**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


Washington,
      D.C. 20549




**FORM
      10-KSB**




(Mark
      One)




**x** **ANNUAL
          REPORT UNDER SECTION 13 OR 15(d) OF THE** **SECURITIES
          EXCHANGE ACT OF** **1934**




For
      the
      fiscal year ended December 31, 2006




**o**  **TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF** **THE
      SECURITIES** **** **EXCHANGE
      ACT OF 1934.**




*Commission
      file number 333-97385*





InfoSearch
                Media, Inc.(Name
                of small business issuer in its charter)Delaware
            90-0002618(State
                or other jurisdiction
            (I.R.S.
                Employerof
                incorporation or organization)
            Identification
                No.)4086
                Del Rey Avenue, Marina Del Rey, California
            90292(Address
                of principal executive offices)
            (Zip
                Code)(310)
                437-7380(Registrant's
                telephone number, including area
                code)




(Former
      name, former address and former fiscal year,


if
      changed since last report)




Securities
      Registered Pursuant to Section 12(b) of the Act: None.




Securities
      Registered Pursuant to Section 12(g) of the Act: None.




Check
      whether the issuer is not required to file reports pursuant to Section
      13


or
      15(d)
      of the Exchange Act. o




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 12 months (or for such shorter period that the registrant
      was required to file such reports), and (2) has been subject to such filing
      requirements for the past 90 days. x Yes o
      No




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




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




Issuer's
      revenues for the fiscal year ended December 31, 2006 were approximately
      $7,600,060.




The
      aggregate market value of the voting and non-voting common equity stock held
      by
      non-affiliates of the issuer **,** based on
      the average bid and asked prices on the Over the Counter Bulletin Board on
      March
      30, 2007 was approximately $5,652,959.




The
      number of shares outstanding of the issuer's common stock, $0.001 par value,
      as
      of the latest practicable date: 51,647,978 shares as of March 31,
      2007.




**DOCUMENTS
      INCORPORATED BY REFERENCE**




None.




Transitional
      Small Business Disclosure Format (Check one): o Yes x
      No





**TABLE
      OF CONTENTS**




PART
                IITEM
                1.
            
            DESCRIPTION
                OF BUSINESS
            
            1ITEM
                1A.
            
            RISK
                FACTORS
            
            8ITEM
                2.
            
            DESCRIPTION
                OF PROPERTY
            
            18ITEM
                3.
            
            LEGAL
                PROCEEDINGS
            
            18ITEM
                4.
            
            SUBMISSION
                OF MATTERS TO A VOTE OF SECURITY HOLDERS
            
            19PART
                IIITEM
                5.
            
            MARKET
                FOR COMMON EQUITY**,**RELATED STOCKHOLDER MATTERSAND SMALL BUSINESS ISSUERPURCHASES
                OF EQUITY SECURITIES
            
            19ITEM
                6.
            
            MANAGEMENT'S
                DISCUSSION AND ANALYSIS OF OPERATIONS AND FINANCIAL CONDITION
            
            21ITEM
                7.
            
            FINANCIAL
                STATEMENTS
            
            27ITEM
                8.
            
            CHANGES
                IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
                DISCLOSURE
            
            27ITEM
                8A.
            
            CONTROLS
                AND PROCEDURES
            
            27ITEM
                8B.
            
            OTHER
                INFORMATION
            
            28PART
                IIIITEM
                9.
            
            DIRECTORS
                AND EXECUTIVE OFFICERS
            
            28ITEM
                10.
            
            EXECUTIVE
                COMPENSATION
            
            31ITEM
                11.
            
            SECURITY
                OWNERSHIP OF CERTAIN BENEFICIAL OWNERS ANDMANAGEMENT****AND
                RELATED STOCKHOLDERMATTERS
            
            39ITEM
                12.
            
            CERTAIN
                RELATIONSHIPS AND RELATED TRANSACTIONS
            
            41ITEM
                13.
            
            EXHIBITS
            
            41ITEM
                14.
            
            PRINCIPAL
                ACCOUNTANT FEES AND SERVICES
            
            43EXHIBIT
                INDEX
            
            46FINANCIAL
                STATEMENTS
            
            F-1







**Forward-Looking
      Statements**




This
      Annual Report on Form 10-KSB includes forward-looking statements within the
      meaning of Section 27A of the Securities Act of 1 933,
      as
      amended (the “Securities Act”), **** and
      Section 21E of the Securities Exchange Act of **** 1934,
      as
      amended (the “Exchange Act”). These
      statements relate to future events or our future financial performance and
      are
      not statements of historical fact. In some cases, you can identify
      forward-looking statements by terminology such as "may," "will," "should,"
      "expect," "plan," "anticipate," "believe," "estimate," "predict," "potential,"
      "objective," "forecast," "goal" or "continue," the negative of such terms,
      or
      other comparable terminology. These statements are only predictions, and actual
      events or results may differ materially. Although we believe that the
      expectations reflected in the forward-looking statements are reasonable, we
      cannot guarantee future results, levels of activity, performance or
      achievements; and in all cases, such statements are subject to our ability
      to
      secure sufficient financing or to increase revenues to support our operations.
      In this regard, our business and operations are subject to substantial risks
      that increase the uncertainty inherent in the forward-looking statements
      contained in this Form 10-KSB. In evaluating our business, you should give
      careful consideration to the information set forth herein,
      including the risks, uncertainties and assumptions that are more fully discussed
      in “Item 1.A Risk Factors.” ****




The
      inclusion of the forward-looking statements should not be regarded as a
      representation by us, or any other person, that such forward-looking statements
      will be achieved. We undertake no duty to update any of the forward-looking
      statements, whether as a result of new information, future events or otherwise.
      In light of the foregoing, readers are cautioned not to place undue reliance
      on
      the forward-looking statements contained in this report.




**Explanatory
      Note**




In
      this
      Annual Report on Form 10-KSB, InfoSearch Media, Inc. (“InfoSearch” or the
“Company”) is restating its balance sheets and related statements of
      operations, stockholders’ equity and cash flows for the quarters ended March 31,
      June 30 and September 30, 2006. These restatements are more fully described
      in
      Note 2 to our Consolidated Financial Statements included in this Form 10-KSB.
      This Form 10-KSB also reflects the restatement of Item 2, “Management’s
      Discussion and Analysis of Financial Condition and Results of Operations,” in
      our Quarterly Reports on Form 10-QSB for the quarters ended March 31, June
      30
      and September 30, 2006. Previously filed Quarterly Reports on Form 10-QSBs
      affected by the restatements have not been amended and should not be relied
      on.






The
      restatements result from our review of recent guidance relating to SFAS No.
      123R, *Share
      Based Payment* (“SFAS
      No. 123R”). The Company previously accounted for cancelled stock options upon
      the termination of employees by recording an expense for the unvested portion
      of
      each terminated employee’s options in each of the first three quarters of the
      year ended December 31, 2006. Upon further examination of its accounting
      methodology for cancelled stock options, the Company determined this to be
      in
      error. The Company has determined that the cancelled stock options should not
      have been expensed and is restating the financial information for the three
      months ended March 31, 2006, the three and six months ended June 30, 2006 and
      the three and nine months ended September 30, 2006. These restatements had
      no
      impact on previously reported revenues, total assets or cash
      position.




**PART
      I**




**Item
      1. Description of Business**




**Business
      Overview**




**Overview**




On
      December 31, 2004, Trafficlogic, Inc., a California corporation (“Trafficlogic”)
      merged with MAC Worldwide, Inc., a Delaware corporation incorporated on December
      14, 2000 (“MAC”). MAC, the surviving company in the merger, changed its name to
“InfoSearch Media, Inc.” on December 31, 2004. Such merger consisted of three
      related transactions: (1) the merger of Trafficlogic with and into a newly
      organized and wholly-owned subsidiary of MAC; (2) the disposition of MAC’s
      wholly-owned operating subsidiary, Mimi & Coco, Inc., a Canadian
      corporation; and (3) the closing of a private placement offering of common
      stock.






1





InfoSearch is
      a Los
      Angeles-based provider
      of "smart," search-targeted text and video content for the Internet, designed
      to
      obtain higher rankings, brand recognition and better website performance for
      publishing and media clients. InfoSearch's network of professional writers,
      editors, other technical specialists and video production facilities also help
      businesses succeed on the Web by implementing text and video content-based
      Internet marketing solutions. InfoSearch’s search marketing solutions
      involve online
      content that supports the non-paid search
      marketing initiatives of its clients. Non-paid search results, (otherwise
      known as organic )
      are the
      search results that the search engines find on the World
      Wide Web as
      opposed to those listings for which companies pay for placement.
      During fiscal 2006, we
      derived revenue from our two primary operating groups, ContentLogic and Web
      Properties.





**ContentLogic**




Through
      our ContentLogic operating
      group, we
      deliver, through sale or license agreements, branded original content for use
      by
      our clients on their websites .
      Utilizing sophisticated content and keywords analytics, content developed in
      the
      ContentLogic program drives traffic to the client’s website through improved
      search engine rankings. The ContentLogic content provides an environment
      engineered to stimulate a sale through the use of content focused on the
      client’s products and services. We derive revenue from this program through
      either the sale or license of the content. While many of our small to medium
      sized business clients prefer the month-to-month leasing option over the
      purchase alternative because it provides a lower upfront cost without a long
      term commitment, larger firms generally prefer the outright purchase of the
      content. We are actively pursuing both methods and have created a dedicated
      team
      to focus on the larger clients. In addition, we have introduced related
      products, including Web analytics through our partnership with Load and links through our partnership
      with LinkWorth. For both Load and LinkWorth, InfoSearch acts as a reseller
      of
      their respective products. The analytics and links products are both sold on
      a
      month-to-month basis.





**Web
      Properties**




Through
      our Web Properties o perating
      group, **** we
      currently operate numerous content-based websites, including ArticleInsider
      and
      Popdex, through which we distribute traffic to advertisers. These websites
      are a
      collection of general informational articles focused on various business topics. We are no
      longer seeking
      or engaging new
      customers for these websites and are harvesting the deferred revenues associated
      with customers we previously engaged for these websites **.** However **,** we
      continue to monetize traffic to these websites through the use of Google’s
      AdSense program. In  March
      2006, **** we
      purchased Answerbag **,** Inc.
      (“Answerbag”), a consumer information website built through content generated
      from its users. In October 2006, we entered into a multi-year alliance with
      Demand Media, Inc. (“Demand Media”), a next generation media company, pursuant
      to which we sold all of the assets of Answerbag, and Demand Media agreed to
      purchase our products and services. During the
      period of our operation of Answerbag, the site generated revenue through the
      use
      of Google’s AdSense program.





**InfoSearch:
      Video**





In
      February 2007, the Company launched
      a new search-targeted online video product to provide the same customer benefits
      as the Company’s written, text-based product line, ContentLogic, including
      improved organic search engine rankings, increased quality
      site traffic and brand recognition. *InfoSearch:Video,* the
      search-targeted online video product, is currently only being offered to a
      select number of major partners. It is
      anticipated that  *InfoSearch:Video* will be
      made widely available to online publishers and businesses through the InfoSearch sales
      force by the end of the
      second quarter of fiscal 2007.





**InfoSearch:
      Publisher**





In
      the
      first quarter of 2007, the Company initiated an effort to target large, online
      publishers who are becoming increasingly aware of the monetization and brand
      value of driving traffic to their online properties, but understand that the
      content they write for their offline publications frequently does not drive
      search rankings and traffic. Our platform addresses this need through the
      development of content that meets the editorial standards and underlying themes
      of these clients and layers on the search optimization techniques we have
      learned through the deployment of our ContentLogic product.




2




**Industry
      Overview**




Internet
      search and
      online advertising are experiencing significant growth. Internet
      search is the
      second most popular activity on the Web, behind only email, with more than
      550
      million searches performed daily worldwide and 245 million searches performed
      in
      the United States. According to U.S. Bancorp Piper Jaffray, the global market
      for performance-based advertising and search marketing, such as pay-per-click
      listings and paid inclusion, will grow from approximately $1.4 billion in 2002
      to approximately $21.7 billion in 2010. This
      growth in Search has led many advertisers to dramatically increase their level
      of advertising investment in search-based promotional methods. In addition,
      U.S.
      Bancorp Piper Jaffray predicts that online advertising in the United States
      will
      represent approximately 6% of total advertising spending in 2008 compared to
      approximately 2% of total advertising spending in 2003.




This
      growth is fueled by the increased acceptance of the Internet as a
      commerce/marketing medium, the rapid expansion of early stage international
      markets, the growth of overall Internet usage and broadband Internet access,
      and
      by the advertiser’s realization of the cost-effectiveness of Internet
      search advertising. This growth may create future opportunities to generate revenues
      and profits through the introduction of new search engine-related marketing
      products.




**Key
      Growth Drivers**




·
            Increased
                E-Commerce - The growth inInternet
                searchrevenues has been proportional to growth in e-commerce. As consumers
                migrate to Internet-based purchasing, advertisers seek to promote
                their
                products or services using Internet methods, the most effective of
                which
                has proven to be****Internet
                search.
                If Internet sellers dedicate even 10% of revenues toward Internet
                marketing and advertising, as is typical of traditional merchants,
                search
                advertising opportunities should expand tremendously. In fact, U.S.
                Bancorp Piper Jaffray projects total e-commerce spending to top $150
                billion in 2007.****




·
            Growth
                of the Internet and Broadband Access-The organic growth of the Internet has created a domestic audience
                rivaling the use of television. This large audience provides a source
                of
                potential customers for merchants and a massive source of advertising
                and
                marketing dollars for those firms interested in search engine marketing.
                This audience is not only growing in size but increasing its time
                spent on
                the Internet due to the increased usage of broadband Internet access.




**·**
            Increased
                Acceptance of Internet Search as a Powerful Marketing Channel - Although
                Internet search was once considered only a method for Internet users
                to
                locate information, its potential as a marketing tool has been quickly
                realized. The growth of those companies offering search engine marketing
                services is demonstrative of the realization among advertisers of
                the
                power of Internet search as a business acquisition medium. However,
                Internet search marketing still represents a very small portion of
                most
                advertising budgets and has a very strong growth
                potential.





·
            International
                Market Expansion - Most international Internet markets are still
                in the
                very early stages of development. As the international market begins
                to
                approach the domestic market in terms of penetration, monetization
                opportunities are expected to be created, including strong e-commerce
                and
                search engine marketing
                opportunities.




·
            Cost
                Effectiveness/High Return on Investment - Due to its relatively low
                cost
                and high conversion rates,Internet
                searchbased marketing offers advertisers a high return on investment compared
                to
                traditional marketing vehicles. Forms of advertising such as the
                yellow
                pages can cost more than $1 per customer lead compared to $.35 per
                customer lead for Overture’s paid listings.




**Opportunity**




Despite
      the massive growth in Internet
      search ,
      several
      problems in the industry have not been addressed adequately by the majority
      of
      search engine marketing companies including:




·
            Placement
                competition due to the concentration ofInternet
                searchtraffic is leading to quickly rising costs of effective paid listing
                keywords, limiting smaller businesses access to paid
                listings;




3




·
            Difficulty
                maintaining high rankings in unpaid listings, which represent a large
                portion ofInternetsearch
                traffic;




·
            Low
                return on investment due to excessivecost-per-click
                (“CPC”)****charges
                from uninterested searchers; and




·
            Poor
                conversion/low close rates due to low quality
                traffic.




Our
      unique content-based products delivered through our ContentLogic and Web
      Properties programs, provide a solution to these problems by leveraging our
      content development expertise to deliver to businesses sustainable access to
      the
      unpaid portion of Internet
      search listings
      with screened leads, above average click-through rates and a price point that
      is
      below the current market average.





**Future
      Market Trends**




We
      are in
      a position to benefit from major trends that will shape the future of
      the **** Internet search
      engine world. The recent success of Yahoo! / Overture and Google has proven
      that
      search listings can be translated into significant revenue streams generating
      high levels of advertising satisfaction and return on investment for
      customers.




Most
      engines only display three to five paid
      listings out of 20 or more per page of search results, leaving a large amount
      of
      room for the expansion of paid listings. Furthermore, search rates, which
      average approximately $.35 per lead, remain
      significantly less than other
      forms of advertising such as Yellow Pages, which currently average approximately
      $1.00 per lead. **** In
      addition, less than 1% of the more than 12 million small businesses in the
      United States currently use Internet
      search as
      method of customer acquisition, presenting another opportunity to expand the
      size of the paid listings and paid inclusion markets.




Our
      search engine marketing service will benefit significantly from any future
      increases in volume and prices of search advertising, particularly in the small
      business segment.




**The
      Rise of Relevance**




It
      was
      once thought that as users became increasingly knowledgeable about the location
      of information throughout the Internet, search engines would become obsolete
      with users accessing the Web through
      specific websites or through the channels of an Internet portal. However, users
      have become more focused on quick and relevant search results and search engines
      have evolved to meet this demand, creating listing parameters that produce
      only
      the targeted information the user desires.





Our
      content-based services align perfectly with this trend. Our content may appeal
      to search engines looking for fresh, highly relevant information because the
      primary purpose of a search engine is to deliver the most relevant, informative
      and useful information to their users. Such search engines therefore have an
      incentive to place the best content at the top of their indexes and it is our
      belief that as our writer talent increases, and as the quality of our content
      improves, our goals become more and more aligned with those of the search
      engines. The result of this synergy is that users, advertisers, search engines
      and our company all receive equal benefit from our model.




**International
      Market Development**





International
      Internet traffic is already significantly larger in volume than domestic
      Internet traffic, with approximately 400 million Internet users abroad compared
      to close to 160 million in the United States. In addition, currently there
      are
      approximately 305 million searches occurring outside of the United States daily,
      growing at an annual rate of 20%. **** At
      this
      pace, the international market for search marketing services may soon eclipse
      the size of the
      domestic opportunity. This trend is amplified by the major portals and Internet
      companies adopting international models
      offering increased search and Internet services abroad.




4





Although
      this market does not currently have the monetization potential of the domestic
      opportunity, the growth rate of monetization in the international markets is
      much faster than in the United States. Currently the largest international
      Internet markets are Japan, Germany, Korea, United Kingdom, France, Italy and
      Spain. However, it is likely that within the next decade China, India and Latin
      America also **** will
      provide significant opportunities.





Our
      services are easily expandable to an international customer base and would
      benefit from increased use of search engines and e-commerce at a multinational
      level.





**Business
      Strategy**




Our
      business strategy focuses on building our client base for ContentLogic and
      continuing to monetize traffic to our Web Properties programs, and with the
      introduction of our video product in February 2007, we expect to expand our
      client base through the sale of video content. ****




For
      our
      ContentLogic program, we derive revenue through the licensing and sale of
      content to our customers. We intend to concentrate on building our base of
      licensing agreements and sales of content to both the small to medium business
      market and the large industry players.




We
      currently operate numerous content-based websites, including ArticleInsider
      and
      Popdex, as part of our Web Properties group. We are no longer seeking
      or engaging new
      customers for these websites and are generating revenue through the use of
      Google’s AdSense program and harvesting the deferred revenues associated with
      customers we **** previously engaged
      for these websites.




In
      February 2007 we **** expanded
      our core product line to include searchable online video content production
      services . *InfoSearch:Video* ,
      the
      Company’s new search-targeted online video product provides the same customer
      benefits as the
      Company’s written, text-based product line, including improved organic search
      engine rankings, increased, quality site traffic and brand recognition. The *InfoSearch:Video* product
      is being designed to serve the needs of publishers and larger businesses,
      enabling them to develop video content as a viable accompaniment to text-based
      online content. The *InfoSearch:Video* product
      initially will be informational videos from 30 seconds to five minutes
      in length and tagged with search-optimized metadata.





**Uniqueness
      of Service**




Several
      factors make our services unique in the search engine advertising
      space.




·
            Content
                Based Model - Our model is unique in the search engine marketing
                space.
                Instead of simply including our clients’ sites in highly trafficked search
                engines through partnering with the major engines or by using deceptive
                search engine optimization techniques, we focus on developing unique,
                relevant and high-quality online content which improves search engine
                ranking and traffic.




·
            Conversion
                Rates - Internal research indicates that theInternettraffic that we drive to ourclients’sites through our developed content has a demonstrably higher conversion
                rate than existing practices or services. This results because searchers
                visiting our clients’ websites utilizing content developed for them by us
                view highly targeted keyword-based content tailored to the client’s
                underlying business. As a result, those visitors arriving on the
                client’s
                site are more likely to make a
                purchase.




·
            Solution
                for Dynamically Generated Sites - Many companies offering their products
                and services on the Internet maintain websites with large amounts
                of
                dynamic content which is difficult for major search engines to find
                due to
                the low visibility of such content to many of the popular search
                engines’
                search listing parameters. Because our keyword-based content model
                provides a solution easily found by the search engine spiders, major
                search engines are far more likely to find and index the client’s
                websites.




·
            Major
                Engine Coverage - Our clients typically receive a large portion of
                their
                traffic from Google, Yahoo!, MSN and AOL. These four sites account
                for a
                large majority of all searches performed on the Internet. Our ability
                to
                develop content that ranks highly with the major search engines represents
                a unique approach to generating qualified traffic for our customers.
                Rather than using deceptive techniques, like doorway pages (a page
                designed to trick search engines into thinking that the site isfocused
                on a topic other than the actual topic in an effort to trick people
                into
                visiting their websites) and link farms (atechnique
                to artificially create links to a particular website, which is one
                of the
                key determinants to ranking in the search engines) which have become
                standard with other search engine optimization companies, we produce
                content which clients utilize on their websites to dramatically improve
                their search engine ranking and drive high volumes of relevantInternettraffic.




5




**Target
      Markets**




We
      have
      developed five major target markets that we are either currently focusing on
      or
      that we intend to focus on in the future. Management believes that these five
      target markets will enable us to maintain our unique competitive position while
      significantly expanding our client base.




·
            Current
                Paid Listings Customers - Our largest source of potential clients
                are
                those companies currently using other methods of online advertising,
                specifically those who are using search engine marketing techniques
                that
                are similar to those provided by us. This market group is familiar
                with
                search engine marketing and its benefits, making them amenable to
                our
                services especially at our discounted price. This group is expected
                to
                continue to be important to our customer acquisition strategy going
                forward.




·
            Small
                to Medium Businesses - Of the 12 million small to medium businesses
                in the
                United States, less than 1% currently use search as method of customer
                acquisition. These small to medium businesses present a customer
                acquisition opportunity for us. Such small to medium businesses are
                massive in numbers, largely ignored by the larger providers of search
                engine marketing services and often overshadowed by the larger competitors
                in their space when they must compete in an auction format. Because
                we
                specifically target the small to medium business market, we feel
                we are
                positioned to offer this market a higher level of customer service
                and
                personalized attention than larger online advertising services. These
                potential clients are also ideal for our ContentLogic service, because
                small to medium sized businesses often do not have the resources
                to hire
                internal copywriters and website developers to drive traffic to their
                sites.




·
            Niche
                Business Sectors - Niche business sectors are those sectors that
                offer a
                unique product or service that is not readily available to consumers
                and
                often can only be found by consumers online. Although these products
                and
                services are often difficult to find and are not typical consumer
                offerings, a strong demand for such products and services exists
                making
                these specialty businesses ideal candidates for search engine marketing.
                Similar to the small to medium size businesses, the niche sector
                is
                largely ignored by the large search engine marketing
                companies.




·
            Large
                Scale Content Opportunities - Large established firms are increasingly
                realizing the importance of online marketing. While they frequently
                have
                the resources to provide our services in-house, they understand that
                it is
                not their core competence and are open to outside service providers.
                We
                are pursuing these large firms to provide content on a large-scale,
                contractual basis. We plan to actively target this sector going forward,
                as we believe it will provide an additional method to leverage the
                strength of our team of copywriters and will potentially constitute
                a
                significant revenue opportunity.




·
            Publisher
                and Editorial Content Opportunities - Publishers and other companies
                who
                have regular needs for editorial content have historically relied
                on a
                combination of staff and contract writers. These firms are increasingly
                looking to outsource the development of that editorial content. In
                addition, many publishers are focusing on growing their online activities
                and websites and understand the benefit of receiving additional traffic
                to
                their websites as a result of search optimized content. We are pursuing
                these editorial content opportunities to provide content on a large-scale,
                contractual basis. We plan to actively target this sector going forward,
                as we believe it will provide an additional method to leverage the
                strength of our team of copywriters and will potentially constitute
                a
                large portion of our revenue.




6




**Sales,
      Marketing, Advertising and Promotion**




As
      of
      December 31, 2006, we had 22 full-time employees in our sales department. Our
      sales department currently focuses on adding new clients to our ContentLogic
      program. Advertising and promotion of our services is broken into three main
      categories: direct sales , online
      promotion **** and
      value
      added resellers .




·
            Direct
                Sales: Our sales staff targets new client relationships through telesales
                efforts, direct marketing, and attendance and sponsorship at various
                trade
                shows and conferences.




·
            Online
                Promotion: We engage in certain advertising and direct marketing
                focused
                on acquiring new merchant advertisers and new distribution partners
                through online promotional methods.




·
            Value
                Added Resellers: We signed WSI, Inc.****(“WSI”)****as
                our firstvalue
                added resellerduring 2006 and expect to continue to expand this program. WSI operates
                or
                franchisesapproximately****500Web****developer
                units in North America. We currently have 120 units who have been
                qualified and 35 that have been trained to sell our ContentLogic
                products.





We
      intend
      to continue our strategy of growing our client base through sales and marketing
      programs and are reviewing more scalable methods and partnerships, especially
      the expansion of our value
      added reseller programs, with the goal of increasing our client base. Further, we continually
      evaluate our marketing and advertising strategies to maximize the effectiveness
      of our programs and their return on investment.





**Competition**




We
      are
      one of the few companies exclusively dedicated to providing online content-based
      marketing solutions to increase lead generation from unpaid search listings.
      Nonetheless, while our content-based solutions are unique, there are other
      companies that use similar techniques in different ways to increase traffic
      leads and conversion rates. Yahoo! Answers is an example of a question and
      answer content site that leverages a large number of non-paid users to generate
      content to drive traffic and ad revenue. It does not, however, sell content
      to
      other companies. In contrast, Introspect provides search engine optimization
      services which include Web design
      and content development. It, however, does not own its own content
      network.




We
      believe that today’s typical Internet **** advertiser
      is becoming more sophisticated regarding the increased value of content-based
      solutions relative to the different forms of **** Internet advertising. These advertisers are increasingly aware of their return on
      investment and are more carefully developing their online marketing programs.
      While the significant growth in the industry has increased the competitive
      levels, we believe that our unique product offering will continue to provide
      an
      edge in developing new client relationships.




**Intellectual
      Property and Proprietary Rights**




We
      seek
      to protect our intellectual property through existing laws and regulations
      and
      by contractual restrictions. We rely upon trademark, patent and copyright law,
      trade secret protection and confidentiality or license agreements with our
      employees, customers, partners and others to help us protect our intellectual
      property.




Our
      policy is to apply for patents or for other appropriate statutory protection
      when we develop valuable new or improved technology. We currently do not have
      any patents or pending patent applications. The status of any patent involves
      complex legal and factual questions. The scope of allowable claims is often
      uncertain. As a result, we cannot be sure that any patent application filed
      by
      us will result in a patent being issued, nor that any patents issued in the
      future will afford adequate protection against competitors with similar
      technology; nor can we provide assurance that patents issued to us will not
      be
      infringed upon or designed around by others. Furthermore, the performance-based
      search advertising industry has been the subject of numerous patents and patent
      applications, which in turn has resulted in litigation. The outcome of this
      ongoing litigation or any future claims in this sector may adversely affect
      our
      business or financial prospects.




All
      of
      our copywriters are under contract assigning to us ownership of the content
      they
      create. In addition, we have copyrighted all content hosted throughout our
      network.




7




**Government
      Regulation**




We
      are
      subject to governmental regulation much like many other companies. There are
      still relatively few laws or regulations specifically addressed to the Internet.
      As a result, the manner in which existing laws and regulations should be applied
      to the Internet in general, and how they relate to our businesses in particular,
      is unclear in many cases. Such uncertainty arises under existing laws regulating
      matters, including user privacy, defamation, pricing, advertising, taxation,
      gambling, sweepstakes, promotions, content regulation, quality of products
      and
      services and intellectual property ownership and infringement.




To
      resolve some of the current legal uncertainty, we expect new laws and
      regulations to be adopted that will be directly applicable to our activities.
      Any existing or new legislation applicable to us could expose us to substantial
      liability, including significant expenses necessary to comply with such laws
      and
      regulations, and could dampen the growth in use of the Internet in
      general.




Several
      new federal laws that could have an impact on our business have already been
      adopted. The Digital Millennium Copyright Act is intended to reduce the
      liability of online service providers for listing or linking to third party
      websites that include materials that infringe copyrights or rights of others.
      The Children’s Online Protection Act and the Children’s Online Privacy
      Protection Act are intended to restrict the distribution of certain materials
      deemed harmful to children and impose additional restrictions on the ability
      of
      online services to collect user information from minors. In addition, the
      Protection of Children from Sexual Predators Act requires online services
      providers to report evidence of violations of federal child pornography laws
      under certain circumstances.




The
      foregoing legislation may impose significant additional costs on our business
      or
      subject us to additional liabilities , if we
      were not to comply fully with their terms, whether intentionally or not. If
      we
      did not meet the safe harbor requirements of the Digital Millennium Copyright
      Act, we could be exposed to copyright actions, which could be costly and
      time-consuming. The Children’s Online Protection Act and the Children’s Online
      Privacy Protection Act impose fines and penalties to persons and operators
      that
      are not fully compliant with their requirements. The federal government could
      impose penalties on those parties that do not meet the full compliance practices
      of the Protection of Children from Sexual Predators Act. We intend to fully
      comply with the laws and regulations that govern our industry, and we intend
      to
      employ internal resources and incur outside professional fees to establish,
      review and maintain policies and procedures to reduce the risk of
      noncompliance.




We
      post
      our privacy policy and practices concerning the use and disclosure of any user
      data on our websites. Any failure by us to comply with posted privacy policies,
      Federal Trade Commission requirements or other domestic or international
      privacy-related laws and regulations could result in proceedings by governmental
      or regulatory bodies that could potentially harm our businesses, results of
      operations and financial condition. In this regard, there are a large number
      of
      legislative proposals before the United
      States Congress
      and various state legislative bodies regarding privacy issues related to our
      businesses. It is not possible to predict whether or when such legislation
      may
      be adopted, and certain proposals, if adopted, could harm our business through
      a
      decrease in user registrations and revenue. These decreases could be caused
      by,
      among other possible provisions, the required use of disclaimers or other
      requirements before users can utilize our services.





**Employees**




As
      of
      December 31, 2006, we employed a total of 51 full-time employees and
      approximately 200 contracted copywriters. We have never had a work stoppage,
      and
      none of our employees are represented by a labor union. We consider our employee
      relationships to be positive. If we are unable to retain our key employees
      or we
      are unable to maintain adequate staffing of qualified employees, particularly
      during peak sales seasons, our business would be adversely
      affected.




**Geographic
      Information**




For
      the
      year ended December 31, 2006, 93.1% of our revenue was generated from
      transactions originating in the United States. All of our fixed assets are
      located in the United States, principally in California at our
      headquarters.




**Item
      1A. Risk Factors.**




Our
      future revenues will be derived from sales of our search engine marketing
      services. There are numerous and varied risks, known and unknown, that may
      prevent us from achieving our goals, including those described below. If any
      of
      these risks actually occurs, our business, financial condition or results of
      operation may be materially adversely affected.




8




**RISKS
      RELATING TO** **THE
      COMPANY**




*Our
      limited operating history makes evaluation of our business
      difficult.*




We
      were
      incorporated in the State of Delaware on December 14, 2000, and we have limited
      historical financial data upon which to base planned operating expenses or
      forecast accurately our future operating results. Further, our limited operating
      history will make it difficult for investors and securities analysts to evaluate
      our business and prospects. You must consider our prospects in light of the
      risks, expenses and difficulties we face as an early stage company with a
      limited operating history.




*We
      may need additional funding to support our operations and capital expenditures,
      which may not be available to us and which lack of availability could adversely
      affect our business.*




We
      have
      no committed sources of additional capital. For the foreseeable future, we
      intend to fund our operations and capital expenditures from limited cash flow
      from operations and our cash on hand. If our capital resources are insufficient,
      we will have to raise additional funds. We may need additional funds to continue
      our operations, pursue business opportunities (such as expansion, acquisitions
      of complementary businesses or the development of new products or services),
      to
      react to unforeseen difficulties or to respond to competitive pressures. There
      can be no assurance that any financing arrangements will be available in amounts
      or on terms acceptable to us, if at all. Furthermore, the sale of additional
      equity or convertible debt securities may result in further dilution to existing
      stockholders. If adequate additional funds are not available, we may be required
      to delay, reduce the scope of or eliminate material parts of the implementation
      of our business strategy, including the possibility of additional acquisitions
      or internally developed businesses.





*We* *incurred
      losses in* ** *2006,* *and we expect our losses to continue for the foreseeable future, which will
      adversely affect our ability to achieve profitability.*




We
      incurred a net loss of $ 4,039,908  for
      the fiscal
      year ended
      December 31, 2006 and a gain of $314,997 for the fiscal
      year **** ended
      December 31, 2005. We
      may incur net losses in the future if, among other issues, our revenues decline,
      our stock option expenses rise, increases in our sales and marketing activities,
      regulatory and compliance costs or changes in fair value of issued warrants.
      These issues may prove to be larger than we currently anticipate which could
      further increase our net losses. We cannot predict when, or if, we will become
      profitable in the future. Even if we achieve profitability, we may not be able
      to sustain it. Through December 31, 2006 we had an accumulated deficit of
      $ 10,367,580 .




*We
      may make acquisitions, which could divert management’s attention, cause
      ownership dilution to our stockholders and be difficult to
      integrate.*




Our
      business strategy depends in part upon our ability to identify, structure and
      integrate acquisitions that are complementary with our business model.
      Acquisitions, strategic relationships and investments in the technology and
      Internet sectors involve a high degree of risk. We may also be unable to find
      a
      sufficient number of attractive opportunities, if any, to meet our objectives.
      Although many technology and Internet companies have grown in terms of revenue,
      few companies are profitable or have competitive market share. Our potential
      strategic acquisition, strategic relationship or investment targets and partners
      may have histories of net losses and may expect net losses for the foreseeable
      future.




Acquisition
      transactions are accompanied by a number of risks that could harm us and our
      business, operating results and financial condition:




·
            we
                could experience a substantial strain on our resources, including
                time and
                money, and we may not be
                successful;




9




·
            our
                management’s attention may be diverted from our ongoing business
                concerns;




·
            while
                integrating new companies, we may lose key executives or other employees
                of these companies;




·
            we
                could experience customer dissatisfaction or performance problems
                with an
                acquired company or technology;




·
            we
                may become subject to unknown or underestimated liabilities of an
                acquired
                entity or incur unexpected expenses or losses from such acquisitions;
                and




·
            we
                may incur possible impairment charges related to goodwill or other
                intangible assets or other unanticipated events or circumstances,
                any of
                which could harm our business.




Consequently,
      we might not be successful in integrating any acquired businesses, products
      or
      technologies, and might not achieve anticipated revenue and cost
      benefits.




*We
      may be unable to attract and retain key employees and the loss of our senior
      management could harm our current and future operations and
      prospect.*




We
      are
      heavily dependent on the continued services of George Lichter, our President
      and
      Chief Executive Officer. Our success also depends on the skills, experience
      and
      performance of other key members of our management team. The loss of any key
      employee, in particular the departure of Mr. Lichter, Chief
      Financial Officer, Frank Knuettel II, Vice
      President and Chief Technology Officer,
      David Warthen, and
      our **** VP
      of
      Sales, Edan Portaro, could have an adverse effect on our prospects, business,
      financial condition, and results of operations. Any member of our senior
      management team may voluntarily terminate his employment with us at any time
      upon short notice.  All
      of
      our officers and employees are employed on an “at will” basis, which may mean
      they may have less of an incentive to stay with us when presented with
      alternative employment opportunities. In addition, **** our
      senior management and **** key
      operating employees hold stock options and restricted stock that have vested.
      These individuals may, therefore, be more likely to leave us if the shares
      of
      our common stock significantly appreciate in value. In
      addition, various senior members of the management team, including Messrs.
      Lichter and Knuettel, have provisions in their employment agreements that
      provide for severance and other compensation and benefits upon termination
      of
      their employment under certain circumstances .





Failure
      to attract and retain necessary technical personnel and skilled management
      could
      adversely affect our business. Our success depends to a significant degree
      upon
      our ability to attract, retain and motivate highly skilled and qualified
      personnel. If we fail to attract, train and retain sufficient numbers of these
      highly qualified people, our prospects, business, financial condition and
      results of operations will be materially and adversely affected.




*Our
      senior management has never managed a public company.*




The
      individuals who now constitute our senior management have never had
      responsibility for managing a publicly traded company. Such responsibilities
      include complying with federal securities laws and making required disclosures
      on a timely basis. There can be no assurance that our senior management will
      be
      able to implement and affect programs and policies in an effective and timely
      manner that adequately respond to such increased legal, regulatory compliance
      and reporting requirements. Further, this could impair our ability to comply
      with legal and regulatory requirements such as those imposed by the
      Sarbanes-Oxley Act of 2002. Our failure to do so could lead to the imposition
      of
      fines and penalties and further result in the deterioration of our
      business.




*We
      may not be able to effectively manage our growth.*




Our
      strategy envisions growing our business. If we fail to effectively manage our
      growth, our financial results could be adversely affected. Growth may place
      a
      strain on our management systems and resources. We must continue to refine
      and
      expand our business development capabilities, our systems and processes and
      our
      access to financing sources. As we grow, we must continue to hire, train,
      supervise and manage new employees. We cannot assure you that we will be able
      to:




·
            meet
                our capital needs;




10




·
            expand
                our systems effectively or efficiently or in a timely
                manner;




·
            allocate
                our human resources optimally;




·
            identify
                and hire qualified employees or retain valued employees;
                or




·
            incorporate
                effectively the components of any business that we may acquire in
                our
                effort to achieve growth.




If
      we are
      unable to manage our growth, our operations and financial results could be
      adversely affected.




*New
      rules, including those contained in and issued under the Sarbanes-Oxley Act
      of
      2002, may make it difficult for us to retain or attract qualified officers
      and
      directors, which could adversely affect the management of our business and
      our
      ability to obtain or retain listing of our common stock.*




We
      may be
      unable to attract and retain qualified officers, directors and members of board of
      directors **** committees
      required to provide for our effective management as a result of the recent
      and
      currently proposed changes in the rules and regulations which govern
      publicly-held companies, including, but not limited to, certifications from
      executive officers and requirements for financial experts on the board of
      directors. The perceived increased personal risk associated with these recent
      changes may deter qualified individuals from accepting these roles. The
      enactment of the Sarbanes-Oxley Act of 2002 has resulted in the issuance of
      a
      series of new rules and regulations and the strengthening of existing rules
      and
      regulations by the Securities and Exchange Commission **** (the
      “SEC”) **,** as well
      as the adoption of new and more stringent rules by the stock exchanges and
      NASDAQ.




Further,
      certain of these recent and proposed changes heighten the requirements for
      board
      or committee membership, particularly with respect to an individual’s
      independence from the corporation and level of experience in finance and
      accounting matters. We may have difficulty attracting and retaining directors
      with the requisite qualifications. If we are unable to attract and retain
      qualified officers and directors, the management of our business and our ability
      to obtain or retain listing of our shares of our common stock on any stock
      exchange or NASDAQ (assuming we elect to seek and are successful in obtaining
      such listing) could be adversely affected.




If
      we are
      unable to obtain adequate insurance, our financial condition could be adversely
      affected in the event of uninsured or inadequately insured loss or damage. Our
      ability to effectively recruit and retain qualified officers and directors
      could
      also be adversely affected if we experience difficulty in obtaining adequate
      directors’ and officers’ liability insurance.




We
      may
      not be able to obtain insurance policies on terms affordable to us that would
      adequately insure our business and property against damage, loss or claims
      by
      third parties. To the extent our business or property suffers any damages,
      losses or claims by third parties, which are not covered or adequately covered
      by insurance, the financial condition of InfoSearch may be materially adversely
      affected.




We
      may be
      unable to maintain sufficient insurance as a public company to cover liability
      claims made against our officers and directors. If we are unable to adequately
      insure our officers and directors, we may not be able to retain or recruit
      qualified officers and directors to manage the
      Company .




**RISKS
      RELATING TO OUR BUSINESS**




*If
      we do not maintain and grow a critical mass of online advertisers and content
      licensees, our operating results could be adversely
      affected.*




11




Our
      success depends, in part, on the maintenance and growth of a critical mass
      of
      online advertisers and content licensees and a continued interest in our
      performance-based advertising and search marketing services. If our business
      is
      unable to achieve a growing base of online advertisers and content licensees,
      in
      particular, we may not successfully develop or market technologies, products
      or
      services that are competitive or accepted by online advertisers and content
      licensees, which comprise a large portion of the search marketing-based
      community. Any decline in the number of online advertisers and content licensees
      could adversely affect our operating results generally.




*We
      are dependent upon several of the major search engines to continue to provide
      us
      traffic that our merchant advertisers deem to be of value, and if they do not,
      it could have a material adverse effect on the value of our
      services.*




We
      are
      dependent upon several of the major Internet search engines namely Google,
      Yahoo!, MSN and AOL to provide us traffic that our merchant advertisers deem
      to
      be of value. The Web Properties business model is predicated on individuals
      performing keyword searches and through those searches finding our articles
      in
      the non-paid search results portion of the search results page and ultimately
      clicking through to the advertiser on the InfoSearch article. If our traffic
      from any or multiple of these search engines were interrupted for any reason,
      we
      would potentially suffer a significant decline in revenue. We monitor the
      traffic delivered to our merchant advertisers in an attempt to optimize the
      quality of traffic we deliver. We review factors such as non-human processes,
      including robots (which create automated, artificial traffic), spiders (which
      review websites for search engines in order for the search engines to categorize
      the content of websites but have no direct commercial value to the website
      owner), scripts (or other software), mechanical automation of clicking and
      other
      sources and causes of low-quality traffic, including, but not limited to, other
      non-human clicking agents. Even with such monitoring in place, there is a risk
      that a certain amount of low-quality traffic will be provided to our merchant
      advertisers, which, if not contained, may be detrimental to those relationships.
      Low-quality traffic (or traffic that is deemed to be less valuable by our
      merchant advertisers) may prevent us from growing our base of merchant
      advertisers and cause us to lose relationships with existing merchant
      advertisers.




*We
      may be subject to litigation for infringing the intellectual property rights
      of
      others.*




Our
      success depends, in part, on our ability to protect our intellectual property
      and to operate without infringing on the intellectual property rights of others.
      There can be no guarantee that any of our intellectual property will be
      adequately safeguarded, or that it will not be challenged by third parties.
      We
      may be subject to patent infringement claims or other intellectual property
      infringement claims that would be costly to defend and could limit our ability
      to use certain critical technologies.




For
      example, Overture Services, a subsidiary of Yahoo!, which operates in certain
      competitive areas with us, owns a patent (U.S. Patent No. 6,269,361), which
      purports to give Overture rights to certain bid-for-placement products and
      pay-per-performance search technologies. Overture is currently involved in
      litigation with two companies relating to this patent (FindWhat and Google).
      These companies are vigorously contesting Overture’s patent. If we were to
      acquire or develop a related product or business model that Overture construes
      as infringing upon the above-referenced patent, then we could be asked to
      license, re-engineer our product(s) or revise our business model according
      to
      terms that may be extremely expensive and/or unreasonable.




Any
      patent litigation could negatively impact our business by diverting resources
      and management attention from other aspects of the business and adding
      uncertainty as to the ownership of technology and services that we view as
      proprietary and essential to our business. In addition, a successful claim
      of
      patent infringement against us and our failure or inability to license the
      infringed or similar technology on reasonable terms, or at all, could have
      a
      material adverse effect on our business.




12




*We
      may be involved in lawsuits to protect or enforce any patents that we may be
      granted, which could be expensive and time consuming.*




We
      may
      initiate patent litigation against third parties to protect or enforce our
      patent rights, and we may be similarly sued by others. We may also become
      subject to interference proceedings conducted in the patent and trademark
      offices of various countries to determine the priority of inventions. The
      defense and prosecution, if necessary, of intellectual property suits,
      interference proceedings and related legal and administrative proceedings is
      costly and may divert our technical and management personnel from their normal
      responsibilities. We may not prevail in any of these suits. An adverse
      determination of any litigation or defense proceedings could put our patents
      at
      risk of being invalidated or interpreted narrowly and could put our patent
      applications at risk of not being issued.




Furthermore,
      because of the substantial amount of discovery required in connection with
      intellectual property litigation, there is a risk that some of our confidential
      information could be compromised by disclosure during this type of litigation.
      In addition, during the course of this kind of litigation, there could be public
      announcements of the results of hearings, motions or other interim proceedings
      or developments in the litigation. If securities analysts or investors perceive
      these results to be negative, it could have an adverse effect on the trading
      price of our common stock.




**RISKS
      RELATING TO OUR INDUSTRY**




*If
      we are unable to compete in the highly competitive performance-based advertising
      and search marketing industries, we may experience reduced demand for our
      products and services.*




We
      operate in a highly competitive environment. We compete with other companies
      in
      the following main areas:




·
            sales
                to online advertisers of performance-based advertising;
                and




·
            content
                licensing services that allow online advertisers and merchants to
                employ
                our content to drive traffic to their
                websites.




Although
      we currently pursue a strategy that allows us to potentially partner with all
      relevant companies in the industry, there are certain companies in the industry
      that may not wish to partner with us.




We
      expect
      competition to intensify in the future because current and new competitors
      can
      enter our market with little difficulty. The barriers to entering our market
      are
      relatively low. In fact, many current Internet and media companies presently
      have the technical capabilities and advertiser bases to enter the search
      marketing services industry. Further, if the consolidation trend continues
      among
      the larger media and search engine companies with greater brand recognition,
      the
      share of the market remaining for us and other smaller search marketing services
      providers could decrease, even though the number of smaller providers could
      continue to increase. These factors could adversely affect our competitive
      position in the search marketing services industry.




Some
      of
      our competitors, as well as potential entrants into our market, may be better
      positioned to succeed in this market. They may have:




·
            longer
                operating histories;




·
            more
                management experience;




·
            an
                employee base with more extensive
                experience;





·
            a
                better ability to service customers in multiple cities in the United
                States and internationally by virtue of the location of sales
                offices;




·
            larger
                customer bases;




·
            greater
                brand recognition; and




13




·
            significantly
                greater financial, marketing and other
                resources.




In
      addition, many current and potential competitors can devote substantially
      greater resources than we can to promotion, website development and systems
      development. Furthermore, currently and in the future to the extent the use
      of
      the Internet and other online services increase ,
      there
      will likely be larger, more well-established and well-financed entities that
      acquire companies and/or invest in or form joint ventures in categories or
      countries of interest to us, all of which could adversely impact our business.
      Any of these trends could increase competition and reduce the demand for any
      of
      our services.




*If
      we are not able to respond to the rapid technological change characteristic
      of
      our industry, our products and services may not be
      competitive.*




The
      market for our services is characterized by rapid change in business models
      and
      technological infrastructure, and we will need to constantly adapt to changing
      markets and technologies to provide competitive services. We believe that our
      future success will depend, in part, upon our ability to develop our services
      for both our target market and for applications in new markets. We may not,
      however, be able to successfully do so, and our competitors may develop
      innovations that render our products and services obsolete or
      uncompetitive.




*Our
      technical systems are vulnerable to interruption and damage that may be costly
      and time-consuming to resolve and may harm our business and
      reputation.*




A
      disaster could interrupt our services for an indeterminate length of time and
      severely damage our business, prospects, financial condition and results of
      operations. Our systems and operations are vulnerable to damage or interruption
      from fire **,** floods **,** network
      failure **,** hardware
      failure **,** software
      failure **,** power
      loss **,** telecommunications failures **,** break-ins **,** terrorism, war or sabotage **,** computer
      viruses **,** denial
      of service attacks **,** penetration of our network by unauthorized computer users and “hackers” and
      other similar events **,** and
      other unanticipated problems.




We
      may
      not have developed or implemented adequate protections or safeguards to overcome
      any of these events. We also may not have anticipated or addressed many of
      the
      potential events that could threaten or undermine our technology network. Any
      of
      these occurrences could cause material interruptions or delays in our business,
      result in the loss of data or render us unable to provide services to our
      customers. In addition, if a person is able to circumvent our security measures,
      he or she could destroy or misappropriate valuable information or disrupt our
      operations. We have deployed firewall hardware intended to thwart hacker
      attacks. Although we maintain property insurance, our insurance may not be
      adequate to compensate us for all losses that may occur as a result of a
      catastrophic system failure or other loss, and our insurers may not be able
      or
      may decline to do so for a variety of reasons.




If
      we
      fail to address these issues in a timely manner, we may lose the confidence
      of
      our online advertisers and content licensees, our revenue may decline and our
      business could suffer.




*We
      rely on outside firms to host our servers, and a failure of service by these
      providers could adversely affect our business and
      reputation.*




We
      rely
      upon third party providers to host our main servers. In the event that these
      providers experience any interruption in operations or cease operations for
      any
      reason or if we are unable to agree on satisfactory terms for continued hosting
      relationships, we would be forced to enter into a relationship with other
      service providers or assume hosting responsibilities ourselves. If we are forced
      to switch hosting facilities, we may not be successful in finding an alternative
      service provider on acceptable terms or in hosting the computer servers
      ourselves. We may also be limited in our remedies against these providers in
      the
      event of a failure of service. In the past, we have experienced short-term
      outages in the service maintained by one of our current co-location providers.
      We also rely on third party providers for components of our technology platform,
      such as hardware and software providers, credit card processors and domain
      name
      registrars. A failure or limitation of service or available capacity by any
      of
      these third party providers could adversely affect our business and
      reputation.




14




*Our
      quarterly results of operations might fluctuate due to changes in the listing
      parameters employed by search engines to show the results of a particular search
      query, which could adversely affect our revenue and* *,* *in turn* *,* *the market price of our common stock.*




Our
      revenue is heavily dependent on how search engines treat our content in their
      indexes. In the event search engines determine that our content is not high
      quality, such search engines may not rank our content as highly in their indexes
      resulting in a reduction in our traffic, which may cause lower than expected
      revenues. We are greatly dependent on a small number of major search engines,
      namely Google, Yahoo!, MSN and AOL. Search engines tend to adjust their listing
      parameters periodically and each adjustment tends to have an impact on how
      our
      content ranks in their indexes. These constant fluctuations could make it
      difficult for us to predict future revenues.




*Our
      quarterly results of operations might fluctuate due to customer retention rates
      for our content licensing product, which could adversely affect our revenue
      and* *,* *in turn* *,* *the market price of our common stock.*




Our
      revenue is dependent on our client retention rate. A decrease in the retention
      rate could have a significant negative impact on our ongoing revenues, cash
      flows and stock price. An increase in the churn rate could also adversely affect
      our reputation, making it more difficult to obtain new clients, further
      negatively impacting our revenues and cash flows.




*We
      are susceptible to general economic conditions, and a downturn in advertising
      and marketing spending by merchants could adversely affect our operating
      results.*




Our
      operating results will be subject to fluctuations based on general economic
      conditions, in particular those conditions that impact merchant-consumer
      transactions. If there were to be a general economic downturn that affected
      consumer activity in particular, however slight, then we would expect that
      business entities, including our current **** online
      advertisers  potential
      online advertisers , **** current **** content
      licensees and potential **** content licensees, could substantially and immediately reduce their advertising and
      marketing budgets. We believe that during periods of lower consumer activity,
      online spending on advertising and marketing is more likely to be reduced,
      and
      more quickly, than many other types of business expenses. These factors could
      cause a material adverse effect on our operating results.




*We
      depend on the growth of the Internet and Internet infrastructure for our future
      growth and any decrease or less than anticipated growth in Internet usage could
      adversely affect our business prospects.*




Our
      future revenue and profits, if any, depend upon the continued widespread use of
      the Internet as an effective commercial and business medium. Factors which
      could
      reduce the widespread use of the Internet include:




·
            possible
                disruptions or other damage to the Internet or telecommunications
                infrastructure;




·
            failure
                of the individual networking infrastructures of our merchant advertisers
                and distribution partners to alleviate potential overloading and
                delayed
                response times;




·
            a
                decision by merchant advertisers to spend more of their marketing
                dollars
                in offline areas;




·
            increased
                governmental regulation and taxation;
                and




·
            actual
                or perceived lack of security or privacy
                protection.








In
      particular, concerns over the security of transactions conducted on the Internet
      and the privacy of users may inhibit the growth of the Internet and other online
      services, especially online commerce. In order for the online commerce market
      to
      develop successfully, we, and other market participants, must be able to
      transmit confidential information, including credit card information, securely
      over public networks. Any decrease or less than anticipated growth in Internet
      usage could have a material adverse effect on our business
      prospects.




15




*We
      are exposed to risks associated with credit card fraud and credit payment,
      and
      we may suffer losses as a result of fraudulent data or payment failure by
      merchant advertisers.*




We
      may
      suffer losses as a result of payments made with fraudulent credit card data.
      Our
      failure to control fraudulent credit card transactions adequately could reduce
      our gross profit margin. In addition, under limited circumstances, we extend
      credit to online advertisers who may default on their accounts payable to
      us.




*Government
      regulation of the Internet and online commerce may adversely affect our business
      and operating results.*




Companies
      engaging in online search, commerce and related businesses face uncertainty
      related to future government regulation of the Internet. Due to the rapid growth
      and widespread use of the Internet, legislatures at the federal and state levels
      are enacting and considering various laws and regulations relating to the
      Internet. Furthermore, the application of existing laws and regulations to
      Internet companies remains somewhat unclear. Our business and operating results
      may be negatively affected by new laws, and such existing or new regulations
      may
      expose us to substantial compliance costs and liabilities and may impede the
      growth in use of the Internet.




The
      application of these statutes and others to the Internet search industry is
      not
      entirely settled. Further, several existing and proposed federal laws could
      have
      an impact on our business ,
      for
      instance :




·
            theDigital Millennium Copyright Act and its related safe harbors are
                intended
                to reduce the liability of online service providers for listing or
                linking
                to third-party websites that include materials that infringe copyrights
                or
                other rights of others;
                and




·
            theCAN-SPAM Act of 2003 and certain state laws are intended to regulate
                interstate commerce by imposing limitations and penalties on the
                transmission of unsolicited commercial electronic mail via the
                Internet.




With
      respect to the subject matter of each of these laws, courts may apply these
      laws
      in unintended and unexpected ways. As a company that provides services over
      the
      Internet, we may be subject to an action brought under any of these or future
      laws governing online services. Many of the services of the Internet are
      automated and companies, such as ours, may be unknowing conduits for illegal
      or
      prohibited materials. It is not known how courts will rule in many
      circumstances; for example, it is possible that some courts could find strict
      liability or impose “know your customer” standards of conduct in certain
      circumstances.




We
      may
      also be subject to costs and liabilities with respect to privacy issues. Several
      Internet companies have incurred costs and paid penalties for violating their
      privacy policies. Further, it is anticipated that new legislation will be
      adopted by federal and state governments with respect to user privacy.
      Additionally, foreign governments may pass laws which could negatively impact
      our business or may prosecute us for our products and services based upon
      existing laws. The restrictions imposed by, and costs of complying with, current
      and possible future laws and regulations related to our business could harm
      our
      business and operating results.




Online
      commerce is relatively new and rapidly changing, and federal and state
      regulations relating to the Internet and online commerce are evolving.
      Currently, there are few laws or regulations directly applicable to the Internet
      or online commerce on the Internet, and the laws governing the Internet that
      exist remain largely unsettled. New Internet laws and regulations could dampen
      growth in use and acceptance of the Internet for commerce. In addition,
      applicability to the Internet of existing laws governing issues such as property
      ownership, copyrights and other intellectual property issues, libel, obscenity
      and personal privacy is uncertain. The vast majority of those laws were adopted
      prior to the advent of the Internet and related technologies and, as a result,
      do not expressly contemplate or address the unique issues presented by the
      Internet and related technologies. Further, growth and development of online
      commerce have prompted calls for more stringent consumer protection laws, both
      in the United
      States and
      abroad. The adoption or modification of laws or regulations applicable to the
      Internet could have a material adverse effect on our Internet business
      operations. We also are subject to regulation not specifically related to the
      Internet, including laws affecting direct marketers and
      advertisers.




16





In
      addition, in 1998, the Internet Tax Freedom Act was enacted, which generally
      placed a three-year moratorium on state and local taxes on Internet access
      and
      on multiple or discriminatory state and local taxes on electronic commerce.
      This
      moratorium was recently extended until November 1, 2007. We cannot predict
      whether this moratorium will be extended in the future or whether future
      legislation will alter the nature of the moratorium. If this moratorium is
      not
      extended in its current form, state and local governments could impose
      additional taxes on Internet-based transactions, and these taxes could decrease
      our ability to compete with traditional retailers and could have a material
      adverse effect on our business, financial condition, results of operations
      and
      cash flow.




In
      addition, several telecommunications carriers have requested that the Federal
      Communications Commission (“FCC”) regulate telecommunications over the Internet.
      Due to the increasing use of the Internet and the burden it has placed on the
      current telecommunications infrastructure, telephone carriers have requested
      the
      FCC to regulate Internet service providers and impose access fees on those
      providers. If the FCC imposes access fees, the costs of using the Internet
      could
      increase dramatically. This could result in the reduced use of the Internet
      as a
      medium for commerce, which could have a material adverse effect on our Internet
      business operations.




*We
      may incur liabilities for the activities of users of our service, which could
      adversely affect our service offerings.*




The
      law
      relating to the liability of providers of online services for activities of
      their users and for the content of their merchant advertiser listings is
      currently unsettled and could damage our business, financial condition and
      operating results. Our insurance policies may not provide coverage for liability
      arising out of activities of our users or merchant advertisers for the content
      of our listings. Furthermore, we may not be able to obtain or maintain adequate
      insurance coverage to reduce or limit the liabilities associated with our
      businesses. We may not successfully avoid civil or criminal liability for
      unlawful activities carried out by consumers of our services or for the content
      of our listings. Our potential liability for unlawful activities of users of
      our
      services or for the content of our listings could require us to implement
      measures to reduce our exposure to such liability, which may require us, among
      other things, to spend substantial resources or to discontinue certain service
      offerings.




**RISKS
      RELATING TO** **OUR**  **COMMON
      STOCK**




*Applicable
      SEC rules governing the trading of “penny stocks” limits the trading and
      liquidity of our common stock which may affect the trading price of our common
      stock.*




Our
      common stock is currently quoted on the NASD’s OTC Bulletin Board, and trades
      below $5.00 per share **.** Therefore ,
      our
      common stock is considered a “penny stock” and subject to SEC rules and
      regulations which impose limitations upon the manner in which such shares may
      be
      publicly traded. These regulations require the delivery, prior to any
      transaction involving a penny stock, of a disclosure schedule explaining the
      penny stock market and the associated risks. Under these regulations, certain
      brokers who recommend such securities to persons other than established
      customers or certain accredited investors must make a special written
      suitability determination regarding such a purchaser and receive such
      purchaser’s written agreement to a transaction prior to sale. These regulations
      have the effect of limiting the trading activity and reducing the liquidity
      of
      an investment in our common stock.




*The
      market price of our common stock is likely to be highly volatile and subject
      to
      wide fluctuations.*




The
      market price of our common stock is likely to be highly volatile and could
      be
      subject to wide fluctuations in response to a number of factors that are beyond
      our control, including:




·
            announcements
                of new products or services by our competitors;
                and




·
            fluctuations
                in revenue attributable to changes in the search engine listing parameters
                that rank the relevance of our
                content.




In
      addition, the market price of our common stock could be subject to wide
      fluctuations in response to:




·
            quarterly
                variations in our revenues and operating
                expenses;




17




·
            announcements
                of technological innovations or new products or services by us;
                and




·
            significant
                sales of our common stock by the selling stock
                holders.




*Our
      operating results may fluctuate significantly, and these fluctuations may cause
      our common stock price to fall.*




Our
      operating results will likely vary in the future primarily as the result of
      fluctuations in our revenues and operating expenses. If our results of
      operations do not meet the expectations of current or potential investors,
      the
      price of our common stock may decline.




*There
      is a limited public market for shares of our common stock, which may make it
      difficult for investors to sell their shares.*




There
      is
      a limited public market for shares of our common stock. An active public market
      for shares of our common stock may not develop, or if one should develop, it
      may
      not be sustained. Therefore, investors may not be able to find purchasers for
      their shares of our common stock.




*We
      do not expect to pay dividends for the foreseeable future.*




We
      currently intend to retain any future earnings to support the development and
      expansion of our business and do not anticipate paying cash dividends in the
      foreseeable future. Our payment of any future dividends will be at the
      discretion of our board of directors after taking into account various factors,
      including but not limited to our financial condition, operating results, cash
      needs, growth plans and the terms of any credit agreements that we may be a
      party to at the time. Accordingly, investors must rely on sales of their common
      stock after price appreciation, which may never occur, as the only way to
      realize their investment. Investors seeking cash dividends should not purchase
      our common stock.




*Anti-takeover
      provisions may limit the ability of another party to acquire us, which could
      cause our stock price to decline.*




If
      we
      become listed on a national stock exchange or the NASDAQ Stock Market or have
      a
      class of voting stock held by more than 2,000 record holders, we will be
      governed by the provisions of Section 203 of the General Corporation Law of
      Delaware. Section 203 of the Delaware General Corporation Law provides, subject
      to enumerated exceptions, that if a person acquires 15% or more of our voting
      stock, the person is an “interested stockholder” and may not engage in “business
      combinations” with us for a period of three years from the time the person
      acquired 15% or more of our voting stock.




**Item
      2. Description of Property.**




The
      Company's corporate headquarters are located in Marina Del Rey, California.
      The
      Company’s lease runs through May 31, 2009, with monthly payments of $17,980 from
      June 1, 2006 through May 31, 2007, $18,520 from June 1, 2007 through May 31,
      2008 and $19,075 from June 1, 2008 through May 31, 2009.




**Item
      3. Legal Proceedings.**





From
      time
      to time, we may be involved in litigation relating to claims arising out of
      our
      operations in the normal course of business. We currently are not a party to
      any
      legal proceedings, the adverse outcome of which, in management’s opinion,
      individually or in the aggregate, would have a material adverse effect on our
      results of operations or financial position. ****





On
      February 28, 2007, the SEC commenced an enforcement action against Mr. Louis
      Zehil, a partner of our former external legal counsel, McGuireWoods LLP, and
      our
      former corporate secretary, alleging that he had engaged in a fraudulent scheme
      to obtain and sell to the investing public shares of securities in several
      other
      companies in violation of the antifraud and registration provisions of the
      federal securities laws. The SEC enforcement proceeding does not include
      allegations with respect to our securities; however, we have commenced a review
      into possible unauthorized trading in our common stock facilitated by Mr. Zehil.
      We cannot predict the outcome of this investigation or whether the investigation
      and/or any potential proceedings resulting from this conduct might have a
      material adverse impact on the Company.




18




**Item
      4. Submission of Matters to a Vote of Security Holders.**




The
      Company held its 2006 annual
      meeting of stockholders on
      December 12, 2006. The meeting was held to consider and vote upon: (i) the
      election of our **** four
      directors (George Lichter, Steve Lazuka, John LaValle and Claudio Pinkus);
      (ii)
      the approval of an amendment to the Company’s 2004 Stock Option Plan (as
      amended, the “Stock Option Plan”) **** to
      increase the number of shares covered by the Stock
      Option Plan from
      5,212,500 to 10,425,000; and (iii) the ratification of the appointment of Singer
      Lewak Greenbaum & Goldstein LLP as the Company’s independent registered
      public accounting firm. Mr.
      Lazuka resigned from our board of directors as of January 2, 2007.




The
      votes
      cast with respect to each director are summarized as follows:




**Director
                Nominee**
            
            **Votes
                For**
            
            **Votes
                Withheld**George
                Lichter
            
            
            19,140,589
            
            
            6,723,353Steve
                Lazuka
            
            
            19,140,589
            
            
            6,723,353John
                LaValle
            
            
            24,691,708
            
            
            1,172,234Claudio
                Pinkus
            
            
            19,138,589
            
            
            6,725,353




The
      votes
      cast with respect to the approval of an amendment to the Stock
      Option Plan to increase the number of shares covered by the Stock
      Option Plan from
      5,212,500 to 10,425,000 are summarized as follows:




**Votes
                For**
            
            **Votes
                Against**
            
            **Abstain**23,359,424
            
            
            2,369,038
            
            
            135,480




The
      votes
      cast with respect to the ratification of the appointment of Singer Lewak
      Greenbaum & Goldstein LLP as the Company’s independent registered public
      accounting firm are summarized as follows:





**Votes
                For**
            
            **Votes
                Against**
            
            **Votes
                Withheld**24,582,363
            
            
            1,249,179
            
            
            32,400





**PART
      II**





**Item
                5.**
            **Market
                for Common Equity****Related Stockholder Matters****and
                Small Business Issuer Purchases of Equity Securities****.**





Our
      common stock is traded on the OTC Bulletin Board under the symbol “ISHM.OB” and
      has been quoted under this symbol since January 5, 2005. Prior to January 5,
      2005, our common
      stock was not
      actively traded and therefore price information for our common
      stock prior to such time, as
      reported on the OTC Bulletin Board **,** is not
      available **.** Prior to
      January 5, 2005, our OTC Bulletin Board under the symbol “MWRD.OB.” The
      quotations reflect inter-dealer prices, without retail mark-up, mark-down or
      commission, and may not represent actual transactions.





The
      following table sets forth the high and low bid prices of our common stock
      on
      the OTC Bulletin Board for the stated calendar quarters.





2005
            
            2006High
            
            Low
            
            High
            
            LowFirst
                Quarter (from January 5, 2005with
                respect to fiscal year 2005)
            
            
            3.85
            
            
            1.83
            
            
            0.74
            
            
            0.41Second
                Quarter
            
            
            2.10
            
            
            0.58
            
            
            0.48
            
            
            0.23Third
                Quarter
            
            
            0.99
            
            
            0.62
            
            
            0.26
            
            
            0.10Fourth
                Quarter
            
            
            0.98
            
            
            0.56
            
            
            0.26
            
            
            0.12




19




The
      closing bid price of our common stock on March 30, 2007 was
      $0.18. As of March 31, 2007, the Company had approximately 79 stockholders
      of
      record.





The
      Company has never declared or paid dividends on its common stock and currently
      does not intend to pay dividends on its common stock in the foreseeable future
      so that it may reinvest earnings in its business. The payment of dividends,
      if
      any, in the future is at the discretion of the board of directors .





There
      have been no sales of unregistered securities during
      the period covered by this report which
      would be required to be disclosed pursuant to Item 701 of Regulation
      S-B **** and
      which
      have not previously been included in a Quarterly Report on Form 10-QSB or on
      a
      Current Report on Form 8-K ,
      except
      for the following:




On
      June
      30, 2006 all of the stock option grants issued to employees prior to June 30,
      2006 had exercise prices above the closing price at the end of the second
      quarter. The board of **** directors ,
      in an
      effort to maintain employee retention, approved the acceleration of vesting
      of
      stock option grants and restricted stock grants, in the amount of 1,428,403
      shares and 1,042,240 shares, respectively. Grants for all employees employed
      as
      of the close of business on June 30, 2006 were accelerated as of June 30, 2006.
      This resulted in a share-based compensation expense of $ 1,041,029 ,
      associated with the acceleration of stock option grants and $718,790 associated
      with restricted stock grants. Both of these values are included in the total
      share-based compensation expense of $4,223,245 for the year  ended
      December 31, 2006.





On
      July
      6, 2006 **,** the
      Company entered into a Settlement Agreement and Release of Claims (the
“Settlement Agreement”), with Gemini Partners, Inc. (“Gemini”), pursuant to
      which the Company issued to Gemini a Common Stock Purchase Warrant immediately
      exercisable into 300,000 shares of the Company’s common stock at a **** price
      of
      $0.01 per share .
      Such
      warrant expires on January 1, 2010. Pursuant to the Settlement Agreement, Gemini
      agreed to cancel its
      existing warrant to purchase 300,000 shares of our common stock at a
      purchase price of $1.00 per share. **** We
      have
      performed an EITF 00-19 analysis of the warrants issued pursuant to the Settlement
      Agreement and
      determined that they will be treated as equity. The fair
      value of the warrant **** was
      calculated as of July 6, 2006 using the Black-Scholes pricing model with the
      following assumptions: expected life , of 54
      months following the grant date; stock volatility of 104.13%;
      risk-free interest rates of 5.2%; and no dividends during the expected term. The
      fair
      value of the warrant was determined to be $68,752. The
      warrant was offered and sold by the Company in reliance on exemptions from
      registration provided by Section 4(2) of the Securities Act as such transaction
      did not involve any public offering.





On **** July
      6,
      2006, the Company entered into the
      GP
      Group Consulting Agreement (the “Consulting Agreement”) with GP Group, LLC (“GP
      Group”), pursuant to which it issued to GP Group a Common Stock Purchase Warrant
      on each of **** August
      6,
      2006, September 6, 2006 and October 6,  2006,
      each such warrant is immediately exercisable into 20,000 shares of the Company’s
      common stock at a price of $0.01 per share. Each such warrant expires on June
      1,
      2010. We have
      performed an EITF 00-19 analysis of the warrants issued pursuant to the Consulting
      Agreement and
      determined that they will be treated as equity. The fair
      values of the warrants was calculated as of issue dates using the Black-Scholes
      pricing model with the following assumptions: expected life of 46, 45,
      and 44 months following the grant dates; stock volatility **** of 104.12%,
      106.98%, and 109.50%; risk-free interest rates of 4.88%, 4.76% and 4.66%; and
      no
      dividends during the expected term, for warrants issued August 6, September
      6,
      and October 6, 2006, respectively. **** The
      fair
      value of the three warrants was determined to be $4,164, $2,804 and $2,611,
      respectively. The Consulting Agreement was terminated effective October 24,
      2006. The warrants were offered and sold by the Company in reliance on
      exemptions from registration provided by Section 4(2) of the Securities Act
      as
      such transaction did not involve any public offering.





The board **** of directors approved
      the sale of substantially all of the assets of Answerbag on September 30, 2006.
      On October 3, 2006, the Company entered into an Asset Purchase Agreement (the
      “Asset Purchase Agreement”) **** to
      sell
      substantially all of the assets of Answerbag to
      Demand Answers, Inc. and its parent, Demand Media **.** In
      conjunction with the agreement, Demand Media received
      a five year warrant to purchase 5,000,000 shares of the Company's common stock
      at a
      purchase price of
      $0.158 per share that expires on October 3, 2011. The exercise price of the
      warrant was determined by calculating the average of the closing price of the
      Company’s common stock from the average of the ten day period from September 11,
      2006 to
      September 22, 2006, and the
      average of the ten day period from October 4,
      2006 to
      October 17, 2006. Pursuant to the Asset Purchase Agreement, Demand Media also
      received the right to appoint one member to the board of directors of the
      Company ,
      which
      they have not exercised . We
      have
      performed an EITF 00-19 analysis of the warrants issued pursuant to the Asset
      Purchase Agreement and
      determined that they will be treated as a liability because of the requirement
      to maintain an effective registration statement for a period of two years. The
      fair
      value of the warrant was calculated as of October 4, 2006 using the
      Black-Scholes pricing model with the following assumptions: expected
      life of 60
      months following the grant date; stock volatility, 109.79%; risk-free interest
      rates of 4.50%; and no dividends during the expected term. The
      fair
      value of the warrant was determined to be $598,836 and appears on the balance
      sheet as Fair Value of Warrant Liability along with the warrants issued pursuant
      to the private placement transaction closed in November 2005. As of December
      31,
      2006, t he
      fair
      value of the warrant was calculated using the Black-Scholes pricing model with
      the following assumptions: stock price of $0.22; expected life of 57
      months following the grant date; stock volatility of 110.12%; risk-free interest
      rates of 4.71%; and no dividends during the expected term. As
      of
      December 31, 2006, the fair value of the warrant was determined to be $911,077,
      resulting in a loss of the fair value of the warrant issued to Demand Media
      of
      $312,691. The warrant was offered and sold by the Company in reliance on
      exemptions from registration provided by Section 4(2) of the Securities Act
      as
      such transaction did not involve any public offering.




20





The
      Company issued 4,510,411 shares of restricted common stock in 2006 to members
      of
      the Company’s board of directors and certain officers **** pursuant
      to the Stock Option Plan .
      The Company **** incurred
      $2,894,423 in non-cash equity compensation expenses associated with these
      grants. The Company also **** issued
      46,025 shares of common stock to certain employees as part of incentive or
      severance programs, incurring $16,980 in non-cash equity compensation expenses. The
      shares of common stock were issued by the Company in reliance on exemptions
      from
      registration provided by Section 4(2) of the Securities Act as such transactions
      did not involve any public offering. ****





**Item
      6. Management’s Discussion and Analysis of Operations and Financial
      Condition** **.**





The
      following discussion should be read in conjunction with the attached financial
      statements and notes thereto. Except for the historical information contained
      herein, the matters discussed below are forward-looking statements that involve
      certain risks and uncertainties, including, among others, the risks and
      uncertainties discussed below. **** Our
      actual results could differ materially from those anticipated in the
      forward-looking statements as a result of various factors, including the risks
      discussed in “Risk Factors” and elsewhere in this report. See “Forward-Looking
      Statements.”





CRITICAL
      ACCOUNTING POLICIES





Revenue
      Recognition





The
      Company recognizes revenue on arrangements in accordance with SEC **** Staff
      Accounting Bulletin No. 101 "Revenue Recognition in Financial Statements" and
      No. 104 "Revenue Recognition," and Emerging Issues Task Force Issue 00-21,
      "Revenue Arrangements with Multiple Deliverables." In all cases, revenue is
      recognized only when the price is fixed or determinable, persuasive evidence
      of
      an arrangement exists, the service is performed, and collectibility of the
      resulting receivable is reasonably assured.





The
      Company’s revenues are derived principally from the licensing or sale of unique
      content developed for its clients under the ContentLogic program or the sale
      of
      advertising on a CPC basis to one of the websites in the Web Properties
      group.




For
      the
      ContentLogic program, the Company derives revenue through the licensing and
      sale
      of content to third party website **** owners.
      Content sale revenue is recognized when the content is delivered to and accepted
      by the client. Revenue earned through a 12-month license agreement is treated
      as
      an installment sale and prorated revenue is recognized on a monthly basis over
      the life of the agreement. Clients subject to a 12-month licensing agreement
      have the right to continue leasing the content at the end of the term on a
      month-to-month basis. In late September 2005,
      the Company added a month-to-month licensing program with higher fees. Revenue
      earned under month-to-month licensing agreements is recognized on a monthly
      basis. As part of the ContentLogic program, the Company also earns revenue
      from Web **** analytics
      and advertising link sales. Revenue earned from these services is recognized
      on
      a monthly basis pursuant to a month-to-month license agreement. Client deposits
      received in advance of work being completed for such services are deferred
      until
      the revenue is earned.





The
      Company derives revenue from the ArticleInsider and Popdex websites in the
      Web
      Properties group on a CPC basis as traffic is distributed to Google AdSense advertisers. The Company has established a partnership with Google through
      which
      Google pays the
      Company fees for
      clicks on advertisements sponsored by Google and displayed on the Company’s
      websites. The Company recognizes revenue associated with the Google AdSense **** program
      as reported by Google to the Company at the end of each month.




21





Cost
      of Sales




A
      significant portion of the Company’s cost of sales is related to content
      developed under the ContentLogic program and for the ArticleInsider and Popdex
      websites as part of the Web Properties group.




For
      the
      ContentLogic program, content developed pursuant to outright sales and licensing
      is developed through editors, keyword analysts and independent contractors
      who
      write and edit the copy and analyze the keywords. The Company recognizes and
      expenses those costs related to the content developed for outright sales to
      clients as the cost is incurred, while the cost of content development for
      licensing subject to a 12-month contract is amortized over the life of the
      contract. In late September **** 2005, the
      Company added a month-to-month ContentLogic licensing option, with content
      development costs for the month-to-month agreements expensed when incurred.





Content
      developed pursuant to InfoSearch’s ArticleInsider and Popdex websites increases
      the value of the network and yields revenue to InfoSearch over a period of
      years, which led to the decision to capitalize the development costs. Through
      December 31, 2004, the Company’s practice was to expense the cost of content
      developed for ArticleInsider and Popdex as the costs were incurred. However,
      with the ongoing management of the ArticleInsider and Popdex websites, it became
      apparent to InfoSearch management that the average lifespan of an article on
      the
      network, i.e. how long it continued to draw traffic from individuals performing
      keyword searches, was well in excess of three years. Earlier expectations were
      that the lifespan would be shorter. It became apparent to InfoSearch management
      that it was not uncommon that an article would not begin drawing traffic until
      some number of months after it was posted on the network. With the advice of
      InfoSearch’s previous auditors, as of January 1, 2005, to better match costs to
      revenues, and recognize the increased value of the network, the Company began
      amortizing content development costs for the Web Properties group over the
      expected life of 36 months,
      which resulted in an increase in the Company’s gross margins. The Company
      continued to review this estimate during the year and determined that the
      estimated useful life should be reduced to two years as of December 31, 2005
      and
      further reduced to one year as of December 31, 2006. InfoSearch is no longer
      developing significant new content for the ArticleInsider and Popdex websites,
      a
      practice which was scaled back in 2005. The total amortized expense was $394,333
      for the period ending December 31, 2006, and the value of unamortized content
      as
      of December 31, 2006 was $4,082.





Valuation
      of Derivative Instruments





SFAS
      No.
      133 “Accounting for Derivative Instruments and Hedging Activities” requires that
      embedded derivative instruments be bifurcated and assessed, along with
      free-standing derivative instruments such as warrants, on their issuance date
      and in accordance with EITF 00-19 “Accounting for Derivative Financial
      Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock” to
      determine whether they should be considered a derivative liability and measure
      at their fair value for accounting purposes. In determining the appropriate
      fair
      value, the Company uses the Black-Scholes option pricing formula
      (“Black-Scholes”). At each period end, or when circumstances indicate that the
      Company reevaluate the accounting of the derivative liability, derivative
      liabilities are adjusted to reflect changes in fair value, with any increase
      or
      decrease in the fair value being recorded in results of operations as
      adjustments to fair value of derivatives.





Equity
      Warrant Asset





We
      account for the equity warrant asset with net settlement terms to purchase
      preferred stock of Demand Media as a derivative. Under the terms of the warrant,
      InfoSearch is entitled to purchase 125,000 shares of Series C Preferred Stock
      of
      Demand Media at an exercise price of $3.85 per share. Under the accounting
      treatment required by SFAS No. 133, equity warrant assets with net settlement
      terms are recorded at fair value and are classified as investments on the
      balance sheet.





The
      fair
      value of the Demand Media warrant is reviewed quarterly. We value the warrant
      using the Black-Scholes option pricing model, which incorporates the following
      material assumptions:





·
            Underlying
                asset value was estimated based on information available, including
                any
                information regarding subsequent rounds of funding or initial public
                offerings.




22




·
            Volatility,
                or the amount of uncertainty or risk about the size of the changes
                in the
                warrant price, was based on indices similar in nature to the business
                in
                which Demand Media operates and yielded a volatility of
                75.0%.





·
            The
                risk-free interest rate was 4.7%.





·
            Expected
                life of five years based on the contractual term of the
                warrant.




Any
      changes from the grant date fair value of the equity warrant asset will be
      recognized as increases or decreases to the equity warrant asset on our balance
      sheet and as net gains or losses on derivative investments within non-operating
      expenses in the consolidated statement of operations.





As
      of
      December 31, 2006, there was no change in the grant date fair value of the
      equity warrant asset.





**RECENTLY
      ISSUED ACCOUNTING PRONOUNCEMENTS**




In
      February 2006, the FASB issued SFAS No. 155, “Accounting for Certain Hybrid
      Financial Instruments”, which amends SFAS No. 133, “Accounting for Derivatives
      Instruments and Hedging Activities” and SFAS No. 140, “Accounting for Transfers
      and Servicing of Financial Assets and Extinguishment of Liabilities”. SFAS No.
      155 amends SFAS No. 133 to narrow the scope exception for interest-only and
      principal-only strips on debt instruments to include only such strips
      representing rights to receive a specified portion of the contractual interest
      or principle cash flows. SFAS No. 155 also amends SFAS No. 140 to allow
      qualifying special-purpose entities to hold a passive derivative financial
      instrument pertaining to beneficial interests that itself is a derivative
      instrument. SFAS No. 155 is effective for financial instruments acquired,
      issued, or subject to a remeasurement event for fiscal years beginning after
      September 15, 2006. The Company is currently evaluating the impact this new
      Standard but believes that it will not have a material impact on the Company’s
      financial position, results of operations, or cash flows.





In
      March
      2006, the FASB issued SFAS No. 156, “Accounting for Servicing of Financial
      Assets” (“SFAS No .
      156”),
      which provides an approach to simplify efforts to obtain hedge-like (offset)
      accounting. This Statement amends FASB Statement No. 140, “Accounting for
      Transfers and Servicing of Financial Assets and Extinguishments of Liabilities”,
      with respect to the accounting for separately recognized servicing assets and
      servicing liabilities. The Statement (1) 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; (2) requires that a separately recognized servicing asset or
      servicing liability be initially measured at fair value, if practicable; (3)
      permits an entity to choose either the amortization method or the fair value
      method for subsequent measurement for each class of separately recognized
      servicing assets or servicing liabilities; (4) permits at initial adoption
      a
      one-time reclassification of available-for-sale securities to trading securities
      by an entity with recognized servicing rights, provided the securities
      reclassified offset the entity’s exposure to changes in the fair value of the
      servicing assets or liabilities; and (5) requires separate presentation of
      servicing assets and servicing liabilities subsequently measured at fair value
      in the balance sheet and additional disclosures for all separately recognized
      servicing assets and servicing liabilities. SFAS No. 156 is effective for all
      separately recognized servicing assets and liabilities as of the beginning
      of an
      entity’s fiscal year that begins after September 15, 2006, with earlier adoption
      permitted in certain circumstances **.** SFAS
      No.
      156 also
      describes the manner in which it should be initially applied. The Company does
      not believe that SFAS No. 156 will have a material impact on its financial
      position, results of operations or cash flows.





In
      July
      2006, the FASB released FASB Interpretation No. 48, *Accounting
      for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109* (FIN
      48).
      FIN 48 clarifies the accounting and reporting for uncertainties in income tax
      law. This interpretation prescribes a comprehensive model for the financial
      statement recognition, measurement, presentation and disclosure of uncertain
      tax
      positions taken or expected to be taken in income tax returns. This Statement is
      effective for fiscal years beginning after December 15, 2006. The Company is
      currently in the process of evaluating the expected effect of FIN 48 on its
      results of operations and financial position.




23




In
      September 2006, the FASB issued
      Statement of Financial Accounting Issues No. 157, “Fair Value Measurements”
(“SFAS 157”), which defines the fair value, establishes a framework for
      measuring fair value and expands disclosures about fair value measurements. SFAS
      157 is
      effective for financial statements issued for fiscal years beginning after
      November 15, 2007, and interim periods within those fiscal years. Early adoption
      is encouraged, provided that we have not yet issued financial statements for
      that fiscal year, including any financial statements for an interim period
      within that fiscal year. We are currently evaluating the impact SFAS 157 may
      have on our financial condition or results of operations.




In
      February 2007, the FASB issued SFAS No. 159, *The
      Fair Value Option for Financial Assets and Financial* *Liabilities* (“SFAS
      No. 159”) .
      SFAS No. 159
      permits entities to choose to measure at fair value many financial instruments
      and certain other items that are not currently required to be measured at fair
      value. Subsequent changes in fair value for designated items will be required
      to
      be reported in earnings in the current period. SFAS No. 159 also establishes
      presentation and disclosure requirements for similar types of assets and
      liabilities measured at fair value. SFAS No. 159 is effective for fiscal years
      beginning after November 15, 2007. We are currently assessing the effect of
      implementing this guidance, which directly depends on the nature and extent
      of
      eligible items elected to be measured at fair value, upon initial application
      of
      the standard on January 1, 2008.




RESULTS
      OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005





REVENUES





Revenues
      decreased 19% to $7,600,060 for the year ended December 31, 2006 from $9,364,401
      for the year ended December 31, 2005. The decrease in revenue is due to the
      reduction in revenue associated with our Web Properties group that was partially
      offset by increased sales and licenses of ContentLogic.





Revenue
      from Web Properties was $1,583,980 in 2006 versus $5,491,912 in 2005 and revenue
      from ContentLogic was $6,016,080 in 2006 versus $3,872,489 in **** 2005. Revenue
      for Web Properties comprised 20.8% of total revenues for 2006 and revenue **** for
      ContentLogic comprised 79.2% in 2006. This compares with 58.6% and 41.4.% of
      revenues attributable to Web Properties and ContentLogic sources, respectively,
      in 2005.





COST
      OF
      SALES AND GROSS PROFIT





The
      Company had a gross profit of $4,926,375 and a gross margin of 64.8% for the
      year ended December 31, 2006 versus gross profits of $6,819,291 and a gross
      margin of 72.8% for the comparable period of 2005. The cost of sales consists
      principally of traffic purchased for resale, customer service and content
      developed for sale or license to our clients.





The
      decrease for the year ended December 31, 2006 over the year ended December
      31,
      2005 in the gross profit is mainly due to the increased emphasis on content
      sales and licensing through the ContentLogic program, the cost of operating the
      affiliate network for our Web Properties group and the introduction of revenue
      streams from new products (Load analytics and LinkWorth links) with lower gross
      margins. The higher
      cost of traffic associated with the affiliate program
      in 2006 yielded lower gross margins than the traffic from organic sources that
      had been the primary source of traffic for our Web Properties group until late
      2005. In 2006, we spent $937,960 acquiring traffic for our affiliate program
      that contributed to Web Properties revenue of $1,583,980 versus $730,608 spent
      to acquire traffic for our affiliate program in 2005 that contributed to Web
      Properties revenue of $5,491,912.  We
      discontinued the affiliate network program
      shortly after the first quarter of 2006 as we had harvested a substantial
      portion of the remaining deferred revenue associated with the Web Properties
      group.





For
      the
      years ended December 31, 2006 and 2005 , $49,360
      and $604,491, respectively, of
      content development costs **** of
      the
      Company were
      capitalized and amortized over their useful lives. The Company recorded $192,808
      and $80,711 in amortization expenses during 2006 and 2005,
      respectively ,
      associated with capitalized development costs for the Web Properties group
      and
      recorded $201,525 and $174,726 in amortization expenses during 2006 and 2005,
      respectively, associated with capitalized content development costs for
      ContentLogic.





The
      gross
      profit attributable to Web Properties was $596,940 in 2006 versus $4,301,719
      in
      2005 and the gross profit attributable to ContentLogic was $4,329,435 in 2006 versus $2,517,572 in 2005. The
      gross margin experienced by Web Properties was 37.7% in 2006 versus 78.39%
      in
      2005 and the gross margin experienced by ContentLogic was **** 72.0%
      in
      2006 versus 65.0% in 2005.




24





OPERATING
      EXPENSES





Operating
      expenses consist of selling expenses and general and administrative expenses.





Selling
      expenses consist of costs incurred to develop and implement marketing and sales
      programs for the Company’s products for ContentLogic. These include costs
      associated with the marketing department participation in trade shows, media
      development and advertising. These selling expenses also include the costs
      of
      hiring and maintaining a sales department. These costs decreased from $2,337,747 for
      the
      year ended December 31, 2005 to $2,138,695 in the same period of 2006. The
      Company streamlined the sales and marketing effort and made numerous adjustments
      to the compensation schedule for members of the sales team and believes that
      it
      has now aligned the compensation structure with the overall goals of the
      Company.





General
      and administrative expenses include senior management, accounting, legal,
      business development consulting, rent, administrative
      personnel, expensing of stock options and restricted stock grants, depreciation
      and amortization and other overhead related costs. These costs increased to
      $9,600,049 for
      the
      year ended December 31, 2006 **** from
      $4,753,820 for the year ended December 31, 2005. This increase is primarily
      attributed to increased executive compensation costs, hiring of additional
      personnel to address the regulatory requirement of being a public company,
      meeting the expected growth of the Company as it expands in the online marketing
      industry, increased depreciation and amortization and non-cash equity
      compensation expenses. On June 30, 2006 the
      vesting of outstanding stock
      options and restricted stock grants was accelerated and expensed. Expenses
      associated with equity grants to consultants, employees and members of the board of directors from
      continuing operations for the year ended December 31, 2006 were $4,144,794,
      which included expenses associated with stock option grants of $1,280,890 and
      restricted stock issued to certain
      employees in lieu of cash compensation of $45,000. Expenses for depreciation
      and
      amortization from continuing operations increased to $557,317 for the year
      ended
      December 31, 2006 from $420,595 for the same period in 2005. Depreciation and
      amortization expenses increased in 2006 as a result of increased amortization
      expenses associated with the reduction in amortization period to one year for
      capitalized content development costs associated with our Web Properties
      group.





OTHER
      NON-OPERATING INCOME/EXPENSE





Other
      non-operating net income is substantially comprised of liquidated damages
      associated with the November
      2005 private placement of the Company’s securities and
      interest income received on the cash balances the Company maintains in money
      market and restricted cash accounts. Liquidated damages expense (including
      interest) totaled $509,904 in 2006. Interest income, net of expense increased
      to
      $92,414 in the year ended December 31, 2006, comprised of $105,820 in interest
      income and $13,406 in interest expense, as compared to $50,373 in interest
      income, net of expense for the year ended December 31, 2005, comprised of
      $63,164 in interest income and $12,791 in interest expense, due to the increased
      cash balances from private placement of common stock and sale of Answerbag.





We
      also
      experienced a gain of $1,728,443 in 2006 associated with the change in fair
      value of the warrants we issued in conjunction with the financing we completed
      in November 2005 and to Demand Media pursuant to the sale of
      Answerbag.





DISCONTINUED
      OPERATIONS





During
      the year ended
      December 31, 2006, the gain
      on sale of the assets of Answerbag **** was
      $ 1,919,962, partially offset by the loss from discontinued operations of $412,132, which
      included depreciation and amortization expenses of $58,212 and restricted stock
      expenses of $45,000. Expenses
      associated with option grants to employees involved in the operation of
      Answerbag were $33,451 for the year ended December 31, 2006.





TAXES





For
      the
      year ended December 31, 2006, the Company incurred a tax liability of $18,585,
      comprised of $8,300 for Delaware corporate taxes and $10,285 for California
      state taxes.




25





NET
      INCOME (LOSS)





We
      had a
      net loss of $ 4,039,908  or $.09 per
      share
      in the year ended December 31, 2006, compared
      to net income of **$** 314,997, or $0.01
      per share **,** in the
      comparable period of 2005. This decrease was due to a decrease in revenues
      and
      gross profit, an increase in non-cash equity compensation, employee
      compensation, professional fees and liquidated damages, partially offset by
      a
      change in the fair value of warrants issued and the gain on sale of Answerbag.





LIQUIDITY
      AND CAPITAL RESOURCES





Cash
      decreased by $2,332,906 to $2,495,654 for the year ended December 31, 2006
      relative to the Company’s fiscal year ending December 31, 2005. This decline is
      mainly due to the use of cash on hand to fund operations during the year ended
      December 31, 2006 . ****





Cash
      used
      in operating activities consisted principally of cash used in the net loss
      of
      $4,039,908 along with the change in fair value of warrants of $1,728,443 and
      the
      gain on the sale of Answerbag assets of $1,919,962, offset by non-cash charges
      for equity based compensation of $4,223,245, depreciation and amortization
      of
      $615,529, and
      liquidated damages of $509,904, and a decrease of $2,045,039 in the net change
      of current assets and current liabilities. The decrease in current assets and
      liabilities resulted primarily from increases in accounts receivable of $64,492
      and in prepaid expenses and other current assets of $16,074, and decreases
      in
      deferred revenue of $2,173,306, offset somewhat by an increase in the accounts
      payable, accrued expenses and other liabilities of $222,141.




For
      the
      year ended December  31,
      2005,
      cash used in operating activities of $4,473,260 consisted principally of a
      decrease of $4,788,257 in the net change of current assets and current
      liabilities. This decrease resulted primarily from increases in prepaid expenses
      and other current assets of $160,706, decreases in amounts refunded to customers
      of $754,659 and deferred revenue of $4,608,043, offset somewhat by a decrease
      in
      accounts receivable of $130,577 and an increase in the accounts payable, accrued
      expenses and other liabilities of $75,377.





Cash provided
      by (used in) investing activities for years ended
      December 31, 2006 and 2005 was $1,989,729 and ($762,950), respectively. For
      the
      year ended December 31, 2006, cash provided by investing activites consisted
      principally of the net proceeds from the sale of the Answerbag assets of
      $2,937,149, offset by cash payments for the purchase of Answerbag of $479,888,
      an increase in restricted cash of $380,530, the purchase of property and
      equipment of $37,640 and $49,361 for development of content .
      For the
      year ended December 31, 2005, the Company used $158,459 for the purchase of
      property and equipment and $604,491 for development of content related to
      12-month content license agreements and the expansion of its Web Properties
      network.





Cash
      used
      in financing activities for the year ended December 31, 2006 of $27,229
      consisted of $33,004 in principal payments on capital leases offset by $5,775
      for the exercise of stock options. Cash provided by financing activities for
      the
      year ended December 31, 2005 of $8,735,811 was due to the receipts of gross
      proceeds of $8,767,845 from the private placement offerings in December 2004,
      March 2005 and November 2005 offset somewhat by principal payments on capital
      leases of $32,034.





As
      of
      December 31, 2006, the Company had cash and cash equivalents amounting to
      $2,495,654, a decrease of $2,332,906 from the balance at December 31, 2005.
      Cash
      and cash equivalents include cash on hand and cash in banks in demand and time
      deposit accounts with maturities of 90 days or less. The Company had
      $380,530 in restricted cash including $302,108 in escrow from the sale of Answerbag ,
      $23,422
      held at various financial institutions and online payment processing firms,
      and
      $55,000 in certificate of deposits securing payment obligations. The Company
      had
      net working capital of $1,750,263 at December 31, 2006.





There
      are
      no material commitments for additional capital expenditures at December 31,
      2006. The continuing commitment of capital is for the existing equipment capital
      leases and the operating lease for the Company's offices. The capital leases
      have future minimum lease payments of $18,632 in 2007. The operating lease
      for
      the offices has future minimum lease payments of $219,540 in 2007, $226,125
      in
      2008 and $95,375 in 2009.




26





OFF-BALANCE
      SHEET ARRANGEMENTS





The
      Company has no off-balance sheet arrangements.





**Item
      7. Financial Statements.**





The
      financial statements and related financial statement schedule are included
      herein and filed as a part of this report. See Index on page F-1.





**Item
      8. Changes in and Disagreements With Accountants on Accounting and Financial
      Disclosure.**





None.





**Item
      8A. Controls and Procedures.**





**(a)
      Evaluation of Disclosure Controls and Procedures**





The
      term
“disclosure controls and procedures” is defined in Rules 13a-15(e) and 15d-15(e)
      of the Exchange Act. This term refers to the controls and procedures of a
      company that are designed to ensure that information required to be disclosed
      by
      a company in the reports that it files under the Exchange Act is recorded,
      processed, summarized, and reported within the required time periods. Our Chief
      Executive Officer and our Chief Financial Officer have evaluated the
      effectiveness of our disclosure controls and procedures as of December 31,
      2006.
      As a result of the material weakness described below, they have concluded that
      our disclosure controls and procedures were not effective as of December 31,
      2006 in providing reasonable assurance that information required to be disclosed
      by the Company in reports that it files or submits under the Exchange Act was
      properly recorded, processed, summarized and reported within the time periods
      specified in SEC rules and forms.




As
      described below, the Company has restated its financial statements for the
      first
      three quarters of 2006. Management has concluded that this restatement resulted
      from how the Company accounted for cancelled stock options upon the termination
      of employees. Under standards established by the Public Accounting Oversight
      Board a “material weakness” is a significant deficiency, or combination of
      deficiencies, that results in more than a remote likelihood that a material
      misstatement of the annual or interim financial statements will not be prevented
      or detected. A “significant deficiency” is a control deficiency, or combination
      of control deficiencies, that adversely affects our ability to initiate,
      authorize, record, process, or report external financial data reliably in
      accordance with generally accepted accounting principles such that there is
      more
      than a remote likelihood that a misstatement of our annual or interim financial
      statements that is more than inconsequential will not be prevented or detected.




At
      the
      beginning of 2006, we adopted FASB 123R, *Share
      Based Payment* ,
      and
      began recording expenses associated with stock option and restricted stock
      grants to employees. The Company for the quarters ended March 31, June 30 and
      September 30, 2006 accounted for cancelled stock options upon the termination
      of
      employees by recording an expense for the unvested portion of each terminated
      employee’s options. Upon further examination of our accounting methodology for
      cancelled stock options, we determined this to be in error. We have
      determined that the cancelled stock options should not have been expensed and
      are restating our financial information for the three months ended March 31,
      2006, the three and six months ended June 30, 2006 and the three and nine months
      ended September 30, 2006.




In
      order
      to remediate this material weakness, the Company intends to hire an
      outside consultant to assist it in addressing and resolving accounting and
      reporting matters for certain equity issuances and other complex transaction
      that involve the application of highly specialized accounting principles.




The
      Sarbanes-Oxley Act of 2002 imposed many new requirements on public companies,
      the most significant of which involves the documentation, testing and reporting
      of the effectiveness of our internal control over financial reporting. We expect
      this effort will involve substantial time and expense. Because we have limited
      resources we can devote to this effort we cannot be sure that we will be able
      to
      complete the task in a timely manner or that our internal controls will meet
      the
      standards that are currently required. We are also reviewing other procedures
      with respect to equity issuances in connection with the internal investigation
      that we announced on March 9, 2007, of the potentially improper issuance of
      share certificates without legends restricting transfer that may have been
      facilitated by Mr. Zehil. Although we are not yet required to report on our
      assessment of the effectiveness of our internal controls over financial
      reporting, until at least the end of the next fiscal year (or provide auditor
      attestation until the end of fiscal 2008) it is possible that we may identify
      one or more material weaknesses before we complete our compliance and
      remediation efforts.




27




**(b)
      Changes in Internal Control over Financial Reporting**





Except
      as
      described above, there were no changes in our internal control over financial
      reporting (as defined in Rules 13a-15(d) and 15d-15(f) under the Exchange Act)
      during the period covered by this report and that have materially affected,
      or
      are reasonably likely to materially affect, our internal control over financial
      reporting.




**Item
      8B. Other Information.**





None.


**PART
      III**





**Item
      9. Directors and Executive Officers.**





The
      following table contains information with respect to our executive officers
      and
      directors, including their ages as of February 28, 2007. There are no family
      relationships between any of our executive officers or directors.




**Name**
            
            **Age**
            
            **Position**George
                Lichter
            
            55
            
            Director,
                President and Chief Executive OfficerSteve
                Lazuka
            
            33
            
            Founder
                and former****DirectorFrank
                KnuettelII
            
            40
            
            Vice
                President and Chief Financial OfficerDavid
                Warthen
            
            49
            
            Vice
                President and Chief Technology OfficerEdan
                Portaro
            
            39
            
            Vice
                President, SalesDavid
                Gagne
            
            33
            
            Vice
                President, TechnologyClaudio
                Pinkus
            
            50
            
            Director,ExecutiveChairmanJohn
                LaValle
            
            50
            
            Director





George
      Lichter **-** Mr.
      Lichter has served as a director ,
      President and Chief Executive Officer **** of
      the
      Company since
      August 2005. Prior to joining the Company, Mr. Lichter co-founded and served
      as
      Co-Chief Executive Officer of the Whole Body/Yoga Works, a national family
      of
      Yoga and alternative health and fitness centers from January 2002 through August
      2005. He currently serves there as a member of the board **** of **** directors .
      Prior
      to co-founding Whole Body/Yoga Works, Mr. Lichter served concurrently as
      President of Ask Jeeves International and Chief Executive Officer of Ask Jeeves
      UK from May 1999 through January 2002. Prior to Ask Jeeves, Mr. Lichter was
      the
      Senior Vice President of Vivendi/Havas Interactive which, prior to its
      divestiture, was Cendant Software from 1994 through April 1999. Prior to that,
      Mr. Lichter was an entertainment attorney in the Beverly Hills law firm of
      Rosenfeld, Meyer & Susman. Mr. Lichter graduated Phi Beta Kappa with a
      bachelor’s degree from UCLA and received a Juris Doctor degree from Stanford Law
      School.




28




Steve
      Lazuka - Mr.
      Lazuka is a **** Founder of the
      Company and served as the Chief
      Strategy Officer from
      August 2005 until November **** 30, 2006. On
      January 2, 2007, Mr. Lazuka resigned as a
      director of the Company, a position he had held since March 2002, and, as of
      the
      date of this report, is not an officer, employee or a director of the Company.
      Mr. Lazuka was the Chief Executive Officer of the Company from the founding
      of
      the Company in March
      2002 through August 2005. Mr **.** Lazuka
      co-founded Website Results, a marketing company in September 1998,
      which was sold in 2000 **** to
      24/7
      Real Media (TFSM), a publicly traded
      online media company. From the time of the sale to 24/7 Real Media until
      founding of the
      Company in March
      2002, Mr. Lazuka served as Vice President of Operations and Business Development
      for 24/7 Search, the search marketing division of 24/7 Real Media. He studied
      Business Management at John Carroll University.




Frank
      Knuettel II **-** Mr.
      Knuettel has served as the Chief
      Financial Officer **** of
      the
      Company since March
      2005. **** Mr.
      Knuettel was elected Corporate Secretary on March 23, 2007. Prior
      to
      joining  the
      Company, **** Mr.
      Knuettel co-founded Internet Machines Corporation, where he held several
      positions, including Chief Executive Officer and Chief Financial Officer. While
      at Internet Machines Corporation, a fabless semiconductor company developing
      chips for high-speed communications devices, Mr. Knuettel raised almost $90
      million in equity and debt, managed significant internal growth and ultimately
      led the sale of the business to IDT Corp. in 2004. Before founding Internet
      Machines in January 2000, Mr. Knuettel was the CFO/COO of Viking Systems, a developer
      of **** enterprise
      resource management systems targeted at the management of non-profit fundraising
      operations. As CFO/COO, Mr. Knuettel led the company through a Chapter XI
      reorganization and managed the post-bankruptcy Series A financing. Prior to
      his
      position at Viking, he was Vice President and Chief Financial Officer of
      Fightertown Entertainment, Inc. in Lake Forest, California. While at
      Fightertown, he was responsible for the development of the company’s strategic
      and expansion plans as well as all financial operations. During his tenure,
      Fightertown’s revenues quadrupled in two years. Mr. Knuettel is a cum laude
      graduate in economics from Tufts University and received an MBA in Finance
      and
      Entrepreneurial Management from The Wharton School, University of Pennsylvania.




David
      Warthen **-** Mr.
      Warthen has served as a V ice
      President and the **** Chief
      Technology Officer **** of
      the
      Company since June
      2006 .
      Mr.
      Warthen is the founder and is currently the Chief Executive Officer of Eye
      Games, Inc., a web-cam video game company creating games for young children.
      Mr.
      Warthen founded Eye Games, Inc. in 2004. Prior to founding Eye Games, Mr.
      Warthen was the Chief Technology Officer of Global Streams, a digital video
      processing company, from 2000 to 2002. He was the original architect for Global
      Streams’ general video communications products. Mr. Warthen was also a
      co-founder and the Chief Technology Officer of Ask Jeeves, a natural language
      search engine. Mr. Warthen currently serves on the board of directors of Eye
      Games, Inc.




Edan
      Portaro **-** Mr.
      Portaro has served as Vice President, Sales of the Company since March
      2006. **** Prior to
      joining InfoSearch as VP of Sales, Edan served as the Senior Sales Consultant
      at
      TechTransform, a strategic business consultancy which advises small and large
      companies on a variety of mission critical issues. Prior to his work at
      TechTransform, he was at YellowPages.com where he first held the position of
      Vice President, National Sales, Directional Marketing and New Business, before
      taking on the role
      of
      Senior Vice President, Retail and National Sales. Prior to YellowPages.com
      Edan,
      spent over a decade at TMP Worldwide/Monster Worldwide where he worked his
      way
      up the ladder through a succession of roles including Marketing Manager,
      Regional Sales Manager, Director New Business Development, VP Sales, Senior
      Vice
      President for New Business and finally to the position of Senior Vice President
      of Directional Marketing for the Monster Franchise initiative.




David
      Gagne **-** Mr.
      Gagne
      served as Vice
      President, Technology **** of
      the
      Company from June 2002 until March 13, 2007, and as of the date of this report
      is not employed by the Company .
      Mr.
      Gagne has been developing enterprise and Internet-based information architecture
      solutions for almost a decade. Mr. Gagne began his professional career in March
      1998 as the lead programmer for Regeneration Technologies, Inc., a biotechnology
      company in North Central Florida. While there, he was integral in the creation
      of a corporate logistics/manufactured goods distribution and warehousing system.
      After a brief stint at Home Shopping Network Direct, Mr. Gagne joined Healthcare
      Recoveries, Inc. in November 2000, before joining InfoSearch in June 2002.
      Mr.
      Gagne has a wealth of experience managing business data systems and is
      accomplished in a wide range of programming languages. Mr. Gagne graduated
      with
      Honors from the University of Florida College of Liberal Arts and Sciences
      with
      a Bachelor’s Degree in English.




Claudio
      Pinkus  **-** Mr.
      Pinkus has been a director of the Company **** since
      April 4, 2005, and has
      served as **** Executive
      Chairman since **** August
      22, 2005. **** Mr.
      Pinkus brings 25 years of strategic technology management experience to the
      Company, with specific expertise in the search engine market. Mr. Pinkus served
      as Chief Operating Officer of Ask Jeeves International, Inc., as well as
      President and Chief Strategy Officer of Ask Jeeves, Inc. Prior to joining Ask
      Jeeves, he served as Chief Executive Officer of Bowne Global Solutions, the
      world’s largest localization services provider. Mr. Pinkus serves on the board
      of RevCube Media, a private Internet advertising company in San Francisco, California and World Links, a Washington,
      DC nonprofit entity. **** In
      addition, from August 23, 2005 until August 23, 2006, Mr. Pinkus provided
      consulting services to the Company with respect to its strategic direction,
      operation of its ContentLogic group **,** and raising
      of capital .




29




John
      LaValle  **-** Mr.
      LaValle has been a director since
      May 3, 2005. Mr. LaValle has over 20 years of experience with high-growth
      technology companies during which time he has helped raise more than $700
      million in funding through venture capitalists, bank and lease financing, and
      public offerings. He has completed three successful IPOs and one of the largest
      secondary offerings ever done by any Internet company. From
      July
      2005 until June 2006, Mr. LaValle was the COO and CFO of National Beverage
      Properties, a real estate company. From February 2004 until July 2005, Mr.
      LaValle was the CFO of TelASIC Communications, a communication chips and
      subsystems manufacturer. From April 2001 until August 2002, Mr. LaValle was
      the
      CFO of Kotura, Inc., a manufacturer of integrated photonics. Mr. LaValle also
      provided consulting services to TelASIC Communications and Kotura, Inc. from
      August 2002 until February 2004. Prior to Kotura ,
      Mr.
      LaValle was CFO of Lightcross, Inc. a manufacturer of integrated, silicon-based
      optical products for telecommunications equipment. Prior to that,
      he was CFO and Executive Vice President of Operations of Stamps.com (IPO in
      1999), CFO of Comcore Semiconductor, a high-performance DSP company (acquired
      by
      National Semiconductor in 1998), and CFO of Trikon Technologies (IPO in 1995),
      a
      chemical vapor deposition and plasma etch semiconductor equipment manufacturer.
      Mr. LaValle also served as CFO of Superconductor Technologies (IPO in 1992),
      a
      manufacturer of high temperature thin film superconductors used in cellular
      base
      station applications, and as CFO of PS Medical, a manufacturer of implantable
      neurosurgery products. Early in his career, he held senior financial analyst
      positions with Chevron Corporation and Andersen Consulting. Mr. LaValle received
      his undergraduate degree with Summa Cum Laude honors from Boston College, and
      earned his MBA from Harvard Business School where he was awarded multiple
      Fellowships. Mr. LaValle also sits on the board of CyberDefender, a Santa
      Monica, CA based private company producing anti-spyware software.




**Code
      of Ethics**





We
      have
      adopted a code of ethics which is applicable to the Company’s principal
      executive officer, principal financial officer, principal accounting officer
      or
      controller, or persons performing similar functions. A copy of our code of
      ethics may be requested without charge by contacting the Company’s Chief
      Financial Officer at the Company’s principal executive offices located at 4086
      Del Rey Avenue, Marina Del Rey, California 90292.





**Audit
      Committee and Audit Committee Financial Expert**





The
      board
      of directors established an Audit
      Committee on
      December 14, 2005. **** John
      LaValle is
      the **** initial and
      sole **** member **** of
      the
      Audit Committee .
      The board of directors has
      determined that Mr. LaValle is independent **** as
      defined in the standards established by the SEC, is financially literate and
      is
      a “financial expert” as defined in the SEC rules. ****





**Procedure
      for the Consideration of Board Candidates Submitted by
      Stockholders**





The
      board
      of directors  established
      a Nominating Committee on May 9, 2006. John LaValle is the sole member of the
      Nominating Committee.  T he
      board
      of directors has **** adopted
      procedures for the
      submission ofdirector
      nominees by stockholders for consideration by theboard.
      If a
      determination is made that an additional director is required, theboardwill
      consider nominees submitted by the Company’s stockholders. Stockholders can
      submit qualified names of nominees for director by writing to our Corporate
      Secretary,Frank
      Knuettel II, at 4086 Del Rey Avenue, Marina Del Rey, California
      90292.For
      such
      nominee to be considered, the nomination must be received by the Corporate
      Secretary not less than 90
      days
      prior to the date of the Company’s proxy materials for the preceding year’s
      annual meeting and the nomination must include the following
      information:





·
            the
                name and address of the proposing stockholder as it appears on the
                Company’s books and the number of shares of Common Stock that are owned
                beneficially by such stockholder (if the stockholder is not a holder
                of
                record appropriate evidence of the stockholder’s ownership must be
                submitted with the nomination);





·
            the
                name, address and contact information of the nominee;




30





·
            a
                statement of the nominee’**s**business and educational
                experience;





·
            detailed
                information about any relationship or understanding between the proposing
                stockholder and the nominee or any other stockholder or group of
                stockholders; and





·
            a
                statement that the nominee is willing to be considered and willing
                to
                serve as a director if nominated and
                elected.





**Communications
      with the Board of Directors**




The board
      of
      directors has
      established a process for stockholders to
      communicate with members of the board .
      If you
      would like to contact the board **,** you can
      do so by forwarding your concern, question or complaint to the Company’s
      Corporate Secretary , Frank
      Knuettel II, at 4086 Del Rey Avenue, Marina Del Rey, California
      90292.





**Item
      10. Executive Compensation.**





SUMMARY
      COMPENSATION TABLE





The
      following tables summarize the annual compensation paid and options granted
      for
      the two years ended December 31,  2006 and
      2005 **** to the
      Company’s Chief Executive Officer and other executive officers whose total
      annual salary and bonus for 2006 exceeded $100,000 :




Name
                  and Principal Position
                (a)
              
              Year
                (b)
              
              Salary
                  ($)
                (c)
              
              Bonus
                  ($)
                (d)
              
              Stock
                  Awards
                ($)
                (e)
              
              Option
                  Awards ($)
                (f)
              
              Non-Equity
                  Incentive Plan Compen-sation
                ($)
                (g)
              
              Non-Qual-ified
                  Deferred Compen- sation Earnings
                ($)
                (h)
              
              All
                  other Compen-sation
                ($)
                (i)
              
              Total
                ($)
                (j)George
                  Lichter (1)
              
              
              2006
              
              
              200,000
              
              
              359,501
              
              
              1,111,512
              
              
              32,500
              
              
              0
              
              
              0
              
              
              9,600
              
              
              1,713,113Chief
                  Executive Officer
              
              
              2005
              
              
              54,615
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              2,400
              
              
              57,015Frank
                  Knuettel II (2)
              
              
              2006
              
              
              182,917
              
              
              138,236
              
              
              318,731
              
              
              174,651
              
              
              0
              
              
              0
              
              
              0
              
              
              814,535Chief
                  Financial Officer
              
              
              2005
              
              
              142,189
              
              
              0
              
              
              61,394
              
              
              52,209
              
              
              0
              
              
              0
              
              
              0
              
              
              255,792Steve
                  Lazuka (3)
              
              
              2006
              
              
              208,479
              
              
              74,999
              
              
              0
              
              
              407,596
              
              
              0
              
              
              0
              
              
              0
              
              
              691,074Chief
                  Strategy Officer
              
              
              2005
              
              
              173,958
              
              
              0
              
              
              0
              
              
              80,182
              
              
              0
              
              
              0
              
              
              0
              
              
              254,140David
                  Averill (4)
              
              
              2006
              
              
              168,076
              
              
              0
              
              
              4,800
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              172,876General
                  Manager, Content Logic
              
              
              2005
              
              
              46,442
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              46,442David
                  Gagne (5)
              
              
              2006
              
              
              107,918
              
              
              0
              
              
              0
              
              
              218,302
              
              
              0
              
              
              0
              
              
              0
              
              
              326,220Vice
                  President of Technology
              
              
              2005
              
              
              99,057
              
              
              0
              
              
              0
              
              
              109,061
              
              
              0
              
              
              0
              
              
              0
              
              
              208,118David
                  Warthen (6)
              
              
              2006
              
              
              14,750
              
              
              0
              
              
              90,000
              
              
              7,333
              
              
              0
              
              
              0
              
              
              0
              
              
              112,083Vice
                  President andChief
                  TechnologyOfficer




(1)
      Mr.
      Lichter was hired as our Chief Executive Officer as of August 2005 and entered
      into an employment agreement on January 4, 2006. All Other Compensation for
      Mr.
      Lichter is comprised of a car allowance.




31




(2)
      Mr.
      Knuettel was hired as our Chief Financial Officer as of March 2005.




(3)
      Mr.
      Lazuka served as our President and Chief Executive Officer until August 22,
      2005
      and as Chief Strategy Officer until
      November 20, 2006. In 2005, **** Mr.
      Lazuka transferred options to purchase 59,165 shares of our common stock to
      a
      family member. Mr.
      Lazuka terminated his employment with the Company as of November 30, 2006 and
      terminated his service as a member of the Company’s board of directors as of
      January 2, 2007.




(4)
      Mr.
      Averill was hired as our General Manager, Content Logic as of September 2005.
      Mr. Averill subsequently resigned effective June 30, 2006.




(5) Mr.
      Gagne
      was hired June 2002 and **** was promoted
      to Vice President Technology as of July 2006. Mr. Gagne terminated his
      employment with the Company as of March 13, 2007.




(6) Mr. Warthen
      was hired as an Executive Vice President and Chief Technology Officer as of
      July
      2006. Mr. Warthen’s employment agreement with the Company provides for an
      initial annual base salary of $180,000, which shall be paid in cash or shares
      of
      InfoSearch common stock issued ,
      at the
      Company’s option, .
      The
      Company has the right to pay Mr. Warthen in cash or stock for the first year
      of
      his employment, which began on July 1, 2006. The Company elected to pay Mr.
      Warthen with stock for the first year and Mr. Warthen is receiving his base
      salary in the form of common stock, which amounts to 107,143 shares per month,
      or portion thereof, for a total of 1,285,714 shares through the one year
      anniversary date of his employment with the Company. The number of shares was
      determined based on the fair market value of the Company’s common stock on
      September 30, 2006. Through March 31, 2007, Mr. Warthen earned 964,286 shares
      of
      our common stock.




32




**OUTSTANDING
      EQUITY AWARDS AT FISCAL-YEAR END**


Option
                  awards
              
              
              Stock
                  awardsName
                (a)
              
              
              Number
                  of Securities Underlying Unexercised Options
                (#)
                Exercis-
                able
                (b)
              
              
              Number
                  of Securities Underlying Unexercised Options
                (#)
                Unexercisable
                (c)
              
              
              Equity
                  Incentive Plan Awards: Number of Securities Underlying Unexercised
                  Unearned Options
                (#)
                (d)
              
              
              Option
                  Exercise Price
                ($)
                (e)
              
              
              Option
                  Expiration Date
                (f)
              
              
              Number
                  of Shares or Units of Stock That Have Not Vested
                (#)
                (g)
              
              
              Market
                  Value of Shares or Units of Stock That Have Not Vested
                ($)
                (h)
              
              
              Equity
                  Incentive Plan Awards: Number of Unearned Shares or Units or Other
                  Rights
                  That Have Not Vested
                (#)
                (i)
              
              
              Equity
                  Incentive Plan Awards: Market or Payout Value of Unearned Shares,
                  Units or
                  Other Rights That Have Not Vested
                ($)
                (j)George
                  LichterChief
                  ExecutiveOfficer(1)
              
              
              325,000
              
              
              0
              
              
              0
              
              
              0.14
              
              
              12/10/2016
              
              
              0
              
              
              0
              
              
              0
              
              
              0Frank
                  Knuettel II
              
              
              282,500
              
              
              0
              
              
              0
              
              
              0.76
              
              
              02/25/2015
              
              
              0
              
              
              0
              
              
              0
              
              
              0Vice
                  President and Chief Financial Officer
              
              
              82,500
              
              
              
              
              
              
              
              
              0.67
              
              
              01/03/2016Steve
                  LazukaChief
                  Strategy Officer (2)
              
              
              541,845
              
              
              0
              
              
              0
              
              
              1.00
              
              
              12/31/2014
              
              
              0
              
              
              0
              
              
              0
              
              
              0David
                  AverillGeneral
                  Manager, Content Logic
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              0David
                  Gagne
              
              
              363,432
              
              
              98,750
              
              
              0
              
              
              1.00
              
              
              02/01/2013
              
              
              0
              
              
              0
              
              
              0
              
              
              0Vice
                  President of Technology
              
              
              11,250
              
              
              
              
              
              
              
              
              0.14
              
              
              12/12/2016David
                  Warthen
                Executive
                  Vice President and Chief Technology Officer
              
              
              66,667
              
              
              333,333
              
              
              0
              
              
              0.14
              
              
              09/28/2016
              
              
              642,857
              
              
              214,762
              
              
              0
              
              
              0




(1) On December
      12, 2006, the board of directors approved options to purchase up to 2,097,150
      shares of the Company’s common stock to George Lichter. Pursuant to the terms
      and subject to the limitations of the Stock Option Plan, such grant to Mr.
      Lichter could not exceed options to purchase up to 325,000 shares of common
      stock. The Company has treated the portion of such grant to the extent it
      exceeded options to purchase 325,000 options as invalid and void ab initio.
      The
      valid portion of the grant that survived was for options to purchase 325,000
      shares of common stock. Such options were 100% vested on the date of the grant,
      have a term of ten years, have an exercise price of $0.17 per share, and are
      subject to the terms and conditions of the Stock Option Plan. On January 12,
      2007, the Company granted Mr. Lichter options to purchase an aggregate of
      1,772,150 shares of common stock. Of this amount, options to purchase up to
      1,000,000 shares of common stock were granted under the Stock Option Plan,
      have
      a term of ten years, and have an exercise price of $0.20 per share, of which,
      options to purchase up to 447,150 shares of common stock were 100% vested on
      the
      date of the grant and options to purchase up to 552,850 shares of common stock
      vest in equal monthly installments over the 36 month period following the date
      of the grant. The remaining options to purchase 772,150 shares of common stock,
      pursuant to the January 12, 2007 grant, were granted pursuant to the terms
      of a
      separate grant agreement, which options will vest immediately upon the first
      occurrence of the Company reporting a net profit for a full fiscal year
      following fiscal year 2006. These options are for a term of ten years, have
      an
      exercise price of $0.20 per share, and are subject to terms substantially
      similar to grants under the Stock Option Plan.




33




(2)
      Pursuant to the terms of his option agreement, Mr. Lazuka’s options expired
      unexercised on February 28, 2007, three months after the termination of his
      employment.




**DIRECTOR
      COMPENSATION**





We
      compensate our non-employee directors, John LaValle and Claudio Pinkus for
      their
      service as members of our board of directors.  Management
      directors do not receive any compensation for their services as directors other
      than the compensation they receive as our officers.




Name
                (a)
              
              Fees
                  Earned or Paid in Cash
                ($)
                (b)
              
              Stock
                  Awards
                ($)
                (c)
              
              Option
                Awards
                ($)
                (d)
              
              Non-Equity
                  Incentive Plan Compen-
                sation
                ($)
                (d)
              
              Change
                  in Pension Value and Nonqualified Deferred Compen-
                sation
                Earnings
                (f)
              
              All
                  Other Compen-
                sation
                ($)
                (g)
              
              Total
                ($)
                (h)Claudio
                  Pinkus(1)
              
              $
              25,000
              
              
              205,000
              
              
              0
              
              
              0
              
              
              0
              
              
              1,482,550
              
              
              1,712,550John
                  LaValle(2)
              
              $
              50,000
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              78,000Martial
                  Chaillet(3)
              
              $
              20,833
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              0
              
              
              50,500


(1)
      Mr.
      Pinkus receives $25,000 per year for his service as a director. On April 4,
      2005, the date of his appointment to the board of directors, Mr. Pinkus was
      granted 100,000 shares of restricted stock which vested on April 4, 2006, the
      one year anniversary of his appointment. Pursuant to a consulting arrangement with
      the
      Company, Mr. Pinkus received during fiscal year 2006, 1,800,027 shares of
      restricted stock valued at $1,111,512, consulting income of $75,000, health
      care
      reimbursements of $7,200 and bonuses of $288,838.





(2)
      Mr.
      LaValle receives $25,000 per year for his service as a director and an
      additional $25,000 per year for his service as the chair and sole member of
      the
      Audit Committee.





(3)
      Mr.
      Chaillet resigned from the Company’s board of directors effective November 9,
      2006, and received the pro-rated amount of his annual compensation as a director
      of $25,000 during fiscal 2006.




34





**Employment
      Agreements**





We
      entered into an employment agreement effective
      August 23, 2005 with
      George Lichter as Chief Executive Officer ,
      which
      was subsequently amended effective July 1, 2006 (as amended, **** the
      “Lichter Employment Agreement”). The Lichter Employment Agreement, as amended,
      provides for an annual
      base salary of $ 250,000, **** subject
      to annual increases, and an
      annual performance-based bonus of up to $150,000. In addition, Mr. Lichter
      receives an automobile allowance of $600 per month. The Lichter Employment
      Agreement also includes restrictive covenants relating to competition and
      solicitation of our customers or employees. The Lichter Employment Agreement
      provides that Mr. Lichter will normally work for us four days per week. We
      have
      agreed to allow Mr. Lichter to continue to serve as an officer and director
      of
      MCS Ventures and Yoga Works, Inc., but only to the extent that Mr. Lichter’s
      continued service does not materially interfere with the performance of his
      duties to us.




Pursuant
      to the
      Lichter Employment Agreement ,
      Mr.
      Lichter was granted, under the Stock
      Option Plan, a restricted stock award representing 675,000 shares of our common
      stock, of which 225,000 shares vested on
      January 4, 2006 and the remaining shares vested in three
      installments of 150,000 shares each on February 23, 2006, April 23, 2006 and
      August 23,  2006.  **** Mr.
      Lichter may participate, as a selling stockholder, in any financing transaction
      undertaken by us for the purpose of satisfying the tax liability incurred by
      Mr.
      Lichter as a result of the restricted stock award. Pursuant
      to the Lichter Employment Agreement, the Company paid Mr. Lichter’s tax
      liability in connection with his restricted stock grant. **** Lichter
      was also subsequently granted an additional stock award representing 675,000
      shares of our common stock, of which 225,000 shares vested on
      January 4, 2006 and the remaining shares vested in three
      installments of 150,000 shares each on February 23, 2006, April 23, 2006 and
      August 23, 2006. **** Pursuant
      to the decision by the board of directors to accelerate the vesting of
      outstanding options and shares of restricted stock, all of these options and
      shares of restricted stock became fully exercisable as of June 30, 2006.




Mr.
      Lichter may terminate the Lichter Employment Agreement and his employment with
      the Company for Good Reason (as defined in the Lichter Employment Agreement),
      including in connection with a Change of Control (as defined in the Lichter
      Employment Agreement) that results in the termination of Mr. Lichter’s
      employment with the Company or a material adverse change in Mr. Lichter’s duties
      and responsibilities. If Mr. Lichter terminates the Lichter Employment Agreement
      and his employment with the Company for Good Reason or in connection with a
      Change of Control as described above, or if the Company terminates the Lichter
      Employment Agreement and Mr. Lichter’s employment with the Company without Cause
      (as defined in the Lichter Employment Agreement) (and, with respect to (ii),
      (iii) and (iv) below, so long as Mr. Lichter has not and does not violate
      certain provisions of the Lichter Employment Agreement), the Company will
      pay **** or
      provide to Mr. Lichter: (i) any earned but unpaid base salary, unpaid pro rata
      annual bonus and unused vacation days accrued through his last day of employment
      with the **** Company,
      including any carryover days; (ii) Mr. Lichter’s full base salary for six
      months; (iii) Mr. Lichter’s annual bonuses that he would have been awarded
      during the same six month period; and (iv) continued coverage, at the Company’s
      expense, under all benefits plans in which Mr. Lichter was a participant
      immediately prior to his last date of employment with the Company. In addition,
      any unvested shares of restricted common stock granted pursuant to the Lichter
      Employment Agreement will automatically vest. ****




The
      Lichter Employment Agreement also includes restrictive covenants relating to
      competition and solicitation of our customers or employees, and employment
      under
      the Lichter Employment Agreement is at will and therefore InfoSearch may
      terminate Mr. Lichter’s employment at any time and for any reason subject to the
      provisions set forth above. ****




We entered
      into an executive employment agreement with Steve Lazuka dated
      December 29, 2004 which terminated on December 31, 2006
      (as
      amended, the “ Lazuka
      Employment Agreement”). **** In
      connection with the appointment of Mr. Lichter as our President and Chief
      Executive Officer, Mr. Lazuka’s employment agreement was amended. The amendment reaffirmed all of
      the provisions of the prior
      agreement, including those establishing the term of employment and compensation payable
      to
      Mr. Lazuka. The
      amendment revised Mr.
      Lazuka’s position and title from President and Chief Executive Officer to Chief
      Strategy Officer and from Chairman to Director. **** The
      Lazuka Employment Agreement provided for an initial annual base salary of
      $175,000, with a minimum annual increase in base salary of 10%. The Lazuka
      Employment Agreement also provided for an annual performance-based bonus of
      up
      to $175,000, as determined by the Company’s board of directors. The Lazuka
      Employment Agreement expired pursuant to its terms on December 31, 2006. The
      Lazuka Employment Agreement
      included restrictive covenants relating to competition and solicitation of
      our
      customers or employees. Under
      the
      Lazuka Employment Agreement, Mr. Lazuka received options to purchase up to
      600,000 shares of our common stock under the Stock Option Plan, which vested
      in
      three equal installments after six months, 12 months and 24 months (options
      to purchase 58,155 shares were subsequently transferred to a family member
      of
      Mr. Lazuka over which Mr. Lazuka exercises no control and does not share voting
      or dispositive power) .
      The
      exercise price of the options granted pursuant to the Lazuka Employment
      Agreement is $1.00 per share. Pursuant
      to the decision by the board of directors to accelerate the vesting of
      outstanding options and shares of restricted stock, all of these options and
      shares of restricted stock became fully exercisable as of June 30, 2006. In
      addition, we were obligated **** to
      include in any financing transaction up to 1,000,000 **** shares
      of
      our common stock owned by Mr. Lazuka. We
      also
      agreed to include all shares of our common stock owned by Mr. Lazuka that are
      not sold in such a financing transaction in any registration statement filed
      by
      us (other than a registration statement filed solely to register an employee
      compensation plan on a Form S-8) and provided Mr. Lazuka the right to demand
      such registration in the event that we fail to register such shares within
      12
      months. Mr.
      Lazuka agreed to execute a standard
      lock-up agreement related to his common stock for a period of 12
      months. ****




35




On
      November 1, 2006, we provided notice to Mr. Lazuka that we would not
      renew the Lazuka Employment Agreement. On December 5, 2006, we entered into
      an
      amendment to the Lazuka
      Employment Agreement with Steve Lazuka. Pursuant to the amendment, as of
      November 30, 2006, Mr. Lazuka ceased serving as our Chief Strategy
      Officer ,
      but
      he **** continued
      to serve as a member of our board of directors. Pursuant to the amendment,
      Mr.
      Lazuka was to receive 12 additional payments of $3,750 over a six month period, totaling $45,000. In
      addition, the non-competition restrictions of original employment agreement
      were
      reduced from two years to one year. **** Mr.
      Lazuka also agreed that he would not make any demand on the Company or otherwise
      require the Company to register his shares. Mr. Lazuka resigned as a member
      of
      the board of directors effective January 2, 2007.




We
      also
      have entered into an executive employment agreement with Frank Knuettel II,
      dated
      March 8, 2005 **** (the
      “Knuettel Employment Agreement”). The Knuettel Employment Agreement provides
      for an initial annual base salary of $175,000, provided that if Mr. Knuettel
      remains in the employment of the Company in the month following the second
      consecutive quarter that the Company is profitable on a GAAP basis, his **a** nnual base
      salary will be
      increased to
      $185,000. The Knuettel Employment Agreement further provides for a potential
      target bonus equal to 30% of **** his
      then
      current annual base
      salary, contingent on the Company’s achieving revenue and operating income goals
      and Mr. Knuettel’s attaining individual goals established by the board **** of directors .
      Under
      the Knuettel Employment Agreement, Mr. Knuettel received options to purchase
      up
      to 262,500 shares of our common
      stock at
      an
      exercise price of $0.76 per share pursuant to the Stock Option Plan,
      which vest over a four-year period. Additionally, Mr. Knuettel received an
      award
      of 352,500 restricted shares of our common stock, which also vest over a
      four-year period of his employment with the Company. Mr. Knuettel was also
      subsequently granted an additional stock award representing 167,500 shares,
      under which 25% of the shares vested on
      January 4, 2006, 12.5% of the shares vested **** on
      July
      7, 2006 and the remaining shares will vest over three years in equal, monthly
      installments, ending on January 4, **** 2009. **** Mr.
      Knuettel was granted an
      additional option award representing 82,500 shares, under which 25% of the
      shares vested on
      January 4, 2006, 12.5% of the shares vested on July
      7, 2006 and the remaining shares will vest over three years in equal, monthly
      installments, ending on January 4, 2009. Pursuant to the decision by the board
      of directors to accelerate the vesting of outstanding options and shares of
      restricted stock, all of these options and shares of restricted stock became
      fully exercisable as of June 30, 2006.




Mr.
      Knuettel may terminate the Knuettel
      Employment Agreement **** and
      his
      employment with the Company for Good Reason (as defined in the Knuettel
      Employment Agreement and which includes a Change of Control (as defined in
      the
      Knuettel Employment Agreement) without Mr. Knuettel’s consent). If Mr. Knuettel
      terminates the Knuettel Employment Agreement and his employment with the Company
      for Good Reason, the Company will pay or provide to Mr. Knuettel: (i) any earned
      but unpaid base salary; (ii) a severance payment in an amount equal to six
      months of Mr. Knuettel’s base salary; and (iii) to the extent that Mr. Knuettel
      holds any unvested portion of the option or shares of restricted stock granted
      to him pursuant to the Knuettel Employment Agreement, the portion of the option
      so granted and the shares of restricted common stock that would otherwise vest
      in the two year period following the date of termination of Mr. Knuettel’s
      employment with the Company will, as of the date of termination become fully
      vested. If the Company terminates the Knuettel Employment Agreement and Mr.
      Knuettel’s employment with the Company without Cause (as defined in the Knuettel
      Employment Agreement), the Company shall pay to Mr. Knuettel (i) any earned
      but
      unpaid base salary; (ii) base salary for the six month period following the
      date
      of such termination; (iii) any bonus earned or accrued through the date of such
      termination; and (iv) one year acceleration of the unvested portion, if any,
      of
      the option and shares of restricted common stock granted pursuant to the
      Knuettel Employment Agreement **.** At the
      election of Mr. Knuettel, the severance benefits are payable by the Company
      in a
      lump sum within 45 days after his last day of employment. The Knuettel
      Employment Agreement also includes restrictive covenants relating to competition
      and solicitation of our customers or employees, and employment under the
      Knuettel Employment Agreement is at will and therefore InfoSearch may terminate
      Mr. Knuettel’s employment at any time and for any reason subject to the
      provisions set forth above.




36




We
      also entered
      into an Employment Agreement with David Gagne which provided for an
      annual salary in the amount of $100,008. Mr. Gagne’s Employment Agreement was
      amended on January 16, 2007 and provided for a base salary of $145,000 per
      annum, the creation of an annual bonus of up to 35% of base compensation, the
      granting of an option to purchase 100,000 shares of the Company’s common stock,
      with such option vesting over 24 months and a termination provision providing
      severance payment equal to six months of his base salary and six months of
      acceleration of his unvested stock options in the event that Mr. Gagne is
      terminated by the Company for other than cause .
      Mr.
      Gagne resigned
      from the Company as of March 13, 2007. The Company entered into a two-month
      consulting agreement with Mr. Gagne whereby Mr. Gagne agreed to provide
      transition and support services in return for gross compensation of $12,083
      per
      month.




We
      made
      an offer of employment, which was accepted and may be deemed an employment
      agreement, to Edan Portaro, our Vice President of Sales on
      March
      14, 2006 **** (the
      “Portaro Employment Agreement”). The
      Portaro Employment Agreement does not have a termination date and provides
      for
      an initial annual base salary of $150,000 and further provides for a potential
      target bonus equal to 150% of base salary, contingent on Mr. Portaro attaining
      goals established by the Chief
      Executive Officer .
      Under
      the Portaro Employment Agreement, Mr. Portaro received options to purchase
      up to
      200,000 shares of our common stock pursuant
      to the Stock Option **** Plan,
      50,000 of which shall vest after one year and the remaining 150,000 will vest
      in
      equal monthly installments during the following three years. Pursuant to the
      decision by the board of directors to accelerate the vesting of outstanding
      options and shares of restricted stock, all of these options and shares of
      restricted stock became fully exercisable as of June 30, 2006. The Portaro
      Employment Agreement also provides that in the event that Mr. Portaro’s position
      is eliminated or his responsibilities are materially reduced within six months
      following a change in control, he will receive severance payment equal to six
      months of his base salary and full acceleration of his unvested stock options.
      Further, the Portaro Employment Agreement provides that in the event that Mr.
      Portaro’s position is eliminated or his responsibilities are materially reduced
      for any reason other than cause or permanent disability, he will receive
      severance payment equal to six months of his base salary and six months of
      acceleration of his unvested stock options.




We
      made
      an offer of employment, which was accepted and may be deemed an employment
      agreement, to David Warthen, our Chief Technology Officer on
      June
      11, 2006 (the
      “Warthen Employment Agreement”) **.** The
      Warthen Employment Agreement does not have a termination date. Mr. Warthen
      also
      currently serves as the Chief Executive Officer of Eye Games, Inc., a developer
      of web-cam, interactive video games. We do not have any relationship with Eye
      Games, Inc., and we have never been a party to any transaction or agreement
      with
      Eye Games, Inc. The Warthen Employment Agreement provides for an initial annual
      base salary of $180,000, which shall be paid in cash or shares of InfoSearch
      common stock issued ,
      at the
      Company’s option . The
      Company has the right to pay Mr. Warthen in cash or stock for the first year
      of
      his employment, which began on July 1, 2006. The Company elected to pay Mr.
      Warthen with stock for the first year and Mr. Warthen is receiving his base
      salary in the form of common stock, which amounts to 107,143 shares per month,
      or portion thereof, for a total of 1,285,714 shares through the one year
      anniversary date of his employment with the Company. The number of shares was
      determined based on the fair market value of the Company’s common stock on
      September 30, 2006. Through March 31, 2007, Mr. Warthen earned 964,286
      shares of our common stock. Under the Warthen Employment Agreement, Mr. Warthen
      received options to purchase up to 400,000 share of our common stock pursuant
      to the Stock Option **** Plan,
      which shall vest in equal monthly installments over three years. Mr. Warthen’s
      employment with InfoSearch is on an “at will” basis.




**2004
      Stock Option Plan**




The
      Stock
      Option Plan gives the board of directors the ability to provide incentives
      through grants or awards of stock options, stock appreciation rights, and
      restricted stock awards (collectively, “Awards”) to present and future employees
      of InfoSearch. Outside directors, consultants and other advisors are also
      eligible to receive Awards under the Stock Option Plan.




Pursuant
      to an amendment, a total of 10,450,000 shares of our common stock are reserved
      for issuance under the Stock Option Plan. If an incentive award expires or
      terminates unexercised or is forfeited, or if any shares are surrendered to
      us
      in connection with an Award, the shares subject to such award and the
      surrendered shares will become available for further awards under the Stock
      Option Plan. As of December 31, 2006, 5,277,511 shares or options were issued
      and outstanding, leaving
      a
      balance of 5,172,489 shares in the Stock Option Plan for future
      issuance.




37





Shares
      issued under the Stock Option Plan through the settlement, assumption or
      substitution of outstanding Awards or obligations to grant future Awards as
      a
      condition of acquiring another entity will not reduce the maximum number of
      shares available under the Stock Option Plan. In addition, the number of shares
      subject to the Stock Option Plan, any number of shares subject to any numerical
      limit in the Stock Option Plan, and the number of shares and terms of any Award
      may be adjusted in the event of any change in our outstanding common stock
      by
      reason of any stock dividend, spin-off, split-up, stock split, reverse stock
      split, recapitalization, reclassification, merger, consolidation, liquidation,
      business combination or exchange of shares or similar transaction.




No
      more
      than 1,000,000 shares of the authorized shares may be allocated to Awards
      granted or awarded to any individual participant during any calendar year.
      Any
      shares of restricted stock and any shares underlying a grant of options that
      are
      forfeited will not count against this limit.




The
      board
      of directors or one of its committees administers the Stock Option Plan. If
      Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”),
      and Rule 16b-3 under the Exchange Act apply to us and the Stock Option Plan,
      then each member of the board of directors or committee, which must have at
      least two members, must meet the standards of independence necessary to be
      classified as an “outside director” for purposes of Section 162(m) of the Code
      and an outside director for the purposes of Rule 16b-3 of the Exchange Act.
      Subject to the terms of the Stock Option Plan, the board of directors or the
      committee administering the Stock Option Plan will have complete authority
      and
      discretion to determine the terms of Awards.




The
      Stock
      Option Plan authorizes the grant of incentive stock options and nonqualified
      stock options. Incentive stock options are stock options that satisfy the
      requirements of Section 422 of the Code. Nonqualified stock options are stock
      options that do not satisfy the requirements of Section 422 of the Code. Options
      granted under the Stock Option Plan entitle the grantee, upon exercise, to
      purchase a specified number of shares from us at a specified exercise price
      per
      share. The board of directors or the committee administering the Stock Option
      Plan determines the period of time during which an option may be exercised,
      as
      well as any vesting schedule, except that no option may be exercised more than
      ten years after the date of grant. The exercise price for shares of common
      stock
      covered by an option cannot be less than the fair market value of the common
      stock on the date of grant.




Under
      the
      Stock Option Plan, a participant may not surrender an option for the grant
      of a
      new option with a lower exercise price or another incentive award. In addition,
      if a participant’s option is cancelled before its termination date, the
      participant may not receive another option within six months of the cancellation
      date unless the exercise price of the new option equals or exceeds the exercise
      price of the cancelled option.




A
      stock
      option may also have a reload feature. Under this feature, if the grantee pays
      the exercise price in the form of previously owned shares of common stock,
      then
      the grantee may receive a reload option for the same number of shares
      surrendered in payment of the exercise price. The exercise price of the reload
      option will be equal to the fair market value of the common stock on the date
      the option is exercised.




The
      Stock
      Option Plan also authorizes the grant of restricted stock awards on terms and
      conditions established by the board of directors or the committee administering
      the Stock Option Plan. The terms and conditions will include the designation
      of
      a restriction period during which the shares are not transferable and are
      subject to forfeiture.




The
      board
      of directors or the committee administering the Stock Option Plan may grant
      stock appreciation rights (SARs) under the Stock Option Plan. Subject to the
      terms of the award, SARs entitle the participant to receive a distribution
      in an
      amount not to exceed the number of shares of common stock subject to the portion
      of the SAR exercised multiplied by the difference between the market price
      of a
      share of common stock on the date of exercise of the SAR and the market price
      of
      a share of common stock on the date of grant of the SAR. Such distributions
      are
      payable in cash or shares of common stock, or a combination thereof, as
      determined by the committee.




38




The
      board
      of directors may suspend or terminate the Stock Option Plan without stockholder
      approval or ratification at any time or from time to time. Unless sooner
      terminated, the Stock Option Plan will terminate on December 15,
      2014.  The
      board
      of directors may also amend the Stock Option Plan at any time.





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





The
      following table sets forth certain information regarding the beneficial
      ownership of the Company’s
      common stock **** as
      of
      February 28, 2007 by (i) each person who, to our knowledge, beneficially owns
      more than 5% of our common
      stock ;
      (ii)
      each of our directors and executive officers; and (iii) all of our executive
      officers and directors as a group : **.** Unless
      otherwise indicated, the address of each beneficial owner is 4086 Del Rey
      Avenue, Marina Del Rey, California 90292. ****




**Name
                and Address of Beneficial Owner**
            
            **Amount****(1)**
            
            **Percent**
              **Of** **Class**George
                Lichter (2)
            
            
            2,684,248
            
            
            5.21
            %Steve
                Lazuka (3)
            
            
            4,195,499
            
            
            8.15
            %David
                Warthen (4)
            
            
            903,969
            
            
            1.76
            %Frank
                KnuettelII
                (5)
            
            
            424,499
            
            
            *Edan
                Portaro (6)
            
            
            240,000
            
            
            *David
                Gagne (7)
            
            
            373,849
            
            
            *Claudio
                Pinkus
            
            
            1,259,427
            
            
            2.45
            %John
                LaValle
            
            
            100,000
            
            
            *Trinad
                Capital Master Fund, Ltd. (8)
              2121
                Avenue of the Starts, Suite 1650
              Los
                Angeles, Ca 90067
            
            
            7,604,537
            
            
            14.77
            %Bruce
                Galloway (9)
            
            
            3,945,250
            
            
            7.66
            %All
                Executive Officers and Directors as a group (total of 7
              persons)****(10)
            
            
            5,985,992
            
            
            11.63
            %




*
      represents beneficial ownership of less than 1%





(1)
            Beneficial
                ownership is calculated based on 51,483,696 shares ofcommon
                stockoutstanding as of February 28, 2007. Beneficial ownership is determined
                in
                accordance with Rule 13d-3 of theExchangeAct.
                The number of shares beneficially owned by a person includes shares
                ofcommon
                stock****subject
                to restricted stock grants, options or warrants held by that person
                that
                are currently exercisable or issuable or exercisable or issuable
                within 60
                days of February 28, 2007. The shares issuable pursuant to those
                restricted stock grants, options or warrants are deemed outstanding
                for
                computing the percentage ownership of the person holding these options
                and
                warrants but are not deemed outstanding for the purposes of computing
                the
                percentage ownership of any other person. The persons and entities
                named
                in the table have sole voting and sole investment power with respect
                to
                the shares set forth opposite the stockholder’s name, subject to community
                property laws, where applicable.





(2)
            Includes818,221
                shares of common stock issuable upon exercise of stock options that
                are
                exercisable within 60 days of February 28, 2007.****





(3)
            Mr.
                Lazuka disclaims beneficial ownership of 1,526,780 shares of common
                stock
                that are held by The Melissa A. Lazuka Living Trust U/A 11/26/04,
                Melissa
                A. Lazuka TTEE, that are included in this number. Mr. Lazuka ceased
                to be
                an officer of the Company as of November 30, 2006 and ceased to be
                a
                director of the Company on January 2, 2007. Mr. Lazuka’s address is 9319
                Hermitage Road, Chardon, Ohio
                44024.





(4)
            Includes111,111
                shares of common stock issuable upon exercise of stock options that
                are
                exercisable within 60 days of February 28, 2007.****





(5)
            Includes
                345,000 shares of common stock issuable upon exercise of stock options
                that are exercisable within 60 days of February 28, 2007. Includes
                79,499
                shares of common stock which are held by the Knuettel Family Trust
                of
                which Mr. Knuettel and Lara Knuettel are co-trustees and share voting
                and
                dispositive power.




(6)
            Includes200,000shares ofcommon
                stockissuable upon exercise ofstock****optionsthat
                are****exercisable
                within 60 days of February 28, 2007.




39




(7)
            Includes367,599
                shares of common stock issuable upon exercise of stock options that
                are
                exercisable within 60 days of February 28,
                2007.


(8)
            Based
                solely upon a Schedule 13Gfiled with the SEC by Trinad Capital Master Fund, Ltd. on November
                13,2006,and subsequently modifiedby
                a Form 4 filed with the SEC on February 28, 2007. These securities
                are
                owned directly by Trinad Capital Master Fund, Ltd. (the "Master Fund")
                which is a reporting person. These securities may be deemed to be
                beneficially owned by Trinad Management, LLC, the investment manager
                of
                the Master Fund and Trinad Capital LP; a controlling stockholder
                of the
                Master Fund; Trinad Advisors II LLC, the general partner of Trinad
                Capital
                LP; Robert S. Ellin, the managing director of and portfolio manager
                for
                Trinad Management, LLC and the managing director of Trinad Advisors
                II LLC
                and Jay A. Wolf a managing director of and portfolio manager for
                Trinad
                Management, LLC and a managing director of Trinad Advisors II LLC.
                Each
                such reporting person disclaims beneficial ownership of the reported
                securities except to the extent of his or its pecuniary interest
                therein,
                and this report shall not be deemed an admission that such reporting
                person is the beneficial owner of the securities for purposes of
                Section
                16 of the Exchange Act, or for any other purpose. The business address
                for
                Trinad Capital Master Fund, Ltd. is 2121 Avenue of the Stars, Suite
                1650,
                Los Angeles, California 90067.





(9)
            Based
                solely upon a Schedule 13G, filed with the SEC by Bruce Galloway
                on
                November 28, 2006. Includes 2,675,250 shares of common stock held
                by
                Strategic Turnaround Equity Partners (Cayman) (“STEP”), 833,000 shares of
                common stock held by Mr. Galloway, 179,000 shares of common stock
                held by
                Mr. Galloway’s spouse, 60,000 shares of common stock held by Mr.
                Galloway’s son, 100,000 shares of common stock held by Jacombs Investment
                Inc., 98,000 shares of common stock held by RexonGalloway, and 30,000
                shares of common stock held by Gary Herman’s IRA. Galloway Capital
                management, LLC, a Delaware limited liability company is the general
                partner of STEP. Mr. Galloway and Mr.Herman
                are the managing members of Galloway Capital Management, LLC, and
                Mr.
                Galloway owns a majority of the membership interests in Galloway
                Capital
                Management, LLC. Mr. Galloway owns approximately 20% of the partnership
                interests in STEP as of November 1, 2006.****The principal business address for Mr. Galloway is c/o Galloway Capital
                Management, LLC, 720 Fifth Avenue, 10th floor, New York, New York
                10019.





(10)
            Excludes
                shares held by Steve Lazuka.




**(a)**
            **Equity
                Compensation Plan
                Information**





The
      following table sets forth, as of December 31, 2006, the number of securities
      outstanding, the weighted average exercise price of such options, warrants
      and rights **** and
      the
      number of securities
      remaining available for future issuance under the Company’s compensation plans
      previously approved by the Company’s stockholders and the Company’s compensation
      plans not previously approved by the Company’s stockholders **:**




Plancategory
              
              Number
                  of securities to be issued on exercise of outstanding options,
                  warrants
                  and rights
                (a)
              
              Weighted
                  average exercise price of outstanding options, warrants and
                  rights
                (b)
              
              Number
                  of securities remaining available for future issuance under equity
                  compensation plans (excluding securities reflected in
                  column(a))
                (c)Equity
                  compensation plans approved by security holders****
              
              
              2,381,946
              
              **$**
              0.58
              
              
              5,197,548Equity
                  compensation plans not approved by security holders****
              
              
              0
              
              
              0
              
              
              0Total
              
              
              2,381,946
              
              $
              0.58
              
              
              5,197,548
  40


**Item
      12. Certain Relationships and Related Transactions.**





As
      of
      December 31, 2006, the
      Company had a loan due from Walter Lazuka, an InfoSearch stockholder ,
      and
      brother of our former director and executive officer Steve Lazuka, totaling
      $25,000. This loan was entered into with Mr. Walter Lazuka in a series of
      transactions from March 19, 2004 through September 16, 2004. This loan was
      written off as uncollectible as of
      June 30, 2006.




On
      August
      23, 2005, we entered
      into a 12-month consulting agreement with Claudio Pinkus, a member of our b oard **** of directors **** (the “ Pinkus
      Consulting Agreement”). The Pinkus Consulting Agreement provided **** for
      an
      annual consulting fee of $100,000 to be paid in semi-monthly payments. The
      Pinkus Consulting Agreement also provides for a quarterly bonus payment of
      up to
      $25,000 for each quarter, as determined by the Company’s board of directors . Pursuant
      to the Pinkus Consulting Agreement, Mr. Pinkus provided strategic and financial
      advisory consulting services to us as requested by our Chief Executive Officer
      or our board of directors. Pursuant
      to the Pinkus Consulting Agreement, Mr. Pinkus was also granted 1,350,000 shares
      of restricted stock, of which 450,000 shares vested on January 4, 2006, 300,000
      shares vested on each of February 23, 2006 **** and
      April
      23, 2006 and a remaining installment of 300,000 shares vested on June 30, 2006.
      Pursuant to the Pinkus Consulting Agreement, on April 5, 2006, the board of directors approved
      the payment of $203,513 in cash and a grant of 450,027 shares of common stock
      to
      Mr. Pinkus in repayment of his tax obligations. The
      Pinkus Consulting Agreement expired pursuant to its terms on August 23, 2006,
      and on November 9, 2006 our board of directors granted Mr. Pinkus his full
      quarterly bonus for the second and third quarters of 2006. **** ****




The
      Company is listed on the OTC Bulletin Board which does not have a requirement
      that a majority of the board of directors be independent. The board of directors
      has adopted the definition of “independent” included in the New York Stock
      Exchange Listed Company Manual and has determined that, of the members of the
      board of directors, only John LaValle is independent. The board of directors
      established an Audit Committee on December 14 , 2005,
      and
      established a Nominating Committee and a Compensation Committee on May 9,
      2006 .
      Mr.
      LaValle i s
      the
      sole member of the Audit Committee and the
      Nominating Committee. Mr. LaValle and Claudio Pinkus are members of the
      Compensation Committee.





**Item
      13. Exhibits**





(a)  The
      following exhibits are to be filed as part of this report:


**Exhibit
                  No.**
              
              **Description**
              
              **Incorporated
                  by Reference to Filings Indicated**2.1
              
              Agreement
                  and Plan of Merger and Reorganization dated as of December 30,
                  2004 amongTrafficlogic,Inc., MAC Worldwide, Inc. andTrafficlogicAcquisition Corp.
              
              Exhibit
                  2.1 to Company’s Current Report on Form 8-K filed on January 4, 2005 File
                  No. 333-973852.2
              
              Split
                  Off Agreement dated December 30, 2004 among MAC Worldwide, Inc.,
                  Vincenzo
                  Cavallo, Anthony Cavallo, Mimi & Coco, Inc. andTrafficlogic,
                  Inc.
              
              Exhibit
                  2.2 to Company’s Current Report on Form 8-K filed on January 4, 2005 File
                  No. 333-973853.1.1
              
              Certificate
                  of Incorporation
              
              Exhibit
                  3.1 to Company’s Form SB-2 filed on July 31, 2002, File Number
                  333-97385)3.1.2
              
              Certificate
                  of Amendment to Certificate of Incorporation of MAC Worldwide,
                  Inc.
              
              Exhibit
                  3.1.2 to Company’s Current Report on Form 8-K filed on January 4, 2005
                  File No. 333-973853.1.3
              
              Certificate
                  of Amendment to Certificate of Incorporation of MAC Worldwide,
                  Inc.
              
              Exhibit
                  3.1.3 to Company’s Current Report on Form 8-K filed on January 4, 2005
                  File No. 333-973853.2
              
              Amended
                  and RestatedBylaws
              
              Exhibit3.3to
                  Company’s Form SB-2/Afiled onMarch 23, 2006,File Number 333-1301734.1
              
              Specimen
                  stock certificate representing the Company’s common stock
              
              Exhibit
                  4.1 to the Registrant’s Registration Statement on Form SB-2 filed on July
                  31, 2002 (Registration No.
                  333-97385)
  41
  4.2
              
              Form
                  of Warrant issued in connection with the Securities Purchase Agreement
                  dated November 2, 2005 between InfoSearch and the signatory Investors
                  thereto
              
              Exhibit
                  4.1 to InfoSearch’s Current Report on Form 8-K filed on November 7, 2005
                  File No. 333-973854.3
              
              Form
                  of Warrants issued to Demand Media, Inc.
              
              Exhibit
                  4.1 to InfoSearch's Current Report on Form 8-K filed on October
                  6, 2006,
                  File No. 333-973854.4*
              
              Common
                  Stock Purchase Warrant issued to Gemini Partners, Inc. on July
                  6,
                  20064.5*
              
              Form
                  of Common Stock Purchase Warrants issued to GP Group LLC on August
                  6,
                  2006, September 6, 2006 and October 6, 200610.1
              
              Employment
                  Agreement dated December 29, 2004 between InfoSearchand
                  Steve Lazuka(1)
              
              Exhibit
                  10.1 to Company’s Current Report on Form 8-K filed on January 4, 2005 File
                  No. 333-9738510.2
              
              Engagement
                  Agreement dated September 27, 2004 betweenTrafficlogic,
                  Inc. and CFO 911
              
              Exhibit
                  10.2 to Company’s Current Report on Form 8-K filed on January 4, 2005 File
                  No. 333-9738510.3
              
              Lock
                  Up Agreements between MAC Worldwide, Inc. andTrafficlogic,
                  Inc. related to Common Stock acquired in the Merger by Steve Lazuka,
                  Charles Dargan, Kelly Bakst and David Gagne
              
              Exhibit
                  10.3 to Company’s Current Report on Form 8-K filed on January 4, 2005 File
                  No. 333-9738510.4
              
              Stock
                  Option Plan(1)
              
              Exhibit10.5to
                  Company’s Current Report on Form 8-K filed on January 4, 2005 File No.
                  333-9738510.5
              
              Subscription
                  Agreement
              
              Exhibit
                  10.6 to Company’s Current Report on Form 8-K filed on January 4, 2005 File
                  No. 333-9738510.6
              
              Employment
                  Agreement dated March 8, 2005 between InfoSearchand
                  Frank KnuettelII(1)
              
              Exhibit
                  10.1 to Company’s Current Report on Form 8-K filed on March 14, 2005 File
                  No. 333-9738510.7
              
              Employment
                  Agreement dated August 23, 2005 between InfoSearch Media, Inc.
                  and George
                  Lichter (1)
              
              Exhibit
                  10.1 to InfoSearch’s Current Report on Form 8-K filed on August 26, 2005
                  File No. 333-9738510.8
              
              Amendment
                  to Employment Agreement between InfoSearch and Steve Lazuka which
                  was
                  originally executed on December 29, 2004 (1)
              
              Exhibit
                  10.2 to InfoSearch’s Current Report on Form 8-K filed on August 26, 2005
                  File No. 333-9738510.9
              
              Securities
                  Purchase Agreement dated November 2, 2005 between InfoSearch and
                  the
                  signatory Investors thereto
              
              Exhibit
                  10.1 to InfoSearch’s Current Report on Form 8-K filed on November 7, 2005
                  File No. 333-9738510.10
              
              Registration
                  Rights Agreement dated November 2, 2005 between InfoSearch and
                  the
                  signatory Investors thereto
              
              Exhibit
                  10.2 to InfoSearch’s Current Report on Form 8-K filed on November 7, 2005
                  File No. 333-9738510.11
              
              Agreement
                  and Plan of Merger and Reorganization among InfoSearch, Apollo
                  Acquisition
                  Corp., Answerbag and Joel Downs, Sunny Walia and Richard Gazan
                  dated as of
                  February 21, 2006
              
              Exhibit
                  2.1 to InfoSearch’s Current Report on Form 8-K filed on February 27, 2006
                  File No. 333-9738510.12
              
              Employment
                  Agreement dated March 14, 2006 between InfoSearch and Edan Portaro
                  (1)
              
              Exhibit
                  10.18 to InfoSearch’s Quarterly Report on Form 10-Q/A filed on July 11,
                  2006 File No. 333-738510.13
              
              Consulting
                  Agreement dated August 23, 2005 between InfoSearch and Claudio
                  Pinkus (1)
              
              Exhibit
                  10.19 to InfoSearch’s Quarterly Report on Form 10-Q/A filed on July 11,
                  2006 File No. 333-7385
  42
  10.14
              
              Asset
                  Purchase Agreement
              
              Exhibit
                  10.21 to InfoSearch’s Current Report on Form 8-K filed on October 6, 2006
                  File No. 333-9738510.15
              
              Amendment,
                  dated as of November 3, 2006, to Employment Agreement, dated as
                  of January
                  4, 2006, between InfoSearch and George Lichter (1)
              
              Exhibit
                  10.22 to InfoSearch’s Current Report on Form 8-K filed on November 6, 2006
                  File No. 333-9738510.16
              
              Amendment
                  to Employment Agreement, dated December 5, 2006, between InfoSearch
                  and
                  Steve Lazuka
              
              Exhibit
                  10.1 to InfoSearch’s Current Report on Form 8-K/A filed on December 12,
                  2006 File No. 333-9738510.17
              
              Form
                  of Indemnity Agreement
              
              Exhibit
                10.4 to
                InfoSearch's Current Report on Form 8-K filed on January 4, 2005
                File No.
                333-9738510.18*
              
              Employment
                  Agreement dated June 11, 2006 between InfoSearch and David Warthen
                  (1)10.19*
              
              Form
                  of Incentive Stock Option Agreement under the MAC Worldwide, Inc.
                  2004
                  Stock Option Plan, as amended (1)10.20*
              
              Form
                  of Restricted Stock Agreement under the MAC Worldwide, Inc. 2004
                  Stock
                  Option Plan, as amended (1)14
              
              Code
                  of Ethics
              
              Exhibit
                  14 to Company’s Annual Report on Form 10-KSB filed on April 15, 2005 File
                  No. 333-9738521
              
              List
                  of Subsidiaries
              
              Exhibit
                  21.1 to the Company’s Quarterly Report on Form 10-Q/A filed on July 11,
                  2006 File No. 333-738523.1*
              
              ConsentofSinger
                  Lewak Greenbaum & Goldstein LLP.31.1*
              
              Certification
                  of Chief Executive Officer pursuant toRule
                  13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the
                  Sarbanes-Oxley Act of 200231.2*
              
              Certification
                  of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a),
                  as
                  adopted pursuant toSection302
                  of the Sarbanes-Oxley Act of 200232.1*
              
              Certifications
                  of Chief Executive Officer and Chief Financial Officer pursuant
                  to 18
                  U.S.C. Section 1350, as adopted pursuant to Section 906 of the
                  Sarbanes-Oxley Act of 2002







*
      Included in this filing.




(1)
      A
      management contract or compensatory plan or arrangement required to be filed
      as
      an exhibit to this report pursuant to Item 13 of Form 10-KSB.





**Item
      14. Principal Accountant Fees and Expenses** **.**





The
      Audit
      Committee has implemented policies and procedures for the pre-approval of all
      audit, audit-related and tax services for the Company, which meets the
      requirements under the Sarbanes-Oxley Act of 2002 and SEC rules. The Audit
      Committee has pre-approved certain audit, audit-related, and tax services to
      be
      performed by our independent auditors, Singer Lewak Greenbaum and Goldstein
      LLP.




43




Singer
      Lewak Greenbaum and Goldstein LLP was the independent registered public
      accounting firm that audited the Company’s financial statements for the fiscal
      years ending December 31, 2005 and 2006. The aggregate fees billed by Singer
      Lewak Greenbaum and Goldstein LLP in connection with audit and non-audit
      services rendered for fiscal years 2006 and 2005 are as follows:


YearEnded
                  December 31,2006
              
              %
              
              2005
              
              %Audit
                  Fees1
              
              $
              254,709
              
              
              
              
              $
              118,393AuditRelatedFees2
              
              $
              110,619
              
              
              100.0
              %
              $
              10,000
              
              
              100.0
              %Tax
                  Fees3
              
              $
              7,493
              
              
              100.0
              %
              $
              0
              
              
              0
              %All
                  Other Fees4
              
              $
              0
              
              
              —
              
              $
              0
              
              
              —TOTAL
              
              $
              372,821
              
              
              
              
              $
              128,393





(1)
            Represents
                fees for professional services rendered in connection with the audit
                of
                our annual financial statements, reviews of our quarterly financial
                statements and advice provided on accounting matters that arose in
                connection with audit services.


(2)
            Represents
                fees for professional services related to the filing of SB-2 registration
                statements and other statutory or regulatory
                filings.


(3)
            Represents
                fees for tax services provided in connection with general tax
                matters.


(4)
            All
                other fees represent fees for services provided to the Company that
                are
                not otherwise included in the categories
                above.




44




**SIGNATURES**





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


INFOSEARCH
                MEDIA, INC./s/ George LichterBy:
                George LichterIts:
                Chief Executive OfficerDate:
                April 17, 2007





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




/s/
              George
              LichterBy:
                George LichterIts:
                Chief Executive Officer and Director(Principal
                Executive Officer)Date:
                  April 17, 2007




/s/
              Frank
              KnuettelIIBy:
                Frank KnuettelIIIts:
                Chief Financial Officer(Principal Financial and Accounting Officer)Date:
                  April 17, 2007




/s/
              John
              LaValleBy:
                John LaValleIts:
                DirectorDate:
                  April 17, 2007


/s/
              Claudio
              PinkusBy:
                Claudio PinkusIts:
                DirectorDate:
                  April 17, 2007


45


**EXHIBIT
      INDEX**


**Exhibit
                  No.**
              
              **Description**
              
              **Incorporated
                  by Reference to Filings Indicated**2.1
              
              Agreement
                  and Plan of Merger and Reorganization dated as of December 30,
                  2004 among
                  Trafficlogic, Inc., MAC Worldwide, Inc. and Trafficlogic Acquisition
                  Corp.
              
              Exhibit
                  2.1 to Company’s Current Report on Form 8-K filed on January 4, 2005 File
                  No. 333-973852.2
              
              Split
                  Off Agreement dated December 30, 2004 among MAC Worldwide, Inc.,
                  Vincenzo
                  Cavallo, Anthony Cavallo, Mimi & Coco, Inc. and Trafficlogic,
                  Inc.
              
              Exhibit
                  2.2 to Company’s Current Report on Form 8-K filed on January 4, 2005 File
                  No. 333-973853.1.1
              
              Certificate
                  of Incorporation
              
              Exhibit
                  3.1 to Company’s Form SB-2 filed on July 31, 2002, File Number
                  333-97385)3.1.2
              
              Certificate
                  of Amendment to Certificate of Incorporation of MAC Worldwide,
                  Inc.
              
              Exhibit
                  3.1.2 to Company’s Current Report on Form 8-K filed on January 4, 2005
                  File No. 333-973853.1.3
              
              Certificate
                  of Amendment to Certificate of Incorporation of MAC Worldwide,
                  Inc.
              
              Exhibit
                  3.1.3 to Company’s Current Report on Form 8-K filed on January 4, 2005
                  File No. 333-973853.2
              
              Amended
                  and Restated Bylaws
              
              Exhibit
                  3.3 to Company’s Form SB-2/A filed on March 23, 2006, File Number
                  333-1301734.1
              
              Specimen
                  stock certificate representing the Company’s common stock
              
              Exhibit
                  4.1 to the Registrant’s Registration Statement on Form SB-2 filed on July
                  31, 2002 (Registration No. 333-97385)4.2
              
              Form
                  of Warrant issued in connection with the Securities Purchase Agreement
                  dated November 2, 2005 between InfoSearch and the signatory Investors
                  thereto
              
              Exhibit
                  4.1 to InfoSearch’s Current Report on Form 8-K filed on November 7, 2005
                  File No. 333-973854.3
              
              Form
                  of Warrants issued to Demand Media, Inc.
              
              Exhibit
                  4.1 to InfoSearch's Current Report on Form 8-K filed on October
                  6, 2006,
                  File No. 333-973854.4*
              
              Common
                  Stock Purchase Warrant issued to Gemini Partners, Inc. on July
                  6,
                  20064.5*
              
              Form
                  of Common Stock Purchase Warrants issued to GP Group LLC on August
                  6,
                  2006, September 6, 2006 and October 6, 200610.1
              
              Employment
                  Agreement dated December 29, 2004 between InfoSearch and Steve
                  Lazuka (1)
              
              Exhibit
                  10.1 to Company’s Current Report on Form 8-K filed on January 4, 2005 File
                  No. 333-9738510.2
              
              Engagement
                  Agreement dated September 27, 2004 between Trafficlogic, Inc. and
                  CFO 911
              
              Exhibit
                  10.2 to Company’s Current Report on Form 8-K filed on January 4, 2005 File
                  No. 333-9738510.3
              
              Lock
                  Up Agreements between MAC Worldwide, Inc. and Trafficlogic, Inc.
                  related
                  to Common Stock acquired in the Merger by Steve Lazuka, Charles
                  Dargan,
                  Kelly Bakst and David Gagne
              
              Exhibit
                  10.3 to Company’s Current Report on Form 8-K filed on January 4, 2005 File
                  No. 333-9738510.4
              
              Stock
                  Option Plan (1)
              
              Exhibit
                  10.5 to Company’s Current Report on Form 8-K filed on January 4, 2005 File
                  No. 333-9738510.5
              
              Subscription
                  Agreement
              
              Exhibit
                  10.6 to Company’s Current Report on Form 8-K filed on January 4, 2005 File
                  No. 333-97385
  46
  10.6
              
              Employment
                  Agreement dated March 8, 2005 between InfoSearch and Frank Knuettel
                  II (1)
              
              Exhibit
                  10.1 to Company’s Current Report on Form 8-K filed on March 14, 2005 File
                  No. 333-9738510.7
              
              Employment
                  Agreement dated August 23, 2005 between InfoSearch Media, Inc.
                  and George
                  Lichter (1)
              
              Exhibit
                  10.1 to InfoSearch’s Current Report on Form 8-K filed on August 26, 2005
                  File No. 333-9738510.8
              
              Amendment
                  to Employment Agreement between InfoSearch and Steve Lazuka which
                  was
                  originally executed on December 29, 2004 (1)
              
              Exhibit
                  10.2 to InfoSearch’s Current Report on Form 8-K filed on August 26, 2005
                  File No. 333-9738510.9
              
              Securities
                  Purchase Agreement dated November 2, 2005 between InfoSearch and
                  the
                  signatory Investors thereto
              
              Exhibit
                  10.1 to InfoSearch’s Current Report on Form 8-K filed on November 7, 2005
                  File No. 333-9738510.10
              
              Registration
                  Rights Agreement dated November 2, 2005 between InfoSearch and
                  the
                  signatory Investors thereto
              
              Exhibit
                  10.2 to InfoSearch’s Current Report on Form 8-K filed on November 7, 2005
                  File No. 333-9738510.11
              
              Agreement
                  and Plan of Merger and Reorganization among InfoSearch, Apollo
                  Acquisition
                  Corp., Answerbag and Joel Downs, Sunny Walia and Richard Gazan
                  dated as of
                  February 21, 2006
              
              Exhibit
                  2.1 to InfoSearch’s Current Report on Form 8-K filed on February 27, 2006
                  File No. 333-9738510.12
              
              Employment
                  Agreement dated March 14, 2006 between InfoSearch and Edan Portaro
                  (1)
              
              Exhibit
                  10.18 to InfoSearch’s Quarterly Report on Form 10-Q/A filed on July 11,
                  2006 File No. 333-738510.13
              
              Consulting
                  Agreement dated August 23, 2005 between InfoSearch and Claudio
                  Pinkus (1)
              
              Exhibit
                  10.19 to InfoSearch’s Quarterly Report on Form 10-Q/A filed on July 11,
                  2006 File No. 333-738510.14
              
              Asset
                  Purchase Agreement
              
              Exhibit
                  10.21 to InfoSearch’s Current Report on Form 8-K filed on October 6, 2006
                  File No. 333-9738510.15
              
              Amendment,
                  dated as of November 3, 2006, to Employment Agreement, dated as
                  of January
                  4, 2006, between InfoSearch and George Lichter (1)
              
              Exhibit
                  10.22 to InfoSearch’s Current Report on Form 8-K filed on November 6, 2006
                  File No. 333-9738510.16
              
              Amendment
                  to Employment Agreement, dated December 5, 2006, between InfoSearch
                  and
                  Steve Lazuka
              
              Exhibit
                  10.1 to InfoSearch’s Current Report on Form 8-K/A filed on December 12,
                  2006 File No. 333-9738510.17
              
              Form
                  of Indemnity Agreement
              
              Exhibit
                10.4 to
                InfoSearch's Current Report on Form 8-K filed on January 4, 2005
                File No.
                333-9738510.18*
              
              Employment
                  Agreement dated June 11, 2006 between InfoSearch and David Warthen
                  (1)10.19*
              
              Form
                  of Incentive Stock Option Agreement under the MAC Worldwide, Inc.
                  2004
                  Stock Option Plan, as amended (1)10.20*
              
              Form
                  of Restricted Stock Agreement under the MAC Worldwide, Inc. 2004
                  Stock
                  Option Plan, as amended (1)14
              
              Code
                  of Ethics
              
              Exhibit
                  14 to Company’s Annual Report on Form 10-KSB filed on April 15, 2005 File
                  No. 333-97385
  47
  21
              
              List
                  of Subsidiaries
              
              Exhibit
                  21.1 to the Company’s Quarterly Report on Form 10-Q/A filed on July 11,
                  2006 File No. 333-738523.1*
              
              Consent
                  of Singer Lewak Greenbaum & Goldstein LLP.31.1*
              
              Certification
                  of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a),
                  as
                  adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
                  200231.2*
              
              Certification
                  of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a),
                  as
                  adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
                  200232.1*
              
              Certifications
                  of Chief Executive Officer and Chief Financial Officer pursuant
                  to 18
                  U.S.C. Section 1350, as adopted pursuant to Section 906 of the
                  Sarbanes-Oxley Act of 2002





*
      Included in this filing.




(1)
      A
      management contract or compensatory plan or arrangement required to be filed
      as
      an exhibit to this report pursuant to Item 13 of Form 10-KSB.




48




**INDEX
      TO CONSOLIDATED FINANCIAL STATEMENTS**


INFOSEARCH
      MEDIA, INC.


AUDITED
      CONSOLIDATED FINANCIAL STATEMENTS


FOR
      THE
      YEARS ENDED DECEMBER 31, 2006 AND 2005





PageReportof
                Independent Registered Public AccountingFirm
            
            
            F-1Consolidated
                Balance Sheets as of December 31, 2006 and 2005
            
            
            F-2Consolidated
                Statementsof
                Operations for theyears
                ended December 31, 2006 and 2005
            
            
            F-3ConsolidatedStatementsof
                Stockholders’ Equity (Deficit)for
                the years ended December 31, 2006 and 2005
            
            
            F-4Consolidated
                Statementsof
                Cash Flows for theyears
                ended December 31, 2006 and 2005
            
            
            F-5Notes
                to Consolidated Financial Statements
            
            
            F-6









REPORT
      OF
      INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM




To
      the
      Board of Directors


InfoSearch
      Media, Inc.


Marina
      Del Rey, California





We
      have
      audited the consolidated balance sheets of InfoSearch
      Media, Inc. and
      subsidiaries as of December
      31, 2006 and 2005 ,
      and the
      related consolidated statements of operations, stockholders' equity and cash
      flows for the years 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 audits.





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





In
      our
      opinion, the consolidated financial statements referred to above present fairly,
      in all material respects, the financial position of InfoSearch Media, Inc.
      and
      subsidiaries as of December
      31, 2006 and 2005 ,
      and the
      results of their operations and their cash flows for the years then ended,
      in
      conformity with U.S. generally accepted accounting principles.




/s/
      Singer Lewak Greenbaum & Goldstein LLP


SINGER
      LEWAK GREENBAUM & GOLDSTEIN LLP





Los
      Angeles, California


April
      17,
      2007




F-1
 
 INFOSEARCH
          MEDIA, INC.
 CONSOLIDATED
          BALANCE SHEETS
 **December
                    31, 2006**
                
                **December
                    31, 2005****ASSETS****CURRENT
                    ASSETS:**Cash
                    and cash equivalents
                
                $
                2,495,654
                
                $
                4,828,560Restricted
                    cash
                
                
                380,530
                
                
                -Accounts
                    receivable
                
                
                68,941
                
                
                4,449Due
                    from related parties
                
                
                50,732
                
                
                25,000Prepaid
                    and other current assets
                
                
                201,604
                
                
                209,762**TOTAL
                    CURRENT ASSETS**
                
                
                3,197,461
                
                
                5,067,771EMPLOYEE
                    ADVANCE
                
                
                1,000
                
                
                2,500CONTENT
                    DEVELOPMENT
                
                
                4,083
                
                
                349,054PROPERTY
                    AND EQUIPMENT, NET
                
                
                131,139
                
                
                285,021SECURITY
                    DEPOSIT
                
                
                37,500
                
                
                37,500EQUITY
                    WARRANT ASSET
                
                
                308,837
                
                
                -**TOTAL
                    ASSETS**
                
                $
                3,680,020
                
                $
                5,741,846**LIABILITIES
                    AND STOCKHOLDERS' EQUITY (DEFICIT)****CURRENT
                    LIABILITIES:**Accounts
                    payable
                
                $
                204,271
                
                $
                276,704Accrued
                    bonuses
                
                
                264,515
                
                
                176,505Accrued
                    expenses
                
                
                400,052
                
                
                268,645Accrued
                    expenses Answerbag acquisition
                
                
                75,156
                
                
                -Capital
                    leases
                
                
                17,621
                
                
                33,004Deferred
                    revenue
                
                
                454,741
                
                
                2,074,103Provision
                    for refunds payable/chargebacks
                
                
                30,842
                
                
                44,151**TOTAL
                    CURRENT LIABILITIES**
                
                
                1,447,198
                
                
                2,873,112CAPITAL
                    LEASES, NET OF CURRENT PORTION
                
                
                -
                
                
                17,621DEFERRED
                    REVENUE, NET OF CURRENT PORTION
                
                
                -
                
                
                553,943FAIR
                    VALUE OF WARRANT LIABILITY
                
                
                1,396,215
                
                
                2,526,272**TOTAL
                    LIABILITIES**
                
                
                2,843,413
                
                
                5,970,948COMMITMENTS
                    AND CONTINGENCIES (Note 13)**STOCKHOLDERS'
                    EQUITY (DEFICIT):**Preferred
                    stock, undesignated, par value $.001per share, 25,000,000
                    sharesauthorized;
                    no shares issued and outstanding;
                
                
                -
                
                
                -Common
                    stock, $.001 par value, authorized 200,000,000 shares;issued
                    and outstanding 51,162,267 and 42,277,775, respectively
                
                
                51,491
                
                
                42,278Committed
                    stock, 164,282 shares
                
                
                22,586
                
                
                -Additional
                    paid in capital
                
                
                11,130,109
                
                
                6,056,291Accumulated
                    deficit
                
                
                (10,367,580
                )
                
                (6,327,671
                )**TOTAL
                    STOCKHOLDERS' EQUITY (DEFICIT):**
                
                
                836,606
                
                
                (229,102
                )**TOTAL
                    LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)**
                
                $
                3,680,020
                
                $
                5,741,846
 The
            accompanying notes are an integral part of the consolidated financial
            statements.
  F-2


INFOSEARCH
        MEDIA, INC.
 CONSOLIDATED
        STATEMENTS OF OPERATIONS


Year
                  Ended December 31,2006
              
              2005CONTENTLOGIC
                  SALES
              
              $
              6,016,080
              
              $
              3,872,489WEB
                  PROPERTIES SALES
              
              
              1,583,980
              
              
              5,491,912NET
                  SALES
              
              
              7,600,060
              
              
              9,364,401CONTENTLOGIC
                  COST OF SALES
              
              
              1,686,645
              
              
              1,354,917WEB
                  PROPERTIES COST OF SALES
              
              
              987,040
              
              
              1,190,193COST
                  OF SALES
              
              
              2,673,685
              
              
              2,545,110GROSS
                  PROFIT
              
              
              4,926,375
              
              
              6,819,291OPERATING
                  EXPENSESGeneral
                  & administrative
              
              
              9,600,049
              
              
              4,753,820Sales
                  & marketing
              
              
              2,138,695
              
              
              2,337,747TOTAL
                  COSTS AND EXPENSES
              
              
              11,738,744
              
              
              7,091,567LOSS
                  FROM OPERATIONS
              
              
              (6,812,369
              )
              
              (272,276
              )CHANGE
                  IN FAIR VALUE OF WARRANTS
              
              
              1,728,443
              
              
              536,900LIQUIDATED
                  DAMAGES
              
              
              (502,397
              )
              
              -OTHER
                  EXPENSES
              
              
              (35,244
              )
              
              -INTEREST
                EXPENSE
              
              
              (13,406
              )
              
              (12,791
              )INTEREST
                  INCOME
              
              
              105,820
              
              
              63,164EARNINGS
                  (LOSS) FROM CONTINUING OPERATIONS BEFORE TAX
              
              
              (5,529,153
              )
              
              314,997TAXES
                  FROM CONTINUING OPERATIONS
              
              
              18,585
              
              
              -NET
                  EARNINGS (LOSS) FROM CONTINUING OPERATIONS
              
              
              (5,547,738
              )
              
              314,997DISCONTINUED
                  OPERATIONS (NOTE 12)Loss
                  from discontinued operations of Answerbag, Inc.
              
              
              (412,132
              )
              
              -Gain
                  on disposal of discontinued operations
              
              
              1,919,962
              
              
              -Tax
                  Provision
              
              
              -
              
              
              -EARNINGS
                  FROM DISCONTINUED OPERATIONS
              
              
              1,507,830
              
              
              -NET
                  EARNINGS (LOSS)
              
              $
              (4,039,908
              )
              $
              314,997EARNINGS
                  (LOSS) PER SHARE FROM CONTINUING OPERATIONS -BASIC
              
              $
              (0.12
              )
              $
              0.01DILUTED
              
              $
              (0.12
              )
              $
              0.01EARNINGS
                  (LOSS) PER SHARE FROM DISCONTINUED OPERATIONS -BASIC
              
              $
              0.03
              
              $
              -DILUTED
              
              $
              0.03
              
              $
              -EARNINGS
                  (LOSS) PER SHAREBASIC
              
              $
              (0.09
              )
              $
              0.01DILUTED
              
              $
              (0.09
              )
              $
              0.01WEIGHTED
                  AVERAGE SHARES OUTSTANDING - BASIC
              
              
              47,202,261
              
              
              42,277,775WEIGHTED
                  AVERAGE SHARES OUTSTANDING - DILUTED
              
              
              47,202,261
              
              
              43,055,104
  The
        accompanying notes are an integral part of the consolidated financial
        statements.
  F-3


INFOSEARCH
        MEDIA, INC.
 CONSOLIDATED
        STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)





TotalCommon
                Stock
            
            Comitted
                  Common
            
            Additional
                  Paid-In
            
            Accumulated
            
            Stockholders'
                EquityShares
            
            Amount
            
            Stock
            
            Capital
            
            Deficit
            
            (Deficit)BALANCE
                - December 31, 2004
            
            
            33,560,275
            
            $
            33,561
            
            $
            -
            
            $
            3,193,093
            
            $
            (6,642,669
            )
            $
            (3,416,015
            )Oversold
                common stock
            
            
            250,000
            
            
            250
            
            
            
            
            
            249,750
            
            
            
            
            
            250,000Stock
                issued for services
            
            
            20,000
            
            
            20
            
            
            
            
            
            75,980
            
            
            
            
            
            76,000Restricted
                stock
            
            
            88,125
            
            
            88
            
            
            
            
            
            443,639
            
            
            
            
            
            443,727Equity
                compensation to consultants
            
            
            
            
            
            
            
            
            
            
            
            125,775
            
            
            
            
            
            125,775Stock
                issued pursuant to private placement
            
            
            8,359,375
            
            
            8,359
            
            
            
            
            
            5,341,641
            
            
            
            
            
            5,350,000Private
                placement costs
            
            
            
            
            
            
            
            
            
            
            
            (532,022
            )
            
            
            
            
            (532,022
            )Fair
                value of warrants liability
            
            
            
            
            
            
            
            
            
            
            
            (3,063,172
            )
            
            
            
            
            (3,063,172
            )Subscription
                receivable
            
            
            (3,699,868
            )
            
            (3,700
            )
            
            
            
            
            (3,252,954
            )
            
            
            
            
            (3,256,654
            )Stock
                issued from subscription receivable
            
            
            3,699,868
            
            
            3,700
            
            
            
            
            
            3,474,561
            
            
            
            
            
            3,478,261Net
                earnings
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            314,999
            
            
            314,999BALANCE
                - December 31, 2005
            
            
            42,277,775
            
            $
            42,278
            
            $
            -
            
            $
            6,056,291
            
            $
            (6,327,670
            )
            $
            (229,101
            )Restricted
                stock
            
            
            4,974,786
            
            
            4,975
            
            
            
            
            
            2,889,450
            
            
            
            
            
            2,894,425Answerbag
                acquisition
            
            
            844,748
            
            
            844
            
            
            
            
            
            264,930
            
            
            
            
            
            265,774Returned
                shares Steve Lazuka
            
            
            (1,000,000
            )
            
            (1,000
            )
            
            
            
            
            1,000
            
            
            
            
            
            -Committted
                stock
            
            
            
            
            
            
            
            
            22,586
            
            
            
            
            
            
            
            
            22,586Stock
                option exercise
            
            
            41,250
            
            
            41
            
            
            
            
            
            5,734
            
            
            
            
            
            5,775Employee
                option compsenation expense
            
            
            
            
            
            
            
            
            
            
            
            1,314,341
            
            
            
            
            
            1,314,341Stock
                grants
            
            
            27,500
            
            
            28
            
            
            
            
            
            8,222
            
            
            
            
            
            8,250Stock-bright
                star award
            
            
            18,525
            
            
            19
            
            
            
            
            
            6,211
            
            
            
            
            
            6,230Liquidated
                damages
            
            
            4,306,613
            
            
            4,306
            
            
            
            
            
            505,598
            
            
            
            
            
            509,904Gemini
                warrants
            
            
            
            
            
            
            
            
            
            
            
            68,752
            
            
            
            
            
            68,752GP
                Group warrants
            
            
            
            
            
            
            
            
            
            
            
            9,580
            
            
            
            
            
            9,580Net
                loss
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (4,039,908
            )
            
            (4,039,908
            )BALANCE
                - December 31, 2006
            
            
            51,491,197
            
            $
            51,491
            
            $
            22,586
            
            $
            11,130,109
            
            $
            (10,367,580
            )
            $
            836,606




The
      accompanying notes are an integral part of the consolidated financial
      statements.




F-4


INFOSEARCH
        MEDIA, INC.
 CONSOLIDATED
        STATEMENTS OF CASH FLOWS


Year
                  ended December 31,2006
              
              2005CASH
                  FLOWS FROM OPERATING ACTIVITIES:Net
                  earnings (loss)
              
              $
              (4,039,908
              )
              $
              314,997Adjustment
                  to reconcile net income (loss) to net cashprovided
                  by (used in) operating activitiesDepreciation
                  and amortization
              
              
              615,529
              
              
              420,595Equity
                  based compensation
              
              
              4,223,245
              
              
              645,502Issuance
                  of warrants
              
              
              78,331Loss
                  from disposal of fixed assets
              
              
              10,937
              
              
              -Liquidated
                  damages
              
              
              509,904
              
              
              -Change
                  in fair value of warrants
              
              
              (1,728,443
              )
              
              (536,900
              )Gain
                  on sale of Answerbag assets
              
              
              (1,919,962
              )
              
              -Changes
                  in assets and liabilities:Accounts
                  receivable
              
              
              (64,492
              )
              
              130,577Prepaid
                  expenses and other current assets
              
              
              (16,074
              )
              
              (160,706
              )Accounts
                  payable, accrued expenses and other liabilities
              
              
              222,141
              
              
              75,377Provision
                  for refunds
              
              
              (13,309
              )
              
              (754,659
              )Deferred
                  revenue
              
              
              (2,173,306
              )
              
              (4,608,043
              )NET
                  CASH USED IN OPERATING ACTIVITIES
              
              
              (4,295,406
              )
              
              (4,473,260
              )CASH
                  FLOWS FROM INVESTING ACTIVITIES:Restricted
                  cash
              
              
              (380,530
              )
              
              -Net
                  cash payments in purchase of Answerbag
              
              
              (479,888
              )
              
              -Net
                  proceeds from sales of Answerbag assets
              
              
              2,937,149
              
              
              -Capital
                  expenditures - fixed assets
              
              
              (37,640
              )
              
              (158,459
              )Capital
                  expenditures - content development
              
              
              (49,361
              )
              
              (604,491
              )NET
                  CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
              
              
              1,989,729
              
              
              (762,950
              )CASH
                  FLOWS FROM FINANCING ACTIVITIES:Principal
                  payments of capital lease obligations
              
              
              (33,004
              )
              
              (32,034
              )Stock
                  option exercise
              
              
              5,775
              
              
              -Gross
                  proceeds from private placements
              
              
              -
              
              
              8,767,845NET
                  CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
              
              
              (27,229
              )
              
              8,735,811Net
                  increase (decrease) in cash and cash equivalents
              
              
              (2,332,906
              )
              
              3,499,601CASH
                  AND CASH EQUIVALENTS - BEGINNING OF PERIOD
              
              
              4,828,560
              
              
              1,328,959CASH
                  AND CASH EQUIVALENTS - END OF PERIOD
              
              $
              2,495,654
              
              $
              4,828,560SUPPLEMENTAL
                  DISCLOSURE OF CASH FLOW INFORMATIONCash
                  paid for interest
              
              $
              13,406
              
              $
              12,791Income
                  tax paid (refunded)
              
              $
              18,585
              
              $
              (6,097
              )NON-CASH
                  SUPPLEMENTAL DISCLOSURE OF INVESTINGAND
                  FINANCING ACTIVITIES:Stock
                  issued or committed to be issued for the acquisition of
                  Answerbag
              
              $
              462,499
              
              
              -


The
        accompanying notes are an integral part of the consolidated financial
        statements.
  F-5





**InfoSearch
      Media, Inc.**


**Notes
      to the Consolidated Financial Statements**


**For
      the Years Ended December 31, 2006 and 2005**





**1.**  **Organization
      and Nature of Operations**





On
      December 31, 2004, Trafficlogic, Inc., a California corporation (“Trafficlogic”)
      merged with MAC Worldwide, Inc. (“MAC”); the surviving company changed its name
      to InfoSearch Media, Inc. (“InfoSearch” or the “Company”). Such merger consisted
      of three related transactions: (1) the merger (the “Merger”) of Trafficlogic
      with and into a newly organized and wholly-owned subsidiary of MAC, Trafficlogic
      Acquisition Corp., a Delaware corporation, which later changed its name to
      Trafficlogic, Inc. (“Acquisition Sub”); (2) the disposition of MAC’s
      wholly-owned operating subsidiary, Mimi & Coco, Inc., a Canadian
      corporation; and (3) the closing of a private placement offering of common
      stock, par value $0.001 per share (the “Private Placement Transaction”). The
      current officers and directors of the Company are listed on page 28 of
      the Annual Report on Form 10-KSB for the year ended December 31,
      2006.  ****




The
      Company is a Los Angeles-based provider
      of "smart," search-targeted text and video content for the Internet, designed
      to
      obtain higher rankings, brand recognition and better website performance for
      publishing and media clients. InfoSearch's network of professional writers,
      editors, other technical specialists and video production facilities also help
      businesses succeed on the Web by implementing text and video content-based
      Internet marketing solutions. InfoSearch’s search marketing solutions
      involve online
      content that supports the non-paid search
      marketing initiatives of its clients. Non-paid search results, (otherwise
      known as organic )
      are the
      search results that the search engines find on the World
      Wide Web as
      opposed to those listings for which companies pay for placement.




The
      Company’s principal executive offices are located at 4086 Del Rey Avenue, Marina Del
      Rey,
      California 90292. The
      Company’s telephone number is (310) 437-7380.




2.  **Restatement
      of Quarterly Financial Information**




The
      Company previously accounted for cancelled stock options upon the termination
      of
      employees by recording an expense for the unvested portion of each terminated
      employee’s options in each of the first three quarters of the year ended
      December 31, 2006. Upon further examination of its accounting methodology for
      cancelled stock options, the Company determined this to be in error. The Company
      has determined that the cancelled stock options should not have been expensed
      and is restating the financial information below for the three months ended
      March 31, 2006, the three and six months ended June 30, 2006 and the three
      and
      nine months ended September 30, 2006.





The
      effects of the restatement on general and administrative expenses, loss from
      continuing operations, net loss, additional paid in capital and earnings per
      share, basic and diluted, for the Company and for continuing operations as
      of
      and for the three months ended March 31, 2006 are as follows:


Three
                    months ended March 31, 2006AS
                    ORIGINALLY REPORTED
                
                RESTATED
                    ADJUSTMENTS
                
                AS
                    RESTATED(unaudited)
                
                (unaudited)
                
                (unaudited)General
                    and administrative
                
                $
                2,296,366
                
                $
                (356,355
                )
                $
                1,940,011Income
                    (loss) from continuing operations
                
                
                (296,086
                )
                
                356,355
                
                
                60,269Net
                    income (loss)
                
                $
                (296,086
                )
                $
                356,355
                
                $
                60,269Additional
                    paid in capital
                
                
                7,445,330
                
                
                (356,355
                )
                
                7,088,975EARNINGS
                    (LOSS) PER SHARE FROMCONTINUING
                    OPERATIONSBASIC
                
                $
                (0.01
                )
                $
                0.01
                
                $
                0.00DILUTED
                
                $
                (0.01
                )
                $
                0.01
                
                $
                0.00EARNINGS
                    (LOSS) PER SHAREBASIC
                
                $
                (0.01
                )
                $
                0.01
                
                $
                0.00DILUTED
                
                $
                (0.01
                )
                $
                0.01
                
                $
                0.00




F-6





The
      effects of the restatement on general and administrative expenses, loss from
      continuing operations, net loss, additional paid in capital and earnings per
      share, basic and diluted, as of and for the three and six months ended June
      30,
      2006 are as follows:


Three
                  months ended June 30, 2006AS
                  ORIGINALLY REPORTED
              
              RESTATED
                  ADJUSTMENTS
              
              AS
                  RESTATED(unaudited)
              
              (unaudited)
              
              (unaudited)General
                  and administrative
              
              $
              5,598,027
              
              $
              (56,562
              )
              $
              5,541,465Income
                  (loss) from continuing operations
              
              
              (3,846,717
              )
              
              56,562
              
              
              (3,790,155
              )Net
                  income (loss)
              
              $
              (3,846,717
              )
              $
              56,562
              
              $
              (3,790,155
              )Additional
                  paid in capital
              
              
              10,795,098
              
              
              (56,562
              )
              
              10,738,536EARNINGS
                  (LOSS) PER SHARE FROMCONTINUING
                  OPERATIONSBASIC
              
              $
              (0.08
              )
              $
              0.00
              
              $
              (0.08
              )DILUTED
              
              $
              (0.08
              )
              $
              0.00
              
              $
              (0.08
              )EARNINGS
                  (LOSS) PER SHAREBASIC
              
              $
              (0.08
              )
              $
              0.00
              
              $
              (0.08
              )DILUTED
              
              $
              (0.08
              )
              $
              0.00
              
              $
              (0.08
              )




F-7




Six
                  months ended June 30, 2006AS
                    ORIGINALLYREPORTED
              
              RESTATEDADJUSTMENTS
              
              ASRESTATED(unaudited)
              
              (unaudited)
              
              (unaudited)General
                  and administrative
              
              $
              7,817,208
              
              $
              (412,917
              )
              $
              7,404,291Income
                  (loss) from continuing operations
              
              
              (4,142,801
              )
              
              412,917
              
              
              (3,729,884
              )Net
                  income (loss)
              
              $
              (4,142,801
              )
              $
              412,917
              
              $
              (3,729,884
              )Additional
                  paid in capital
              
              
              10,795,098
              
              
              (412,917
              )
              
              10,382,181EARNINGS
                  (LOSS) PER SHARE FROMCONTINUING
                  OPERATIONSBASIC
              
              $
              (0.09
              )
              $
              0.01
              
              $
              (0.08
              )DILUTED
              
              $
              (0.09
              )
              $
              0.01
              
              $
              (0.08
              )EARNINGS
                  (LOSS) PER SHAREBASIC
              
              $
              (0.09
              )
              $
              0.01
              
              $
              (0.08
              )DILUTED
              
              $
              (0.09
              )
              $
              0.01
              
              $
              (0.08
              )


The
      effects of the restatement on general and administrative expenses, loss from
      continuing operations, net loss, additional paid in capital and earnings per
      share, basic and diluted, as of and for the three and nine months ended
      September 30, 2006 are as follows:




Three
                months ended September 30, 2006AS
                  ORIGINALLYREPORTED
            
            RESTATEDADJUSTMENTS
            
            ASRESTATED(unaudited)
            
            (unaudited)
            
            (unaudited)General
                and administrative
            
            $
            1,444,647
            
            $
            (101,656
            )
            $
            1,342,991Income
                (loss) from continuing operations
            
            $
            (475,114
            )
            
            101,656
            
            
            (373,458
            )Net
                income (loss)
            
            $
            (751,898
            )
            $
            101,656
            
            $
            (650,242
            )Additional
                paid in capital
            
            
            11,598,416
            
            
            (101,656
            )
            
            11,496,760EARNINGS
                (LOSS) PER SHARE FROMCONTINUING
                OPERATIONSBASIC
            
            $
            (0.01
            )
            $
            0.00
            
            $
            (0.01
            )DILUTED
            
            $
            (0.01
            )
            $
            0.00
            
            $
            (0.01
            )EARNINGS
                (LOSS) PER SHAREBASIC
            
            $
            (0.02
            )
            $
            0.00
            
            $
            (0.01
            )DILUTED
            
            $
            (0.02
            )
            $
            0.00
            
            $
            (0.01
            )




F-8




Nine
                  months ended September 30, 2006AS
                    ORIGINALLYREPORTED
              
              RESTATEDADJUSTMENTS
              
              ASRESTATED(unaudited)
              
              (unaudited)
              
              (unaudited)General
                  and administrative
              
              $
              9,104,840
              
              $
              (514,573
              )
              $
              8,590,267Income
                  (loss) from continuing operations
              
              $
              (4,510,829
              )
              
              514,573
              
              
              (3,996,256
              )Net
                  income (loss)
              
              $
              (4,894,699
              )
              $
              514,573
              
              $
              (4,380,126
              )Additional
                  paid in capital
              
              
              11,598,416
              
              
              (514,573
              )
              
              11,083,843EARNINGS
                  (LOSS) PER SHARE FROMCONTINUING
                  OPERATIONSBASIC
              
              $
              (0.10
              )
              $
              0.01
              
              $
              (0.09
              )DILUTED
              
              $
              (0.10
              )
              $
              0.01
              
              $
              (0.09
              )EARNINGS
                  (LOSS) PER SHAREBASIC
              
              $
              (0.11
              )
              $
              0.01
              
              $
              (0.10
              )DILUTED
              
              $
              (0.11
              )
              $
              0.01
              
              $
              (0.10
              )


**3.**  **Summary
      of Significant Accounting Policies**





Basis
      of Consolidation





The
      consolidated financial statements include the accounts of the Company and one
      subsidiary, Answerbag, Inc., a California corporation, which was acquired by
      the
      Company in March 2006. All significant intercompany accounts and transactions
      have been eliminated in consolidation.





Revenue
      Recognition





The
      Company recognizes revenue on arrangements in accordance with Securities and
      Exchange Commission Staff Accounting Bulletin No. 101 "Revenue Recognition
      in
      Financial Statements" and No. 104 "Revenue Recognition," and Emerging Issues
      Task Force Issue 00-21, "Revenue Arrangements with Multiple Deliverables."
      In
      all cases, revenue is recognized only when the price is fixed or determinable,
      persuasive evidence of an arrangement exists, the service is performed, and
      collectibility of the resulting receivable is reasonably assured.





The
      Company’s revenues are derived principally from the licensing or sale of unique
      content developed for its clients under the ContentLogic program or the sale
      of
      advertising on a cost-per-click **** (“ CPC ”) **** basis
      to
      one of the websites in the Web Properties group.




For
      the
      ContentLogic program, the Company derives revenue through the licensing and
      sale
      of content to third party website **** owners.
      Content sale revenue is recognized when the content is delivered to and accepted
      by the client. Revenue earned through a 12-month license agreement is treated
      as
      an installment sale and prorated revenue is recognized on a monthly basis over
      the life of the agreement. Clients subject to a 12-month licensing agreement
      have the right to continue leasing the content at the end of the term on a
      month-to-month basis. In late September, 2005, the Company added a
      month-to-month licensing program with higher fees. Revenue earned under
      month-to-month licensing agreements is recognized on a monthly basis. As part
      of
      the ContentLogic program, the Company also earns revenue from Web analytics and advertising link sales. Revenue earned from these services is
      recognized on a monthly basis pursuant to a month-to-month license agreement.
      Client deposits received in advance of work being completed for such services
      are deferred until the revenue is earned.





The
      Company derives revenue from the Web Properties websites on a CPC basis as
      traffic is distributed to Google AdSense advertisers. The Company has established a partnership with Google through
      which
      Google pays InfoSearch fees for clicks on advertisements sponsored by Google
      and
      displayed on the Answerbag, ArticleInsider and Popdex websites .
      The
      Company recognizes revenue associated with the Google AdSense program
      as reported by Google to the Company at the end of each month.




F-9





Cost
      of Sales





A
      significant portion of the Company’s cost of sales is related to content
      developed under the ContentLogic program and for content developed for display
      on the Web Properties group’s websites.




For
      the
      ContentLogic program, content developed pursuant to outright sales and licensing
      is developed through editors, keyword analysts and independent contractors
      who
      write and edit the copy and analyze the keywords. The Company recognizes and
      expenses those costs related to the content developed for outright sales to
      clients as the cost is incurred, while the cost of content development for
      licensing subject to a 12-month contract is amortized over the life of the
      contract. In late September **** 2005, the
      Company added a month-to-month ContentLogic licensing option, with content
      development costs for the month-to-month agreements expensed when incurred.





Content
      developed pursuant to InfoSearch’s ArticleInsider and Popdex websites increase
      the value of the network and yield revenue to InfoSearch over a period of years,
      which led to the decision to capitalize the development costs. Through December
      31, 2004, the Company’s practice was to expense the cost of content developed
      for ArticleInsider and Popdex as the costs were incurred. However, with the
      ongoing management of the ArticleInsider and Popdex websites, it became apparent
      to InfoSearch management that the average lifespan of an article on the network,
      i.e. how long it continued to draw traffic from individuals performing keyword
      searches, was well in excess of three years. Earlier expectations were that
      the
      lifespan would be shorter. It became apparent to InfoSearch management that
      it
      was not uncommon that an article would not begin drawing traffic until some
      number of months after it was posted on the network. As of January 1, 2005,
      to
      better match costs to revenues, and recognize the increased value of the
      network, the Company began amortizing Web Properties content development costs
      over the expected life of 36 **** months,
      which resulted in an increase in the Company’s gross margins. The Company
      continued to review this estimate during the year and determined that the
      estimated useful life should be reduced to two years as of December 31, 2005
      and
      further reduced to one year as of December
      31, 2006. InfoSearch is no longer developing significant new content for the
      ArticleInsider and Popdex websites, a practice which was scaled back in 2005.
      The total value of unamortized content as of December 31, 2006 was $4,082 and
      the Company recorded an amortized content expense for the year ended December
      31, 2006 of $394,333.





Cash
      and Cash Equivalents




Cash
      and
      cash equivalents include cash on hand and cash in banks in demand and time
      deposit accounts with maturities of 90 days or less. The Company had $380,530
      in
      restricted cash including $302,108 in escrow from the sale of Answerbag ,
      Inc.,
      $23,422 held at various financial institutions and online payment processing
      firms, and $55,000 in certificate of deposits securing payment
      obligations.





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 amounts reported in the financial statements and accompanying notes.
      Actual results could differ from those estimates.





Concentrations
      of Credit Risk





Financial
      instruments, which potentially subject the Company to concentrations of credit
      risk, consist principally of cash and cash equivalents and trade receivables.
      The Company maintains cash and cash equivalents with high-credit, quality
      financial institutions. At December 31, 2006, the cash balances held at
      financial institutions were either in excess of federally insured limits or
      not
      subject to the federal insurance system.





Credit
      is
      generally extended based upon an evaluation of each customer's financial
      condition, with terms consistent in the industry and no collateral required.
      The
      Company determines an allowance for collectibility on a periodic basis. Amounts
      are written off against the allowance in the period the Company determines
      that
      the receivable is uncollectible.




F-10





For
      the
      years ended December 31, 2006 and 2005, the Company recorded
      an expense related to chargebacks of $181,375 and $76,429, respectively. As
      a
      matter of practice, the Company does not
      extend credit and thus has limited accounts receivable. However, in certain
      instances, situations arise, often after a customer has been a client for a
      period, where the monthly prepayments made, typically in electronic form, are
      rejected by the credit card processor. In limited situations, this can arise
      due
      to a dispute with the Company and in
      others where the client will no longer honor charges on this card. In certain
      instances decisions are made to refund the deposits or accept the rejected
      charges, and in other instances the original charge is no longer
      collectable.





Property
      and Equipment





Property
      and equipment is stated at cost and depreciation is provided for by the
      straight-line method over the related assets’ estimated economic lives ranging
      from three to five years. Amortization of leasehold improvements is provided
      for
      by the straight-line method over the lesser of the estimated economic useful
      lives or the lease term. Property under capital leases is amortized over the
      lease terms and included in depreciation and amortization expense.





Long-Lived
      Asset Impairment





The
      Company periodically evaluates whether events and circumstances have occurred
      that indicate that the remaining estimated useful life of long-lived assets
      may
      warrant revision or that the remaining balance may not be recoverable. When
      factors indicate that the asset should be evaluated for possible impairment,
      the
      Company uses an estimate of the undiscounted net cash flows over the remaining
      life of the asset in measuring whether the asset is recoverable. Based upon
      the
      anticipated future income and cash flow from operations and other factors,
      relevant in the opinion of the Company’s management, there has been no
      impairment.





Fair
      Value of Financial Instruments





To
      meet
      the reporting requirements of SFAS No. 107, “Disclosures About Fair Value of
      Financial Instruments” (“SFAS 107”), the Company calculates the fair value of
      financial instruments and includes this additional information in the notes
      to
      financial statements when the fair value is different than the book value of
      those financial instruments. When the fair value is equal to the book value,
      no
      additional disclosure is made. The Company uses quoted market prices whenever
      available to calculate these fair values.





Valuation
      of Derivative Instruments





SFAS
      No.
      133 “Accounting for Derivative Instruments and Hedging Activities” requires that
      embedded derivative instruments be bifurcated and assessed, along with
      free-standing derivative instruments such as warrants, on their issuance date
      and in accordance with EITF 00-19 “Accounting for Derivative Financial
      Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock” to
      determine whether they should be considered a derivative liability and measure
      at their fair value for accounting purposes. In determining the appropriate
      fair
      value, the Company uses the Black-Scholes option pricing formula (“Black
      Scholes”). At each period end, or when circumstances indicate that the Company
      reevaluate the accounting of the derivative liability, derivative liabilities
      are adjusted to reflect changes in fair value, with any increase or decrease
      in
      the fair value being recorded in results of operations as adjustments to fair
      value of derivatives.





Deferred
      Revenue





Deferred
      revenue primarily represents payments received from customers as deposits in
      advance of the delivery of content, links or analytics under the ContentLogic
      program. In addition, a small remaining amount of the deferred revenue is
      associated with the Web Properties group. This deferred revenue results from
      payments received from customers as deposits in excess of revenue earned based
      on click-through activity ( website visitations) for our ArticleInsider and Popdex websites and will be recognized
      as traffic is delivered.





Income
      Taxes





The
      Company follows Statement of Financial Accounting Standards No. 109, “Accounting
      for Income Taxes”, which requires recognition of deferred tax assets and
      liabilities for the expected future tax consequences of events that have been
      included in the financial statements or tax returns. Under this method, deferred
      tax assets and liabilities are based on the differences between the financial
      statement and tax bases of assets and liabilities using enacted tax rates in
      effect for the year in which the differences are expected to
      reverse.




F-11




Accounting
      for Stock-Based Compensation





Effective
      January 1, 2006, the Company adopted Statement of Financial Accounting Standards
      (SFAS) No. 123(R), *Share-Based
      Payment* (SFAS
      123(R)), which requires the measurement and recognition of compensation expense
      for all share-based payment awards made to employees and directors, including
      stock options based on their fair values. SFAS 123(R) supersedes Accounting
      Principles Board Opinion No. 25, *Accounting
      for Stock Issued to Employees* (APB
      25), which the Company previously followed in accounting for stock-based awards.
      In March 2005, the SEC issued *Staff
      Accounting Bulletin No. 107* (SAB
      107) to provide guidance on SFAS 123(R). The Company has applied SAB 107 in
      its
      adoption of SFAS 123(R).





The
      Company adopted SFAS 123(R) using the modified prospective transition method
      as
      of January 1, 2006. In accordance with the modified prospective transition
      method, the Company’s financial statements for prior periods have not been
      restated to reflect, and do not include, the impact of SFAS 123(R). Share-based
      compensation expense recognized is based on the value of the portion of
      share-based payment awards that is ultimately expected to vest. Share-based
      compensation expense recognized in the Company’s Consolidated Statements of
      Operations during the twelve months ended December 31, 2006 includes
      compensation expense for share-based payment awards granted prior to, but not
      yet vested, as of December 31, 2006 based on the grant date fair value estimated
      in accordance with the pro forma provisions of SFAS 123.





In
      conjunction with the adoption of SFAS 123(R), the Company elected to attribute
      the value of share-based compensation to expense using the straight-line method,
      which was previously used for its pro forma information required under SFAS
      123.
      Share-based compensation expense related to stock options was $1,314,341 for
      the
      year ended December 31, 2006, and was recorded in the financial statements
      as
      follows:




YearEnded
              December
                31, 2006Selling
                and marketing
            
            $
            194,267General
                and administrative
            
            
            1,086,712Discontinued
                operations
            
            
            33,451Total
                share-based compensation expense for stock options
            
            $
            1,314,341





As
      all of
      the stock option grants issued to employees prior to June 30, 2006 had exercise
      prices above the closing price at the end of the second quarter, the board **** of **** directors ,
      in an
      effort to maintain employee retention, approved the acceleration of vesting
      of
      stock option grants and restricted stock grants, in the amount of 1,428,403
      shares and 1,042,240 shares, respectively. Grants for all employees employed
      as
      of the close of business on June 30, 2006 were accelerated as of June 30, 2006.
      This resulted in a share-based compensation expense of $ 1,041,029 associated
      with the acceleration of stock option grants and $718,790 associated with
      restricted stock grants. Both of these values are included in the total
      share-based compensation expense of $4,223,245 for the year ended December
      31,
      2006.





During
      the year ended December 31, 2005, there was no share-based compensation expense
      related to stock options recognized under the intrinsic value method in
      accordance with APB 25. Had compensation cost for the Company’s stock options
      been recognized based upon the estimated fair value on the grant date under
      the
      fair value methodology prescribed by SFAS No. 123, as amended by SFAS No. 148,
      the Company’s net loss and loss per share would have been as
      follows:





Year
                EndedDecember
                31, 2005Net
                earnings, as reported
            
            $
            314,998Less:
                total stock based compensation, net of related tax effect
            
            
            730,288Pro
                formanet loss
            
            $
            (415,290
            )Net
                earnings (loss) per share:Earnings
                per share, basic and diluted, as reported
            
            $
            0.01Loss
                per share, basic and diluted, pro forma
            
            $
            (0.01
            )




F-12




The
      Company’s calculations were made using the Black-Scholes option pricing model
      with the following weighted average assumptions for the years ended December
      31,
      2006 and 2005: expected life, five years following the grant date; stock
      volatility, 110.75% and 107.5%, respectively; risk-free interest rates of 4.57%
      and 4.35%, respectively; and no dividends during the expected term. As
      stock-based compensation expense recognized in the consolidated statements
      of
      operations pursuant to SFAS No. 123(R) is based on awards ultimately expected
      to
      vest, expense for grants beginning upon adoption of SFAS No. 123(R) on January
      1, 2006 is reduced for estimated forfeitures. SFAS No. 123(R) requires
      forfeitures to be estimated at the time of grant and revised, if necessary,
      in
      subsequent periods if actual forfeitures differ from those estimates.
      Forfeitures are estimated based on historical experience of forfeited stock
      options as a percent of total options granted.





Reclassifications





Certain
      account balances in the prior year have been reclassified to permit comparison
      with the current year.





**RECENTLY
      ISSUED ACCOUNTING PRONOUNCEMENTS**


In
        May
        2005, the FASB issued SFAS No. 154, "Accounting Changes and Error Corrections"
        ("SFAS No. 154") that addresses accounting for changes in accounting principals,
        changes in accounting estimates, and changes required by an accounting
        pronouncement in the instance that the pronouncement does not include specific
        transition provisions and error correction. SFAS No. 154 requires retrospective
        application to prior periods’ financial statements of changes in accounting
        principals and error correction unless impracticable to do so. SFAS No. 154
        states an exception to retrospective application when a change in accounting
        principal, or the method of applying it, may be inseparable from the effect
        of
        the change in accounting estimate. When a change in principle is inseparable
        from a change in estimate, such as depreciation, amortization, or depletion,
        the
        change to the financial statements is to be presented in a prospective manner.
        SFAS No. 154 and the required disclosures are effective for accounting changes
        and error corrections in fiscal years beginning after December 15, 2005.
        The
        adoption of this new standard did not have a material impact in the Company’s
        financial position, results of operations or cash flows.
 
 In
        September 2006, the SEC issued
        Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year
        Misstatements when Quantifying Misstatements in Current Year Financial
        Statements” (“SAB 108”). SAB 108 provides
        guidance on the consideration of the effects of prior year misstatements
        in
        quantifying current year misstatements for the purpose of a materiality
        assessment. SAB 108 establishes an approach that requires quantification
        of
        financial statement errors based on the effects of each of the Company ’s
        balance sheet and statement of operations and the related financial statement
        disclosures. SAB 108 permits
        existing public companies to record the cumulative effect of initially applying
        this approach in the first year ending after November 15, 2006 by recording
        the
        necessary correcting adjustments to the carrying values of assets and
        liabilities as of the beginning of that year with the offsetting adjustment
        recorded to the opening balance of retained earnings. Additionally, the use
        of
        the cumulative effect transition method requires detailed disclosure of the
        nature and amount of each individual error being corrected through the
        cumulative adjustment and how and when it arose. The adoption of SAB 108
        did not
        have a material impact on our financial condition or results of operations.




In
      February 2006, the FASB issued SFAS No. 155, “Accounting for Certain Hybrid
      Financial Instruments”, which amends SFAS No. 133, “Accounting for Derivatives
      Instruments and Hedging Activities” and SFAS No. 140, “Accounting for Transfers
      and Servicing of Financial Assets and Extinguishment of Liabilities”. SFAS No.
      155 amends SFAS No. 133 to narrow the scope exception for interest-only and
      principal-only strips on debt instruments to include only such strips
      representing rights to receive a specified portion of the contractual interest
      or principle cash flows. SFAS No. 155 also amends SFAS No. 140 to allow
      qualifying special-purpose entities to hold a passive derivative financial
      instrument pertaining to beneficial interests that itself is a derivative
      instrument. SFAS No. 155 is effective for financial instruments acquired,
      issued, or subject to a remeasurement event for fiscal years beginning after
      September 15, 2006. The Company is currently evaluating the impact this new
      Standard but believes that it will not have a material impact on the Company’s
      financial position, results of operations, or cash flows.





In
      March
      2006, the FASB issued SFAS No. 156, “Accounting for Servicing of Financial
      Assets” (“SFAS No .
      156”),
      which provides an approach to simplify efforts to obtain hedge-like (offset)
      accounting. This Statement amends FASB Statement No. 140, “Accounting for
      Transfers and Servicing of Financial Assets and Extinguishments of Liabilities”,
      with respect to the accounting for separately recognized servicing assets and
      servicing liabilities. The Statement (1) 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; (2) requires that a separately recognized servicing asset or
      servicing liability be initially measured at fair value, if practicable; (3)
      permits an entity to choose either the amortization method or the fair value
      method for subsequent measurement for each class of separately recognized
      servicing assets or servicing liabilities; (4) permits at initial adoption
      a
      one-time reclassification of available-for-sale securities to trading securities
      by an entity with recognized servicing rights, provided the securities
      reclassified offset the entity’s exposure to changes in the fair value of the
      servicing assets or liabilities; and (5) requires separate presentation of
      servicing assets and servicing liabilities subsequently measured at fair value
      in the balance sheet and additional disclosures for all separately recognized
      servicing assets and servicing liabilities. SFAS No. 156 is effective for all
      separately recognized servicing assets and liabilities as of the beginning
      of an
      entity’s fiscal year that begins after September 15, 2006, with earlier adoption
      permitted in certain circumstances. SFAS
      No.
      156 also
      describes the manner in which it should be initially applied. The Company does
      not believe that SFAS No. 156 will have a material impact on its financial
      position, results of operations or cash flows.




F-13





In
      July
      2006, the FASB released FASB Interpretation No. 48, *Accounting
      for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109* ( “ FIN
      48 ” ).
      FIN 48
      clarifies the accounting and reporting for uncertainties in income tax law.
      This
      interpretation prescribes a comprehensive model for the financial statement
      recognition, measurement, presentation and disclosure of uncertain tax positions
      taken or expected to be taken in income tax returns. This statement is effective
      for fiscal years beginning after December 15, 2006. The Company is currently
      in
      the process of evaluating the expected effect of FIN 48 on its results of
      operations and financial position.




In
      September 2006, the FASB issued
      Statement of Financial Accounting Issues No. 157, “Fair Value Measurements”
(“SFAS 157”), which defines the fair value, establishes a framework for
      measuring fair value and expands disclosures about fair value measurements.
      This
      statement is effective for financial statements issued for fiscal years
      beginning after November 15, 2007, and interim periods within those fiscal
      years. Early adoption is encouraged, provided that we have not yet issued
      financial statements for that fiscal year, including any financial statements
      for an interim period within that fiscal year. We are currently evaluating
      the
      impact SFAS 157 may have on our financial condition or results of operations.




In
      February 2007, the FASB issued SFAS No. 159, *The
      Fair Value Option for Financial Assets and Financial
      Liabilities* ** (“SFAS
      No. 159”) .
      SFAS
      No. 159 permits entities to choose to measure at fair value many financial
      instruments and certain other items that are not currently required to be
      measured at fair value. Subsequent changes in fair value for designated
      items will be
      required to be reported in earnings in the current period. SFAS No. 159 also
      establishes presentation and disclosure requirements for similar types of assets
      and liabilities measured at fair value. SFAS No. 159 is effective for fiscal
      years beginning after November 15, 2007. We are currently assessing the effect
      of implementing this guidance, which directly depends on the nature and extent
      of eligible items elected to be measured at fair value, upon initial application
      of the standard on January 1, 2008.




**4.**  **Accounts
      Receivable**





At
      December 31, 2006, accounts receivable from operations of $68,941, of which
      $9,980 was due from Google, $6,436 was due from LinkWorth and
      $52,525 were due from content licensing or purchase customers, including $30,466
      due from Demand Media, Inc . At
      December 31, 2005, the
      Company’s Google partnership accounted for all of the Company’s accounts
      receivable. The Company has not experienced any problem with collectibility
      of
      receivables.





At
      December 31, 2006 accounts receivable from related parties was $50,732, of which
      $19,338 is due from George Lichter, CEO and $31,394 is due from David Warthen ,
      CTO, to
      repay the Company for income taxes paid on behalf of each individual,
      respectively. Mr. Lichter paid the full amount to the Company in January 2007
      and Mr. Warthen paid the full amount to the Company in March 2007. ****





**5.**  **Property
      and Equipment**




The
      property and equipment for the year ended December 31, 2006 and 2005
      was:





2006
            
            2005Computer
                equipment
            
            $
            355,794
            
            $
            350,637Software
            
            
            35,907
            
            
            55,843Other
                equipment
            
            
            42,918
            
            
            42,918Leasehold
                improvements
            
            
            62,076
            
            
            62,076Furniture
                and fixtures
            
            
            48,167
            
            
            48,167Total
                fixed assets
            
            
            544,862
            
            
            559,641Less:
                Accumulated depreciation
            
            
            (413,723
            )
            
            (274,620
            )Net
                property and equipment
            
            $
            131,139
            
            $
            285,021




F-14




Depreciation
      expense for the years ended December 31, 2006 and 2005 was $167,220 and
      $165,158, respectively.





Property
      and equipment under capital leases was $90,348 and $108,893 at December 31,
      2006
      and 2005, respectively. Depreciation expenses related to equipment under capital
      leases was $30,454 at December 31, 2006 and $34,393 at December 31, 2005.





**6.**  **Equity
      Warrant Asset**





We
      account for the equity warrant asset with net settlement terms to purchase
      preferred stock of Demand Media as a derivative. Under the terms of the warrant,
      InfoSearch is entitled to purchase 125,000 shares of Series C Preferred Stock
      of
      Demand Media at an exercise price of $3.85 per share. Under the accounting
      treatment required by SFAS No. 133, equity warrant assets with net settlement
      terms are recorded at fair value and are classified as investments on the
      balance sheet.





The
      fair
      value of the Demand Media warrant is reviewed quarterly. We value the warrant
      using the Black-Scholes option pricing model, which incorporates the following
      material assumptions:





·
            Underlying
                asset value was estimated based on information available, including
                any
                information regarding subsequent rounds of funding or initial public
                offerings.





·
            Volatility,
                or the amount of uncertainty or risk about the size of the changes
                in the
                warrant price, was based on indices similar in nature to the business
                in
                which Demand Media operates and yielded a volatility of
                75.0%.





·
            The
                risk-free interest rate was 4.7%.





·
            Expected
                life of five years based on the contractual term of the
                warrant.




Any
      changes from the grant date fair value of the equity warrant asset will be
      recognized as increases or decreases to the equity warrant asset on our
      consolidated balance sheet and as net gains or losses on derivative investments
      within non-operating expenses in the consolidated statement of operations.





As
      of
      December 31, 2006, there was no change in the grant date fair value of the
      equity warrant asset.





**7.**  **Deferred
      Revenue**





Deferred
      revenue represents payments received from customers as follows: (1) in excess
      of
      revenue earned based on click-through activity ( website visitations) and will be recognized as actual click-throughs occur and (2)
      as
      deposits in advance of delivery of content under the ContentLogic
      program.





As
      of
      December 31, 2006, the Company had
      deferred revenue of $454,741, all of which is classified as current. As of
      December 31, 2005, the
      current portion of the deferred revenue is $2,074,103 and the long term portion
      of the deferred revenue is $553,943. The Company allocates between the current
      portion and the long term portion based upon its historical experience and
      its
      estimate of click through activity over the succeeding 12 months.





**8.**  **Income
      Taxes**





The
      following table reconciles the Federal statutory rate of 35% to the Company’s
      effective tax rate:





Year
                Ended December 31,2006
            
            2005Expected
                income tax (benefit)
            
            $
            (1,367,249
            )
            $
            148,977State
                tax (benefit), net of Federal effect
            
            
            1,056
            
            
            26,093Permanent
                differences
            
            
            (31,722
            )
            
            0Increase
                in valuation allowance
            
            
            1,268,058
            
            
            (174,270
            )Other
            
            
            148,442
            
            
            0Actual
                Income tax
            
            $
            18,585
            
            $
            800




F-15





The
      components of the Company’s deferred tax asset at December 31, 2006 are as
      follows:





Net
                operating loss
            
            $
            3,772,813Share-based
                compensation
            
            
            597,634Accrued
                compensation
            
            
            61,576Other
            
            
            47,682Valuation
                allowance
            
            
            (4,479,705
            )Deferred
                tax asset
            
            $
            -





As
      of
      December 31, 2006, the Company had Federal net operating losses totaling
      approximately $8,818,703, which will expire in 2024. The change in valuation
      analysis of the Federal deferred tax asset at December 31, 2006 was
      $ 1,268,058.  As
      of
      December 31, 2006, the Company had California net operating losses totaling
      approximately $8,760,796, which will expire in between 2014 and 2016. The change
      in valuation analysis of the state deferred tax asset at December 31, 2006
      was
      $ 336,509.





**9.**  **Net
      Income (loss) Per Share**





Net
      income (loss) per share is computed as net income (loss) divided by the weighted
      average number of common shares outstanding for the period. As of December
      31,
      2006, 13,035,918
      shares exercisable from stock options, restricted stock and warrants are
      excluded from the computation of net earnings (loss) per share as their effect
      would be anti-dilutive. As of December 31, 2005 there were 777,329 potentially
      dilutive shares which were included in the computations and there were 2,313,641
      potentially dilutive shares excluded from the computation of net earnings (loss)
      due to the exercise price being greater than the Company’s weighted average
      stock price for the period.





**10.**  **Stockholders’
      Equity (Deficit)**





The
      authorized capital stock currently consists of 200,000,000 shares of common
      stock ,
      par
      value $0.001 per share, and 25,000,000 shares of preferred stock, par value
      $0.001 per share, the rights and preferences of which may be established from
      time to time by the
      Company’s board of directors .
      As of
      December 31, 2006, there were 51,162,267 shares of the
      Company’s common stock issued
      and outstanding and options exercisable, warrants exercisable or restricted
      stock for 13,035,918 shares of common
      stock. No
      other
      securities, including without limitation any preferred stock, convertible
      securities, options, warrants, promissory notes or debentures are outstanding.




F-16





Common
      Stock





Holders
      of common
      stock are
      entitled to one vote for each share held on all matters submitted to a vote
      of
      stockholders and do not have cumulative voting rights. Accordingly, holders
      of a
      majority of the shares of common
      stock **** entitled
      to vote in any election of directors may elect all of the directors standing
      for
      election. Subject to preferences that may be applicable to any shares of
      preferred stock outstanding at the time, holders of common
      stock **** are
      entitled to receive dividends ratably, if any, as may be declared from time
      to
      time by **** the board of
      directors out of funds legally available therefore.





Upon
      our
      liquidation, dissolution or winding up, the holders of our common stock are
      entitled to receive ratably, our net assets available after the payment
      of:





a.
            all
                secured liabilities, including any then outstanding secured debt
                securities which we may have issued as of such
                time;





b.
            all
                unsecured liabilities, including any then unsecured outstanding secured
                debt securities which we may have issued as of such time;
                and





c.
            all
                liquidation preferences on any then outstanding preferred
                stock.





Holders
      of common
      stock have no
      preemptive, subscription, redemption or conversion rights, and there are no
      redemption or sinking fund provisions applicable to the common stock. The
      rights, preferences and privileges of holders of common stock are subject to,
      and may be adversely affected by, the rights of the holders of shares of any
      series of preferred stock which we may designate and issue in the
      future.





Upon
      the
      closing of the Private Placement Transaction, on December 31, 2004, the Company
      sold 3,699,868 shares of common stock to investors in a Private Placement
      Transaction, at a price of $1.00 per share, for a total of $3,478,261 net of
      expenses. Net proceeds were received by the Company on January 3, 2005. In
      connection with the Merger and the Private Placement Transaction **,** the
      Company issued warrants exercisable for 300,000 shares of common stock to a
      financial advisor for services rendered in the Merger .
      The
      warrants ,
      which
      were subsequently cancelled in connection with the settlement agreement
      discussed below, were exercisable at $1.00 per shar **e,** vested immediately and had **** a
      term of
      five years. These securities where offered and sold by the Company in reliance
      on exemptions from registration provided by Section 4(2) of the Securities
      Act
      and Regulation D promulgated thereunder. The investors in the Private Placement
      Transaction were all “accredited investors” as that term is defined under
      Regulation D. The investors were provided a confidential offering memorandum
      and
      executed individual subscription agreements in which they made representations
      regarding their sophistication and qualifications as accredited investors.




On
      January 24, 2005, pursuant to a letter agreement between the Company and an
      investor relations firm, the Company issued options exercisable for 150,000
      shares of common
      stock in return for services rendered to InfoSearch. The options are exercisable
      at a price of $3.25 per share and expire on January 24, 2012. The Company
      recorded a total of $125,775 in option expense relating to this transaction.
      The
      Company relied on the exemptions from registration provided by Section 4(2)
      of
      the Securities Act and Regulation D promulgated thereunder, because the
      transaction did not involve any public offering and was made in connection
      with
      a privately negotiated transaction. The fair value of the options was calculated
      as of January 24, 2005 using the Black-Scholes pricing model with the following
      assumptions: expected life, 84 months following the grant date; stock
      volatility, 168.00%; risk-free interest rate of 3.97%; and no dividends during
      the expected term.





On
      February 16, 2005, pursuant to a consulting agreement between the Company and its investor
      relations firm, the Company issued 20,000 shares of common
      stock to our investor relations firm in return for services rendered for a
      total
      of $76,000 to InfoSearch. The Company relied on the exemptions from registration
      provided by Section 4(2) of the Securities Act and Regulation D promulgated
      thereunder, because the transaction did not involve any public offering and
      was
      made in connection with a privately negotiated transaction.




F-17




On
      March
      1, 2005, the Company issued 250,000 shares of common
      stock in a private placement transaction to an accredited investor who paid
      $250,000 to InfoSearch for the shares. These securities where offered and sold
      by the Company in reliance on exemptions from registration provided by Section
      4(2) of the Securities Act and Regulation D promulgated thereunder. The investor
      was an “accredited investor” as that term is defined under Regulation D. The
      investor was provided a confidential offering memorandum and executed individual
      subscription agreements in which the investor made representations regarding
      its
      sophistication and qualifications as an accredited investor.




On
      November 7, 2005, the Company issued 8,359,375 shares of common
      stock in a private placement transaction to 15 accredited investors for the
      purchase price of $0.64 per share (representing a 20% discount to the closing
      price of our common stock on November 2, 2005) for total proceeds of $5.35
      million. In addition, the investors received
      4,179,686 warrants to purchase 4,179,686 shares of common
      stock. The warrants expire on November 7, 2010 and are exercisable at a price
      of
      $0.88 per share. These securities where offered and sold by the Company in
      reliance on exemptions from registration provided by Section 4(2) of the
      Securities Act and Regulation D promulgated thereunder. The investors were
      “accredited investors” as that term is defined under Regulation D.




As
      required by the private placement transaction on November 7, 2005, a
      registration statement was not declared effective by the SEC within the
      timeframe set forth in the Registration Rights Agreement, the Company was
      required to pay liquidated damages and related interest of $509,904 during
      the
      year ended December 31, 2006. On August 22, 2006, the investors agreed to accept
      4,306,613 shares of the Company’s common stock in exchange for extinguishment of
      this liability. The number of shares issued in exchange for the liquidated
      damages was determined based on a discount to the average of the Company’s stock
      price for the five days preceding the first **** issuance
      date ,
      which
      is the date three days following receipt of the minimum two-thirds majority
      necessary to amend the Registration Rights Agreement. These shares were issued
      to the investors on October 4, 2006, and are recorded as equity as of December
      31, 2006. The interest expense associated with the liquidated damages was
      $7,507.




The
      warrants issued to all participants in the November 7, 2005 private placement
      require the Company to settle the contracts by the delivery of registered
      shares. At the date of issuance, the Company did not have an effective
      registration statement related to the shares that could be issued should the
      warrant holders exercise the warrants. In addition, the warrant holders have
      the
      right to require that the Company settle the warrant on a net-cash basis in
      a
      fundamental transaction, regardless of the form of tender underlying the
      fundamental transaction. As the contracts must be settled by the delivery of
      registered shares and the delivery of the registered shares are not controlled
      by the Company and the rights of the warrant holders to settle in cash
      potentially in preference to other stockholders **** receiving
      other forms of consideration, pursuant to EITF 00-19, "Accounting for Derivative
      Financial Instruments Indexed to, and Potentially Settled in, a Company's Own
      Stock", the warrants are being treated as a liability. The fair value of the
      warrants was calculated as of November 7, 2005 using the Black-Scholes pricing
      model with the following assumptions: expected life, 60 months following the
      grant date; stock volatility, 152.00%; risk-free interest rate of 4.5%; and
      no
      dividends during the expected term.





The
      fair
      value of the warrants at the date of issuance is recorded as a warrant liability
      on the balance sheet and the change in fair value at each reporting date was
      included in other income on the income statement under change in fair value
      of
      warrant liability. The value of the warrants on the date of the transaction
      and
      as of December 31, 2005 was $3,063,172 and $2,526,272, respectively. In
      addition, the fair value decreased from December 31, 2005 through December
      31,
      2006 by $2,041,134. The change in fair value was calculated by using the
      Black-Scholes pricing model with the following assumptions: expected life,
      46
      months as of December 31, 2006; stock volatility, 110.12%; risk-free interest
      rate of 4.6%; and no dividends during the expected term.




On
      July
      6, 2006 **,** the
      Company entered into a Settlement Agreement and Release of Claims (the
“Settlement Agreement”), with Gemini Partners, Inc. (“Gemini”), pursuant to
      which the Company issued to Gemini a Common Stock Purchase Warrant immediately
      exercisable into 300,000 shares of the Company’s common stock at a price of
      $0.01 per share .
      Such
      warrant expires on January 1, 2010. Pursuant to the Settlement Agreement, Gemini
      agreed to cancel **** its
      existing warrant to purchase 300,000 shares of our common stock at a
      purchase price of $1.00 per share. **** The
      Company has performed an EITF 00-19 analysis of the warrants issued pursuant
      to
      the Settlement
      Agreement and
      determined that they will be accounted for as equity. The **** fair
      value of the warrant **** was
      calculated as of July 6, 2006 using the Black-Scholes pricing model with the
      following assumptions: expected life **** of **** 54
      months
      following the grant date; stock volatilit y of 104.13%;
      risk-free interest rate of 5.2%; and no dividends during the expected term.
      The
      fair value of the warrant was determined to be $68,752.  The
      warrant was offered and sold by the Company in reliance on exemptions from
      registration provided by Section 4(2) of the Securities Act as such transaction
      did not involve any public offering.




F-18





On **** July
      6,
      2006, the Company entered into a
      GP
      Group Consulting Agreement (the “Consulting Agreement”) with **** GP
      Group,
      LLC (“GP Group”), pursuant to which it issued to GP Group a Common Stock Purchase
      Warrant on
      August 6, 2006, September 6, 2006 and October 6,  2006,
      each such warrant immediately exercisable into 20,000 shares of the Company’s
      common stock at a price of $0.01 per share. Each such warrant expires on January
      1, 2010.  **** The
      Company has performed an EITF 00-19 analysis of the warrants issued pursuant
      to
      the Consulting
      Agreement and
      determined that they will be accounted for as equity. The fair values of the
      warrants were calculated as of each respective issuance dates using the
      Black-Scholes pricing model with the following assumptions: expected
      life of 46, 45,
      and 44 months following the grant dates; stock volatility , **** of **** 104.12%,
      106.98%, and 109.50%; risk-free interest rates of 4.88%, 4.76% and 4.66%; and
      no
      dividends during the expected term, for warrants issued August 6, September
      6,
      and October 6, 2006, respectively. The fair
      values of the three warrants were determined to be $4,165, $2,804 and $2,611,
      respectively. The Consulting Agreement was terminated effective October 24,
      2006. The warrants were offered and sold by the Company in reliance on
      exemptions from registration provided by Section 4(2) of the Securities Act
      as
      such transaction did not involve any public offering.




The
      Company issued 4,510,411 shares of restricted common stock in 2006 to members
      of
      the Company’s board of directors and certain officers. The Company incurred
      $2,894,423 in non-cash equity compensation expenses associated with these
      grants, of which $2,849,423 was included in general and administrative expense
      and $45,000 was included in discontinued operations. The Company issued 46,025
      shares of common stock to certain employees as part of incentive or severance
      programs, incurring $14,480 in non-cash equity compensation expenses.





Preferred
      Stock





The board of
      directors is authorized, without further stockholder approval, to issue up
      to
      25,000,000 shares of preferred stock in one or more series and to fix the
      rights, preferences, privileges and restrictions of these shares, including
      dividend rights, conversion rights, voting rights, terms of redemption and
      liquidation preferences, and to fix the number of shares constituting any series
      and the designations of these series. These shares may have rights senior to
      the common
      stock . At
      December 31, 2005 and 2006, the Company had no shares of preferred stock
      outstanding.





The
      description of our securities contained herein is a summary only and may be
      exclusive of certain information that may be important to you. For more complete
      information, you should read our Certificate of Incorporation and its
      restatements and amendments, together with our corporate bylaws.





**11.**  **Stock
      Option Plan**





The
      2004
      Stock Option Plan gives
      the
      board of directors the ability to provide incentives through grants or awards
      of
      stock options, stock appreciation rights, and restricted stock awards
      (collectively, “Awards”) to present and future employees of us and our
      affiliated companies. Outside directors, consultants, and other advisors are
      also eligible to receive Awards under the 2004
      Stock Option **** Plan.





On
      June
      30, 2006, all of the stock option grants issued to employees prior to June
      30,
      2006 had exercise prices above the closing price at the end of the second
      quarter. The board of **** directors ,
      in an
      effort to maintain employee retention, approved the acceleration of vesting
      of
      stock option grants and restricted stock grants, in the amount of 1,428,403
      shares and 1,042,240 shares, respectively. Grants for all employees employed
      as
      of the close of business on June 30, 2006 were accelerated as of June 30, 2006.
      This resulted in a share-based compensation expense of $ 1,041,029 ,
      associated with the acceleration of stock option grants and $718,790 associated
      with restricted stock grants. Both of these values are included in the total
      share-based compensation expense of $4,223,245 for the year- ended
      December 31, 2006.




F-19




On
      December 12, 2006, the 2004 Stock Option Plan was amended (as
      amended, the “Plan”) **** by
      a vote
      of the stockholders **** to
      increase the number of shares of common stock reserved to issuance to 10,425,000
      from 5,212,500. If an incentive award expires or terminates unexercised or
      is
      forfeited, or if any shares are surrendered to us in connection with an Award,
      the shares subject to such award and the surrendered shares will become
      available for further awards under the Plan.





Shares
      issued under the Plan through the settlement, assumption or substitution of
      outstanding Awards or obligations to grant future Awards as a condition of
      acquiring another entity will not reduce the maximum number of shares available
      under the Plan. In addition, the number of shares subject to the Plan, any
      number of shares subject to any numerical limit in the Plan, and the number
      of
      shares and terms of any Award may be adjusted in the event of any change in
      our
      outstanding common stock by reason of any stock dividend, spin-off, split-up,
      stock split, reverse stock split, recapitalization, reclassification, merger,
      consolidation, liquidation, business combination or exchange of shares or
      similar transaction.




No
      more
      than 1,000,000 shares of the authorized shares may be allocated to Awards
      granted or awarded to any individual participant during any calendar year.
      Any
      shares of restricted stock and any shares underlying a grant of options that
      are
      forfeited will not count against this limit.




The
      Plan
      authorizes the grant of Incentive Stock Options and Nonqualified Stock Options.
      Incentive Stock Options are stock options that satisfy the requirements of
      Section 422 of the Code. Nonqualified Stock Options are stock options that
      do
      not satisfy the requirements of Section 422 of the Code. Options granted under
      the Plan entitle the grantee, upon exercise, to purchase a specified number
      of
      shares from us at a specified exercise price per share. The committee determines
      the period of time during which an Option may be exercised, as well as any
      vesting schedule, except that no Option may be exercised more than ten years
      after the date of grant. The exercise price for shares of common stock covered
      by an Option cannot be less than the fair market value of the common stock
      on
      the date of grant.




A
      summary
      of the Company’s stock option activity is as follows:





#
                of Shares
            
            Weighted
                Average ExercisePrice
            
            Weighted
                Average RemainingContractual
                Term
            
            AggregateIntrinsic
                ValueOutstanding
                as of December 31, 2005
            
            
            3,278,141
            
            $
            0.93Granted
            
            
            1,999,000
            
            $
            0.27Exercised
            
            
            (41,250
            )
            $
            0.14Cancelled
                / Forfeited
            
            
            (2,084,272
            )
            $
            0.85Outstanding
                as of December 31, 2006
            
            
            3,151,619
            
            $
            0.58
            
            
            8.60
            
            $
            71,400Exercisable
                as of December 31, 2006
            
            
            2,381,946
            
            $
            0.76
            
            
            8.21
            
            $
            22,315Expected
                to vest in future years
            
            
            770,199
            
            $
            0.16
            
            
            3.64
            
            $
            58,050





The
      weighted average grant date fair value of options granted during the year ended
      December 31, 2006 was $0.22. The intrinsic value of options exercised during
      the
      year ended December 31, 2006 was $2,888.




F-20





Additional
      information regarding options outstanding at December 31, 2006 is as
      follows:





Options
                outstanding
            
            Options
                exercisableExercise
                prices
            
            Number
                of
              shares
            
            Weighted
              average
              remaining
              contractual
              Life
                (Years)
            
            Weighted
              Average
              Exercise
                Price
            
            Number
                of
              Shares
            
            Weighted
              Average
              Exercise
                Price$0.14
            
            
            533,750
            
            
            9.75
            
            
            0.14
            
            
            73,980
            
            
            0.14$0.17
            
            
            574,000
            
            
            9.94
            
            
            0.17
            
            
            327,925
            
            
            0.17$0.22
            
            
            48,123
            
            
            9.57
            
            
            0.22
            
            
            4,385
            
            
            0.22$0.23
            
            
            20,000
            
            
            9.83
            
            
            0.23
            
            
            0
            
            
            0.23$0.39
            
            
            340,000
            
            
            9.26
            
            
            0.39
            
            
            340,000
            
            
            0.39$0.41
            
            
            26,000
            
            
            9.36
            
            
            0.41
            
            
            26,000
            
            
            0.41$0.67
            
            
            82,500
            
            
            9.08
            
            
            0.67
            
            
            82,500
            
            
            0.67$0.68
            
            
            5,000
            
            
            8.97
            
            
            0.68
            
            
            5,000
            
            
            0.68$0.76
            
            
            262,500
            
            
            8.15
            
            
            0.76
            
            
            262,500
            
            
            0.76$0.78
            
            
            75,000
            
            
            8.84
            
            
            0.78
            
            
            75,000
            
            
            0.78$0.81
            
            
            98,500
            
            
            8.45
            
            
            0.81
            
            
            98,500
            
            
            0.81$1.00
            
            
            1,086,156
            
            
            7.10
            
            
            1.00
            
            
            1,086,156
            
            
            1.00Total
                Options
            
            
            3,151,619
            
            
            8.60
            
            
            0.58
            
            
            2,381,946
            
            
            0.76





At
      December 31, 2006, 5,172,548 shares (remaining balance reflects issuance of
      restricted stock) were available for future grants under the Plan.





As
      of
      December 31, 2006, the total compensation related to non-vested option awards
      yet to be expensed was $99,713 to be recognized over a weighted average period
      of 3.19 years. As of December 31, 2006, the total compensation related to
      non-vested restricted stock awards yet to be expensed was $90,000 to be
      recognized over a weighted average period of 0. 5 years.





As
      of
      December 31, 2006, we had 5,359,131 shares of restricted stock grants
      outstanding to employees and directors of the Company, with 4,716,274 vested
      and
      642,857 unvested.





A
      summary
      of the Company’s restricted stock activity is as follows:


Weighted
                  AverageShares
              
              Grant
                  Date Fair ValueNon
                  Vested Shares as of January 1, 2006
              
              
              305,863
              
              $
              0.95Granted
              
              
              5,053,268
              
              
              0.50Forfeited
              
              
              -
              
              
              0.00Vested
              
              
              4,716,274
              
              
              0.58Non
                  Vested Shares as of December 31, 2006
              
              
              642,857
              
              
              0.14





**12.**  **Related
      Party Transactions**





As
      of
      December 31, 2005, the Company had a loan due from Walter Lazuka, an InfoSearch
      stockholder and
      brother of our former director and executive officer Steve Lazuka ,
      totaling $25,000. This loan was entered into with Mr. Walter Lazuka in a series
      of transactions from March 19, 2004 through September 16, 2004. This
      loa n
      was
      written off as uncollectible as of June 30, 2006.




F-21




On
      August
      23, 2005, we entered
      into a 12-month consulting agreement with Claudio Pinkus, a member of our
      b oard of directors (the **“** Pinkus
      Consulting Agreement”). The Pinkus Consulting Agreement provided **** for
      an
      annual consulting fee of $100,000 to be paid in semi-monthly payments. The
      Pinkus Consulting Agreement also provided for a quarterly bonus payment of
      up to
      $25,000 for each quarter, as determined by the Company’s board **** of directors .
      Pursuant to the Pinkus Consulting Agreement, Mr. Pinkus provided strategic
      and
      financial advisory consulting services to us as requested by our Chief Executive
      Officer or our board of directors. Pursuant to the Pinkus Consulting Agreement,
      Mr. Pinkus was also granted 1,350,000 shares of restricted stock, of which
      450,000 shares vested on January 4, 2006, 300,000 shares vested on each of
      February 23, 2006 and
      April
      23, 2006 and a remaining installment of 300,000 shares vested on June 30, 2006.
      Pursuant to the Pinkus Consulting Agreement, on April 5, 2006, the board of directors **** approved
      the payment of $203,513 in cash and a grant of 450,027 shares of common stock
      to
      Mr. Pinkus in repayment of his tax obligations. The
      Pinkus Consulting Agreement expired pursuant to its terms on August 23, 2006,
      and on November 9, 2006 our board of directors granted Mr. Pinkus his full
      quarterly bonus for the second and third quarters of 2006. ****





**13.**  **Commitments
      and Contingencies**





The
      Company has entered into a non-cancelable operating lease for facilities through
      May 31, 2009. Rental expense was $193,360 and $162,757 for years ended December
      31, 2006 and 2005, respectively. At December 31, 2006 **,** the
      future minimum lease payments for the years ending December 31 are as
      follows:


2007****
              
              $
              219,5402008****
              
              
              226,1252009
              
              
              95,375Total
                  Minimum Lease Payments
              
              $
              542,120




The
      Company has entered into capital leases for equipment. The leases are for 24
      and
      36 months and contain bargain purchase provisions so that the Company can
      purchase the equipment at the end of each lease. The following sets forth the
      minimum future lease payments and present values of the net minimum lease
      payments under these capital leases for the years ending December 31, are as
      follows:


Total
                  minimum lease payments for 2007
              
              $
              18,632Less:
                  Imputed interest
              
              
              1,
                  011Present
                  value of total minimum lease payments
              
              $
              17,621




The
      capitalized lease payments for the years ended December 31, 2006 and 2005 were
      $39,949 and $44,717, respectively. Total interest expense for the years ended
      December 31, 2006 and 2005 was $5,793 and $12,791, respectively.





Employment Agreements





We
      entered into an employment agreement effective
      August 23, 2005 with
      George Lichter as Chief Executive Officer ,
      which
      was subsequently amended effective July 1, 2006 (as amended, **** the
      “Lichter Employment Agreement”). The Lichter Employment Agreement, as amended,
      provides for an annual base salary of $ 250,000,
      subject to annual increases, **** and
      an
      annual performance-based bonus of up to $150,000. In addition, Mr. Lichter
      receives an automobile allowance of $600 per month. The Lichter Employment
      Agreement also includes restrictive covenants relating to competition and
      solicitation of our customers or employees. The Lichter Employment Agreement
      provides that Mr. Lichter will normally work for us four days per week. We
      have
      agreed to allow Mr. Lichter to continue to serve as an officer and director
      of
      MCS Ventures and Yoga Works, Inc., but only to the extent that Mr. Lichter’s
      continued service does not materially interfere with the performance of his
      duties to us.




Pursuant
      to the
      Lichter Employment Agreement ,
      Mr.
      Lichter was granted, under the Stock Option Plan, a restricted stock award
      representing 675,000 shares of our common stock, of which 225,000 shares vested **** on
      January 4, 2006 and the remaining shares vested in three
      installments of 150,000 shares each on February 23, 2006, April 23, 2006 and
      August 23, 2006. Mr.
      Lichter may participate, as a selling stockholder, in any financing transaction
      undertaken by us for the purpose of satisfying the tax liability incurred by
      Mr.
      Lichter as a result of the restricted stock award. Pursuant
      to the Lichter Employment Agreement, the Company paid Mr. Lichter’s tax
      liability in connection with his restricted stock grant. **** Lichter
      was also subsequently granted an additional stock award representing 675,000
      shares of our common stock, of which 225,000 shares vested **** on
      January 4, 2006 and the remaining shares vested in three
      installments of 150,000 shares each on February 23, 2006, April 23, 2006 and
      August 23, 2006. **** Pursuant
      to the decision by the board of directors to accelerate the vesting of
      outstanding options and shares of restricted stock, all of these options and
      shares of restricted stock became fully exercisable as of June 30, 2006.




F-22




Mr.
      Lichter may terminate the Lichter Employment Agreement and his employment with
      the Company for Good Reason (as defined in the Lichter Employment Agreement),
      including in connection with a Change of Control (as defined in the Lichter
      Employment Agreement) that results in the termination of Mr. Lichter’s
      employment with the Company or a material adverse change in Mr. Lichter’s duties
      and responsibilities. If Mr. Lichter terminates the Lichter Employment Agreement
      and his employment with the Company for Good Reason or in connection with a
      Change of Control as described above, or if the Company terminates the Lichter
      Employment Agreement and Mr. Lichter’s employment with the Company without Cause
      (as defined in the Lichter Employment Agreement) (and, with respect to (ii),
      (iii) and (iv) below, so long as Mr. Lichter has not and does not violate
      certain provisions of the Lichter Employment Agreement), the Company will pay
      or
      provide to Mr. Lichter: (i) any earned but unpaid base salary, unpaid pro rata
      annual bonus and unused vacation days accrued through his last day of employment
      with the Company, including any carryover days; (ii) Mr. Lichter’s full base
      salary for six months; (iii) Mr. Lichter’s annual bonuses that he would have
      been awarded during the same six month period; and (iv) continued coverage,
      at
      the Company’s expense, under all benefits plans in which Mr. Lichter was a
      participant immediately prior to his last date of employment with the Company.
      In addition, any unvested shares of restricted common stock granted pursuant
      to
      the Lichter Employment Agreement will automatically vest.




The
      Lichter Employment Agreement also includes restrictive covenants relating to
      competition and solicitation of our customers or employees, and employment
      under
      the Lichter Employment Agreement is at will and therefore InfoSearch may
      terminate Mr. Lichter’s employment at any time and for any reason subject to the
      provisions set forth above. ****




We
      entered into an executive employment agreement with Steve Lazuka dated December
      29, 2004 which terminated on December 31, 2006
      (as
      amended, the “ Lazuka
      Employment Agreement ”). In
      connection with the appointment of Mr. Lichter as our President and Chief
      Executive Officer, Mr. Lazuka’s employment agreement was amended. The amendment reaffirmed all of
      the provisions of the prior
      agreement, including those establishing the term of employment and compensation payable
      to
      Mr. Lazuka. The amendment revised Mr.
      Lazuka’s position and title from President and Chief Executive Officer to Chief
      Strategy Officer and from Chairman to Director. **** The
      Lazuka Employment Agreement provided for an initial annual base salary of
      $175,000, with a minimum annual increase in base salary of 10%. The Lazuka
      Employment Agreement also provided for an annual performance-based bonus of
      up
      to $175,000, as determined by the Company’s board of directors. The Lazuka
      Employment Agreement expired pursuant to its terms on December 31, 2006. The
      Lazuka Employment Agreement included restrictive covenants relating to
      competition and solicitation of our customers or employees. Under the Lazuka
      Employment Agreement, Mr. Lazuka received options to purchase up to 600,000
      (with options to purchase 58,155 shares transferred to a family member over
      which Mr. Lazuka exercises no control) shares of our common stock under the
      Stock Option Plan, which vested in three equal installments after six months,
      12
      months and 24 months. The exercise price of the options granted pursuant to
      the
      Lazuka Employment Agreement is $1.00 per share. Pursuant
      to the decision by the board of directors to accelerate the vesting of
      outstanding options and shares of restricted stock, all of these options and
      shares of restricted stock became fully exercisable as of June 30, 2006. In
      addition, we were obligated to
      include in any financing transaction up to 1,000,000 shares
      of our common stock owned by Mr. Lazuka. We also agreed to include all shares
      of
      our common stock owned by Mr. Lazuka that are not sold in such a financing
      transaction in any registration statement filed by us (other than a registration
      statement filed solely to register an employee compensation plan on a Form
      S-8)
      and provided Mr. Lazuka the right to demand such registration in the event
      that
      we fail to register such shares within 12 months. Mr. Lazuka agreed to execute
      a
      standard lock-up agreement related to his our common stock for a period of
      12
      months. ****




On
      November 1, 2006, we provided notice to Mr. Lazuka that we would not
      renew the Lazuka Employment Agreement. On December 5, 2006, we entered into
      an
      amendment to the Lazuka
      Employment Agreement with Steve Lazuka. Pursuant to the amendment, as of
      November 30, 2006, Mr. Lazuka ceased serving as our Chief Strategy
      Officer ,
      but he continued
      to serve as a member of our board of directors. Pursuant to the amendment,
      Mr.
      Lazuka was to receive 12 additional payments of $3,750 over a six month period, totaling $45,000. In
      addition, the non-competition restrictions of original employment agreement
      were
      reduced from two years to one year. Mr.
      Lazuka also agreed that he would not make any demand on the Company or otherwise
      require the Company to register his shares. Mr. Lazuka resigned as a member
      of
      the board of directors effective January 2, 2007.




F-23




We
      also
      have entered into an executive employment agreement with Frank Knuettel II,
      dated
      March 8, 2005 (the
      “Knuettel Employment Agreement”). The Knuettel Employment Agreement provides for
      an initial annual base salary of $175,000, provided that if Mr. Knuettel remains
      in the employment of the Company in the month following the second consecutive
      quarter that the Company is profitable on a GAAP basis, his annual **** base
      salary will be
      increased to
      $185,000. The Knuettel Employment Agreement further provides for a potential
      target bonus equal to 30% of **** his
      then
      current annual base
      salary, contingent on the Company’s achieving revenue and operating income goals
      and Mr. Knuettel’s attaining individual goals established by the board of directors .
      Under
      the Knuettel Employment Agreement, Mr. Knuettel received options to purchase
      up
      to 262,500 shares of our common stock at
      an
      exercise price of $0.76 per share pursuant to the Stock Option Plan,
      which vest over a four-year period. Additionally, Mr. Knuettel received an
      award
      of 352,500 restricted shares of our common stock, which also vest over a
      four-year period of his employment with the Company. Mr. Knuettel was also
      subsequently granted an additional stock award representing 167,500 shares,
      under which 25% of the shares vested on
      January 4, 2006, 12.5% of the shares vested **** on
      July
      7, 2006 and the remaining shares will vest over three years in equal, monthly
      installments, ending on January 4, 2009.
      Mr.
      Knuettel was granted an
      additional option award representing 82,500 shares of our common stock at an
      exercise price of $0.67 per share, under which 25% of the shares vested **** on
      January 4, 2006, 12.5% of the shares vested **** on
      July
      7, 2006 and the remaining shares will vest over three years in equal, monthly
      installments, ending on January 4, 2009. Pursuant
      to the decision by the board of directors to accelerate the vesting of
      outstanding options and shares of restricted stock, all of these options and
      shares of restricted stock became fully exercisable as of June 30, 2006.




Mr.
      Knuettel may terminate the Knuettel
      Employment Agreement and
      his
      employment with the Company for Good Reason (as defined in the Knuettel
      Employment Agreement and which includes a Change of Control (as defined in
      the
      Knuettel Employment Agreement) without Mr. Knuettel’s consent). If Mr. Knuettel
      terminates the Knuettel Employment Agreement and his employment with the Company
      for Good Reason, the Company will pay or provide to Mr. Knuettel: (i) any earned
      but unpaid base salary; (ii) a severance payment in an amount equal to six
      months of Mr. Knuettel’s base salary; and (iii) to the extent that Mr. Knuettel
      holds any unvested portion of the option or shares of restricted stock granted
      to him pursuant to the Knuettel Employment Agreement, the portion of the option
      so granted and the shares of restricted common stock that would otherwise vest
      in the two year period following the date of termination of Mr. Knuettel’s
      employment with the Company will, as of the date of termination become fully
      vested. If the Company terminates the Knuettel Employment Agreement and Mr.
      Knuettel’s employment with the Company without Cause (as defined in the Knuettel
      Employment Agreement), the Company shall pay to Mr. Knuettel (i) any earned
      but
      unpaid base salary; (ii) base salary for the six month period following the
      date
      of such termination; (iii) any bonus earned or accrued through the date of
      such
      termination; and (iv) one year acceleration of the unvested portion, if any,
      of
      the option and shares of restricted common stock granted pursuant to the
      Knuettel Employment Agreement **.** At the
      election of Mr. Knuettel, the severance benefits are payable by the Company
      in a
      lump sum within 45 days after his last day of employment. The Knuettel
      Employment Agreement also includes restrictive covenants relating to competition
      and solicitation of our customers or employees, and employment under the
      Knuettel Employment Agreement is at will and therefore InfoSearch may terminate
      Mr. Knuettel’s employment at any time and for any reason subject to the
      provisions set forth above.




We
      also
      entered into an Employment Agreement with David Gagne which provided for an
      annual salary in the amount of $100,008. Mr. Gagne’s Employment Agreement was
      amended on January 16, 2007 and provided for a base salary of $145,000 per
      annum, the creation of an annual bonus of up to 35% of base compensation, the
      granting of an option to purchase 100,000 shares of the Company’s common stock,
      with such option vesting over 24 months and a termination provision providing
      severance payment equal to six months of his base salary and six months of
      acceleration of his unvested stock options in the event that Mr. Gagne is
      terminated for other than cause. Mr. Gagne terminated his employment with the
      Company as of March 13, 2007.




F-24




We
      made
      an offer of employment, which was accepted and may be deemed an employment
      agreement, to Edan Portaro, our Vice President of Sales on
      March
      14, 2006 **** (the
      “Portaro Employment Agreement”) **.** The
      Portaro Employment Agreement does not have a termination date and provides
      for
      an initial annual base salary of $150,000 and further provides for a potential
      target bonus equal to 150% of base salary, contingent on Mr. Portaro attaining
      goals established by the Chief
      Executive Officer .
      Under
      the Portaro Employment Agreement, Mr. Portaro received options to purchase
      up to
      200,000 shares of our common stock **** pursuant
      to the Stock Option Plan,
      50,000 of which shall vest after one year and the remaining 150,000 will vest
      in
      equal monthly installments during the following three years. Pursuant to the
      decision by the board of directors to accelerate the vesting of outstanding
      options and shares of restricted stock, all of these options and shares of
      restricted stock became fully exercisable as of June 30, 2006. The Portaro
      Employment Agreement also provides that in the event that Mr. Portaro’s position
      is eliminated or his responsibilities are materially reduced within six months
      following a change in control, he will receive severance payment equal to six
      months of his base salary and full acceleration of his unvested stock options.
      Further, the Portaro Employment Agreement provides that in the event that Mr.
      Portaro’s position is eliminated or his responsibilities are materially reduced
      for any reason other than cause or permanent disability, he will receive
      severance payment equal to six months of his base salary and six months of
      acceleration of his unvested stock options.




We
      made
      an offer of employment, which was accepted and may be deemed an employment
      agreement, to David Warthen, our Chief Technology Officer on
      June
      11, 2006 **** (the
      “Warthen Employment Agreement”) **.** The
      Warthen Employment Agreement does not have a termination date. Mr. Warthen
      also
      currently serves as the Chief Executive Officer of Eye Games, Inc., a developer
      of web-cam, interactive video games. We do not have any relationship with Eye
      Games, Inc., and we have never been a party to any transaction or agreement
      with
      Eye Games, Inc. The Warthen Employment Agreement provides for an initial annual
      base salary of $180,000, which shall be paid in cash or shares of InfoSearch
      common stock issued ,
      at the
      Company’s option .
      The
      Company has the right to pay Mr. Warthen in cash or stock for the first year
      of
      his employment, which began on July 1, 2006. The Company elected to pay Mr.
      Warthen with stock for the first year and Mr. Warthen is receiving his base
      salary in the form of common stock, which amounts to 107,143 shares per month,
      or portion thereof, for a total of 1,285,714 shares through the one year
      anniversary date of his employment with the Company. The number of shares was
      determined based on the fair market value of the Company’s common stock on
      September 30, 2006. Through March 31, 2007, Mr. Warthen earned 964,286 shares
      of
      our common stock. Under
      the
      Warthen Employment Agreement, Mr. Warthen will receive options to purchase
      up to
      400,000 share of our common stock pursuant
      to the Stock Option Plan,
      which shall vest in equal monthly installments over three years. Mr. Warthen’s
      employment with InfoSearch is on an “at will” basis.




**14.**  **Answerbag**





Acquisition
      of Answerbag





On
      February 22, 2006, InfoSearch entered into an Agreement and Plan of Merger
      and
      Reorganization ("Merger Agreement") with Answerbag, Inc., a privately held
      California corporation ("Answerbag") and Apollo Acquisition Corp., a California
      corporation and a wholly-owned subsidiary of InfoSearch ("Merger Sub"). Pursuant
      to the terms of the Merger Agreement, Merger Sub merged with and into Answerbag,
      with Answerbag surviving as a wholly-owned subsidiary of InfoSearch (the
      " Answerbag **** Merger").
      The pro forma results of operations for the current period and a comparable
      prior period as though the acquisition of Answerbag had been completed at the
      beginning of the periods is not material.




The
      Merger closed on March 3, 2006 .
      Under
      the terms of the transaction, the Company acquired 100% of the issued and
      outstanding capital stock of Answerbag for
      $161,875 in cash and issuance of 351,902 shares of InfoSearch common stock
      with
      a market value of $161,875, based on the five day average closing price of
      $0.46
      per share prior to the consummation of the transaction. Answerbag is a
      user-generated question and answer content website, which can be found at www.answerbag.com .
      Questions, answers and ranking of answers on the Answerbag website are supplied
      by a growing community of registered users. In addition, the Company incurred
      $27,460 in direct acquisition costs.





Per
      the Merger **** Agreement,
      the Company will pay up to an additional $300,625 in cash and issue up to
      653,533 additional shares of common stock having a market value of
      $300,625. These amounts will be issued in four installments at 90, 180, 270
      and
      360 days after the close based on performance contingencies as detailed in
      the
      Merger Agreement, which states that the purchase price will be adjusted if
      Mr.
      Joel Downs, founder of Answerbag, terminates his employment with the Company
      or
      if average traffic volume falls below certain levels. The Company has made
      the
      first three contingent payments aggregating $225,469 pursuant to the agreement,
      one third on each
      of **** June
      9,
      2006, September 12, 2006 and December **** 7,
      2006, **** and
      issued our common stock aggregating 492,846 shares, one third on each
      of **** June
      9,
      2006, September 7, 2006 and November 29, 2006.




F-25


.


The
      total
      purchase price is summarized as follows:





Cash
                consideration
            
            $
            462,500Common
                stock
            
            
            288,361Acquisition
                related costs
            
            
            27,460Total
                purchase price
            
            $
            778,321The
                Company’s allocation of the purchase price is summarized as follows:Accounts
                Receivable
            
            $
            14,935Intangible
                assets
            
            
            763,386Total
                Assets
            
            $
            778,321




The
      intangible assets that the Company purchased were the Answerbag.com website,
      Answerbag.com trade name and the website's registered users. The Company has
      performed a valuation analysis, including the purchase price allocation and
      determination of the useful life of the intangible assets. The valuation
      analysis concluded that there was no goodwill acquired as part of the purchase
      transaction. The analysis further concluded that the amortizable life of the
      acquired definite-lived intangible assets is five years.





As
      a
      result of the sale of substantially all of the assets of Answerbag to Demand
      Media, Inc. ,
      the
      performance contingencies no longer apply. As a result of the
      elimination of the performance contingencies, the obligation of the Company
      to
      make the one remaining payment is no
      longer contingent. The Company has accrued the liability for the remaining
      one
      cash payment totaling $75,156
      and for the issuance of 164,282 shares of common stock with a market value
      of
      $22,586.





Discontinued
      Operations of Answerbag





Due
      to
      the rise in competition and the considerable investment that would be needed
      to
      bring Answerbag to fruition, the board of directors approved
      the sale of Answerbag on September 30, 2006. On October 3, 2006, the Company
      entered into an Asset Purchase Agreement to sell substantially all of the assets
      of Answerbag to
      Demand Answers, Inc. and its parent, Demand Media, Inc. in exchange for cash
      proceeds of $3,000,000. Of this amount, $300,000 was deposited into escrow
      for a
      period of up to 12 **** months
      pending any unknown contingent liabilities.





The board **** of directors approved
      the sale of substantially
      all of the assets of Answerbag
      on September 30, 2006. On October 3, 2006, the Company entered into an Asset
      Purchase Agreement (the
      “Asset Purchase Agreement”) **** to
      sell
      substantially all of the assets of Answerbag to Demand Answers, Inc. and its
      parent, Demand Media . In
      conjunction with the agreement, Demand Media received a five year warrant to
      purchase 5,000,000 shares of the Company's common stock at a
      purchase price of
      $0.158 per share that expires on October 3, 2011. The exercise price of the
      warrant was determined by calculating the average of the closing price of the
      Company’s common stock from the average of the ten day period from September 11,
      2006 to
      September 22, 2006, and the
      average of the ten day period from October 4,
      2006 to
      October 17, 2006. Pursuant to the Asset Purchase Agreement, Demand Media also
      received the right to appoint one member to the board of directors of the
      Company ,
      which
      they have not exercised .
      We have
      performed an EITF 00-19 analysis of the warrants issued pursuant to the Asset
      Purchase Agreement and
      determined that they will be treated as a liability because of the requirement
      to maintain an effective registration statement for a period of two years.
      The
      fair value of the warrant was calculated as of October 4, 2006 using the
      Black-Scholes pricing model with the following assumptions: expected
      life of 60
      months following the grant date; stock volatility, 109.79%; risk-free interest
      rates of 4.50%; and no dividends during the expected term. The
      fair
      value of the warrant was determined to be $598,836 and appears on the balance
      sheet as Fair Value of Warrant Liability along with the warrants issued pursuant
      to the private placement transaction closed in November 2005. As of December
      31,
      2006, t he
      fair
      value of the warrant was calculated using the Black-Scholes pricing model with
      the following assumptions: stock price of $0.22; expected life of 57
      months following the grant date; stock volatility of 110.12%; risk-free interest
      rates of 4.71%; and no dividends during the expected term. As
      of
      December 31, 2006, the fair value of the warrant was determined to be $911,077,
      resulting in a loss of the fair value of the warrant issued to Demand Media
      of
      $312,691. The warrant was offered and sold by the Company in reliance on
      exemptions from registration provided by Section 4(2) of the Securities Act
      as
      such transaction did not involve any public offering.




F-26





In
      accordance with SFAS 144, “Accounting for the Impairment or Disposal of Long
      Lived Assets”, the Company is accounting for the operations of Answerbag as a
      discontinued operation. The results of operations of Answerbag are reflected
      as
      discontinued operations for the year ended December 31, 2006. The revenues
      and
      net loss of Answerbag for the year ended December 31, 2006 are summarized
      below:





Revenues
            
            $
            59,777Pretax
                Loss
            
            
            (412,132
            )Gain
                on sale
            
            
            1,919,962Net Earnings
                from Discontinued Operations
            
            $
            1,507,830





Demand
      Media also agreed to purchase content from the Company for a total consideration
      of $2,000,000. The purchase price for existing content will be paid in two
      installments totaling $200,000 within five days of October 4, 2006 and the
      amount related to new, original content will be paid in equal installments
      of
      $300,000 to be paid quarterly over six consecutive quarters, beginning October
      1, 2006. In addition, as further discussed in Note 6, Demand Media issued
      warrants to the Company to purchase 125,000 shares of Series C Preferred Stock
      of Demand Media, which preferred stock represents less than one-tenth of a
      percent of the outstanding capital stock of Demand Media. Upon the close of
      the
      transaction with Demand Media, Inc. InfoSearch received initial payments of
      $3,200,000.





**15.**  **Subsequent
      Event**





On
      February 28, 2007, the SEC commenced an enforcement action against Mr. Louis
      Zehil, a partner of our former external legal counsel, McGuireWoods LLP, and
      our
      former corporate secretary, alleging that he had engaged in a fraudulent scheme
      to obtain and sell to the investing public shares of securities in several
      other
      companies in violation of the antifraud and registration provisions of the
      federal securities laws. The SEC enforcement proceeding does not include
      allegations with respect to our securities; however, we have commenced a review
      into possible unauthorized trading in our common stock facilitated by Mr. Zehil.
      We cannot predict the outcome of this investigation or whether the investigation
      and/or any potential proceedings resulting from this conduct might have a
      material adverse impact on the Company.




F-27