,206**Other
                  assets**
              
              
              (1,948,750
              )
              
              (388,587
              )**Deposits**
              
              
              (2,763
              )
              
              49,848**Deferred
                  Revenue**
              
              
              681,360
              
              
              265,438**Accounts
                  payable and accruals**
              
              
              1,770,254
              
              
              268,373**NET
                  CASH FLOWS USED BY OPERATING ACTIVITIES**
              
              
              7,338,512
              
              
              (2,477,774
              )**CASH
                  FLOWS FROM INVESTING ACTIVITIES:****Purchase
                  of Fixed Assets**
              
              
              (563,586
              )
              
              (456,399
              )**Acquired
                  Assets**
              
              
              (159,446
              )**NET
                  CASH FLOWS PROVIDED (USED) BY INVESTING
                  ACTIVITIES**
              
              
              (723,032
              )
              
              (456,399
              )**CASH
                  FLOWS FROM FINANCING ACTIVITIES:****Payment
                  for acquisition of Utah Clay Technology**
              
              
              
              
              
              -**Proceeds
                  from line of credit**
              
              
              68,000
              
              
              -**Payments
                  on Notes payable**
              
              
              (292,655
              )
              
              (115,356
              )**Payment
                  on line of credit**
              
              
              (68,000
              )
              
              -**Proceeds
                  from notes payable - related parties**
              
              
              
              
              
              2,786,800**Conversions
                  and refinancings on notes payable - related
                  parties**
              
              
              
              
              
              (1,099,004
              )**Proceeds
                  from notes payable & debentures****Payment
                  on long-term debt**
              
              
              (2,901,595
              )**Payment
                  to reacquire stock**
              
              
              (339,282
              )**Payments
                  on bank borrowings**
              
              
              (54,748
              )**Issuance
                  of Common Stock**
              
              
              378,260
              
              
              1,405,228**NET
                  CASH FLOWS PROVIDED BY FINANCING ACTIVITIES**
              
              
              (3,210,020
              )
              
              2,977,668**NET
                  INCREASE (DECREASE) IN CASH**
              
              
              3,405,460
              
              
              43,495**CASH
                  AT BEGINNING OF PERIOD**
              
              
              253,856
              
              
              210,361**CASH
                  AT END OF PERIOD**
              
              
              3,659,316
              
              
              253,856**SUPPLEMENTAL
                  DISCLOSURE OF CASH FLOWS INFORMATION:****Cash
                  paid for interest**
              
              
              1,318,076
              
              
              92,636**Cash
                  paid for taxes**
              
              
              800
              
              
              800**SUPPLEMENTAL
                  DISCLOSURE OF NON-CASH TRANSACTIONS****Stock
                  issued for services**
              
              
              128,103
              
              
              563,647**Stock
                  Compensation**
              
              
              619,363
              
              
              341,238747,466
              
              
              904,885
 See
        accompanying notes to financial statements


F-4




**Commerce
                Planet****Consolidated
                Condensed Statement of Stockholders' Equity (Deficit) - Common
                Stock****For
                the years ended December 31, 2006 and 2005****Preferred
                Stock**
            **Common
                Stock**
            
            **Additional****Shares**
            
            
            **Par**
            
            
            **Shares**
            
            
            **Par**
            
            
            **Paid
                in**
            
            
            **Shares
                to****Issued**
            
            
            **.001**
            
            
            **Issued**
            
            
            **.001**
            
            
            **Capital**
            
            
            **be
                Issued****BALANCE,
                December 31, 2004**
            
            
            
            
            
            
            
            **$**
            **33,885,117**
            
            **$**
            **33,891**
            
            **$**
            **4,844,384**
            
            **$**
            **1,473****Issuance
                of stock for equity line**
            
            
            
            
            
            
            
            
            1,550,000
            
            
            1,544
            
            
            (1,165
            )**Issuance
                of stock for inducement**
            
            
            
            
            
            
            
            
            808,500
            
            
            810
            
            
            322,135
            
            
            (410
            )**Issuance
                of stock for cash**
            
            
            
            
            
            
            
            
            264,000
            
            
            264
            
            
            
            
            
            (264
            )**Beneficial
                Conversion**
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            754,238**Exercise
                of Puts**
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            1,348,696**Conversion
                on convertible debentures**
            
            
            
            
            
            
            
            
            66,516
            
            
            67
            
            
            56,472**Stock
                Issued for Services**
            
            
            
            
            
            
            
            
            1,100,000
            
            
            1,100
            
            
            436,000
            
            
            (750
            )**Re-issuance
                of stock as registered**
            
            
            
            
            
            
            
            
            1,420,500
            
            
            1,420**Issuance
                of stock warrants**
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            341,238**Reduction
                in stock subscription receivable, pre merger**
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (59,880
            )**Issuance
                of Stock Subscription Agreements**
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            188,106
            
            
            1,794**Net
                Loss for Period****BALANCE,
                December 31, 2005**
            
            
            **-**
            
            
            **-**
            
            
            **39,094,633**
            
            
            **39,096**
            
            
            **8,230,224**
            
            
            **1,843****Beneficial
                Conversion**
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (799,780
            )**Exercise
                of Warrants**
            
            
            
            
            
            
            
            
            587,210
            
            
            587
            
            
            151,416**Conversion
                of convertible debentures**
            
            
            
            
            
            
            
            
            7,348,488
            
            
            7,348
            
            
            1,314,490**Shares
                returned to Company**
            
            
            
            
            
            
            
            
            (1,805,371
            )
            
            (1,805
            )
            
            -**Shares
                repurchased**
            
            
            
            
            
            
            
            
            (226,500
            )
            
            
            
            
            (339,055
            )**Shares
                issued**
            
            
            15
            
            
            
            
            
            78,750
            
            
            78
            
            
            36,280**Purchase
                Interaccurate**
            
            
            
            
            
            
            
            
            42,266
            
            
            42
            
            
            58,709**Issuance
                of stock for services**
            
            
            
            
            
            
            
            
            300,000
            
            
            300
            
            
            55,950**Employee
                stock, options, and warrants**
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            619,363**Payment
                for stock subscription agreements**
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (1,843
            )**Stock
                Subscription agreements**
            
            
            
            
            
            
            
            
            1,774,363
            
            
            1,774**Net
                Income****BALANCE,
                December 31, 2006**
            
            
            **15**
            
            
            **-**
            
            **$**
            **47,193,839**
            
            **$**
            **47,420**
            
            **$**
            **9,327,597**
            
            **$**
            **-**





See
      accompanying notes to financial statements




F-5








**Commerce
                Planet****Consolidated
                Condensed Statement of Stockholders' Equity (Deficit) - Common
                Stock****For
                the years ended December 31, 2006 and 2005****Shares**
              **to
                be returned**
            
            
            **Deferred**Compensation
            
            
            **Stock**
                **Sub**Receivable
            
            
            **Accumulated
                Deficit**
            
            
            **Total** S/E**BALANCE,
                December 31, 2004**
            
            **$**
            **-**
            
            **$**
            **(199,150**
            **)**
            **$**
            **(59,880**
            **)**
            **$**
            **(4,595,945**
            **)**
            **$**
            **24,773****Issuance
                of stock for equity line**
            
            
            (385
            )
            
            
            
            
            
            
            
            
            
            
            **(6**
            **)****Issuance
                of stock for inducement**
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            **322,535****Issuance
                of stock for cash**
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            **-****Beneficial
                Conversion**
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            **754,238****Exercise
                of Puts**
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            **1,348,696****Conversion
                on convertible debentures**
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            **56,539****Stock
                Issued for Services**
            
            
            
            
            
            127,297
            
            
            
            
            
            
            
            
            **563,647****Re-issuance
                of stock as registered**
            
            
            (1,420
            )
            
            
            
            
            
            
            
            
            
            
            **-****Issuance
                of stock warrants**
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            **341,238****Reduction
                in stock subscription receivable, pre merger**
            
            
            
            
            
            
            
            
            59,880
            
            
            
            
            
            **-****Issuance
                of Stock Subscription Agreements**
            
            
            
            
            
            
            
            
            (189,900
            )
            
            
            
            
            **-****Net
                Loss for Period**
            
            
            
            
            
            
            
            
            
            
            
            (6,265,924
            )
            
            **(6,265,924**
            **)****BALANCE,
                December 31, 2005**
            
            
            **(1,805**
            **)**
            
            **(71,853**
            **)**
            
            **(189,900**
            **)**
            
            **(10,861,869**
            **)**
            
            **(2,854,264**
            **)****Beneficial
                Conversion**
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            **(799,780**
            **)****Exercise
                of Warrants**
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            **152,003****Conversion
                of convertible debentures**
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            **1,321,838****Shares
                returned to Company**
            
            
            1,805
            
            
            
            
            
            
            
            
            
            
            
            **-****Shares
                repurchased**
            
            
            (227
            )
            
            
            
            
            
            
            
            
            
            
            **(339,282**
            **)****Shares
                issued**
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            **36,358****Purchase
                Interaccurate**
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            **58,751****Issuance
                of stock for services**
            
            
            
            
            
            71,853
            
            
            
            
            
            
            
            
            **128,103****Employee
                stock, options, and warrants**
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            **619,363****Payment
                for stock subscription agreements**
            
            
            
            
            
            
            
            
            189,900
            
            
            
            
            
            **188,057****Stock
                Subscription agreements**
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            **1,774****Net
                Income**
            
            
            
            
            
            
            
            
            
            
            
            8,741,105
            
            
            **8,741,105****BALANCE,
                December 31, 2006**
            
            **$**
            **(227**
            **)**
            **$**
            **-**
            
            **$**
            **-**
            
            **$**
            **(2,120,764**
            **)**
            **$**
            **7,254,026**








See
      accompanying notes to financial statements




F-6




COMMERCE
      PLANET, Inc.


Notes
      to
      Financial Statements


December
      31, 2006





NOTE
      1 -
      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





Organization





Utah
      Clay
      Technology, Inc. (the "Company"), a Utah corporation, was incorporated on March
      1, 1994. On December 24, 2003, the Company entered into an Agreement and Plan
      of
      Reorganization with NeWave, Inc. a Nevada corporation, pursuant to which the
      Company agreed that NeWave, Inc. would become the wholly-owned subsidiary
      subject to the parties to the Agreement meeting certain conditions. The parties
      to the Agreement satisfied the required conditions to close on January 15,
      2004,
      including transfer of all funds. On January 15, 2004, all outstanding shares
      of
      Utah Clay Technology, Inc. common stock were acquired by NeWave, Inc. The
      purchase price consisted of $150,000 and the assumption of $165,000 in
      convertible debt for 576,968 shares of NeWave, Inc. dba Onlinesupplier.com's
      common stock. Although from a legal perspective, NeWave, Inc. acquired NeWave
      dba Onlinesupplier.com, the transaction is viewed as a recapitalization of
      NeWave dba Onlinesupplier.com accompanied by an issuance of stock by NeWave
      dba
      Onlinesupplier.com for the net assets of NeWave, Inc. This is because NeWave,
      Inc. did not have operations immediately prior to the transaction, and following
      the reorganization, NeWave dba Onlinesupplier.com was the operating company.
      Effective February 11, 2004 the Company changed its name from Utah Clay
      Technology, Inc. to NeWave, Inc.




On
        June
        1, 2006, the Company acquired all of the assets, both fixed and intangible,
        of
        Onesource Imaging, a California corporation. The assets were acquired in
        exchange for our assumption of certain liabilities totaling $52,747. On June
        20,
        2006 the Company established three wholly- owned subsidiaries, OS Imaging,
        Inc.,
        Legacy Media, Inc., and Consumer Loyalty Group, Inc. to support our growth
        and
        develop new customer relationships. Effective June 22, 2006, the Company
        changed
        its name from NeWave, Inc. to Commerce Planet, Inc. On October 3, 2006, the
        Company acquired the assets of Interaccurate, Inc. including software,
        intellectual properties, and a web hosting facility for $176,239 in cash
        42,266
        shares of common stock. On October 11, 2006 the Company’s subsidiary, Consumer
        Loyalty Group, executed an agreement with Datascension, Inc., an unrelated
        party, to establish a Costa Rican call center. The call center began operations
        on November 27, 2006.





Commerce
      Planet, through its wholly-owned subsidiaries, offers a comprehensive line
      of
      products and services at wholesale prices through its online club memberships
      as
      well as online tools and technology to create, manage, and maintain effective
      website solutions for eCommerce. Additionally, the Company provides businesses
      with lead generation and order acquisition services, graphic design, printing
      and fulfillment, as well as secure co-location and data hosting
      services.





Basis
      Of Accounting





The
      accompanying financial statements have been prepared on the accrual basis of
      accounting in accordance with generally accepted accounting
      principles.





Reclassification
      Of Cost Of Sales And Operating Expenses





In
      the
      accompanying condensed statement of operations, all of the Company's operating
      expenses have been classified as cost of sales, salary expense, stock
      compensation, advertising expense, and other operating expense. This basis
      of
      presentation is different than in prior reports, and all prior period amounts
      have been changed to comply with the current period classification.





Cash
      And Cash Equivalents





The
      Company considers all highly liquid debt instruments, purchased with an original
      maturity of three months or less, to be cash equivalents.


F-7




Use
      Of
      Estimates





The
      preparation of financial statements, in conformity with generally accepted
      accounting principles, requires management to make estimates and assumptions
      that affect the reported amounts of assets and liabilities, and disclosure
      of
      contingent assets and liabilities at the date of the financial statements and
      the reported amounts of revenue and expenses during the reporting period. The
      Company defers revenue based on its estimate of the timing of payments within
      a
      month, estimate the benefit period of memberships to defer direct-response
      advertising, identify services prior to receipt of invoice for accrual purposes,
      and estimate the useful life of assets to calculate depreciation. Actual results
      could differ from those estimates.





Property
      and Equipment





Property
      and equipment are stated at cost. Depreciation is provided using the
      straight-line method over the estimated useful lives of the related assets,
      generally three to seven years.





Income
      Taxes





Deferred
      income tax assets and liabilities are computed annually for differences between
      the financial statements and tax basis of assets and liabilities that will
      result in taxable or deductible amounts in the future based on enacted laws
      and
      rates applicable to the periods in which the differences are expected to affect
      taxable income (loss).





Basic
      And Diluted Net Loss Per Share





Basic
      net
      earnings (loss) per common share is computed by dividing net earnings (loss)
      applicable to common shareholders by the weighted-average number of common
      shares outstanding during the period. Diluted net earnings per common share
      is
      determined using the weighted-average number of common shares outstanding during
      the period, adjusted for the dilutive effect of common stock equivalents,
      consisting of shares that might be issued upon exercise of common stock warrants
      and conversion of convertible debt. In periods where losses are reported, the
      weighted-average number of common shares outstanding excludes common stock
      equivalents, because their inclusion would be anti-dilutive. At December 31,
      2005, the total amount of outstanding convertible debentures was $4,203,698
      which might be converted into 35,030,817 shares of the Company’s common stock,
      based on the closing price of its common shares on December 31, 2005. At
      December 31, 2005, there were 4,148,750 warrants outstanding that were eligible
      for conversion into shares of the Company’s common stock. All convertible
      debentures have been retired as of December 31, 2006, and the
      Company had 9,996,722 warrants outstanding that were eligible for
      conversion into shares of our common stock.





Stock
      Based Compensation





The
      Company has adopted the disclosure provisions only of SFAS No. 123 and continues
      to account for stock based compensation using the intrinsic value method
      prescribed in accordance with the provisions of APB No. 25, "Accounting for
      Stock Issued to Employees", and related interpretations. Common stock issued
      to
      employees for compensation is accounted for based on the market price of the
      underlying stock, generally the average closing price.





During
      the year ended December 31, 2006, the Company granted 1,124,327 options to
      purchase common stock under its employee stock option plan, and issued warrants
      to purchase 1,300,000 of common stock. Additionally, warrants to purchase 27
      shares of preferred stock which convert at 0.4167% of outstanding shares on
      the
      day of conversion. The strike prices on these issues range from $0.0 to $1.78
      and each issue was accounted for in accordance with the provisions of APB No.
      25.





Fair
      Value Of Financial Instruments





Statement
      of financial accounting standards No. 107, "Disclosures about Fair Value of
      Financial Instruments", requires that the Company disclose estimated fair values
      of financial instruments. The carrying amounts reported in the statements of
      financial position for current assets and current liabilities qualifying as
      financial instruments are a reasonable estimated of fair value.


F-8


Comprehensive
      Income





Statement
      of financial accounting standards No. 130, "Reporting Comprehensive Income",
      (SFAS No. 130), establishes standards for reporting and display of comprehensive
      income, its components and accumulated balances. Comprehensive income is defined
      to include all changes in equity, except those resulting from investments by
      owners and distributions to owners. Among other disclosures, SFAS No. 130
      requires that all items that are required to be recognized under current
      accounting standards as components of comprehensive income be reported in a
      financial statements that is displayed with the same prominence as other
      financial statements. The Company adopted this standard in 1998 and the
      implementation of this standard did not have a material impact on its financial
      statements.





Accounts
      Receivable





The
      Company maintains an allowance for doubtful accounts for estimated losses that
      may arise if any of its customers are unable to make required payments.
      Management specifically analyzes the age of customer balances, historical bad
      debt experience, customer credit-worthiness, and changes in customer payments
      terms when making estimates of the uncollectibility of the Company's trade
      accounts receivable balances. If the Company determines that the financial
      conditions of any of its customers deteriorated, whether due to customer
      specific or general economic issues, an increase in the allowance will be made.
      Accounts receivable are written off when all collection attempts have
      failed.





Inventory





The
      Company does not carry product inventories. Wholesale goods purchased for
      individual resale are drop shipped by third party suppliers. Marketing materials
      and other supplies which are kept on hand are generally expensed as purchased.
      The Company wrote-off minor amounts of inventory in conjunction with
      discontinued operations during the year ended December 31, 2006.





Revenue
      Recognition




The
        Company has eight revenue streams:


-
        Charging our members a monthly fee for the tools and services needed to create
        and run a successful Internet auction business.
 
 - Offering
        our customers access to coaching services provided through a third party
        arrangement with 20-20 Advisors for a monthly fee. We began to offer this
        service in February 2005.
 
 -
        Offering our customers access to discounted value-added services such as:
        prescription drug plans, roadside assistance, tax and legal services, real
        estate listing services, and discounted entertainment packages for a monthly
        fee. These services are currently offered to our customers through third
        party
        arrangements with suppliers such as My Computer Club, Inc., West, Inc. and
        InQ.
 
 -
        Product
        sales via our website.
 
 -
        Providing our customer information to third parties who compensate us with
        a fee
        for each customer contact information acquired, or by sharing the revenues
        generated from contacting our customer. Revenues generated by the sale of
        our
        customer information have been related to offers made to customers in a wide
        variety of industries. Revenues generated from sharing arrangements have
        primarily been related to the sale of extended business coaching products
        and
        services.
 
 - Providing
        businesses with graphic design and printing services, data merge, mailing
        and
        finishing.
 
 - Offering
        clients fulfillment services including: assembly; pick and pack; mailing;
        and warehousing and inventory management services.
 
 -
        Design
        and implementation of cutting-edge technology for secure electronic payment
        modules, advanced content search tools, and secure data hosting.
 
 The
        Company does not provide multiple deliverables to its customers as described
        in
        EITF 00-21. Instead, the Company generally uses one revenue stream to develop
        potential revenues from another source, not from the same source. As such,
        the
        Company does not anticipate that the adoption of EITF 00-21 has a material
        effect on the financial statements.





The
      Company's revenues earned from membership setup fees and monthly charges are
      recorded when the credit card transaction is processed and the Company has
      received confirmation that the credit card processing has been successful.
      The
      Company does not recognize the revenues earned related to membership fees
      charged to credit cards until the collection of the revenue is assured. This
      is
      due to the uncertainty surrounding the credit card transactions. Current terms
      of the onlinesupplier.com membership agreement stipulate that the customer
      pays
      a nonrefundable fee between $1.85 and $9.95 fee to set up an account. The
      customer then has a fourteen day period to review the Company's offerings.
      If
      the customer does not cancel the service within the fourteen day window, a
      charge between $29.95 and $59.95 is billed to the customer's credit card on
      a
      monthly basis. The membership terms are agreed to under a negative option and
      we
      will continue to bill the customer on a monthly basis until they cancel their
      account. The Company initiates the sale of products for its affiliates during
      the process of selling the Company's own products, normally when an individual
      accesses our internet home page or calls the Company's sales or customer service
      department. The Company's internal system maintains records of each sale of
      an
      affiliate's product. The affiliate completes the sales process by fulfilling
      the
      particular product. Payments are forwarded to the Company, plus or minus two
      percent of actual billings, when the affiliate has completed the fulfillment
      of
      their product and has approved the cross selling revenue due to the Company.
      The
      Company notes that on a historical basis, its affiliates have generally approved
      all sales initiated by the Company. The Company recognizes cross selling
      revenues once it has reconciled its internal records of cross selling sales
      with
      the affiliate's records. The Company has several contracts with affiliates.
      The
      terms of each contract are varied but in most cases, a minimum/flat amount
      of
      revenue is earned per sale based on a certain volume being
      reached.


F-9




The
      Company generates leads for Applied Merchant as potential customers of the
      Company contact the Company's customer service department. The Company can
      not
      reasonably determine the actual incremental cost incurred in the process of
      generating each telephone call from a potential customer. Therefore costs are
      expensed as incurred.





The
      Company recognizes income when the products are received by the customer. The
      Company applies the provisions of SEC Staff Accounting Bulletin ("SAB") No.104,
      "Revenue Recognition in Financial Statements" which provides guidance on the
      recognition, presentation and disclosure of revenue in financial statements.
      SAB
      No. 104 outlines the basic criteria that must be met to recognize revenue and
      provides guidance for the disclosure of revenue recognition policies. The
      Company's revenue recognition policy for sale of products is in compliance
      with
      SAB No. 104. Revenue from the sale of products is recognized when a formal
      arrangement exists, the price is fixed or determinable, the delivery is
      completed and collectibility is reasonably assured. Generally, the Company
      extends credit to its customers and does not require collateral. The Company
      performs ongoing credit evaluations of its customers and historic credit losses
      have been within management's expectations. The Company accounts for sales
      returns related to product sales on an individual basis, as they occur. Sales
      returns related to product sales have not been significant in the
      past.





Advertising
      Costs




The
        Company expenses the media costs of advertising the first time the advertising
        takes place, except for direct-response advertising that is contracted with
        its
        advertising partners on a cost per customer acquired basis, which is capitalized
        and amortized over its expected period of future benefits. Direct-response
        advertising consists primarily of on line advertising that include reference
        codes that are used for purchasing the Company’s products and services. The
        capitalized costs of the advertising are amortized over the three-month period
        following the receipt of a trial order for the Company’s products and services.
        At December 31, 2006, and December 31, 2005, capitalized direct-response
        advertising costs of $1,962,466 and $159,182, respectively, were included
        in
        "Prepaid Expenses" in the accompanying Balance Sheets. Advertising expense
        was
        $6,055,104 in 2006 and $3,098,204 in 2005.





Discontinued
      Operations





During
      2005, the Company decided to cease operations at Auction Liquidator, Inc. and
      Discount Online Warehouse in order to focus its efforts and resources on
      Onlinesupplier.com. Discontinued operations did not have a material effect
      on
      the Company’s financial statements for the year ended December 31,
      2006.





NOTE
      2 -
      FEDERAL INCOME TAXES





The
      Financial Accounting Standards Board (FASB) has issued Statement of Financial
      Accounting Standards Number 109 ("SFAS 109"). "Accounting for Income Taxes",
      which requires a change from the deferred method to the asset and liability
      method of accounting for income taxes. Under the asset and liability method,
      deferred income taxes are recognized for the tax consequences of "temporary
      differences" by applying enacted statutory tax rates applicable to future years
      to differences between the financial statement carrying amounts and the tax
      basis of existing assets and liabilities.





**Year
                Ended December 31****2006**
            
            
            **2005****Deferred
                tax assets****Net
                operating loss carryforwards**
            
            $
            2,920,118
            
            $
            13,455,180**Valuation
                allowance**
            
            
            (2,920,118
            )
            
            (13,455,180
            )**Net
                deferred tax assets**
            
            $
            -
            
            $
            -




At
      December 31, 2006, the Company had net operating
      loss carryforwards of approximately $4,714,075 for federal income tax purposes.
      These carryforwards if not utilized to offset taxable income will begin to
      expire in 2025.




F-10




NOTE
      3 -
      ACCOUNTS RECEIVABLE





As
      of
      December 31, 2006, and December 31, 2005 accounts receivable, consists of the
      following:


**Year
                Ended December
                31****2006**
            
            
            **2005****Accounts
                Receivable****Impact
                Legal**
            
            $
            313,963
            
            $
            284,482**Cutting
                Edge**
            
            
            343,221
            
            
            -**Platinum
                Values**
            
            
            -
            
            
            72,256**Misc**
            
            
            1,109,853
            
            
            159,681**Allowance
                  for Doubtful Accounts**
            
            
            (199,511
            )
            
            (265,000
            )**Total**
            
            $
            1,567,526
            
            $
            251,419





Miscellaneous
      receivables consist of multiple trade receivables, none of which are
      material.





NOTE
      4 -
      OTHER RECEIVABLES





As
      of
      December 31, 2006, and December 31, 2005 other receivables, consists of the
      following:





**Year
                Ended December
                31****2006**
            
            
            **2005****Other
                Receivables****Merchant
                Card Reserve**
            
            $
            2,032,824
            
            $
            110,244**Return
                Provision**
            
            
            (141,536
            )
            
            (37,000
            )**Other**
            
            
            10,183
            
            
            3,662**Total**
            
            $
            1,901,470
            
            $
            76,906




NOTE
      5 -
      PREPAID EXPENSES





As
      of
      December 31, 2006, and December 31, 2005 prepaid expenses, consists of the
      following:




**Year
                Ended December 31****2006**
            
            
            **2005****Prepaid
                Expenses****Deferred
                Advertising**
            
            $
            1,962,466
            
            $
            159,182**Insurance**
            
            $
            189,138
            
            $
            10,969**Other**
            
            
            195,577
            
            
            108,192**Total**
            
            $
            2,347,181
            
            $
            278,343




NOTE
      6 -
      ACCOUNTS PAYABLE & ACCRUED EXPENSES




As
      of
      December 31, 2006, and December 31, 2005, accounts payable and accrued
      expenses, consists of the following:





**Year
                Ended December 31****2006**
            
            
            **2005****Accounts
                Payable and Accrued Expenses****Accounts
                Payable and Accrued Expenses**
            
            $
            1,804,979
            
            $
            586,133**Accrued
                Payroll and Payroll Taxes**
            
            $
            654,393
            
            $
            57,335**Accrued
                Interest**
            
            
            -
            
            
            79,896**Total**
            
            $
            2,459,372
            
            $
            723,364





NOTE
      7 -
      NOTES PAYABLE - RELATED PARTIES AND OTHERS





Notes
      Payable




The
        Company established a Note Payable for the financing of its Directors and
        Officers Liability Insurance on November 1, 2006. At December 31, 2006, the
        Notes Payable balance was $69,681 which represents the company’s entire debt.
        The total premiums for the policy are $120,088 and $88,875 was finances after
        a
        down payment of $31,212. The balanced was financed for 9 months at an annual
        interest rate of 9.75%.




Notes
      Payable - Related Parties





At
      December 31, 2005, the Company had Notes Payable to two majority shareholders
      for $25,000 each for a total of $50,000. Each note is unsecured, due on demand,
      and bears interest at a rate of 6%. At December 31, 2006 the Notes Payable
      were
      completely repaid.





NOTE
      8 -
      CONVERTIBLE DEBT





Convertible
      Debentures





On
      January 5, 2004, the Company issued $125,000 worth of 6%, 5-year Term,
      Convertible Debentures to a minority shareholder. At December 31, 2006 the
      debenture was completely repaid.





On
      January 5, 2004, the Company issued convertible debentures of $250,000 to
      Dutchess Private Equities Fund LP. The debentures convert on January 15, 2009.
      The holder of the debentures can convert the face value of the debenture plus
      accrued interest into shares of the Company’s common stock at the lesser of (i)
      75% of the lowest closing bid price during the 15 full trading days prior to
      the
      conversion date or (ii) 100% of the average of the five lowest closing bid
      prices for the 30 trading days immediately following the first reverse split
      in
      stock price. The convertible debentures shall pay 6% cumulative interest,
      payable in cash or stock at the Company’s option, at the time of conversion. At
      December 31, 2006, the debenture was completely repaid.





On
      January 19, 2004, the Company issued convertible debentures of $305,000 to
      eFund
      Capital Partners, LLC. The debentures convert on January 19, 2009. The holder
      of
      the debentures can convert the face value of the debenture plus accrued interest
      into shares of the Company’s common stock at the lesser of (i) 75% of the lowest
      closing bid price during the 15 full trading days prior to the conversion date
      or (ii) 100% of the average of the five lowest closing bid prices for the 30
      trading days immediately following the first reverse split in stock price.
      The
      convertible debentures shall pay 6% cumulative interest, payable in cash or
      stock at the Company’s option, at the time of conversion. At December 31, 2006,
      the debenture was completely repaid.





On
      January 25, 2004, the Company issued convertible debentures of $50,000 to
      Dutchess Private Equities Fund LP. The debentures convert on January 25, 2009.
      The holder of the debentures can convert the face value of the debenture plus
      accrued interest into shares of the Company’s common stock at the lesser of (i)
      75% of the lowest closing bid price during the 15 full trading days prior to
      the
      conversion date or (ii) 100% of the average of the five lowest closing bid
      prices for the 30 trading days immediately following the first reverse split
      in
      stock price. The convertible debentures shall pay 6% cumulative interest,
      payable in cash or stock at the Company’s option, at the time of conversion. At
      December 31, 2006, the debenture was completely repaid.





On
      January 25, 2004, the Company issued convertible debentures of $50,000 to eFund
      Capital Partners, LLC. The debentures convert on January 25, 2009. The holder
      of
      the debentures can convert the face value of the debenture plus accrued interest
      into shares of the Company’s common stock at the lesser of (i) 75% of the lowest
      closing bid price during the 15 full trading days prior to the conversion date
      or (ii) 100% of the average of the five lowest closing bid prices for the 30
      trading days immediately following the first reverse split in stock price.
      The
      convertible debentures shall pay 6% cumulative interest, payable in cash or
      stock at the Company’s option, at the time of conversion. At December 31, 2006,
      the debenture was completely repaid.


F-11




On
      March
      3, 2004, the Company issued convertible debentures of $28,000 to Preston Capital
      Partners, LLC. The debentures convert on March 3, 2009. The holder of the
      debentures can convert the face value of the debenture plus accrued interest
      into shares of the Company’s common stock at the lesser of (i) 75% of the lowest
      closing bid price during the 15 full trading days prior to the conversion date
      or (ii) 100% of the average of the five lowest closing bid prices for the 30
      trading days immediately following the first reverse split in stock price.
      The
      convertible debentures shall pay 6% cumulative interest, payable in cash or
      stock at the Company’s option, at the time of conversion. At December 31, 2006,
      the debenture was completely repaid.





On
      April
      1, 2004, the Company issued convertible debentures of $90,000 to Dutchess
      Private Equities Fund, II. The debentures convert on April 1, 2009. The holder
      of the debentures can convert the face value of the debenture plus accrued
      interest into shares of the Company’s common stock at the lesser of (i) 75% of
      the lowest closing bid price during the 15 full trading days prior to the
      conversion date or (ii) 100% of the average of the five lowest closing bid
      prices for the 30 trading days immediately following the first reverse split
      in
      stock price. The convertible debentures shall pay 8% cumulative interest,
      payable in cash or stock at the Company’s option, at the time of conversion. The
      debenture was issued at a discount of $15,000. On July 9, 2004, the Company
      issued a warrant to Dutchess Private Equities Fund, II, to purchase 225,000
      of
      the Company’s common shares at an exercise price at $1.42 per share. These
      warrants were valued at $49,612. At December 31, 2006, the debenture was
      completely repaid.





On
      April
      1, 2004, the Company issued convertible debentures of $90,000 to eFund Capital
      Partners, LLC. The debentures convert on April 1, 2009. The holder of the
      debentures can convert the face value of the debenture plus accrued interest
      into shares of the Company’s common stock at the lesser of (i) 75% of the lowest
      closing bid price during the 15 full trading days prior to the conversion date
      or (ii) 100% of the average of the five lowest closing bid prices for the 30
      trading days immediately following the first reverse split in stock price.
      The
      convertible debentures shall pay 8% cumulative interest, payable in cash or
      stock at the Company’s option, at the time of conversion. The debenture was
      issued at a discount of $15,000. On July 9, 2004, the Company issued a warrant
      to eFund Capital Partners, LLC, to purchase 225,000 of the Company’s common
      shares at an exercise price at $1.42 per share. These warrants were valued
      at
      $49,612. At December 31, 2006, the debenture was completely repaid.




On
      May 5,
      2004, the Company issued convertible debentures of $90,000 to Dutchess Private
      Equities Fund, II. The debentures convert on May 5, 2009. The holder of the
      debentures can convert the face value of the debenture plus accrued interest
      into shares of the Company’s common stock at the lesser of (i) 75% of the lowest
      closing bid price during the 15 full trading days prior to the conversion date
      or (ii) 100% of the average of the five lowest closing bid prices for the 30
      trading days immediately following the first reverse split in stock price.
      The
      convertible debentures shall pay 8% cumulative interest, payable in cash or
      stock at the Company’s option, at the time of conversion. The debenture was
      issued at a discount of $15,000. On July 9, 2004, the Company issued a warrant
      to Dutchess Private Equities Fund, II, to purchase 225,000 of the Company’s
      common shares at an exercise price at $1.42 per share. These warrants were
      valued at $65,098. At December 31, 2006, the debenture was completely
      repaid.





On
      May 5,
      2004, the Company issued convertible debentures of $90,000 to eFund
      CapitalPartners, LLC. The debentures convert on May 5, 2009. The holder of
      the
      debentures can convert the face value of the debenture plus accrued interest
      into shares of the Company’s common stock at the lesser of (i) 75% of the lowest
      closing bid price during the 15 full trading days prior to the conversion date
      or (ii) 100% of the average of the five lowest closing bid prices for the 30
      trading days immediately following the first reverse split in stock price.
      The
      convertible debentures shall pay 8% cumulative interest, payable in cash or
      stock at the Company’s option, at the time of conversion. The debenture was
      issued at adiscount of $15,000. On July 9, 2004, the Company issued a warrant
      to
      eFund CapitalPartners, LLC, to purchase 225,000 of the Company’s common shares
      at an exercise price at $1.42 per share. These warrants were valued at $65,098.
      At December 31, 2006, the debenture was completely repaid.





On
      July
      9, 2004, the Company issued convertible debentures of $180,000 to Dutchess
      Private Equities Fund, II. The debentures convert on July 9, 2009. The holder
      of
      the debentures can convert the face value of the debenture plus accrued interest
      into shares of the Company’s common stock at the lesser of (i) 75% of the lowest
      closing bid price during the 15 full trading days prior to the conversion date
      or (ii) 100% of the average of the five lowest closing bid prices for the 30
      trading days immediately following the first reverse split in stock price.
      The
      convertible debentures shall pay 8% cumulative interest, payable in cash or
      stock at the Company’s option, at the time of conversion. The debenture was
      issued at a discount of $30,000. On July 9, 2004, the Company issued a warrant
      to Dutchess Private Equities Fund, II, to purchase 450,000 of the Company’s
      common shares at an exercise price at $1.17 per share. These warrants were
      valued at $127,126. At December 31, 2006, the debenture was completely
      repaid.


F-12




On
      August
      15, 2004, the Company issued convertible debentures of $144,000 to
      Dutchess Private Equities Fund, II. The debentures convert on August 15, 2009.
      The holder of the debentures can convert the face value of the debenture plus
      accrued interest into shares of our common stock at the lesser of (i) 75% of
      the
      lowest closing bid price during the 15 full trading days prior to the conversion
      date or (ii) 100% of the average of the five lowest closing bid prices for
      the
      30 trading days immediately following the first reverse split in stock price.
      The convertible debentures shall pay 8% cumulative interest, payable in cash
      or
      stock at our option, at the time of conversion. This debenture was issued at
      a
      discount of $24,000. On August 18, 2004, we issued a warrant to Dutchess Private
      Equities Fund, II, to purchase 360,000 of our common shares at an exercise
      price
      at $1.03 per share. These warrants were valued at $74,843. At December 31,
      2006
      the debenture was completely repaid.





On
      August
      15, 2004, the Company issued convertible debentures of $60,000 to eFund Small
      Cap Fund, LP. The debentures convert on August 15, 2009. The holder of the
      debentures can convert the face value of the debenture plus accrued interest
      into shares of the Company’s common stock at the lesser of (i) 75% of the lowest
      closing bid price during the 15 full trading days prior to the conversion date
      or (ii) 100% of the average of the five lowest closing bid prices for the 30
      trading days immediately following the first reverse split in stock price.
      The
      convertible debentures shall pay 8% cumulative interest, payable in cash or
      stock at the Company’s option, at the time of conversion. This debenture was
      issued at a discount of $10,000. On August 18, 2004, the Company issued a
      warrant to eFund Capital Partners, to purchase 150,000 of the Company’s common
      shares at an exercise price at $1.03 per share. These warrants were valued
      at
      $31,185. At December 31, 2006, the debenture was completely repaid.





On
      September 25, 2004, the Company issued convertible debentures of $222,000 to
      Dutchess Private Equities Fund. The debentures convert on September 25, 2009.
      The holder of the debentures can convert the face value of the debenture plus
      accrued interest into shares of the Company’s common stock at the lesser of (i)
      75% of the lowest closing bid price during the 15 full trading days prior to
      the
      conversion date or (ii) 100% of the average of the five lowest closing bid
      prices for the 30 trading days immediately following the first reverse split
      in
      stock price. The convertible debentures shall pay 8% cumulative interest,
      payable in cash or stock at the Company’s option, at the time of conversion.
      This debenture was issued at a discount of $37,000. On September 25, 2004,
      the
      Company issued a warrant to Dutchess Private Equities Fund, to purchase 540,000
      of our common shares at an exercise price at $1.25 per share. These warrants
      were valued at $140,130. At December 31, 2006, the debenture was completely
      repaid.





On
      September 25, 2004, the Company issued convertible debentures of $60,000 to
      eFund Small Cap Fund, LP. The debentures convert on September 24, 2009. The
      holder of the debentures can convert the face value of the debenture plus
      accrued interest into shares of the Company’s common stock at the lesser of (i)
      75% of the lowest closing bid price during the 15 full trading days prior to
      the
      conversion date or (ii) 100% of the average of the five lowest closing bid
      prices for the 30 trading days immediately following the first reverse split
      in
      stock price. The convertible debentures shall pay 8% cumulative interest,
      payable in cash or stock at the Company’s option, at the time of conversion.
      This debenture was issued at a discount of $10,000. On September 25, 2004,
      the
      Company issued a warrant to eFund Capital Partners, to purchase 150,000 of
      the
      Company’s common shares at an exercise price at $1.25 per share. These warrants
      were valued at $37,873. At December 31, 2006, the debenture was completely
      repaid.





On
      October 25, 2004, the Company issued convertible debentures of $60,000 to
      Dutchess Private Equities Fund, II, LP. The debentures convert on October 25,
      2009. The holder of the debentures can convert the face value of the debenture
      plus accrued interest into shares of the Company’s common stock at the lesser of
      (i) 75% of the lowest closing bid price during the 15 full trading days prior
      to
      the conversion date or (ii) 100% of the average of the five lowest closing
      bid
      prices for the 30 trading days immediately following the first reverse split
      in
      stock price. The convertible debentures shall pay 8% cumulative interest,
      payable in cash or stock at the Company’s option, at the time of conversion.
      This debenture was issued at a discount of $10,000. On October 25, 2004, the
      Company issued a warrant to Dutchess Private Equities Fund, II, to purchase
      150,000 of the Company’s common shares at an exercise price at $1.53 per share.
      These warrants were valued at $37,840. At December 31, 2006, the debenture
      was
      completely repaid.


F-13




On
      November 11, 2004, the Company issued convertible debentures of $162,000 to
      Dutchess Private Equities Fund, II, LP. The debentures convert on November
      11,
      2009. The holder of the debentures can convert the face value of the debenture
      plus accrued interest into shares of the Company’s common stock at the lesser of
      (i) 75% of the lowest closing bid price during the 15 full trading days prior
      to
      the conversion date or (ii) 100% of the average of the five lowest closing
      bid
      prices for the 30 trading days immediately following the first reverse split
      in
      stock price. The convertible debentures shall pay 8% cumulative interest,
      payable in cash or stock at the Company’s option, at the time of conversion.
      This debenture was issued at a discount of $27,000. On November 11, 2004, the
      Company issued a warrant to Dutchess Private Equities Fund, II, to purchase
      480,000 of the Company’s common shares at an exercise price at $1.25 per share.
      These warrants were valued at $168,254. At December 31, 2006, the debenture
      was
      completely repaid.





On
      December 28, 2004, the Company issued convertible debentures of $240,000 to
      Dutchess Private Equities Fund, II, LP. The debentures convert on December
      28,
      2009. The holder of the debentures can convert the face value of the debenture
      plus accrued interest into shares of the Company’s common stock at the lesser of
      (i) 75% of the lowest closing bid price during the 15 full trading days prior
      to
      the conversion date or (ii) 100% of the average of the five lowest closing
      bid
      prices for the 30 trading days immediately following the first reverse split
      in
      stock price. The convertible debentures shall pay 8% cumulative interest,
      payable in cash or stock at the Company’s option, at the time of conversion.
      This debenture was issued at a discount of $40,000. On December 28, 2004, the
      Company issued a warrant to Dutchess Private Equities Fund, II, to purchase
      720,000 of the Company’s common shares at an exercise price at $1.25 per share.
      These warrants were valued at $200,010 At December 31, 2006, the debenture
      was
      completely repaid.




The
        Debentures pay six percent (6%) or eight percent (8%) cumulative interest,
        in
        cash or in shares of common stock, par value $0.001 per share, of the Company,
        at the Company's option, at the time of each conversion. The Company shall
        pay
        interest on the unpaid principal amount of this Debenture at the time of
        each
        conversion until the principal amount hereof is paid in full or has been
        converted. If the interest is to be paid in cash, the Company shall make
        such
        payment within five (5) business days of the date of conversion. If the interest
        is to be paid in Common Stock, said Common Stock shall be delivered to the
        Holder, or per Holder's instructions, within five (5) business days of the
        date
        of conversion. The Debentures are subject to automatic conversion at the
        end of
        five (5) years from the date of issuance at which time all Debentures
        outstanding will be automatically converted based upon the formula set forth
        in
        the agreement The principal amount of the Debentures are secured by shares
        pledged as collateral pursuant to the terms of a Security Agreement. These
        Debentures are full recourse loans being made by the Holder and the Company
        is
        liable for any deficiency. At December 31, 200,6 the debenture was completely
        repaid.
 
 Effective
        November 1, 2005, the Company entered into a Convertible Debenture agreement
        with a majority shareholder to issue $180,000 worth of non-interest bearing,
        5-year Term, Convertible Debentures at a discount of $178,200. The debentures
        are convertible into shares of the Company's common stock at a price equal
        to
        the lesser of; (i) 75% of the average of the closing bid price of the stock
        for
        the five days prior to conversion or (ii) the average of the closing bid
        price
        of the stock on the five (5) days immediately preceding the date of the of
        debenture agreement. At December 31, 2006, the debenture was completely
        repaid.
 
 Effective
        December 18, 2005, the Company entered into a Convertible Debenture Exchange
        Agreement with majority shareholders to exchange the unpaid balance of
        promissory notes issued in 2005 worth $1,784,239 into 10%, 4-year term,
        Convertible Debentures. The debentures are convertible at the lesser of (i)
        75%
        of the average of the lowest closing bid price during fifteen (15) immediately
        preceding the conversion date or (ii) 100% of the average of the closing
        bid
        price of the stock for the twenty (20) days immediately preceding the closing
        date of the debenture agreement. At December 31, 2006, the debenture was
        completely repaid.




F-14




Convertible
        Promissory Notes
  On
        February 11, 2005, the Company issued a Note to Dutchess Private Equities
        Fund,
        II, in the amount of $360,000, at a discount of $60,000. The Note had a 0%
        interest rate. At December 31, 2006, Note was completely repaid.
 
 On
        April
        18, 2005, the Company issued a Note to Dutchess Private Equities Fund, II,
        in
        the amount of $132,000, at a discount of $22.000. The Note had a 0% interest
        rate. At December 31, 2006, the Note was completely repaid.
 
 On
        April
        18, 2005, the Company issued a Note to eFund Capital Partners, in the amount
        of
        $132,000, at a discount of $22,000. The Note had a 0% interest rate. At December
        31, 2006, the Note was completely repaid.
 
 On
        May
        20, 2005, the Company issued a Note to Dutchess Private Equities Fund, II,
        in
        the amount of $402,750, at a discount of $52,750. The Note had a 0% interest
        rate and $112,500 was repaid prior to December 18, 2005. The remaining amount
        was exchanged into a four year, convertible debenture bearing interest of
        10%
        effective December 18, 2005. At December 31, 2006, the Note was completely
        repaid.
 
 On
        June
        2, 2005, the Company issued a Note to Dutchess Private Equities Fund, II,
        in the
        amount of $540,000, at a discount of $80,000. The Note had a 0% interest
        rate
        and was exchanged into a four year, convertible debenture bearing interest
        of
        10% effective December 18, 2005. At December 31, 2006, the Note was completely
        repaid.
 
 On
        July
        22, 2005, the Company issued a Note to Dutchess Private Equities Fund, II,
        in
        the amount of $258,000, at a discount of $33,000. The Note had a 0% interest
        rate and was exchanged into a four year, convertible debenture bearing interest
        of 10% effective December 18, 2005. At December 31, 2006, the Note was
        completely repaid.
 
 On
        August
        4, 2005, the Company issued a Note to Dutchess Private Equities Fund, II,
        in the
        amount of $162,000, at a discount of $17,000. The Note had a 0% interest
        rate
        and was exchanged into a four year, convertible debenture bearing interest
        of
        10% effective December 18, 2005. At December 31, 2006, the Note was completely
        repaid.
 
 On
        August
        17, 2005, the Company issued a Note to Dutchess Private Equities Fund, II,
        in
        the amount of $247,200, at a discount of $41,200. The Note had a 0% interest
        rate and was exchanged into a four year, convertible debenture bearing interest
        of 10% effective December 18, 2005. At December 31, 2006, the Note was
        completely repaid.
 
 On
        August
        18, 2005, the Company issued Notes to eFund, in the amount of $221,000, at
        a
        total discount of $37,000. The Notes had a 0% interest rate and $18,211 was
        repaid prior to December 18, 2005. The remaining outstanding amount was
        exchanged into a four year, convertible debenture bearing interest of 10%
        effective December 18, 2005. At December 31, 2006, the Note was completely
        repaid.
 
 On
        August
        18, 2005, the Company issued a Note to a majority shareholder, in the amount
        of
        $84,000, at a total discount of $14,000. The notes had a 0% interest rate
        and
        were exchanged into a four year, convertible debenture bearing interest of
        10%
        effective December 18, 2005. At December 31, 2006, the promissory note was
        completely repaid.
 
 On
        September 16, 2005, the Company issued a Note to Dutchess Private Equities
        Fund,
        L.P., in the amount of $192,000, at a discount of $32,000. The Note has a
        0%
        interest rate and $162,752 was repaid during 2005, and the remaining $29,248
        was
        outstanding at December 31, 2005. At December 31, 2006, the Note was completely
        repaid.
 
 On
        September 30, 2005, the Company issued a Note to Dutchess Private Equities
        Fund,
        LP, in the amount of $276,000, at a discount of $46,000. The Note has a 0%
        interest rate and is due and payable on March 30, 2006. At December 31, 2006,
        the Note was completely repaid.




F-15


On
        October 11, 2005, the Company issued a Note to Dutchess Private Equities
        Fund,
        LP, in the amount of $30,000, at a discount of $5,000. The Note has a 0%
        interest rate. At December 31, 2006, the Note was completely
        repaid.
 
 Effective
        December 18, 2005, the Company entered into a Convertible Debenture Exchange
        Agreement with majority shareholders to exchange the unpaid balance of Notes
        issued in 2005 worth $1,784,239 into 10%, 4-year term, Convertible
        Debentures.
 
 Each
        of
        the Convertible Promissory Notes shall be paid in cash or in shares of common
        stock, par value $0.001 per share, of the Company, at the Company's option,
        at
        the time of each conversion. The Company shall pay interest on the unpaid
        principal amount of this Promissory Note at the time of each conversion until
        the principal amount hereof is paid in full or has been converted. If the
        interest is to be paid in cash, the Company shall make such payment within
        five
        (5) business days of the date of conversion. If the interest is to be paid
        in
        Common Stock, said Common Stock shall be delivered to the Holder, or per
        Holder's instructions, within five (5) business days of the date of conversion.
        The Promissory Notes are subject to automatic conversion at the maturity
        date at
        which time all Promissory Notes outstanding will be automatically converted
        based upon the formula set forth in the agreement. At December 31, 2006 the
        Note
        was completely repaid.





NOTE
      9 -
      CAPITAL STOCK





Preferred
      Stock





On
      August
      3, 2006, the Company authorized 100 shares of preferred series “D” stock at par
      value of $0.001. Shares of preferred stock convert at 0.4167% of outstanding
      shares of common stock on the day of conversion. As of December 31, 2006, 15
      preferred shares were issued as follows:




Michael Hill
            
            7
                sharesCharlie Gugliuzza
            
            7
                SharesDavid Foucar
            
            1
                Share




Common
      Stock





In
      January 2004, the Company increased the number of authorized shares of common
      stock to 300,000,000. The Company effectuated a 3 for 1 forward stock split
      on
      February 18, 2005. All shares have been stated to retroactively affect this
      reverse stock split.





During
      the year ended December 31, 2006, the following shares of common stock were
      issued by the Company:





**Name**
            
            **Transaction
                Type**
            
            **Date**
            
            **Issued****Oustanding at
                12/31/05**
            
            
            
            
            
            **39,094,633**Minority
                Shareholder
            
            Stock
                Rescission
            
            01/05/06
            
            (340,500)Preston
                Capital
            
            Stock
                Rescission
            
            01/05/06
            
            (384,871)Efund
                Capital Partners
            
            Conversion
                of convertible debentures
            
            01/13/06
            
            100,000Dutchess
                Equities Fund LP
            
            Conversion
                of convertible debentures
            
            01/13/06
            
            300,000Minority
                Shareholder
            
            Conversion
                of convertible debentures
            
            01/13/06
            
            10,000Minority
                Shareholder
            
            Conversion
                of convertible debentures
            
            01/19/06
            
            10,000Efund
                Capital Partners
            
            Conversion
                of convertible debentures
            
            01/19/06
            
            150,000Dutchess
                Equities Fund LP
            
            Conversion
                of convertible debentures
            
            01/19/06
            
            287,801Dutchess
                Equities Fund LP II
            
            Conversion
                of convertible debentures
            
            02/03/06
            
            30,000Efund
                Capital Partners
            
            Conversion
                of convertible debentures
            
            02/03/06
            
            100,000Minority
                Shareholder
            
            Conversion
                of convertible debentures
            
            02/03/06
            
            9,000Dutchess
                Equities Fund LP
            
            Conversion
                of convertible debentures
            
            02/22/06
            
            37,800Efund
                Capital Partners
            
            Conversion
                of convertible debentures
            
            03/07/06
            
            500,000Dutchess
                Equities Fund LP
            
            Conversion
                of convertible debentures
            
            03/10/06
            
            84,750Minority
                Shareholder
            
            Conversion
                of convertible debentures
            
            03/10/06
            
            5,000Dutchess
                Equities Fund LP
            
            Conversion
                of convertible debentures
            
            03/16/06
            
            150,000Minority
                Shareholder
            
            Conversion
                of convertible debentures
            
            03/16/06
            
            10,000Minority
                Shareholder
            
            Warrant
                Exercise
            
            03/16/06
            
            120,000Minority
                Shareholder
            
            Conversion
                of convertible debentures
            
            03/24/06
            
            5,000Dutchess
                Equities Fund LP
            
            Conversion
                of convertible debentures
            
            03/24/06
            
            83,400Minority
                Shareholders
            
            Subscription
                Agreement 12/28/05
            
            04/03/06
            
            1,736,363Dutchess
            
            Subscription
                Agreement 12/28/05
            
            04/03/06
            
            8,000Efund
            
            Subscription
                Agreement 12/28/05
            
            04/03/06
            
            30,000EFund
                Capital Partners
            
            Conversion
                of convertible debentures
            
            04/13/06
            
            619,118Efund
                Small Cap Fund
            
            Conversion
                of convertible debentures
            
            04/13/06
            
            467,654Minority
                Shareholder
            
            Conversion
                of convertible debentures
            
            04/25/06
            
            171,500Affiliate
            
            Stock
                Rescission
            
            05/04/06
            
            (375,000)Marketbyte
                LLC
            
            Stock
                Rescission
            
            05/04/06
            
            (375,000)


F-16





**Name**
            
            **Transaction
                Type**
            
            **Date**
            
            **Issued**Luminary
                Ventures
            
            Stock
                Rescission
            
            05/04/06
            
            (150,000)Minority
                Shareholder
            
            Stock
                Rescission
            
            05/04/06
            
            (75,000)Pacific
                Shores
            
            Stock
                Rescission
            
            05/04/06
            
            (75,000)Minority
                Shareholder
            
            Stock
                Rescission
            
            05/04/06
            
            (30,000)Preston
                Capital Partners
            
            Excecise
                Put
            
            05/17/06
            
            287,439Minority
                Shareholder
            
            Conversion
                of convertible debentures
            
            05/17/06
            
            449,500Preston
                Capital Partners
            
            Excecise
                Put
            
            05/22/06
            
            105,559Preston
                Capital Partners
            
            Excecise
                Put
            
            05/31/06
            
            74,212Dutchess
                Private Equities II
            
            Conversion
                of convertible debentures
            
            06/01/06
            
            150,000Dutchess
                Private Equities II
            
            Conversion
                of convertible debentures
            
            06/02/06
            
            300,000Dutchess
                Private Equities II
            
            Conversion
                of convertible debentures
            
            06/06/06
            
            257,915Dutchess
                Private Equities
            
            Conversion
                of convertible debentures
            
            06/07/06
            
            347,621Dutchess
                Private Equities II
            
            Conversion
                of convertible debentures
            
            06/07/06
            
            250,000EFund
                Capital Partners
            
            Conversion
                of convertible debentures
            
            06/08/06
            
            439,794Dutchess
                Private Equities II
            
            Conversion
                of convertible debentures
            
            06/13/06
            
            225,000Dutchess
                Private Equities II
            
            Conversion
                of convertible debentures
            
            06/19/06
            
            375,127Dutchess
                Private Equities II
            
            Conversion
                of convertible debentures
            
            07/12/06
            
            241,127Dutchess
                Private Equities II
            
            Conversion
                of convertible debentures
            
            08/03/06
            
            501,381Ronald
                Feldman
            
            Conversion
                of convertible debentures
            
            08/10/06
            
            480,000Minority
                Shareholder
            
            Conversion
                of convertible debentures
            
            08/10/06
            
            200,000Seacoast
                Financial
            
            Shares
                Issued for services
            
            09/26/06
            
            300,000Interaccurate
                acquisition
            
            Issued
                for Payment
            
            10/31/06
            
            42,266Affiliate
            
            Warrant
                Exercise
            
            11/13/06
            
            30,000Commerce
                Planet
            
            Shares
                Repurchased
            
            12/01/06
            
            (34,500)Commerce
                Planet
            
            Shares
                Repurchased
            
            12/04/06
            
            (15,000)Commerce
                Planet
            
            Shares
                Repurchased
            
            12/05/06
            
            (34,000)Commerce
                Planet
            
            Shares
                Repurchased
            
            12/07/06
            
            (15,000)Commerce
                Planet
            
            Shares
                Repurchased
            
            12/08/06
            
            (20,000)Commerce
                Planet
            
            Shares
                Repurchased
            
            12/11/06
            
            (13,000)Commerce
                Planet
            
            Shares
                Repurchased
            
            12/12/06
            
            (7,000)Affiliate
            
            Warrant
                Exercise
            
            12/15/06
            
            48,750Commerce
                Planet
            
            Shares
                Repurchased
            
            12/19/06
            
            (20,000)Commerce
                Planet
            
            Shares
                Repurchased
            
            12/20/06
            
            (32,500)Commerce
                Planet
            
            Shares
                Repurchased
            
            12/28/06
            
            (31,000)Commerce
                Planet
            
            Shares
                Repurchased
            
            12/29/06
            
            (4,500)**Oustanding at
                12/31/06**
            
            
            
            
            
            **47,193,839**




F-17


During
      the years ended December 31, 2006, and December 31, 2005, the Board of Directors
      approved the issuance of warrants to purchase an aggregate of 3,274,327 shares
      of the Company's common stock. Such warrants are exercisable at prices ranging
      from $0.01 to $1.74 per share, vest over periods up to 24 months, and expire
      at
      various times through December 2010. 750,000 of the total warrants outstanding
      were cancelled and 198,750 were exercised. The average remaining contractual
      life of all outstanding warrants is 2.7 years.





A
      summary
      of warrant activity for 2006 and 2005, including preferred share equivalents,
      is
      as follows:




**Weighted
                Average**
            **Weighted
                Average****Issued**
            
            
            **Price**
            
            
            **Exercisable**
            
            
            **Price****Outstanding,
                December 31, 2004**
            
            
            4,020,000
            
            $
            1.23
            
            
            4,020,000
            
            $
            1.23**Granted**
            
            
            878,750
            
            $
            0.67**Exercised****Outstanding,
                December 31, 2005**
            
            
            4,898,750
            
            $
            1.13
            
            
            4,020,000
            
            $
            1.23**Granted**
            
            
            7,733,634
            
            $
            0.31
            
            
            6,225,472
            
            $
            0.03**Cancelled**
            
            
            (750,000
            )
            $
            0.67**Exercised**
            
            
            (715,960
            )
            $
            0.77
            
            
            (715,960
            )
            $
            0.77**Outstanding,
                December 31, 2004**
            
            
            11,166,424
            
            $
            0.49
            
            
            9,529,512
            
            $
            0.47





NOTE
      10 -
      OTHER INCOME AND EXPENSE





As
      of
      December 31, 2006, and December 31, 2005, other income and expenses, consists
      of
      the following:





**Year
                Ended December 31****2006**
            
            
            **2005****Other
                Income/Expense****Other
                Income**
            
            
            (30,080
            )
            
            -**Beneficial
                Conversion Recovery**
            
            
            (837,191
            )
            
            -**Interest
                Income**
            
            
            (50,331
            )
            
            -**Interest
                Expense**
            
            
            1,373,668
            
            
            1,630,464**Other
                Income/Expense**
            
            
            456,066
            
            
            1,630,464





During
      the years ended December 31, 2005, and 2004, we incurred beneficial conversion
      expenses of $754,238 and $655,516, which are included in interest expense in
      the
      consolidated financial statements. During the year ended December 31, 2006,
      we
      retired all of our debt allowing us to recover $837,191 of the beneficial
      conversion expense taken in 2004 and 2005, which was included in other income.





F-18


NOTE
        11 -
        FINANCIAL ACCOUNTING DEVELOPMENTS
 
 Recently
        issued Accounting Pronouncements
 
 In
        February 2003, the Financial Accounting Standards Board ("FASB") issued SFAS
        No.
        150, "Accounting for Certain Financial Instruments with Characteristics of
        Both
        Liabilities and Equity". SFAS 150 is effective for financial instruments
        entered
        into or modified after May 31, 2003, and otherwise is effective at the beginning
        of the first interim period beginning after June 15, 2003. This statement
        establishes new standards of how an issuer classifies and measures certain
        financial instruments with characteristics
        of both liabilities and equity. SFAS 150 requires that an issuer classify
        a
        financial instrument that is within the scope of this statement as a liability
        because the financial instrument embodies an obligation of the issuer. This
        statement applies to certain forms of mandatory redeemable financial instruments
        including certain types of preferred stock, written put options and forward
        contracts. SFAS 150 did not materially effect the Company’s financial
        statements.





In
      December 2003, the FASB issued FASB Interpretation No. 146, (revised
      December2003) "Consolidation of Variable Interest Entities" (FIN 146) which
      addresses how a business enterprise should evaluate whether it has a controlling
      financial interest in an entity through means other than voting rights and
      accordingly should consolidate the entity. FIN No. 146R replaces FASB
      Interpretation No. 146, "Consolidation of Variable Interest Entities", which
      was
      issued in January 2003. Companies are required to apply FIN No. 146R to variable
      interests in variable interest entities ("VIEs") created after December 31,
      2003. For variable interest in VIEs created before January 1, 2004, the
      Interpretation is applied beginning January 1, 2005. For any VIEs that must
      be
      consolidated under FIN No. 146R that were created before January 1, 2004,the
      assets, liabilities and non-controlling interests of the VIE initially are
      measured at their carrying amounts with any difference between the net amount
      added to the balance sheet and any previously recognized interest being
      recognized as the cumulative effect of an accounting change.





If
      determining the carrying amounts is not practicable, fair value at the date
      FIN
      No. 146R first applies may be used to measure the assets, liabilities and
      non-controlling interest of the VIE. The Company doe not have any interest
      in
      any VIE.





In
      March
      2003, the FAS issued SFAS No. 149, "Amendment of Statement 133 on Derivative
      Instruments and Hedging Activities". SFAS 149 is effective for contracts entered
      into or modified after June 30, 2003. This statement amends and clarifies
      financial accounting and reporting for derivative instruments, including certain
      derivative instruments embedded in other contracts (collectively referred to
      as
      derivatives) and for hedging activities under SFAS 133, "Accounting for
      Derivative Instruments and Hedging Activities". SFAS 149 did not materially
      effect the Company’s financial statements.





In
      December 2004, the FASB issued SFAS No. 123(R)(revised 2004), "Share Based
      Payment" which amends FASB Statement No. 123 and will be effective for public
      companies for interim or annual periods after January 15, 2005. The new standard
      will require entities to expense employee stock options and other share-based
      payments. The new standard may be adopted in one of three ways - the modified
      prospective transition method, a variation of the modified prospective
      transition method or the modified retrospective transition method. The Company
      is to evaluate how it will adopt the standard and evaluate the effect that
      the
      adoption of SFAS 123(R) will have on our financial position and results of
      operations.





In
      November 2004, the FASB issued SFAS NO. 151, "Inventory Costs, an amendment
      of
      ARB No 43, Chapter 4". This statement amends the guidance in ARB No. 43, Chapter
      4 Inventory Pricing, to clarify the accounting for abnormal amounts of idle
      facility expense, freight, handling cost, and wasted material (spoilage).
      Paragraph 5 of ARB No. 43, Chapter 4, previously stated that, "under some
      circumstances, items such as idle facility expense, excessive spoilage, double
      freight and rehandling costs may be so abnormal as to require treatment as
      current period charges." SFAS No. 151 requires that those items be recognized
      as
      current-period charges regardless of whether they meet the criterion of "so
      abnormal". In addition, this statement requires that allocation of fixed
      production overheads to the costs of conversion be based on the prospectively
      and are effective for inventory costs incurred during fiscal years
      beginning


after
      June 5, 2005, with earlier application permitted for inventory costs incurred
      during fiscal years beginning after the date this Statement was issued. The
      adoption of SFAS No. 151 is not expected to have a material impact on the
      Company's financial position and results of operations.





In
      December 2004, the FASB issued SFAS No. 153, Exchanges of Non-monetary Assets,
      an amendment of APB Opinion No. 29. The guidance in APB Opinion 29, Accounting
      for Non-monetary Transactions, is based on the principle that exchange of
      non-monetary assets should be measured based on the fair value of assets
      exchanged. The guidance in that Opinion, however, included certain exceptions
      to
      that principle. This Statement amends Opinion 29 to eliminate the exception
      for
      non-monetary exchanges of similar productive assets that do not have commercial
      substance. A non-monetary exchange has commercial substance if the future cash
      flows of the entity are expected to change significantly as a result of the
      exchange. SFAS No. 153 is effective for non-monetary exchanges occurring in
      fiscal periods beginning after June 15, 2005. The adoption of SFAS No. 153
      is
      not expected to have a material impact on the Company's financial position
      and
      results of operations.


F-19




In
      March
      2005, the FASB issued FASB Interpretation No. 47, "Accounting for Conditional
      Asset Retirement Obligations" ("FIN 47"). FIN 47 provides guidance relating
      to
      the identification of and financial reporting for legal obligations to perform
      an asset retirement activity. The Interpretation requires recognition of a
      liability for the fair value of a conditional asset retirement obligation when
      incurred if the liability's fair value can be reasonably estimated. FIN 47
      also
      defines when an entity would have sufficient information to reasonably estimate
      the fair value of an asset retirement obligation. The provision is effective
      no
      later than the end of fiscal years ending after December 15, 2005. The Company
      will adopt FIN 47 beginning the first quarter of fiscal year 2006 and does
      not
      believe the adoption will have a material impact on its consolidated financial
      position or results of operations or cash flows.





In
      May
      2005, the FASB issued SFAS No. 154, "Accounting Changes and Error Corrections"
      ("SFAS 154") which replaces Accounting Principles Board Opinions No. 20
      "Accounting Changes" and SFAS No. 3, "Reporting Accounting Changes in Interim
      Financial Statements-An Amendment of APB Opinion No. 28." SFAS 154 provides
      guidance on the accounting for and reporting of accounting changes and error
      corrections. It establishes retrospective application, or the latest practicable
      date, as the required method for reporting a change in accounting principle
      and
      the reporting of a correction of an error. SFAS 154 is effective for accounting
      changes and a correction of errors made in fiscal years beginning after December
      15, 2005 and is required to be adopted by the Company in the first quarter
      of
      2006. The Company is currently evaluating the effect that the adoption of SFAS
      154 will have on its results of operations and financial condition but does
      not
      expect it to have a material impact.





In
      June
      2005, the Emerging Issues Task Force, or EITF, reached a consensus on Issue
      05-6, Determining the Amortization Period for Leasehold Improvements, which
      requires that leasehold improvements acquired in a business combination or
      purchased subsequent to the inception of a lease be amortized over the lesser
      of
      the useful life of the assets or a term that includes renewals that are
      reasonably assured at the date of the business combination or purchase. EITF
      05-6 is effective for periods beginning after July 1, 2005. We do not expect
      the
      provisions of this consensus to have a material impact on the financial
      position, results of operations or cash flows.





In
      February 2006, the amendment to FASB Statement No 133, Accounting for Derivative
      Instruments and Hedging Activities, and No. 140, Accounting for Transfers and
      Servicing of Financial Assets and Extinguishment of Liabilities was issued
      as
      SFAS 155, Accounting for Certain Hybrid Financial Instruments.





This
      Statement permits fair value remeasurement for any hybrid financial instrument
      that contains an embedded derivative that otherwise would require bifurcation.
      Clarifies which interest-only strips and principal-only strips are not subject
      to the requirements of Statement 133, establishes a requirement to evaluate
      interest in securitized financial assets to identify interests that are
      freestanding derivatives or that are hybrid financial instruments that contain
      an embedded derivative requiring bifurcation. Clarifies that concentrations
      of
      credit risk in the form of subordination are not embedded derivatives and amends
      Statement 140 to eliminate the prohibition on a qualifying special-purpose
      entity from holding a derivative financial instrument that pertains to a
      beneficial interest other than another derivative financial
      instrument.





This
      Statement is effective for all financial instruments acquired or issued after
      the beginning of the Company’s first fiscal year that begins after September 15,
      2006.





The
      fair
      value election provided for in paragraph 4(c) of this Statement may also be
      applied upon adoption of this Statement for hybrid financial instruments that
      had been bifurcated under paragraph 12 of Statement 133 prior to the adoption
      of
      this Statement. Earlier adoption is permitted as of the beginning of our fiscal
      year, provided we have not yet issued financial statements, including financial
      statements for any interim period, for that fiscal year. Provisions of this
      Statement may be applied to instruments that we hold at the date of adoption
      on
      an instrument-by-instrument basis. The Company is currently reviewing the
      effects of adoption of this Statement but it is not expected to have a material
      impact on our financial statements.


F-20


In
      March
      2006 the amendment to FASB Statement No. 140, Accounting for Transfers and
      Servicing of Financial Assets and Extinguishment of Liabilities, with respect
      to
      the accounting for separately recognized servicing assets and servicing
      liabilities was issued as SFAS 156, Accounting for Servicing of Financial
      Assets.





This
      Statement requires an entity to recognize a servicing asset or servicing
      liability each time it undertakes an obligation to service a financial asset
      by
      entering into a servicing contract in certain situations, requires all
      separately recognized servicing assets and servicing liabilities to be initially
      measured at fair value, if practicable and permits and entity to choose either
      the amortization method or the fair value measurement method for each class
      of
      separately recognized servicing assets and servicing liabilities. At its initial
      adoption, permits a one-time reclassification of available-for-sale securities
      to trading securities by entities with recognized servicing rights, without
      calling into question the treatment of other available-for-sale securities
      under
      Statement 115, provided that the available-for-sale securities are identified
      in
      some manner as offsetting the entity's exposure to changes in fair value of
      servicing assets or servicing liabilities that a servicer elects to subsequently
      measure at fair value. Requires separate presentation of servicing assets and
      servicing liabilities subsequently measured at fair value in the statement
      of
      financial position and additional disclosures for all separately recognized
      servicing assets and servicing liabilities. Adoption of this Statement is
      required as of the beginning of the first fiscal year that begins after
      September 15, 2006. The adoption of this statement is not expected to have
      a
      material impact on our financial statements.





NOTE
      12 -
      COMMITMENTS & CONTINGENCIES





Commitments





Minimum
      future rental payments under non-cancelable operating leases as of December
      31,
      2006, for each of the next five years and in the aggregate are as
      follows:





**2007**
            
            $
                285,807**2008**
            
            $
                293,229**2009**
            
            $
                120,976**Total**
            
            $
                700,012




The
      Company entered a two year cost plus agreement on October 11, 2006, with
      Datascension, Inc., an unrelated party, that enables Consumer Loyalty Group
      to
      operate a state of the art call center. The call center became operational
      on
      November 27, 2006 and is utilized to support Consumer Loyalty Group customer
      service and sales efforts at dramatically lowered costs in comparison to their
      U.S. based counterparts.





The
      Company’s bank deposits at Bank of America, First Republic Bank, and First
      Regional Bank all exceed the federally insured limit of $100,000.





NOTE
      13 -
      RELATED PARTY TRANSACTIONS





On
      February 11, 2005, the Company issued a Note to Dutchess Private Equities Fund,
      II, in the amount of $360,000, at a discount of $60,000. The Note has a 0%
      interest rate. During the year ended December 31, 2005, this Note was repaid,
      and the balance at December 31, 2005 was zero. We issued 37,500 shares to the
      Holder as an inducement to provide financing. The shares were valued at $40,219.
      At December 31, 2006 the Note was completely repaid.





In
      February 2005, the Company entered into a software agreement with Discount
      Solutions, Inc. to purchase certain software license rights to software that
      is
      used to provide web based stores to the Company’s customers. The Company agreed
      to purchase a perpetual license for use of the software of $52,500, and to
      compensate Discount Solutions $24,000 monthly for the full service hosting
      and
      maintenance of the Company’s customers' web stores. The Company’s Chief
      Executive Officer is a majority owner of Discount Solutions. This agreement
      automatically renews monthly unless notice is provided be either party. We
      intend to renegotiate and extend the terms of this agreement.


F-21


On
        April
        18, 2005, the Company issued $132,000 of non-interest bearing Convertible
        Promissory Notes, due August 18, 2005 at a discount of $44,000, to eFund
        Capital
        Partners, LLC and Dutchess Private Equities Fund, II, LP. The Notes have
        a 0%
        interest rate. During the year ended December 31, 2005, this Note was repaid,
        and the balance at December 31, 2005 was zero. The Company issued 13,750
        shares
        to eFund Capital Partners and Dutchess Private Equities Fund, II, LP as an
        inducement to provide financing. The shares were valued at $31,968. At December
        31, 2006, the Note was completely repaid.
 
 On
        May
        20, 2005, the Company issued a $402,750 non-interest bearing Convertible
        Promissory Note, due December 20, 2005 at a discount of $52,750, to Dutchess
        Private Equities Fund, II, LP. The Note has a 0% interest rate. During the
        year
        ended December 31, 2005, $112,500 of this Note was repaid, and the balance
        was
        exchanged into a Convertible Debenture effective December 18, 2005. The balance
        at December 31, 2005 was zero. The Company issued 40,000 shares to Dutchess
        Private Equities Fund, II, LP as an inducement to provide financing. The
        shares
        were valued at $46,500. At December 31, 2006, the Note was completely
        repaid.
 
 On
        June
        2, 2005, the Company issued a $540,000 non-interest bearing Convertible
        Promissory Note, due December 20, 2005 at a discount of $80,000, to Dutchess
        Private Equities Fund, II, LP. The Note has a 0% interest rate. During the
        year
        ended December 31, 2005, none of this Note was repaid, and the balance was
        exchanged into a Convertible Debenture effective December 18, 2005. The balance
        at December 31, 2005, was zero. The Company issued 54,000 shares to Dutchess
        Private Equities Fund, II, LP as an inducement to provide financing. The
        shares
        were valued at $50,700. At December 31, 2006, the Note was completely
        repaid.
 
 On
        July
        22, 2005, the Company issued a $258,000 non-interest bearing Convertible
        Promissory Note, due December 22, 2005 at a discount of $33,000, to Dutchess
        Private Equities Fund, II, LP. The Note has a 0% interest rate. During the
        year
        ended December 31, 2005, none of this Note was repaid, and the balance was
        exchanged into a Convertible Debenture effective December 18, 2005. The balance
        at December 31, 2005 was zero. The Company issued 10,000 shares to Dutchess
        Private Equities Fund, II, LP as an inducement to provide financing. The
        shares
        were valued at $8,925. At December 31, 2006, the Note was completely
        repaid.
 
 The
        Company awarded 750,000 warrants to its Chief Financial Officer upon his
        hiring
        during July 2005. 500,000 of the warrants vest one year after his date of
        hire,
        and 250,000 vest two years after his date of hire. 500,000 of the warrants
        are
        priced at $1.12 per share, and 250,000 are priced at $0.10 per share. The
        warrants have been cancelled.
 
 On
        August
        4, 2005, the Company issued a $162,000 non-interest bearing Convertible
        Promissory Note, due January 4, 2006 at a discount of $17,000, to Dutchess
        Private Equities Fund, II, LP. The Note has a 0% interest rate. During the
        year
        ended December 31, 2005, none of this Note was repaid, and the balance was
        exchanged into a Convertible Debenture effective December 18, 2005. The balance
        at December 31, 2005 was zero. The Company issued 25,000 shares to Dutchess
        Private Equities Fund, II, LP as an inducement to provide financing. The
        shares
        were valued at $15,937. At December 31, 2006, the Note was completely
        repaid.
 
 On
        August
        17, 2005, the Company issued a $247,200 non-interest bearing Convertible
        Promissory Note, due January 17, 2006 at a discount of $40,200, to Dutchess
        Private Equities Fund, II, LP. The Note has a 0% interest rate. During the
        year
        ended December 31, 2005, none of this Note was repaid, and the balance was
        exchanged into a Convertible Debenture effective December 18, 2005. The balance
        at December 31, 2005 was zero. The Company issued 37,000 shares to Dutchess
        Private Equities Fund, II, LP as an inducement to provide financing. The
        shares
        were valued at $24,975. At December 31, 2006, the Note was completely
        repaid.
 
 On
        August
        18 2005, the Company issued a $221,000 non-interest bearing Convertible
        Promissory Note, due December 18, 2005 at a discount of $37,000, to eFund
        Capital Partners. The Note has a 0% interest rate. During the year ended
        December 31, 2005, $18,211 of this Note was repaid, and the balance was
        exchanged into a Convertible Debenture effective December 18, 2005. The balance
        at December 31, 2005 was zero. The Company issued 30,000 shares to eFund
        Capital
        Partners as an inducement to provide financing. The shares were valued at
        $19,125. At December 31, 2006, the Note was completely repaid.
  F-22




On
        August
        18 2005, the Company issued a $84,000 non-interest bearing Convertible
        Promissory Note, due December 18, 2005 at a discount of $14,000, to Barrett
        Evans. The Note has a 0% interest rate. During the year ended December 31,
        2005,
        none of this Note was repaid, and the balance was exchanged into a Convertible
        Debenture effective December 18, 2005. The balance at December 31, 2005 was
        zero. We issued 10,000 shares to Barrett Evans as an inducement to provide
        financing. The shares were valued at $6,375. On September 16, 2005, the Company
        issued a $192,000 non-interest bearing Convertible Promissory Note, due March
        15, 2006 at a discount of $32,000, to Dutchess Private Equities Fund, II,
        LP.
        The Note has a 0% interest rate. During the year ended December 31, 2005,
        $162,752 of this Note was repaid, and the balance at December 31, 2005 was
        $29,248. The Company issued 50,000 shares to Dutchess Private Equities Fund,
        II,
        LP as an inducement to provide financing. The shares were valued at $31,500.
        At
        December 31, 2006, the Note was completely repaid.
 
 On
        September 30, 2005, the Company issued a $276,000 non-interest bearing
        Convertible Promissory Note, due March 30, 2006 at a discount of $46,000,
        to
        Dutchess Private Equities Fund, LP. The Note has a 0% interest rate. During
        the
        year ended December 31, 2005, none of this Note was repaid, and the balance
        at
        December 31, 2005 was $276,000. The Company issued 70,000 shares to Dutchess
        Private Equities Fund, LP as an inducement to provide financing. The shares
        were
        valued at $42,000. At December 31, 2006, the Note was completely
        repaid.
 
 On
        October 11, 2005, the Company issued a $30,000 non-interest bearing Convertible
        Promissory Note, due April 11, 2006 at a discount of $5,000, to Dutchess
        Private
        Equities Fund, LP. The Note has a 0% interest rate. During the year ended
        December 31, 2005, none of this Note was repaid, and the balance December
        31,
        2005 was $30,000. The Company issued 8,000 shares to Dutchess Private Equities
        Fund, LP as an inducement to provide financing. The shares were valued at
        $5,000. At December 31, 2006, the Note was completely repaid.
 
 Effective
        November 1, 2005, the Company agreed to issue a convertible debenture to
        eFund
        Capital Partners, in the amount of $180,000, at a discount of $176,200. The
        debenture has a 10% interest rate and is due and payable November 1, 2009.
        The
        debentures are convertible into shares of the Company’s common stock at a price
        equal to the lesser of; (i) 75% of the average of the closing bid price of
        the
        stock for the five days prior to conversion or (ii) the average of the closing
        bid price of the stock on the five days immediately preceding the date of
        the of
        debenture agreement. At December 31, 2006, the debenture was completely
        repaid.
 
 Effective
        December 15, 2005, the Company entered into a Convertible Debenture Exchange
        Agreement with Dutchess Private Equities Fund, II, LP and eFund Capital Partners
        to exchange the unpaid balance of promissory notes issued in 2005 worth
        $1,784,239 into 10%, 4-year term, Convertible Debentures. The debentures
        are
        convertible at the lesser of (i) 75% of the average of the lowest closing
        bid
        price during fifteen immediately preceding the conversion date or (ii) 100%
        of
        the average of the closing bid price of the stock for the twenty days
        immediately preceding the closing date of the debenture agreement. At December
        31, 2006, the debentures were completely repaid.
 
 The
        Convertible Promissory Notes shall be paid in cash or in shares of common
        stock,
        par value $0.001 per share, of the Company, at the Company's option, at the
        time
        of each conversion. The Company shall pay interest on the unpaid principal
        amount of this Promissory Note at the time of each conversion until the
        principal amount hereof is paid in full or has been converted. If the interest
        is to be paid in cash, the Company shall make such payment within five (5)
        business days of the date of conversion. If the interest is to be paid in
        Common
        Stock, said Common Stock shall be delivered to the Holder, or per Holder's
        instructions, within five (5) business days of the date of conversion. The
        Promissory Notes are subject to automatic conversion at the maturity date
        at
        which time all Promissory Notes outstanding will be automatically converted
        based upon the formula set forth in the agreement. At December 31, 2006 the
        debenture was completely repaid.
 
 On
        October 3, 2006, the Company acquired the assets of Interaccurate, Inc.
        including software, intellectual properties, and a web hosting facility.
        Total
        consideration of $235,000 consisted of $176,239 in cash 42,266 shares of
        common
        stock. The Company’s executives Michael Hill, Charlie Gugliuzza, and Ethan
        Brooks were parties to the transaction.
  NOTE
        14 -
        SUBSEQUENT EVENTS
 
 On
        November 27, 2006, the Board of Directors authorized the repurchase of its
        outstanding common stock through December 31, 2007 in the open market or
        in any
        private transaction, from time-to-time and in accordance with applicable
        laws,
        rules and regulations, subject to an aggregate purchase limit of $2,000 000.
 
 On
        February 26, 2007, the Company filed Articles of Correction with the Utah
        Department of Commerce’s Division of Corporations which corrected an incorrect
        statement in the Articles of Incorporation relating to the conversion rate
        of
        the Company's Series D Convertible Preferred Stock.
  On
        February 16, 2007, 3,037,500 shares of the Company’s common stock, par value
        $0.001 per share were sold to JLF Partners I, L.P., JLF Partners II, L.P.
        and
        JLF Offshore Fund, Ltd. The sale of the shares was made pursuant to a Securities
        Purchase Agreement, dated February 7, 2006. Shares held by Michael Hill,
        Charles
        Gugliuzza, David Foucar, Aaron Gravitz, Ethan Brooks and Miguel Angel Vazquez
        were sold for a purchase price of $1.90 per share, which represented a 10%
        discount to the average trailing 20 day closing bid price for the shares
        of the
        Common Stock.
  In
        a
        separate transaction, on February 16, 2007, 1,800,000 shares of the Company’s
        Common Stock were sold to selected institutional investors. The sale of the
        shares was made pursuant to a Securities Purchase Agreement, dated February
        12,
        2006. Shares held by eFund Capital Partners were sold to institutional investors
        and were sold for a purchase price of $1.90 per share. Subsequent to the
        this
        transaction, eFund will remain a major shareholder of the Company.




F-23




**ITEM
      8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
      FINANCIAL DISCLOSURE.**





None.





**ITEM
      8A. CONTROLS AND PROCEDURES.**





As
      of the
      end of the period covered by this Annual Report on Form 10-KSB, an evaluation
      was performed under the supervision and with the participation of our
      management, including the Chief Executive Officer and Chief Financial Officer,
      of the effectiveness of the design and operation of our disclosure controls
      and
      procedures (as defined in Rules 13a-14 and 15d-14 of the Securities Exchange
      Act
      of 1934). Based on that evaluation, our Chief Executive Officer and Chief
      Financial Officer concluded that our disclosure controls and procedures are
      effective to ensure that information we are required to disclose in reports
      that
      we file or submit under the Securities Exchange Act of 1934 (i) is recorded,
      processed, summarized and reported within the time periods specified in
      Securities and Exchange Commission rules and forms, and (ii) is accumulated
      and
      communicated to our management, including our Chief Executive Officer and Chief
      Financial Officer, as appropriate, to allow timely decisions regarding required
      disclosure. Our disclosure controls and procedures are designed to provide
      reasonable assurance that such information is accumulated and communicated
      to
      our management. Our disclosure controls and procedures include components of
      our
      internal control over financial reporting. Management's assessment of the
      effectiveness of our internal control over financial reporting is expressed
      at
      the level of reasonable assurance that the control system, no matter how well
      designed and operated, can provide only reasonable, but not absolute, assurance
      that the control system's objectives will be met.





CHANGES
      IN INTERNAL CONTROLS





There
      was
      no change in our internal control over financial reporting that occurred during
      the fourth quarter covered by this Annual Report on Form 10-KSB that materially
      affected, or is reasonably likely to materially affect, our internal control
      over financial reporting.





**ITEM
      8B. OTHER INFORMATION.**





None.




-
          38
          -


**PART
      III**





**ITEM
      9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
      COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.**





The
      following table sets forth the name, age, positions and offices or employments
      for the past five years as of December 31, 2006, of our executive officers
      and
      directors. Members of the board are elected and serve for one year terms or
      until their successors are elected and qualify. All of the officers serve at
      the
      pleasure of the Board of Directors of the Company.




NAME
            
            AGE
            
            POSITIONMichael Hill
            
            30
            
            Chief Executive Officer, Chairman of
              the
              Board of DirectorsDavid Foucar
            
            46
            
            Chief Financial Officer,
              DirectorCharlie Gugliuzza
            
            32
            
            President,
              Director




MICHAEL
      HILL has been our Chief Executive Officer and Director since January 15, 2004.
      Mr. Hill was appointed to the position of Chairman of the Board of Directors
      on
      August 18, 2006. From 1999 until 2003, Mr. Hill acted as President and Chief
      Executive Officer of Intravantage Marketing, another Santa Barbara based
      marketing firm, while simultaneously serving as a consultant for several smaller
      organizations. From January 1998 until starting Intavantage Marketing he was
      the
      Vice President of International Specialties, Inc.





DAVID
      FOUCAR has been our Chief Financial Officer since June 13, 2006. Mr. Foucar
      has
      served as Director since August 18, 2006. Mr. Foucar has over 20 years of
      experience in finance and accounting including 10 years in the technology
      industry. From October 2003 until June 2006, Mr. Foucar was the President and
      Owner of Malibu West, a Financial Consulting firm. From March 2001 to October
      2003, Mr. Foucar served as Director of Financial Planning and Analysis for
      Intel, Inc.’s Mobile Communications Division. His experience also includes
      management positions at Xircom, Inc., as well as financial management positions
      at Intel, Inc., Nestle USA, and Siemens AG. Mr. Foucar received his B.S. in
      Business Management and Economics from the University of La Verne, and an M.B.A.
      in Finance from California Lutheran University.




CHARLIE
      GUGLIUZZA has served as our Director since August 18, 2006. Mr. Gugliuzza has
      served as our President since September 7, 2006. From May 2006 until September
      2006, Mr. Gugliuzza was employed as a consultant with Olive Tree Consulting.
      Prior to this position, Mr. Gugliuzza was the Chief Executive Officer of
      American Power Supplies from February 2004 to April 2005. He served as the
      Chief
      Operating Officer of Battery—Biz from January 2002 until January 2004. Mr
      Gugliuzza also served as the Chief Operating Officer of eBatts.com from January
      1999 to December 2001. Mr. Gugliuzza received his B.A. in Political Science
      from
      the University of California at Irvine, and his J.D. from the University of
      Loyola—Los Angeles.





BOARD
      OF
      DIRECTORS




We
      currently have three members of our Board of Directors, who are elected to
      annual terms and until their successors are elected and qualified. Executive
      officers are appointed by the Board of Directors on an annual basis and serve
      until their successors have been duly elected and qualified. There are no family
      relationships among any of our directors, officers or key
      employees.





AUDIT
      COMMITTEE





We
      do not
      have a separate Audit Committee. Our full Board of Directors performs the
      functions usually designated to an Audit Committee. Mr. Foucar, a Director,
      qualifies as an "audit committee financial expert" as defined in Item 401(e)(2)
      of Regulation S-B.





CODE
      OF
      ETHICS





We
      have
      adopted a code of ethics that applies to our principal executive officer,
      principal financial officer, principal accounting officer or controller, or
      persons performing similar functions. We filed our Code of Ethics to our Report
      on Form 10-KSB for the year ended December 31, 2003 as Exhibit 14.1. Our Code
      of
      Ethics is available upon request at no charge to any
      shareholder.


-
          39
          -




**ITEM
      10. EXECUTIVE COMPENSATION.**





The
      following table presents a summary of the compensation paid to our Chief
      Executive Officer, our Chief Financial Officer and our President, during the
      fiscal year ended December 31, 2006. Except as listed below, there are no
      bonuses, other annual compensation, restricted stock awards or stock
      options/SARs or any other compensation paid to the named executive
      officers.





**Summary
      Compensation Table**





Name
                and Principal
            
            Year
              Ended
            
            Base
                Salary
            
            Bonus
            
            Stock
                Awards
            
            Option
                Awards
            
            Non-equity
                plan compensation
            
            Non-qualified
                Deferred compensation Earnings
            
            All
                Other Compensation
            
            Dollar
                Value of total compensation for the covered fiscal yearPosition
            
            December
                31,
            
            $
            
            $
            
            $
            
            $
            
            $
            
            $
            
            $
            
            $(a)
            
            (b)
            
            (c)
            
            (d)
            
            (e)
            
            (f)
            
            (g)
            
            (h)
            
            (i)
            
            (j)**Michael
                Hill**
            
            2006
            
            305,408
            
            224,458
            
            0
            
            480,422
                (1)(2)
            
            0
            
            0
            
            24,600
                (4)
            
            1,034,888Chief
                Executive Officer, Director
            
            2005
            
            164,308
            
            124,116
            
            0
            
            0
            
            0
            
            0
            
            0
            
            288,424**Charlie
                Gugliuzza**
            
            2006
            
            109,038
            
            224,446
            
            0
            
            480,422
                (1)(2)
            
            0
            
            0
            
            25,241
                (4)
            
            839,147President,
                Director**David
                Foucar**
            
            2006
            
            69,000
            
            17,316
            
            0
            
            210,015(1)(3)
            
            0
            
            0
            
            17,500
                (4)
            
            313,831Chief
                Financial Officer, Director




(1)
      The
      members of our Board of Directors received a Series D Preferred Stock Purchase
      Warrant for 1 share of our Series D Convertible Preferred Stock as compensation
      for serving as director.





(2)
      Mr.
      Hill and Mr. Gugliuzza received 12 shares of our Series D Preferred Stock as
      compensation for serving as Chief Executive Officer and President, respectively.





(3)
      Mr.
      Foucar received a one time stock option grant of 0.25% of the total number
      of
      shares outstanding as of June 13, 2006. The options vest over 24 months on
      a
      pro-rata basis.





(4)
      Includes $15,000 paid to each of our directors for expenses they incurred in
      performing their duties for the Board.





EXECUTIVE
      COMPENSATION NARRATIVE




On
        September 7, 2006, we entered into an employment agreement with our Chief
        Executive Officer, Michael Hill, whereby he receives an annual salary of
        $350,000. In addition, Mr. Hill will receive an annual bonus equal to 5%
        of our
        adjusted net profits. In the third quarter of 2006, Mr. Hill received 12
        shares
        of our Series D Preferred Stock as compensation for serving as our Chief
        Executive Officer.
 
 On
        September 7, 2006, our Board of Directors appointed Charlie Gugliuzza as
        our
        President. On September 1, 2006, we also entered into an employment agreement
        with Mr. Gugliuzza whereby he receives an annual salary of $350,000. In
        addition, Mr. Gugliuzza will receive an annual bonus equal to 5% of our adjusted
        net profits. In the third quarter of 2006, Mr. Gugliuzza received 12 shares
        of
        our Series D Preferred Stock as compensation for serving as our President.
 
 On
        June
        13, 2006, our Board of Directors appointed David Foucar as Chief Financial
        Officer. Under Mr. Foucar’s employment agreement he receives an annual salary of
        $130,000. In addition, he is eligible to receive an annual bonus of up to
        20% of
        his annual salary. Mr. Foucar also received a one time stock option grant
        of
        0.25% of the total number of shares outstanding as of June 13, 2006. The
        options
        vest over 24 months on a pro-rata basis.


-
          40
          -




**Outstanding
      Equity Awards at Fiscal Year-End Table**





Option
                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 ($)(a)
            
            (b)
            
            (c)
            
            (d)
            
            (e)
            
            (f)
            
            (g)
            
            (h)
            
            (i)
            
            (j)Michael
                Hill
            
            1,179,846
            
            0
            
            0
            
            0
            
            Jan.
                1, 2010
            
            0
            
            0
            
            0
            
            0Charlie
                Gugliuzza
            
            1,179,846
            
            0
            
            0
            
            0
            
            Jan.
                1, 2010
            
            0
            
            0
            
            0
            
            0David
                Foucar
            
            31,270
            
            81,734
            
            0
            
            0
            
            Jun.
                13, 2010
            
            0
            
            0
            
            0
            
            0




DIRECTOR
      COMPENSATION





The
      following table presents a summary of the compensation paid to the members
      of
      our Board of Directors during the fiscal year ended December 31, 2006. Except
      as
      listed below, no other compensation was paid to our Directors.





**Director
      Compensation Table**





Name
            
            Fees
                Earned or Paid in Cash
            
            Stock
                Awards
            
            Option
                Awards
            
            Non-equity
                plan compensation
            
            Non-qualified
                Deferred compensation Earnings
            
            All
                Other Compensation
            
            Total$
            
            $
            
            $
            
            $
            
            $
            
            $
            
            $(a)
            
            (b)
            
            (c)
            
            (d)
            
            (g)
            
            (h)
            
            (i)
            
            (j)Michael
                Hill
            
            15,000
            
            187,566
            
            0
            
            0
            
            0
            
            0
            
            202,566Charlie
                Gugliuzza
            
            15,000
            
            187,566
            
            0
            
            0
            
            0
            
            0
            
            202,566David
                Foucar
            
            15,000
            
            187,566
            
            0
            
            0
            
            0
            
            0
            
            202,566





DIRECTOR
      COMPENSATION AGREEMENT





Starting
      in 2006, our Directors receive $3,000 for each month of service. In addition,
      our Directors received one share of Series D Convertible Preferred Stock as
      compensation during the third quarter of 2006.




-
          41
          -


**ITEM
      11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
      AND RELATED STOCKHOLDER MATTERS.**





The
      following table sets forth certain information concerning the beneficial
      ownership of our outstanding classes of stock as of December 31, 2006, by each
      person known by us to (i) own beneficially more than 5% of each class, (ii)
      by
      each of our Directors and Executive Officers and (iii) by all Directors and
      Executive Officers as a group. Unless otherwise indicated below, to our
      knowledge, all persons listed below have sole voting and investment power with
      respect to their shares of common stock except to the extent that authority
      is
      shared by spouses under applicable law.





**Name
                and Title of Beneficial Owner**
            
            **Amount
                and Nature of Beneficial Ownership**
            
            **Percentage**Michael
                Hill (b)
              30
                S. La Patera Lane, Suite 8
              Goleta,
                CA 93117
            
            10,553,041
            
            21.2%David
                Foucar (c)
              30
                S. La Patera Lane, Suite 8
              Goleta,
                CA 93117
            
            220,200
            
            *Charlie
                Gugliuzza (d)
              30
                S. La Patera Lane, Suite 8
              Goleta,
                CA 93117
            
            2,635,291
            
            5.3%Barrett
                Evans (e)
              301
                East Ocean Blvd.
              Long
                Beach, CA 90802
            
            10,291,250
            
            21.4%Michael
                A. Novielli (f)
              100
                Mill Plain Rd., 3rd Floor
              Danbury,
                CT 06811
            
            7,057,750
            
            14.0%Douglas
                Leighton (g)
              50
                Commonwealth Ave.
              Boston,
                MA 02116
            
            7,057,750
            
            14.0%Dutchess
                Advisors, LLC (h)
              50
                Commonwealth Ave.
              Boston,
                MA 02116
            
            3,600,000
            
            7.6%eFund
                Capital Parthers, LLC (i)
              301
                East Ocean Blvd.
              Long
                Beach, CA 90802
            
            7,013,250
            
            14.7%eFund
                Small-Cap Fund (j)
              301
                East Ocean Blvd.
              Long
                Beach, CA 90802
            
            3,300,000
            
            6.9%Aaron
                Gravitz (k)
              327
                Woodley Court
              Santa
                Barbara, CA 93105
            
            2,608,571
            
            5.5%All
                Directors and current executive officers as a group
            
            13,408,532
            
            25.5%





***** Less
      than
      1%





a)
      Percentage calculations are based on 47,193,839 shares issued and outstanding
      as
      of December 31, 2006.





b)
      Mr.
      Hill owns 7,996,500 of common stock and 13 shares of Series D Convertible Stock
      that can be converted within 60 days into 2,556,541 shares of common stock.
      Each
      share of Series D Convertible Preferred Stock converts into 0.4167% of the
      total
      number of shares issued and outstanding on the date of conversion.





c)
      Mr.
      Foucar owns 23,543 shares of common stock that are issuable within 60 days
      upon
      the exercise of options. The options have an exercise price of $0.45 per share
      and expire on June 13, 2010. Mr. Foucar also owns 1 share of Series D
      Convertible Stock that can be converted within 60 days into 196,657 shares
      of
      common stock. Each share of Series D Convertible Preferred Stock converts into
      0.4167% of the total number of shares issued and outstanding on the date of
      conversion.





d)
      Mr.
      Gugliuzza owns 78,750 shares of common stock that are issuable within 60 days
      upon the exercise of warrants. The warrants have an exercise price of $0.18
      per
      share and expire on December 25, 2009. Mr. Gugliuzza also owns 13 shares of
      Series D Convertible Stock that can be converted within 60 days into 2,163,227
      shares of common stock. Each share of Series D Convertible Preferred Stock
      converts into 0.4167% of the total number of shares issued and outstanding
      on
      the date of conversion.





e)
      Mr.
      Evans owns 10,000 shares of common stock, 6,531,250 shares of common stock
      through eFund Capital Partners, LLC and 3,000,000 shares of common stock through
      eFund Small Cap Fund, LP. Mr. Evans owns 225,000 shares of common stock through
      eFund Capital Partners, LLC that are issuable within 60 days upon the exercise
      of warrants with an exercise price of $1.53 per share and an expiration date
      of
      April 1, 2008. Mr. Evans owns 225,000 shares of common stock through eFund
      Capital Partners, LLC that are issuable within 60 days upon the exercise of
      warrants with an exercise price of $1.42 and an expiration date of May 5, 2008.
      Mr. Evans owns 150,000 shares of common stock through eFund Small Cap Fund
      LP
      that are issuable within 60 days upon the exercise of warrants with an exercise
      price of $1.03 per share and an expiration date of August 18, 2008. Mr. Evans
      owns 150,000 shares of common stock through eFund Small Cap Fund LP that are
      issuable within 60 days upon the exercise of warrants with an exercise price
      of
      $1.25 and an expiration date of September 25, 2008.





f)
      Mr.
      Novielli owns 128,000 shares of common stock through Dutchess Private Equities
      Fund, L.P., 179,750 shares of common stock through Dutchess Private Equities
      Fund II, L.P., 3,600,000 shares of common stock through Dutchess Advisors,
      LLC.
      Mr. Novielli owns 540,000 shares of common stock through Dutchess Private
      Equities Fund, L.P. that are issuable within 60 days upon the exercise of
      warrants with an exercise price of $1.25 and an expiration date of September
      25,
      2008. Mr. Novielli owns 720,000 shares of common stock through Dutchess Private
      Equities Fund, L.P. that are issuable within 60 days upon the exercise of
      warrants with an exercise price of $1.25 and an expiration date of December
      18,
      2008. Mr. Novielli owns 225,000 shares of common stock through Dutchess Private
      Equities Fund II, L.P. that are issuable within 60 days upon the exercise of
      warrants with an exercise price of $1.42 and an expiration date of April 1,
      2008. Mr. Novielli owns 225,000 shares of common stock through Dutchess Private
      Equities Fund II, L.P. that are issuable within 60 days upon the exercise of
      warrants with an exercise price of $1.42 and an expiration date of May 5, 2008.
      Mr. Novielli owns 450,000 shares of common stock through Dutchess Private
      Equities Fund II, L.P. that are issuable within 60 days upon the exercise of
      warrants with an exercise price of $1.17 and an expiration date of July 7,
      2008.
      Mr. Novielli owns 360,000 shares of common stock through Dutchess Private
      Equities Fund II, L.P. that are issuable within 60 days upon the exercise of
      warrants with an exercise price of $1.03 and an expiration date of August 18,
      2008. Mr. Novielli owns 150,000 shares of common stock through Dutchess Private
      Equities Fund II, L.P. that are issuable within 60 days upon the exercise of
      warrants with an exercise price of $1.53 and an expiration date of October
      25,
      2008. Mr. Novielli owns 480,000 shares of common stock through Dutchess Private
      Equities Fund II, L.P. that are issuable within 60 days upon the exercise of
      warrants with an exercise price of $1.25 and an expiration date of November
      11,
      2008.




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          42
          -




g)
      Mr.
      Leighton owns 128,000 shares of common stock through Dutchess Private Equities
      Fund, L.P., 179,750 shares of common stock through Dutchess Private Equities
      Fund II, L.P. and 3,600,000 shares of common stock through Dutchess
      Advisors, LLC. Mr. Leighton owns 540,000 shares of common stock through
      Dutchess Private Equities Fund, L.P. that are issuable within 60 days upon
      the
      exercise of warrants with an exercise price of $1.25 and an expiration date
      of
      September 25, 2008. Mr. Leighton owns 720,000 shares of common stock through
      Dutchess Private Equities Fund, L.P. that are issuable within 60 days upon
      the
      exercise of warrants with an exercise price of $1.25 and an expiration date
      of
      December 18, 2008. Mr. Leighton owns 225,000 shares of common stock through
      Dutchess Private Equities Fund II, L.P. that are issuable within 60 days upon
      the exercise of warrants with an exercise price of $1.42 and an expiration
      date
      of April 1, 2008. Mr. Leighton owns 225,000 shares of common stock through
      Dutchess Private Equities Fund II, L.P. that are issuable within 60 days upon
      the exercise of warrants with an exercise price of $1.42 and an expiration
      date
      of May 5, 2008. Mr. Leighton owns 450,000 shares of common stock through
      Dutchess Private Equities Fund II, L.P. that are issuable within 60 days upon
      the exercise of warrants with an exercise price of $1.17 and an expiration
      date
      of July 7, 2008. Mr. Leighton owns 360,000 shares of common stock through
      Dutchess Private Equities Fund II, L.P. that are issuable within 60 days upon
      the exercise of warrants with an exercise price of $1.03 and an expiration
      date
      of August 18, 2008. Mr. Leighton owns 150,000 shares of common stock through
      Dutchess Private Equities Fund II, L.P. that are issuable within 60 days upon
      the exercise of warrants with an exercise price of $1.53 and an expiration
      date
      of October 25, 2008. Mr. Leighton owns 480,000 shares of common stock through
      Dutchess Private Equities Fund II, L.P. that are issuable within 60 days upon
      the exercise of warrants with an exercise price of $1.25 and an expiration
      date
      of November 11, 2008.





h)
      Dutchess Advisors owns 3,600,000 shares of common stock. Michael Novielli and
      Douglas Leighton have voting and dispositive power over the shares held by
      Dutchess Advisors, LLC.





i)
      eFund
      Capital Partners owns 6,531,250 shares of common stock. eFund Capital Partners
      owns 225,000 shares of common stock that are issuable within 60 days upon the
      exercise of warrants with an exercise price of $1.53 per share and an expiration
      date of April 1, 2008. eFund Capital Partners owns 225,000 shares of common
      stock that are issuable within 60 days upon the exercise of warrants with an
      exercise price of $1.42 and an expiration date of May 5, 2008. Barrett Evans
      has
      voting and dispositive power over the shares held by eFund Capital Partners
      LLC.





j)
      eFund
      Small Cap Fund, L.P. owns 3,000,000 shares of common stock. eFund Small Cap
      Fund, L.P. owns 150,000 shares of common stock that are issuable within 60
      days upon the exercise of warrants with an exercise price of $1.03 per share
      and
      an expiration date of August 18, 2008. eFund Small Cap Fund, L.P. owns 150,000
      shares of common stock that are issuable within 60 days upon the exercise of
      warrants with an exercise price of $1.25 and an expiration date of September
      25,
      2008. Barrett Evans has voting and dispositive power over the shares held by
      eFund Small Cap Fund, L.P.





k)
      Aaron
      Gravitz owns 2,608,571 shares of common stock.





**ITEM
      12. CERTAIN RELATIONSHIPS AND RELATED
      TRANSACTIONS.**




On
        February 11, 2005, we issued a Note to Dutchess Private Equities Fund, II,
        in
        the amount of $360,000, at a discount of $60,000. The Note has a 0% interest
        rate. During the year ended December 31, 2005, this Note was repaid, and
        the
        balance at December 31, 2005 was zero. We issued 37,500 shares to the Holder
        as
        an inducement to provide financing. The shares were valued at $40,219. At
        December 31, 2006 the Note was completely repaid.
 
 In
        February 2005, we entered into a software agreement with Discount Solutions,
        Inc. to purchase certain software license rights to software that is used
        to
        provide web based stores to our customers. We agreed to purchase a perpetual
        license for use of the software of $52,500, and to compensate Discount Solutions
        $24,000 monthly for the full service hosting and maintenance of our customers'
        web stores. Our Chief Executive Officer is a majority owner of Discount
        Solutions. This agreement automatically renews monthly unless notice is provided
        be either party. We intend to renegotiate and extend the terms of this
        agreement.
 
 On
        April
        18, 2005, we issued a $132,000 non-interest bearing Convertible Promissory
        Note,
        due August 18, 2005 at a discount of $44,000, to eFund Capital Partners,
        LLC and
        Dutchess Private Equities Fund, II, LP. The Notes have a 0% interest rate.
        During the year ended December 31, 2005, this Note was repaid, and the balance
        at December 31, 2005 was zero. We issued 13,750 shares to eFund Capital Partners
        and Dutchess Private Equities Fund, II, LP as an inducement to provide
        financing. The shares were valued at $31,968. At December 31, 2006, the Note
        was
        completely repaid.


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          43
          -




On
        May
        20, 2005, we issued a $402,750 non-interest bearing Convertible Promissory
        Note,
        due December 20, 2005 at a discount of $52,750, to Dutchess Private Equities
        Fund, II, LP. The Note has a 0% interest rate. During the year ended December
        31, 2005, $112,500 of this Note was repaid, and the balance was exchanged
        into a
        Convertible Debenture effective December 18, 2005. The balance at December
        31,
        2005 was zero. We issued 40,000 shares to Dutchess Private Equities Fund,
        II, LP
        as an inducement to provide financing. The shares were valued at $46,500.
        At
        December 31, 2006, the Note was completely repaid.
 
 On
        June
        2, 2005, we issued a $540,000 non-interest bearing Convertible Promissory
        Note,
        due December 20, 2005 at a discount of $80,000, to Dutchess Private Equities
        Fund, II, LP. The Note has a 0% interest rate. During the year ended December
        31, 2005, none of this Note was repaid, and the balance was exchanged into
        a
        Convertible Debenture effective December 18, 2005. The balance at December
        31,
        2005 was zero. We issued 54,000 shares to Dutchess Private Equities Fund,
        II, LP
        as an inducement to provide financing. The shares were valued at $50,700.
        At
        December 31, 2006, the Note was completely repaid.
 
 On
        July
        22, 2005, we issued a $258,000 non-interest bearing Convertible Promissory
        Note,
        due December 22, 2005 at a discount of $33,000, to Dutchess Private Equities
        Fund, II, LP. The Note has a 0% interest rate. During the year ended December
        31, 2005, none of this Note was repaid, and the balance was exchanged into
        a
        Convertible Debenture effective December 18, 2005. The balance at December
        31,
        2005 was zero. We issued 10,000 shares to Dutchess Private Equities Fund,
        II, LP
        as an inducement to provide financing. The shares were valued at $8,925.
        At
        December 31, 2006, the Note was completely repaid.
 
 We
        awarded seven hundred and fifty thousand warrants to our Chief Financial
        Officer
        upon his hiring during July 2005. Five hundred thousand of the warrants vest
        one
        year after his date of hire, and two hundred fifty thousand vest two years
        after
        his date of hire. Five hundred thousand of the warrants are priced at $1.12
        per
        share, and two hundred fifty thousand are priced at $0.10 per share. The
        warrants have been cancelled.
 
 On
        August
        4, 2005, we issued a $162,000 non-interest bearing Convertible Promissory
        Note,
        due January 4, 2006 at a discount of $17,000, to Dutchess Private Equities
        Fund,
        II, LP. The Note has a 0% interest rate. During the year ended December 31,
        2005, none of this Note was repaid, and the balance was exchanged into a
        Convertible Debenture effective December 18, 2005. The balance at December
        31,
        2005 was zero. We issued 25,000 shares to Dutchess Private Equities Fund,
        II, LP
        as an inducement to provide financing. The shares were valued at $15,937.
        At
        December 31, 2006, the Note was completely repaid.
 
 On
        August
        17, 2005, we issued a $247,200 non-interest bearing Convertible Promissory
        Note,
        due January 17, 2006 at a discount of $40,200, to Dutchess Private Equities
        Fund, II, LP. The Note has a 0% interest rate. During the year ended December
        31, 2005, none of this Note was repaid, and the balance was exchanged into
        a
        Convertible Debenture effective December 18, 2005. The balance at December
        31,
        2005 was zero. We issued 37,000 shares to Dutchess Private Equities Fund,
        II, LP
        as an inducement to provide financing. The shares were valued at $24,975.
        At
        December 31, 2006, the Note was completely repaid.
 
 On
        August
        18 2005, we issued a $221,000 non-interest bearing Convertible Promissory
        Note,
        due December 18, 2005 at a discount of $37,000, to eFund Capital Partners.
        The
        Note has a 0% interest rate. During the year ended December 31, 2005, $18,211
        of
        this Note was repaid, and the balance was exchanged into a Convertible Debenture
        effective December 18, 2005. The balance at December 31, 2005 was zero. We
        issued 30,000 shares to eFund Capital Partners as an inducement to provide
        financing. The shares were valued at $19,125. At December 31, 2006, the Note
        was
        completely repaid.
 
 On
        August
        18 2005, we issued a $84,000 non-interest bearing Convertible Promissory
        Note,
        due December 18, 2005 at a discount of $14,000, to Barrett Evans. The Note
        has a
        0% interest rate. During the year ended December 31, 2005, none of this Note
        was
        repaid, and the balance was exchanged into a Convertible Debenture effective
        December 18, 2005. The balance at December 31, 2005 was zero. We issued 10,000
        shares to Barrett Evans as an inducement to provide financing. The shares
        were
        valued at $6,375. On September 16, 2005, we issued a $192,000 non-interest
        bearing Convertible Promissory Note, due March 15, 2006 at a discount of
        $32,000, to Dutchess Private Equities Fund, II, LP. The Note has a 0% interest
        rate. During the year ended December 31, 2005, $162,752 of this Note was
        repaid,
        and the balance at December 31, 2005 was $29,248. We issued 50,000 shares
        to
        Dutchess Private Equities Fund, II, LP as an inducement to provide financing.
        The shares were valued at $31,500. At December 31, 2006, the Note was completely
        repaid.
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            44
            -




On
        September 30, 2005, we issued a $276,000 non-interest bearing Convertible
        Promissory Note, due March 30, 2006 at a discount of $46,000, to Dutchess
        Private Equities Fund, LP. The Note has a 0% interest rate. During the year
        ended December 31, 2005, none of this Note was repaid, and the balance at
        December 31, 2005 was $276,000. We issued 70,000 shares to Dutchess Private
        Equities Fund, LP as an inducement to provide financing. The shares were
        valued
        at $42,000. At December 31, 2006, the Note was completely repaid.
 
 On
        October 11, 2005, we issued a $30,000 non-interest bearing Convertible
        Promissory Note, due April 11, 2006 at a discount of $5,000, to Dutchess
        Private
        Equities Fund, LP. The Note has a 0% interest rate. During the year ended
        December 31, 2005, none of this Note was repaid, and the balance December
        31,
        2005 was $30,000. We issued 8,000 shares to Dutchess Private Equities Fund,
        LP
        as an inducement to provide financing. The shares were valued at $5,000.
        At
        December 31, 2006, the Note was completely repaid.
 
 Effective
        November 1, 2005, we agreed to issue a convertible debenture to eFund Capital
        Partners, in the amount of $180,000, at a discount of $176,200. The debenture
        has a 10% interest rate and is due and payable November 1, 2009. The debentures
        are convertible into shares of our common stock at a price equal to the lesser
        of; (i) seventy-five percent of the average of the closing bid price of the
        stock for the five days prior to conversion or (ii) the average of the closing
        bid price of the stock on the five days immediately preceding the date of
        the of
        debenture agreement. At December 31, 2006, the debenture was completely
        repaid.
 
 Effective
        December 15, 2005, we entered into a Convertible Debenture Exchange Agreement
        with Dutchess Private Equities Fund, II, LP and eFund Capital Partners to
        exchange the unpaid balance of promissory notes issued in 2005 worth $1,784,239
        into 10%, 4-year term, Convertible Debentures. The debentures are convertible
        at
        the lesser of (i) seventy-five percent of the average of the lowest closing
        bid
        price during fifteen immediately preceding the conversion date or (ii) 100%
        of
        the average of the closing bid price of the stock for the twenty days
        immediately preceding the closing date of the debenture agreement. At December
        31, 2006, the debenture was completely repaid.
  On
        October 3, 2006 we acquired the assets of Interaccurate, Inc. including
        software, intellectual properties, and a web hosting facility. Total
        consideration of $235,000 consisting of $176,239 in cash 42,266 shares of
        common
        stock. Our executives Michael Hill, Charlie Gugliuzza, and Ethan Brooks were
        parties to the transaction.


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            45
            -




**ITEM
        13. EXHIBITS.**
  EXHIBIT
NUMBER
              DESCRIPTION


2.1
      Agreement and Plan of Reorganization between Utah Clay Technology, Inc. and
      NeWave, Inc., D.B.A. Online Supplier NeWave Shareholders and Dutchess Advisors,
      Ltd., dated December 24, 2003 (included as Exhibit 2.1 to the Form 8-K filed
      February 12, 2004, and incorporated herein by reference).





3.1
      Articles of Incorporation (included as Exhibit 3.(i) to the Form SB-2/A filed
      April 11, 2000, and incorporated herein by reference).





3.2
      Amended Articles of Incorporation (included as Exhibit 3.(i) to the Form 10-QSB
      filed November 14, 2001, and incorporated herein by reference).





3.3
      Articles of Amendment to Articles of Incorporation, dated January 30, 2004
      (included as Exhibit 3.2 to the 10-QSB filed May 24, 2004, and incorporated
      herein by reference).





3.4
      By-laws (included as Exhibit 3.(ii) to the Form SB-2/A filed April 11, 2000,
      and
      incorporated herein by reference).





3.5
      Articles of Amendment to the Amended and Restated Articles of Incorporation,
      dated May 18, 2006 (include as Exhibit 3.1 to the Form 8K filed June 8, 2006,
      and incorporated herein by reference).





3.6
      Certificate of Designation of Series C Convertible Preferred Stock (included
      as
      Exhibit 4.1 to the 10-KSB filed April 14, 2004, and incorporated herein by
      reference).





3.7
      Certificate of Designation for Series D Convertible Preferred Stock (included
      as
      Exhibit 3.1 to the Form 8-K filed August 9, 2006, and incorporated herein by
      reference).





3.8
      Restated Bylaws (included as Exhibit 3.1 to the Form 8-K filed September 8,
      2006, and incorporated herein by reference).





4.1
      Form
      Series C Convertible Preferred Stock Purchase Agreement (included as Exhibit
      4.2
      to the 10-KSB filed April 14, 2004, and incorporated herein by
      reference).





4.2
      Debenture Agreement between the Company and Dutchess Private Equities Fund,
      dated January 5, 2004 (included as Exhibit 4.1 to the Form 10-QSB filed May
      24,
      2004, and incorporated herein by reference).





4.3
      Debenture Agreement between the Company and Dutchess Private Equities Fund,
      dated January 25, 2004 (included as Exhibit 4.2 to the Form 10-QSB filed May
      24,
      2004, and incorporated herein by reference).





4.4
      Debenture Agreement between the Company and eFund Capital Partners, LLC, dated
      January 26, 2004 (included as Exhibit 4.3 to the Form 10-QSB filed May 24,
      2004,
      and incorporated herein by reference).





4.5
      Debenture Agreement between the Company and eFund Capital Partners, LLC, dated
      February 19, 2004 (included as Exhibit 4.4 to the Form 10-QSB filed May 24,
      2004, and incorporated herein by reference).





4.6
      Debenture Agreement between the Company and Preston Capital Partners, LLC,
      dated
      March 3, 2004 (included as Exhibit 4.5 to the Form 10-QSB filed May 24, 2004,
      and incorporated herein by reference).





4.7
      Debenture Agreement between the Company and Dutchess Private Equities Fund,
      II,
      dated April 1, 2004 (included as Exhibit 4.6 to the Form 10-QSB filed August
      23,
      2004, and incorporated herein by reference).





4.8
      Debenture Agreement between the Company and eFund Capital Partners, dated April
      2, 2004 (included as Exhibit 4.7 to the Form 10-QSB filed August 23, 2004,
      and
      incorporated herein by reference).


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          46
          -


4.9
      Debenture Agreement between the Company and Dutchess Private Equities Fund,
      II,
      dated May 5, 2004 (included as Exhibit 4.8 to the Form 10-QSB filed August
      23,
      2004, and incorporated herein by reference).





4.10
      Debenture Agreement between the Company and eFund Capital Partners, dated May
      5,
      2004 (included as Exhibit 4.9 to the Form 10-QSB filed August 23, 2004, and
      incorporated herein by reference).





4.11
      Warrant Agreement between the Company and Dutchess Private Equities Fund, II,
      LP, dated April 1, 2004 (included as Exhibit 4.10 to the Form SB-2 filed October
      8, 2004, and incorporated herein by reference).





4.12
      Warrant Agreement between the Company and eFund Capital Partners, dated April
      2,
      2004 (included as Exhibit 4.11 to the Form SB-2 filed October 8, 2004, and
      incorporated herein by reference).





4.13
      Warrant Agreement between the Company and Dutchess Private Equities Fund, II,
      LP, dated May 5, 2004 (included as Exhibit 4.12 to the Form SB-2 filed October
      8, 2004, and incorporated herein by reference).





4.14
      Warrant Agreement between the Company and eFund Capital Partners, dated May
      5,
      2004 (included as Exhibit 4.13 to the Form SB-2 filed October 8, 2004,and
      incorporated herein by reference).





4.15
      Warrant Agreement between the Company and Dutchess Private Equities Fund, II,
      LP, dated July 9, 2004 (included as Exhibit 4.14 to the Form SB-2 filed October
      8, 2004, and incorporated herein by reference).





4.16
      Debenture Agreement between the Company and Dutchess Private Equities Fund
      II,
      LP, dated July 9, 2004 (included as Exhibit 4.15 to the Form SB-2 filed October
      8, 2004, and incorporated herein by reference).





4.17
      Debenture Agreement between the Company and Dutchess Private Equities Fund
      II,
      LP, dated August 15, 2004 (included as Exhibit 4.16 to the Form SB-2 filed
      October 8, 2004, and incorporated herein by reference).





4.18
      Debenture Agreement between the Company and eFund Small Cap Fund, LP, dated
      August 15, 2004 (included as Exhibit 4.17 to the Form SB-2 filed October 8,
      2004, and incorporated herein by reference).





4.19
      Warrant Agreement between the Company and Dutchess Private Equities Fund, II,
      LP, dated August 18, 2004 (included as Exhibit 4.18 to the Form SB-2 filed
      October 8, 2004, and incorporated herein by reference).





4.20
      Warrant Agreement between the Company and eFund Small Cap Fund, LP, dated August
      18, 2004 (included as Exhibit 4.19 to the Form SB-2 filed October 8, 2004,
      and
      incorporated herein by reference).





4.21
      Debenture Agreement between the Company and Dutchess Private Equities Fund,
      LP,
      dated September 25, 2004 (included as Exhibit 4.20 to the Form SB-2 filed
      October 8, 2004, and incorporated herein by reference).





4.22
      Debenture Agreement between the Company and eFund Small Cap Fund, LP, dated
      September 25, 2004 (included as Exhibit 4.21 to the Form SB-2 filed October
      8,
      2004, and incorporated herein by reference).





4.23
      Warrant Agreement between the Company and Dutchess Private Equities Fund, LP,
      dated September 25, 2004 (included as Exhibit 4.22 to the Form SB-2 filed
      October 8, 2004, and incorporated herein by reference).





4.24
      Warrant Agreement between the Company and eFund Small Cap Fund, LP, dated
      September 25, 2004 (included as Exhibit 4.23 to the Form SB-2 filed October
      8,
      2004, and incorporated herein by reference).


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          47
          -


4.25
      Debenture Agreement between the Company and Dutchess Private Equities Fund,
      dated February 4, 2004 (included as Exhibit 4.24 to the Form SB-2 filed December
      9, 2004, and incorporated herein by reference).





4.26
      Debenture Agreement between the Company and Dutchess Private Equities Fund,
      II,
      LP, dated October 25, 2004 (included as Exhibit 4.25 to the Form 10-KSB filed
      April 15, 2005, and incorporated herein by reference).





4.27
      Warrant Agreement between the Company and Dutchess Private Equities Fund, II,
      LP, dated October 25, 2004 (included as Exhibit 4.26 to the Form 10-KSB filed
      April 15, 2005, and incorporated herein by reference).





4.28
      Debenture Agreement between the Company and Dutchess Private Equities Fund,
      II,
      LP, dated November 11, 2004 (included as Exhibit 4.27 to the Form 10-KSB filed
      April 15, 2005, and incorporated herein by reference).





4.29
      Warrant Agreement between the Company and Dutchess Private Equities Fund, LP,
      dated November 11, 2004 (included as Exhibit 4.28 to the Form 10-KSB Filed
      April
      15, 2005, and incorporated herein by reference).





4.30
      Debenture Agreement between the Company and Dutchess Private Equities Fund,
      II,
      LP, dated December 28, 2004 (included as Exhibit 4.29 to the Form 10-KSB filed
      April 15, 2005, and incorporated herein by reference).





4.31
      Warrant Agreement between the Company and Dutchess Private Equities Fund, LP,
      dated December 28, 2004 (included as Exhibit 4.30 to the Form 10-KSB filed
      April
      15, 2005, and incorporated herein by reference).





4.32
      Promissory Note between the Company and Dutchess Private Equities Fund, II,
      LP,
      dated February 11, 2005 (included as Exhibit 4.31 to the Form 10-QSB filed
      May
      23, 2005, and incorporated herein by reference).





4.33
      Promissory Note between the Company and eFund Small Cap Fund, L.P., dated April
      8, 2005 (included as Exhibit 4.34 to the Form 10-QSB filed August 19, 2005,
      and
      incorporated herein by reference).





4.34
      Promissory Note between the Company and Dutchess Private Equities Fund, II,
      LP,
      dated April 12, 2005 (included as Exhibit 4.38 to the Form 10-QSB filed August
      19, 2005, and incorporated herein by reference).





4.35
      Promissory Note between the Company and Dutchess Private Equities Fund, II,
      LP,
      dated May 20, 2005 (included as Exhibit 4.38 to the Form 10-QSB filed August
      19,
      2005, and incorporated herein by reference).





4.36
      Promissory Note between the Company and Dutchess Private Equities Fund, II,
      LP,
      dated June 2, 2005 (included as Exhibit 4.38 to the Form 10-QSB filed August
      19,
      2005, and incorporated herein by reference).





4.37
      Receivable Factoring Agreement between the Company and Dutchess Private Equities
      Fund, II, LP, dated June 8, 2005 (included as Exhibit 4.38 to the Form 10-QSB
      filed August 19, 2005, and incorporated herein by reference).





4.38
      Promissory Note between the Company and Dutchess Private Equities Fund, II,
      LP,
      dated July 22, 2005 (included as Exhibit 4.39 to the Form 10-QSB filed November
      14, 2005, and incorporated herein by reference).





4.39
      Promissory Note between the Company and Dutchess Private Equities Fund, II,
      LP,
      dated August 4, 2005 (included as Exhibit 4.40 to the Form 10-QSB filed November
      14, 2005, and incorporated herein by reference)


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          48
          -


4.40
      Promissory Note between the Company and Dutchess Private Equities Fund, II,
      LP,
      dated August 17, 2005 (included as Exhibit 4.41 to the Form 10-QSB filed
      November 14, 2005, and incorporated herein by reference)





4.41
      Promissory Note between the Company and eFund Capital Partners, LLC, dated
      August 18, 2005 (included as Exhibit 4.42 to the Form 10-QSB filed November
      14,
      2005, and incorporated herein by reference)





4.42
      Promissory Note between the Company and Barrett Evans, dated August 18, 2005
      (included as Exhibit 4.43 to the Form 10-QSB filed November 14, 2005, and
      incorporated herein by reference)





4.43
      Promissory Note between the Company and eFund Capital Partners, LLC, dated
      August 18, 2005 (included as Exhibit 4.44 to the Form 10-QSB filed November
      14,
      2005, and incorporated herein by reference)





4.44
      Promissory Note between the Company and eFund Capital Partners, LLC, dated
      August 18, 2005 (included as Exhibit 4.45 to the Form 10-QSB filed November
      14,
      2005, and incorporated herein by reference)





4.45
      Promissory Note between the Company and Dutchess Private Equities Fund, LP,
      dated September 16, 2005 (included as Exhibit 4.46 to the Form 10-QSB filed
      November 14, 2005, and incorporated herein by reference)





4.46
      Promissory Note between the Company and Dutchess Private Equities Fund, L.P.,
      dated September 30, 2005 (included as Exhibit 4.47 to the Form 10-QSB filed
      November 14, 2005, and incorporated herein by reference)





4.47
      Convertible Debenture Exchange Agreement between the Company and Dutchess
      Private Equities Fund, II, LP dated December 18, 2005 (included as Exhibit
      4.2
      to the Form 8-K filed February 17, 2006, and incorporated herein by
      reference).





4.48
      Convertible Debenture Exchange Agreement between the Company and eFund Capital
      Partners, LLC dated December 18, 2005 (included as Exhibit 4.1 to the Form
      8-K
      filed February 17, 2006, and incorporated herein by reference).





4.49
      Promissory Note between the Company and Dutchess Private Equities Fund, L.P.,
      dated October 11, 2005 (included as Exhibit 4.50 to the Form 10-KSB dated March
      21, 2006, and incorporated by reference).





4.50
      Stock Subscription Agreement between the Company and Gary D. Elliston, dated
      December 22, 2005, (included as Exhibit 4.51 to the Form 10-KSB dated March
      21,
      2006, and incorporated by reference).





4.51
      Stock Subscription Agreement between the Company and Cliff M. Holloway, dated
      December 22, 2005, (included as Exhibit 4.52 to the Form 10-KSB dated March
      21,
      2006, and incorporated by reference).





4.52
      Stock Subscription Agreement between the Company and John C. Boutwell, Jr,
      dated
      December 22, 2005, (included as Exhibit 4.53 to the Form 10-KSB dated March
      21,
      2006, and incorporated by reference).





4.53
      Stock Subscription Agreement between the Company and Mr. and Mrs. Jack B.
      Manning, dated December 22, 2005, (included as Exhibit 4.54 to the Form 10-KSB
      dated March 21, 2006, and incorporated by reference).





4.54
      Stock Subscription Agreement between the Company and Stephen Moore, dated
      December 22, 2005, (included as Exhibit 4.55 to the Form 10-KSB dated March
      21,
      2006, and incorporated by reference).


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          49
          -


4.55
      Stock Subscription Agreement between the Company and Monte L. Roach, dated
      December 22, 2005, (included as Exhibit 4.56 to the Form 10-KSB dated March
      21,
      2006, and incorporated by reference).





4.56
      Convertible Promissory Notes between the Company and Ronald Feldman, dated
      January 9, 2006 (included as Exhibit 4.57 to the Form 10-QSB filed May 8, 2006
      and incorporated herein by reference).





4.57
      Convertible Promissory Notes between the Company and Ronald Feldman, dated
      January 9, 2006 (included as Exhibit 4.58 to the Form 10-QSB filed May 8, 2006
      and incorporated herein by reference).





4.58
      Convertible Promissory Notes between the Company and Wakelin McNeel, dated
      January 6, 2006 (included as Exhibit 4.57 to the Form 10-QSB filed May 8, 2006
      and incorporated herein by reference).





10.1
      2000
      Stock Option Plan (included as Exhibit 9 to the Form SB-2/A filed April 11,
      2000, and incorporated herein by reference).





10.2
      Sublease between the Company and Pinnacle Sales Group, LLC, dated August 18,
      2003 (included as Exhibit 10.1 to the Form 10-KSB filed April 14, 2004, and
      incorporated herein by reference).





10.3
      Sublease Agreement between the Company and Mammoth Moving Inc., dated July
      14,
      2003 (included as Exhibit 10.2 to the Form 10-KSB filed April 14, 2004, and
      incorporated herein by reference).





10.4
      Investment Agreement between the Company and Preston Capital Partners, LLC,
      dated September 13, 2004 (included as Exhibit 10.3 to the Form SB-2 filed
      October 8, 2004, and incorporated herein by reference).





10.5
      Registration Rights Agreement between the Company and Preston Capital Partners,
      LLC, dated September 13, 2004 (included as Exhibit 10.4 to the Form SB-2 filed
      October 8, 2004, and incorporated herein by reference).





10.6
      Placement Agent Agreement between the Company, Preston Capital Partners, and
      Legacy Trading Co., LLC, Inc., dated September 13, 2004 (included as Exhibit
      10.5 to the Form SB-2 filed October 8, 2004, and incorporated herein by
      reference).





10.7
      Registration Rights Agreement between the Company and Dutchess Private Equities
      Fund, LP, dated January 14, 2004 (included as Exhibit 10.1 to the Form 10-QSB
      filed May 24, 2004, and incorporated herein by reference).





10.8
      Registration Rights Agreement between the Company and Dutchess Private Equities
      Fund, LP, dated January 26, 2004 (included as Exhibit 10.2 to the Form 10-QSB
      filed May 24, 2004, and incorporated herein by reference).





10.9
      Registration Rights Agreement between the Company and eFund Capital Partners,
      LLC, dated January 26, 2004 (included as Exhibit 10.3 to the Form 10-QSB filed
      May 24, 2004, and incorporated herein by reference).





10.10
      Registration Rights Agreement between the Company and eFund Capital Partners,
      LLC, dated February 19, 2004 (included as Exhibit 10.4 to the Form 10-QSB filed
      May 24, 2004, and incorporated herein by reference).





10.11
      Registration Rights Agreement between the Company and Preston Capital Partners,
      LLC, dated March 3, 2004 (included as Exhibit 10.5 to the Form 10-QSB filed
      May
      24, 2004, and incorporated herein by reference).





10.12
      Consulting Agreement between the Company and Luminary Ventures, Inc., dated
      March 2, 2004 (included as Exhibit 99.1 to the Form S-8 filed March 11, 2004,
      and incorporated herein by reference).





10.13
      Consulting Agreement between the Company and Jeffrey Conrad, dated January
      30,
      2004 (included as Exhibit 99.2 to the Form S-8 filed February 13, 2004, and
      incorporated herein by reference).


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          50
          -





10.14
      Consulting Agreement between the Company and Catherine Basinger, dated January
      30, 2004 (included as Exhibit 99.3 to the Form S-8 filed February 13, 2004,
      and
      incorporated herein by reference).





10.15
      Consulting Agreement between the Company and Barrett Evans, dated August 18,
      2003 (included as Exhibit 10.11 to the Form 10-QSB filed August 23, 2004, and
      incorporated herein by reference).





10.16
      Consulting Agreement between the Company and Michael Hill, dated August 18,
      2003
      (included as Exhibit 10.12 to the Form 10-QSB filed August 23, 2004, and
      incorporated herein by reference).





10.17
      Lead Marketing Agreement between the Company and Vandalay Venture, Group, Inc.
      d/b/a Applied Merchant, dated June 2004 (included as Exhibit 10.13 to the Form
      10-QSB filed August 23, 2004, and incorporated herein by
      reference).





10.18
      Standard Multi-Tenant Office Lease between the Company and La Patera Investors,
      dated April 9, 2004 (included as Exhibit 10.17 to the Form SB-2 filed October
      8,
      2004, and incorporated herein by reference).





10.19
      ASP
      Software Subscription Agreement between the Company and Net Chemistry, dated
      August 11, 2004 (included as Exhibit 10.18 to the Form SB-2 filed October 8,
      2004, and incorporated herein by reference).





10.20
      Consulting Agreement between the Company and Pacific Shore Investments, LLC,
      dated August 15, 2004 (included as Exhibit 10.19 to the Form SB-2 filed October
      8, 2004, and incorporated herein by reference).





10.21
      Membership Agreement between the Company and Memberworks, dated September 30,
      2003 (included as Exhibit 10.20 to the Form SB-2 filed October 8, 2004, and
      incorporated herein by reference).





10.22
      Amendment to Membership Agreement between the Company and Memberworks, dated
      August 17, 2004 (included as Exhibit 10.21 to the Form SB-2 filed October 8,
      2004, and incorporated herein by reference).





10.23
      Revolving Credit Facility between the Company and Dutchess Private Equities
      Fund
      and eFund, dated March 9, 2004 (included as Exhibit 10.23 to the Form 10-QSB
      filed November 22, 2004, and incorporated herein by reference).





10.24
      Line of Credit Agreement between the Company and Barrett Evans, dated August
      18,
      2003 (included as Exhibit 10.23 to the Form SB-2 filed December 9, 2004, and
      incorporated herein by reference).





10.25
      Debt Financing Agreement between the Company and Shirley Oaks, dated January
      26,
      2004 (included as Exhibit 10.24 to the Form SB-2 filed December 9, 2004, and
      incorporated herein by reference).





10.26
      Consulting Agreement between the Company and Aaron Gravitz, dated August 18,
      2003 (included as Exhibit 10.25 to the Form SB-2 filed December 9, 2004, and
      incorporated herein by reference).





10.27
      Debt Financing Agreement between the Company and Sharon Paugh, dated January
      26,
      2004 (included as Exhibit 10.26 to the Form SB-2 filed December 9, 2004, and
      incorporated herein by reference).





10.28
      Debt Financing Agreement between the Company and Jennifer Strohl, dated March
      22, 2004 (included as Exhibit 10.27 to the Form SB-2 filed December 9, 2004,
      and
      incorporated herein by reference).


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          51
          -


10.29
      Business Services Agreement between the Company and Luminary Ventures, Inc.,
      dated March 3, 2005 (included as Exhibit 10.1 to the Form S-8 filed April 29,
      2005, and incorporated herein by reference).





10.30
      Employment Offer Letter between the Company and Paul Daniel, dated June 24,
      2005
      (included as Exhibit 10.1 to the Form 8-K filed August 25, 2005, and
      incorporated herein by reference).





10.31
      Corporate Consulting Agreement between the Company and eFund Capital Partners
      LLC dated November 1, 2005 (included as Exhibit 10.1 to the Form 8-K filed
      February 17, 2006, and incorporated by reference herein).





10.32
      Corporate Consulting Agreement between the Company and Olive Tree LLC dated
      June
      28, 2005, as amended on October 25, 2005, October 31, 2005, and January 4,
      2006
      (included as Exhibit 10.32 to the Form 10-KSB filed March 21 2006, and
      incorporated herein by reference).





10.33
      Corporate Consulting Agreement between the Company and SeaCoast Financial LLC,
      dated February 7, 2006 (included as Exhibit 10.33 to the Form 10-QSB filed
      May
      8, 2006, and incorporated herein by reference).





10.34
      Asset Purchase Agreement by and among the Company and Onesource Imaging, Miquel
      A. Vazquez and Joanie Vazquez dated June 1, 2006 (included as Exhibit 10.1
      to
      the Form 8-K filed June 8, 2006, and incorporated herein by
      reference).





10.35
      General Assignment and Bill of Sale between the Company and Onesource Imaging,
      Inc., dated June 1, 2006 (included as Exhibit 10.2 to the Form 8-K filed June
      8,
      2006, and incorporated herein by reference).





10.36
      Executive Employment Agreement between the Company and Miguel Vazquez, dated
      June 1, 2006 (included as Exhibit 10.3 to the Form 8-K filed June 8, 2006,
      and
      incorporated herein by reference).





10.37
      Employment Offer Letter between the Company and Dave Foucar, dated June 8,
      2006
      (included as Exhibit 10.1 to the Form 8-K filed June 21, 2006, and incorporated
      herein by reference).





10.38
      Employment Agreement between the Company and Michael Hill, dated September
      7,
2006 (included as Exhibit 10.1 to the Form 8-K filed September 8, 2006, and
      incorporated herein by reference).





10.39
      Employment Agreement between the Company and Charlie Gugliuzza, dated September
      7, 2006 (included as Exhibit 10.2 to the Form 8-K filed September 8, 2006,
      and
      incorporated herein by reference).





14.1
      Corporate Code of Conduct and Ethics (included as Exhibit 14.1 to the 10-KSB
      filed April 14, 2004, and incorporated herein by reference).





31.1
      Certification of the Chief Executive Officer pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002.





31.2
      Certification of the Chief Financial Officer pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002.





32.1
      Certification of Officers pursuant to 18 U.S.C. Section 1350, as adopted
      pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.





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            52
            -


**ITEM
        14. PRINCIPAL ACCOUNTANT FEES AND
        SERVICES.**
 
 AUDIT
        FEES





Jaspers
      +
      Hall, PC were our auditors for the fiscal year ended December 31, 2005, and
      continued as our auditors for the fiscal year ended December 31, 2006.





For
      their
      2005 year end audit and review of our Quarterly Reports on Form 10-QSB for
      2006,
      Jaspers + Hall, PC billed us $22,500. We have contracted Jaspers + Hall, PC
      to
      complete the audit for the year ended 2006 for $25,000.





AUDIT
      RELATED FEES





None.





TAX
      FEES





None.





ALL
      OTHER
      FEES





None.





THE
      BOARD
      OF DIRECTORS PRE-APPROVAL POLICY AND PROCEDURES





We
      do not
      have a separate Audit Committee. Our full Board of Directors performs the
      functions of an Audit Committee. During fiscal year 2004, the Board of Directors
      adopted policies and procedures for the pre-approval of audit and non-audit
      services for the purpose of maintaining the independence of our independent
      auditors. We may not engage our independent auditors to render any audit or
      non-audit service unless either the service is approved in advance by the Board
      of Directors or the engagement to render the service is entered into pursuant
      to
      the Board of Director's pre-approval policies and procedures. On an annual
      basis, the Board of Directors may pre-approve services that are expected to
      be
      provided to us by the independent auditors during the following 12 months.
      At
      the time such pre-approval is granted, the Board of Directors must (1) identify
      the particular pre-approved services in a sufficient level of detail so that
      management will not be called upon to make judgment as to whether a proposed
      service fits within the pre-approved services and (2) establish a monetary
      limit
      with respect to each particular pre-approved service, which limit may not be
      exceeded without obtaining further pre-approval under the policy.





The
      Board
      has considered whether the provision of the services described above under
      the
      caption "All Other Fees" is compatible with maintaining the auditor's
      independence.




SIGNATURES





Pursuant
      to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
      1934, the registrant has duly caused this report to be signed on its behalf
      by
      the undersigned, thereunto duly authorized, in the City of Goleta, State of
      California on the 1st day of March 2007.





**COMMERCEPLANET,
      INC.**




/s/ Michael Hill
            
            Date:
              March 1, 2007By:
                Michael Hill
              Title:
                Chief Executive Officer/s/ David Foucar
            
            Date: March 1, 2007By:
                David Foucar
              Title:
                Chief Financial Officer
              Principal
                Accounting Officer





Pursuant
      to the requirements of the Securities Exchange Act of 1934, this report has
      been
      signed below by the following persons on behalf of the registrant and in the
      capacities and on the date indicated.




Signature
            
            Title
            
            Date/s/ Michael Hill
              Michael Hill
            
            Chairman
                of the Board of Directorsand
                Chief Executive Officer
            
            March
                1, 2007/s/ David Foucar
              David Foucar
            
            Director
                andChief
                Financial OfficerPrincipal
                Accounting Officer
            
            March
                1, 2007/s/ Charlie Gugliuzza
              Charlie Gugliuzza
            
            Director
                andPresident
            
            March
                1, 2007