**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**





**FORM
      10-KSB/A**





(Mark
      One)





xANNUAL
      REPORT UNDER
      SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF


1934
      FOR
      THE FISCAL YEAR ENDED DECEMBER 31, 2006.





oTRANSITION
      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)





o
      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 o
      No





o
      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). o 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 o; No x











EXPLANATORY
      NOTE





We
      are
      amending our Annual Report on Form 10-KSB for the year ended
      December 31, 2006 to amend the financial statements and footnotes of this
      report in order to disclose that we adopted the use of Statement of Financial
      Accounting Standards No. 123R , “Share-Based Payment.”  In addition,
      we amended Note 7, Stock-Based Compensation, to reflect the adoption of an
      accounting policy regarding the Statement of Financial Accounting Standards
      No.
      123R.  We elected early adoption of SFAS 123R for the year ended
      December 31, 2005 and all subsequent periods.  Therefore, our
      financial statements for the year ended December 31, 2006 and 2005 include
      stock
      option expense, which was determined under the guidelines of SFAS 123R. This
      amendment pertains only to additional disclosures and has no financial
      impact.








COMMERCE
      PLANET, INC.


10-KSB/A





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 ACCOUNTING AND 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 AND MANAGEMENT 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 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.





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          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 offers
      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 $4,375,761 for the year ended December 31, 2006,
      as
      compared to $1,744,865 for the year ended December 31, 2005. Costs of sales
      increased by 150.8% over 2005 which was a much lower rate than the growth of
      revenues. On a percentage basis, cost of goods sold decreased from 23.8% 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 $1,265,062 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**
            
            
            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$
            1,265,062
            
            
            $
            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 $0.17 for the year ended
      December 31, 2006 as compared to ($0.17) for the year ended December 31, 2005
      and was 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.





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          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
            $
            120,9762010
            $
            -2011
            $
            -TOTAL
            $
            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, 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-2INCOMESTATEMENT
            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
              
              
              
              315,343**Inventory**
              
              
              -
              
              
              
              2,590**Total
                  Current Assets**
              
              
              9,475,493
              
              
              
              900,114**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
              
              
              $
              710,364**Notes
                  Payable**
              
              
              69,681
              
              
              
              345,998**Deferred
                  Revenue**
              
              
              1,017,360
              
              
              
              336,001**Total
                  Current Liabilities**
              
              
              3,546,413
              
              
              
              1,392,363**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
 
 The
        accompanying notes to the
        consolidated financial statements are an integral part of these
        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
 
 The
        accompanying notes to the consolidated financial statements are an integral
        part
        of these 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 IN)/PROVIDED 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 (USED IN)/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
  The
        accompanying notes to the consolidated financial statements are an integral
        part
        of these 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****Shares**
                **Issued**
              
              
              **Par**
                  ******.********************001**************
              
              
              **Shares**Issued
              
              
              **Par**.001
              
              
              **Additional**Paid
                    inCapital
              
              
              **Shares
                    to**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**
              
              
              **$**
              **-**
 
 The
        accompanying notes to the
        consolidated financial statements are an integral part of these
        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 the Company’s 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
        its 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.  All inter-company accounts and transactions have been
        eliminated in consolidation.
 
 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 Income (Loss) Per Share
 
 Basic
        net
        income (loss) per common share is computed by dividing net income (loss)
        applicable to common shareholders by the weighted-average number of common
        shares outstanding during the period. Diluted net income (loss) 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 the Company’s common stock.
 
 Stock
        Based Compensation
 
 The
        Company has adopted the use of Statement of Financial Accounting standards
        No.
        123R , “Share-Based Payment” (SFAS No. 123R).   This Statement
        requires a public entity to measure the cost of employee services received
        in
        exchange for an award of equity instruments based on the grant-date fair
        value
        of the award (with limited exceptions). That cost is recognized over the
        period
        during which an employee is required to provide service in exchange for the
        award—the requisite service period (usually the vesting period). No compensation
        cost is recognized for equity instruments for which employees do not render
        the
        requisite service.   This Statement supersedes APB Opinion No.
        25, “Accounting for Stock Issued to Employees”, and its related implementation
        guidance and eliminates the alternative to use Opinion 25’s intrinsic value
        method of accounting that was provided in Statement 123 as originally
        issued.  For public entities that file as small business issuers,
        implementation of these rules was required as of the beginning of the first
        interim or annual reporting period that begins after December 15,
        2005.
 
 See
        Note 7
        below for further detail on stock based compensation.
 
 
 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
        its members a monthly fee for the tools and services needed to create and
        run a
        successful Internet auction business.
  - Offering
        its customers access to coaching services provided through a third party
        arrangement with 20-20 Advisors for a monthly fee. The Company began to offer
        this service in February 2005.
 
 -
        Offering
        its 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 the Company’s customers through third party
        arrangements with suppliers such as My Computer Club, Inc., West, Inc. and
        InQ.
 
 -
        Product
        sales via its website.
 
 -
        Providing its customer information to third parties who compensate the Company
        with a fee for each customer’s contact information acquired, or by sharing the
        revenues generated from contacting its customer. Revenues generated by the
        sale
        of the Company’s 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
        the Company 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 the Company’s 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 and 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, 2005 and
        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.
 
 The
        Company and its subsidiaries are currently open to audit under the statute
        of
        limitations by the Internal Revenue Service for the years ending December
        31,
        2003 through 2006.  The Company and its subsidiaries state income tax
        returns are open to audit under the statute of limitations for the years
        ending
        December 31, 2003 through 2006.
  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**
              
              
              10,182
              
              
              
              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
              
              
              
              145,192**Total**
              
              $
              2,347,181
              
              
              $
              315,343
  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
              
              
              $
              573,133**Accrued
                  Payroll and Payroll Taxes**
              
              $
              654,393
              
              
              $
              57,335**Accrued
                  Interest**
              
              
              -
              
              
              
              79,896**Total**
              
              $
              2,459,372
              
              
              $
              710,364
 
 NOTE
        7 –
STOCK BASED COMPENSATION
 
 The
        Company has adopted the use of Statement of Financial Accounting Standards
        No.
        123R , “Share-Based Payment” (SFAS No. 123R).   SFAS 123R was
        issued in December 2004. SFAS 123R requires the Company to measure the cost
        of
        employee services received in exchange for an award of equity instruments
        based
        on the grant-date fair value of the award (with limited exceptions). That
        cost
        is recognized over the period during which an employee is required to provide
        service in exchange for the award—the requisite service period (usually the
        vesting period). No compensation cost is recognized for equity instruments
        for
        which employees do not render the requisite service.   This
        Statement supersedes APB Opinion No. 25, “Accounting for Stock Issued to
        Employees”, and its related implementation guidance and eliminates the
        alternative to use Opinion 25’s intrinsic value method of accounting that was
        provided in Statement 123 as originally issued.  The Company elected
        early adoption of SFAS 123R.  Therefore, the Company’s financial
        statements for the year ended December 31, 2006 and 2005 include stock option
        expense, which was determined under the guidelines of SFAS 123R.
 
 The
        Company currently uses the Black-Scholes option pricing model to determine
        the
        fair value of options, warrants, and stock awards issued as compensation.
        The
        determination of the fair value of stock-based payment awards on the date
        of
        grant using an option-pricing model is affected by the Company’s stock price as
        well as assumptions regarding a number of complex and subjective variables.
        These variables include the Company’s expected stock price volatility over the
        term of the awards, actual and projected employee stock option exercise
        behaviors, risk-free interest rate and expected dividends.
 
 The
        Company estimates the volatility of its common stock by using historic
        volatility in market traded stock.  The Company estimates the expected
        term of options granted to be 4 years since the Company has no historic basis
        for trading in its options, once exercised shares are restricted limiting
        their
        short term value, and because the Company expects that long term growth in
        the
        market value of its stock will provide the greatest return to employees.
        The
        Company bases the risk-free interest rate that it uses in the option pricing
        model on zero-coupon yields implied from U.S. Treasury issues with remaining
        terms similar to the expected term on the options. The Company does not
        anticipate paying any cash dividends in the foreseeable future and therefore
        uses an expected dividend yield of zero in the option pricing model. The
        Company
        is required to estimate forfeitures at the time of grant and revise those
        estimates in subsequent periods if actual forfeitures differ from those
        estimates. The Company has no significant historical data to estimate
        pre-vesting option forfeitures and so record stock-based compensation expense
        for all awards with no adjustments for forfeitures since the Company expects
        the
        forfeiture rate to be immaterial related to early issues. All share-based
        payment awards are amortized on a straight-line basis over the requisite
        service
        periods of the awards, which are generally the vesting periods.
 
 The
        assumptions used to value of equity instruments issued as compensation are
        as
        follows:
  **2006**
              
              
              **2005**Expected
                  life (in years)
              
              
              4.0
              
              
              
              2.0Volatility
              
              
              32.93-56.14
              %
              
              
              11.97
              %Risk
                  free interest rate
              
              
              4.35-4.53
              %
              
              
              3.98
              %Dividend
                  yield
              
              
              —
              
              
              
              —
 
 If
        factors
        change and the Company employs different assumptions for estimating stock-based
        compensation expense in future periods or if the Company decides to use a
        different valuation model, the future periods may differ significantly from
        what
        the Company has recorded in the current period and could materially affect
        its
        operating income, net income and net income per share.
 
 The
        accounting guidance provided for within SFAS 123R is relatively new. The
        application of this accounting guidance may be subject to further interpretation
        and refinement over time. There are significant differences among valuation
        models, and there is a possibility that the Company will adopt different
        valuation models in the future. This may result in a lack of consistency
        in
        future periods and materially affect the fair value estimate of stock-based
        compensation. It may also result in a lack of comparability with other companies
        that use different models, methods and assumptions.
 
 Incentive
        Stock Option Plan
 
 The
        Company’s incentive stock option plan is a long-term retention program that is
        intended to attract, retain and provide incentives for talented
        employees.  The plan also aligns stockholder and employee interests
        and the Company considers its option programs critical to its operation and
        productivity.  The incentive stock option plan was established during
        fiscal 2006 under the direction of the Company’s Board of
        Directors.
 
 As
        of
        December 31, 2006, the Company had reserved 2,349,966 shares of common stock
        for
        issuance under the plan.  Shares issued under the plan are not
        registered and must be held when exercised according to Rule 144, promulgated
        under the Securities Act of 1933.  During the year ended December 31,
        2006, the Company granted 1,124,327 options to purchase common stock under
        its
        employee stock option plan.  The strike prices on these issues range
        from $0.21 to $1.47.
 
 The
        following table sets forth the summary of the Company’s incentive stock option
        plan activity for the year ended December 31, 2006 and 2005,
        respectively:
  **2006**
              
              
              **2005**Options
              
              
              Weighted
                  Average Exercise Price
              
              
              Options
              
              
              Weighted
                  Average Exercise PriceOutstanding,
                  Beginning of Period
              
              
              0
              
              
              $
              0.00
              
              
              
              0
              
              
              $
              0.00Granted
              
              
              1,451,977
              
              
              $
              0.67
              
              
              
              0
              
              
              $
              0.00Cancelled
              
              
              (327,650
              )
              
              $
              0.98
              
              
              
              0
              
              
              $
              0.00Exercised
              
              
              0
              
              
              $
              0.00
              
              
              
              0
              
              
              $
              0.00Outstanding,
                  End of Period
              
              
              1,124,327
              
              
              $
              0.58
              
              
              
              0
              
              
              $
              0.00Exercisable,
                  End of Period
              
              
              370,475
              
              
              $
              0.43
              
              
              
              0
              
              
              $
              0.00
 
 Employee
        Warrants
 
 In
        addition to the Company’s incentive stock option plan, the Company has issued
        warrants to purchase common stock from time to time to key employees to retain
        employees, provide incentives, and align stockholder and employee
        interests.  Warrant shares issued are not registered and must be held
        when exercised according to Rule 144, promulgated under the Securities Act
        of
        1933.  During the year ended December 31, 2006, the Company issued
        1,428,750 warrants to purchase common stock under its employee stock option
        plan.  The strike prices on these issues range from $0.00 to
        $1.12.
 
 The
        following table sets forth the summary of warrants issued as stock compensation
        for the year ended December 31, 2006 and 2005, respectively:
  **2006**
              
              
              **2005**Warrants
              
              
              Weighted
                  Average Exercise Price
              
              
              Warrants
              
              
              Weighted
                  Average Exercise PriceOutstanding,
                  Beginning of Period
              
              
              750,000
              
              
              $
              0.78
              
              
              
              0
              
              
              $
              0.00Granted
              
              
              1,428,750
              
              
              $
              0.10
              
              
              
              750,000
              
              
              $
              0.78Cancelled
              
              
              (750,000
              )
              
              $
              0.78
              
              
              
              0
              
              
              $
              0.00Exercised
              
              
              78,750
              
              
              $
              0.16
              
              
              
              0
              
              
              $
              0.00Outstanding,
                  End of Period
              
              
              1,350,000
              
              
              $
              0.09
              
              
              
              750,000
              
              
              $
              0.78Exercisable,
                  End of Period
              
              
              420,833
              
              
              $
              0.08
              
              
              
              0
              
              
              $
              0.00
 
 Preferred
        Shares
 
 The
        Company has issued warrants to purchase Series D Convertible Preferred
        Stock.  The Series D Preferred Stock converts to common shares at
        0.4167% of outstanding shares on the day of conversion.  Warrants to
        purchase 12 preferred shares were issued to the Company’s Chief Executive
        Officer and President, respectively, in accordance with their employment
        agreements.  Additionally, during 2006, a warrant to purchase 1 share
        of Series D Preferred Stock was issued to each of the Company’s three directors
        for their service on the Board of Directors.  During the year ended
        December 31, 2006, the Company issued warrants to purchase a total of 27
        shares
        of Series D Preferred Stock.  The strike price associated with these
        warrants was $0.01
 
 The
        following table sets forth the summary of warrants to purchase Series D
        Preferred Stock issued as stock compensation for the year ended December
        31,
        2006 and 2005, respectively:
  2006
              
              
              2005Warrants
              
              
              Common
                  Share Equivalent
              
              
              Weighted
                  Average Exercise Price
              
              
              Warrants
              
              
              Common
                  Share Equivalent
              
              
              Weighted
                  Average Exercise PriceOutstanding,
                  Beginning of Period
              
              
              0
              
              
              
              0
              
              
              $
              0.00
              
              
              
              0
              
              
              
              0
              
              
              $
              0.00Granted
              
              
              27
              
              
              
              5,309,307
              
              
              $
              0.01
              
              
              
              0
              
              
              
              0
              
              
              $
              0.00Cancelled
              
              
              0
              
              
              
              
              
              
              $
              0.00
              
              
              
              0
              
              
              
              0
              
              
              $
              0.00Exercised
              
              
              15
              
              
              
              2,949,615
              
              
              $
              0.01
              
              
              
              0
              
              
              
              0
              
              
              $
              0.00Outstanding,
                  End of Period
              
              
              12
              
              
              
              2,359,692
              
              
              $
              0.01
              
              
              
              0
              
              
              
              0
              
              
              $
              0.00Exercisable,
                  End of Period
              
              
              12
              
              
              
              2,359,692
              
              
              $
              0.01
              
              
              
              0
              
              
              
              0
              
              
              $
              0.00
 
 Compensation
        Expense
 
 The
        following table sets forth the expense recognized for stock-based compensation
        for the years ended December 31, 2006 and 2005, respectively, and figures
        representing the anticipated value of stock-based compensation expense for
        2007
        and 2008:
  ACTUAL
                  
                  EXPECTED2005
                  
                  
                  2006
                  
                  2007
                  
                  
                  2008Incentive
                      Stock Options
                  
                  $
                  0
                  
                  
                  $
                  54,232
                  
                  
                  
                  $
                  126,786
                  
                  
                  $
                  74,652Warrants
                  
                  $
                  341,238
                  
                  
                  $
                  (208,162
                  )
                  (1)
                  
                  $
                  152,460
                  
                  
                  $
                  54,935Preferred
                      Stock Warrants
                  
                  $
                  0
                  
                  
                  $
                  773,293
                  
                  
                  
                  $
                  375,107
                  
                  
                  $
                  0.00Total
                      Stock Based Compensation
                  
                  $
                  341,238
                  
                  
                  $
                  619,363
                  
                  
                  
                  $
                  654,353
                  
                  
                  $
                  129,587
  (1)
              Reduction
                  in expense for forfeiture of warrants on employee termination without
                  completion of requisite service
                  period.
 
 Intrinsic
        Values
 
 The
        following table sets forth the intrinsic values of equity instruments issued
        as
        compensation as of December 31, 2006 and 2005, respectively:
  ISSUED
              
              
              EXERCISABLE2005
              
              
              2006
              
              
              2005
              
              
              2006Incentive
                  Stock Options
              
              $
              0
              
              
              $
              638,870
              
              
              $
              0
              
              
              $
              374,731Warrants
              
              $
              1,500
              
              
              $
              1,920,396
              
              
              $
              0
              
              
              $
              673,035Preferred
                  Stock Warrants
              
              $
              0
              
              
              $
              7,645,402
              
              
              $
              0
              
              
              $
              3,397,956Total
                  Stock-Based Compensation
              
              $
              1,500
              
              
              $
              10,204,668
              
              
              $
              0
              
              
              $
              4,445,722
 
 NOTE
        8 -
        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, which were financed
        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 was unsecured, due on
        demand,
        and bears interest at a rate of 6%. At December 31, 2006 the Notes Payable
        were
        completely repaid.
 
 NOTE
        9 -
        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 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 $24,000. On August 18, 2004, the
        Company issued a warrant to Dutchess Private Equities Fund, II, to purchase
        360,000 of the Company’s 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 the Company’s 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, 2006, 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, the 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 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
        10 -
        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
              
              Exercise
                  Put
              
              05/17/06
              
              287,439Minority
                  Shareholder
              
              Conversion
                  of convertible debentures
              
              05/17/06
              
              449,500Preston
                  Capital Partners
              
              Exercise
                  Put
              
              05/22/06
              
              105,559Preston
                  Capital Partners
              
              Exercise
                  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
              
              
              
              0
              
              
              
              0.00**Exercised**
              
              
              0
              
              
              
              0.00
              
              
              
              0
              
              
              
              0.00**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
              
              
              
              0
              
              
              
              0.00**Exercised**
              
              
              (715,960
              )
              
              $
              0.77
              
              
              
              (715,960
              )
              
              $
              0.77**Outstanding,
                  December 31, 2004**
              
              
              11,166,424
              
              
              $
              0.49
              
              
              
              9,529,512
              
              
              $
              0.47
 
 NOTE
        11 -
        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, the Company 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, the Company retired all of its debt allowing it to recover $837,191
        of
        the beneficial conversion expense taken in 2004 and 2005, which was included
        in
        other income.
  F-18
  NOTE
        12 -
        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 does 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 its 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. The Company does
        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 the
        Company’s fiscal year, provided the Company has 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
        the
        Company holds 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 the Company’s 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 the Company’s financial statements.
 
 NOTE
        13 -
        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**2010**
              
              $            
                  -**2011**
              
              $            
                  -**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
        14 -
        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. The Company 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. The
        Company intends 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. The Company 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
        15 -
        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/A, 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/A 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 shares 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.
  -
            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.
 
 -
            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.
 
 -
            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.
  -
            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).
 
 -
            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).
 
 -
            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)
 
 -
            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 herein 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 herein 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 herein 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 herein 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 herein 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 herein by reference).
 
 -
            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 herein 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).
  -
            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).
 
 -
            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 herein by reference).
 
 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.
  -
            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.
  -
            53
            -
  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 24th day of August 2007.
 
 **COMMERCEPLANET,
        INC.**
  /s/
                  Michael Hill
              
              Date:
                  August 24, 2007By:
                  Michael Hill
                Title:
                  Chief ExecutiveOfficer/s/
                  David Foucar
              
              Date:
                  August 24, 2007By:
                  David Foucar
                Title:
                  Chief FinancialOfficer
                Principal
                  AccountingOfficer
 
 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 Directors and Chief Executive Officer
              
              August
                  24, 2007/s/
                  David Foucar
                David
                  Foucar
              
              Chief
                  Financial Officer and
                Principal
                  Accounting Officer
              
              August
                  24, 2007/s/
                  Charlie Gugliuzza
                Charlie
                  Gugliuzza
              
              Director
                  and President
              
              August
                  24, 2007